Average Fuel Economy Standards Passenger Cars and Light Trucks Model Year 2011

Note: EPA no longer updates this information, but it may be useful as a reference or resource.
PDF Version (262 pp, 6731K, About PDF)

[Federal Register: March 30, 2009 (Volume 74, Number 59)]
[Rules and Regulations]
[Page 14195-14244]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30mr09-12]
[[Page 14196]]

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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Parts 523, 531, 533, 534, 536 and 537
[Docket No. NHTSA-2009-0062]
RIN 2127-AK29

Average Fuel Economy Standards Passenger Cars and Light Trucks
Model Year 2011

AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Final rule; record of decision.

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SUMMARY: The future of this country's economy, security, and
environment are linked to one key challenge: energy. To reduce fuel
consumption, NHTSA has been issuing Corporate Average Fuel Economy
(CAFE) standards since the late 1970's under the Energy Policy and
Conservation Act (EPCA). However, the principal effects of these
standards are broader than their statutory purpose. Reducing fuel
consumption conserves petroleum, a non-renewable energy source, saves
consumers money, and promotes energy independence and security by
reducing dependence on foreign oil. It also directly reduces the motor
vehicle tailpipe emissions of carbon dioxide (CO₂), which is
the principal greenhouse gas emitted by motor vehicles.
    The Energy Independence and Security Act (EISA) amended EPCA by
mandating that the model year (MY) 2011-2020 CAFE standards be set
sufficiently high to ensure that the industry-wide average of all new
passenger cars and light trucks, combined, is not less than 35 miles
per gallon by MY 2020. This is a minimum requirement, as NHTSA must set
standards at the maximum feasible level in each model year. NHTSA will
determine, based on all of the relevant circumstances, whether that
additional requirement calls for establishing standards that reach the
35 mpg goal earlier than MY 2020.
    NHTSA published a proposal in May 2008 to begin implementing EISA
by establishing CAFE standards for MYs 2011-2015. A draft final rule
for those model years was completed, but not issued.
    In the context of his calls for the development of new national
policies to prompt sustained domestic and international actions to
address the closely intertwined issues of energy independence, energy
security and climate change, the President issued a memorandum on
January 26, 2009, requesting NHTSA to divide its rulemaking into two
parts. First, he requested the agency to issue a final rule adopting
CAFE standards for MY 2011 only. Given the substantial time and
analytical effort involved in developing CAFE standards and the limited
amount of time before the statutory deadline of March 30, 2009 for
establishing the MY 2011 standards, the agency has necessarily based
this one year final rule almost wholly on the information available to
it and the analysis performed by it in support of the draft final rule
completed last fall.
    Second, the President requested NHTSA to establish standards for MY
2012 and later after considering the appropriate legal factors, the
comments filed in response to the May 2008 proposal, the relevant
technological and scientific considerations, and, to the extent
feasible, a forthcoming report by the National Academy of Sciences,
mandated under section 107 of EISA, assessing existing and potential
automotive technologies and costs that can practicably be used to
improve fuel economy. The deferral of action on standards for the later
model years provides the agency with an opportunity to review its
approach to CAFE standard setting, including its methodologies,
economic and technological inputs and decisionmaking criteria, so as to
ensure that it will produce standards that contribute, to the maximum
extent possible within the limits of EPCA/EISA, to meeting the energy
and environmental challenges and goals outlined by the President.
    NHTSA estimates that the MY 2011 standards will raise the industry-
wide combined average to 27.3 mpg, save 887 million gallons of fuel
over the lifetime of the MY 2011 cars and light trucks, and reduce
CO₂ emissions by 8.3 million metric tons during that period.

DATES: This final rule is effective May 29, 2009.
    Petitions for reconsideration must be received by May 14, 2009.

ADDRESSES: Petitions for reconsideration must be submitted to:
Administrator, National Highway Traffic Safety Administration, 1200 New
Jersey Avenue, SE., Washington, DC 20590.

FOR FURTHER INFORMATION CONTACT: For policy and technical issues: Ms.
Julie Abraham or Mr. Peter Feather, Office of Rulemaking, National
Highway Traffic Safety Administration, 1200 New Jersey Avenue, SE.,
Washington, DC 20590. Telephone: Ms. Abraham (202) 366-1455; Mr.
Feather (202) 366-0846.
    For legal issues: Mr. Stephen Wood or Ms. Rebecca Yoon, Office of
the Chief Counsel, National Highway Traffic Safety Administration, 1200
New Jersey Avenue, SE., Washington, DC 20590. Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive overview
    A. The President's January 26, 2009 Memorandum on CAFE Standards
for Model Years 2011 and Beyond
    1. Rulemaking Background
    2. Requests in the President's Memorandum
    (a) CAFE Standards for Model Year 2011
    (b) CAFE Standards for Model Years 2012 and Beyond
    3. Implementing the President's Memorandum
    B. Energy Independence and Security Act of 2007
    C. Notice of Proposed Rulemaking for MYs 2011-2015 and Request
for New Product Plans
    1. Key Economic Values for Benefits Computations and Standard Setting
    2. Standards
    (a) Classification of Vehicles
    (b) Stringency
    (c) Benefits and Costs
    (i) Benefits
    (ii) Costs
    (d) Effect of Flexibilities on Benefits and Costs
    3. Credits
    4. Preemption
    D. Brief Summary of Public Comments on the NPRM
    E. New Information Received or Developed by NHTSA Between the
NPRM and Final Rule
    1. New Manufacturer Product Plans
    2. Revised Assessment of Technology Effectiveness and Costs
    3. Final Environmental Impact Statement
    F. Final Rule for MY 2011
    1. Introduction
    2. Key Economic Values for Benefits Computations
    3. Standards
    (a) Classification
    (b) Stringency
    (c) Benefits and Costs
    (i) Benefits
    (ii) Costs
    (d) Flexibilities
    4. Credits
    5. Preemption
II. Background
    A. Role of Fuel Economy Improvements in Promoting Energy
Independence, Energy Security, and a Low Carbon Economy
    B. Contributions of Fuel Economy Improvements to CO₂
Tailpipe Emission Reductions Since 1975
    C. Chronology of Events Since the National Academy of Sciences
Called for Reforming and Increasing CAFE Standards
    1. National Academy of Sciences Issues Report on Future of CAFE
Program (February 2002)
    (a) Significantly Increasing CAFE Standards Without Making Them

[[Page 14197]]

Attribute-Based Would Adversely Affect Safety
    (b) Climate Change and Other Externalities Justify Increasing
the CAFE Standards
    2. NHTSA Issues Final Rule Establishing Attribute-Based CAFE
Standards for MY 2008-2011 Light Trucks (March 2006)
    3. Supreme Court Issues Decision in Massachusetts v. EPA (April 2007)
    4. NHTSA and EPA Coordinate on Development of Rulemaking
Proposals (Summer-Fall 2007)
    5. Ninth Circuit Issues Decision Re Final Rule for MY 2008-2011
Light Trucks (November 2007)
    6. Congress Enacts Energy Security and Independence Act of 2007
(December 2007)
    7. NHTSA Proposes CAFE Standards for MYs 2011-2015 and Requests
New Product Plans for Those Years (April 2008)
    8. NHTSA Contracts With ICF International To Conduct Climate
Modeling and Other Analyses in Support of Draft and Final
Environmental Impact Statements (May 2008)
    9. Manufacturers Submit New Product Plans (June 2008)
    10. NHTSA Contracts With Ricardo To Aid in Assessing Public
Comments On Cost and Effectiveness of Fuel Saving Technologies (June 2008)
    11. Ninth Circuit Revises Its Decision Re Final Rule for MY
2008-2011 Light Trucks (August 2008)
    12. NHTSA Releases Final Environmental Impact Statement (October 2008)
    13. Office of Information and Regulatory Affairs Completes
Review of a Draft MY 2011-2015 Final Rule (November 2008)
    14. Department of Treasury Extends Loans to General Motors and
Chrysler (December 2008)
    15. Department of Transportation Decides Not To Issue MY 2011-
2015 Final Rule (January 2009)
    16. The President Requests NHTSA To Issue Final Rule for MY 2011
Only (January 2009)
    17. General Motors and Chrysler Submit Restructuring Reports to
Department of Treasury (February 2009)
    D. Energy Policy and Conservation Act, as Amended
    1. Vehicles Subject to Standards for Automobiles
    2. Mandate To Set Standards for Automobiles
    3. Attribute-Based Standards
    4. Factors Considered in the Setting of Standards
    (a) Factors That Must Be Considered
    (i) Technological Feasibility
    (ii) Economic Practicability
    (iii) The Effect of Other Motor Vehicle Standards of the
Government on Fuel Economy
    (iv) The Need of the United States To Conserve Energy
    1. Fuel Prices and the Value of Saving Fuel
    2. Petroleum Consumption and Import Externalities
    3. Air Pollutant Emissions
    (v) Other Factors--Safety
    (b) Factors That Cannot Be Considered
    (c) Weighing and Balancing of Factors
    5. Consultation in Setting Standards
    6. Test Procedures for Measuring Fuel Economy
    7. Enforcement and Compliance Flexibility
III. The Anticipated Vehicles in the MY 2011 Fleets and NHTSA's
Baseline Market Forecast
    A. Why does NHTSA establish a baseline market forecast?
    B. How does NHTSA develop the baseline market forecast?
    1. NHTSA first asks manufacturers for updated product plan data
    (a) Why does NHTSA use manufacturer product plans to develop the baseline?
    (b) What product plan data did NHTSA use in the NPRM?
    (c) What product plan data did NHTSA receive for the final rule?
    (d) How is the product plan data received for the final rule
different from what the agency used in the NPRM analysis, and how
does it impact the baseline?
    2. Once NHTSA has the product plans, how does it develop the baseline?
    3. How does NHTSA's market forecast reflect current market conditions?
IV. Fuel Economy-Improving Technologies
    A. NHTSA Analyzes What Technologies Can Be Applied Beyond Those
in the Manufacturers' Product Plans
    B How NHTSA Decides Which Technologies To Include
    1. How NHTSA Did This Historically, and How for the NPRM
    2. NHTSA's Contract With Ricardo for the Final Rule
    C. What technology assumptions has NHTSA used for the final rule?
    1. How do NHTSA's technology assumptions in the final rule
differ from those used in the NPRM?
    2. How are the technologies applied in the model?
    3. Technology Application Decision Trees
    4. Division of Vehicles Into Subclasses Based on Technology
Applicability, Cost and Effectiveness
    5. How did NHTSA develop technology cost and effectiveness
estimates for the final rule?
    6. Learning Curves
    7. Technology Synergies
    8. How does NHTSA use full vehicle simulation?
    9. Refresh and Redesign Schedule
    10. Phase-In Caps
    D. Specific Technologies Considered for Application and NHTSA's
Estimates of Their Incremental Costs and Effectiveness
    1. What data sources did NHTSA evaluate?
    2. Individual Technology Descriptions and Cost/Effectiveness Estimates
    (a) Gasoline Engine Technologies
    (i) Overview
    (ii) Low Friction Lubricants (LUB)
    (iii) Engine Friction Reduction (EFR)
    (iv) Variable Valve Timing (VVT)
    1. Intake Cam Phasing (ICP)
    2. Coupled Cam Phasing (CCPS and CCPO)
    3. Dual Cam Phasing (DCP)
    (v) Discrete Variable Valve Lift (DVVLS, DVVLD, DVVLO)
    (vi) Continuously Variable Valve Lift (CVVL)
    (vii) Cylinder Deactivation (DEACS, DEACD, DEACO)
    (viii) Conversion to Double Overhead Camshaft Engine With Dual
Cam Phasing (CDOHC)
    (ix) Stoichiometric Gasoline Direct Injection (SGDI)
    (x) Combustion Restart (CBRST)
    (xi) Turbocharging and Downsizing (TRBDS)
    (xii) Cooled Exhaust Gas Recirculation Boost (EGRB)
    (b) Diesel Engine Technologies
    (i) Diesel Engine With Lean NO_X Trap (LNT) Catalyst
After-Treatment
    (ii) Diesel Engine With Selective Catalytic Reduction (SCR)
After-Treatment
    (c) Transmission Technologies
    (i) Improved Transmission Controls and Externals (IATC)
    (ii) Automatic 6-, 7- and 8-Speed Transmissions (NAUTO)
    (iii) Dual Clutch Transmissions/Automated Manual Transmissions (DCTAM)
    (iv) Continuously Variable Transmission (CVT)
    (v) 6-Speed Manual Transmissions (6MAN)
    (d) Hybrid and Electrification/Accessory Technologies
    (i) Overview
    (ii) Hybrid System Sizing and Cost Estimating Methodology
    (iii) Electrical Power Steering (EPS)
    (iv) Improved Accessories (IACC)
    (v) 12V Micro Hybrid (MHEV)
    (vi) High Voltage/Improved Alternator (HVIA)
    (vii) Integrated Starter Generator (ISG)
    (viii) Power Split Hybrid
    (ix) 2-Mode Hybrid
    (x) Plug-In Hybrid
    (e) Vehicle Technologies
    (i) Material Substitution (MS1, MS2, MS5)
    (ii) Low Drag Brakes (LDB)
    (iii) Low Rolling Resistance Tires (ROLL)
    (iv) Front or Secondary Axle Disconnect for Four-Wheel Drive Systems (SAX)
    (v) Aerodynamic Drag Reduction (AERO)
    (f) Technologies Considered But Not Included in the Final Rule Analysis
    (i) Camless Valve Actuation
    (ii) Lean-Burn Gasoline Direct Injection Technology
    (iii) Homogeneous Charge Compression Ignition
    (iv) Electric Assist Turbocharging
    E. Cost and Effectiveness Tables
V. Economic Assumptions Used in NHTSA's Analysis
    A. Introduction: How NHTSA Uses the Economic Assumptions in Its Analysis
    B. What economic assumptions does NHTSA use in its analysis?
    1. Determining Retail Price Equivalent
    2. Potential Opportunity Costs of Improved Fuel Economy
    3. The On-Road Fuel Economy `Gap'
    4. Fuel Prices and the Value of Saving Fuel
    5. Consumer Valuation of Fuel Economy and Payback Period
    6. Vehicle Survival and Use Assumptions
    7. Growth in Total Vehicle Use
    8. Accounting for the Rebound Effect of Higher Fuel Economy
    9. Benefits From Increased Vehicle Use
    10. Added Costs From Congestion, Crashes, and Noise

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    11. Petroleum Consumption and Import Externalities
    12. Air Pollutant Emissions
    (a) Impacts on Criteria Pollutant Emissions
    (b) Reductions in CO₂ Emissions
    (c) Economic Value of Reductions in CO₂ Emissions
    13. The Value of Increased Driving Range
    14. Discounting Future Benefits and Costs
    15. Accounting for Uncertainty in Benefits and Costs
VI. How NHTSA Sets the CAFE Standards
    A. Which attributes does NHTSA use to determine the standards?
    B. Which mathematical function does NHTSA use to set the standards?
    C. What other types of standards did commenters propose?
    D. How does NHTSA fit the curve and estimate the stringency that
maximizes net benefits to society?
    E. Why has NHTSA used the Volpe model to support its analysis?
VII. Determining the Appropriate Level of the Standards
    A. Analyzing the Preferred Alternative
    B. Alternative Levels of Stringency Considered for Establishment
as the Maximum Feasible Level of Average Fuel Economy
    C. EPCA Provisions Relevant to the Selection of the Final Standards
    1. 35 in 2020
    2. Annual Ratable Increase
    3. Maximum Feasibility and the Four Underlying EPCA Considerations
    (a) Technological Feasibility
    (b) Economic Practicability
    (c) Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
    (d) Need of the United States To Conserve Energy
    (i) Consumer Cost
    (ii) National Balance of Payments
    (iii) Environmental Implications
    (iv) Foreign Policy Considerations
    4. Comparison of Alternatives
    5. Other Considerations Under EPCA
    (a) Safety
    (b) AMFA Credits
    (c) Flexibility Mechanisms: Credits, Fines
    D. Analysis of Environmental Consequences in Selecting the Final Standards
    E. Picking the Final Standards
    1. Eliminating the Alternatives Facially Inconsistent With EPCA
    (a) No-Action Alternative
    (b) Technology Exhaustion Alternative
    2. Choosing Among the Remaining Alternatives
    (a) Difficulty and Importance of Achieving a Reasonable
Balancing of the Factors
    (b) The Correct Balancing of the Factors for Setting the MY 2011
Standards Is To Maximize Societal Net Benefits
VIII. Safety
    A. Summary of NHTSA's Approach in This Final Rule
    B. Background
    1. NHTSA's Early Studies
    2. The 2002 National Academy of Sciences Study
    3. NHTSA's updated 2003 Study
    4. Summary of Studies Prior to This Rulemaking
    B. Response to Comments in This Rulemaking on Safety and Vehicle Weight
    1. Views of Other Government Agencies
    2. Comments From Other Parties
    C. Comments on Other Issues Related to Safety
    1. Vehicle Compatibility Design Issues
    2. Whether Manufacturers Downweight in Response to Increased
CAFE Stringency
    3. Whether Flat Standards Are More or Less Harmful to Safety
Than Footprint-Based Standards
    4. Whether NHTSA Should Set Identical Targets for Passenger Cars
and Light Trucks for Safety Reasons
    5. Whether NHTSA Should Have Considered the 2002 NAS Report
Dissent in Deciding Not To Apply Material Substitution for Vehicles
Under 5,000 Pounds
IX. The Final Fuel Economy Standards for MY 2011
    A. Final Passenger Car Standard
    B. Final Light Truck Standard
    C. Energy and Environmental Backstop
    D. Combined Fleet Performance
    E. Costs and Benefits of Final Standards
    1. Benefits
    2. Costs
    F. Environmental Impacts of Final Standards
X. Other Fuel Economy Standards Required by EISA
XI. Vehicle Classification
    A. Summary of Comments
    B. Response to Comments
    1. This Rule Substantially Tightens NHTSA's Vehicle
Classification Definitions
    (a) Under Sec.  523.5(b), Only Vehicles That Actually Have 4WD
Will Be Classified as 4WD Vehicles
    (b) The Final Rule Amends Sec.  523.5(a)(4) To Prevent Gaming
That Might Jeopardize Fuel Savings Created by NHTSA's Clarified
Position on 2WD Vehicles
    2. Especially as Tightened by This Rule, NHTSA's Classification
Definitions Are More Difficult to Game Than Commenters Suggest
    3. Additional Changes in NHTSA's Classification Definitions
Would Not Result in Greater Fuel Savings and Lower CO₂ Emissions
    4. The Vehicle Classification Definitions Embodied in This Final
Rule Are Consistent With NHTSA's Statutory Authority and Respond to
the Ninth Circuit's Opinion
XII. Flexibility Mechanisms and Enforcement
    A. NHTSA's Request for Comment Regarding Whether the Agency
Should Consider Raising the Civil Penalty for CAFE Non-Compliance
    B. CAFE Credits
    C. Extension and Phasing Out of Flexible-Fuel Incentive Program
XIII. Test Procedure for Measuring Wheelbase and Track Width and
Calculating Footprint
    A. Test Procedure Execution
    B. Measured Value Tolerances
    C. Administrative and Editorial Issues
XIV. Sensitivity and Monte Carlo Analysis
XV. NHTSA's Record of Decision
XVI. Regulatory Notices and Analyses
    A. Executive Order 12866 and DOT Regulatory Policies and Procedures
    B. National Environmental Policy Act
    1. Clean Air Act (CAA)
    2. National Historic Preservation Act (NHPA)
    3. Executive Order 12898 (Environmental Justice)
    4. Fish and Wildlife Conservation Act (FWCA)
    5. Coastal Zone Management Act (CZMA)
    6. Endangered Species Act (ESA)
    7. Floodplain Management (Executive Order 11988 & DOT Order 5650.2)
    8. Preservation of the Nation's Wetlands (Executive Order 11990
& DOT Order 5660.1a)
    9. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle
Protection Act (BGEPA), Executive Order 13186
    10. Department of Transportation Act (Section 4(f))
    C. Regulatory Flexibility Act
    D. Executive Order 13132 (Federalism)
    E. Executive Order 12988 (Civil Justice Reform)
    F. Unfunded Mandates Reform Act
    G. Paperwork Reduction Act
    H. Regulation Identifier Number (RIN)
    J. Executive Order 13045
    K. National Technology Transfer and Advancement Act
    L. Executive Order 13211
    M. Department of Energy Review
    N. Privacy Act
XVII. Regulatory Text

I. Executive Overview

A. The President's January 26, 2009 Memorandum on CAFE Standards for
Model Years 2011 and Beyond

1. Rulemaking Background
    On May 2, 2008, NHTSA published a Notice of Proposed Rulemaking
entitled Average Fuel Economy Standards, Passenger Cars and Light
Trucks; Model Years 2011-2015, 73 FR 24352. In mid-October, the agency
completed and released a final environmental impact statement in
anticipation of issuing standards for those years. Based on its
consideration of the public comments and other available information,
including information on the financial condition of the automotive
industry, the agency adjusted its analysis and the standards and
prepared a final rule for MYs 2011-2015. On November 14, the Office of
Information and Regulatory Affairs (OIRA) of the Office of Management
and Budget cleared the rule as consistent with the Order.\1\ However,
issuance of the final rule was held in abeyance. On January 7, 2009,

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the Department of Transportation announced that the final rule would
not be issued, saying:
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    \1\ Record of OIRA's action can be found at 
http://www.reginfo.gov/public/do/eoHistReviewSearch (last visited March 8,
2009). To find the report on the clearance of the draft final rule,
select ``Department of Transportation'' under ``Economically
Significant Reviews Completed'' and select ``2008'' under ``Select
Calendar Year.''

    The Bush Administration will not finalize its rulemaking on
Corporate Fuel Economy Standards. The recent financial difficulties
of the automobile industry will require the next administration to
conduct a thorough review of matters affecting the industry,
including how to effectively implement the Energy Independence and
Security Act of 2007 (EISA). The National Highway Traffic Safety
Administration has done significant work that will position the next
Transportation Secretary to finalize a rule before the April 1, 2009
deadline.\2\
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    \2\ The statement can be found at http://www.dot.gov/affairs/
dot0109.htm (last accessed February 11, 2009).
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2. Requests in the President's Memorandum
    In light of the requirement to prescribe standards for MY 2011 by
March 30, 2009 and in order to provide additional time to consider
issues concerning the analysis used to determine the appropriate level
of standards for MYs 2012 and beyond, the President issued a memorandum
on January 26, 2009, requesting the Secretary of Transportation and
Administrator \3\ of the National Highway Traffic Safety Administration
NHTSA to divide the rulemaking into two parts: (1) MY 2011 standards,
and (2) standards for MY 2012 and beyond.
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    \3\ Currently, the National Highway Traffic Safety
Administration does not have an Administrator. Ronald L. Medford is
the Acting Deputy Administrator.
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(a) CAFE Standards for Model Year 2011
    The request that the final rule establishing CAFE standards for MY
2011 passenger cars and light trucks be prescribed by March 30, 2009
was based on several factors. One was the requirement that the final
rule regarding fuel economy standards for a given model year must be
adopted at least 18 months before the beginning of that model year (49
U.S.C. 32902(g)(2)). The other was that the beginning of MY 2011 is
considered for the purposes of CAFE standard setting to be October 1,
2010. As part of that final rule, the President requested that NHTSA
consider whether any provisions regarding preemption are consistent
with the EISA, the Supreme Court's decision in Massachusetts v. EPA and
other relevant provisions of law and the policies underlying them.
(b) CAFE Standards for Model Years 2012 and Beyond
    The President requested that, before promulgating a final rule
concerning the model years after model year 2011, NHTSA

    [C]onsider the appropriate legal factors under the EISA, the
comments filed in response to the Notice of Proposed Rulemaking, the
relevant technological and scientific considerations, and to the
extent feasible, the forthcoming report by the National Academy of
Sciences mandated under section 107 of EISA.

    In addition, the President requested that NHTSA further consider
whether any provisions regarding preemption are appropriate under
applicable law and policy.
3. Implementing the President's Memorandum
    In keeping with the President's remarks on January 26 for new
national policies to address the closely intertwined issues of energy
independence, energy security and climate change, and for the
initiation of serious and sustained domestic and international action
to address them, NHTSA will develop CAFE standards for MY 2012 and
beyond only after collecting new information, conducting a careful
review of technical and economic inputs and assumptions, and standard
setting methodology, and completing new analyses.
    For MY 2011, however, time limitations precluded the adoption of
this approach. As noted above, EPCA requires that standards for that
model year be established by the end of March of this year. Thus,
immediate decisions had to be made about the establishment of the MY
2011 standards. There was insufficient time between the issuance of the
President's memorandum in late January and the end of March to revisit
and, if and as appropriate, revise the extensive and complex analysis
in any substantively significant way. This is particularly so given the
requirement under EPCA to consult with the Environmental Protection
Agency and the Department of Energy on these complicated and important
technical matters. Decisions regarding those matters potentially affect
not just NHTSA's CAFE rulemaking, but also programs of other
departments and agencies. Accordingly, the methodologies, economic and
technological inputs and decisionmaking criteria used in this rule are
necessarily largely those developed by NHTSA in the fall of 2008.
    In looking ahead to the next CAFE rulemaking, the agency emphasizes
that while the methodologies, economic and technological inputs and
decisionmaking criteria used in this rule were well-supported choices
for the purposes of the MY 2011 rulemaking, they were not the only
reasonable choices that the agency could have made for that purpose.
Many of the key aspects of this rulemaking reflect decisions among
several reasonable alternatives. The choices made in the context of
last fall may or may not be the choices that will be made in the
context of the follow-on rulemaking.
    The deferral of action on the CAFE standards for the years after MY
2011 provides the agency with an opportunity to review its approach to
CAFE standard setting, including its methodologies, economic and
technological inputs, and decisionmaking criteria. It is reasonable to
anticipate that this process may lead to changes, given the further
review and analysis that will be conducted pursuant to the President's
request, and given the steady and potentially substantial evolution in
technical and policy factors relevant to the next CAFE rulemaking.
These factors include, but are not limited to, energy and climate
change needs and policy choices regarding goals and approaches to
achieving them, developments in domestic legislation and international
negotiations regarding those goals and approaches, the financial health
of the industry, technologies for reducing fuel consumption, fuel
prices, and climate change science and damage valuation.
    The goal of the review and re-evaluation will be to ensure that the
approach used for MY 2012 and thereafter produces standards that
contribute, to the maximum extent possible under EPCA/EISA, to meeting
the energy and environmental challenges and goals outlined by the
President. We will seek to craft our program with the goal of creating
the maximum incentives for innovation, providing flexibility to the
regulated parties, and meeting the goal of making substantial and
continuing reductions in the consumption of fuel. To that end, we are
committed to ensuring that the CAFE program for beyond MY 2011 is based
on the best scientific, technical, and economic information available,
and that such information is developed in close coordination with other
federal agencies and our stakeholders, including the states and the
vehicle manufacturers.
    We will also re-examine EPCA, as amended by EISA, to consider
whether additional opportunities exist for achieving the President's
goals. For example, EPCA authorizes, within relatively narrow limits
and subject to making specified findings, for increasing the amount of
civil penalties

[[Page 14200]]

for violating the CAFE standards.\4\ Further, while EPCA prohibits
updating the test procedures used for measuring passenger car fuel
economy, it places no such limitation on the test procedures for light
trucks.\5\ If the test procedures used for light trucks were revised to
provide for the operation of air conditioning during fuel economy
testing, vehicle manufacturers would have a regulatory incentive to
increase the efficiency and reduce the weight of air conditioning systems,
thereby reducing fuel consumption and tailpipe emissions of CO₂.
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    \4\ Under 49 U.S.C. 32904(c), EPA must ``use the same procedures
for passenger automobiles the Administrator used for model year 1975
(weighted 55 percent urban cycle and 45 percent highway cycle), or
procedures that give comparable results.''
    \5\ 49 U.S.C. 32912(c).
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    In response to the President's request that NHTSA consider whether
any provisions regarding preemption are consistent with EISA, the
Supreme Court's decision in Massachusetts v. EPA and other relevant
provisions of law and the policies underlying them, NHTSA has decided
not to include any provisions addressing preemption in the Code of
Federal Regulations at this time. The agency will re-examine the issue
of preemption in the content of its forthcoming rulemaking to establish
Corporate Average Fuel Economy standards for 2012 and later model years.

B. Energy Independence and Security Act of 2007

    The mandates in the Energy Independence and Security Act of 2007
(EISA) \6\ for reducing fuel consumption by motor vehicles and
expanding the production of renewable fuels represent major steps
forward in promoting energy independence and security and in addressing
climate change risks by reducing CO₂ emissions. EISA
requires the first statutory increase in fuel economy standards for
passenger automobiles (referred to below as ``passenger cars'') since
those standards were originally mandated in 1975. It also includes an
important reform--switching to ``attribute-based standards.'' This
switch will help to ensure that increased fuel efficiency does not come
at the expense of automotive safety.
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    \6\ Public Law 110-140, 121 Stat. 1492 (Dec. 18, 2007).
---------------------------------------------------------------------------

    More specifically, EISA made a number of important changes to EPCA.
EISA:
    • Establishes a statutory mandate to establish passenger car
standards for each model year at the maximum feasible level and
eliminates the old statutory default standard of 27.5 mpg for passenger
cars and the provision giving us discretion to amend that default
standard. Thus, given that there will no longer be a default standard,
the agency must act affirmatively to establish a new passenger car
standard for each model year.
    • Retains the requirement to establish separate standards
for passenger cars and light trucks and to set them at the maximum
feasible level, but sets forth special requirements for the MY 2011-
2020 standards.
    • The standards must increase ratably each year and, at a
minimum, be set sufficiently high to ensure that the average fuel
economy of the combined industry-wide fleet of all new passenger cars
and light trucks sold in the United States during MY 2020 is at least
35 mpg.\7\
---------------------------------------------------------------------------

    \7\ Although NHTSA previously established an attribute-based
standard for MY 2011 light trucks in its 2006 final rule, EISA
mandates a new rulemaking, reflecting new statutory considerations
and a new administrative record, and consistent with EPCA as amended
by EISA, to establish the standard for those light trucks.
---------------------------------------------------------------------------

    • Mandates the reforming of CAFE standards for passenger
cars by requiring that all CAFE standards be based on one or more
vehicle attributes related to fuel economy (like size or weight). Fuel
economy targets are set for individual vehicles and increase as the
attribute decreases and vice versa. For example, size-based (i.e.,
size-indexed) standards assign higher fuel economy targets to smaller
vehicles and lower ones to larger vehicles. Use of this approach helps
to ensure that the improvements in fuel economy do not come at the
expense of safety. NHTSA pioneered that approach in its last rulemaking
on CAFE standards for light trucks.
    • Requires that for each model year, beginning with MY 2011,
each manufacturer's domestically-manufactured passenger car fleet must
achieve a measured average fuel economy that is not less than 92
percent of the average fuel economy of the combined industry-wide fleet
of domestic and non-domestic passenger cars sold in the United States
in that model year.
    • Limits to five the number of model years for which
standards can be established in a single rulemaking.
    • Provides greater flexibility for automobile manufacturers
by (a) increasing from three to five the number of years that a
manufacturer can carry forward the compliance credits it earns by
exceeding CAFE standards, (b) allowing a manufacturer to transfer the
credits it has earned from one of its compliance categories of
automobiles to another class, and (c) authorizing the trading of
credits between manufacturers.

C. Notice of Proposed Rulemaking for MYs 2011-2015 and Request for New
Product Plans

1. Key Economic Values for Benefits Computations and Standard Setting
    NHTSA's analysis of the proposed and alternative CAFE standards in
the Notice of Proposed Rulemaking (NPRM) \8\ relied on a range of
information, economic estimates, and input parameters. These economic
assumptions play a role in the determination of the level of the
standards, with some having greater impacts than others. The cost of
technologies, the price of gasoline, and discount rate used for
discounting future benefits had the greatest influence over the level
of the standards. In order of impact, the full list of the economic
assumptions is as follows: (1) Technology cost; (2) fuel prices; (3)
discount rate; (4) oil import externalities; (5) rebound effect; (6)
criteria air pollutant damage costs; (7) carbon costs. The table below
shows the NPRM assumptions on which the agency received the most
extensive public comment.
---------------------------------------------------------------------------

    \8\ 73 FR 24352, May 2, 2008. In a separate notice published on
the same day, the agency requested automobile manufacturers to
submit new product plans for MYs 2011-15. 73 FR 24190.
    \9\ Although Table V-3 Economic Values for Benefits Computations
in the NPRM indicated that all of the values in that table were
2006$, several values were actually in 2005$. Thus, the monopsony
component, which was shown in that table as $0.176, should have been
shown as $0.182. Likewise, the price shock component should have
been $0.113, instead of $0.109. The sum of those two values should
have been $0.295, not $0.285.

  Table I-1--NPRM Key Economic Values for Benefits Computations (2006$)
                                   \9\
------------------------------------------------------------------------

------------------------------------------------------------------------
Fuel Prices (average retail gasoline price per gallon, 2011-       $2.34
 30).........................................................
Discount Rate Applied to Future Benefits.....................         7%
Economic Costs of Oil Imports ($/gallon):
    ``Monopsony'' Component..................................     $0.182

[[Page 14201]]

    Price Shock Component....................................     $0.113
    Military Security Component..............................  .........
                                                              ----------
        Total Economic Costs.................................     $0.295
Emission Damage Costs:
    Carbon Dioxide ($/metric ton)............................      $7.00
    Annual Increase in CO2 Damage Cost.......................       2.4%
------------------------------------------------------------------------

2. Standards
(a) Classification of Vehicles
    In the NPRM, the agency classified the vehicles subject to the
proposed standards as passenger cars or as light trucks in the same way
that the vehicles had been traditionally classified under the CAFE
program. In particular, sport utility vehicles (SUVs), mini-vans and
pickup trucks were classified as light trucks. However, the agency
raised the possibility of reclassifying many of the two-wheel drive
SUVs as passenger cars for the purposes of the final rule.
(b) Stringency
    We proposed setting separate attribute-based fuel economy standards
for passenger cars and light trucks consistent with the size-based
approach that NHTSA used in establishing the light truck standards for
MY 2008-2011 light trucks.
    Compared to the April 2006 final rule that established those
attribute-based standards, the NPRM more thoroughly evaluated the value
of the costs and benefits of setting CAFE standards. This was important
because assumptions regarding projected gasoline prices, along with
assumptions about the value of reducing the negative externalities
(economic and environmental) from producing and consuming fuel, were
based on changed economic, environmental, and energy security
conditions. These environmental externalities include, among other
things, an estimation of the value of reducing tailpipe emissions of
CO₂.\10\
---------------------------------------------------------------------------

    \10\ The externalities included in our analysis do not, however,
include those associated with the reduction of the other GHG emitted
by automobiles, i.e., methane (CH₄), nitrous oxide
(N₂O), and hydroflurocarbons (HFCs). Actual air
conditioner operation is not included in the test procedures used to
obtain both (1) emission rates for purposes of determining
compliance with EPA criteria pollutant emission standards and (2)
fuel economy values for purposes of determining compliance with
NHTSA CAFE standards, although air conditioner operation is included
in ``supplemental'' federal test procedures used to determine
compliance with corresponding and separate EPA criteria pollutant
emission standards. As noted above, EPCA precludes basing passenger
car standards on those other test procedures, but places no such
limit on the test procedures used as the basis for light truck standards.
---------------------------------------------------------------------------

    In light of EISA and the need to balance the statutory
considerations in a way that reflects the current need of the nation to
conserve energy, including the current assessment of climate change
risks, the agency revisited the various assumptions used to determine
the level of the standards. Specifically, the agency used higher
gasoline prices and higher estimates for energy security values ($0.29
per gallon instead of $0.09 per gallon). The agency also monetized
carbon dioxide (at $7.00/ton), which it did not do in the previous
rulemaking, and expanded the list of technologies it used in assessing
the capability of manufacturers to improve fuel economy. In addition,
the agency used cost estimates that reflect economies of scale and
estimated ``learning''-driven reductions in the cost of technologies as
well as quicker penetration rates for advanced technologies.
    The agency could not set out the exact level of CAFE that each
manufacturer would be required to meet for each model year under the
passenger car or light truck standards since the levels would depend on
information that would not be available until the end of each of the
model years, i.e., the final actual production figures for each of
those years. The agency could, however, project what the industry-wide
level of average fuel economy would be for passenger cars and for light
trucks if each manufacturer produced its expected mix of automobiles
and just met its obligations under the proposed ``optimized'' standards
for each model year. Adjacent to each average fuel economy figure in
the NPRM was the estimated associated level of tailpipe emissions of
CO₂ that would be achieved.\11\
---------------------------------------------------------------------------

    \11\ Given the contributions made by CAFE standards to
addressing not only energy independence and security, but also to
reducing tailpipe emissions of CO₂, fleet performance was
stated in the above discussion both in terms of fuel economy and the
associated reductions in tailpipe emissions of CO₂ since
the CAFE standards would have the practical effect of limiting those
emissions approximately to the indicated levels during the official
CAFE test procedures established by EPA. The relationship between
fuel consumption and carbon dioxide emissions is discussed ubiquitously,
such as at www.fueleconomy.gov, a fuel economy-related
web site managed by DOE and EPA (see http://www.fueleconomy.gov/feg/
contentIncludes/co2_inc.htm, which provides a rounded value of 20
pounds of CO₂ per gallon of gasoline). (Last accessed
March 8, 2009.) The CO₂ emission rates shown were based
on gasoline characteristics. Because diesel fuel contains more
carbon (per gallon) than gasoline, the presence of diesel engines in
the fleet--which NHTSA expects to increase in response to the
proposed CAFE standards--will cause the actual CO₂
emission rate corresponding to any given CAFE level to be slightly
higher than shown here. (The agency projected that 4 percent of the
MY 2015 passenger car fleet and 10 percent of the MY 2015 light
truck fleet would have diesel engines.) Conversely (and
hypothetically), applying the same CO₂ emission standard
to both gasoline and diesel vehicles would discourage manufacturers
from improving diesel engines, which show considerable promise as a
means to improve fuel economy.
---------------------------------------------------------------------------

    For passenger cars:

MY 2011: 31.2 mpg (285 g/mi of tailpipe emissions of CO₂)
MY 2012: 32.8 mpg (271 g/mi of tailpipe emissions of CO₂)
MY 2013: 34.0 mpg (261 g/mi of tailpipe emissions of CO₂)
MY 2014: 34.8 mpg (255 g/mi of tailpipe emissions of CO₂)
MY 2015: 35.7 mpg (249 g/mi of tailpipe emissions of CO₂)

    For light trucks:

MY 2011: 25.0 mpg (355 g/mi of tailpipe emissions of CO₂)
MY 2012: 26.4 mpg (337 g/mi of tailpipe emissions of CO₂)
MY 2013: 27.8 mpg (320 g/mi of tailpipe emissions of CO₂)
MY 2014: 28.2 mpg (315 g/mi of tailpipe emissions of CO₂)
MY 2015: 28.6 mpg (310 g/mi of tailpipe emissions of CO₂)

    The combined industry-wide average fuel economy (in miles per
gallon, or mpg) levels (in grams per mile, or g/mi) for both cars and
light trucks, if each manufacturer just met its obligations under the
proposed ``optimized'' standards for each model year, would be as follows:

MY 2011: 27.8 mpg (2.5 mpg increase above MY 2010; 320 g/mi CO₂)
MY 2012: 29.2 mpg (1.4 mpg increase above MY 2011; 304 g/mi CO₂)
MY 2013: 30.5 mpg (1.3 mpg increase above MY 2012; 291 g/mi CO₂)
MY 2014: 31.0 mpg (0.5 mpg increase above MY 2013; 287 g/mi CO₂)
MY 2015: 31.6 mpg (0.6 mpg increase above MY 2014; 281 g/mi CO₂)

    The annual average increase during this five year period was approximately

[[Page 14202]]

4.5 percent. Due to the uneven distribution of new model introductions
during this period and to the fact that significant technological
changes could be most readily made in conjunction with those
introductions, the annual percentage increases were greater in the
early years in this period.
(c) Benefits and Costs
(i) Benefits
    We estimated that the proposed standards for the five-year period
would save approximately 54.7 billion gallons of fuel (18.7 billion
gallons for passenger cars and 36 billion gallons for light trucks) and
reduce tailpipe CO₂ emissions by 521 million metric tons
(178 million metric tons for passenger cars and 343 million metric tons
for light trucks) over the lifetime of the vehicles sold during those
model years, compared to the fuel use and emissions reductions that
would occur if the standards remained at the adjusted baseline (i.e.,
the higher of manufacturer's plans and the manufacturer's required
level of average fuel economy for MY 2010).
    We estimated that the value of the total benefits of the proposed
standards would be approximately $88 billion ($31 billion for passenger
cars and $57 billion for light trucks) over the lifetime of the
vehicles sold during those model years.
(ii) Costs
    The total costs for manufacturers to comply with the standards for
the five-year period would be approximately $47 billion ($16 billion
for passenger cars and $31 for light trucks) compared to the costs they
would incur if the standards remained at the adjusted baseline.
(d) Effect of Flexibilities on Benefits and Costs
    The above benefit and cost estimates did not reflect the
availability and use of flexibility mechanisms, such as compliance
credits and credit trading, because EPCA prohibits NHTSA from
considering the effects of those mechanisms in setting CAFE standards.
However, the agency noted that, in reality, manufacturers were likely
to rely to some extent on flexibility mechanisms provided by EPCA and
would thereby reduce the cost of complying with the proposed standards
to a meaningful extent.
3. Credits
    NHTSA also proposed a new Part 536 on trading and transferring
``credits'' earned for exceeding applicable CAFE standards.\12\ Under
the proposed Part 536, credit holders (including, but not limited to,
manufacturers) would have credit accounts with NHTSA, and would be able
to hold credits, apply them to compliance with CAFE standards, transfer
them to another ``compliance category'' for application to compliance
there, or trade them. Traded credits would be subject to an
``adjustment factor'' to ensure total oil savings are preserved, as
required by EISA. EISA also prohibits credits earned before MY 2011
from being transferred, so NHTSA developed several regulatory
restrictions on trading and transferring to facilitate Congress' intent
in this regard.
---------------------------------------------------------------------------

    \12\ Congress required that DOT establish a credit
``transferring'' regulation, to allow individual manufacturers to
move credits from one of their fleets to another (e.g., using a
credit earned for exceeding the light truck standard for compliance
in the domestic passenger car standard). Congress allowed DOT to
establish a credit ``trading'' regulation, so that credits may be
bought and sold between manufacturers and other parties.
---------------------------------------------------------------------------

4. Preemption
    In the proposal, the agency continued its discussion, conducted in
a series of rulemaking proposals and final rules spanning a six-year
period, of the issue of preemption of state regulations regulating
tailpipe emissions of GHGs, especially carbon dioxide.

D. Brief Summary of Public Comments on the NPRM

    Standard stringency: Automobile manufacturers argued that the
standards, especially those for light trucks in the early years, should
be lower. Environmental and consumer groups and states wanted higher
standards throughout the five-year period.
    Footprint attribute: Commenters generally supported the agency's
choice of footprint as an attribute, although several urged consideration
of additional attributes and a few argued for different attributes.
    Setting standards at levels at which net benefits are projected to
be maximized (optimized standards) vs. using other decision-making
formulae: A consumer group urged setting standards at the optimized +
50% alternative level, while some environmental groups favored setting
them at levels at which total benefits equal total costs. Manufacturers
contended that the optimized approach does not assure economic
practicability, especially for manufacturers needing to borrow at high
interest rates to finance design changes. A manufacturer association
and other commenters said agency did not assess the ability of the
manufacturers to raise the capital necessary to develop and implement
sufficient technologies.
    Front-loading/ratable increase: Some commenters, especially the
manufacturers, argued that the statutory requirement for ``ratable''
increases in standards means that the increases must be proportional or
at least must not be disproportionately large or small in relation to
one another. They did not discuss how that requirement is to be read
together with either the statutory requirement to set standards for
each model year at the level that is the maximum feasible level for
that model year, or the separate statutory requirement for the overall
fleet to achieve at least 35 mpg.
    Key economic and other assumptions affecting stringency--
    • Technology costs and effectiveness--The manufacturers said
that NHTSA underestimated the costs. A manufacturer association
submitted a study by Sierra Research challenging the cost and
effectiveness estimates developed by NHTSA and EPA for the NPRM.
    • Fuel prices--A manufacturer association and dealer
associations said that Energy Information Administration's (EIA)
reference case should be used. Environmental and consumer groups,
states and some members of Congress said NHTSA should use at least the
EIA high price case. The EIA Administrator stated at a June 2008
Congressional hearing that the then current prices were at or above
EIA's high case and that he would use that case in the CAFE rulemaking.
    • Discount rate--The manufacturers said the rate should be
at least 7%, while environmental and consumer groups and states said it
should not be greater than 3 percent.
    • Military costs--Many commenters argued that NHTSA should
place a value other than zero on military security externalities.
    • Social cost of carbon--Some commenters said the domestic
value of reducing CO₂ emissions should be lower than the
NPRM value of $7; environmental and consumer groups and states said it
should be much higher. The former tended to favor a value reflecting
damage to the U.S. only, while the latter favored a global value.
    • Weight reduction--States and environmental and consumer
groups said that NHTSA should consider downweighting for vehicles under
5,000 lbs; an insurance safety research group supported the proposal
not to consider that.
    Rate of application of advanced technologies (diesels and hybrids):

[[Page 14203]]

Manufacturers argued that NHTSA was overly optimistic; environmental/
consumer groups and states argued that NHTSA relied too much on
manufacturer product plans and should require manufacturers to improve
fuel economy more quickly.
    Fitting of standard curve to data: A manufacturer association and
two manufacturers questioned the empirical and technical bases for the
shape of the curves.
    Steepness of car standard curve: The two manufacturer associations
and several environmental groups said that the proposed car curves were
too steep: manufacturers did so because of impracticability;
environmental groups, because of what they saw as an incentive to
increase vehicle size.
    Backstop standard: Environmental and consumer groups argued that
NHTSA must establish absolute backstop standards for all vehicles.
Manufacturers argued that anti-backsliding features of the attribute-
based standards function as a backstop.
    ``SUV loophole'': In general, manufacturers agreed with the
agency's decision to reclassify 2 WD SUVs from the light truck fleet to
the passenger car fleet, as long as this change would take effect after
MY 2010. Environmental and consumer groups argued that the
classification system should be further revised to address ``gaming''
and did not address the agency's justification for the proposed revisions.
    Credits: Manufacturers argued that earned carry forward/back
credits, as long as they were not acquired by transfer or trade, should
be available to meet the minimum standard for domestic cars.
Manufacturers also requested flexibility to manage their own credit
shortfalls, instead of having the agency automatically decide upon and
implement plans for them. One manufacturer asked that the new statutory
provision giving credits a 5 year life be applied to all existing credits,
instead of only those credits earned in model year 2009 or thereafter.
    Impact on small/limited-line manufacturers: Small/limited-line
manufacturers argued that the proposed standards impact them more than
full-line manufacturers, and requested either that the car standards be
set based on the plans of all car manufacturers, instead of just the
seven largest, or that some alternative form of standard be set for them.
    Preemption: Manufacturers argued that the effects of state
regulation of CO₂ emissions are ``related to'' the
regulation of fuel economy within the meaning of section 32919(a) of
EPCA; environmental and consumer groups and states argued that the
purpose of regulating CO₂ emissions may overlap with, but is
different from the purpose of regulating fuel economy

E. New Information Received or Developed by NHTSA Between the NPRM and
Final Rule

    There were a number of changes after the NPRM that made possible
analytical improvements for the final rule. These changes also caused
the CAFE levels, fuel savings, and CO₂ emissions that are
attributable to each alternative and scenario examined for this final
rule to differ from those presented in the NPRM.
1. New Manufacturer Product Plans
    As discussed in the NPRM, the agency requested new product plans
from manufacturers to aid in determining appropriate standards for the
final rule. The product plans submitted in May 2007 naturally did not
take into consideration the later passage of EISA and its minimum 35
mpg combined fleet requirement by 2020. In addition, during that time,
the fuel prices rose substantially.
    The new product plans submitted in the summer of 2008 in response
to the NPRM reflect those new realities in a couple of ways. First,
companies provided product plans that reflected the manufacturers'
implementation of some of the cost-effective technologies that the
agency had projected in the NPRM. This increased the baseline against
which the fuel saving from the standards are calculated. As a result,
some of the savings and CO₂ emission reductions that were
attributed in the NPRM to the rulemaking action are now attributed to
actions taken ``independently by the manufacturers, as reflected in the
improved product plans. Second, the size of the overall fleet had
declined from the time of the NPRM to the final rule, resulting in
fewer vehicle miles traveled.
2. Revised Assessment of Technology Effectiveness and Costs
    With the aid of an expert consulting firm, NHTSA revised the
technology assumptions in the NPRM based on comments and new
information received during the comment period and used those revised
assumptions for analyzing alternatives and scenarios for the Final
Environmental Impact Assessment (FEIS) and final rule. In several
cases, the agency concluded on the basis of analysis of that additional
information that the costs in the NPRM and Draft EIS were
underestimated and benefits overestimated, and in most cases, these
estimates were not well differentiated by vehicle class. The agency
also revised its phase-in schedule of the technologies to account more
fully for needed lead time.
3. Final Environmental Impact Statement
    With the aid of an expert consulting firm, the agency completed a
final environmental impact statement (FEIS), the first FEIS prepared by
a federal agency to examine climate change issues comprehensively.\13\
The FEIS examines the climate change and other environmental effects of
the changes in emissions of greenhouse gases and criteria air
pollutants resulting from a wide variety of alternative standards. For
this purpose, the agency relied extensively on the 2007 reports of the
Intergovernmental Panel on Climate Change and contracted with ICF
International to perform climate modeling. That impact statement also
carefully assesses the cumulative impacts of past, present and future
CAFE rulemakings.
---------------------------------------------------------------------------

    \13\ The Final Environmental Impact Statement can be found on
the NHTSA website at http://www.nhtsa.gov/staticfiles/DOT/NHTSA/
Rulemaking/Rules/Associated%20Files/CAFE%20FEIS.pdf (last accessed
March 8, 2009).
---------------------------------------------------------------------------

F. Final Rule for MY 2011

1. Introduction
    As discussed above, and at length later in this rule, NHTSA's
review and analysis of comments on its proposal have led the agency to
make many changes to its methods for analyzing potential MY 2011 CAFE
standards, as well as to the data and other information to which the
agency has applied these methods. The following are some of the more
prominent changes:
    • After receiving, reviewing, and integrating updated
product plans from vehicle manufacturers, NHTSA has revised its
forecast of the future light vehicle market.
    • NHTSA has changed the methods and inputs it uses to
represent the applicability, availability, cost, and effectiveness of
future fuel-saving technologies.
    • NHTSA has based its fuel price forecast on the AEO 2008
High Case price scenario instead of the AEO 2008 Reference Case.
    • NHTSA has reduced mileage accumulation estimates (i.e.,
vehicle miles traveled) to levels consistent with this increased fuel
price forecast.
    • NHTSA has applied increased estimates for the value of oil
import externalities.
    • NHTSA has now included all manufacturers--not just the largest

[[Page 14204]]

seven--in the process used to fit the curve and estimate the stringency
at which societal net benefits are maximized.
    • NHTSA has tightened its application of the definition of
``nonpassenger automobiles,'' causing a reassigning of over one million
vehicles from the light truck fleet to the passenger car fleet.
    • NHTSA has now fitted the shape of the curve based on
``exhaustion'' of available technologies instead of on manufacturer-
level optimization of CAFE levels.
    These changes affected both the shape and stringency of the
attribute-based standards. Taken together, the last three of the above
changes reduced the steepness of the curves defining fuel economy
targets for passenger cars, and also less significantly reduced the
steepness of the light truck curves.
    NHTSA recognizes that, when considered in isolation, some of the
above changes might, on an ``intuitive'' basis, be expected to result
in higher average required fuel economy levels. For example, setting
aside other changes, the increase in estimated fuel prices and oil
import externalities might be expected to result in higher average fuel
economy requirements. On the other hand, again setting aside other
changes, the updated characterization of fuel-saving technologies, the
reassignment of over one million vehicles to the passenger car fleet,
the reduction in mileage accumulation, and the inclusion of all
manufacturers in the standard setting process might intuitively be
expected to result in lower average fuel economy requirements.
    However, there are theoretical reasons for which even such isolated
expectations might not be met. For example, if a change in inputs
caused societal net benefits to increase equally at all stringencies,
the level of stringency that maximized societal net benefits would
remain unchanged, although it would produce greater net benefits after
the change in inputs. Further, some of the changes listed above are
interdependent, making it difficult, if not impossible, to isolate the
effect attributable to every change. For example, NHTSA applied the
reduced mileage accumulation, which reduces the benefits of adding
technology, in conjunction with applying increased fuel prices, which
increase the benefits of adding technology.
    There is no obvious way to determine reliably the net effect of all
these (and other) changes short of applying all of the revised values
to the model and looking at the results. We devote a good deal of the
preamble discussion to these changes and their net implications for the
standards in this rule.
    The final rule reflects the combined effect of all of these
changes, as well as minor changes not listed above.
2. Key Economic Values for Benefits Computations
    NHTSA's analysis of the final standards and alternative CAFE
standards for MYs 2011 relied on an expanded range of information and
revised economic estimates and input parameters. These economic
assumptions played a role in the determination of the level of the
standards, with some having greater impacts than others. The agency,
following discussions with other agencies of the U.S. government,
updated its estimate of the global value of the social cost of carbon
(i.e., the value of reducing CO₂ emissions) and developed a
domestic value, as well as updated its estimates for other
externalities based on comments and updated information received during
the comment period. Specifically, the final standards are based the
following revised economic assumptions:

   Table I-2--Final Rule Key Economic Values for Benefits Computations
                                 (2007$)
------------------------------------------------------------------------

------------------------------------------------------------------------
Fuel Prices (average retail gasoline price per gallon, 2011-       $3.33
 30)........................................................
Discount Rates Applied to Future Benefits:
    Reductions in CO2 Emissions.............................          3%
    Other Benefits..........................................          7%
Economic Costs of Oil Imports ($/gallon):
     ``Monopsony'' Component................................       $0.27
    Price Shock Component...................................       $0.12
    Military Security Component.............................  ..........
                                                             -----------
        Total Economic Costs................................       $0.39
Emission Damage Costs:
    Carbon Dioxide ($/metric ton):
        (U.S. domestic value)...............................    14 $2.00
        (Mean global value from Tol (2008)).................      $33.00
        (One standard deviation above mean global value)....      $80.00
    Annual Increase in CO2 Damage Cost......................        2.4%
------------------------------------------------------------------------

3. Standards
(a) Classification
    In the NPRM, the two-wheel drive sport-utility vehicles (2WD SUVs)
were classified in the same way they were classified by their
manufacturers in their May 2007 product plans. For the purposes of this
final rule, however, they were reclassified in accordance with the
discussion in the NPRM of the proper classification of those vehicles.
This resulted in the shifting of over one million two-wheel drive
vehicles from the truck fleet to the car fleet. This shift had the
effect of lowering the average fuel economy for cars due to the
inclusion of vehicles previously categorized as trucks, and lowered
average fuel economy for trucks because the truck category now has a
larger proportion of heavier trucks. Following our careful
consideration of the public comments on that discussion, we reaffirm
the reasoning and conclusions of that discussion.
---------------------------------------------------------------------------

    \14\ Derived from NHTSA's $33 per metric ton estimate of the
global value of reducing CO₂ emissions.
---------------------------------------------------------------------------

(b) Stringency
    This final rule establishes footprint-based fuel economy standards
for MY 2011 passenger cars and light trucks.
    Each vehicle manufacturer's required level of CAFE is based on
target levels of average fuel economy set for vehicles of different
sizes and on the distribution of that manufacturer's vehicles among
those sizes. Size is defined by vehicle footprint. The curves defining
the performance target at each footprint reflect the technological and
economic capabilities of the industry. The target for each footprint is
the same for all

[[Page 14205]]

manufacturers, regardless of differences in their overall fleet mix.
Compliance will be determined by comparing a manufacturer's
harmonically averaged fleet fuel economy levels in a model year with a
required fuel economy level calculated using the manufacturer's actual
production levels and the targets for each footprint of the vehicles
that it produces.
    The standards were developed with the aid of a computer model
(known as the ``Volpe Model''). NHTSA uses the Volpe model as a tool to
inform its consideration of potential CAFE standards for MY 2011. The
Volpe model requires the following types of information as inputs: (1)
A forecast of the future vehicle market, (2) estimates of the
availability, applicability, and incremental effectiveness and cost of
fuel-saving technologies, (3) estimates of vehicle survival and mileage
accumulation patterns, the rebound effect, future fuel prices, the
social cost of carbon, and many other economic factors, (4) fuel
characteristics and vehicular emissions rates, and (5) coefficients
defining the shape and level of CAFE curves to be examined. These
inputs are selected by the agency based on best available information
and data.
    The agency analyzed seven regulatory alternatives, one of which
maximizes net benefits within the limits of available information and
is known as the ``optimized standards.'' The optimized standards are
set at levels, such that, considering all of the manufacturers
together, no other alternative is estimated to produce greater net
benefits to society. Those net benefits reflect the difference between
(1) the present value of all monetized benefits of the standards, and
(2) the total costs of all technologies applied in response to the
standards. Many of the other alternative standards exceed the level at
which the estimated net benefits are maximized, including one
alternative in which standards are set at a level at which total costs
equal total benefits and another alternative set at a level of maximum
technology application without regard to cost. For each alternative,
the model estimates the costs associated with additional technology
utilization, as well as accompanying changes in travel demand, fuel
consumption, fuel outlays, emissions, and economic externalities
related to petroleum consumption and other factors. These comprehensive
analyses, which also included scenarios with different economic input
assumptions as presented in the Final Environmental Impact Statement
(FEIS) and the Final Regulatory Impact Analysis (FRIA), informed and
contributed to the agency's consideration of the ``need of the United
States to conserve energy,'' as well as the other statutory factors in
49 U.S.C. 32902(f), and safety impacts. In addition, they informed the
agency's consideration of environmental impacts under NEPA. The agency
identified the optimized standards as its preferred alternative in the FEIS.
    NHTSA considered the results of analyses conducted on alternative
standards for MY 2011 by the Volpe model and analyses conducted outside
of the Volpe model, including analysis of the impacts of emissions of
carbon dioxide and criteria pollutants, and analysis of which
technologies are available now and which will not be available until
the longer term, and analysis of the extent to which changes in vehicle
prices and fuel economy might affect vehicle production and sales.
Further, NHTSA considered whether it could expedite the entry of any
technologies into the market through these standards. Using all of this
information, the agency considered the governing statutory factors,
along with environmental issues and other relevant societal issues such
as safety, and is promulgating the maximum feasible standards based on
its best judgment on how to balance these factors.
    Upon a considered analysis of all information available, including
all information submitted to NHTSA in comments, the agency is adopting
the ``optimized standard'' alternative as the final standards for MY
2011.\15\ We note that we used the Volpe Model in the last two light
truck rulemakings and that we adopted ``optimized standards'' in the
last light truck rulemaking. We believe that use of the Volpe model is
a valid and objective way to establish attribute-based standards under
EPCA. Further, by limiting the standards to levels that can be achieved
using technologies each of which are estimated to provide benefits that
at least equal its costs, the net benefit maximization approach helps
to assure the marketability of the manufacturers' vehicles and thus
economic practicability of the standards.
---------------------------------------------------------------------------

    \15\ The agency notes, for NEPA purposes, that the ``optimized
standard'' alternative adopted as the final standards corresponds to
the ``Optimized Mid-2'' scenario described in Section 2.2.2 of the FEIS.
---------------------------------------------------------------------------

    Providing this assurance assumes increased importance in view of
current and anticipated conditions in the industry in particular and
the economy in general. As has been widely reported in the public
domain throughout this rulemaking, and as shown in public comments, the
national and global economies raise serious concerns. Even before those
recent developments, the automobile manufacturers were already facing
substantial difficulties. Together, these problems have made NHTSA's
economic practicability analysis particularly important and challenging
in this rulemaking.
    The agency cannot set out the exact level of CAFE that each
manufacturer will be required to meet for MY 2011 under the passenger
car or light truck standards because the levels will depend on
information that will not be available until the end of that model
year, i.e., the final actual production figures for that year. The
agency can, however, project what the industry-wide level of average
fuel economy will be for passenger cars and for light trucks if each
manufacturer produced its expected mix of automobiles and just met its
obligations under the ``optimized'' standards. Adjacent to each average
fuel economy figure is the estimated associated level of tailpipe
emissions of CO₂ that will be achieved.\16\
---------------------------------------------------------------------------

    \16\ See supra note 6.

MY 2011 passenger cars: 30.2 mpg (294 g/mi of tailpipe emissions of CO₂)
MY 2011 light trucks: 24.1 mpg (369 g/mi of tailpipe emissions of CO₂)

    The combined industry-wide average fuel economy (in miles per
gallon, or mpg) levels (in grams per mile, or g/mi) for both cars and
light trucks, if each manufacturer just met its obligations under the
``optimized'' standards, will be as follows:

MY 2011: 27.3 mpg (2.0 mpg increase above MY 2010; 326 g/mi CO₂)

    In addition, per EISA, each manufacturer's domestic passenger fleet
is required in MY 2011 to achieve 27.5 mpg or 92 percent of the CAFE of
the industry-wide combined fleet of domestic and non-domestic passenger
cars \17\ for that model year, whichever is higher. This requirement
results in the following alternative minimum standard (not attribute-
based) for domestic passenger cars:
---------------------------------------------------------------------------

    \17\ Those numbers set out several paragraphs above.

MY 2011: 27.8 mpg (320 g/mi of tailpipe emissions of CO₂)
(c) Benefits and Costs
(i) Benefits
    We estimate that the MY 2011 standards will save approximately 887
million gallons of fuel and reduce tailpipe emissions of CO₂
by 8.3 million metric tons.

[[Page 14206]]

    For passenger cars, the standards will save approximately 463
million gallons of fuel and reduce tailpipe CO₂ emissions by
4.3 million metric tons over the lifetime of the MY 2011 passenger
cars, compared to the fuel savings and emissions reductions that would
occur if the standards remained at the adjusted baseline (i.e., the
higher of manufacturer's plans and the manufacturer's required level of
average fuel economy for MY 2010). The value of the total benefits of
the passenger car standards are estimated to be slight over $1 billion
\18\ over the lifetime of the MY 2011 cars. This estimate of societal
benefits includes direct impacts from lower fuel consumption as well as
externalities and also reflects offsetting societal costs resulting
from the rebound effect.
---------------------------------------------------------------------------

    \18\ The slightly over $1 billion estimate is based on a 7
percent discount rate for valuing future impacts.
---------------------------------------------------------------------------

    We estimate that the standards for light trucks will save
approximately 424 million gallons of fuel and prevent the tailpipe
emission of 4.0 million metric tons of CO₂ over the lifetime
of the light trucks sold during those model years, compared to the fuel
savings and emissions reductions that would occur if the standards
remained at the adjusted baseline. The value of the total benefits of
the light truck standards will be approximately $921 million \19\ over
the lifetime of the MY 2011 light trucks. This estimate of societal
benefits includes direct impacts from lower fuel consumption as well as
externalities and also reflects offsetting societal costs resulting
from the rebound effect.
---------------------------------------------------------------------------

    \19\ The $921 million estimate is based on a 7 percent discount
rate for valuing future impacts.
---------------------------------------------------------------------------

(ii) Costs
    NHTSA estimates that, as a result of the final standards for MY
2011, manufacturers will incur costs of approximately $1.460 billion
for additional fuel-saving technologies, compared to the costs they
would incur if the standards remained at MY 2010 levels.
    For passenger cars, we estimate that manufacturers will incur costs
of approximately $595 million for additional fuel-saving technologies,
compared to the costs they would incur if the standards remained at MY
2010 levels. Our estimate is that the resulting vehicle price increases
to buyers of MY 2011 passenger cars will be recovered or paid back \20\
in additional fuel savings in an average of 4.4 years (53 months),
assuming fuel prices ranging from $2.95 per gallon in 2011 to $3.62 per
gallon in 2030.\21\
---------------------------------------------------------------------------

    \20\ See Section V.B.5 below for discussion of payback period.
    \21\ The fuel prices (shown here in 2007 dollars) used to
calculate the length of the payback period are those projected
(Annual Energy Outlook 2008) by the Energy Information Administration
over the life of the MY 2011 light trucks, not current fuel prices.
---------------------------------------------------------------------------

    The agency further estimates that, in response to the final
standards for MY 2011 light trucks, manufacturers will incur costs of
approximately $865 million for additional fuel-saving technologies,
compared to the costs they would incur if the standards remained at MY
2010 levels. We estimate that the resulting vehicle price increases to
buyers of MY 2011 light trucks will be paid back in additional fuel
savings in an average of 7.7 years (92 months), assuming the same fuel
prices as mentioned above.
(d) Flexibilities
    Manufacturers are likely to rely extensively on flexibility
mechanisms provided by EPCA (as described in Section XII) and will
thereby reduce the costs (and benefits) of complying with the standards
to a meaningful extent. However, the benefit and compliance cost
estimates used by the agency in determining the maximum feasible level
of the CAFE standards and shown above assume that manufacturers will
rely solely on the installation of fuel economy technology to achieve
compliance with the standards. The estimates do not reflect the
availability and use of flexibility mechanisms, such as compliance
credits and credit trading. The reason for this is because EPCA
prohibits NHTSA from considering the effects of those mechanisms in
setting CAFE standards. EPCA has precluded consideration of the FFV
adjustments ever since it was amended to provide for those adjustments.
The prohibition against considering compliance credits was added by EISA.
4. Credits
    NHTSA is also adopting a new Part 536 on use of ``credits'' earned
for exceeding applicable CAFE standards. Part 536 will implement the
provisions in EISA authorizing NHTSA to establish by regulation a
credit trading program and directing it to establish by regulation a
credit transfer program.\22\ Since its enactment, EPCA has permitted
manufacturers to earn credits for exceeding the standards and to apply
those credits to compliance obligations in years other than the model
year in which it was earned. EISA extended the ``carry-forward'' period
to five model years, and left the ``carry-back'' period at three model
years. Under Part 536, credit holders (including, but not limited to,
manufacturers) will have credit accounts with NHTSA, and will be able
to hold credits, apply them to compliance with CAFE standards, transfer
them to another ``compliance category'' for application to compliance
there, or trade them. A credit may also be cancelled before its expiry
date, if the credit holder so chooses. Traded and transferred credits
will be subject to an ``adjustment factor'' to ensure total oil savings
are preserved, as required by EISA. EISA also prohibits credits earned
before MY 2011 from being transferred, so NHTSA has developed several
regulatory restrictions on trading and transferring to facilitate
Congress' intent in this regard. Additional information on Part 536 is
available in Section XII below.
---------------------------------------------------------------------------

    \22\ Congress required that DOT establish a credit
``transferring'' regulation, to allow individual manufacturers to
move credits from one of their fleets to another (e.g., using a
credit earned for exceeding the light truck standard for compliance
with the domestic passenger car standard). Congress allowed DOT to
establish a credit ``trading'' regulation, so that credits may be
bought and sold between manufacturers and other parties.
---------------------------------------------------------------------------

5. Preemption
    As noted above, NHTSA has decided not to include any preemption
provisions in the regulatory text at this time and will re-examine the
issue of preemption in the context of the rulemaking for MY 2012 and
later years.

II. Background

A. Role of Fuel Economy Improvements in Promoting Energy Independence,
Energy Security, and a Low Carbon Economy

    Improving vehicle fuel economy has been long and widely recognized
as one of the key ways of achieving energy independence, energy
security, and a low carbon economy.\23\ Most recently,

[[Page 14207]]

the United Nations Environment Programme, International Energy Agency,
International Transport Forum and FIA Foundation released a report \24\
in March 2009 calling for a 50 percent increase in fuel economy in
response to predictions by the IEA that fuel consumption and
CO₂ emissions from the global light duty fleet will
otherwise roughly double between 2000 and 2050.
---------------------------------------------------------------------------

    \23\ Among the reports and studies noting this point are the following:
    John Podesta, Todd Stern and Kim Batten, ``Capturing the Energy
Opportunity; Creating a Low-Carbon Economy,'' Center for American
Progress (November 2007), pp. 2, 6, 8, and 24-29, Available at:
http://www.americanprogress.org/issues/2007/11/pdf/energy_chapter.pdf
 (last accessed March 8, 2009).
    Sarah Ladislaw, Kathryn Zyla, Jonathan Pershing, Frank
Verrastro, Jenna Goodward, David Pumphrey, and Britt Staley, ``A
Roadmap for a Secure, Low-Carbon Energy Economy; Balancing Energy
Security and Climate Change,'' World Resources Institute and Center
for Strategic and International Studies (January 2009), pp. 21-22;
Available at: http://pdf.wri.org/secure_low_carbon_energy_economy_roadmap.pdf.
 (last accessed March 7, 2009).
    Alliance to Save Energy et al., ``Reducing the Cost of
Addressing Climate Change Through Energy Efficiency (2009).
Available at: http://Aceee.org/energy/climate/leg.htm. 
(last accessed March 7, 2009).
    John DeCicco and Freda Fung, ``Global Warming on the Road; The
Climate Impact of America's Automobiles,'' Environmental Defense
(2006) pp. iv-vii; available at: http://www.edf.org/documents/
5301_Globalwarmingontheroad.pdf.  (last accessed March 7, 2009).
    ``Why is Fuel Economy Important?,'' a Web page maintained by the
Department of Energy and Environmental Protection Agency, Available
at http://www.fueleconomy.gov/feg/why.shtml (last accessed February
17, 2009);
    Robert Socolow, Roberta Hotinski, Jeffery B. Greenblatt, and
Stephen Pacala, ``Solving The Climate Problem: Technologies
Available to Curb CO₂ Emissions,'' Environment, volume
46, no. 10, 2004. pages 8-19. Available at: 
http://www.princeton.edu/~cmi/resources/CMI_Resources_new_files/
Environ_08-21a.pdf.  (last accessed March 7, 2009).
    \24\ ``50BY50 Global Fuel Economy Initiative, Making Cars 50%
More Fuel Efficient by 2050 Worldwide,'' Available at: 
http://www.fiafoundation.org/50by50/Documents/50BY50_report.pdf 
(last accessed March 7, 2009).
---------------------------------------------------------------------------

    The significance accorded improving fuel economy reflects several
factors. The emission of CO₂ from the tailpipes of cars and
light trucks is one of the largest sources of U.S. CO₂ emissions.\25\
---------------------------------------------------------------------------

    \25\ EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks:
1990-2006 (April 2008), pp. ES-4, ES-8, and 2-24.
---------------------------------------------------------------------------

    Further, using vehicle technology to improve fuel economy, thereby
reducing tailpipe emissions of CO₂, is one of the three main
measures of reducing those tailpipe emissions of CO₂.\26\
The two other measures for reducing the tailpipe emissions of
CO₂ are switching to vehicle fuels with lower carbon content
and changing driver behavior, i.e., inducing people to drive less.
---------------------------------------------------------------------------

    \26\ Podesta et al., p. 25; Ladislaw et al. p. 21; DeCicco et
al. p. vii; ``Reduce Climate Change,'' a Web page maintained by the
Department of Energy and Environmental Protection Agency at 
http://www.fueleconomy.gov/feg/climate.shtml (last accessed March 7, 2009).
---------------------------------------------------------------------------

    In order to reduce the amount of tailpipe emissions of
CO₂ per mile, either the amount of fuel consumed per mile
must be reduced or lower carbon intensive fuels must be used. While
there are emission control technologies that can capture or destroy the
pollutants (e.g., carbon monoxide) that are produced by imperfect
combustion of fuel, there is no current or anticipated control
technology for CO₂. Thus, the technologies for reducing
tailpipe emissions of CO₂ are the technologies that reduce
fuel consumption and thereby reduce CO₂ emissions as well,
as well as the technologies for accommodating the use of alternative
fuels. Consequently, substantially reducing fuel use through using
automotive technology to improve fuel economy is indispensable if
automobile manufacturers are to make substantial and continuing
progress in reducing those emissions.
    The relationship between improving fuel economy and reducing
CO₂ tailpipe emissions is a very direct and close one.
CO₂ is the natural by-product of the combustion of fuel in
motor vehicle engines. The more fuel efficient a vehicle is, the less
fuel it burns to travel a given distance. The less fuel it burns, the
less CO₂ it emits in traveling that distance.\27\ Since the
amount of CO₂ emissions is essentially constant per gallon
combusted of a given type of fuel, the amount of fuel consumption per
mile is directly related to the amount of CO₂ emissions per
mile. Thus, requiring improvements in fuel economy necessarily has the
effect of requiring reductions in tailpipe emissions of CO₂ emissions.
---------------------------------------------------------------------------

    \27\ Panel on Policy Implications of Greenhouse Warming,
National Academy of Sciences, National Academy of Engineering,
Institute of Medicine, ``Policy Implications of Greenhouse Warming:
Mitigation, Adaptation, and the Science Base,'' National Academies
Press, 1992. p. 287.
---------------------------------------------------------------------------

    This can be seen in the graph \28\ and table below. The graph shows
how the amount of CO₂ emitted by a vehicle per year varies
according to the vehicle's fuel economy. The table shows the limit that
a CAFE standard would indirectly place on tailpipe CO₂
emissions. To take the first value of fuel economy from the table below
as an example, a standard of 21.0 mpg would indirectly place
substantially the same limit on tailpipe CO₂ emissions as a
tailpipe CO₂ emission standard of 423.2 g/mi of
CO₂, and vice versa.\29\
---------------------------------------------------------------------------

    \28\ The graph is the same as the one shown on Reduce Climate
Change, a Web page maintained by the Department of Energy and
Environmental Protection Agency. Available at: 
http://www.fueleconomy.gov/feg/climate.shtml (last accessed March 8, 2009).
    \29\ To the extent that manufacturers comply with a CAFE
standard with diesel automobiles instead of gasoline ones, the level
of CO₂ tailpipe emissions would be higher. As noted
above, the agency projects that 4 percent of the MY 2015 passenger
car fleet and 10 percent of the MY 2015 light truck fleet will have
diesel engines. The CO₂ tailpipe emissions of a diesel
powered passenger car are 15 percent per mile higher than those of a
comparable gasoline powered-passenger car achieving the same mpg.

---------------------------------------------------------------------------

[[Page 14208]]
[GRAPHIC] [TIFF OMITTED] TR30MR09.000

    The relationship between improving fuel economy and reducing
tailpipe emissions of CO₂ is so strong that EPA determines
fuel economy by the simple expedient of measuring the amount of
CO₂ emitted from the tailpipe, not by attempting to measure
directly the amount of fuel consumed during a vehicle test, a difficult
task to accomplish with precision. EPA then uses the carbon content of
the test fuel \30\ to calculate the amount of fuel that had to be
consumed per mile in order to produce that amount of CO_2.
Finally, EPA converts that fuel figure into a miles-per-gallon figure.
---------------------------------------------------------------------------

    \30\ This is the method that EPA uses to determine compliance
with NHTSA's CAFE standards.

---------------------------------------------------------------------------

[[Page 14209]]

B. Contribution of Fuel Economy Improvements to CO₂ Tailpipe
Emission Reductions Since 1975

    The need to take action to reduce GHG emissions, e.g., motor
vehicle tailpipe emissions of CO₂, in order to forestall and
even mitigate climate change is well recognized.\31\ Less well
recognized are two related facts.
---------------------------------------------------------------------------

    \31\ IPCC (2007): Climate Change 2007: Mitigation of Climate
Change. Contribution of Working Group III to the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change [B. Metz, O.
Davidson, P. Bosch, R. Dave, and L. Meyer (eds.)]. Cambridge
University Press, Cambridge, United Kingdom and New York, NY, USA.
---------------------------------------------------------------------------

    First, improving fuel economy is the only method available to motor
vehicle manufacturers for making substantial and continuing reductions
in the CO₂ tailpipe emissions of motor vehicles and thus
must be the core element of any effort to achieve those reductions.
    Second, the significant improvements in fuel economy since 1975,
due to the CAFE standards and other market conditions as well, have
directly caused reductions in the rate of CO₂ tailpipe
emissions per vehicle.
    In 1975, passenger cars manufactured for sale in the U.S. averaged
only 15.8 mpg (562.5 grams of CO₂ per mile or 562.5 g/mi of
CO₂). By 2007, the average fuel economy of new passenger
cars had increased to 31.3 mpg, causing the emission of CO₂
to fall to 283.9 g/mi.\32\ Similarly, in 1975, light trucks produced
for sale in the U.S. averaged 13.7 mpg (648.7 g/mi of CO₂).
By 2007, the average fuel economy of new light trucks had risen to 23.1
mpg, causing emission of CO₂ to fall to 384.7 g/mi.
---------------------------------------------------------------------------

    \32\ These figures are not real world fuel economy figures. They
are based on the laboratory figures fuel economy test procedures
used for the CAFE program. Real world fuel economy figures would be
less (and CO₂ emission figures higher).
[GRAPHIC] [TIFF OMITTED] TR30MR09.001

[[Page 14210]]

If fuel economy had not increased above the 1975 level, cars and light
trucks would have emitted an additional 11 billion metric tons of
CO₂ into the atmosphere between 1975 and 2005. That is
nearly the equivalent of emissions from all U.S. fossil fuel combustion
for two years (2004 and 2005). The figure below shows the amount of
CO₂ emissions avoided due to increases in fuel economy.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR30MR09.002

[[Page 14211]]

BILLING CODE 4910-59-C
    Some commenters on the NPRM argued that some of improvements in
fuel economy, and thus some of the reductions in CO₂, shown
in that figure would have occurred in the absence of any CAFE
standards. We agree. Similarly, and to the same extent, some of the
improvements in fuel economy and accompanying reductions in
CO₂ that would occur under a regulation directly regulating
CO₂ would occur in the absence of any such regulation. We
note that no published research has isolated the contribution of CAFE
standards themselves to historical increases in fuel economy from those
of the many other factors that can affect fuel economy.

C. Chronology of Events Since the National Academy of Sciences Called
for Reforming and Increasing CAFE Standards

1. National Academy of Sciences Issues Report on Future of CAFE Program
(February 2002)
(a) Significantly Increasing CAFE Standards Without Making Them
Attribute-Based Would Adversely Affect Safety
    In the 2002 congressionally-mandated report entitled
``Effectiveness and Impact of Corporate Average Fuel Economy (CAFE)
Standards,'' \33\ a committee of the National Academy of Sciences (NAS)
(``2002 NAS Report'') concluded that the then-existing form of
passenger car and light truck CAFE standards permitted vehicle
manufacturers to comply in part by downweighting and even downsizing
their vehicles and that these actions had led to additional fatalities.
The committee explained that this safety problem arose because, at that
time, the CAFE standards were not attributed-based and thus subjected
all passenger cars to the same fuel economy target and all light trucks
to the same target, regardless of their weight, size, or load-carrying
capacity.\34\ The committee said that this experience suggests that
consideration should be given to developing a new system of fuel
economy targets that reflects differences in such vehicle attributes.
---------------------------------------------------------------------------

    \33\ National Research Council, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy
Press, Washington, DC (2002). Available at  http://www.nap.edu/
openbook.php?isbn=0309076013  (last accessed March 8, 2009). The
conference committee report for the Department of Transportation and
Related Agencies Appropriations Act for FY 2001 (Pub. L. 106-346)
directed NHTSA to fund a study by NAS to evaluate the effectiveness
and impacts of CAFE standards (H. Rep. No. 106-940, p. 117-118). In
response to the direction from Congress, NAS published this lengthy report.
    \34\ NHTSA formerly used this approach for CAFE standards. EISA
prohibits its use after MY 2010.
---------------------------------------------------------------------------

    Looking to the future, the committee made a critical distinction
between possible ways of improving fuel economy and the ways likely to
be chosen for doing so. It said that while it was technically feasible
and potentially economically practicable for manufacturers to improve
fuel economy without reducing vehicle weight or size and, therefore,
without significantly affecting the safety of motor vehicle travel, the
actual strategies chosen by manufacturers to improve fuel economy would
depend on a variety of factors. In the committee's judgment, the
extensive downweighting and downsizing that occurred after fuel economy
requirements were established in the 1970s suggested that the
likelihood of a similar response to further increases in fuel economy
requirements must be considered seriously. Any reduction in vehicle
size and weight would have safety implications.
    The committee said, ``to the extent that the size and weight of the
fleet have been constrained by CAFE requirements * * * those
requirements have caused more injuries and fatalities on the road than
would otherwise have occurred.'' \35\ Specifically, it noted: ``the
downweighting and downsizing that occurred in the late 1970s and early
1980s, some of which was due to CAFE standards, probably resulted in an
additional 1300 to 2600 traffic fatalities in 1993.'' \36\
---------------------------------------------------------------------------

    \35\ NAS, p. 29.
    \36\ NAS, p. 3 (Finding 2).
---------------------------------------------------------------------------

    The committee cautioned that the safety effects of future
downsizing and downweighting were likely to be hidden by the generally
increasing safety of the light-duty vehicle fleet.\37\ It said that
some might argue that this improving safety picture means that there is
room to improve fuel economy without adverse safety consequences;
however, such an approach would not achieve the goal of avoiding the
adverse safety consequences of fuel economy increases. Rather, the
safety penalty imposed by increased fuel economy (if weight reduction
were used as one of the fuel economy improving measures) would be more
difficult to identify in light of the continuing improvement in vehicle
safety. NAS said that although it anticipated that these safety
innovations would improve the safety of vehicles of all sizes, that
fact did not mean downsizing to achieve fuel economy improvements would
not have any safety costs. If two vehicles of the same size were
modified, one both by downsizing it and adding the safety innovations
and the other solely by adding safety innovations, the latter vehicle
would in all likelihood be safer.
---------------------------------------------------------------------------

    \37\ Two of the 12 members of the committee dissented from the
majority's safety analysis and conclusions.
---------------------------------------------------------------------------

    The committee concluded that if an increase in fuel economy were
implemented pursuant to standards that were structured so as to
encourage either downsizing or the increased production of smaller
vehicles, some additional traffic fatalities would be expected. It said
that the larger and faster the required increases, the more likely
adverse impacts. Without a thoughtful restructuring of the program,
there would be the trade-offs that must be made if CAFE standards were
increased by any significant amount.\38\
---------------------------------------------------------------------------

    \38\ NAS, p. 9.
---------------------------------------------------------------------------

    In response to these conclusions, NHTSA issued attribute-based CAFE
standards for light trucks and sought legislative authority to issue
attribute-based CAFE standards for passenger cars before undertaking to
raise the car standards. Congress went a step further in enacting EISA,
not only authorizing the issuance of attribute-based standards, but
also mandating them.
(b) Climate Change and Other Externalities Justify Increasing the CAFE
Standards
    The 2002 NAS report also concluded that the CAFE standards have
increased fuel economy, which in turn has reduced dependence on
imported oil, improved the nation's terms of trade, and reduced
emissions of carbon dioxide, (a principal GHG), relative to what they
otherwise would have been. If fuel economy had not improved, gasoline
consumption (and crude oil imports) in 2002 would have been about 2.8
million barrels per day (mmbd) greater than it was then.\39\ As noted
above, reducing fuel consumption in vehicles also reduces carbon
dioxide emissions. If the nation were using 2.8 mmbd more gasoline in
2002, carbon emissions would have been more than 100 million metric
tons of carbon (mmtc) higher. Thus, improvements in light-duty vehicle
(4 wheeled motor vehicles under 10,000 pounds gross vehicle weight
rating) fuel economy reduced overall U.S. emissions by about 7 percent
as of 2002.\40\
---------------------------------------------------------------------------

    \39\ NAS, pp. 3 and 20.
    \40\ NAS, p. 20.
---------------------------------------------------------------------------

    The report concluded that technologies exist that could
significantly reduce fuel consumption by passenger cars and light
trucks further within 15 years (i.e., by about 2017), while maintaining
vehicle size,

[[Page 14212]]

weight, utility and performance.\41\ Given their lower fuel economy,
light duty trucks were said to offer the greatest potential for
reducing fuel consumption.\42\ The report also noted that vehicle
development cycles--as well as future economic, regulatory, safety and
consumer preferences--would influence the extent to which these
technologies could lead to increased fuel economy in the U.S. market.
---------------------------------------------------------------------------

    \41\ NAS, p. 3 (Finding 5).
    \42\ NAS, p. 4 (Finding 5).
---------------------------------------------------------------------------

    To assess the economic trade-offs associated with the introduction
of existing and emerging technologies to improve fuel economy, the NAS
conducted what it called a ``cost-efficient analysis'' based on the
direct benefits (value of saved fuel) to the consumer--``that is, the
committee identified packages of existing and emerging technologies
that could be introduced over the next 10 to 15 years that would
improve fuel economy up to the point where further increases in fuel
economy would not be reimbursed by fuel savings.'' \43\
---------------------------------------------------------------------------

    \43\ NAS, pp. 4 (Finding 6) and 64).
---------------------------------------------------------------------------

    The committee emphasized that it is critically important to be
clear about the reasons for considering improved fuel economy. While it
said that the dollar value of the saved fuel would be the largest
portion of the potential benefits, the committee noted that there is
theoretically insufficient reason for the government to issue higher
standards just to obtain those direct benefits since consumers have a
wide variety of opportunities to buy a fuel-efficient vehicle.\44\
---------------------------------------------------------------------------

    \44\ NAS, pp. 8-9.
---------------------------------------------------------------------------

    The committee said that there are two compelling concerns that
justify a government-mandated increase in fuel economy, both relating
to externalities. The first and most important concern, it argued, is
the accumulation in the atmosphere of greenhouse gases, principally
carbon dioxide.\45\
---------------------------------------------------------------------------

    \45\ NAS, pp. 2, 13, and 83.
---------------------------------------------------------------------------

    A second concern is that petroleum imports have been steadily
rising because of the nation's increasing demand for gasoline without a
corresponding increase in domestic supply. The high cost of oil imports
poses two risks: downward pressure on the strength of the dollar (which
drives up the cost of goods that Americans import) and an increase in
U.S. vulnerability to macroeconomic shocks that cost the economy
considerable real output.
    To determine how much the fuel economy standards should be
increased, the committee urged that all social benefits be considered.
That is, it urged not only that the dollar value of the saved fuel be
considered, but also that the dollar value to society of the resulting
reductions in greenhouse gas emissions and in dependence on imported
oil should be calculated and considered. The committee said that if it
is possible to assign dollar values to these favorable effects, it
becomes possible to make at least crude comparisons between the
socially beneficial effects of measures to improve fuel economy on the
one hand, and the costs (both out-of-pocket and more subtle) on the
other. The committee chose a value of about $0.30/gal of gasoline for
the externalities associated with the combined impacts of fuel consumption
on greenhouse gas emissions and on world oil market conditions.\46\
---------------------------------------------------------------------------

    \46\ NAS, pp. 4 and 85-86.
---------------------------------------------------------------------------

    The report expressed concerns about increasing the standards under
the CAFE program as currently structured. While raising CAFE standards
under the existing structure would reduce fuel consumption, doing so
under alternative structures ``could accomplish the same end at lower
cost, provide more flexibility to manufacturers, or address inequities
arising from the present'' structure.\47\
---------------------------------------------------------------------------

    \47\ NAS, pp. 4-5 (Finding 10).
---------------------------------------------------------------------------

    To address those structural problems, the report suggested various
possible reforms. The report found that the ``CAFE program might be
improved significantly by converting it to a system in which fuel
targets depend on vehicle attributes.'' \48\ The report noted further
that under an attribute-based approach, the required CAFE levels could
vary among the manufacturers based on the distribution of their product
mix. NAS stated that targets could vary among passenger cars and among
trucks, based on some attribute of these vehicles such as weight, size,
or load-carrying capacity. The report explained that a particular
manufacturer's average target for passenger cars or for trucks would
depend upon the fractions of vehicles it sold with particular levels of
these attributes.\49\
---------------------------------------------------------------------------

    \48\ NAS, p. 5 (Finding 12).
    \49\ NAS, p. 87.
---------------------------------------------------------------------------

2. NHTSA Issues Final Rule Establishing Attribute-Based CAFE Standards
for MY 2008-2011 Light Trucks (March 2006)
    The 2006 final rule reformed the structure of the CAFE program for
light trucks by introducing an attribute-based approach and using that
approach to establish higher CAFE standards for MY 2008-2011 light
trucks.\50\ Reforming the CAFE program enables it to achieve larger
fuel savings, while enhancing safety and preventing adverse economic
consequences.
---------------------------------------------------------------------------

    \50\ 71 FR 17566; April 6, 2006.
---------------------------------------------------------------------------

    As noted above, under Reformed CAFE, fuel economy standards were
restructured so that they are based on a vehicle attribute, a measure
of vehicle size called ``footprint.'' It is the product of multiplying
a vehicle's wheelbase by its track width. A target level of fuel
economy was established for each increment in footprint (0.1 ft\2\).
Trucks with smaller footprints have higher fuel economy targets;
conversely, larger ones have lower targets. A particular manufacturer's
compliance obligation for a model year is calculated as the harmonic
average of the fuel economy targets for the manufacturer's vehicles,
weighted by the distribution of the manufacturer's production volumes
among the footprint increments. Thus, each manufacturer is required to
comply with a single overall average fuel economy level for each model
year of production.
    The approach for determining the fuel economy targets was to set
them just below the level where the increased cost of technologies that
could be adopted by manufacturers to improve fuel economy would first
outweigh the added benefits that would result from those technologies.
These targets translate into required levels of average fuel economy
that are technologically feasible because manufacturers can achieve
them using technologies that are or will become available. Those levels
also reflect the need of the nation to reduce energy consumption
because they reflect the economic value of the savings in resources, as
well as of the reductions in economic and environmental externalities
that result from producing and using less fuel.
    We carefully balanced the estimates costs of the rule with the
estimated benefits of reducing energy consumption. Compared to
Unreformed (non-attributed-based) CAFE, Reformed CAFE enhances overall
fuel savings while providing vehicle manufacturers with the flexibility
they need to respond to changing market conditions. Reformed CAFE also
provides a more equitable regulatory framework by creating a level
playing field for manufacturers, regardless of whether they are full-
line or limited-line manufacturers. We were particularly encouraged
that Reformed CAFE will confer no compliance advantage if vehicle
makers choose to downsize

[[Page 14213]]

some of their fleet as a CAFE compliance strategy, thereby reducing the
adverse safety risks associated with the Unreformed CAFE program.
3. Supreme Court Issues Decision in Massachusetts v. EPA (April 2007)
    On April 2, 2007, the U.S. Supreme Court issued its opinion in
Massachusetts v. EPA,\51\ a case involving a 2003 order of the
Environmental Protection Agency (EPA) denying a petition for rulemaking
to regulate greenhouse gas emissions from motor vehicles under the
Clean Air Act.\52\ The Court ruled that the state of Massachusetts had
standing to sue EPA because it had already lost an amount of land and
stood to lose more due to global warming-induced increases in sea
level; that some portion of this harm was traceable to the absence of a
regulation issued by EPA requiring reductions in GHG emissions
(CO₂ emissions, most notably) by motor vehicles; and that
EPA's issuance of such a regulation would reduce the risk of further
harm to Massachusetts.\53\ On the merits, the Court ruled that
greenhouse gases are ``pollutants'' under the Clean Air Act and that
the Act therefore authorizes EPA to regulate greenhouse gas emissions
from motor vehicles if that agency makes the necessary findings and
determinations under section 202 of the Act.
---------------------------------------------------------------------------

    \51\ 127 S.Ct. 1438 (2007).
    \52\ 68 FR 52922, September 8, 2003.
    \53\ As noted above, a CAFE standard and its mathematically
equivalent CO₂ tailpipe emission standard would each have
the same effect on those emissions and thus on the risk of further
harm except to the extent, as noted in a footnote above, diesel
engines are used to comply with the CAFE standards.
---------------------------------------------------------------------------

    The Court considered EPCA briefly, stating

    [T]hat DOT sets mileage standards in no way licenses EPA to
shirk its environmental responsibilities. EPA has been charged with
protecting the public's ``health'' and ``welfare,'' 42 U.S.C.
7521(a)(1), a statutory obligation wholly independent of DOT's
mandate to promote energy efficiency. See Energy Policy and
Conservation Act, Sec.  2(5), 89 Stat. 874, 42 U.S.C. 6201(5). The
two obligations may overlap, but there is no reason to think the two
agencies cannot both administer their obligations and yet avoid inconsistency.

127 S.Ct. at 1462.

    The Supreme Court did not address or define the nature or extent of
the overlap or explore the types of benefits considered in establishing
the levels of the CAFE standards. Further, the Court did not address
the express preemption provision in EPCA.
4. NHTSA and EPA Coordinate on Development of Rulemaking Proposals
(Summer-Fall 2007)
    In the wake of the Supreme Court's decision, on May 14, 2007,
President Bush responded to the Supreme Court's opinion, stating

* * * I'm directing the EPA and the Departments of Transportation,
Energy, and Agriculture to take the first steps toward regulations
that would cut gasoline consumption and greenhouse gas emissions
from motor vehicles * * *

    On May 14, 2007, President Bush issued Executive Order 13432, which
announces

[i]t is the policy of the United States to ensure the coordinated
and effective exercise of the authorities of the President and the
heads of the Department of Transportation, the Department of Energy,
and the Environmental Protection Agency to protect the environment
with respect to greenhouse gas emissions from motor vehicles,
nonroad vehicles, and nonroad engines, in a manner consistent with
sound science, analysis of benefits and costs, public safety, and
economic growth.

    The Executive Order goes on to require coordination among the
agencies when taking action to directly regulate (or substantially and
predictably affect) greenhouse gas emissions from motor vehicles,
nonroad vehicles, and use of motor vehicle fuels. Such action is to be
undertaken jointly ``to the maximum extent permitted by law and
determined by the head of the agency to be practicable.''
    Consistent with these directives, NHTSA and EPA took the first
steps toward regulations that would cut gasoline consumption and
greenhouse gas emissions from motor vehicles pursuant to Presidential
directive. NHTSA and EPA staff jointly assessed which technologies
would be available and their effectiveness and cost. They also jointly
assessed the key economic and other assumptions affecting the
stringency of future standards. Finally, they worked together in
updating and further improving the Volpe model that had been used to
help determine the stringency of the MY 2008-2011 light truck CAFE
standards. Much of the work between NHTSA and EPA staff was reflected
in rulemaking proposals being developed by NHTSA prior to the enactment
of EISA and was substantially retained when NHTSA revised its proposals
to be consistent with that legislation. Ultimately, the NPRM published
by the agency in May and today's final rule are based on NHTSA's
assessments of how they meet EPCA, as amended by EISA.
5. Ninth Circuit Issues Decision Re Final Rule for MY 2008-2011 Light
Trucks (November 2007)
    On November 15, 2007, the United States Court of Appeals for the
Ninth Circuit issued its decision in Center for Biological Diversity v.
NHTSA,\54\ the challenge to the MY 2008-11 light truck CAFE rule. The
Court rejected the petitioners' argument that EPCA precludes the use of
a marginal cost-benefit analysis that attempted to weigh all of the
social benefits (i.e., externalities as well as direct benefits to
consumers) of improved fuel savings in determining the stringency of
the CAFE standards.
---------------------------------------------------------------------------

    \54\ 508 F.3d 508.
---------------------------------------------------------------------------

    The Court found that NHTSA had been arbitrary and capricious in the
following respects:
    • NHTSA's decision that it could not monetize the benefit of
reducing CO₂ emissions for the purpose of conducting its
marginal benefit-cost analysis based on its view that the value of the
benefit of CO₂ emission reductions resulting from fuel
consumption reductions was too uncertain to permit the agency to
determine a value for those emission reductions; \55\
---------------------------------------------------------------------------

    \55\ As noted above in the preamble, the agency has developed a
value for those reductions and used it in the analyses underlying
the standards adopted in this final rule. For further discussion,
see Section V of this preamble.
---------------------------------------------------------------------------

    • NHTSA's lack, in the Court's view, of a reasoned
explanation for its decision not to establish a ``backstop'' (i.e., a
fixed minimum CAFE standard applicable to manufacturers); \56\
---------------------------------------------------------------------------

    \56\ EISA's requirement that standards be based on one or more
vehicle attributes appears to preclude the specification of such a
backstop standard for the latter two categories of automobiles. For
further discussion, see Section VI of this preamble.
---------------------------------------------------------------------------

    • NHTSA's lack, again in the Court's view, of a reasoned
explanation for its decision not to revise the regulatory definitions
for the passenger car and light truck categories of automobiles so that
some vehicles currently classified as light trucks are instead
classified as passenger cars; \57\
---------------------------------------------------------------------------

    \57\ In this final rule, NHTSA has moved 1.4 million 2 wheel
drive SUVs from the light truck class to the passenger car class. It
re-examined the legislative history of the statutory definitions of
``automobile'' and ``passenger automobile'' and the term
``nonpassenger automobile'' and analyzed the impact of that moving
any vehicles out of the nonpassenger automobile (light truck)
category into the passenger automobile (passenger car) category
would have the level of standards for both groups of automobiles.
For further discussion, see Section XI of this preamble.
---------------------------------------------------------------------------

    • NHTSA's decision not to subject most medium- and heavy-
duty pickups and most medium- and heavy-duty cargo vans (i.e., those
between 8,500 and 10,000 pounds gross vehicle weight

[[Page 14214]]

rating (GVWR,) to the CAFE standards; \58\
---------------------------------------------------------------------------

    \58\ EISA removed these vehicles from the statutory definition
of ``automobile'' and mandated the establishment of CAFE standards
for them following the completion of reports by the National Academy
of Sciences and NHTSA.
---------------------------------------------------------------------------

    • NHTSA's decision to prepare and publish an Environmental
Assessment (EA) and making a finding of no significant impact
notwithstanding what the Court found to be an insufficiently broad
range of alternatives, insufficient analysis of the climate change
effects of the CO₂ emissions, and limited assessment of
cumulative impacts in its EA under the National Environmental Policy
Act (NEPA).\59\
---------------------------------------------------------------------------

    \59\ On February 6, 2008, the Government petitioned for en banc
rehearing by the 9th Circuit on the limited issue of whether it was
appropriate for the panel, having held that the agency
insufficiently explored the environmental implications of the MY
2008-11 rulemaking in its EA, to order the agency to prepare an EIS
rather than simply remanding the matter to the agency for further
analysis. The Court subsequently modified its order as described below.
---------------------------------------------------------------------------

    The Court did not vacate the standards, but instead said it would
remand the rule to NHTSA to promulgate new standards consistent with
its opinion ``as expeditiously as possible and for the earliest model
year practicable.\60\ Under the decision, the standards established by
the April 2006 final rule would remain in effect unless and until
amended by NHTSA. In addition, it directed the agency to prepare an
Environmental Impact Statement.
---------------------------------------------------------------------------

    \60\ The deadline in EPCA for issuing a final rule establishing,
for the first time, a CAFE standard for a model year is 18 months
before the beginning of that model year. 49 U.S.C. 32902(g)(2). The
same deadline applies to issuing a final rule amending an existing
CAFE standard so as to increase its stringency. Given that the
agency has long regarded October 1 as the beginning of a model year,
the statutory deadline for increasing the MY 2009 standard was March
30, 2007, and the deadline for increasing the MY 2010 standard is
March 30, 2008. Thus, the only model year for which there was
sufficient time at the time of the Court's decision to gather all of
the necessary information, conduct the necessary analyses and
complete a rulemaking was MY 2011. As noted earlier in this notice,
however, EISA requires that a new standard be established for that
model year. This rulemaking was conducted pursuant to that requirement.
---------------------------------------------------------------------------

    As of the date of the issuance of this final rule, the Court has
not yet issued its mandate in this case.
6. Congress Enacts Energy Security and Independence Act of 2007
(December 2007)
    As noted above in Section I.B., EISA significantly changed the
provisions of EPCA governing the establishment of future CAFE
standards. These changes made it necessary for NHTSA to pause in its
efforts so that it could assess the implications of the amendments made
by EISA and then, as required, revise some aspects of the proposals it
had been developing (e.g., the model years covered and credit issues).
7. NHTSA Proposes CAFE Standards for MYs 2011-2015 and Requests New
Product Plans for Those Years (April 2008) \61\
---------------------------------------------------------------------------

    \61\ A description of the NPRM appears in section I.C of this preamble.
---------------------------------------------------------------------------

8. NHTSA Contracts With ICF International To Conduct Climate Modeling
and Other Analyses in Support of Draft and Final Environmental Impact
Statements (May 2008)
    NHTSA contracted with ICF International (ICF) to support it in
conducting its environmental analyses and preparing the draft and final
environmental impact statements. ICF provides consulting services and
technology solutions in energy, climate change, environment, transportation,
social programs, health, defense, and emergency management.
9. Manufacturers Submit New Product Plans (June 2008)
    These product plans identify which vehicle models manufacturers
intend to build and which technologies the manufacturers intend to
apply and when to their vehicles. NHTSA began its analysis of the MY
2011 CAFE standards with the product plans and used them to establish a
baseline, which is then used to evaluate different potential levels of
future CAFE stringency.
10. NHTSA Contracts With Ricardo To Aid in Assessing Public Comments on
Cost and Effectiveness of Fuel Saving Technologies (June 2008)
    NHTSA received numerous public comments on the types of potential
fuel saving technologies that we discussed in the NPRM, their costs and
effectiveness in improving fuel economy, and in which model year and to
which vehicles they may be applied. To aid the agency in analyzing and
responding to these comments, and to ensure that the analysis for the
final rule is thorough and robust, NHTSA contracted with Ricardo, a
highly reputable and neutral source of outside expertise in the areas
of powertrain and vehicle technologies. NHTSA chose Ricardo because of
its extensive experience and expertise in working with both government
and industry on fuel economy-improving technology issues.
11. Ninth Circuit Revises Its Decision Re Final Rule for MY 2008-2011
Light Trucks (August 2008)
    In response to the Government petition for rehearing, the Ninth
Circuit modified its decision by replacing its direction to prepare an
EIS with a direction to prepare either a new EA or, if necessary, an
EIS.\62\
---------------------------------------------------------------------------

    \62\ See  CBD v. NHTSA, 538 F.3d 1172 (9th Cir. 2008).
---------------------------------------------------------------------------

12. NHTSA Releases Final Environmental Impact Statement (October 2008)
    On October 17, 2008, EPA published a notice announcing the
availability of NHTSA's final environmental impact statement (FEIS) for
this rulemaking.\63\ Throughout the FEIS, NHTSA relied extensively on
findings of the United Nations Intergovernmental Panel on Climate
Change (IPCC) and the U.S. Climate Change Science Program (USCCSP). In
particular, the agency relied heavily on the most recent, thoroughly
peer-reviewed, and credible assessments of global climate change and
its impact on the United States: the IPCC Fourth Assessment Report
Working Group I4 and II5 Reports, and reports by the USCCSP that
include Scientific Assessments of the Effects of Global Climate Change
on the United States and Synthesis and Assessment Products.
---------------------------------------------------------------------------

    \63\ 73 FR 61859.
---------------------------------------------------------------------------

    In the FEIS, NHTSA compared the environmental impacts of its
preferred alternative and those of reasonable alternatives. It
considered direct, indirect, and cumulative impacts and describes these
impacts to inform the decisionmaker and the public of the environmental
impacts of the various alternatives.
    Among other potential impacts, NHTSA analyzed the direct and
indirect impacts related to fuel and energy use, emissions, including
carbon dioxide and its effects on temperature and climate change, air
quality, natural resources, and the human environment. Specifically,
the FEIS used a climate model to estimate and report on four direct and
indirect effects of climate change, driven by alternative scenarios of
GHG emissions, including:
    1. Changes in CO₂ concentrations;
    2. Changes in global mean surface temperature;
    3. Changes in regional temperature and precipitation; and
    4. Changes in sea level.
    NHTSA also considered the cumulative impacts of the proposed
standards for MY 2011-2015 passenger cars and light trucks, together with

[[Page 14215]]

estimated impacts of NHTSA's implementation of the CAFE program through
MY 2010 and NHTSA's future CAFE rulemaking for MYs 2016-2020.
    NHTSA intends to review all analyses for model years after MY 2011
in connection with the rulemaking for MY 2012 and thereafter,
consistent with the President's Memorandum of January 26, 2009.
13. Office of Information and Regulatory Affairs Completes Review of a
Draft MY 2011-2015 Final Rule (November 2008)
    The Office of Information and Regulatory Affairs of the Office of
Management and Budget completed review of the rule under Executive
Order 12866, Regulatory Planning and Review, on November 14, 2008.\64\
---------------------------------------------------------------------------

    \64\ http://www.reginfo.gov/public/do/eoHistReviewSearch (last
visited March 8, 2009). To find the report on the clearance of the
draft final rule, select ``Department of Transportation'' under
``Economically Significant Reviews Completed'' and select ``2008''
under ``Select Calendar Year.''
---------------------------------------------------------------------------

14. Department of Treasury Extends Loans to General Motors and Chrysler
(December 2008)
    The Department of the Treasury established the Automotive Industry
Financing Program ``to prevent a significant disruption of the American
automotive industry that poses a systemic risk to financial market
stability and will have a negative effect on the real economy of the
United States.'' \65\ Under that program, initial loans were made to
General Motors and Chrysler.
---------------------------------------------------------------------------

    \65\ http://www.treasury.gov/initiatives/eesa/program-
descriptions/aifp.shtml (last visited March 8, 2009).
---------------------------------------------------------------------------

15. Department of Transportation Decides Not To Issue MY 2011-2015
Final Rule (January 2009)
    On January 7, 2009, the Department of Transportation announced that
the Bush Administration would not issue the final rule.
16. The President Requests NHTSA To Issue Final Rule for MY 2011 Only
(January 2009)
    As explained above, in his memorandum of January 26, 2009, the
President requested the agency to issue a final rule adopting CAFE
standards for MY 2011 only. Further, the President requested NHTSA to
establish standards for MY 2012 and later after considering the
appropriate legal factors, the comments filed in response to the May
2008 proposal, the relevant technological and scientific
considerations, and, to the extent feasible, a forthcoming report by
the National Academy of Sciences assessing automotive technologies that
can practicably be used to improve fuel economy.
17. General Motors and Chrysler Submit Restructuring Reports to
Department of the Treasury (February 2009)
    The reports were required under the terms of the loans made
available to these companies in December to assist the domestic auto
industry in becoming financially viable.

D. Energy Policy and Conservation Act, as Amended

    EPCA, which was enacted in 1975, mandates a motor vehicle fuel
economy regulatory program to meet the various facets of the need to
conserve energy, including ones having environmental and foreign policy
implications. EPCA allocates the responsibility for implementing the
program between NHTSA and EPA as follows: NHTSA sets CAFE standards for
passenger cars and light trucks; EPA establishes the procedures for
testing, test vehicles, collects and analyzes manufacturers' data, and
calculates the average fuel economy of each manufacturer's passenger
cars and light trucks; and NHTSA enforces the standards based on EPA's
calculations.
    We have summarized below EPCA, as amended by EISA.
1. Vehicles Subject to Standards for Automobiles
    With two exceptions specified in EPCA, all four-wheeled motor
vehicles with a gross vehicle weight rating of 10,000 pounds or less
will be subject to the CAFE standards, beginning with MY 2011. The
exceptions will be work trucks \66\ and multi-stage vehicles. Work
trucks are defined as vehicles that are:
---------------------------------------------------------------------------

    \66\ While EISA excluded work trucks from ``automobiles,'' it
did not exclude them from regulation under EPCA. As amended by EISA,
EPCA requires that work trucks be subjected to average fuel economy
standards (49 U.S.C. 32902(b)(1)(C)), but only after first the
National Academy of Sciences completes a study and then NHTSA
completes a follow-on study. Congress thus recognized and made
allowances for the practical difficulties that led NHTSA to decline
to include work trucks in its final rule for MY 2008-11 light trucks.

--Rated at between 8,500 and 10,000 pounds gross vehicle weight; and
--Are not a medium-duty passenger vehicle (as defined in section
86.1803-01 of title 40, Code of Federal Regulations, as in effect on
the date of the enactment of the Ten-in-Ten Fuel Economy Act).\67\
---------------------------------------------------------------------------

    \67\ 49 U.S.C. 32902(a)(19).

Medium-duty passenger vehicles (MDPV) include 8,500 to 10,000 lb. GVWR
sport utility vehicles (SUVs), short bed pick-up trucks, and passenger
vans, but exclude pickup trucks with longer beds and cargo vans rated
at between 8,500 and 10,000 lb. GVWR. It is those excluded pickup
trucks and cargo vans that are work trucks. ``Multi-stage vehicle''
includes any vehicle manufactured in different stages by 2 or more
manufacturers, if no intermediate or final-stage manufacturer of that
vehicle manufactures more than 10,000 multi-stage vehicles per year.\68\
---------------------------------------------------------------------------

    \68\ 49 U.S.C. 32902(a)(3).
---------------------------------------------------------------------------

    Under EPCA, as it existed before EISA, the agency had discretion
whether to regulate vehicles with a GVWR between 6,000 lb and 10,000
GVWR. It could regulate the fuel economy of vehicles with a GVWR within
that range under CAFE if it determined that (1) standards were feasible
for these vehicles, and (2) either (a) that these vehicles were used
for the same purpose as vehicles rated at not more than 6,000 lbs.
GVWR, or (b) that their regulation would result in significant energy
conservation.
    EISA eliminated the need for administrative determinations in order
to subject vehicles between 6,000 and 10,000 lb. GVWR to the CAFE
standards for automobiles. Congress did so by making the determination
itself that all vehicles within that GVWR range should be included,
with the exceptions noted above.
2. Mandate To Set Standards for Automobiles
    For each future model year, EPCA requires that the agency establish
standards for all new automobiles at the maximum feasible levels for
that model year. EISA made no change in this requirement. A
manufacturer's individual passenger cars and light trucks are not
required to meet a particular fuel economy level. Instead, EPCA
requires that the average fuel economy of a manufacturer's fleet of
passenger cars (or light trucks) in a particular model year must meet
the standard for those automobiles for that model year.
    For MYs 2011-2020 and for MYs 2021-2030, EPCA specifies additional
requirements regarding standard setting. Each of those requirements and
the maximum feasible requirement must be interpreted in the context of
the other requirements. For MYs 2011-2020, separate standards for
passenger cars and for light trucks must be set at high enough levels
to ensure that the CAFE of the industry-wide combined fleet of new
passenger cars and light trucks for MY 2020 is not less than 35 mpg.

[[Page 14216]]

    In light of the evident confusion of some commenters about the 35
mpg requirement, we want to emphasize that that figure is not the CAFE
level that any individual manufacturer's combined CAFE will be required
to meet. The 35 mpg requirement applies solely to the agency's standard
setting and concerns the required combined effect that the separate MY
2020 standards for passenger cars and light trucks must achieve with
respect to the single fleet containing the MY 2020 passenger cars and
light trucks of all manufacturers. That single industry-wide fleet must
have a CAFE of at least 35 mpg. If that requirement were exactly met,
we anticipate that manufacturers with relatively larger proportions of
smaller automobiles would be required to achieve combined CAFEs greater
than 35 mpg, while manufacturers with relatively largely proportions of
larger automobiles would be required to achieve combined CAFEs that
might in that year be somewhat below 35 mpg. EISA does not specify
precisely how compliance with this minimum requirement is to be ensured
or how or when the CAFE of the industry-wide combined fleet for MY 2020
is to be calculated for purposes of determining the agency's compliance.
    If the current gap between passenger car CAFE and light truck CAFE
persists, the standard for MY 2020 passenger cars would likely, as a
practical matter, need to be set high enough to ensure that the
industry-wide level of average fuel economy for passenger cars is not
less than 40 mpg in order for the CAFE of the combined industry-wide
fleet to reach 35 mpg,. The standard for MY 2020 light trucks could be
somewhat below 35 mpg. Again, these are the levels of stringency
necessary to meet the minimum requirement of an industry-wide combined
average of at least 35 mpg in MY 2020. Reaching 35 mpg earlier than MY
2020 would require even higher car and light truck standards in MY
2020. In addition, the CAFE of each manufacturer's fleet of domestic
passenger cars must meet a sliding, absolute minimum level in each
model year: 27.5 mpg or 92 percent of the projected CAFE of the
industry-wide fleet of new domestic and non-domestic passenger cars for
that model year.
    The standards for passenger cars and those for light trucks must
increase ratably each year. We interpret this requirement, in
combination with the requirement to set the standards for each model
year at the level determined to be the maximum feasible level for that
model year, to mean that the annual increases should not be
disproportionately large or small in relation to each other.
    EPCA, as it existed before EISA, required that light truck
standards be set at the maximum feasible level for each model year, but
simply specified a default standard of 27.5 mpg for passenger cars for
MY 1985 and thereafter. It permitted, but did not require that NHTSA
establish a higher or lower standard for passenger cars if the agency
found that the maximum feasible level of fuel economy is higher or
lower than 27.5 mpg. Henceforth, the agency must establish a standard
for each model year at the maximum feasible level.
3. Attribute-Based Standards
    The standards for passenger cars and light trucks must be based on
one or more vehicle attributes, like size or weight, that correlate
with fuel economy and must be expressed in terms of a mathematical
function. Fuel economy targets are set for individual vehicles and
increase as the attribute decreases and vice versa. For example, size-
based (i.e., size-indexed) standards assign higher fuel economy targets
to smaller (and generally, but not necessarily lighter) vehicles and
lower ones to larger (and generally, but not necessarily heavier)
vehicles. The fleet wide average fuel economy that a particular
manufacturer must achieve depends on the size mix of its fleet, i.e.,
the proportion of the fleet that is small-, medium- or large-sized.
    This approach can be used to require virtually all manufacturers to
increase significantly the fuel economy of a broad range of both
passenger cars and light trucks. Further, this approach can do so
without creating an incentive for manufacturers to make small vehicles
smaller or large vehicles larger, with attendant implications for safety.
4. Factors Considered in the Setting of Standards
    In determining the maximum feasible level of average fuel economy
for a model year, EPCA requires that the agency consider four factors:
Technological feasibility, economic practicability, the effect of other
standards of the Government on fuel economy, and the need of the nation
to conserve energy. EPCA does not define these terms or specify what
weight to give each concern in balancing them; thus, NHTSA defines them
and determines the appropriate weighting based on the circumstances in
each CAFE standard rulemaking.
(a) Factors That Must Be Considered
(i) Technological Feasibility
    ``Technological feasibility'' refers to whether a particular method
of improving fuel economy can be available for commercial application
in the model year for which a standard is being established. Thus, the
agency is not limited in a CAFE rulemaking to technology that is
already being commercially applied at that time.
(ii) Economic Practicability
    ``Economic practicability'' refers to whether a standard is one
``within the financial capability of the industry, but not so stringent
as to'' lead to ``adverse economic consequences, such as a significant
loss of jobs or the unreasonable elimination of consumer choice.'' \69\
In an attempt to ensure the economic practicability of attribute based
standards, the agency considers a variety of factors, including the
annual rate at which manufacturers can increase the percentage of its
fleet that has a particular type of fuel saving technology, and cost to
consumers. Since consumer acceptability is an element of economic
practicability, the agency, in this rule, has limited its consideration
of fuel saving technologies to be added to vehicles to those that
provide benefits that match their costs. The agency believes this
approach is reasonable for the MY 2011 standards in view of the facts
before it at this time. The agency is aware, however, that facts
relating to a variety of key issues in CAFE rulemaking are steadily
evolving and will review its balancing of these factors in light of the
facts before it in the next rulemaking proceeding.
---------------------------------------------------------------------------

    \69\ 67 FR 77015, 77021; December 16, 2002.
---------------------------------------------------------------------------

    At the same time, the law does not preclude a CAFE standard that
poses considerable challenges to any individual manufacturer. The
Conference Report for EPCA, as enacted in 1975, makes clear, and the
case law affirms, ``(A) determination of maximum feasible average fuel
economy should not be keyed to the single manufacturer which might have
the most difficulty achieving a given level of average fuel economy.''
\70\ Instead, the agency is compelled ``to weigh the benefits to the
nation of a higher fuel economy standard against the difficulties of
individual automobile manufacturers.'' Id. The law permits CAFE
standards exceeding the projected capability of any particular
manufacturer as long as the standard is economically practicable for
the industry as a whole. Thus, while

[[Page 14217]]

a particular CAFE standard may pose difficulties for one manufacturer,
it may also present opportunities for another. The CAFE program is not
necessarily intended to maintain the competitive positioning of each
particular company. Rather, it is intended to enhance fuel economy of
the vehicle fleet on American roads, while protecting motor vehicle
safety and being mindful of the risk of harm to the overall United
States economy.
---------------------------------------------------------------------------

    \70\ CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986).
---------------------------------------------------------------------------

(iii) The Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
    ``The effect of other motor vehicle standards of the Government on
fuel economy'' means, according to the agency's longstanding view,
``the unavoidable adverse effects on fuel economy of compliance with
emission, safety, noise, or damageability standards.'' \71\ The purpose
of this provision was to ensure that any adverse effects of other
standards on fuel economy were taken into consideration in connection
with the fuel economy standards. The concern about adverse effects is
evident in a 1974 report, entitled ``Potential for Motor Vehicle Fuel
Economy Improvement,'' prepared and submitted to Congress by the
Department of Transportation and Environmental Protection Agency.\72\
That report noted that the weight added by safety standards would
reduce, and one set of emissions standards might temporarily reduce,
the level of achievable fuel economy.\73\ The same concern can also be
found in the congressional committee reports on the bills that became
EPCA.\74\
---------------------------------------------------------------------------

    \71\ 42 FR 63184, 63188; Dec. 15, 1977. See also 42 FR 33534,
33537; June 30, 1977.
    \72\ This report was prepared in compliance with Section 10 of
the Energy Supply and Environmental Coordination Act of 1974, Public
Law 93-319.
    \73\ See pages 6-8 and 91-93.
    \74\ See page 22 of Senate Report 94-179, pages 88 and 90 of
House Report 94-340, and pages 155-7 of the Conference Report,
Senate Report 94-516.
---------------------------------------------------------------------------

    In the case of emission standards, this includes standards adopted
by the Federal government and can include standards adopted by the
States as well, since in certain circumstances the Clean Air Act allows
States to adopt and enforce State standards different from the Federal ones.
(iv) The Need of the United States To Conserve Energy
    ``The need of the United States to conserve energy'' means ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \75\ Environmental implications
principally include reductions in emissions of criteria pollutants and
carbon dioxide. A prime example of foreign policy implications are
energy independence and security concerns.
---------------------------------------------------------------------------

    \75\ 42 FR 63184, 63188 (1977).
---------------------------------------------------------------------------

1. Fuel Prices and the Value of Saving Fuel
    Projected future fuel prices are a critical input into the
preliminary economic analysis of alternative CAFE standards, because
they determine the value of fuel savings both to new vehicle buyers and
to society. In this rule, NHTSA relies on fuel price projections from
the U.S. Energy Information Administration's (EIA) Annual Energy
Outlook (AEO) for this analysis.
2. Petroleum Consumption and Import Externalities
    U.S. consumption and imports of petroleum products impose costs on
the domestic economy that are not reflected in the market price for
crude petroleum, or in the prices paid by consumers of petroleum
products such as gasoline. These costs include (1) higher prices for
petroleum products resulting from the effect of U.S. oil import demand
on the world oil price; (2) the risk of disruptions to the U.S. economy
caused by sudden reductions in the supply of imported oil to the U.S.;
and (3) expenses for maintaining a U.S. military presence to secure
imported oil supplies from unstable regions, and for maintaining the
strategic petroleum reserve (SPR) to cushion against resulting price
increases. Higher U.S. imports of crude oil or refined petroleum
products increase the magnitude of these external economic costs, thus
increasing the true economic cost of supplying transportation fuels
above the resource costs of producing them. Conversely, reducing U.S.
imports of crude petroleum or refined fuels or reducing fuel
consumption can reduce these external costs.
3. Air Pollutant Emissions
    While reductions in domestic fuel refining and distribution that
result from lower fuel consumption will reduce U.S. emissions of
various pollutants, additional vehicle use associated with the rebound
effect from higher fuel economy will increase emissions of these
pollutants. Thus, the net effect of stricter CAFE standards on
emissions of each pollutant depends on the relative magnitudes of its
reduced emissions in fuel refining and distribution, and increases in
its emissions from vehicle use.
    Fuel savings from stricter CAFE standards also result in lower
emissions of CO₂, the main greenhouse gas emitted as a
result of refining, distribution, and use of transportation fuels.
Lower fuel consumption reduces carbon dioxide emissions directly,
because the primary source of transportation-related CO₂
emissions is fuel combustion in internal combustion engines.
    The agency has considered environmental issues, both within the
context of EPCA and the National Environmental Policy Act, in making
decisions about the setting of standards from the earliest days of the
CAFE program. As courts of appeal have noted in three decisions
stretching over the last 20 years,\76\ the agency defined the ``need of
the Nation to conserve energy'' in the late 1970s as including ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \77\ Pursuant to that view, the agency
declined in the past to include diesel engines in determining the
maximum feasible level of average fuel economy for passenger cars and
for light trucks because particulate emissions from diesels were then
both a source of concern and unregulated.\78\
---------------------------------------------------------------------------

    \76\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12
(D.C. Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27
(D.C. Cir. 1988) (noting that ``NHTSA itself has interpreted the
factors it must consider in setting CAFE standards as including
environmental effects''); and Center for Biological Diversity v.
NHTSA, 508 F.3d 508, 529 (9th Cir. 2007).
    \77\ 42 FR 63,184, 63,188 (Dec. 15, 1977) (emphasis added).
    \78\ For example, the final rules establishing CAFE standards
for MY 1981-84 passenger cars, 42 FR 33533, 33540-1 and 33551; June
30, 1977, and for MY 1983-85 light trucks, 45 FR 81593, 81597;
December 11, 1980.
---------------------------------------------------------------------------

    In the late 1980s, NHTSA cited concerns about climate change as one
of its reasons for limiting the extent of its reduction of the CAFE
standard for MY 1989 passenger cars \79\ and for declining to reduce
the standard for MY 1990 passenger cars.\80\
---------------------------------------------------------------------------

    \79\ 53 FR 39275, 39302; October 6, 1988.
    \80\ 54 FR 21985,
---------------------------------------------------------------------------

    Since then, DOT has considered the indirect benefits of reducing
tailpipe carbon dioxide emissions in its fuel economy rulemakings
pursuant to the statutory requirement to consider the nation's need to
conserve energy by reducing consumption. In this rulemaking, consistent
with the Ninth Circuit's decision and its observations about the
potential effect of changing information about climate change on the

[[Page 14218]]

balancing of the EPCA factors and aided by the 2007 reports of the
United Nations Intergovernmental Panel on Climate Change \81\ and other
information, NHTSA has monetized the reductions in tailpipe emissions
of CO₂ that will result from the CAFE standards and is
adopting CAFE standards for MY 2011 at levels that reflect an estimated
value of those reductions in CO₂ as well as the value of
other benefits of those standards. In setting these CAFE standards,
NHTSA also considered environmental impacts under NEPA, 42 U.S.C. 4321-4347.
---------------------------------------------------------------------------

    \81\ The IPCC 2007 reports can be found at http://www.ipcc.ch/. 
(Last accessed March 8, 2009.)
---------------------------------------------------------------------------

(v) Other Factors--Safety
    In addition, the agency historically has considered the potential
for adverse safety consequences when deciding upon a maximum feasible
level. This practice is recognized approvingly in case law.\82\
---------------------------------------------------------------------------

    \82\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F. 2d
1322 (D.C. Cir. 1986) (Administrator's consideration of market
demand as component of economic practicability found to be
reasonable); Public Citizen 848 F.2d 256 (Congress established broad
guidelines in the fuel economy statute; agency's decision to set
lower standard was a reasonable accommodation of conflicting
policies). As the United Staets Court of Appeals pointed out in
upholding NHTSA's exercise of judgment in setting the 1987-1989
passenger car standards, ``NHTSA has always examined the safety
consequences of the CAFE standards in its overall consideration of
relevant factors since its earliest rulemaking under the CAFE
program.'' Competitive Enterprise Institute v. NHTSA (CEI I), 901
F.2d 107, 120 at n.11 (D.C. Cir. 1990).
---------------------------------------------------------------------------

(b) Factors That Cannot be Considered
    EPCA provides that in determining the level at which it should set
CAFE standards for a particular model year, NHTSA may not consider the
ability of manufacturers to take advantage of several EPCA provisions
that facilitate compliance with the CAFE standards and thereby reduce
the costs of compliance.\83\ As noted below in Section XII,
manufacturers can earn compliance credits by exceeding the CAFE
standards and then use those credits to achieve compliance in years in
which their measured average fuel economy falls below the standards.
Manufacturers can also increase their CAFE levels through MY 2019 by
producing alternative fuel vehicles. EPCA provides an incentive for
producing these vehicles by specifying that their fuel economy is to be
determined using a special calculation procedure that results in those
vehicles being assigned a high fuel economy level.
---------------------------------------------------------------------------

    \83\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

(c) Weighing and Balancing of Factors
    EPCA did not define the factors or specify the relative weight to
be given the factors in weighing and balancing them. Instead, EPCA gave
broad guidelines within which the agency is to exercise discretion in
determining what level of stringency is the maximum feasible level of
stringency. Thus, the agency has substantial discretion in defining and
weighing the terms and accommodating conflicting priorities consistent
with the purposes of EPCA.
5. Consultation in Setting Standards
    EPCA provides that NHTSA is to consult with the Department of
Energy (DOE) and Environmental Protection Agency prior to prescribing
CAFE standards. It specifies further that NHTSA is to provide DOE with
an opportunity to provide written comments on draft proposed and final
CAFE standards.\84\
---------------------------------------------------------------------------

    \84\ In addition, Executive Order No. 13432 provides that a
Federal agency undertaking a regulatory action that can reasonably
be expected to regulate emissions directly, or to substantially and
predictably affect emissions, of greenhouse gases from motor
vehicles, shall act jointly and consistently with other agencies to
the extent possible and to consider the views of other agencies
regarding such action.
---------------------------------------------------------------------------

6. Test Procedures for Measuring Fuel Economy
    EPA's fuel economy test procedures specify equations for
calculating fuel economy. These equations are based on the carbon
balance technique which allows fuel economy to be determined from
measurement of exhaust emissions. As noted above, this technique relies
upon the premise that the quantity of carbon in a vehicle's exhaust gas
is equal to the quantity of carbon consumed by the engine as fuel.
    After measuring the amount of CO₂ emitted from the
tailpipe of a test vehicle, as well as the amount of carbon in
hydrocarbon (HC) and carbon monoxide (CO), EPA then uses the carbon
content of the test fuel to calculate the amount of fuel that had to be
consumed per mile in order for the vehicle to produce that amount of
carbon containing emissions.\85\ Finally, EPA converts that fuel figure
into a miles-per-gallon figure.
---------------------------------------------------------------------------

    \85\ Under the procedures established by EPA, compliance with
the CAFE standards is based on the rates of emission of
CO₂, CO, and hydrocarbons from covered vehicles, but
primarily on the emission rates of CO₂. In the
measurement and calculation of a given vehicle model's fuel economy
for purposes of determining a manufacturer's compliance with federal
fuel economy standards, the role of CO₂ is approximately
100 times greater than the combined role of the other two relevant
carbon exhaust gases. Given that the amount of CO₂, CO,
and hydrocarbons emitted by a vehicle varies directly with the
amount of fuel it consumes, EPA can reliably and accurately convert
the amount of those gases emitted by that vehicle into the miles per
gallon achieved by that vehicle.
---------------------------------------------------------------------------

7. Enforcement and Compliance Flexibility
    EPA is responsible for measuring automobile manufacturers' CAFE so
that NHTSA can determine compliance with the CAFE standards. In making
these measurements for passenger cars, EPA is required by EPCA \86\ to
use the EPA test procedures in place as of 1975 (or procedures that
give comparable results), which are the city and highway tests of
today, with adjustments for procedural changes that have occurred since
1975. EPA uses similar procedures for light trucks, although, as noted
above, EPCA does not require it to do so.
---------------------------------------------------------------------------

    \86\ 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

    When NHTSA finds that a manufacturer is not in compliance, it
notifies the manufacturer. Surplus credits generated from the five
previous years can be used to make up the deficit. The amount of credit
earned is determined by multiplying the number of tenths of a mpg by
which a manufacturer exceeds a standard for a particular category of
automobiles by the total volume of automobiles of that category
manufactured by the manufacturer for a given model year. If there are
no (or not enough) credits available, then the manufacturer can either
pay the fine, or submit a carry back plan to the agency. A carry back
plan describes what the manufacturer plans to do in the following three
model years to earn enough credits to make up for the deficit. NHTSA
must examine and determine whether to approve the plan.
    In the event that a manufacturer does not comply with a CAFE
standard, even after the consideration of credits, EPCA provides for
the assessing of civil penalties, unless, as provided below, the
manufacturer has earned credits for exceeding a standard in an earlier
year or expects to earn credits in a later year. The Act specifies a
precise formula for determining the amount of civil penalties for such
a noncompliance. The penalty, as adjusted for inflation by law, is
$5.50 for each tenth of a mpg that a manufacturer's average fuel
economy falls short of the standard for a given model year multiplied
by the total volume of those vehicles in the affected fleet (i.e.,
import or domestic passenger car, or light truck), manufactured for
that model year. The amount of the penalty may not be reduced except
under the unusual or extreme circumstances specified in the statute.

[[Page 14219]]

    Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does
not provide for recall and remedy in the event of a noncompliance. The
presence of recall and remedy provisions \87\ in the Safety Act and
their absence in EPCA is believed to arise from the difference in the
application of the safety standards and CAFE standards. A safety
standard applies to individual vehicles; that is, each vehicle must
possess the requisite equipment or feature which must provide the
requisite type and level of performance. If a vehicle does not, it is
noncompliant. Typically, a vehicle does not entirely lack an item or
equipment or feature. Instead, the equipment or features fails to
perform adequately. Recalling the vehicle to repair or replace the
noncompliant equipment or feature can usually be readily accomplished.
---------------------------------------------------------------------------

    \87\ 49 U.S.C. 30120, Remedies for defects and noncompliance.
---------------------------------------------------------------------------

    In contrast, a CAFE standard applies to a manufacturer's entire
fleet for a model year. It does not require that a particular
individual vehicle be equipped with any particular equipment or feature
or meet a particular level of fuel economy. It does require that the
manufacturer's fleet, as a whole, comply. Further, although under the
attribute-based approach to setting CAFE standards fuel economy targets
are established for individual vehicles based on their footprints, the
vehicles are not required to comply with those targets. However, as a
practical matter, if a manufacturer chooses to design some vehicles so
that fall below their target levels of fuel economy, it will need to
design other vehicles so that exceed their targets if the manufacturer's
overall fleet average is to meet the applicable standard.
    Thus, under EPCA, there is no such thing as a noncompliant vehicle,
only a noncompliant fleet. No particular vehicle in a noncompliant fleet
is any more, or less, noncompliant than any other vehicle in the fleet.

III. The Anticipated Vehicles in the MY 2011 Fleets and NHTSA's
Baseline Market Forecast

    NHTSA has a long-standing practice of analyzing regulatory options
in fuel economy rulemakings based on the best available information,
including information regarding the future vehicle market and future
fuel economy technologies. The passenger cars and light trucks
currently sold in the United States, and which are anticipated to be
sold in MY 2011, are highly varied and satisfy a wide range of consumer
needs. From the two-seater Mercedes Benz Smart (produced by Daimler) to
the Ford F-150 pickup truck, from the Honda CR-V to the Chrysler Town
and Country to the GMC Savana, American consumers have a great number
of vehicle options to accommodate their needs and preferences.
    Automobile manufacturers generally attempt to plan their motor
vehicle production several years in advance. When a new vehicle is
introduced, it is the product of several years of design, testing,
product-specific tooling investment, and regulatory certification. In
order to minimize costs, manufacturers generally attempt to place large
automotive parts supply contracts years in advance. Manufacturers must
therefore attempt to predict the types, characteristics, and quantities
of vehicles that consumers will wish to purchase a few years hence.
These plans include what is currently known about the salability and
marketability of these future vehicles, and hence consider the future
state of prices facing the consumer, including that of gasoline. These
plans also contain not only the specific vehicle models which
manufacturers intend to build and their planned annual production, but
also information about specific design features and configurations as
well as the fuel-efficient technologies they are planning to
incorporate in these vehicles. Manufacturer's plans rapidly become
embodied in special tooling and production configurations in factories
and advance orders for component parts. NHTSA requests, and
manufacturers provide, product plan information to the agency during
rulemaking. NHTSA begins its analysis with the submitted product plans
and uses them to establish a baseline, which is used to analyze varying
levels of future CAFE standards.
    In anticipation of the analysis to support today's final rule,
NHTSA issued a request in May 2008 that manufacturers provide the
agency with updated product plans, as well as estimates of the
availability, effectiveness, and cost of fuel-saving technologies.\88\
Considering its past experiences integrating manufacturers' product
plans, reviewing the content of those plans, and seeking clarification
and appropriate correction of those plans, the agency provided
manufacturers with updated tools to facilitate manufacturers' quality
control efforts. NHTSA also tripled the number of agency engineers
assigned to reviewing manufacturers' plans.
---------------------------------------------------------------------------

    \88\ See 73 FR 24910 (May 2, 2008) for NHTSA's most recent
request for comments, which accompanied the NPRM.
---------------------------------------------------------------------------

A. Why does NHTSA establish a baseline market forecast?

    NHTSA begins its analysis by establishing the baseline market
forecast. This forecast represents the fleet that the agency believes
would exist in the absence of fuel economy standards for MY 2011. A
forecast is necessary because the standards will apply to a future
fleet which does not yet exist and therefore must be predicted in order
to estimate the costs and benefits of CAFE standards, as well as
regulatory alternatives as required by OMB and DOT.

B. How does NHTSA develop the baseline market forecast?

1. NHTSA First Asks Manufacturers for Updated Product Plan Data
    NHTSA relies on product plans from manufacturers to help the agency
determine the composition of the future fleets. The product plan
information is provided in response to NHTSA's request for information
from the manufacturers, and responds to very detailed questions about
vehicle model characteristics that influence fuel economy.\89\ The
baseline market forecast that NHTSA uses in its analysis is based
significantly on this confidential product plan information. Individual
manufacturers are better able than any other entity to anticipate what
mix of products they are likely to sell in the future. In this
rulemaking as in prior rulemakings, some commenters requested that
NHTSA make product plan information public to allow members of the
public to comment more fully on the baseline developed by the agency.
For example, the Attorneys General commented that ``the agency should
provide sufficient summaries or aggregations of this information or
make special arrangements so that interested parties such as the state
Attorneys General can view this confidential information under a
confidentiality agreement.''
---------------------------------------------------------------------------

    \89\ Id.
---------------------------------------------------------------------------

    NHTSA cannot make public the entire contents of the product plans.
The submitted product plans contain confidential business information,
which the agency is prohibited by federal law from disclosing; \90\ making

[[Page 14220]]

this information publicly available would cause competitive harm to
manufacturers. See 5 U.S.C. 552(b)(4); 18 U.S.C. 1905; 49 U.S.C.
30167(a); 49 CFR part 512; Critical Mass Energy Project v. Nuclear
Regulatory Comm'n, 975 F.2d 871 (D.C. Cir. 1992). In its publicly
available rulemaking documents the agency does, however, provide
aggregated information compiled from individual manufacturer
submissions regarding its forecasts of the future vehicle market in
such a way that confidential business information is not disclosed.
This aggregated information, such as appears below and in the
accompanying Regulatory Impact Analysis (RIA), includes vehicle fleet
size and composition (passenger cars versus light trucks), overall fuel
economy baseline and major technology applications and design trends.
---------------------------------------------------------------------------

    \90\ NHTSA grants confidentiality to manufacturers' future
specific product plans under 49 CFR Part 512. Once NHTSA has granted
a manufacturer's claim of confidentiality, NHTSA may not release the
covered information except in certain circumstances listed in Sec. 
512.23, none of which include increasing the ability of the public
to comment on rulemakings employing the confidential information,
unless the manufacturers consent to the disclosure.
---------------------------------------------------------------------------

(a) Why does NHTSA use manufacturer product plans to develop the baseline?
    In order to analyze potential new CAFE standards in a way that
tries to simulate how manufacturers could comply with them, NHTSA
develops a forecast of the future vehicle market on a model-by-model,
engine-by-engine, and transmission-by-transmission basis, such that
each defined vehicle model refers to a separately-defined engine and a
separately-defined transmission. For the 2011 model year covered by
this final rule, the light vehicle (passenger car and light truck)
market forecast included almost 1,400 vehicle models, 400 specific
engines, and 300 specific transmissions. NHTSA believes that this level
of detail in the representation of the vehicle market is important both
to an accurate analysis of manufacturer-specific costs and to the
analysis of attribute-based CAFE standards. Because CAFE standards
apply to the average fuel economy performance of each manufacturer's
fleets of cars and light trucks, the impact of potential standards on
individual manufacturers is effectively estimated through analysis of
manufacturers' planned fleets. NHTSA has used this level of detail in
CAFE analysis throughout the history of the program. Furthermore,
because required CAFE levels under an attribute-based CAFE standard
depend on manufacturers' fleet composition, the stringency of an
attribute-based standard is effectively predicted by performing
analysis at this level of detail.
    EPCA does not require NHTSA to use manufacturers' product plans in
order to develop a baseline for purposes of analyzing potential new
CAFE standards. The agency could use exclusively non-confidential
information to develop a market forecast at the same level of detail as
mentioned above, and has done exactly so for purposes of analytical
development and testing, and to represent manufacturers that have not
provided product plans to NHTSA. However, as discussed above, the
agency believes that one of the most valuable sources of information
about future product mix projections is the product plan information
provided by individual manufacturers, because individual manufacturers
are in a unique position to anticipate what mix of products they are
likely to sell in the future.
    Manufacturers generally support NHTSA's use of product plan data in
developing the baseline. Other commenters such as CFA and Public
Citizen, in contrast, stated that the product plans relied upon in the
NPRM are outdated because they were developed before EISA was enacted,
and that the agency should develop its own projections of the vehicle
fleets, which could be made public, instead of relying on confidential
industry plans, which could bias the standards in favor of the
industry. CFA suggested that NHTSA's analysis was based on only ``a
very thin body of knowledge about the veracity, relevance and
predictive value of auto manufacturer product plans, recent changes in
fuel economy and the practices of automakers in adopting fuel economy
technologies.'' Public Citizen stated that because the product plans
are confidential, ``This significantly biases the standards in favor of
industry by shutting the public out of the process,'' and that
``Consumers must essentially trust that NHTSA has set standards in
their interest using information provided by industry.'' Public Citizen
argued that ``In the past, * * * NHTSA has done its own research and
evaluation of these factors which was more transparent.''
    NHTSA's analysis of product plan data is much more rigorous than
commenters suggest. NHTSA engineers carefully examine the information
submitted by manufacturers, and upon discovering what appear to be
errors or inconsistencies, request and receive manufacturers'
explanations and, as appropriate, corrections. For example, the
agency's analysis in preparation for the final rule revealed systematic
errors in plans submitted by two major manufacturers, both of which
resubmitted their plans with corrections.\91\ In addition, the agency
found that two manufacturers inappropriately planned to have some 2-
wheel drive sport-utility vehicles (2WD SUVs) classified as light
trucks, even though the agency explained in the NPRM that, for
enforcement purposes, it planned to classify such vehicles as passenger
cars, and other manufacturers submitted product plans consistent with
the agency's intentions. As discussed below and in Section IX, NHTSA
performed its analysis with these vehicles reassigned to the passenger
car fleet.
---------------------------------------------------------------------------

    \91\ Specifically, one manufacturer had submitted data with a
structure that had inadvertently been misaligned, such that many
vehicle models were incorrectly identified as using engines
applicable to other vehicle models (e.g., a vehicle known to use an
inline 4-cylinder engine might have been identified as using a V-8
engines). Another manufacturer had submitted vehicle dimensional
estimates based on an incorrect SAE measurement procedure.
---------------------------------------------------------------------------

    NHTSA also disagrees with Public Citizen's suggestion that the
agency's use of product plans precludes public participation in the
rulemaking process. As discussed, analysis of confidential product
plans has long been a core feature of developing the CAFE standards,
and the agency is fully transparent in providing aggregated information
about the plans as well as detailed information about the agency's
technology and economic assumptions and the process the agency
undertakes to evaluate and set the standards.
    NHTSA could potentially conduct rulemaking analysis as Public
Citizen suggests using exclusively public information, (including
commercially available information). Indeed, the agency has done
exactly so for purposes of development and testing, and to develop
forecasts of fleets likely to be produced by manufacturers that have
not responded to the agency's request for product plans. However, the
agency currently believes that an analysis based exclusively on
publicly- and commercially-available information would be less
accurate--in terms of its representation of the future light vehicle
market--than an analysis based in large measure on product plan data.
Most publicly available information about vehicles and vehicle
technologies concerns the current fleet, not potential future fleets.
In many cases, manufacturers are prepared to provide far more detail in
confidential submissions then they are prepared to provide in public.
This detail may include the manufacturer's expectation of sales for
particular future models; which technologies are being applied to
particular vehicles; and the manufacturer's expectation of fuel

[[Page 14221]]

economy for future vehicles. This information is typically considered
business confidential by the manufacturer, but is helpful in more
accurately ascertaining both the baseline technology level and fuel
economy of manufacturer's future sales as well as the extent of
opportunities for improving fuel economy.
    NHTSA notes that manufacturers' public statements about future
vehicles have been very optimistic recently with regard to fuel
economy-enhancing technologies, and NHTSA takes these statements into
account when evaluating the submitted product plans. When manufacturer
statements about future vehicles differ substantially from the
submitted product plans, NHTSA generally contacts the manufacturer to
determine the reason for the discrepancy. However, manufacturers
frequently make announcements regarding vehicles or technologies they
hope to produce in the future. Often, they are conditional statements
and plans, and whether they reach the point of commercialization
depends greatly on how circumstances, including public acceptance,
evolve. Thus, for purposes of analyzing the MY 2011 CAFE standards, the
agency currently concludes that information manufacturers provide
confidentially to NHTSA is more reliable than the information appearing
in public sources such as press reports and speeches by manufacturers'
employees, especially given the short time period between the
submission of this information in 2008 and when manufacturers will
begin building their MY 2011 vehicles.
    Nevertheless, EPCA does not require NHTSA to use manufacturers'
confidential business information when evaluating the maximum feasible
levels for new CAFE standards. The agency will base its analysis for
future rulemakings on information--public, commercially-available, or
confidential--it considers most accurate.
    NHTSA recognizes that automobile manufacturers are facing a period
of uncertainty with respect to demand for their products that is
without parallel. Recent swings in prices for fuel have altered demand
patterns, while commodity prices have impacted costs of production.
Concurrently, turmoil in the credit markets and recent upswings in
unemployment also affect the vehicle market. The short and long term
implications of such volatility for future sales will not be known for
some time. In light of such conditions, reliance on product plans in this
rulemaking helps to align the analysis with the best available information.
    NHTSA further recognizes that, in connection with their recent
requests for federal assistance, some manufacturers made statements in
December 2008 regarding future technologies and fuel economy levels,
and that some of these statements indicated plans to achieve CAFE
levels considerably higher than reflected in the product plans
submitted to NHTSA in mid-2008.\92\ The information provided in these
submissions to Congress reflects a level of detail much less than NHTSA
typically receives in the confidential product plan submissions, so it
is difficult for NHTSA to determine whether these manufacturer
statements and submissions reflect the same underlying assumptions as
manufacturers' mid-2008 product plans.
---------------------------------------------------------------------------

    \92\ Available on the Internet at http://financialservices.house.gov/
autostabilization.html (last accessed February 15, 2009).
---------------------------------------------------------------------------

    More recently, in mid-February, Chrysler and General Motors
submitted restructuring plans to the U.S. Department of the Treasury to
support those companies' requests for federal loans. Like the
information these companies provided in December, these plans do not
contain complete and detailed forecasts of the volume and
characteristics of specific vehicle models Chrysler and General Motors
plan to produce. However, the restructuring plans do contain specific
information regarding the CAFE levels that these manufacturers expect
to achieve.
    Chrysler's plan shows that, during MYs 2008-2015, Chrysler plans to
exceed required CAFE levels in some model years and to apply credits it
earns in doing so toward shortfalls in other model years.\93\ The
charts in Chrysler's plans specifically reference the ``Dec 2008 Draft
Rule'' (presumably, the final standards NHTSA submitted to OMB in
November 2008), and indicate that Chrysler appears to believe that
attribute-based CAFE standards for those model years will result in
required CAFE levels for Chrysler similar to those originally estimated
by NHTSA for MYs 2011-2015 based on the product plan information that
Chrysler submitted to NHTSA in July 2008.
---------------------------------------------------------------------------

    \93\ Chrysler's submission to the Treasury Department, p. 117.
Available at http://www.treasury.gov/initiatives/eesa/agreements/
auto-reports/ChryslerRestructuringPlan.pdf, (last accessed Feb. 19, 2009).
---------------------------------------------------------------------------

    GM's plan states that GM ``is committed to meeting or exceeding all
Federal fuel economy standards in the 2010-2015 model years'', and
shows the CAFE levels that GM plans to achieve in those model years,
assuming ``full usage of all credit flexibilities under the CAFE
program.'' \94\ However, GM's plan does not show the CAFE levels
expected to be required of GM under new attribute-based CAFE standards,
and it is unclear from GM's plan how specific changes (since July 2008)
in the company's plans relate to its planned CAFE levels. For example,
while GM's restructuring plan refers to plans to increase hybrid
vehicle offerings, the plan does not include production forecasts
needed to understand how those offerings affect GM's planned CAFE levels.
---------------------------------------------------------------------------

    \94\ GM's submission to the Treasury Department, p. 21.
Available at, http://www.treasury.gov/initiatives/eesa/agreements/
auto-reports/GMRestructuringPlan.pdf (last accessed Feb. 19, 2009).
---------------------------------------------------------------------------

    Considering the context for and generality of the Chrysler and GM
restructuring plans, and the lack of such plans from other
manufacturers, and notwithstanding the considerable uncertainties
currently surrounding the future market for light vehicles, NHTSA
believes that its market forecast for MY 2011, as informed by product
plans submitted to the agency in mid-2008, remains the most useful
available point of reference for the establishment of MY 2011 standards,
and the evaluation of the costs and benefits of these new standards.
(b) What product plan data did NHTSA use in the NPRM?
    For the NPRM, NHTSA received product plan information from
Chrysler, Ford, GM, Honda, Nissan, Mitsubishi, Porsche and Toyota
covering multiple model years. The agency did not receive any product
plan information from BMW, Ferrari, Hyundai, Mercedes (Daimler) or VW.
However, only Chrysler and Mitsubishi provided us with product plans
that showed differing production quantities, vehicle introductions,
vehicle redesign/refresh changes, without any carryover production
quantities through MY 2015. For the other companies that provided data,
the agency carried over production quantities for their vehicles,
allowing for growth, starting with the year after their product plan
data showed changes in production quantities or showed the introduction
or redesign/refresh of vehicles.
    Product plan information was provided through MY 2013 by Ford and
Toyota, thus the first year that the agency carried over production
quantities for those companies was MY 2014. Product plan information
was provided through MY 2012 for GM and Nissan, thus the first year
that the agency carried over production quantities for those companies
was MY 2013. Product plan information was

[[Page 14222]]

provided by Honda through MY 2008. Honda asked the agency to carry over
those plans and also provided data for the last redesign of a vehicle
and asked the agency to carry them forward. Product plan information
was provided through MY 2008 for Porsche, thus the first year that the
agency carried over production quantities for Porsche was MY 2009.
    Because Hyundai was one of the seven largest vehicle manufacturers,
and thus factored explicitly into the optimization process, and NHTSA
desired to conduct this process using the best and most complete
forecast of the future vehicle market, NHTSA used Hyundai's mid-year
2007 data contained in the agency's CAFE database to establish the
baseline models and production quantities for their vehicles.\95\ For
the other manufacturers that did not submit product plans, NHTSA used
the 2005 information from the database, the latest complete data set
that NHTSA had available for use.
---------------------------------------------------------------------------

    \95\ Manufacturers must submit pre- and mid-model year CAFE
reports to the agency as part of the CAFE compliance process under
49 CFR part 537.
---------------------------------------------------------------------------

    As mentioned above, NHTSA received comments that the product plans
it relied upon in the NPRM were out of date and not reflective of
recent announcements from manufacturers regarding new products. CFA
referred to NHTSA's discussion in the NPRM of the relative completion
of various manufacturers' product plans to argue that the product plans
were incomplete and inaccurate. Public Citizen argued that the product
plans were out of date. The Attorneys General and NRDC argued that
NHTSA should update the product plans, the baseline, and the technology
inputs to the Volpe model in light of recent manufacturer statements
about their intent to introduce advanced technologies, such as plug-in
hybrid vehicles, in the near future.
    In response, as noted above, NHTSA published a request for comments
seeking updated information from manufacturers regarding their future
product plans in a companion notice to the NPRM. In examining the
updated product plans received in response to the request for
information, and as discussed more fully below, NHTSA has determined
that the product plans for MY 2011 provided incorporate these
announcements and reflect changes to planned product introduction by
manufacturers in response to the recent market shift towards more fuel-
efficient vehicles, particularly the shift towards increased production
of smaller cars.
(c) What product plan data did NHTSA receive for the final rule?
    For the final rule, NHTSA received product plan information from
Chrysler, Ford (Ford's product plans included separate plans for Jaguar
and Land Rover vehicles, both of which are now owned by Tata Motors and
are thus attributed to that company in the final rule), GM, Honda,
Hyundai, Mitsubishi, Nissan, Porsche, Subaru, and Toyota, covering
multiple model years. The agency did not receive product plan
information from BMW, Daimler (Mercedes), Ferrari, Suzuki or VW.
Chrysler, Ford, Hyundai and Mitsubishi provided us with product plans
that showed changes in production quantities, vehicle introductions,
and vehicle redesigns/refreshes changes, without any carryover
production quantities through MY 2015. For the other companies that
provided data, the agency was careful to carry over production
quantities for their vehicles, allowing for growth, starting with the
year after their product plan data showed changes in production
quantities or showed the introduction or redesign/refresh of vehicles.
    Further, NHTSA used the pre-model year 2008 CAFE reports as the
basis for the future MY 2011 product plans and filled in gaps in the
data (e.g., engine specifications, wheelbase, track width, etc.) for
those manufacturers with information gathered from the Web sites of the
individual manufacturers and from general automotive Web sites such as
Edmunds.com, Cars.com, and Wards.com.
(d) How is the product plan data received for the final rule different
from what the agency used in the NPRM analysis, and how does it impact
the baseline?
    Informed by the overall fleet size and market share estimates
applied by the agency (and discussed below), manufacturers' plans
changed considerably between 2007 and 2008. NHTSA's forecast, based on
the Energy Information Administration's (EIA's) Annual Energy Outlook
(AEO) 2008, of the total number of light vehicles likely to be sold
during MY 2011 through MY 2015 dropped from 85 to 83 million vehicles--
about 16.5 million vehicles annually.\96\ Also, due in part to the
reclassification of roughly 1.4 million 2WD SUVs, the share of MY 2011
vehicles expected to be classified as light trucks fell from 49 percent
in NHTSA's 2007 market forecast to 42 percent in the agency's current
forecast.
---------------------------------------------------------------------------

    \96\ NHTSA recognizes that domestic vehicle sales are currently
well below this rate. However, as discussed below, the agency
considers this an aspect (like gasoline prices near $2 per gallon)
of the current economy, and not an indicator of the longer-term
prospect for light vehicle sales in the U.S. Just as the agency
currently expects fuel prices to return to high levels, it expects
vehicle sales to rise well above today's rate.
---------------------------------------------------------------------------

    The latter of the above changes is reflected in the baseline
distribution of vehicle models with respect to fuel economy and
footprint. Figures III-1 and III-2 show passenger car and light truck
2011 models, respectively, in the 2007 plans. Figures III-3 and III-4
show passenger car and light truck models, respectively, in the 2008
plans. A comparison of Figures III-1 and III-3 shows that the number of
passenger cars models with footprints between roughly 41 and 52 square
feet has increased considerably, and that the number of passenger car
models with relatively high fuel economy levels (e.g., above 35 mpg)
has increased. Conversely, a comparison of Figures III-2 and III-3
shows less pronounced differences between the 2007 and 2008 plans,
although the number of small light truck models decreased (due to
reclassification).

[[Page 14223]]
[GRAPHIC] [TIFF OMITTED] TR30MR09.003
[[Page 14224]]
[GRAPHIC] [TIFF OMITTED] TR30MR09.004
[[Page 14225]]

    NHTSA's expectations regarding manufacturers' market shares (the
basis for which is discussed below) have also changed since 2007. These
changes are reflected below in Table III-1, which shows the agency's
2007 and 2008 sales forecasts for passenger cars and light trucks.\97\
---------------------------------------------------------------------------

    \97\ As explained below, although NHTSA normalized each
manufacturer's overall market share to produce a realistically-sized
fleet, the product mix for each manufacturer that submitted product
plans was preserved. The agency has reviewed manufacturers' product
plans in detail, and understands that manufacturers do not sell the
same mix of vehicles in every model year.
[GRAPHIC] [TIFF OMITTED] TR30MR09.006

    Additionally, for some advanced technologies, the updated product
plans submitted by manufacturers for the final rule include higher
quantities in MY 2011 and beyond than the older product plans used for
the NPRM had indicated. These changes are consistent with most
manufacturers' indications that their product planning was informed by
expectations that fuel prices considerably higher than those in EIA's
AEO 2008 reference case forecast would prevail during the first half of
the next decade. Most recently, the restructuring plans submitted by
General Motors and Chrysler offer additional information on changes to
product plans, albeit at an aggregate level, that are deemed necessary
to achieve ``operational and functional viability.''
    Manufacturers' most recently submitted detailed plans (i.e., those
submitted to NHTSA in July 2008) show significant application of the
following engine technologies in MY 2011 (percent of the entire fleet
having that technology is shown in the parentheses): Intake cam phasing
(34 percent), dual cam phasing (35 percent), stoichiometric gasoline
direction injection (11 percent), and turbocharging and engine
downsizing (6 percent). Regarding transmission technologies,
manufacturers' plans show significant application of the following
technologies by MY 2011: 6-, 7-, or 8-speed automatic transmissions (27
percent), and strong hybrids (4 percent). Manufacturers' plans also
show significant application of electric power steering (3 percent) and
integrated starter/generators (34 percent) by MY 2011.
    Though not applicable to today's rulemaking, and while updated
product plans may reflect different rates of technology application,
manufacturers' July 2008 plans also indicated expectations that the use
of some of these and other technologies would continue to increase
after MY 2011. For example, manufacturers' product plans indicated at
the time that use of stoichiometric gasoline direction injection would
increase from 11 percent of the fleet in MY 2011 to 15 percent of the
fleet in MY 2015, and that use of turbocharging and engine downsizing
would increase from 6 percent of the fleet in MY 2011 to 13 percent of
the fleet in MY 2015. These plans further indicated that use of dual
cam phasing, combustion restart, and integrated starter/generators
would increase to 49 percent, 10 percent, and 49 percent, respectively,
by MY 2015.
    The restructuring plans Chrysler and GM submitted to the Department
of the Treasury in February 2009 both indicate intentions to increase
the rate of technology adoption and alter the mix towards higher
numbers of flexible fuel, alternative fuel and electric vehicles.
Chrysler's restructuring plan shows plans to introduce three new
electric or hybrid-electric vehicle models in MYs 2010-2011, and an
additional seven such models during MYs 2012-2015.\98\ As mentioned
above, Chrysler's restructuring plan is clearly informed by and
responsive to NHTSA's 2008 draft final standards for MYs 2011-2015.
Though less clear in terms of specific requirements to the company,
GM's restructuring plan also appears to be responsive to those MYs
2011-2015 standards. GM's restructuring plan indicates that in MY 2012,
the company plans greater deployment of 2-step variable valve timing,
new 4-cylinder gasoline engines, dry dual clutch transmissions, ``Gen
2'' strong hybrids, extended range electric vehicles, and possibly
compressed natural gas.\99\ The plan further indicates that in MY 2015,
GM expects to introduce ``Gen 3'' hybrids, lean-burn homogeneous charge
compression ignition (HCCI) gasoline engines, and fuel cell vehicles.
---------------------------------------------------------------------------

    \98\ Chrysler, p. 135.
    \99\ GM, p. 21.
---------------------------------------------------------------------------

    Manufacturers' July 2008 product plans also show increasing numbers
of mid-size ladder-frame SUVs being planned for redesign as unibody
SUVs/crossover vehicles. Additionally, some ladder-frame SUVs and mid-
size pickup

[[Page 14226]]

trucks are planned to be discontinued altogether and replaced with
totally new products that have unibody construction. Some of the trend
for mid-size SUVs being replaced by unibody vehicles is already visible
in the marketplace and reflected in NHTSA's forecast of the MY 2011
light vehicle market.
    Concerning engine trends, the manufacturers' plans show a
significant amount of engine downsizing. This downsizing is of two
major types: first, replacing existing engines with smaller
displacement engines while keeping the same number of cylinders per
engine; second, replacing existing engines with engines having a
smaller number of cylinders (e.g., 6-cylinder engines instead of 8-
cylinder engines and 4-cylinder engines instead of 6-cylinder engines).
The plans indicate that for many of the engines being downsized, the
replacement engines have some form of advanced valve actuation (e.g.,
variable valve lift) combined with other technologies, such as engine
friction reduction or direct injection. When such changes occur the
replacement engines appear to provide higher fuel economy, with maximum
power and torque similar to the engines they are replacing. It is not
clear from manufacturers' product plans whether and, if so, how vehicle
prices and other performance measures (e.g., launch, gradeability) will
be affected.
    When engines are planned to be replaced with fewer-cylinder engines
(e.g., smaller V6 engines instead of large V8 engines), the plans show
some of these engines having some form of advanced valve actuation,
combined with direct injection and turbocharging. Some of these engines
also have combustion restart. These engines also provide maximum power
and torque similar to the engines they are replacing while delivering
higher fuel economy, although impacts on price and performance measures
are also uncertain.
    For some selected technologies, Table III-2 compares MY 2011
penetration rates in manufacturers' product plans from the 2007 plans
to those from the 2008 plans. This comparison reveals both increases
and decreases in planned technology application for MY 2011, including
a doubling in the planned production of hybrid electric vehicles (here,
including only ``strong'' hybrids such as power-split hybrids and plug-
in hybrids). Because this comparison is limited to MY 2011, it does not
evidence manufacturers' plans--discussed above--to redesign many
vehicles in MY 2012 (and later years) and, in doing so, to increase
further the use of some fuel-saving technologies. This also holds true
for the GM and Chrysler restructuring plans, which describe limits to
attaining anticipated MY 2011 targets, in particular for GM trucks in
that year, but at the same time differ markedly in terms of the
estimates of the total number of vehicles sold. Information on the
impact of penetration rates is of course conditioned on sales volumes,
which vary for MY 2011 from 11.1 million for Chrysler to 14.3 million
for GM. While information regarding these later technology improvements
was provided to NHTSA, it did not form the basis for the establishment
of the MY 2011 CAFE standards.
[GRAPHIC] [TIFF OMITTED] TR30MR09.007

    Manufacturers have also, in 2008, indicated plans to sell more
dual-fuel or flexible-fuel vehicles (FFVs) than indicated in the plans
they submitted to NHTSA in 2007. FFVs create a potential market for
alternatives to petroleum-based gasoline and diesel fuel. For purposes
of determining compliance with CAFE standards, the fuel economy of a
FFV is, subject to limitations, adjusted upward to account for this
potential.\100\ However, NHTSA is precluded from ``taking credit'' for
the compliance flexibility by accounting for manufacturers' ability to
earn and use credits in determining what standards would be ``maximum
feasible.''\101\ Some manufacturers plan to produce a considerably
greater share of FFVs than can earn full credit under EPCA. The
projected average FFV share of the market in MY 2011 is 14 percent for
the NPRM and 17 percent for the final rule.
---------------------------------------------------------------------------

    \100\ See 49 U.S.C. 32905 and 32906.
    \101\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------

    Consistent with these expected trends toward wider application of
fuel-saving technologies, the product plan data indicates that almost
all manufacturers expect to produce a more efficient fleet than they
had planned to produce in 2007. However, because manufacturers' product
plans also reflect simultaneous changes in fleet mix and other vehicle
characteristics, the relationship between increased technology
utilization and

[[Page 14227]]

increased fuel economy cannot be isolated with any certainty. To do so
would require an apples-to-apples ``counterfactual'' fleet of vehicles
that are, except for technology and fuel economy, identical--for
example, in terms of fleet mix and vehicle performance and utility. As
a result, NHTSA's baseline market forecast shows industry-wide average
fuel economy levels somewhat higher than shown in the NPRM. Average
fuel economy for MY 2011 is 26.0 mpg in the NPRM baseline forecast, and
26.5 mpg in the final rule.
    These changes are shown in greater detail below in Table III-3a,
which shows manufacturer-specific CAFE levels (not counting CAFE
credits that some manufacturers expect to earn by producing flexible
fuel vehicles) planned in 2007 for passenger cars and light trucks.
Table III-3b shows the combined averages of these planned CAFE levels.
Tables III-4a and III-4b show corresponding information from
manufacturers' 2008 plans. These tables demonstrate that, with very few
exceptions, manufacturers are planning to increase overall average fuel
economy beyond the levels shown in the plans they submitted in 2007. In
addition, according to the restructuring plans submitted to the
Treasury Department, GM states that it will reach average fleet fuel
economy of 32.5 mpg for passenger vehicles and 23.6 mpg for trucks in
MY 2011, compared to the 30.3 and 21.4 reported in Table III-4a,
below.\102\ Also, Chrysler's restructuring plan states that the company
plans to accelerate its utilization of more fuel-efficient power
trains, for example, to improve fuel efficiency on a remixed product
line. In addition, Chrysler plans, according to the restructuring, to
offer flexible fuel capability in half of its light trucks by 2012.
---------------------------------------------------------------------------

    \102\ Unlike the values shown in Table III-4a, the average fuel
economy levels shown in GM's restructuring plan reflect ``full usage
of all credit flexibilities under the CAFE program.'' It is not
clear how much of the difference between Table III-4a and GM's
February 2009 estimates is accounted for by such flexibilities.
[GRAPHIC] [TIFF OMITTED] TR30MR09.008

[[Page 14228]]
[GRAPHIC] [TIFF OMITTED] TR30MR09.009
[[Page 14229]]
[GRAPHIC] [TIFF OMITTED] TR30MR09.010

    Tables III-5 through III-7 summarize other changes in
manufacturers' product plans between those submitted to NHTSA in 2007
(for the NPRM) and 2008 (for the final rule). These tables present
average vehicle footprint, curb weight, and power-to-weight ratios for
each of the seven largest manufacturers, and for the overall industry.
The tables do not identify manufacturers by name, and do not present
them in the same sequence.
    Table III-5 shows that manufacturers' latest plans reflect a very
slight (less than 0.1 square feet) increase in overall average
passenger vehicle size, and suggests that manufacturers currently plan
to sell larger trucks than they reported previously. However, these
planned increases are, in the aggregate, attributable to the
reassignment of vehicles from the light truck to the passenger car
fleet. The average planned footprint among all planned passenger cars
and light trucks remained unchanged.
[GRAPHIC] [TIFF OMITTED] TR30MR09.011

    Table III-6 shows that manufacturers' latest plans reflect a small
increase in overall average vehicle weight. However, for both the
passenger car and light truck fleets, the reassignment of some light
trucks to the passenger car fleet caused the average curb weight for
both fleets to increase, even though doing so did not (and, of course,
could not) change the overall average curb weight. Without these
reassignments, the average curb weights of the passenger car and light
truck fleets would have dropped by about 5 and 35 pounds,
respectively.\103\
---------------------------------------------------------------------------

    \103\ Notwithstanding the reassignment of some vehicles to the
passenger car fleet, manufacturers' July 2008 product plans also
indicated shifts in the mix of passenger cars and light trucks, such
that overall average curb weight increased despite these small
decreases in average passenger car and average light truck curb weight.

---------------------------------------------------------------------------

[[Page 14230]]
[GRAPHIC] [TIFF OMITTED] TR30MR09.012

    Table III-7 shows that manufacturers' latest plans reflect a small
increase (about 1.7 percent) in overall average performance, and
suggests that increases will mostly occur in the light truck fleet.
Considering that this 3.5 percent increase in light truck performance
is accompanied by a 2.7 percent increase in light truck curb weight,
this suggests that (1) the vehicles being reassigned to the passenger
car fleet are among the less powerful (per pound) of the vehicles
previously assigned to the light truck fleet and (2) manufacturers are
planning to install somewhat more powerful engines in many light trucks
than previously reported to NHTSA. This trend is detectable by analysis
of the detailed product plans, and is appears to be corroborated by the
reported change in intended product mix that GM and Chrysler state in
their restructuring plans.
[GRAPHIC] [TIFF OMITTED] TR30MR09.013

    These overall trends mask the fact that manufacturers' plans did
not all change in the same ways. In terms of planned average footprint,
changes in manufacturers' plans ranged from a 4 percent decrease to a 5
percent increase. In terms of planned average curb weight and power-to-
weight ratio, these ranges covered -4 percent to 3 percent and -5
percent to 15 percent, respectively.
    NHTSA recognizes that some manufacturers' plans to increase vehicle
performance reflect an intention to apply some fuel-saving technologies
in ways that do not hold performance and utility constant, and
therefore do not achieve the same fuel economy increases that NHTSA
would assume when estimating the effect of adding these technologies
for the sole purpose of complying with CAFE standards. This continues
what has long been standard practice in the industry. Vehicle
performance, amenities, and utility have been generally increasing for
more than a century, in response to consumer demand. Manufacturers have
applied innumerable technological advances during that time, and
although they have achieved significant fuel economy gains, they have
not applied these technological advances for the sole purpose of
increasing fuel economy. When applying a given technology to a given
vehicle, a manufacturer does so in a way that balances multiple vehicle
characteristics, including fuel economy. For example, while a
manufacturer might make both a gasoline and diesel version of a given
sedan, the diesel version might offer more weight-increasing amenities
(e.g., luxury seating) and significantly better performance (e.g.,
torque). In this case, the diesel version would have greater value to
the consumer, and would thus command a higher price.
    The Union of Concerned Scientists (UCS) and some other commenters
suggested that manufacturers' product plans, and NHTSA's use of these
plans, may have at least the appearance of wrongdoing.\104\ Such
comments cite a ``lack of transparency'' ultimately traceable to the
fact that the submitted product plans contain confidential business
information, which the agency is prohibited by federal law from
disclosing, as discussed above. However, NHTSA believes these
perceptions may also arise because UCS and others realize that
manufacturers often use technology to increase performance (and other
vehicle characteristics), not just to increase fuel economy, and thus
may assign a fuel economy ``effectiveness'' to a technology in their
product plans that is lower than if the technology was used solely to
increase fuel economy. If so, NHTSA rejects the notion that for
manufacturers to do so constitutes any

[[Page 14231]]

form of ``wrongdoing.'' Manufacturers compete in a marketplace that
reflects the values that consumers place on vehicle amenities,
performance, and utility, as well as fuel economy.
---------------------------------------------------------------------------

    \104\ See, e.g., UCS, p. 14.
---------------------------------------------------------------------------

    When NHTSA estimates the cost and effect of adding technologies in
response to CAFE standards, the agency is treating these technologies
as being applied solely for that purpose; therefore, the agency's
analysis reflects an attempt to hold amenities, performance, and
utility constant. Thus, NHTSA's analysis estimates means by which
manufacturers could comply with CAFE standards. Manufacturers, however,
determine how they actually will comply. As an example, if a
manufacturer plans to apply technologies in ways that increase vehicle
performance in addition to increasing fuel economy, NHTSA would have to
find a way of accounting for the value that those performance increases
represent. While the manufacturers seeking federal funds have reported
plans to alter their product mix in favor of smaller, more fuel-
efficient vehicles, it is too soon to tell to what extent consumers
will adapt to such a product mix for MY 2011 (which may, to a large
extent, depend on fuel prices), or whether the rest of the industry
will follow or instead decide to serve the market for larger
performance vehicles left behind by GM and Chrysler.
    Expected model years in which each vehicle model will be redesigned
or freshened constitute another important aspect of NHTSA's market
forecast. As discussed in Section IV, NHTSA's analysis supporting
today's rulemaking times the addition of most technologies to coincide
with either a vehicle redesign or a vehicle freshening. Product plans
submitted to NHTSA preceding both the NPRM and the final rule contained
manufacturers' estimates of vehicle redesign and freshening schedules.
However, as discussed in Section IV, NHTSA estimated that in the
future, most vehicles would be redesigned on a five-year schedule, with
vehicle freshening (i.e., refresh) occurring every two to three years
after a redesign. After applying these estimates, the shares of
manufacturers' passenger car and light truck estimated to be redesigned
in MY 2011 were as summarized below for the seven largest
manufacturers. Table III-8 shows the percentages of each manufacturer's
fleets expected to be redesigned in MY 2011 from the market forecast
used by NHTSA in the analysis documented in the NPRM. To protect
confidential information, manufacturers are not identified by name.
Table III-9 presents corresponding estimates from the analysis
supporting today's final rule. To further protect confidential
information, the numbering of individual manufacturers is different
from that shown in Table III-8.
[GRAPHIC] [TIFF OMITTED] TR30MR09.014

    We continue, therefore, to estimate that manufacturers' redesigns
will not be uniformly distributed across model years. This is in
keeping with standard industry practices, and reflects what
manufacturers actually do-NHTSA has observed that manufacturers in fact
do redesign more vehicles in some years than in others. NHTSA staff
have closely examined manufacturers' planned redesign schedules,
contacting some manufacturers for clarification of some plans, and
confirmed that these plans remain unevenly distributed over time. For
example, although Table 9 shows that NHTSA expects Company 2 to
redesign 34 percent of its passenger car models in MY 2011, current
information indicates that this company will then redesign only (a
different) 10 percent of its passenger cars in MY 2012. Similarly,
although Table 9 shows that NHTSA expects four of the largest seven
light truck manufacturers to redesign virtually no light truck models
in MY 2011, current information also indicates that these four
manufacturers will redesign 21-49 percent of their light trucks in MY
2012. GM and Chrysler's recent restructuring plans lend support to
these observations. Chrysler described its planned entries of new
vehicles (its ``launch cadence'') in

[[Page 14232]]

its plan, and there is clear phasing, with MY 2011 experiencing many
new introductions and some later years having none.\105\
---------------------------------------------------------------------------

    \105\ Chrysler plan, p. 135.
---------------------------------------------------------------------------

    NHTSA understands that a manufacturer may choose to time the
application of technologies to coincide with planned redesigns, and
elect in one model year to apply more technology than needed to meet
its required CAFE level in that year. However, NHTSA has decided not to
attempt to represent this type of manufacturer response to the MY 2011
CAFE standards because it is not relevant for the current
rulemaking.\106\ NHTSA will consider this issue further in future
rulemaking analyses.
---------------------------------------------------------------------------

    \106\ Additionally, although the agency will reconsider this
issue in future rulemakings, at this time the agency is not
confident that it has the statutory authority to base its
determination of the maximum feasible CAFE standard in a given model
year on manufacturers' ability to over-comply during prior model
years in which more vehicles were redesigned.
---------------------------------------------------------------------------

2. Once NHTSA has the product plans, how does it develop the baseline?
    In all cases, manufacturers' sales volumes were normalized to
produce passenger car and light truck fleets which reflected each
manufacturers' MY 2008 market shares within the aggregate vehicle sales
volume forecast in EIA's 2008 Annual Energy Outlook. NHTSA does this in
order to develop a market forecast that is realistic in terms of both
its overall size as well as manufacturers' relative market shares. The
product mix for each manufacturer that submitted product plans was
preserved and, in the case of those than did not submit plans, the
product mix used was the same as indicated in their pre-model year 2008
CAFE data. As was discussed earlier, the manufacturers themselves are
uncertain about future aggregate sales volumes. Although the market is
facing a downturn of unprecedented magnitude, NHTSA currently expects
that pent-up demand (driven, for example, by the continued use and
eventual scrappage of existing vehicles) and an eventual economic
recovery will, over time, bring sales back to more historic levels.
    CBD commented that this method of establishing the baseline fleet
``has illegally constrained [NHTSA's] analysis by locking [NHTSA] into
the assumption that a manufacturer's fleet mix need not, and will not,
change in response to'' increasing consumer demand for vehicles with
improved fuel economy. Whether NHTSA should incorporate market shifts
in its modeling has been a theme in comments for the past several CAFE
rulemakings. Comments with regard to market shift tend to address two
different issues. First, commenters request that NHTSA assume a higher
fuel economy baseline than manufacturer product plans indicate, due to
market shifts occurring because consumers demand higher fuel economy
even without CAFE standards. The Mercatus Center, for example, raised
this point in comments to the NPRM. Second, commenters suggest that
NHTSA should incorporate the market shifts that result due to CAFE
regulation, as manufacturers adjust vehicle prices and fuel economy
levels, and consumers respond to those changes. The Alliance
recommended that NHTSA use NERA's nested logit model, for example,
since it attempts to account for ``actual consumer demand behavior'' to
address this issue.
    NHTSA agrees in principle that some kind of ``market shift'' model
could provide useful information regarding the possible effects of
potential new CAFE standards, and has researched how to integrate such
a model into its stringency analysis. NHTSA recognizes that the product
plans on which the agency relies to determine CAFE stringency represent
a snapshot, and are subject to change in response to consumer demand,
whether driven by CAFE or by extrinsic factors. Although NHTSA has now
spent several years considering how to incorporate market shifts into
its analysis of potential CAFE standards, the agency has still not been
able to develop credible coefficients specifying such a model, and we
have therefore continued to refrain in the final rule from integrating
a market share model into the Volpe model.\107\ However, manufacturer
product plans for MY 2011 do already, at a minimum, reflect whatever
market shifts the manufacturers believe will occur in the absence of
regulations. Additionally, the agency conducts a separate analysis of
potential changes in manufacturers' overall sales volumes. NHTSA will
continue to consider ways in which to incorporate market shift modeling
into its analysis for future rulemakings. Recent upheavals in the
economy, including historically quick run-ups in gasoline prices
followed by as dramatic declines, greatly affect consumer demand for
vehicles. Econometric models such as nested logit are necessarily
calibrated on historic data and thus, while offering a consistent
method for describing the future, are constrained to reflect behavior
based on past reactions to events. The release of the restructuring
plans for GM and Chrysler are cases in point. They show considerable
alterations in product plans, including reduction of planned sales
volumes and nameplates, along with introduction of new models and
accelerated adoption of technology, that appear to reflect a break with
historical trends.
---------------------------------------------------------------------------

    \107\ NHTSA is aware that Resources for the Future (RFF) has
drafted a report regarding its examination of consumer behavior
modeling. Although a market share model, as currently envisioned by
NHTSA, would also need to address manufacturer behavior (in
particular, regarding pricing), NHTSA will consider RFF's work in
evaluating future changes to NHTSA's analytical methods. NHTSA has
met with EPA and RFF staff to discuss the status of RFF's efforts,
and will consider any results RFF is able to develop.
---------------------------------------------------------------------------

    Thus, the baseline fleet for MY 2011, or the baseline market
forecast, consists of the vehicles present in the normalized and
completed product plans, before NHTSA applies technologies to them.
Manufacturers typically provide product plans not only for the years
covered by a CAFE rulemaking, but also for prior years--so, for
purposes of this rulemaking, NHTSA has product plans from many
manufacturers beginning with MY 2008. As discussed above, NHTSA uses
the baseline market forecast as a way of gauging what manufacturer fuel
economy levels would exist in the absence of new CAFE standards. In
order to provide a point of reference for estimating the costs and
benefits of new standards, NHTSA assumes that, without new standards,
the fuel economy standards would remain at the level of the MY 2010
standards.\108\ However, the baseline market forecast, which again, is
based on the product plans, does not show all manufacturers in
compliance with the MY 2010 standards. This results from manufacturers'
ability to use compliance flexibilities, like credits (AMFA and
otherwise) and fines, to meet the standards, which NHTSA is statutorily
prohibited from considering in setting the standards.
---------------------------------------------------------------------------

    \108\ As a point of reference for analysis, we note that
assuming that CAFE standards remain at 2010 levels is different from
assuming that manufacturer fuel economy levels remains at their 2010
levels. As a legal matter under EISA, after MY 2011, if NHTSA does
not set standards for a model year, there are no standards for that
model year. However, as a practical matter, it is reasonable to
assume that manufacturers would proceed as if the previous year's
standard carried over, rather than changing their vehicles and
allowing fuel economy to fall without limit.
---------------------------------------------------------------------------

    In order to ensure that our analysis does not incorporate such
flexibilities and thus result in double-counting of costs that were
evaluated in the previous rulemaking, NHTSA must adjust the baseline
market forecast upwards. For manufacturers whose

[[Page 14233]]

product plans show fuel economy levels below the MY 2010 standards,
NHTSA adjusts them upwards by adding technology to the manufacturer's
fleet in order to get the manufacturer into compliance without use of
credits or payment of fines. For manufacturers whose product plans meet
or exceed the MY 2010 standards, NHTSA incorporates them as-is. NHTSA
develops an adjusted baseline because the costs and benefits of
reaching the MY 2010 standards were already accounted for in prior
rulemakings, just as the costs and benefits of reaching the MY 2011
standards are accounted for in the current rulemaking. To avoid double-
counting the costs to manufacturers or the benefits to society required
to meet the MY 2010 standards, NHTSA develops this adjusted baseline,
which the agency then uses in analyzing the MY 2011 standards.
    The Alliance commented that NHTSA should use an ``actual'' baseline
instead of a ``projected'' baseline. The Alliance stated that ``NHTSA
assumes that manufacturers were going to increase fuel economy
significantly in numerous ways apart from a congressional or agency
mandate to do so,'' and argued that ``by failing to consider the price
increases needed to reach its `projected baseline,' NHTSA
underestimates the increase in vehicle prices by about $260 per vehicle
for cars and $920 per vehicle for trucks on average.''
    As explained, NHTSA would be double-counting to incorporate the
costs of meeting the MY 2010 standards in the cost/benefit analysis for
the current rulemaking. NHTSA discusses these costs, however, in the
FRIA in Chapter I.
3. How does NHTSA's market forecast reflect current market conditions?
    NHTSA's market forecast for MY 2011, which is based significantly
on confidential product plans provided to the agency by vehicle
manufacturers, reflects the agency's best judgment at the time it was
developed. Manufacturers submitted plans during the summer of 2008. In
preceding months, the industry had begun to show signs of stress, and
the agency believes manufacturers' revised plans submitted after the
NPRM were informed by this. NHTSA is well aware that market conditions
have deteriorated since late summer, just as the agency is aware that
gasoline prices have fallen considerably in recent months.
    The agency notes, as mentioned above, that manufacturers' product
plans were submitted along with manufacturers' indications that these
plans were generally informed by expectations that relatively high fuel
prices would prevail in the future. Although NHTSA did not request that
manufacturers provide comprehensive and detailed forecasts of the world
economy, including markets for credit and petroleum, the agency
believes that manufacturers anticipated that, at least from MY 2011
forward, the economic environment would look much less dire than more
recent events would suggest. The agency believes these expectations
were consistent with those embodied in the high price scenario in EIA's
AEO 2008, upon which the agency has based the fuel prices and total
light vehicle market size used in the analysis supporting today's final rule.
    NHTSA is cautiously hopeful that market conditions will rebound,
and our market forecast remains consistent with that expectation. The
recent restructuring plans submitted by Chrysler and GM, while
diverging in absolute terms with respect to sales volumes, also
anticipate significant sales growth by the middle part of the decade.
In any event, were NHTSA to adopt more pessimistic expectations, those
expectations would need to be reflected in other economic forecasts--in
particular of petroleum prices. Were NHTSA to apply economic estimates
that assume credit markets remain very constricted during MY 2011, it
should, for internal consistency, apply considerably reduced estimates
of the overall number of light vehicles sold in the U.S., and
potentially lower estimates of gasoline and diesel fuel prices during
the lifetimes of the vehicles covered by the standards.
    NHTSA has concluded that the forecasts it has applied in its
current rulemaking for MY 2011 reflect the best internally consistent
information available. The agency will, of course, update these
forecasts in future rulemakings, and will base its analysis in those
rulemakings on information--public, commercially-available, or
confidential--that it considers most indicative of the fleets that
manufacturers are likely to produce in future model years

IV. Fuel Economy-Improving Technologies

    As explained above, pursuant to the President's January 26, 2009
memorandum, this final rule establishes passenger car and light truck
CAFE standards for one year, MY 2011. Although this final rule
establishes standards for that year alone, the agency undertook a
comprehensive analysis of fuel economy-improving technologies with a
time horizon similar to the one considered in the 2002 National Academy
of Sciences (NAS) CAFE report. Like NAS, the agency considered
technologies that are readily available, well known and could be
incorporated into vehicles once production decisions are made (these
are referred to as ``production intent'' technologies). Other
technologies considered, called ``emerging'', are beyond the research
phase and under development, but are not widely used at this time. The
agency did not consider technologies in the research stage because
their costs and/or performance are not presently well known.
    The agency has elected to include the full analysis in this final
rule for several reasons. First, it supplements the analysis of fuel
saving technology released by the 2002 NAS study. Second, it places in
meaningful context the portion of the analysis that relates directly to
MY 2011, showing which technologies are not available for that year and
why. The agency typically evaluates technologies within a time context
spanning more than a single model year, even if the rulemaking itself
addresses only a single year as in the current rulemaking, because when
manufacturers add technologies to vehicle models in order to meet CAFE
standards, they tend to phase them in over several model years,
consistent with vehicle redesign and refresh schedules, supplier
contract procedures, the need for testing and validation of new
technologies, and so forth. Consequently, although the final rule
establishes standards for MY 2011 only, NHTSA believes that including
the entire technology analysis will increase public understanding of
the agency's estimates for MY 2011 of technology costs, effectiveness,
and availability, as well as manufacturer vehicle freshening and
redesign cycles.
    With that in mind, the following section details the cost and
effectiveness estimates completed for technologies in the production
intent or emerging technology phase timeline. The estimates are drawn
from an analysis conducted in the summer of 2008. It relied as much as
possible on published studies and confidential product plan data
submitted by manufacturers on July 1, 2008 in response to the agency's
NPRM request for comments published May 2, 2008. The analysis was
conducted by engineers from DOT and Ricardo, an international
consulting firm that specializes in automotive engineering consulting
(discussed below). The engineering team used all data available at that
time, along with their expert opinion to derive cost and effectiveness
estimates for technologies

[[Page 14234]]

either in production or in the emerging stage of production for
purposes of this rulemaking.
    The agency believes that the resulting estimates are the best
available for MY 2011, given the information that existed at the time.
NHTSA recognizes, however, that the analysis of and public debate over
the cost and effectiveness of the various fuel saving technologies is
an ongoing one. It recognizes too that aspects of its technology
analysis will likely require updating or otherwise merit revision for
the next CAFE rulemaking. As time progresses, new research occurs, new
studies become available and product plan information changes. As with
all CAFE rulemakings and pursuant to the President's memorandum, the
agency will take a fresh look at all of its technology-related
assumptions for the purpose of future rulemakings.

A. NHTSA Analyzes What Technologies Can Be Applied Beyond Those in the
Manufacturers' Product Plans

    One of the key statutory factors that NHTSA must consider in
setting maximum feasible CAFE standards for each model year is the
availability and feasibility of fuel saving technologies. When
manufacturers submit their product plans to NHTSA, they identify the
technologies they are planning for each vehicle model in each model
year. They also provide their assessments of the costs and
effectiveness of those fuel saving technologies. The agency uses the
manufacturers' product plan data to ascertain the ``baseline''
capabilities and average fuel economy of each manufacturer. Given the
agency's need to consider economic practicability in determining how
quickly additional fuel saving technologies can be added to the
manufacturers' vehicle planned fleets, the agency researches and
develops, based on the best available information and data, its own
list of technologies that it believes will be ready for implementation
during the model years covered by the rulemaking. This includes
developing estimates of the costs and effectiveness of each technology
and lead time needs. The resultant technology assumptions form an input
into the Volpe model. The model simulates how manufacturers can comply
with a given CAFE level by adding technologies beyond those they
planned in a systematic, efficient and reproducible manner. The
following sections describe NHTSA's fuel-saving technology assumptions
and methodology for estimating them, and their applicability to MY 2011
vehicles.

B. How NHTSA Decides Which Technologies to Include

1. How NHTSA Did This Historically, and How for the NPRM
    In the agency's last two CAFE rulemakings, which established light
truck CAFE standards for MYs 2005-2007 and MYs 2008-2011, NHTSA relied
on the 2002 National Academy of Sciences' report, ``Effectiveness and
Impact of Corporate Average Fuel Economy Standards'' \109\ (``the 2002
NAS Report'') for estimating potential fuel economy effectiveness
values and associated retail costs of applying combinations of
technologies in 10 classes of production vehicles. The NAS study was
commissioned by the agency, at the direction of Congress, in order to
provide independent and peer reviewed estimates of cost and
effectiveness numbers. The NAS list was determined by a panel of
experts formed by the National Academy of Sciences, and was then peer-
reviewed by individuals chosen for their diverse perspectives and
technical expertise in accordance with procedures approved by the
Report Review Committee of the National Research.
---------------------------------------------------------------------------

    \109\ National Research Council, ``Effectiveness and Impact of
Corporate Average Fuel Economy (CAFE) Standards,'' National Academy
Press, Washington, DC (2002). Available at http://www.nap.edu/
openbook.php?isbn=0309076013  (last accessed October 11, 2008).
---------------------------------------------------------------------------

    In the NPRM for the MY 2011-2015 CAFE standards, NHTSA explained
that there has been substantial advancement in fuel-saving automotive
technologies since the publication of the 2002 NAS Report. New
technologies, i.e., ones that were not assessed in the NAS report, have
appeared in the market place or are expected to appear in the timeframe
of the proposed rulemaking. Also, new studies have been conducted and
reports issued by several other organizations providing new or
different information regarding the fuel economy technologies that will
be available and their costs and effectiveness values. To aid the
agency in assessing these developments, NHTSA contracted with the NAS
to update the fuel economy section, Chapter 3, of the 2002 NAS Report.
However, as NHTSA explained, the NAS update was not available in time
for this rulemaking.
    Accordingly, NHTSA worked with EPA staff to update the technology
assumptions, and used the results as a basis for its NPRM. EPA staff
published a related report and submitted it to the NAS committee.\110\
---------------------------------------------------------------------------

    \110\ EPA Staff Technical Report: Cost and Effectiveness
Estimates of Technologies Used to Reduce Light-Duty Vehicle Carbon
Dioxide Emissions, EPA 420-R-08-008, March 2008.
---------------------------------------------------------------------------

2. NHTSA's Contract with Ricardo for the Final Rule
    NHTSA specifically sought comment on the estimates, which it had
developed jointly with EPA, of the availability, applicability, cost,
and effectiveness of fuel-saving technologies, and the order in which
the technologies were applied. See 73 FR 24352, 24367. To aid the
agency in analyzing those comments and increasing the accuracy, clarity
and transparency of its technology assumptions and methodologies
employed in developing them, it hired an international consulting firm,
Ricardo, which specializes in automotive engineering consulting.
Ricardo, which describes itself as an eco-innovation technology
company, is a leading independent provider of technology, product
innovation, engineering solutions, software and strategic consulting.
Its skill base includes the state-of-the-art in low emissions and fuel-
efficient powertrain and vehicle technology. Its customers include
government agencies here and abroad and the world's automotive,
transport and new-energy industries.\111\ For example, it has provided
technical consulting on low CO₂ strategies to the UK
Department for Transport (DfT).\112\ Additionally, in December 2007,
Ricardo completed an important study for EPA titled ``A Study of
Potential Effectiveness of Carbon Dioxide Reducing Vehicle
Technologies.'' \113\
---------------------------------------------------------------------------

    \111\ More information about Ricardo's work is available at their
Web site, http://www.ricardo.com  (last accessed September 20,
2008). Its 2007 Annual Report provides a comprehensive view of some
of its current work. See http://www.ricardo.com/investors/download/
annualreport2007.pdf  (last accessed September 22, 2008).
    \112\ Ricardo UK Ltd., ``Understanding manufacturers' responses
to policy measures to incentivise fuel efficiency,'' Oct. 5, 2007.
Available at http://www.dft.gov.uk/consultations/closed/
co2emissions/ricardoreport.pdf  (last accessed Oct. 4, 2008).
    \113\ A slightly updated (June 2008) version of Ricardo's study
for EPA is available on EPA's Web site, at http://www.epa.gov/otaq/
technology/420r08004a.pdf (last accessed September 20, 2008).
---------------------------------------------------------------------------

    Ricardo's role was as a technical advisor to NHTSA staff. In this
capacity, Ricardo helped NHTSA undertake a comprehensive review of the
NPRM technology assumptions and all comments received on those
assumptions, based on both old and new public and confidential
manufacturer information. NHTSA and Ricardo staff reviewed and compared
comments on the availability and applicability of technologies, and the
logical progression between them. NHTSA also reviewed and compared the
methodologies used for determining

[[Page 14235]]

the costs and effectiveness of the technologies as well as the specific
estimates provided. Relying on the technical expertise of Ricardo and
taking into consideration all the information available, NHTSA revised
its estimates of the availability and applicability of many
technologies, and revised its estimate of the order in which the
technologies were applied and how they are differentiated by vehicle
class, as well as the costs and effectiveness estimates and used the
revised numbers in analyzing alternative levels of stringency.
    While NHTSA sought Ricardo's expertise and relied significantly on
their assistance as a neutral expert in developing its technical
assumptions, it retained responsibility for the final estimates. The
agency believes that the representation of technologies for MY 2011--
that is, estimates of the availability, applicability, cost, and
effectiveness of fuel-saving technologies, and the order in which the
technologies were applied--used in this rulemaking is more accurate
than that used in the NPRM, and is the best available for purposes of
this rulemaking.

C. What Technology Assumptions has NHTSA Used for the Final Rule?

1. How do NHTSA's technology assumptions in the final rule differ from
those used in the NPRM?
    This final rule uses the same basic framework as the NPRM. However,
NHTSA made several changes to its technology assumptions based on
comments and information received during the rulemaking. As in the NPRM
and the MY 2008-2011 light truck rule, the agency relied on the Volpe
model CAFE Compliance and Effects Modeling System which was developed
by the Department of Transportation's Volpe National Transportation
Systems Center (Volpe Center) to apply technologies. The model, known
as the Volpe model, is the primary tool the agency has used in
conducting a ``compliance analysis'' of various CAFE stringencies. The
Volpe model relied on the same types of technology related inputs as in
previous rules, including market data files, technology cost and
effectiveness estimates by vehicle classification, technology
synergies, phase-in rates, learning curve adjustments, and technology
decision trees.
    Regarding the decision trees, both the structure of the trees and
ordering of the technologies were revised. The decision trees have been
expanded so that NHTSA is better able to track the incremental and net/
cumulative cost and effectiveness of each technology, which
substantially improves the ``accounting'' of costs and effectiveness
for the final rule.\114\ The revised decision trees also have improved
integration, accuracy, and technology representations.
---------------------------------------------------------------------------

    \114\ In addition to the (simplified) decision trees, as
published in this document, NHTSA also utilized ``expanded''
decision trees in the final rule analysis. Expanded decision trees
graphically represent each unique path, considering the branch
points available to the Volpe model, which can be utilized for
applying fuel saving technologies. For instance, the engine decision
tree shown in this document has 20 boxes representing engine
technologies, whereas the expanded engine decision tree requires a
total of 45 boxes to accurately represent all available application
variants. Expanded decision trees presented a significant
improvement, compared to the NPRM analysis, in the overall
assessment and tracking of applied technologies since they allowed
NHTSA staff to accurately view and assess both the incremental and
the accumulated, or net cost and effectiveness at any stage of
technology application in a decision tree. Because of the large
format of the expanded decision trees, they could not be included in
the Federal Register, so NHTSA refers the reader to Docket No.
NHTSA-2008-0177. Expanded decision trees for the engine,
electrification/transmission/hybridization, and the vehicle
technologies (three separate decision trees) were developed for each
of the 12 vehicle technology application classes (the vehicle
subclasses discussed in Section IV.D.4) and the three expanded
decision trees for the Large Car subclass have been placed in the
docket as an example for the reader's information.
---------------------------------------------------------------------------

    In revising the decision trees, NHTSA updated, combined, split and/
or renamed technologies. Several technologies were added, while others
were deleted. The three technologies that were deleted because they do
not appear in either public or confidential data and are primarily in
the research phase of development are: Camless Valve Actuation, Lean-
Burn Gasoline Direct-Injection and Homogenous Charge Compression
Ignition.\115\ NHTSA also added three advanced technologies based on
confidential manufacturer submissions which showed these technologies
as being emerging and currently under development. These technologies
are: Combustion Restart, Exhaust Gas Recirculation Boost, and Plug-in
Hybrids.
---------------------------------------------------------------------------

    \115\ We note that GM included lean burn HCCI in its
restructuring plans submitted to Congress, but the restructuring
plans were submitted too late for the agency to consider them in its
technology analysis, among other reasons. GM Restructuring Plan, p. 22.
---------------------------------------------------------------------------

    The Volpe model was modified to allow a non-linear phase-in rate
across the five model years, rather than a constant phase-in rate as
was used in the NPRM and in previous rules. Most technology
applications have tighter phase-in caps in the early years to provide
for additional lead time.
    In the NPRM, NHTSA applied volume-based learning factors to
technology costs for the first time. These learning factors were
developed using the parameters of learning threshold, learning rate
(decremented over two cycles), and the initial (unlearned) cost. In the
NPRM, NHTSA applied a learning rate discount of 20 percent each time a
technology was projected for use on 25,000 vehicles per manufacturer,
which was the threshold volume for learning rate discounts. The
discounts were only taken twice, at 25,000 and 50,000 vehicles. A
technology was viewed as being fully learned out at 100,000 units.
    The agency also reconsidered volume-based learning factors and made
significant revisions. First, the volume learning is now applied on an
industry basis as opposed to a manufacturer basis. This takes into
account the fact that the automobile industry shares best practices and
that manufacturers learn from that sharing to produce their vehicles at
lower costs. For the final rule, the revised learning threshold is set
to 300,000 vehicles per year by the automobile industry. This number
was developed based on comments indicating that many of the publicly
available technology cost estimates are based on production quantities
of 900,000 to 1.5 million vehicles by at least 3 manufacturers. The
agency notes, however, that none of the technologies applied in MY 2011
receive volume-based learning, due to the time frame applicable.
    For the technologies applied in the final rule, a time-based
learning factor was used in response to public comments from Ford and
others. This learning factor was not applied in the NPRM. Time-based
learning is applied to widely available, high volume, stable and mature
technologies typically purchased under negotiated multi-year
contractual agreement with suppliers. This type of an agreement is
typical of most supplier-provided fuel saving technologies. With time-
based learning, the initial cost of a technology is reduced by a fixed
amount in its second and subsequent year of availability. A fixed rate
3 percent year-over-year cost reduction is applied up to a maximum of
12 percent cost reduction.
    In the NPRM NHTSA divided vehicles into ten subclasses based on
technology applicability: four for cars and six for trucks. NHTSA
assigned passenger cars into one of the following subclasses:
Subcompact, Compact, Midsize, or Large Car. NHTSA assigned light trucks
into one of the following subclasses: Minivan, Small SUV, Medium SUV,
Large SUV, Small Pickup

[[Page 14236]]

Truck, or Large Pickup Truck. In its 2008 NPRM for MY 2011-2015, NHTSA
included some differentiation in cost and effectiveness numbers between
the various classes to account for differences in technology costs and
effectiveness that are observed when technologies are applied on to
different classes and subclasses of vehicles.
    For the final rule, NHTSA, working with Ricardo, increased the
accuracy of its technology assumptions by reexamining the subclasses
developed for the purpose of modeling technology application. For
passenger cars, NHTSA divided vehicles into eight subclasses based on
technology applicability by creating a performance class under each of
the four subclasses. For trucks, NHTSA established four subclasses,
including a minivan subclass, and small, midsize and large SUV/Pickup/
Van subclasses. NHTSA also provided more differentiation in the costs
and effectiveness values by vehicle subclass. The agency found it
important to make that differentiation because the agency estimated
that some technologies would have different implications for large
vehicles than for smaller vehicles.
    In summary, the revisions to NHTSA's methodology for technology
application and cost and effectiveness estimates are designed to
respond to comments, many of which focused on various inaccuracies and
lack of clarity in the NPRM. NHTSA believes that the methodology for
the final rule, as compared to the NPRM methodology, is much clearer,
more accurate, and more representative of likely manufacturer behavior,
although, of course, manufacturers are free to respond to the CAFE
standards with whatever application of technology they choose. The
revised technology related assumptions help substantially ensure the
technological feasibility and economic practicability of the MY 2011
CAFE standards promulgated in this final rule.
2. How are the technologies applied in the model?
    For the final rule, as in the NPRM, NHTSA made significant use of
the CAFE Volpe model as discussed above. The NPRM contained a detailed
discussion of the Volpe model and specifically stated its two primary
objectives as (1) identifying technologies that manufacturers could
apply in order to comply with a specified CAFE standard, and (2)
calculating the cost and effects of manufacturers' technology
applications. The NPRM also discussed other modeling systems and
approaches that NHTSA considered to accomplish these same objectives,
and also discusses why ultimately the agency chose to use the Volpe
model (see 79 FR 24352, 24391). However, having done so for this final
rule does not limit the agency's ability to use another approach for
future CAFE rulemakings, and NHTSA will continue to consider other
methods for estimating the costs and effects of adding technologies to
manufacturers' future fleets.
    The Volpe model relies on several inputs and data files to conduct
the compliance analysis, and each of these are discussed in detail in
the NPRM. Many of these inputs contain economic and environmental data
required for the full CAFE analysis. However, for the purposes of
applying technologies, the subject of this section, the Volpe model
primarily uses three data files, one that contains data on the vehicles
being manufactured, one that identifies the appropriate stage within
the vehicle's life-cycle for the technology to be applied, and one that
contains data/parameters regarding the available technologies the model
can apply. These inputs are discussed below.
    The Volpe model begins with an ``initial state'' of the domestic
vehicle market, which in this case is the market for passenger cars and
light trucks to be sold during the period covered by the final rule.
The vehicle market is defined on a model, engine, and transmission
basis, such that each defined vehicle model refers to a separately-
defined engine and a separately-defined transmission. For the final
rule, this represented roughly 5,500 cars and trucks, 700 engines, and
600 transmissions. The information, which is stored in a file called
the ``vehicle market forecast,'' is informed significantly by product
plans provided to NHTSA by vehicle manufacturers.\116\ However, the
Volpe model does not require that the market forecast be based on
confidential product plans, and the model is often tested using input
files developed using only publicly- and commercially-available
information. Also, as discussed in Section III above, EPCA does not
require NHTSA to use manufacturers' confidential product plans as a
basis for setting future CAFE standards, and the agency will continue
to base its market forecasts on whatever it determines is the best
available information, whether from public, commercially-available, or
confidential sources.
---------------------------------------------------------------------------

    \116\ The market forecast is developed by NHTSA using the
product plan information provided to the agency by individual
vehicle manufacturers in response to NHTSA's requests. The submitted
product plans contain confidential business information (CBI), which
the agency is prohibited by federal law from disclosing.
---------------------------------------------------------------------------

    In addition to containing data about each vehicle, engine, and
transmission, this file contains information for each technology under
consideration as it pertains to the specific vehicle (whether the
vehicle is equipped with it or not), the model year the vehicle is
undergoing redesign, and information about the vehicle's subclass for
purposes of technology application.
    The market forecast file provides NHTSA the ability to identify, on
a technology by technology basis, which technologies may already be
present (manufactured) on a particular vehicle, engine, or
transmission, or which technologies are not applicable (due to
technical considerations) to a particular vehicle, engine, or
transmission. These identifications are made on a model-by-model,
engine-by-engine, and transmission-by-transmission basis. For example,
if Manufacturer X advises NHTSA that Vehicle Y will be manufactured
with Technology Z, then for this vehicle Technology Z will be shown as
used. Or alternatively, NHTSA might conclude based on its own
assessment that for a given four cylinder engine, Manufacturer A cannot
utilize a particular Technology C due to an engineering issue that
prohibits it. In this case, NHTSA would, in the market forecast file,
indicate that Technology C should not be applied to this particular
engine (i.e., is unavailable). Since multiple vehicle models may be
equipped with this engine, this may affect multiple models. In using
this aspect of the market forecast file, NHTSA ensures the Volpe model
only applies technologies in an appropriate manner, since before any
application of a technology can occur, the model checks the market
forecast to see if it is either already present or unavailable.
    Manufacturers typically plan vehicle changes to coincide with
certain stages of a vehicle's life cycle that are appropriate for the
change, or in this case the technology being applied. For instance,
some technologies (e.g., those that require significant revision) are
nearly always applied only when the vehicle is expected to be
redesigned. Other technologies can be applied only when the vehicle is
expected to be refreshed or redesigned and some others can be applied
at any time, regardless of whether a refresh or redesign event is
conducted. Accordingly, the model will only apply a technology at the
particular point deemed suitable. These constraints are intended to
produce results consistent with manufacturers' product planning
practices. For each technology under consideration,

[[Page 14237]]

NHTSA stipulates whether it can be applied any time, at refresh/
redesign, or only at redesign. The data forms another input to the
Volpe model, as discussed in detail below, called the Technology
Refresh and Redesign Application table (Table IV-6). Each manufacturer
identifies its planned redesign model year for each of its vehicles,
and this data is also stored in the market forecast file. Vehicle
redesign/refresh assumptions are discussed in Section IV.C.9 below.
    As discussed in Section IV.C.4 on vehicle subclasses below, NHTSA
assigns one of 12 subclasses to each vehicle manufactured in the
rulemaking period. The vehicle subclass data is used for the purposes
of technology application. Each vehicle's class is stored in the market
forecast file. When conducting a compliance analysis, if the Volpe
model seeks to apply technology to a particular vehicle, it checks the
market forecast to see if the technology is available and if the
refresh/redesign criteria are met. If these conditions are satisfied,
the model determines the vehicle's subclass, which it then uses to
reference another input called the technology input file.
    In the technology input file, NHTSA has developed a separate set of
technology data variables for each of the twelve vehicle subclasses.
Each set of variables is referred to as an ``input sheet,'' so for
example, the subcompact input sheet holds the technology data that is
appropriate for the subcompact subclass. Each input sheet contains a
list of technologies available for members of the particular vehicle
subclass. The following items are provided for each technology: a brief
description, its abbreviation, the decision tree with which it is
associated, the (first) year in which it is available, the upper and
lower cost and effectiveness (fuel consumption reduction) estimates,
the learning type and rate, the cost basis, its applicability, and the
phase-in values.
    The input sheets are another method NHTSA uses to determine how to
properly apply, or in some cases constrain, a technology's application,
as well as to establish the costs and fuel consumption changes that
occur as it is applied. Examples of how technologies are applied (or
constrained) include the ``Applicability'' variable: if it is set to
``TRUE,'' then the technology can be applied to all members of the
vehicle subclass (a value of ``FALSE'' would prevent the Volpe model
from applying the technology to any member). Another example would be
the ``Year Available'' variable, which if set to ``2012'' means the
model can apply it to MY 2012 and later members, but cannot apply the
technology to MY 2011 models. The ``Learning Type'' and ``Learning
Rate'' define reductions in technology costs, if any are appropriate,
that the Volpe model may apply under certain conditions, as discussed
in the Learning Curve section below. ``Phase-in Values'' are intended
to address the various constraints that limit a manufacturer's ability
to apply technologies within a short period of time. For phase-ins,
once the model applies a given technology to a percentage of a given
manufacturers' fleet up to a specified phase-in cap, the model then
ceases to apply it further instead applying other technologies. Phase-
in caps are also discussed below in Section IV.C.10.
    Perhaps the most important data contained in the input sheets are
the cost and effectiveness information associated with each technology.
One important concept to understand about the cost and effectiveness
values is that they are ``incremental'' in nature, meaning that the
estimates are ``referenced'' to some prior technology state in the
decision tree in which the applied technology is represented, typically
the preceding technology. Therefore, when considering values shown in
the input sheet, the reader must understand that in all but a few cases
they cannot fully deduce the accumulated or ``NET'' cost and
effectiveness, referenced back to the base condition (i.e., start of
the decision tree), without performing a more detailed analysis. The
method for conducting this analysis, and a brief example of how it is
done, is discussed in the Decision Tree section below. For the final
rule, to help readers better understand Volpe model net or accumulated
costs and fuel consumption reductions, NHTSA has published net values
to key technology locations on the decision trees (e.g., to diesel
engine conversion, or a strong hybrid). See the Tables showing
Approximate Net Technology Costs and Approximate Net Technology
Effectiveness, located in Section IV.E below. The tables have been
produced for each of the four vehicle subclasses in the passenger car,
performance passenger car, and light truck vehicle groups.
    The incremental costs of some technologies are dependent on certain
factors specific to the vehicle to which they are applied. For
instance, when the Material Substitution technology is applied, the
cost of application is based on a cost per unit weight reduction, in
dollars per pound, since the weight removed is a percentage of the curb
weight of the vehicle (which differs from one vehicle to the next).
Similarly, some engine technologies need to be calculated on a cost per
cylinder basis, or a cost per configuration basis (i.e., a cost per
bank basis, so that a V-configured engine would cost twice as much as
an in-line, single bank engine). For each technology, the input sheet
also contains a Cost Basis variable which indicates whether the costs
need to be adjusted in this manner. This functionality, some of which
is new for the final rule, allows NHTSA to estimate more accurately the
costs of technology application, since in the NPRM the vehicles in a
subclass were assumed to have common cylinder counts and configurations
(thus the costs were underestimated for some vehicles and overestimated
for others).
    Lastly for the technology input file, the term ``synergy'' as it
applies to the Volpe modeling process refers to the condition that
occurs when two or more technologies are applied to a vehicle and their
effects interact with each other, resulting in a different net effect
than the combination of the individual technologies. The term synergy
usually connotes a positive interaction (e.g., 1 + 1 is more than 2),
but as used here it also includes negative interactions (e.g., 1 + 1 is
less than 2). Synergies are discussed in greater detail below in
Section IV.C.7, and the values for the synergy factors NHTSA used in
the final rule are stored in the technology input file.
    In some cases more than one decision tree path can lead to a
subsequently applied technology. For example, the power split hybrid
technology can be reached from one of two prior transmission
technologies (CVT or DCTAM). Accordingly the incremental cost and
effectiveness for applying the technology may vary depending on the
path and the modifications made in the prior technology. To ensure
accurate tracking of net costs and effectiveness, the Volpe model
utilizes path correction factors, as discussed further in the decision
tree discussion below. This functionality is an improvement to the
final rule, and the specific factors used are stored in the technology
input sheets. A copy of the final rule input sheets, titled ``2011-
2015--LV--CAFE--FinalRuleInputSheets20081019.pdf,'' can be obtained
from the final rule docket.
    One additional concept to understand about how the Volpe model
functions is called an ``engineering constraint,'' a programmatic
method of controlling technology application that is independent of
those discussed above. NHTSA has determined that some technologies are
only suitable or

[[Page 14238]]

unsuitable when certain vehicle, engine, or transmission conditions
exist. For example, secondary axle disconnect is only suitable for 4WD
vehicles, and cylinder deactivation is unsuitable for any engine with
fewer than 6 cylinders, while material substitution is only available
for vehicles with curb weights greater than 5,000 pounds. Additionally,
in response to comments received, an engineering constraint was added
for purposes of the final rule to prevent the cylinder deactivation
technology from being applied to vehicles equipped with manual
transmissions, due primarily to driveability and NVH concerns
documented by the commenter. Where appropriate and required, NHTSA has
utilized engineering constraints to ensure accurate application of the
fuel saving technologies.
3. Technology Application Decision Trees
    Several changes were made to the Volpe model between the analysis
reported in the NPRM and the final rule. This section will discuss two
of those changes: First, the updates to the set of technologies; and
second, the updates to the logical sequence for progressing through
these technologies, which NHTSA describes as ``decision trees.''
    As discussed above, the set of technologies considered by the
agency has evolved since the NPRM. The set of technologies now included
in the Volpe model is shown below in Table IV-1, with abbreviations
used by the model to refer to each technology in the interest of
brevity. Section IV.D below explains each technology in much greater
detail, including definitions and cost and effectiveness values.

[[Page 14239]]

[GRAPHIC] [TIFF OMITTED] TR30MR09.015

    As in the NPRM, each technology is assigned to one of the five
following categories based on the system it affects or impacts: engine,
transmission, electrification/accessory, hybrid or vehicle. Each of
these categories has its own decision tree that the Volpe model uses to
apply technologies sequentially during the compliance analysis. The
decision trees were designed and configured to allow the Volpe model to
apply technologies in a cost-effective, logical order that also
considers ease of implementation. For example, effective software or
control logic changes are implemented before replacing a component or
system with a completely redesigned one, which is typically a much more
expensive option.
    Each technology within the decision trees has an incremental cost
and an incremental effectiveness estimate associated with it, and the
estimates are specific to a particular vehicle subclass (see the tables
provided below in Section IV.D). Each technology's

[[Page 14240]]

incremental estimate takes into account its position in the decision
tree path. If a technology is located further down the decision tree,
the estimates for the costs and effectiveness values attributed to that
technology are influenced by the incremental estimates of costs and
effectiveness values for prior technology applications. In essence,
this approach accounts for ``in-path'' effectiveness synergies and cost
effects that occur between the technologies in the same path. When
comparing cost and effectiveness estimates from various sources and
those provided by commenters, it is vital that the estimates are
evaluated in the proper context, especially as concerns their likely
position in the decision trees and other technologies that may be
present or missing. Not all estimates provided by commenters can be
considered an ``apples-to-apples'' comparison with those used by the
Volpe model, since in some cases the order of application, or included
technology content, is inconsistent with that assumed in the decision tree.
    For the final rule, significant revisions have been made to the
sequence of technology applications within the decision trees, and in
some cases the paths themselves have been modified and additional paths
have been added. The additional paths allow for a more accurate
application of technology, insofar as the model now considers the
existing configuration of the vehicle when applying technology. In this
analysis, single overhead camshaft (SOHC), dual overhead camshaft
(DOHC) and overhead valve (OHV) configured engines now have separate
paths that allow for unique path-dependent versions of certain engine
technologies. Thus, the cylinder deactivation technology (DEAC) now
consists of three unique versions that depend on whether the engine
being evaluated is an SOHC, DOHC or OHV design; these technologies are
designated by the abbreviations DEACS, DEACD and DEACO, respectively,
to designate which engine path they are located on. Similarly the last
letter for the Coupled Cam Phasing (CCP) and Discrete Variable Valve
Lift (DVVL) abbreviations are used to identify which path the
technology is applicable to.
    Use of separate valvetrain paths and unique path-dependent
technology variations also ensures that the incremental cost and
effectiveness estimates properly account for technology effects so as
not to ``double-count.'' For example, in the SOHC path, the incremental
effectiveness estimate for DVVLS assumes that some pumping loss
reductions have already been accomplished by the preceding technology,
CCPS, which reduces or diminishes the effectiveness estimate for DVVLS
because part of the efficiency gain associated with the reduction of
the pumping loss mechanism has already occurred. Commenters pointed out
several instances in the NPRM where double-counting appeared to have
occurred, and the accounting approach used in the final rule resolves
these concerns.
    In reviewing NPRM comments, NHTSA noted several questions regarding
the retention of previously applied technologies when more advanced
technologies (i.e., those further down the decision tree) were applied.
In response, NHTSA has clarified the final rule discussions on this
issue. In both the NPRM and final rule, as appropriate and feasible,
previously-applied technologies are retained in combination with the
new technology being applied, but this is not always the case. For
instance, one exception to this would be the application of diesel
technology, where the entire engine is assumed to be replaced, so
gasoline engine technologies cannot carry over. This exception for
diesels, along with a few other technologies, is documented below in
the detailed discussion of changes to each decision tree and
corresponding technologies.
    As the Volpe model steps through the decision trees and applies
technologies, it accumulates total or ``NET'' cost and effectiveness
values. Net costs are accumulated using an additive approach while net
effectiveness estimates are accumulated multiplicatively. To help
readers better understand the accumulation process, and in response to
comments expressing confusion on this subject, the following examples
demonstrate how the Volpe model calculates net values.
    Accumulation of net cost is explained first as this is the simpler
process. This example uses the Electrification/Accessory decision tree
sequentially applying the EPS, IACC, MHEV, HVIA and ISG technologies to
a subcompact vehicle using the cost and effectiveness estimates from
its input sheet. As seen in Table IV-2 below, the input sheet cost
estimates have a lower and upper value which may be the same or a
different value (i.e., a single value or a range) as shown in columns
two and three. The Volpe model first averages the values (column 4),
and then sums the average values to calculate the net cost of applying
each technology (column 5). Accordingly, the net cost to apply the MHEV
technology for example would be ($112.50 + $192.00 + $372.00 =
$676.50). Net costs are calculated in a similar manner for all the
decision trees.
[GRAPHIC] [TIFF OMITTED] TR30MR09.016

[[Page 14241]]

    The same decision tree, technologies, and vehicle are used for the
example demonstrating the model's net effectiveness calculation. Table
IV-3 below shows average incremental effectiveness estimates in column
two; this value is calculated in the same manner as the cost estimates
above (average of lower and upper value taken from the input sheet). To
calculate the change in fuel consumption due to application of the EPS
technology with incremental effectiveness of 1.5 percent (or 0.015 in
decimal form, column 3), when applied multiplicatively, means that the
vehicle's current fuel consumption `X' would be reduced by a factor of
(1-0.015) = 0.985,\117\ or mathematically 0.985*X. To represent the
changed fuel consumption in the normal fashion (as a percentage
change), this value is subtracted from 1 (or 100%) to show the net
effectiveness in column 5.
---------------------------------------------------------------------------

    \117\ A decrease in fuel consumption (FC) means the fuel economy
(FE) will be increased since fuel consumption and economy are
related by the equation FC = 1/FE.
---------------------------------------------------------------------------

    As the IACC technology is applied, the vehicle's fuel consumption
is already reduced to 0.985 of its original value. Therefore the
reduction for an additional incremental 1.5 percent results in a new
fuel consumption value of 0.9702, or a net 2.98 percent effectiveness,
as shown in the table. Net effectiveness is calculated in a similar
manner for the all decision trees. It should be noted that all
incremental effectiveness estimates were derived with this multiplicative
approach in mind; calculating the net effectiveness using an additive
approach will yield a different and incorrect net effectiveness.
[GRAPHIC] [TIFF OMITTED] TR30MR09.017

    To improve the accuracy of accumulating net cost and effectiveness
estimates for the final rule, ``path-dependent corrections'' were
employed. The NPRM analysis had the potential to either overestimate or
underestimate net cost and effectiveness depending on which decision
tree path the Volpe model followed when applying the technologies. For
example, if in the NPRM analysis a diesel technology was applied to a
vehicle that followed the OHV path, the net cost and effectiveness
could be different from the net estimates for a vehicle that followed
the OHC path even though the intention was to have the same net cost
and effectiveness. In order to correct this issue, the final rule
analysis has added path-dependent correction tables to the input
sheets. The model uses these tables to correct net cost and
effectiveness estimate differences that occur when multiple paths lead
into a single technology that is intended to have the same net cost and
effectiveness no matter which path was followed.\118\ Path-dependent
corrections were used when applying cylinder deactivation (on the DOHC
path), turbocharging and downsizing, diesel and strong hybrids. This is
essentially an accounting issue and the path-dependent corrections are
meant to remedy the accuracy issues reported in the NPRM comment responses.
---------------------------------------------------------------------------

    \118\ The correction tables are used for path deviations within
the same decision tree. However, there is one exception to this
rule, specifically that the tables are used to keep the model from
double-counting cost and effectiveness estimates when both the CBRST
and MHEV are applied to the same vehicle. Both technologies try to
accomplish the same goal of reducing fuel consumption, by limiting
idle time, but through different means. If either of these
technologies exists on a vehicle and the Volpe model applies the
other, the correction tables are used to remove the cost and
effectiveness estimates for CBRST, thus ensuring that double-
counting does not occur.
---------------------------------------------------------------------------

    The following paragraphs explain, in greater detail, the revisions
to the decision trees and technologies from the NPRM to the final rule.
Revisions were made in response to comments received and pursuant to
NHTSA's analysis, and were made to improve the accuracy of the Volpe
compliance analysis, or to correct other concerns from the NPRM analysis.
Engine Technology Decision Tree
    Figure IV-1 below shows the final rule decision tree for the engine
technology category. For the final rule, NHTSA removed camless valve
actuation (CVA), lean-burn GDI (LBDI), and homogenous charge
compression ignition (HCCI) from the decision trees because these
technologies were determined to be still in the research phase of
development. NHTSA did not receive any new information or comments that
suggested these technologies are under development, so NHTSA removed
them from the decision trees. At the top of the engine decision tree
Low Friction Lubricants (LUB) and Engine Friction Reduction (EFR)
technologies are retained as utilized in the NPRM.
    As stated above, SOHC, DOHC and OHV engines have separate paths,
whereas as the NPRM only made the distinction between OHC and OHV
engines. The separation of SOHC and DOHC engines allowed the model to
more accurately apply unique path-dependent valvetrain technologies
including variations of Variable Valve Timing (VVT), Variable Valve
Lift (VVL) and cylinder deactivation that are tailored to either SOHC
or DOHC engines. This separation also allowed for a more accurate
method of accounting for net cost and effectiveness

[[Page 14242]]

compared to the NPRM. For both the SOHC and DOHC paths, VVL
technologies were moved upstream of cylinder deactivation in response
to comments from the Alliance, additional confidential manufacturer
comments and submitted product plan trends, and NHTSA's analysis.
Confidential comments stated that applying cylinder deactivation to an
OHC engine is more complex and expensive than applying it to an OHV
engine. The Alliance additionally stated that cylinder deactivation is
very application-dependent, and is more effective when applied to
vehicles with high power-to-weight ratios. Taking in account the
application-specific nature of cylinder deactivation and the fact the
VVL technologies are more suitable to a broader range of applications,
NHTSA moved VVL technologies ``upstream'' of cylinder deactivation on
the SOHC and DOHC to more accurately represent how a manufacturer might
apply these technologies.
BILLING CODE 4910-59-P

[[Page 14243]]
[GRAPHIC] [TIFF OMITTED] TR30MR09.018

BILLING CODE 4910-59-C
    On the OHV path, the ordering of cylinder deactivation (DEACO) then
Coupled Cam Phasing (CCPO), which is opposite the order of the SOHC and
DOHC paths, was retained as defined in the NPRM. This ordering depicts
most accurately how manufacturers would actually implement these
technologies and was reflected in the submitted product plans for OHV
engines, which are largely used on trucks with high power-to-weight
ratios. After the application of CCPO on the OHV decision tree, the
model chooses between Discrete Variable Valve Lift (DVVLO) and the
conversion to a dual overhead camshaft engine (CDOHC). This conversion
now includes Dual Cam Phasing (DCP) instead of Continuously Variable
Valve Lift (CVVL) because it is assumed that DCP, with its higher
application rates, would more likely be

[[Page 14244]]

applied than CVVL, with its lower application rates.
    At this stage, and similar to the NPRM, the decision tree paths all
converge into Stoichiometric Gasoline Direct Injection (SGDI). All
previously applied technologies are retained with the assumption that
SGDI is applied in addition to the pre-existing engine technologies.
After SGDI, a newly defined technology, Combustion Restart (CBRST), has
been added.
    The ``branch point'' after CBRST has been limited to two paths
instead of the three paths in NPRM. This is due to the removal of HCCI
from the final rule decision trees. The final rule engine decision tree
allowed the model to apply either Turbocharging and Downsizing (TRBDS)
or the conversion to diesel (DSLC). TRBDS is considered to be a
completely new engine that has been converted to DOHC, if not already
converted, with only LUB, EFR, DCP, SGDI and CBRST applied.
    The conversion to diesel is also considered to be a completely new
engine that replaces the gasoline engine (although it carries over the
LUB and EFR technologies). If the model chooses to follow the TRBDS
path, the next technology that can be applied is another newly-added
technology, EGR Boost (EGRB). After EGRB, the model is allowed to then
convert the engine to diesel (DSLT). It should be noted that the path-
dependent variations of diesel, (DSLC) and (DSLT), result in the exact
same technology. The net cost and effectiveness estimates are the same
for both but DSLT's incremental cost and effectiveness estimates are
slightly lower to account for the TRBDS and EGRB technologies that have
already been applied.
Electrification/Accessory Technology Decision Tree
    This path, shown in Figure IV-2, was named simply ``Accessory
Technology'' in the NPRM. Electric Power Steering (EPS) is now the
first technology in this decision tree, since it is a primary enabler
for both mild and strong hybrids. Improved Accessories (IACC) has been
redefined to include only an intelligent cooling system and follows EPS
(in the NPRM, IACC was the first technology in the tree). The 42-volt
Electrical System (42V) technology has been removed because it is no
longer viewed as the voltage of choice by manufactures and is being
replaced by higher voltage systems. Micro-Hybrid (MHEV), which follows
IACC, has been added as a 12-volt stop/start system to replace
Integrated Starter/Generator with Idle-Off (ISGO), which was on the
``Transmission/Hybrid Technology'' decision tree in the NPRM. Higher
Voltage/Improved Alternator (HVIA), a higher efficiency alternator that
can incorporate higher voltages (greater than 42V) follows MHEV.
Integrated Starter Generator Hybrid (ISG) replaced IMA/ISAD/BSG Hybrid
(which was also on the Transmission/Hybrid Technology decision tree in
the NPRM) as a higher voltage hybrid system with limited regenerative
capability. ISG takes into account all the previously applied
Electrification/Accessory technologies and is the final step necessary
in order to convert the vehicle to a (full) strong hybrid. All
Electrification/Accessory technologies can be applied to both automatic
and manual transmission vehicles.
Transmission Technology Decision Tree
    This decision tree, shown in Figure IV-2, contains two paths: one
for automatic transmissions and one for manual transmissions. On the
automatic path, the Aggressive Shift Logic (ASL) and Early Torque
Converter Lockup (TORQ) technologies from the NPRM have been combined
into an Improved Auto Trans Controls/Externals (IATC) technology, as
both these technologies typically include only software or calibration-
related transmission modifications. This technology was moved to the
top of the decision tree since it was deemed to be easier and less
expensive to implement than a major redesign of the existing
transmission. The 5-Speed Automatic Transmission (5SP) technology from
the NPRM has been deleted due to several factors. First, the updated
decision tree logic seeks to optimize the current hardware as an
initial step, instead of applying an expensive redesign technology.
Second, NHTSA determined an industry trend of 4-speed automatics going
directly to 6-speed automatics, as reflected in the submitted product
plans. And finally, confidential manufacturer comments indicated that
in some cases 5-speed transmissions offered little or no fuel economy
improvement over 4-speed transmissions (primarily due to higher
internal mechanical and hydraulic losses, and increased rotating mass),
making the technology less attractive from a cost and effectiveness
perspective. In the final rule, both 4-speed and 5-speed automatic
transmissions get the IATC technology applied first, before progressing
through the rest of the transmission decision tree.
    After IATC the decision tree splits into a ``Unibody only'' and
``Unibody or Ladder Frame'' paths, which is identical to the NRPM
version of the decision tree. Both of these paths represent a
conversion to new and fully optimized designs. The Unibody only path
contains the Continuously Variable Transmission (CVT) technology, while
the Unibody or Ladder Frame path has the 6-Speed Automatic Transmission
(6SP) technology being replaced by 6/7/8-Speed Automatic Transmission
with Improved Internals (NAUTO). The NAUTO technology represents a new
generation of automatics with lower internal losses from gears and
hydraulic systems.
    The NPRM technology ``Automated Manual Transmission (AMT)'' has
been renamed Dual Clutch Transmission/Automated Manual Transmission
(DCTAM) to more accurately reflect the true intent of this technology
to be a Dual Clutch Transmission (DCT). The NPRM's use of the
abbreviation ``AMT'' was confusing to many commenters, including the
Alliance, BorgWarner, Chrysler, Ford and General Motors, and appeared
to indicate that the NPRM analysis applied true automated manual
transmissions, which exhibit a torque interrupt characteristic that
many in the industry feel will not be customer acceptable. DCT does not
have the torque interrupt concern. The technology DCTAM for the final
rule assumes the use of a DCT type transmission only.
    The manual transmission path only has one technology application,
like the NPRM. However, the technology being applied has been defined
as conversion to a 6-Speed Manual with Improved Internals (6MAN)
instead of a conversion to a 6/7/8-Speed Manual Transmission as defined
in the NRPM. Extremely limited use of manual transmissions with more
than 6 speeds is indicated in the updated product plans, so NHTSA
believes this is a more accurate option for replacing a 4 or 5-speed
manual transmission.
Hybrid Technology Decision Tree
    The strong hybrid options, 2-Mode (2MHEV) and Power Split (PSHEV),
are no longer sequential as defined in the NPRM's Transmission/Hybrid
decision tree. For the final rule, the model only applies strong hybrid
technologies when both the Electrification/Accessory and Transmission
(automatic transmissions only) technologies have been fully added to
the vehicle, as seen in Figure IV-2. The final rule analysis and logic
ensures that the model does not double-count the cost and effectiveness
estimates for previously applied technologies that are included (e.g.,
EPS) or replaced (e.g., transmission) by strong hybrid systems, which
is responsive to General Motors' comment

[[Continued on page 14245]]
Notices For
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
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