6 April 2006
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[Federal Register: April 6, 2006 (Volume 71, Number 66)]
[Rules and Regulations]
[Page 17565-17679]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06ap06-13]
[[Page 17565]]
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Part II
Department of Transportation
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National Highway Traffic Safety Administration
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49 CFR Parts 523, 533 and 537
Average Fuel Economy Standards for Light Trucks Model Years 2008-2011;
Final Rule
[[Page 17566]]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Parts 523, 533 and 537
[Docket No. NHTSA 2006-24306]
RIN 2127-AJ61
Average Fuel Economy Standards for Light Trucks Model Years 2008-
2011
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation.
ACTION: Final rule.
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SUMMARY: This final rule reforms the structure of the corporate average
fuel economy (CAFE) program for light trucks and establishes higher
CAFE standards for model year (MY) 2008-2011 light trucks. Reforming
the CAFE program will enable it to achieve larger fuel savings, while
enhancing safety and preventing adverse economic consequences.
During a transition period of MYs 2008-2010, manufacturers may
comply with CAFE standards established under the reformed structure
(Reformed CAFE) or with standards established in the traditional way
(Unreformed CAFE). This will permit manufacturers and the agency to
gain experience with implementing the Reformed CAFE standards. In MY
2011, all manufacturers will be required to comply with a Reformed CAFE
standard.
Under Reformed CAFE, fuel economy standards are restructured so
that they are based on a measure of vehicle size called ``footprint,''
the product of multiplying a vehicle's wheelbase by its track width. A
target level of fuel economy is established for each increment in
footprint. Smaller footprint light trucks have higher targets and
larger ones, lower targets. A particular manufacturer's compliance
obligation for a model year will be calculated as the harmonic average
of the fuel economy targets for the manufacturer's vehicles, weighted
by the distribution of manufacturer's production volumes among the
footprint increments. Thus, each manufacturer will be required to
comply with a single overall average fuel economy level for each model
year of production.
The Unreformed CAFE standards are: 22.5 miles per gallon (mpg) for
MY 2008, 23.1 mpg for MY 2009, and 23.5 mpg for MY 2010. To aid the
transition to Reformed CAFE, the Reformed CAFE standards for those
years are set at levels intended to ensure that the industry-wide costs
of the Reformed standards are roughly equivalent to the industry-wide
costs of the Unreformed CAFE standards in those model years. For MY
2011, the Reformed CAFE standard is set at the level that maximizes net
benefits. Net benefits includes the increase in light truck prices due
to technology improvements, the decrease in fuel consumption, and a
number of other factors viewed from a societal perspective. All of the
standards have been set at the maximum feasible level, while accounting
for technological feasibility, economic practicability and other
relevant factors.
Since a manufacturer's compliance obligation for a model year under
Reformed CAFE depends in part on its actual production in that model
year, its obligation cannot be calculated with absolute precision until
the final production figures for that model year become known. However,
a manufacturer can calculate its obligation with a reasonably high
degree of accuracy in advance of that model year, based on its product
plans for the year. Prior to and during the model year, the
manufacturer will be able to track all of the key variables in the
formula used for calculating its obligation (e.g., distribution of
production and the fuel economy of each of its models). This final rule
announces estimates of the compliance obligations, by manufacturer, for
MYs 2008-2011 under Reformed CAFE, using the fuel economy targets
established by NHTSA and the product plans submitted to NHTSA by the
manufacturers in response to an August 2005 request for updated product
plans.
This rulemaking is mandated by the Energy Policy and Conservation
Act (EPCA), which was enacted in the aftermath of the energy crisis
created by the oil embargo of 1973-74. The concerns about reliance on
petroleum imports, energy security, and the effects of energy prices
and supply on national economic well-being that led to the enactment of
EPCA remain very much alive today. America is still overly dependent on
petroleum. Sustained growth in the demand for oil worldwide, coupled
with tight crude oil supplies, are the driving forces behind the sharp
price increases seen over the past several years and are expected to
remain significant factors in the years ahead. Increasingly, the oil
consumed in the U.S. originates in countries with political and
economic situations that raise concerns about future oil supply and
prices. In the long run, technological innovation will play an
increasingly larger role in reducing our dependence on petroleum.
We recognize that financial difficulties currently exist in the
motor vehicle industry and that a substantial number of job reductions
have been announced recently by large full-line manufacturers.
Accordingly, we have carefully balanced the costs of the rule with the
benefits of conservation. Compared to Unreformed CAFE, Reformed CAFE
enhances overall fuel savings while providing vehicle manufacturers
with the flexibility they need to respond to changing market
conditions. Reformed CAFE will also provide 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 are particularly encouraged that Reformed CAFE will reduce the
adverse safety risks generated by the Unreformed CAFE program. The
transition from the Unreformed CAFE to the Reformed CAFE system will
begin soon, but ample lead time is provided before Reformed CAFE takes
full effect in MY 2011.
DATES: Today's final rule is effective August 4, 2006. Petitions for
reconsideration must be received by May 22, 2006.
ADDRESSES: Petitions for reconsideration must be submitted to:
Administrator, National Highway Traffic Safety Administration, 400
Seventh Street, SW., Nassif Building, Washington, DC 20590-001.
FOR FURTHER INFORMATION CONTACT: For technical issues, call Ken Katz,
Lead Engineer, Fuel Economy Division, Office of International Vehicle,
Fuel Economy, and Consumer Standards, at (202) 366-0846, facsimile
(202) 493-2290, electronic mail kkatz@nhtsa.dot.gov. For legal issues,
call Stephen Wood or Christopher Calamita of the Office of the Chief
Counsel, at (202) 366-2992, or e-mail them at
swood@nhtsa.dot.gov or ccalamita@nhtsa.dot.gov.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive summary
A. Events leading to today's final rule
B. Today's final rule
C. Energy demand and supply and the value of conservation
II. Background
A. 1974 DOT/EPA report to Congress on potential for motor
vehicle fuel economy improvements
B. Energy Policy and Conservation Act of 1975
C. 1979-2002 light truck standards
D. 2001 National Energy Policy
E. 2002 NAS study of CAFE reform
F. 2003 final rule establishing MY 2005-2007 light truck
standards
[[Page 17567]]
G. 2003 comprehensive plans for addressing vehicle rollover and
compatibility
H. 2003 ANPRM
1. Need for reform
2. Reform options
I. Recent Developments
1. Factors underscoring need for reform
2. Revised Product Plans
III. Summary of the NPRM
IV. Summary of public comments
V. The Unreformed CAFE standards for MYs 2008-2010
A. Legal authority and requirements under EPCA
B. Establishing Unreformed standards according to EPCA--process
for determining maximum feasible levels
C. Baseline for determining manufacturer capabilities in MYs
2008-2010
D. Technologically feasible additions to product plans
E. Improved product plans
F. Economic practicability and other economic issues
1. Costs
2. Benefits
3. Comparison of estimated costs to estimated benefits
4. Uncertainty
G. Unreformed standards for MYs 2008-2010
VI. The Reformed CAFE standards for MYs 2008-2011
A. Overview of Reformed CAFE
B. Authority for Reformed CAFE
C. Legal issues related to Reformed CAFE
1. Maximum feasible
2. Backstop
3. Transition period
D. Structure of Reformed CAFE
1. Footprint based function
2. Continuous function
a. Overview of establishing the continuous function standard
b. Industry-wide considerations in defining the stringency of
the standard
c. Improving the light truck fleet
d. Defining the function and the preliminary shape of the curve
e. Final level of the curve (and the targets)
3. Application of the continuous function based standard
4. Why this approach to reform and not another?
a. Continuous function vs. the proposed step-function
(categories)
b. Continuous function and targets vs. classes and standards
c. Consideration of additional attributes
d. Backstop and ``fuel saving'' mechanisms
5. Benefits of reform
a. Increased energy savings
b. Reduced incentive to respond to the CAFE program in ways
harmful to safety
i. Reduces incentive to reduce vehicle size and to offer smaller
vehicles
ii. Reduces the difference between car and light truck CAFE
standards
c. More equitable regulatory framework
d. More responsive to market changes
E. Comparison of estimated costs to estimated benefits
1. Costs
2. Benefits
3. Uncertainty
F. MY 2008-2011 Reformed CAFE standards
VII. Technology issues
A. Reliance on the NAS report
B. Technologies included in the manufacturers' product plans
C. Lead Time
D. Technology effectiveness and practical limitations
E. Technology incompatibility
F. Weight reduction
VIII. Economic assumptions
A. Costs of technology
B. Fuel prices
C. Consumer valuation of fuel economy and payback period
D. Opportunity costs
E. Rebound effect
F. Discount rate
G. Import externalities (monopsony, oil disruption effects, and
costs of maintaining U.S. presence and strategic petroleum reserve)
H. Uncertainty analysis
I. The 15 percent gap
J. Pollution and greenhouse gas valuation
K. Increased driving range and vehicle miles traveled
L. Added costs from congestion, crashes, and noise
M. Employment impacts
IX. MY 2008-2010 Transition period
A. Choosing the Reformed or Unreformed CAFE system
B. Application of credits between compliance options
X. Impact of other Federal motor vehicle standards
A. Federal motor vehicle safety standards
1. FMVSS 138, Tire Pressure Monitoring System 2 FMVSS 202, Head
Restraints
3. FMVSS 208, Occupant Crash Protection (Rear Center Seat Lap/
Shoulder Belts)
4. FMVSS 208, Occupant Crash Protection (35 mph Frontal Impact
Testing)
5. FMVSS 301, Fuel System Integrity
B. Potential future safety standards and voluntary safety
improvements
1. Anti-lock Brakes and Electronic Stability Control (ESC)
2. Roof Crush, FMVSS 216
3. Side Impact and Ejection Mitigation Air Bags (Thorax and Head
Air Bags)
4. Offset Frontal Crash Testing
C. Cumulative weight impacts of the safety standards and
voluntary improvements
D. Federal Motor Vehicle Emissions Standards
1. Tier 2 requirements
2. Onboard vapor recovery
3. California Air Resources Board--Clean Air Act Section 209
standards
XI. Need of the Nation to Conserve Energy
XII. Comparison of the final and proposed standards
A. Changes in the Volpe model
B. Higher fuel price forecasts
C. Revisions to the Reformed CAFE system
D. Updated product plans
E. Evaluating the adopted Reformed CAFE
XIII. Applicability of the CAFE standards
A. Inclusion of MDPVs in MY 2011
B. ``Flat-floor'' provision
XIV. Additional issues
A. Limited-line manufacturer standard
B. Credit trading
C. Reporting requirements
D. Preemption
XV. Rulemaking analyses and notices
A. Executive Order 12866 and DOT Regulatory Policies and
Procedures
B. National Environmental Policy Act
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)
I. Executive Order 13045
J. National Technology Transfer and Advancement Act
K. Executive Order 13211
L. Department of Energy review
M. Privacy Act
XVI. Regulatory Text
I. Executive Summary
A. Events Leading to Today's Final Rule
In the notice of proposed rulemaking (NPRM) that the agency
published on August 30, 2005, the agency proposed to reform the light
truck CAFE program. The Reformed CAFE standard was to be based on a
step function.\1\ To aid the transition to the Reformed CAFE system, we
proposed to provide manufacturers with two alternative compliance
options (Unreformed and Reformed) for manufacturers in MYs 2008-2010.
The agency proposed requiring compliance with the Reformed CAFE system,
beginning in MY 2011. The agency noted in the NPRM that it was
publishing a separate notice inviting the manufacturers to submit more
updated product plans and stated that it recognized that the new plans
might differ enough from the previously submitted plans to necessitate
changes in the shape of the step function as well as in the levels of
stringency of the standards.
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\1\ As proposed, the structure of Reformed CAFE for each model
year would have three basic elements--
(1)--six footprint categories of vehicles.
(2)--a target level of average fuel economy for each footprint
category, as expressed by a step function (see figure 1 below).
(3)--a Reformed CAFE standard based on the harmonic production-
weighted average of the fuel economy targets for each category.
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In addition, the agency invited public comment on a number of
additional changes to the CAFE program. One was whether to base the
Reformed CAFE on a continuous function instead of a step function. A
second was whether to include large sport utility vehicles (SUVs) in
the CAFE standards. A third was whether to revise the ``flat floor''
criterion for classifying vehicles as light trucks so that minivans and
passenger vans would be treated as light trucks.
In response to the NPRM and request for new product plans, the
agency
[[Page 17568]]
obtained a great deal of new information. Compared to the plans that
the manufacturers submitted to the agency in early 2004, the new plans
submitted in November 2005 contained a significant increase in the
variety and amount of efforts to improve fuel economy. The agency also
received critiques of the analyses it performed to determine the fuel
economy capabilities of the manufacturers in MYs 2008-2011.
In response to the public comments, the agency revised its analyses
and assumptions including those related to the rate at which increased
amounts of fuel saving technologies can be added to a manufacturer's
fleet. The new assumptions are closer to the assumptions made by the
National Academies of Science in a 2002 study of the CAFE program, and
provide increased assurance that the standards adopted today will be
economically practicable.
NHTSA also made other changes. It decided to base Reformed CAFE on
a continuous function instead of a step function in order to reduce the
incentive under Reformed CAFE for manufacturers to downsize (thus
reducing safety) or upsize (thus reducing fuel economy) vehicles. It
also decided to add the larger SUVs and passenger vans to the mandatory
Reformed CAFE program in MY 2011 and beyond to increase long-term
energy savings.
B. Today's Final Rule
The final rule adopted today reforms the structure of the CAFE
regulatory program so that it achieves higher fuel savings while
enhancing safety and preventing adverse economic consequences. We have
previously set forth our concerns about the way in which the current
CAFE program operates and sought comment on approaches to reforming the
CAFE program. We have also previously increased light truck CAFE
standards, from the ``frozen'' level of 20.7 mpg applicable from MY
1996 through MY 2004, to a level of 22.2 mpg applicable to MY 2007. In
adopting those increased standards, we noted that we were limited in
our ability to make further increases without reforming the program.
The Reformed CAFE structure established and institutionalized in
this document minimizes those limitations by establishing a system
based on light truck size, which allows us to establish higher CAFE
standards for MY 2008-2011 light trucks and achieve greater fuel
savings across the industry. In addition to the improved energy
savings, this CAFE program enhances safety by eliminating the previous
regulatory incentive to downsize vehicles and by raising the light
truck standards so that there is no regulatory incentive from the CAFE
program to design small vehicles as light trucks instead of passenger
cars. It prevents adverse economic consequences by incorporating
greater consideration of economic practicability issues into the
projections of the timing and rate at which manufacturers can introduce
fuel economy improving technologies into their fleets, and by setting
the Reformed CAFE standards, beginning in MY 2011, at the level at
which marginal benefits equal marginal costs.
During a transition period of MYs 2008-2010, manufacturers may
comply with CAFE standards established under the reformed structure
(Reformed CAFE) or with standards established in the traditional way
(Unreformed CAFE). This will permit manufacturers to gain experience
with the Reformed CAFE standards. The Reformed CAFE standards for those
model years are set at levels intended to ensure that the industry-wide
costs of those standards are roughly equivalent to the industry-wide
costs of the Unreformed CAFE standards for those model years. The
additional lead time provided by the transition period will aid, for
example, those manufacturers that, for the first time, face a binding
CAFE standard (i.e., one set above their planned level of CAFE) and
will be required to make fuel economy improvements to achieve
compliance. In MY 2011, all manufacturers are required to comply with a
Reformed CAFE standard. The Reformed CAFE standard for that model year
is set at the level that maximizes net benefits by setting the fuel
economy targets at the point at which marginal benefits of the last
added increment of fuel savings equal the marginal costs of the added
technology that produced those savings.
As in prior CAFE rulemakings establishing Unreformed standards,
this final rule sets the Unreformed standards for MYs 2008-2010 with
particular regard to the capabilities of and impacts on the ``least
capable'' full line manufacturer (i.e., a full line manufacturer is one
that produces a wide variety of types and sizes of vehicles) with a
significant share of the market. A single CAFE level, applicable to
each manufacturer, is established for each model year.
The Unreformed CAFE standards for MYs 2008-2010 are:
MY 2008: 22.5 mpg
MY 2009: 23.1 mpg
MY 2010: 23.5 mpg
We estimate that compliance with these standards will save 4.4 billion
gallons of fuel over the lifetime of the vehicles sold during those
model years, compared to the savings that would occur if the standards
remained at the MY 2007 level of 22.2 mpg.
Under Reformed CAFE, each manufacturer's required level of CAFE is
based on target levels set according to vehicle size. The targets are
assigned according to a vehicle's ``footprint''--the product of the
average track width (the distance between the centerline of the tires)
and wheelbase (basically, the distance between the centers of the
axles). Each vehicle footprint value is assigned a target specific to
that footprint value. This differs from what we proposed. The proposed
reform was based on a discontinuous (or ``step'') function. The
proposal segmented the light truck fleet into six discrete categories
based on ranges of footprint and assigned a target fuel economy value
for each category. The reform adopted in today's final rule is based on
a continuous function. Under it, targets are assigned along the
continuum of footprint values in the light truck fleet. Each footprint
value has a different target. The target values reflect the
technological and economic capabilities of the industry. The target for
a given footprint value is the same for all manufacturers, regardless
of differences in their overall fleet mixes. Compliance is determined
by comparing a manufacturer's harmonically averaged fleet fuel economy
in a model year with a required fuel economy level calculated using the
manufacturer's actual production levels and the category targets.
The Reformed CAFE standards adopted today are more stringent than
those proposed in the NPRM. Under the Reformed CAFE system in the NPRM,
we estimated that the average CAFE level required of light truck
manufacturers would be 23.9 mpg. It is important to note that the MY
2011 standard as adopted in this rule applies to a larger population of
vehicles than that in the NPRM. Today's final rule includes medium duty
passenger vehicles (MDPVs) (i.e., larger passenger vans and SUVs) as
part of the MY 2011 regulated fleet. We estimate that the average CAFE
level required of manufacturers under this rule in MY 2011 will be 24.0
mpg. Thus, the MY 2011 standard is more stringent than that proposed
while regulating more vehicles, i.e., larger vehicles with typically
low fuel economy performance.
As stated above, manufacturers provided updated product plans that
[[Page 17569]]
reflect changes made to the evaluated light truck fleet used in the
NPRM, partly in response to changes in fuel prices. Changing market
conditions, a regulatory landscape revised by our proposal, and the
more stringent fuel efficiency levels required under Reform CAFE will
result in the production of MY 2008-2011 light truck fleets that will
consume approximately 11 billion fewer gallons of fuel over their
lifetimes than the fleets that were originally planned in 2004.
Apart from the updated product plans, the agency has revised some
of the assumptions inputted into the Reformed CAFE analysis. In
response to comments and consistent with the findings of the National
Academy of Sciences, we revised the phase-in rates to provide for
additional lead-time when projecting technology applications. The
agency also revised fuel prices and the vehicle miles traveled
schedule, which is used to calculate fuel savings, in response to
higher fuel price forecasts.
Given the revised product plans, the revisions to the model
assumptions, and the more stringent standards adopted in this rule, the
Reformed standards will save approximately 7.8 billion additional
gallons of fuel over the lifetime of the vehicles sold during those
four model years. The Reformed standards for MYs 2008-2010 will save
approximately 500 million more gallons of fuel than the Unreformed
standards for those model years. As noted above, the Reformed standard
for MY 2011 is the first Reformed standard set through a process the
explicitly maximizes net benefits. It will save more than 2.8 billion
gallons of fuel over the lifetime of vehicle sold in that model year.
In order to provide a comparison of the fuel savings of the final
rule versus the proposed rule, we recalculated the fuel savings from
the proposed Reformed CAFE standards using the updated product plans
and the final rule assumptions. Under this analysis, we calculated that
the proposed Reformed standards would save 5.4 billion gallons under
these more current assumptions. This compares to the 7.8 billion
gallons of fuel saved under the more stringent Reformed CAFE standards
adopted today.
If all manufacturers comply with the Reformed CAFE standards, the
total costs would be approximately $6.7 billion for MYs 2008-2011,
compared to the costs they would incur if the standards remained at the
MY 2007 level of 22.2 mpg. The resulting vehicle price increases to
buyers of MY 2008 light trucks would be paid back \2\ in additional
fuel savings in an average of 2.9 years and to buyers of MY 2011 light
trucks in an average of 4,4 years, assuming fuel prices ranging from
$1.96 to $2.39 per gallon (in 2003 dollars).\3\ We estimate that the
total benefits under the Unreformed CAFE standards for MYs 2008-2010
plus the Reformed CAFE standard for MY 2011 are approximately $7.6
billion (2003 dollars, discounted at 7%), and under the Reformed CAFE
standards for MYs 2008-2011 are approximately $8.1 billion (2003
dollars, discounted at 7%).
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\2\ The payback period represents the length of time required
for a vehicle buyer to recoup the higher cost of purchasing a more
fuel-efficient vehicle through savings in fuel use. When a more
stringent CAFE standard requires a manufacturer to improve the fuel
economy of some of its vehicle models, the manufacturer's added
costs for doing so are reflected in higher prices for these models.
While buyers of these models pay higher prices to purchase these
vehicles, their improved fuel economy lowers their owners' costs for
purchasing fuel to operate them. Over time, buyers thus recoup the
higher purchase prices they pay for these vehicles in the form of
savings in outlays for fuel. The length of time required to repay
the higher cost of buying a more fuel-efficient vehicle is referred
to as the buyer's ``payback period.''
The length of this payback period depends on the initial
increase in a vehicle's purchase price, the improvement in its fuel
economy, the number of miles it is driven each year, and the retail
price of fuel. We calculated payback periods using the fuel economy
improvement and average price increase for each manufacturer's
vehicles estimated to result from the proposed standard, the U.S.
Energy Information Administration's forecast of future retail
gasoline prices, and estimates of the number of miles light trucks
are driven each year as they age developed from U.S. Department of
Transportation data. Energy Information Administration, Annual
Energy Outlook 2005 (AEO 2005), Table 100, http://www.eia.doe.gov/oiaf/aeo/supplement/index.html
; and U.S. Department of
Transportation, 2001 National Household Travel Survey, http://nhts.ornl.gov/2001/index.shtml.
Under these assumptions, payback
periods for the final rule alternatives (i.e., Unreformed and
Reformed CAFE) range from 2.9 to 4.9 years. .
\3\ The fuel prices used to calculate the length of the payback
periods are those expected over the life of the MY 2008-2011 light
trucks, not the current fuel prices. Those future fuel prices were
obtained from the AEO 2006 (Early Report).
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We have determined that the standards under both Unreformed CAFE
and Reformed CAFE represent the maximum feasible fuel economy level for
each system. In reaching this conclusion, we have balanced the express
statutory factors and other relevant considerations, such as safety
concerns, effects on employment and the need for flexibility to
transition to a Reformed CAFE program that can achieve greater fuel
savings in a more economically efficient way.
The Reformed CAFE approach incorporates several important elements
of reform suggested by the National Academy of Sciences in its 2002
report (Effectiveness and Impact of Corporate Average Fuel Economy
(CAFE) Standards). The agency believes that these reforms give the
Reformed CAFE approach four basic advantages over the Unreformed CAFE
approach.
First, Reformed CAFE increases energy savings. The energy-saving
potential of Unreformed CAFE is limited because only a few full-line
manufacturers are required to make improvements. In effect, the
capabilities of these full-line manufacturers, whose offerings include
larger and heavier light trucks, constrain the stringency of the
uniform, industry-wide standard. As a result, the Unreformed CAFE
standard is generally set below the capabilities of limited-line
manufacturers, who sell predominantly lighter and smaller light trucks.
Under Reformed CAFE, which accounts for size differences in product
mix, virtually all light-truck manufacturers will be required to use
advanced fuel-saving technologies to achieve the requisite fuel economy
for their vehicles. Thus, Reformed CAFE will continue to require full-
line manufacturers to improve the overall fuel economy of their fleets,
while also requiring limited-line manufacturers to enhance the fuel
economy of the vehicles they sell.
Second, Reformed CAFE offers enhanced safety. Due to the structure
of Unreformed CAFE standards, vehicle manufacturers that need to
supplement their product plans in order to comply with the standards
can increase their likelihood of compliance by pursuing a variety of
compliance strategies that entail safety risks: Downsizing of vehicles,
design of some vehicles to permit classification as ``light trucks''
for CAFE purposes, and offering smaller and lighter vehicles to offset
sales of larger and heavier vehicles. The adverse safety effects of
downsizing and downweighting have already been documented for passenger
cars in the CAFE program. For example, when a manufacturer designs a
vehicle to permit its classification as a light truck, it may increase
the vehicle's propensity to roll over.
Reformed CAFE is designed to lessen each of these safety risks.
Downsizing of vehicles is discouraged under Reformed CAFE since as
vehicles become smaller, the applicable fuel economy target becomes
more stringent. Moreover, Reformed CAFE lessens the incentive to design
smaller vehicles to achieve a ``light truck'' classification, since
many small light trucks are subject to targets that have at least the
same degree of stringency as passenger car standards, if not higher
stringency.
Third, Reformed CAFE provides a more equitable regulatory framework
for
[[Page 17570]]
different vehicle manufacturers. Under Unreformed CAFE, the cost
burdens and compliance difficulties have been imposed nearly
exclusively on the full-line manufacturers. Reformed CAFE spreads the
regulatory cost burden for fuel economy more broadly across the
industry.
Fourth, Reformed CAFE is more market-oriented because it more fully
respects economic conditions and consumer choice. Reformed CAFE does
not force vehicle manufacturers to adjust fleet mix toward smaller
vehicles unless that is what consumers are demanding. Instead, it
allows the manufacturers to adjust the mix of their product offerings
in response to the market place. As a result, as the industry's sales
volume and mix changes in response to economic conditions (e.g.,
gasoline prices and household income) and consumer preferences (e.g.,
desire for seating capacity or hauling capability), the level of CAFE
required of manufacturers under Reformed CAFE will, at least partially,
adjust automatically to these changes. Accordingly, Reformed CAFE
reduces the need that the agency might otherwise have to revisit
previously established standards in light of changed market conditions,
a difficult process that undermines regulatory certainty for the
industry. In the mid-1980's, for example, the agency relaxed several
Unreformed CAFE standards because fuel prices fell more than had been
expected when those standards were established and, as a result,
consumer demand for small vehicles with high fuel economy did not
materialize as expected.
In addition to reforming the structure of the light truck CAFE
program, we are also expanding its applicability. Starting in MY 2011,
the CAFE program will include MPDVs, light trucks that have a gross
vehicle weight rating (GVWR) less than 10,000 lbs., a GVWR greater than
8,500 lbs. or a curb weight greater than 6,000 lbs., and that primarily
transport passengers. We estimate this will bring an additional 240,000
vehicles into the CAFE program in that model year.
C. Energy Demand and Supply and the Value of Conservation
As we noted in the notice of proposed rulemaking (NPRM),\4\ many of
the concerns about energy security and the effects of energy prices and
supply on national economic well-being that led to the enactment of
EPCA in 1975 persist today.\5\ The demand for oil is steadily growing
in the U.S. and around the world. By 2030, U.S. demand for petroleum
products is expected to increase 33 percent compared to 2004.\6\ World
oil demand is expected to increase by nearly 44 percent between 2004
and 2025.\7\ Most of these increases would occur in the transportation
sector. To meet this projected increase in world demand, worldwide
productive capacity would have to increase by more than 36 million
barrels per day over current levels. OPEC producers are expected to
supply nearly 40 percent of the increased production. By 2025, 60
percent of the oil consumed in the U.S. would be imported oil. Strong
growth in the demand for oil worldwide, coupled with tight crude oil
supplies, is the driving force behind the sharp price increases seen
over the past four years. Increasingly, the oil consumed in the U.S.
originates in countries with political and economic situations that
raise concerns about future oil supply and prices.
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\4\ 70 FR 51414, August 30, 2005.
\5\ The sources of the figures in this section can be found
below in section VIII, ``Need for Nation to conserve energy.''
\6\ Annual Energy Outlook 2006 with projections to 2030 (Early
Release), http://www.eia.doe.gov/ oiaf/aeo/index.html.
\7\ Id.
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Energy is an essential input to the U.S. economy and having a
strong economy is essential to maintaining and strengthening our
national security. Conserving energy, especially reducing the nation's
dependence on petroleum, benefits the U.S. in several ways. Reducing
total petroleum use decreases our economy's vulnerability to oil price
shocks. Reducing dependence on oil imports from regions with uncertain
conditions enhances our energy security. Reducing the growth rate of
oil use will help relieve pressures on already strained domestic
refinery capacity, decreasing the likelihood of future product price
volatility.
Today's final rule is one piece of President Bush's strategy to
move the nation beyond a petroleum-based economy. Aside from the fuel
savings that will be realized by today's final rule, the Administration
is focusing research on bio-based transportation fuels, improved
batteries for hybrid vehicles, and the on-going hydrogen fuel
initiative. The President's Advanced Energy Initiative and today's
final rule will build on the progress made by the Administration's 2001
National Energy Policy and the increased CAFE standards for MY 2005-
2007 light trucks.
II. Background
In proposing the CAFE standards for MYs 2008-2011, the agency
provided a detailed summary of the history of fuel economy standards,
and in particular, fuel economy standards for light trucks. Below we
have provided a summary of that discussion. For more background on the
light truck CAFE program, refer to the NPRM.
A. 1974 DOT/EPA Report to Congress on Potential for Motor Vehicle Fuel
Economy Improvements
In 1974, the Department of Transportation (DOT) and Environmental
Protection Agency (EPA) submitted to Congress a report entitled
``Potential for Motor Vehicle Fuel Economy Improvement (1974
Report).\8\ This report was prepared in compliance with Section 10 of
the Energy Supply and Environmental Coordination Act of 1974, Public
Law 93-319 (the Act). In the 1974 Report, DOT/EPA said that performance
standards regulating fuel economy could take either of two modes: a
production-weighted average standard for each manufacturer's entire
fleet of vehicles or a fuel economy standard tailored to individual
classes of vehicles. Included as a possible form for a production-
weighted standard was a variable standard based on the costs or
potential to improve for each manufacturer (1974 Report, p. 77).
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\8\ The 1974 report is available in the docket for this
rulemaking.
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DOT/EPA concluded in the 1974 Report that a production-weighted
standard establishing one uniform specific fuel economy average for all
manufacturers would, if sufficiently stringent to have the needed
effect, impact most heavily on manufacturers who have lower fuel
economy, while not requiring manufacturers of current vehicles with
better fuel economy to maintain or improve their performance. (1974
Report, p. 12) Production-weighted standards specifically tailored to
each manufacturer would eliminate some inequities, but were considered
to be difficult to administer fairly. (Ibid.)
B. Energy Policy and Conservation Act of 1975
Congress enacted the Energy Policy and Conservation Act (EPCA Pub.
L. 94-163) during the aftermath of the energy crisis created by the oil
embargo of 1973-74. The Act established an automobile fuel economy
regulatory program by adding Title V, ``Improving Automotive
Efficiency,'' to the Motor Vehicle Information and Cost Savings Act.
Title V has been amended from time to time and codified without
[[Page 17571]]
substantive change as Chapter 329 of title 49, United States Code.
Chapter 329 provides for the issuance of average fuel economy standards
for passenger automobiles and separate standards for automobiles that
are not passenger automobiles (light trucks).
For the purposes of the CAFE statute, ``automobiles'' include any
``4-wheeled vehicle that is propelled by fuel (or by alternative fuel)
manufactured primarily for use on public streets, roads, and highways
(except a vehicle operated only on a rail line), and rated at not more
than 6,000 pounds gross vehicle weight.'' They also include any such
vehicle rated at between 6,000 and 10,000 pounds gross vehicle weight
(GVWR) if the Secretary decides by regulation that an average fuel
economy standard for the vehicle is feasible, and that either such a
standard will result in significant energy conservation or the vehicle
is substantially used for the same purposes as a vehicle rated at not
more than 6,000 pounds GVWR.\9\
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\9\ In 1978, we extended the CAFE program to include vehicles
rated between 6,000 and 8,500 pounds GVWR (March 23, 1978; 43 FR
11995, at 11997). Vehicles rated at between 6,000 and 8,500 pounds
GVWR first became subject to the CAFE standards in MY 1980.
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The CAFE standards set a minimum performance requirement in terms
of an average number of miles a vehicle travels per gallon of gasoline
or diesel fuel. Individual vehicles and models are not required to meet
the mileage standard. Instead, each manufacturer must achieve a
harmonically averaged level of fuel economy for all specified vehicles
manufactured by a manufacturer in a given MY. The statute distinguishes
between ``passenger automobiles'' and ``non-passenger automobiles.'' We
generally refer to non-passenger automobiles as light trucks.
In enacting EPCA and after considering the variety of approaches
presented in the 1974 Report, Congress made a clear and specific choice
about the structure of the average fuel economy standard for passenger
cars. Congress established a common statutory CAFE standard applicable
to each manufacturer's fleet of passenger automobiles.
Congress was considerably less decided and prescriptive with
respect to what sort of standards and procedures should be established
for light trucks. It neither made a clear choice among the approaches
(or among the forms of those approaches) identified in the 1974 Report
nor precluded the selection of any of those approaches or forms.
Further, it did not establish by statute a CAFE standard for light
trucks. Instead, Congress provided the Secretary with a choice of
establishing a form of a production-weighted average standard for each
manufacturer's entire fleet of light trucks, as suggested in the 1974
Report, or a form of production-weighted standards for classes of light
trucks. Congress directed the Secretary to establish maximum feasible
CAFE standards applicable to each manufacturer's light truck fleet, or
alternatively, to classes of light trucks, and to establish them at
least 18 months prior to the start of each model year. When determining
a ``maximum feasible level of fuel economy,'' the Secretary is directed
to balance factors including the nation's need to conserve energy,
technological feasibility, economic practicability and the impact of
other motor vehicle standards on fuel economy.
C. 1979-2002 Light Truck Standards
NHTSA established the first light truck CAFE standards for MY 1979
and applied them to light trucks with a GVWR up to 6,000 pounds (March
14, 1977; 42 FR 13807). Beginning with MY 1980, NHTSA raised this GVWR
ceiling to 8,500 pounds. For MYs 1979-1981, the agency established
separate standards for two-wheel drive (2WD) and four-wheel drive (4WD)
light trucks without a ``combined'' standard reflecting the combined
capabilities of 2WD and 4WD light trucks. Manufacturers that produced
both 2WD vehicles and 4WD vehicles could, however, decide to treat them
as a single fleet and comply with the 2WD standard.
Beginning with MY 1982, NHTSA established a combined standard
reflecting the combined capabilities of 2WD and 4WD light trucks, plus
optional 2WD and 4WD standards. Manufacturers had the option of
complying under the combined fleet standard, or under the separate 2WD
and 4WD standards. Although the combined standard reflected the
combined capabilities of 2WD and 4WD light trucks, it did not
necessarily reflect the combined capabilities of the 2WD and 4WD fleets
of an individual manufacturer (e.g., a manufacturer may have found it
easier to comply with the combined standard than the 2WD and 4WD
standards separately, or vice versa). After MY 1991, NHTSA dropped the
optional 2WD and 4WD standards.
As explained in the NPRM, NHTSA twice found it necessary to reduce
a light truck standard when it received new information relating to the
agency's past projections. In 1979, the agency reduced the MY 1981 2WD
standard after Chrysler demonstrated that there were smaller than
expected fuel economy benefits from various technological improvements
and larger than expected adverse impacts from other federal vehicle
standards and test procedures (December 31, 1979; 44 FR 77199).
In 1984, the agency reduced the MY 1985 light truck standards after
we concluded that market demand for light truck performance, as
reflected in engine mix and axle ratio usage, had not materialized as
anticipated when the agency initially established the MY 1985
standards. The agency said that this resulted from lower than
anticipated fuel prices. The agency concluded that the only actions
then available to manufacturers to improve their fuel economy levels
for MY 1986 would have involved product restrictions likely resulting
in significant adverse economic impacts. The reduction of the MY 1985
standard was upheld by the U.S. Circuit Court of Appeals for the
District of Columbia. Center for Auto Safety v. NHTSA, 793 F.2d 1322
(D.C. Cir. 1986) (rejecting the contention that the agency gave
impermissible weight to the effects of shifts in consumer demand toward
larger, less fuel-efficient trucks on the fuel economy levels
manufacturers could achieve).\10\
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\10\ NHTSA similarly found it necessary on occasion to reduce
the passenger car CAFE standards in response to new information. The
agency reduced the MY 1986 passenger car standard because a
continuing decline in gasoline prices prevented a projected shift in
consumer demand toward smaller cars and smaller engines and because
the only actions available to manufacturers to improve their fuel
economy levels for MY 1986 would have involved product restrictions
likely resulting in significant adverse economic impacts. (October
4, 1985; 40 FR 40528) This action was upheld in Public Citizen v.
NHTSA, 848 F.2d 256 (D.C. Cir. 1988). NHTSA also reduced the MY
1987-88 passenger car standards (October 6, 1986; 51 FR 35594) and
MY 1989 passenger car standard (October 6, 1988; 53 FR 39275) for
similar reasons.
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On November 15, 1995, the Department of Transportation and Related
Agencies Appropriations Act for FY 1996 was enacted, which limited the
ability of the agency to establish CAFE standards for light trucks
(Section 330, Pub. L. 104-50). Pursuant to that Act, we then issued a
final rule limited to MY 1998, setting the light truck CAFE standard
for that year at 20.7 mpg, the same level as the standard we had set
for MY 1997 (61 FR 14680; April 3, 1996). The same limitation on the
setting of CAFE standards was included in the Appropriations Acts for
each of FYs 1997-2001. The agency followed the same process as for MY
1998, established the light truck CAFE standard at 20.7 mpg, for MYs
1999-2002.
[[Page 17572]]
While the Department of Transportation and Related Agencies
Appropriations Act for FY 2001 (Pub. L. 106-346) contained a
restriction on CAFE rulemaking identical to that contained in prior
appropriation acts, the conference committee report for that Act
directed NHTSA to fund a study by the NAS to evaluate the effectiveness
and impacts of CAFE standards (H. Rep. No. 106-940, at p. 117-118).
In a letter dated July 10, 2001, following the release of the
President's National Energy Policy, Secretary of Transportation Mineta
asked the House and Senate Appropriations Committees to lift the
restriction on the agency spending funds for the purposes of improving
CAFE standards. The Department of Transportation and Related Agencies
Appropriations Act for FY 2002 (Pub. L. 107-87), which was enacted on
December 18, 2001, did not contain a provision restricting the
Secretary's authority to prescribe fuel economy standards.
D. 2001 National Energy Policy
The National Energy Policy,\11\ released in May 2001, stated that
``(a) fundamental imbalance between supply and demand defines our
nation's energy crisis'' and that ``(t)his imbalance, if allowed to
continue, will inevitably undermine our economy, our standard of
living, and our national security.'' The National Energy Policy was
designed to promote dependable, affordable and environmentally sound
energy for the future. The Policy envisions a comprehensive long-term
strategy that uses leading edge technology to produce an integrated
energy, environmental and economic policy. It set forth five specific
national goals: ``modernize conservation, modernize our energy
infrastructure, increase energy supplies, accelerate the protection and
improvement of the environment, and increase our nation's energy
security.''
---------------------------------------------------------------------------
\11\ http://www.whitehouse.gov/energy/National-Energy-Policy.pdf
.
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The National Energy Policy included recommendations regarding the
path that the Administration's energy policy should take and included
specific recommendations regarding vehicle fuel economy and CAFE. It
recommended that the President direct the Secretary of Transportation
to--
--Review and provide recommendations on establishing CAFE standards
with due consideration of the National Academy of Sciences study
released (in prepublication form) in July 2001. Responsibly crafted
CAFE standards should increase efficiency without negatively impacting
the U.S. automotive industry. The determination of future fuel economy
standards must therefore be addressed analytically and based on sound
science.
--Consider passenger safety, economic concerns, and disparate impact on
the U.S. versus foreign fleet of automobiles.
--Look at other market-based approaches to increasing the national
average fuel economy of new motor vehicles.
E. 2002 NAS Study of CAFE Reform
In response to direction from Congress, NAS published a lengthy
report in 2002 entitled ``Effectiveness and Impact of Corporate Average
Fuel Economy (CAFE) Standards.'' \12\
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\12\ The NAS submitted its preliminary report to the Department
of Transportation in July 2001 and released its final report in
January 2002.
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The report concludes that the CAFE program has clearly contributed
to increased fuel economy and that it was appropriate to consider
further increases in CAFE standards. (NAS, p. 3 (Finding 1)) It cited
not only the value of fuel savings, but also adverse consequences
(i.e., externalities) associated with high levels of petroleum
importation and use that are not reflected in the price of petroleum
(e.g., the adverse impact on energy security). The report further
concluded that technologies exist that could significantly reduce fuel
consumption by passenger cars and light trucks within 15 years, while
maintaining vehicle size, weight, utility and performance. (NAS, p. 3
(Finding 5)) Light duty trucks were said to offer the greatest
potential for reducing fuel consumption. (NAS, p. 4 (Finding 5)) 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. The report noted that the widespread
penetration of even existing technologies will probably require 4-8
years. 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''--``that is, the committee [that authored the report]
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.'' (NAS, p. 4 (Finding 6))
Recognizing the many trade-offs that must be considered in setting
fuel economy standards, the report took no position on what CAFE
standards would be appropriate for future years. It noted,
``(s)election of fuel economy targets will require uncertain and
difficult trade-offs among environmental benefits, vehicle safety,
cost, oil import dependence, and consumer preferences.''
The report found that, to minimize financial impacts on
manufacturers, and on their suppliers, employees, and consumers,
sufficient lead-time (consistent with normal product life cycles)
should be given when considering increases in CAFE standards. The
report stated that there are advanced technologies that could be
employed, without negatively affecting the automobile industry, if
sufficient lead-time were provided to the manufacturers.
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. (NAS, pp. 4-5 (Finding 10))\13\
Further, 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.'' (NAS, p. 29) Specifically, they 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.'' (NAS, p. 3
(Finding 2)).
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\13\ The report noted the following about the concept of equity:
Potential Inequities
The issue of equity or inequity is subjective. However, one
concept of equity among manufacturers requires equal treatment of
equivalent vehicles made by different manufacturers. The current
CAFE standards fail this test. If one manufacturer was positioned in
the market selling many large passenger cars and thereby was just
meeting the CAFE standard, adding a 22-mpg car (below the 27.5-mpg
standard) would result in a financial penalty or would require
significant improvements in fuel economy for the remainder of the
passenger cars. But, if another manufacturer was selling many small
cars and was significantly exceeding the CAFE standard, adding a 22-
mpg vehicle would have no negative consequences.
(NAS, p. 102).
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To address those structural problems, the report suggested various
possible
[[Page 17573]]
reforms.\14\ 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.'' (NAS, p. 5 (Finding 12)). The report noted
that a system in which fuel economy targets were dependent on vehicle
weight, with lower fuel consumption targets set for lighter vehicles
and higher targets for heavier vehicles, up to some maximum weight,
would create incentives to reduce the variance in vehicle weights
between large and small vehicles, thus providing for overall vehicle
safety. (NAS, p. 5 (Finding 12)). The report stated that such a system
has the potential to increase fuel economy with fewer negative effects
on both safety and consumer choice.
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\14\ In assessing and comparing possible reforms, the report
urged consideration of the following factors:
Fuel use responses encouraged by the policy,
Effectiveness in reducing fuel use,
Minimizing costs of fuel use reduction,
Other potential consequences
--Distributional impacts
--Safety
--Consumer satisfaction
--Mobility
--Environment
--Potential inequities, and Administrative feasibility.
(NAS, p. 94).
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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 (NAS, p.
87). For example, if weight were the criterion, a manufacturer that
sells mostly light vehicles would have to achieve higher average fuel
economy than would a manufacturer that sells mostly heavy vehicles.
The report illustrated an example of an attribute-based system
using a continuous function (NAS, p. 109). Essentially, as illustrated,
the continuous function was represented as a line, which graphed
``gallons per mile'' versus ``curb weight.'' Under the continuous
function example, a vehicle's target fuel economy would be determined
by locating the vehicle's curb weight along the line and identifying
the corresponding gallons per mile value.
In February 2002, Secretary Mineta asked Congress ``to provide the
Department of Transportation with the necessary authority to reform the
CAFE program, guided by the NAS report's suggestions.''
F. 2003 Final Rule Establishing MY 2005-2007 Light Truck Standards
On April 7, 2003, the agency published a final rule establishing
light truck CAFE standards for MYs 2005-2007: 21.0 mpg for MY 2005,
21.6 mpg for MY 2006, and 22.2 mpg for MY 2007 (68 FR 16868; Docket No.
2002-11419; Notice 3). The agency determined that these levels are the
maximum feasible CAFE levels for light trucks for those model years,
balancing the express statutory factors and other included or relevant
considerations such as the impact of the standard on motor vehicle
safety and employment. NHTSA estimated that the fuel economy increases
required by the standards for MYs 2005-2007 would generate
approximately 3.6 billion gallons of gasoline savings over the 25-year
lifetime of the affected vehicles.
We recognized in the final rule that the standard established for
MY 2007 could be a challenge for General Motors. We recognized further
that, between the issuance of the final rule and the last (MY 2007) of
the model years for which standards were being established, there was
more time than in previous light truck CAFE rulemakings for significant
changes to occur in external factors capable of affecting the
achievable levels of CAFE. These external factors include fuel prices
and the demand for vehicles with advanced fuel saving technologies,
such as hybrid electric and advanced diesel vehicles. We said that
changes in these factors could lead to higher or lower levels of CAFE,
particularly in MY 2007. Recognizing that it may be appropriate to re-
examine the MY 2007 standard in light of any significant changes in
those factors, the agency reaffirms its plans to monitor the compliance
efforts of the manufacturers.
G. 2003 Comprehensive Plans for Addressing Vehicle Rollover and
Compatibility
In September 2002, NHTSA completed a thorough examination of the
opportunities for significantly improving vehicle and highway safety
and announced the establishment of interdisciplinary teams to formulate
comprehensive plans for addressing the four most promising problem
areas.\15\ Based on the work of the teams, the agency issued detailed
reports analyzing each of the problem areas and recommending
coordinated strategies that, if implemented effectively, will lead to
significant improvements in safety.
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\15\ A fifth problem area was announced in 2004, improving
traffic safety data.
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Two of the problems areas are vehicle rollover and vehicle
compatibility. The reports on those areas identify a series of vehicle,
roadway and behavioral strategies for addressing the problems.\16\
Among the vehicle strategies, both reports identified reform of the
CAFE program as one of the steps that needed to be taken to reduce
those problems:
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\16\ See http://www-nrd.nhtsa.dot.gov/vrtc/ca/capubs/IPTRolloverMitigationReport/; http://www-nrd.nhtsa.dot.gov/
rd.nhtsa.dot.gov/
The current structure of the CAFE system can provide an
incentive to manufacturers to downweight vehicles, increase
production of vehicle classes that are more susceptible to rollover
crashes, and produce a less homogenous fleet mix. As a result, CAFE
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is critical to the vehicle compatibility and rollover problems.
Recognizing the role of CAFE, we stated:
It is NHTSA's goal to identify and implement reforms to the CAFE
system that will facilitate improvements in fuel economy without
compromising motor vehicle safety or American jobs. * * *
* * * NHTSA intends to examine the safety impacts, both positive and
negative, that may result from any modifications to CAFE as it now
exists. Regardless of the root causes, it is clear that the
downsizing of vehicles that occurred during the first decade of the
CAFE program had serious safety consequences. Changes to the
existing system are likely to have equally significant impacts.
NHTSA is determined to ensure that these impacts are positive.
H. 2003 ANPRM
On December 29, 2003, the agency published an ANPRM seeking comment
on various issues relating to reforming the CAFE program (68 FR 74908;
Docket No. 2003-16128).\17\ The agency sought comment on possible
enhancements to the program that would assist in further fuel
conservation, while protecting motor vehicle safety and the economic
vitality of the automobile industry. The agency indicated that it was
particularly interested in structural reform. That document, while not
espousing any particular form of reform, sought specific input on
various options aimed
[[Page 17574]]
at adapting the CAFE program to today's vehicle fleet and needs.
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\17\ On the same date, we also published a request for comments
seeking manufacturer product plan information for MYs 2008-2012 to
assist the agency in analyzing possible reforms to the CAFE program
which are discussed in a companion notice published today. (68 FR
74931) The agency sought information that would help it assess the
effect of these possible reforms on fuel economy, manufacturers,
consumers, the economy, motor vehicle safety and American jobs.
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1. Need for Reform
The 2003 ANPRM discussed the principal criticisms of the current
CAFE program that led the agency to explore light truck CAFE reform (68
FR 74908, at 74910-13). First, the energy-saving potential of the CAFE
program is hampered by the current regulatory structure. The Unreformed
approach to CAFE does not distinguish between the various market
segments of light trucks, and therefore does not recognize that some
vehicles designed for classification purposes as light trucks may
achieve fuel economy similar to that of passenger cars. The Unreformed
CAFE approach instead applies a single standard to the light truck
fleet as a whole, encouraging manufacturers to offer small light trucks
that will offset the larger vehicles that get lower fuel economy. A
CAFE system that more closely links fuel economy standards to the
various market segments reduces the incentive to design vehicles that
are functionally similar to passenger cars but classified as light
trucks.
Second, because weight strongly affects fuel economy, the current
light truck CAFE program encourages vehicle manufacturers to reduce
weight in their light truck offerings to achieve greater fuel
economy.\18\ As the NAS report and a more recent NHTSA study have
found, downweighting of the light truck fleet, especially those trucks
in the low and medium weight ranges, creates more safety risk for
occupants of light trucks and all motorists combined.\19\
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\18\ Manufacturers can reduce weight without changing the
fundamental structure of the vehicle by using lighter materials or
eliminating available equipment or options. In contrast, reducing
vehicle size, and particularly footprint, generally entails an
alteration of the basic architecture of the vehicle.
\19\ However, both studies also suggest that if downweighting is
concentrated on the heaviest light trucks in the fleet there would
be no net safety impact, and there might even be a small fleet-wide
safety benefit. There is substantial uncertainty about the curb
weight cut-off above which this would occur.
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Third, the agency noted the adverse economic impacts that might
result from steady future increases in the stringency of CAFE standards
under the current regulatory structure. Rapid increases in the light
truck CAFE standard could have serious adverse economic consequences.
The vulnerability of full-line manufacturers to tighter CAFE standards
does not arise primarily from poor fuel economy ratings within weight
classes, i.e., from less extensive use of fuel economy improving
technologies. As explained in the 2003 ANPRM, their overall CAFE
averages are low compared to manufacturers that produce more relatively
light vehicles because their sales mixes service a market demand for
bigger and heavier vehicles capable of more demanding utilitarian
functions. An attribute-based (weight and/or size) system could avoid
disparate impacts on full-line manufacturers that could result from a
sustained increase in CAFE standards.
2. Reform Options
In discussing potential changes, the agency focused primarily on
structural improvements to the current CAFE program authorized under
the current statutory authority, and secondarily on definitional
changes to the current vehicle classification system and whether to
include vehicles between 8,500 to 10,000 lbs. GVWR. The NPRM explored
the various reform options raised in the ANPRM. It is worth noting
again several of those options.
Included in the reform discussion was an attribute-based
``continuous-function'' system, such as that discussed in the NAS
report. We chose various measures of vehicle weight and/or size to
illustrate the possible design of an attribute-based system. However,
we also sought comment as to the merits of using other vehicle
attributes as the basis of an attribute-based system.
The 2003 ANPRM also presented potential reform options under which
vehicles with a GVWR of up to 10,000 lbs. could be included under the
CAFE program. One presented option would be to include vehicles defined
by EPA as medium duty passenger vehicles \20\ for use in the CAFE
program. This definition would essentially make SUVs and passenger vans
between 8,500 and 10,000 lbs. GVWR subject to CAFE, while continuing to
exclude most medium- and heavy-duty pickups and most medium- and heavy-
duty cargo vans that are primarily used for agricultural and commercial
purposes.
---------------------------------------------------------------------------
\20\ The EPA's discussion of the MDPV definition is at 65 FR
6698, 6749-50, 6851-6852.
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Through the 2003 ANPRM, the agency intended to begin a public
discussion on potential ways, within current statutory authority, to
improve the CAFE program to better achieve our public policy
objectives. The agency set forth a number of possible concepts and
measures, and invited the public to present additional concepts. The
agency expressed interest in any suggestions toward revamping the CAFE
program in such a way as to enhance overall fuel economy while
protecting occupant safety and the economic vitality of the auto
market.
I. Recent developments
1. Factors underscoring need for reform
In the NPRM, we recognized two important complicating factors that
underscore the need for CAFE reform. One factor is the fiscal problems
reported by General Motors and Ford, while the other is the recent
surge in gasoline prices, a development that may be exacerbating the
financial challenges faced by both companies.
Two of the larger, full-line light-truck manufacturers, General
Motors and Ford, have reported serious financial difficulties. The
investment community has downgraded the bonds of both companies.
Further, both companies have announced significant layoffs and other
actions to improve their financial condition. While these financial
problems did not give rise to the Administration's CAFE reform
initiative, the financial risks now faced by these companies, including
their workers and suppliers, underscore the importance to full-line
vehicle manufacturers of establishing an equitable CAFE regulatory
framework.
There has also been a sharp and sustained surge in gasoline prices
since our last light truck final rule in April 2003 and the December
2003 ANPRM on CAFE reform. According to the Energy Information
Administration (EIA), the retail price for gasoline in April 2003 was
$1.59 per gallon and in December 2003 was $1.48 per gallon.\21\ When
the NPRM was published the weekly U.S. retail price was $2.55 per
gallon.\22\ While the retail price of gasoline has declined since
publication of the NPRM it is still $2.34, which is $.75 per gallon
higher than when the 2003 final rule was published.\23\
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\21\ See http://tonto.eia.doe.gov/oog/ info/gdu/gaspump.html. \22\ See http://www.eia.doe.gov/ oil--gas/petroleum/data--
publications/wrgp/ mogas--home--page.html and http://tonto.eia.doe.
gov/oog/info/gdu/gasdiesel.asp.
\23\ See id.
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We noted in the NPRM that it is important to recognize that CAFE
standards for MYs 2008-2011 should not be based on current gasoline
prices. They should be based on our best forecast of what average real
gasoline prices will be in the U.S. during the years that these
vehicles will be used by consumers: The 36-year period beginning in
2008 and extending to 2034.\24\ Since miles of travel tend to be
[[Page 17575]]
concentrated in the early years of a vehicle's lifetime, the projected
gasoline price in the 2008-2020 period is particularly relevant for
this rulemaking.
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\24\ To calculate the fuel savings for the light trucks
manufactured in a model year, we consider the savings over a 26-year
period. The number of light trucks manufactured during each model
year that remains in service during each subsequent calendar year is
estimated by applying estimates of the proportion of light trucks
surviving to each age up to 26 years (see Table VIII-2 in the PRIA).
At the end of 26 years, the proportion of light trucks remaining in
service falls below 10 percent.
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The Preliminary Regulatory Impact Analysis (PRIA) for the NPRM was
based on projected gasoline prices from the then most recent Annual
Energy Outlook 2005 (AEO2005) (published in 2004 before the recent
price rises), which projected gasoline prices ranging from $1.51 to
$1.58 per gallon.\25\ The Final Regulatory Impact Analysis (FRIA) for
today's rule is based on the revised forecast EIA published in the
AEO2006 (Early outlook) (see FRIA p. XIII-26). The current forecasted
price for gasoline ranges from $1.96 to $2.39 per gallon.\26\
---------------------------------------------------------------------------
\25\ http://www.eia.doe.gov/oiaf/aeo/index.html.
\26\ The EIA gasoline prices are provided in 2003 dollars. In
terms of 2006 dollars (based on the 2003 GDP deflator; see, http://www.gpoaccess.gov/usbudget/fy05/sheets/hist10z1.xls
) the forecasted
range of fuel prices would be $2.04 to 2.49.
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2. Revised product plans
In response to a request for comment (RFC) \27\ published in
conjunction with the NRPM, the agency has received updated product
plans from the vehicle manufacturers. While the NPRM was based on
product plans received in response to the 2003 ANPRM, the final rule
relied on product plans received in response to the August 2005 RFC.
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\27\ 70 FR 51466; August 30, 2005; Docket No. NHTSA-2005-22144-
03.
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III. Summary of the NPRM
On August 30, 2005, the agency published a notice of proposed
rulemaking (NPRM) to establish CAFE standards for model years (MYs)
2008 through 2011, and more importantly to reform the CAFE program (70
FR 51414). The NPRM was one piece of the Department of Transportation's
continuing effort to achieve higher fuel savings while enhancing safety
and preventing adverse economic consequences. We noted that the
previous rulemaking efforts increased the light truck CAFE standards,
from the ``frozen'' level of 20.7 mpg applicable from MY 1996 through
MY 2004, to a level of 22.2 mpg applicable to MY 2007. However, in
order to continue moving forward with improved fuel savings while
enhancing safety and preventing adverse economic consequences the
agency proposed to reform the light truck CAFE system.
In the NPRM, we proposed fuel economy standards for light trucks in
MYs 2008-2010, established under the traditional CAFE system
(Unreformed CAFE system). We also proposed standards for MYs 2008-2010
established under a proposed reformed CAFE system (Reformed CAFE).
During MYs 2008-2010, manufacturers would have an option of complying
with standards established under the Unreformed or the Reformed CAFE
system. We proposed that this period would serve as a transition period
to provide manufacturers an opportunity to adjust to changes in the
CAFE system and to provide this agency and the manufacturers'
opportunity to gain experience with the new system. For MY 2011, we
proposed standards established under Reformed CAFE only.
The Unreformed standards for MYs 2008-2010 were proposed with
particular regard to the capabilities of and impacts on the ``least
capable'' full-line manufacturer (a full-line manufacturer is one that
produces a wide variety of types and sizes of vehicles) with a
significant share of the market. A single CAFE level, applicable to
each manufacturer, was proposed each model year as follows:
MY 2008: 22.5 mpg
MY 2009: 23.1 mpg
MY 2010: 23.5 mpg
We estimated that these standards could save 4.4 billion gallons of
fuel over the lifetime of the vehicles sold during those model years,
compared to the savings that would occur if the standards remained at
the MY 2007 level of 22.2 mpg.
The proposed Reformed CAFE system relied on a category and target
system in which the light truck fleet was segmented according to size
and a manufacturer's required fuel economy level would be based on its
actual fleet distribution across the categories as compared to
applicable fuel economy targets. As proposed, the structure of Reformed
CAFE for each model year would have three basic elements--
(1)--six footprint \28\ categories of vehicles.
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\28\ Footprint is an aspect of vehicle size--the product of
multiplying a vehicle's wheelbase by its average track width.
---------------------------------------------------------------------------
(2)--a target level of average fuel economy for each footprint
category, as expressed by a step function (The step or ``staircase''
nature of the function can be seen in Figure 1 below.).
(3)--a Reformed CAFE standard based on the harmonic production-
weighted average of the fuel economy targets for each category.
[[Page 17576]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.000
To define the proposed category boundaries (step boundaries), we
first plotted the light truck production volumes by footprint. We then
sought to designate the category boundaries at points where there was
low volume footprint immediately adjacent to and to left of a high
volume footprint. Our intent in doing this was to reduce any incentive
for manufacturers to increase footprint in order to move a model into a
category with a lower fuel economy target. We sought to create a
reasonable number of categories that would also combine, to the extent
practicable, similar vehicle types into the same category. Each
category was then assigned a fuel economy target.
The proposed fuel economy targets were determined by a three-step
process. First, the agency applied feasible technology to each of the
seven largest light truck manufacturers' fleets \29\ individually until
the marginal cost of the added technology equaled the marginal benefit
of the additional technology. Next, initial targets were determined by
placing all of the improved vehicles into the six categories and
calculating a production-weighted fuel economy average within each
category. Finally, the initial targets were adjusted by equal
increments of fuel savings to a level at which marginal cost equaled
marginal benefit for industry as a whole. This final level provided the
targets as proposed, which would be used to determine a manufacturer's
required fuel economy level.
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\29\ The seven largest light truck manufacturers are General
Motors, Ford, DaimlerChrysler, Toyota, Honda, Hyundai, and Nissan.
---------------------------------------------------------------------------
Under the proposed reform, the required level of CAFE for a
particular manufacturer for a model year would be calculated after
inserting the following data into the standard for that model year:
that manufacturer's actual total production and its production in each
footprint category for that model year.\30\ The calculation of the
required level would be made by dividing the manufacturer's total
production for the model year by the sum of the six fractions (one for
each category) obtained by dividing the manufacturer's production in a
category by the category's target.
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\30\ Since the calculation of a manufacturer's required level of
average fuel economy for a particular model year would require
knowing the final production figures for that model year, the final
formal claculation of that level would not occur until after those
figures are submitted by the manufacturer to EPA. That submission
would not, of course, be made until after the end of that model
year.
---------------------------------------------------------------------------
As proposed, a manufacturer's required fuel economy was represented
as the following formula:
[GRAPHIC] [TIFF OMITTED] TR06AP06.001
During the MY 2008-2010 transition period, we proposed that
manufacturers may comply with CAFE standards established under Reformed
CAFE or with standards established under Unreformed CAFE. To further
ease the transition, and to ensure that the Reformed standards were
economically practical, the proposed Reformed CAFE standards were set
at levels at which the industry-wide cost of those standards were
roughly equivalent to the industry-wide cost of the Unreformed CAFE
standards for those model years.
[[Page 17577]]
As proposed, all manufacturers would be required to comply with a
Reformed CAFE standard in MY 2011. The proposed Reformed CAFE standard
for that model year was set at the level that maximized net benefits.
Under the NPRM, the range of targets for each model year was as
follows:
MY 2008: From 26.8 mpg for the smallest vehicles to 20.4 mpg for the
largest;
MY 2009: From 27.4 mpg for the smallest vehicles to 21.0 mpg for the
largest;
MY 2010: From 27.8 mpg for the smallest vehicles to 20.8 mpg for the
largest;
MY 2011: From 28.4 mpg for the smallest vehicles to 21.3 mpg for the
largest
We estimated that the standards based on these targets would save
approximately 10.0 billion gallons of fuel over the lifetime of the
vehicles sold during those four model years, compared to the savings
that would occur if the standards remained at the MY 2007 level of 22.2
mpg. The Reformed standards for MYs 2008-2010 were estimated to save
525 million more gallons of fuel than the Unreformed standards for
those years. We estimated the proposed MY 2011 standard to save an
additional 2.8 billion gallons of fuel.
We tentatively determined that the proposed standards under both
Unreformed CAFE and Reformed CAFE represent the maximum feasible fuel
economy level for each system. In reaching this conclusion, we balanced
the express statutory factors and other relevant considerations, such
as safety concerns, effects on employment and the need for flexibility
to transition to a Reformed CAFE program that can achieve greater fuel
savings in a more economically efficient way.
The proposed Reformed CAFE approach incorporated several important
elements of reform suggested by the National Academy of Sciences in its
2002 report (Effectiveness and Impact of Corporate Average Fuel Economy
(CAFE) Standards; NAS report). The agency outlined four basic
advantages that the proposed Reformed CAFE approach has over the
Unreformed CAFE approach: enlarged energy savings, enhanced safety, a
more equitable regulatory framework for different vehicle
manufacturers, and a more market oriented approach that more fully
respects economic conditions and consumer choice. Reformed CAFE forces
vehicle manufacturers to ensure that they are incorporating available
technologies to enhance fuel efficiency in all the vehicles they
produce.
In addition to the proposed step function approach, the agency also
discussed a continuous function approach. We explained that under a
continuous function approach there would be no categories, but instead
each footprint value would be assigned a fuel economy target. We
provided an example of a continuous function standard and requested
comment on such an approach.
Aside from proposing structural changes to the CAFE program, the
agency also discussed the potential of expanding the applicability of
the program to include heavier and heavier rated light trucks in MY
2011. The agency requested comment on the inclusion of vehicles
classified by the Environmental Protection Agency (EPA) as medium duty
passenger vehicles (MDPVs) \31\ in the light truck CAFE program.
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\31\ In 40 CFR 86-1803-01, EPA defines ``MPDV'' as a light truck
rated at more than 8,500 lbs GVWR, or that has a vehicle curb weight
of more than 6,000 pounds, or that has a basic vehicle frontal area
in excess of 45 square feet. ``MDPV'' does not include a vehicle
that:
Is an ``incomplete truck'' as defined in this subpart; or
Has a seating capacity of more than 12 persons; or
Is designed for more than 9 persons in seating rearward of the
driver's seat; or
Is equipped with an open cargo area (for example, a pick-up
truck box or bed) of 72.0 inches in interior length or more. A
covered box not readily accessible from the passenger compartment
will be considered an open cargo area for purposes of this
definition.
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Along with soliciting comment on the CAFE proposal, the agency also
requested updated product plan information and other data to assist in
developing a final rule. We noted that based on public comments and
other information, new data and analysis, and updated product plans,
the standards adopted in the final rule could well be different then
those proposed.
IV. Summary of Public Comments
NHTSA received over 45,000 individual submissions to the rulemaking
docket prior to the close of the comment period, including ones from
vehicle manufacturers and associations, environmental and consumer
advocacy groups, members of Congress, and private individuals. The vast
majority of the submissions were letters or e-mails prepared by various
organizations and submitted by private individuals to the docket.
Light truck manufacturers and their trade associations that
commented on the proposal included General Motors Corporation (Docket
No. 2005-22223-1493), Ford Motor Company (Docket No. NHTSA-2005-22223-
1570), DaimlerChrysler (Docket No. 20005-22223-1573), Toyota (Docket
No. NHTSA-2005-22223-1724), Honda (Docket No. NHTSA-2005-22223-1649),
Nissan (Docket No. NHTSA-2005-22223-2058), Mitsubishi Motor Company
(Docket No. NHTSA-2005-22223-1819), Hyundai (Docket No. NHTSA-2005-
22223-2035), Porsche (Docket No. NHTSA-2005-22223-1688), BMW of North
America (Docket No. NHTSA-2005-22223-1616), Volkswagen of North America
(Docket No. NHTSA-2005-22223-1674), the Alliance of Automobile
Manufacturers (Alliance; Docket No. NHTSA-2005-22223-1642), and the
Association of International Automobile Manufacturers (Docket No.
NHTSA-2005-22223-1645).
Manufacturers generally agreed that distinguishing vehicles within
the light truck fleet according to a size metric, i.e., footprint,
adequately recognized differences in manufacturers' compliance efforts
due to differences in fleet mix. They stated that step-function
standard based on footprint would provide manufacturers greater
flexibility in complying with the CAFE requirements while at the same
time, address safety concerns associated with the program. Contrary to
their general support for the proposed step function standard,
manufacturers expressed reservations with a continuous function
standard as discussed in the NPRM. Manufacturers stated that a
continuous function standard would be overly complex to administer and
with which to comply.
While manufacturers expressed general support for the structure of
the proposed Reformed CAFE, manufacturers generally expressed concern
with the process, as well as the assumptions relied upon in that
process, used to define the Reformed CAFE standards. Manufacturers
argued that the agency's reliance on a cost-benefit analysis to
determine the stringency of the light truck CAFE standards did not
adequately account for the capabilities of the industry, and in some
instances would not satisfy the ``economic practicability''
consideration required under EPCA. Additionally, manufacturers took
issue with the economic and technological assumptions employed in the
Reformed CAFE analysis, as well as in the Unreformed CAFE analysis.
Manufacturers asserted that the agency did not properly account for
technological and market risks that have the potential to render the
standards infeasible.
With regard to the applicability of the light truck CAFE program,
the vehicle
[[Page 17578]]
manufacturers generally opposed including vehicles with a GVWR greater
than 8,500 lbs in the light truck program. Manufacturers asserted that
standards were not practical for these vehicles; these vehicles are
used in a substantially different manner than lighter vehicles, making
the CAFE standards inappropriate; and that regulation of these vehicles
would not result in significant fuel savings.
Environmental, consumer and safety advocacy groups commenting on
the proposal included Environmental Defense (Docket No. NHTSA-2005-
22223-1491, 1698-1703, 1805), Natural Resource Defense Council (NRDC;
Docket No. NHTSA-2005-22223-1705 through 1710), the Union of Concerned
Scientists (Docket No. NHTSA-2005-22223-1977, 1978), the Insurance
Institute for Highway Safety (IIHS; Docket No. NHTSA-2005-22223-2082),
Center for Biological Diversity (Docket No. NHTSA-2005-22223-1638
through 1641), National Environmental Trust (Docket No. NHTSA-2005-
22223-1483, 1484), Sierra Club (Docket No. NHTSA-2005-22223-1623), U.S.
PIRG (Docket No. NHTSA-2005-22223-1623), Alliance to Save Energy--
American Council for an Energy-Efficient Economy (ACEEE; (Docket No.
NHTSA-2005-22223-1711), the American Jewish Committee (Docket No.
NHTSA-2005-22223-1420), Alliance for Affordable Energy et al. (Docket
No. NHTSA-2005-22223-1726),\32\ AAA (Docket No. NHTSA-2005-22223-1804),
and Public Citizen (Docket No. NHTSA-2005-22223-2188, 2189).
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\32\ Signatories to the Alliance for Affordable Energy et al.,
included representatives from Environmental and Energy Study Group,
Environmental Energy Solutions, Global Possibilities, Institute for
Environmental Research Education, Mainstay Energy, National
Environmental Trust, North Carolina Solar Center, Oregon
Environmental Council, Redwood Alliance, The Stella Group, Ltd., SUN
DAY Campaign, SustainableBusiness.com, Triangle Clean Cities
Coalition, and Vermont Energy Investment Corp.
---------------------------------------------------------------------------
In general, the environmental and consumer groups stated that the
increased fuel prices, the need of the nation to conserve energy and
the availability of ``effective technologies'' necessitate more
stringent standards. Several of these commenters stated that the light
truck standard should approach that for passenger cars or higher. These
groups generally asserted that any reform proposal must include a
mechanism to guarantee the fuel savings projected by the agency under
the new standards. Many of these groups expressed concern that the
proposed structure and reliance on vehicle footprint in the Reformed
CAFE system would permit manufacturers to ``upsize'' their fleets,
which would result in reduced fuel savings. Several commenters stated
that the statutory requirement to set ``maximum feasible'' standards
makes it impermissible for the agency to limit the level of the new
standards based on the concepts of ``optimal economic efficiency'' or
``least capable manufacturer.'' They argued that setting the Reformed
CAFE standards during the transition period at levels that impose the
same costs as the Unreformed standards was inconsistent with the
``maximum feasible'' requirement. Additionally, some of these groups
disagreed with the agency's statement regarding the preemption of State
regulation of greenhouse gas emissions from motor vehicles. The Center
for Biological Diversity asserted that the accompanying draft
Environmental Assessment was inadequate.
IIHS expressed concern that the category system as proposed would
provide an incentive for unsafe compliance strategies. IIHS stated that
the category system still provided an incentive to downsize a vehicle
within a category in order to improve its fuel economy. IIHS stated
that downsizing, particularly among the smaller vehicles, can have a
negative impact on safety. To address this issue, IIHS recommended that
the agency adopt a continuous function approach as discussed in the
NPRM.
A number of comments representing the interests of States were
received. These comments generally voiced opposition to various parts
of the NPRM. The New York State Department of Environmental
Conservation (NY DEC; Docket No. NHTSA-22223-1646), the State of New
Jersey Department of Environmental Protection (Docket No. NHTSA-22223-
1651), NESCAUM \33\ (Docket No. NHTSA-22223-1625), the Pennsylvania
Department of Environmental Protection (PA DEP; Docket No. NHTSA-22223-
1807), the California Air Resources Board (Docket No. NHTSA-22144-31),
STAPPA/ALAPCO \34\ (Docket No. NHTSA-22223-1494), and the Connecticut
Department of Environmental Protection (Docket No. NHTSA-22223-1624)
disagreed with the statement in the NPRM preamble about preemption of
State greenhouse gas regulations for motor vehicles and requested that
not include any such statement in the final rule. These commenters
generally also requested that the agency increase the stringency of the
final fuel economy requirements as well as regulate the fuel economy of
light trucks with a GVWR up to 10,000 lbs. The Attorneys General for
California, Massachusetts, New York, Connecticut, New Jersey, Maine,
Oregon, Vermont, and the New York City Corporation Counsel (Attorneys
General; Docket No. NHTSA-22223-2223) also objected to the preemption
language, and further stated that the agency is obligated to perform an
environmental impact statement under the National Environmental Policy
Act. The California Energy Commission expressed support for the
Reformed CAFE structure, but stated that, because of uncertainty in the
economic assumptions relied upon by the agency, standards should be
established at this time for model year 2008 only (Docket No. NHTSA-
22144-19).
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\33\ NESCAUM (Northeast States for Coordinated Air Use
Management) is an interstate association of air quality control
divisions representing the six New England States, as well as New
York and New Jersey.
\34\ State and Territorial Air Pollution Program Administrators
and the Association of Local Air Pollution Control Officials.
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Members of Congress also submitted comment, expressing concern over
the proposal. A letter signed by Representatives Tammy Baldwin, Jim
McDermott, Susan Davis, Raul Grijalva, Barbara Lee, Michael Michaud, Ed
Case, Robert Wexler, Pete Stark, Dennis Cardoza, Allyson Y. Schwartz,
and Jim Moran stated that the proposal contains a number of positive
aspects, particularly the use of footprint instead of weight as the
basis for Reformed CAFE (Docket No. NHTSA-22223-1334). However,
Representative Baldwin et. al asked that the agency establish more
stringent standards and establish standards for vehicles with a GVWR
between 8,500 and 10,000 lbs, stating that such revisions are necessary
to reduce the nation's demand for foreign oil and to lower gasoline
costs for consumers.
Comments were also received from a variety of additional
organizations and interests. The Competitive Enterprise Institute
(Docket No. NHTSA-22223-1682) commented that the proposal would provide
more flexibility to manufacturers and be more accommodating to consumer
preference, but argued that increased CAFE standards have the potential
to affect motor vehicle safety adversely. The Mercatus Center (Docket
No. NHTSA-22223-1632) and Criterion Economics (Docket No. NHTSA-22223-
1976) raised concerns relating to many of the analytic assumptions used
in the preliminary regulatory impact analysis. The Sport Utility
Vehicle Owners of America (Docket No. NHTSA-22223-1599) and Marine
Retailers Association of America (Docket No. NHTSA-22223-84) argued
that there was a need to
[[Page 17579]]
consider the utility of light trucks, particularly towing capacity.
As stated above, the vast majority of comments received were
submitted by individual citizens. Private individuals expressed concern
that the proposed standards would not be sufficient to meet the
nation's need to conserve energy, would not protect the nation from
future spikes in fuel prices, would negatively impact the environment,
and would encourage manufacturers to build larger vehicles with lower
fuel economy.
NRDC provided citizens with a letter requesting that the agency
increase the light truck standard by 1 mpg a year over five years.
These letters raised concern that the fuel economy standards as
proposed would not adequately address the nation's need to conserve
fuel.
The Union of Concerned Scientists also provided citizens with form
letters that requested the agency to regulate vehicles with a GVWR
greater than 8,500 lbs, to consider ``cost-efficient technologies'' for
``mid-size SUVs,'' and to provide a mechanism to ensure that
manufacturers do not ``up-size'' vehicles. Other similar documents were
also submitted to the docket.
Some expressed belief that sufficient technology is available that
would enable the manufacturers to exceed the proposed CAFE standards.
While the above discussion very briefly describes the comments
submitted by the various interested parties, more detailed discussions
of the comments and the agency's responses are embedded in the analysis
and discussion which follow.
V. The Unreformed CAFE Standards for MYs 2008-2010
The agency is establishing Unreformed CAFE standards of 22.5 miles
per gallon (mpg) for model year (MY) 2008, 23.1 mpg for MY 2009, and
23.5 mpg for MY 2010. We estimate that these standards will save 4.4
billion gallons of fuel over the lifetime of vehicles sold during those
model years, compared to the savings that would occur if the standards
remained at the MY 2007 level of 22.2 mpg. We have determined that
these requirements represent the maximum feasible fuel economy levels
achievable by industry in those model years.
Consistent with the NPRM, the Unreformed CAFE standards in MYs
2008-2010 are one option for compliance during a transition period in
which manufacturers may comply with either the Reformed or Unreformed
CAFE systems. During the transition period, the requirements under the
Reformed CAFE systems are linked to those of the Unreformed system, in
the sense that the Reformed CAFE standards for MYs 2008-2010 are set at
levels intended to ensure that the industry-wide cost of the Reformed
standards are roughly equivalent to the industry-wide cost of the
Unreformed CAFE standards in those model years.
As stated in the NPRM, this transition approach has several
important advantages. We have determined the Unreformed standards to be
economically practicable. The Reformed standards spread the cost burden
across the industry to a greater extent. As such, equalizing the cost
between the Unreformed and the Reformed CAFE systems ensures that the
costs associated with the transition period do not result in
economically severe compliance requirements. Further, this approach
promotes an orderly and effective transition to the Reformed CAFE
system since experience will be gained prior to MY 2011. In this
section, we describe how we developed the Unreformed CAFE standards.
In arriving at the Unreformed CAFE standards, we used the same type
of analyses as in the NPRM and as we employed in establishing light
truck CAFE standards for MYs 2005-2007. First, we analyzed the
confidential product planning data submitted by the manufacturers to
ascertain the ``baseline'' capabilities and fuel economy of each
manufacturer that has a significant share of the light truck market.
Second, we conducted a three-stage manual engineering analysis (the
Stage Analysis), in conjunction with a computer-based engineering
analysis (the Volpe Analysis), to determine what technologies each
company with a significant share of the market could use to enhance its
overall fleet fuel economy average. In order to perform the two
analyses, the agency relied on the National Academy of Sciences (NAS)
report entitled, ``Effectiveness and Impact of Corporate Average Fuel
Economy (CAFE) Standards,'' which contains costs and effectiveness
estimates for various technologies that could be used to enhance
vehicle fuel economy.
As explained in the August 2005 NPRM,\35\ the Stage Analysis
involves application of the agency's engineering expertise and judgment
about possible adjustments to the detailed product plans submitted by
individual manufacturers. More specifically, Stage I analysis involves
the application of technologies which are deemed to be available for
use by MY 2008 and which would not require significant changes to the
vehicle's driveline components (i.e., the engine and transmission).
Stage II analysis involves the application of more advanced
transmission upgrades and engine improvements that are readily
available in the marketplace. Stage III analysis involves the
application of diesel and hybrid powertrains to select products.
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\35\ 70 FR 51414 (August 30, 2005).
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The Volpe Analysis was described in detail in the NPRM and Final
Rule establishing light truck CAFE standards for MYs 2005-2007.\36\ The
Volpe analysis uses a technology application algorithm to
systematically apply consistent cost and performance assumptions to the
entire industry, as well as consistent assumptions regarding economic
decision-making by manufacturers. The resultant computer model (the
CAFE Compliance and Effects Model), developed by technical staff of the
DOT Volpe National Transportation Systems Center in consultation with
NHTSA staff, is used to help estimate the overall economic impact of
the Unreformed CAFE standards. The Volpe analysis shows the economic
impact of the standards in terms of increases in new vehicle prices on
a manufacturer-wide, industry-wide, and average per-vehicle basis.
Based on these estimates and corresponding estimates of net economic
and other benefits, the agency is able to set the standards that are
economically practicable and technologically feasible. The Stage
Analysis and the Volpe Analysis rely on the same product plan
information from manufacturers, consider many of the same technologies
(the Stage Analysis considers some manufacturer-specific technologies
not represented in the Volpe Analysis), and apply similar conditions
regarding the applicability of those technologies.
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\36\ See 67 FR 77015 (December 16, 2002) and 68 FR 16868 at
16871 (April 7, 2003). Docket Nos. NHTSA-2002-11419-55 and NHTSA-
2002-11419-18361.
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We note that the Volpe model has been updated and refined with
respect to its representation of some fuel-saving technologies, but
remains fundamentally the same. The updated model has also been peer
reviewed.\37\ The model documentation, including a description of the
input assumptions and process, as well as peer review reports and the
agency's response to reviewers, were made available in the rulemaking
docket for the August 2005 NPRM.\38\
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\37\ The agency's response to the peer review is provided in the
docket at NHTSA-2005-22223-52.
\38\ See Docket Nos. NHTSA-20005-22223-3, 4, 5.
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We received a significant number of comments in response to the
proposed
[[Page 17580]]
Unreformed CAFE standards, expressing a wide range of views. While some
of those commenting argued that technology is available to set the
standards higher, others argued that insufficient lead time, as well as
technological and monetary constraints, make it unlikely that the
proposed standards would be attainable. We have reviewed these comments
and adjusted many aspects of the analyses used to determine the
Unreformed CAFE standards in order to account for issues brought to our
attention. Responses to comments that raised specific technology and
economic assumptions issues are discussed in detail below in sections
VIII. Technology issues, and IX.
Economic Assumptions
In the balance of this section, we describe in further detail how
we developed the Unreformed CAFE standards. After considering the
foregoing and taking into consideration the statutory criteria
specified in 49 U.S.C. 32092(f) \39\, we are adopting the Unreformed
CAFE standards specified above, having concluded that they constitute
the maximum feasible standards for MYs 2008-2010.
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\39\ The statutory criteria, which are addressed elsewhere in
this document, are: (1) The nation's need to conserve energy; (2)
technological feasibility; (3) economic practicability (including
employment consequences); and the impact of other regulations on
fuel economy.
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A. Legal Authority and Requirements Under EPCA
As previously stated, EPCA requires that the CAFE standards set a
minimum performance standard at a level determined by the Secretary of
Transportation to be the ``maximum feasible'' average fuel economy
achievable by manufacturers in a given model year (49 U.S.C. 32902). To
guide determinations of the maximum feasible fuel economy level,
Congress specified four statutory criteria that must be considered:
technological feasibility, economic practicability, the effect of other
Federal motor vehicle standards on fuel economy, and the need of the
United States to conserve energy. The agency is permitted to consider
additional societal considerations and historically has considered the
potential for adverse safety consequences when deciding upon a maximum
feasible level.\40\ The overarching principle that emerges from the
enumerated factors and the court-sanctioned practice of considering
safety and links them together is that CAFE standards should be set at
a level that will achieve the greatest amount of fuel savings without
leading to significant adverse societal consequences.
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\40\ 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 States 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).
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We have set the Unreformed standards with particular regard to the
``least capable manufacturer with a significant share of the market,''
in response to the direction in the conference report on the CAFE
statute language to consider industry-wide considerations, but not
necessarily base the standards on the manufacturer with the greatest
compliance difficulties.\41\ This approach is consistent with the
Conference Report on the legislation enacting the CAFE statute:
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\41\ ``Least capable manufacturer'' is something of a misnomer
as a major manufacturer could install substantial amounts of fuel
saving technologies and still be the major manufacturer with lowest
projected CAFE due to its mix of vehicles.
Such determination [of maximum feasible average fuel economy
level] should take industry-wide considerations into account. For
example, a determination of maximum feasible average fuel economy
should not be keyed to the single manufacturer that might have the
most difficulty achieving a given level of average fuel economy.
Rather, the Secretary must weigh the benefits to the nation of a
higher average fuel economy standard against the difficulties of
individual manufacturers. Such difficulties, however, should be
given appropriate weight in setting the standard in light of the
small number of domestic manufacturers that currently exist and the
possible implications for the national economy and for reduced
competition association [sic] with a severe strain on any
---------------------------------------------------------------------------
manufacturer.
S. Rep. No. 94-516, 94th Congress, 1st Sess. 154-155 (1975). The agency
must consider the industry's ability to improve fuel economy, but with
appropriate consideration given to the difficulties of individual
manufacturers.
In response to this congressional direction, we have traditionally
given particular regard to the ``least capable manufacturer with a
substantial share of the market.'' The agency must take particular care
in considering the statutory factors with regard to these
manufacturers-- weighing their asserted capabilities, product plans and
economic conditions against agency projections of their capabilities,
the need for the nation to conserve energy and the effect of other
regulations (including motor vehicle safety and emissions regulations)
and other public policy objectives.
The agency has historically assessed whether a potential CAFE
standard is economically practicable in terms of whether the standard
is one ``within the financial capability of the industry, but not so
stringent as to threaten substantial economic hardship for the
industry.'' \42\ See, e.g., Public Citizen, 848 F.2d at 264. In
essence, in determining the maximum feasible level of CAFE, the agency
assesses what is technologically feasible for manufacturers to achieve
without leading to significant adverse economic consequences, such as a
significant loss of jobs or the unreasonable elimination of consumer
choice.
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\42\ In adopting this interpretation in the final rule
establishing the MY 1981-1984 fuel economy standards for passenger
cars (June 30, 1977; 42 FR 33534, at 33536-7), the Department
rejected several more restrictive interpretations. One was that the
phrase means that the standards are statutorily required to be set
at levels solely on a cost-benefit basis. The Department pointed out
that Congress had rejected a manufacturer-sponsored amendment to the
Act that would have required standards to be set at a level at which
benefits were commensurate with costs. It also dismissed the idea
that economic practicability should limit standards to free market
levels that would be achieved with no regulation.
---------------------------------------------------------------------------
At the same time, the law does not preclude a CAFE standard that
poses considerable challenges to any individual manufacturer. The
Conference Report 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.'' CAS, 793 F.2d at
1338-39. 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 statute permits the
imposition of reasonable, ``technology forcing'' challenges on any
individual manufacturer, but does not contemplate standards that will
result in ``severe'' economic hardship by forcing reductions in
employment affecting the overall motor vehicle industry.\43\
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\43\ In the past, the agency has set CAFE standards above its
estimate of the capabilities of a manufacturer with less than a
substantial, but more than a de minimis, share of the market. See,
e.g., CAS, 793 F.2d at 1326 (noting that the agency set the MY 1982
light truck standard at a level that might be above the capabilities
of Chrysler, based on the conclusion that the energy benefits
associated with the higher standard would outweigh the harm to
Chrysler, and further noting that Chrysler had 10-15 percent market
share while Ford had 35 percent market share). On other occasions,
the agency reduced an established CAFE standard to address
unanticipated market conditions that rendered the standard
unreasonable and likely to lead to severe economic consequences. 49
FR 41250, 50 FR 40528, 53 FR 39275; see Public Citizen, 848 F.2d at
264.
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[[Page 17581]]
By focusing primarily on the least capable manufacturer with a
significant share of the market, this approach has ensured that the
standards are technologically feasible and economically practicable for
manufacturers with a significant share of the market. If a standard is
technologically feasible and economically practicable for the ``least
capable'' manufacturer, it can be presumed to be so for the ``more
capable'' manufacturers. Together, the manufacturers with a significant
share of the market represented a very substantial majority of the
light trucks manufactured and thus were deemed to represent ``industry-
wide considerations.''
B. Establishing Unreformed Standards According to EPCA--Process for
Determining Maximum Feasible Levels
In establishing the Unreformed standards for MYs 2008-2010, the
agency relied upon its historical standard setting process, which
includes consideration of the ``least capable manufacturer with a
significant share of the market.''
NRDC, Environmental Defense and the Union of Concerned Scientists
stated that the ``least capable manufacturer'' approach applied by the
agency in setting standards under the Unreformed CAFE standards
violates EPCA and Congress' expressed intent. NRDC argued that ``while
the agency is permitted to consider the single, least capable
manufacturer in assessing economic practicability, it simply may not
allow that manufacturer's capabilities to drive the standard setting
process,'' and referred to CAS.
In CAS, the petitioners alleged that the agency had given
``impermissible weight to shifts in consumer demand toward larger, less
fuel-efficient trucks''\44\ in reducing the MY 1985 standard for light
trucks and in establishing the MY 1986 standard for light trucks. In
reducing the MY 1985 standard as well as in establishing the MY 1986
one, NHTSA considered the impacts of different levels of standards on
the least capable manufacturer. The Court noted the conference report
for EPCA ``states that the fuel economy standards delegated to NHTSA
are to be the product of balancing the benefits of higher fuel economy
levels against the difficulties individual manufacturers would face in
achieving those levels,''\45\ Then it quoted language to that effect
from the conference report. In the end, the Court upheld the standards
established through consideration of the least capable manufacturer
with a significant share of the market, stating that ``a standard with
harsh economic consequences for the auto[mobile] industry * * * would
represent an unreasonable balancing of EPCA's policies.''\46\
---------------------------------------------------------------------------
\44\ Id. at 1323-4.
\45\ Id. at 1338.
\46\ Id. at 1340.
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As a first step toward ensuring that the CAFE levels selected as
the maximum feasible levels under Unreformed CAFE will not lead to
significant adverse consequences, we reviewed in detail the
confidential product plans provided by the manufacturers with a
substantial share of the light truck market (General Motors, Ford and
DaimlerChrysler) and all other manufacturers that submitted
confidential product plan data and assessed their technological
capabilities to go beyond those plans. By doing so, we are able to
determine the extent to which each can enhance their fuel economy
performance using technology.
C. Baseline for Determining Manufacturer Capabilities in MYs 2008-2010
In order to determine the maximum feasible fuel economy levels for
MYs 2008-2010 under the Unreformed CAFE system, we first determined
each manufacturer's fuel economy baselines for MYs 2008-2010. That is,
we determined the fuel economy levels that manufacturers were planning
to achieve in those years.
The manufacturer baselines relied upon for the proposed Unreformed
CAFE standards were based upon information submitted by manufacturers
in response to the December 29, 2003 request for product plans \47\,
and any additional manufacturer updates. In conjunction with the August
2005 NPRM, we issued a RFC seeking updated product plans to enable
NHTSA to use the most accurate and up-to-date product plan information
in establishing the Reformed and Unreformed CAFE standards.\48\
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\47\ See 68 FR 74931; see also Docket No. NHTSA-2003-16709-1.
\48\ See Docket No. NHTSA-2005-22144.
---------------------------------------------------------------------------
In response to the RFC, we received product plans from
DaimlerChrysler, Ford, General Motors, Honda, Hyundai, Mitsubishi,
Nissan, Subaru and Toyota. To supplement the data provided in response
to the RFC, we also relied on product data available from public
sources. Taken together, it was this updated information that the
agency used in development of the standards for today's final rule.
We note that BMW, Porsche, and Volkswagen previously paid fines in
lieu of complying with the MY 2002 and 2003 light truck CAFE standards.
The agency assumes that because of that past history and their low
light truck production volumes Porsche and Volkswagen will continue to
pay fines instead of bringing their fleets into compliance. For purpose
of the NPRM, we also assumed that BMW would continue to pay fines.
However, BMW has indicated that it does not intend to pay fines in the
model years subject to this rulemaking. We have adjusted our analysis
accordingly.
Finally, in response to a comment from DaimlerChrysler, we removed
Mitsubishi's information from DaimlerChrysler's product plans due to
DaimlerChrysler's recent sale of its entire share of Mitsubishi stock
and adjusted DaimlerChrysler's baseline capabilities accordingly.
Based on the updated manufacturer's responses and the available
public data, we determined the baseline capabilities as follows:
Table 1.--Estimated Market Shares and Planned CAFE Levels (Without Credits)
----------------------------------------------------------------------------------------------------------------
Market MY 2008 MY 2009 MY 2010
Manufacturer share\*\ (mpg) (mpg) (mpg)
----------------------------------------------------------------------------------------------------------------
General Motors.......................................... 25.8 21.36 21.43 21.59
Ford.................................................... 19.4 21.53 21.79 22.65
DaimlerChrysler......................................... 23.0 21.96 22.01 22.42
Toyota.................................................. 11.6 22.51 22.44 22.65
Honda................................................... 6.5 24.56 24.56 24.56
Nissan.................................................. 5.7 21.01 20.70 21.13
[[Page 17582]]
Hyundai................................................. 3.6 23.22 23.49 23.36
Subaru.................................................. 1.1 25.87 27.15 27.05
BMW..................................................... 0.8 21.29 21.29 21.29
Porsche................................................. 0.2 16.80 16.80 16.80
Isuzu................................................... 0.4 20.38 20.24 20.14
Suzuki.................................................. 0.3 21.93 21.93 21.93
Volkswagen.............................................. 0.3 18.78 18.78 18.78
Mitsubishi.............................................. 1.3 24.33 24.41 24.70
----------------------------------------------------------------------------------------------------------------
*Based on 2005 production data.
After ascertaining the baseline capabilities of individual
manufacturers, the agency applied the Stage analysis to analyze the
potential technological improvements to the product offerings for each
manufacturer with a substantial share of the light truck market, as
well as for the remaining light truck manufacturers.\49\
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\49\ A more detailed discussion of these issues is contained in
the Chapter VI of the FRIA, which has been placed in the docket for
this notice. Some of the information included in the FRIA, including
the details of manufacturers' future product plans, has been
determined by the Agency to be confidential business information,
the release of which could cause competitive harm. The public
version of the FRIA omits the confidential information. The FRIA
also discusses in detail the fuel-economy-enhancing technologies
expected to be available during the MY 2008-2011 time period.
---------------------------------------------------------------------------
The Alliance and Ford argued that in establishing manufacturer
baselines for our analysis, the agency erroneously assumed that each
manufacturer's fleet average would be at 22.2 mpg for Model Year 2007.
These commenters stated that this assumption is incorrect, because some
manufacturers did not submit product plan information to support this
assumption and other manufacturers achieve compliance with the CAFE
requirements through the use of credits and payment of fines. The
Alliance and Ford also stated that some manufacturers (in anticipation
of future CAFE increases) might have taken steps in support of higher
fleet averages and might have already incorporated fuel saving
technologies.
In response, we note that the agency did not assume that each
manufacturer's fleet average would be 22.2 mpg for MY 2007. We used the
manufacturer's plans to determine the fleet average. When a
manufacturer's plans were below 22.2 mpg, we estimated the technologies
and costs necessary to bring their fleet average up to a 22.2 mpg
baseline. These costs were assigned to the MY 2007 standards, and such
costs were not included in the costs for MY 2008.
With respect to alternative fuel vehicles, we note that
manufacturers may improve their calculated fuel economy performance by
placing these vehicles into the market through MY 2012.\50\ However, 49
U.S.C. 32902(h) prohibits us from taking such benefits into
consideration in determining the maximum feasible fuel economy
standard. Accordingly, the baseline projections cannot reflect those
credits.\51\
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\50\ The applicability of the alternative fuel provision in
Sec. 32905 was extended in the Energy Policy Act of 2005 (Pub. L.
109-58).
\51\ Sec. 32902(h) states that when establishing fuel economy
standards, the agency:
(1) May not consider the fuel economy of dedicated automobiles;
and
(2) Shall consider dual fueled automobiles to be operated only
on gasoline or diesel fuel.
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D. Technologically Feasible Additions to Product Plans
As explained in the August 2005 NPRM, we performed a Stage analysis
to determine what fuel-saving technologies could be applied to a
manufacturer's baseline. At each of the three stages, we add
technologies based on our engineering judgment and expertise about
possible adjustments to the detailed product plans submitted by the
manufacturers. Our decision on whether and when to add a technology
reflects our consideration of the practicability of applying a specific
technology and the necessity for sufficient lead-time in its
application. In addition to considering lead time and practicability,
the agency adds technologies in a cost-minimizing fashion. That is, we
add technologies in order of lower to higher costs as explained in the
FRIA (see FRIA p. VI-13).
While technologies are applied in order of ``effective cost,'' the
level of technology added to a manufacturer's fleet is based on the
agency's engineering expertise. Technologies are not added until net
benefits are maximized as under the Reformed CAFE system. Instead, the
agency uses engineering expertise to apply technology. We impose phase-
in caps for applications of technology over time and do not make
significant changes until a vehicle is refreshed or redesigned to
account for product cycles. As such, the price of fuel does not
directly factor into the application of technology under the Unreformed
CAFE system to the degree that it does under the Reformed CAFE system.
New product plan data in response to the NPRM indicated that
manufacturers had shifted the fleet mix and improved the fuel economy
of some vehicles. These changes reduced the amount of technology
available to be applied. For this reason, more costly technologies
(diesel and hybrids) were projected onto the fleet. The agency feels
justified in doing so because higher gasoline prices will increase the
demand for these types of technologies.
In evaluating which technologies to apply, and the sequence in
which to apply them, we follow closely the NAS report. The NAS report
estimated the incremental benefits and the incremental costs of
technologies that may be applicable to actual vehicles of different
classes and intended uses.\52\ The NAS report also identified what it
called ``cost-efficient technology packages'' (i.e., combinations of
technologies that would result in fuel economy improvements sufficient
to cover the purchase price increases that such technologies would
require).\53\
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\52\ See NAS Report at p. 40. See also Docket No. 2005-22223-10,
``Fuel Economy Potential of 2010 Light Duty Trucks.'' This document
was prepared under the auspices of the U.S. Department of Energy for
NHTSA, in order to update the estimates provided by the 2001 NAS
Report.
\53\ See NAS Report at p. 64.
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The Stage I analysis includes technologies that are available for
use by MY 2008, but that some manufacturers are not currently choosing
to use in their product plans or are using in a limited manner.
However, many of these technologies are currently being used in today's
light truck fleet. They include non-powertrain applications such as
low-rolling-resistance tires, low-friction lubricants, aerodynamic drag
reduction, and electric-power steering pumps.
[[Page 17583]]
The Stage II analysis includes two major categories of
technological improvements to the manufacturers' fleets. The first
category is transmission improvements, which includes the introduction
and expanded use of 5-speed and 6-speed transmissions and continuously
variable transmissions (CVTs). The second category is engine
improvements, which includes gradually upgrading light truck engines to
include multi-valve overhead camshafts; introducing engines with more
than 2 valves per cylinder; applying variable valve timing or variable
valve lift and timing to multi-valve overhead camshaft engines; and
applying cylinder deactivation to 6- and 8-cylinder engines.
The Stage III analysis includes projections of the potential CAFE
increase that could result from the application of diesel engines and
hybrid powertrains to select products. Both diesel engines and hybrid
powertrains appear in several manufacturers plans within the MY 2008-
2010 timeframe, and other manufacturers have publicly indicated that
they are looking seriously into both technologies.
The Stage analysis also includes the possibility that manufacturers
could utilize some vehicle weight reduction as a fuel economy
improvement technology on light trucks with curb weights over 5,000
pounds.\54\ However, the weight reduction was only applied in
conjunction with a planned vehicle redesign, and sometimes in concert
with a reduction in aerodynamic drag.
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\54\ Based on the results of Dr. Kahane's revised weight and
safety analysis, the net weight-safety effect of removing 100 lbs.
from a light truck--if footprint is held constant--is zero for all
light trucks with curb weights above 3,900 lbs. However, the Stage
analysis only considered weight reduction for vehicles with a curb
weight in excess of 5,000 lbs. given the statistical uncertainty
with the 3,900 lbs. figure. Further discussion of the application of
weight reduction is provided below.
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The agency again relied on the NAS report, which contains costs and
effectiveness estimates for various technologies that could be used to
enhance a vehicle's fuel economy. In most instances, NHTSA used the NAS
report's mid-range estimate of the potential fuel economy benefits of
specific technologies. However, if NHTSA projected the use of a
technology specific to a manufacturer, NHTSA relied on effectiveness
estimates provided by that manufacturer when applying that technology
to that manufacturer and if appropriate, to other manufacturers.
In arriving at the Unreformed CAFE standard, the agency took into
account the concerns raised by the manufacturers in response to the
August 2005 NPRM. Specifically, the agency is aware that vehicle
manufacturers require sufficient lead time to incorporate changes and
new features into their vehicles. The agency is also aware that the
vehicle manufacturers are unable to deploy new technologies throughout
their entire light truck fleet in one model year. Similarly, NHTSA also
recognizes that vehicle manufacturers follow design cycles when
introducing or significantly modifying a product. In revising and
applying the Stage Analysis, NHTSA took these concerns into
consideration.
For each of the largest manufacturers that provided product plans
with baselines below our proposed levels for at least one model year,
the agency projected the use of several Stage I technologies, beginning
with MY 2008, and several more technologies, beginning with MY 2009. We
note that in performing the Stage Analysis, the agency relied on
product plans submitted by the manufacturers as well as comments
received in response to the August 2005 NPRM. The agency removed
incompatible technologies and technologies already incorporated into
manufacturers' product plans from the Stage Analysis. More importantly,
the agency delayed and ``staggered'' applications of technologies such
that they are not implemented across the entire fleet in one model
year. Most new technologies were added in conjunction with model
changes or vehicle introductions. That is, instead of adding
technologies to existing vehicles in the middle of their product cycle,
we added technologies to vehicles at the time the vehicles were
undergoing major engineering changes or when they were introduced.
Aside from reliance on the NAS report, we also relied to a limited
extent on technologies present in the manufacturers' confidential
product plans. If a technology was present in a manufacturer's product
plans, we evaluated the opportunity for additional application of the
technology within that manufacturer's fleet, and if appropriate, other
manufacturers' fleets. The following are examples of non-confidential
technologies used in the Stage Analysis.
Stage 1
Electrical power steering--We first applied this technology to
lighter vehicles that do not require a conversion to a 42-volt
electrical system. The agency avoided using this technology for heavier
vehicles in the near term. The power demands for lighter vehicles do
not require a 42-volt system for operation of electric power steering.
However, for larger vehicles it appears that a 42-volt system is
required to accommodate electric power steering, and adding a 42-volt
system was deemed a technology that can be only introduced in
conjunction with model changes or product introductions.
In all cases, electric power steering was added to the Stage
Analysis to coincide with model changes. By MY 2008, electrical power
steering was included on some of the lighter vehicles undergoing model
changes. By MYs 2009 and 2010, this technology was gradually added to
heavier vehicles at the beginning of their respective product cycles.
That way, installation of electrical power steering can coincide with
the necessary conversion of these heavier vehicles to a 42-volt
electrical system.
Low-friction lubricants--This technology does not require
engineering changes to vehicle engines. Therefore, it was implemented
in MYs 2008 and 2009 on a large percentage of the eligible fleet
without ``staggering'' the implementation. That is, the agency believes
that this technology can be implemented within a relatively short lead
time. The agency did not apply low-friction lubricants to vehicles with
engines that require higher-friction lubricants.
Aerodynamic drag reduction--This technology was applied to certain
vehicles to coincide with a major vehicle redesign or a vehicle
introduction. Because aerodynamic drag reduction typically involves
actual vehicle body changes, we were especially careful not to
attribute any aerodynamic drag reduction, except at the beginning of a
new product cycle.
Low-rolling-resistance tires--This technology was added to lighter,
passenger-car-based (unibody construction) light trucks that were
deemed compatible with passenger-car-like tires. Due to compatibility
concerns expressed by several manufacturers, these tires were not
applied to light trucks intended for significant off-road duty or
pickup trucks with substantial cargo carrying capabilities. Because
this technology does not require vehicle engineering resources, we
implemented this technology such that it does not necessarily coincide
with a planned vehicle introduction or redesign. We believe that in
this case, the lead time is sufficient for the manufacturers to make
arrangements to purchase sufficient quantities.
Engine accessory improvement--The agency projected the use of this
technology for several manufacturers. This technology category
encompasses a variety of engine accessory
[[Page 17584]]
improvement technologies that several manufacturers are currently
incorporating, such as improved fuel and oil pumps. If a manufacturer
provided NHTSA with descriptions for these specific technologies, they
were applied to that manufacturer's vehicles where appropriate. If
manufacturers provided no information regarding their incorporation of
engine accessory improvement technologies, NHTSA applied a potential
engine accessory improvement to vehicles that had an engine and engine
technologies that would benefit from and be compatible with specific
engine accessory improvements. The agency believes that this technology
is cost-effective. This technology generally affects the operation of
the engine, thus this technology was added in conjunction with a
planned introduction of new models.
Stoichiometric Spark Ignition Direct Injection--This technology was
added to select vehicles, i.e., those vehicles produced by
manufacturers that have product plans which reflect a familiarity with
the technology. This technology was applied in conjunction with a
planned vehicle redesign. Implementation of this technology was delayed
in response to comments and in recognition of cost issues associated
with insufficient lead time.
Weight reduction--As explained below, this fuel economy improvement
method was used sparingly on vehicles with a curb weights in excess of
5,000 pounds and was applied in conjunction with a planned vehicle
redesign.
Stage 2
5-speed and 6-speed automatic transmissions--These technologies
were added to some vehicles that, based on the manufacturers' product
plans, were projected to continue using 4-speed automatic
transmissions. As with Stage I technologies, when a transmission
upgrade is used in the Stage Analysis, it is timed to coincide with
model changes. Further, we first implemented this technology in
vehicles that share major mechanical components with vehicles already
equipped with 5- or 6-speed transmissions. For example, we project this
technology on certain pickup trucks that share their platforms and
engines with multipurpose passenger motor vehicles already equipped
with 6-speed transmissions, knowing that these transmissions were
readily available to the manufacturer and were compatible with the
basic vehicle architecture.
Cylinder deactivation--In response to comments, the agency did not
apply this technology to vehicles with incompatible existing engine
architecture. The agency applied this technology to select vehicles. In
doing so, the agency took into account whether this technology was
already available to the manufacturers. In some instances, this
technology was already utilized by vehicle manufacturers on some of
their light trucks, and the agency believes that adopting this
technology to other light trucks would save costs, especially if the
technology is implemented at the time of vehicle redesign.
Dual overhead cam (DOHC)--The agency did not use, or delayed the
implementation of this technology in vehicles where the comments
indicated that the change from single overhead cam (SOHC) would be too
complicated and would not produce significant fuel economy improvements
because of incompatibility with the existing engine architecture. In
other vehicles, implementation of DOHC was timed to coincide with a
planned vehicle or engine redesign. In applying this technology, the
agency examined the manufacturers' current vehicles. In some instances
the manufacturers carry both DOHC engines and SOHC engines of the same
displacement and basic architecture. In these instances, the agency
projected a gradual switch to only the DOHC engines.
Continuous Variable Transmission (CVT)--CVT technology was relied
upon in the analysis for the NPRM. The agency did not apply CVTs in the
final rule. The updated product plans reflected that manufacturers had
applied CVTs or 6-speeds instead to all of those vehicles to which the
agency's analysis applied CVTs in the NPRM.
Front Axle Disconnect--Where this technology was implemented, it
was timed to coincide with planned vehicle redesign. In addition, in
response to comments regarding the general effectiveness of this
technology vis-[aacute]-vis its effectiveness in specific vehicle
applications, we revised downward the projected fuel economy benefits
attributed to this technology.
Variable Valve Lift and Timing--Based on comments, this technology
was not used on certain vehicles because the basic engine architecture
was incompatible. According to commenters, this technology is
incompatible with overhead valve engines. Instead, this technology was
applied to certain vehicles already equipped with overhead cam engines
featuring variable valve timing.
Stage III
Stage III technologies were not included in the Stage Analysis for
all manufacturers because some manufacturers can meet the Unreformed
CAFE standards without the need to use any diesel or hybrid technology.
For some vehicle manufacturers, we estimated higher sales of light
trucks equipped with hybrid engines compared to the manufacturer's
product plans. This revised estimate is based on continuing strong
demand and increased popularity of hybrid vehicles. For other
manufacturers, we projected the use of direct-injection diesel engines
in place of large displacement gasoline V8 engines.
E. Improved Product Plans
The agency's revised Stage Analysis produced the following
individual projections:
Table 2.--Manufacturers' Fuel Economy Capabilities as Projected Under the Stage Analysis
----------------------------------------------------------------------------------------------------------------
Model year Model year Model year
Manufacturer 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
DaimlerChrysler................................................. *22.475 23.059 23.599
Ford............................................................ 22.455 23.060 23.935
General Motors.................................................. 22.506 23.060 23.450
Nissan.......................................................... 22.452 23.091 23.470
Toyota.......................................................... 22.506 23.054 24.044
----------------------------------------------------------------------------------------------------------------
*While compliance is calculated with the standard is in tenths of a mile per gallon, our initial analysis
projects fuel economy capabilities to thousandths of mpg.
[[Page 17585]]
The technologically-feasible fuel economy levels determined under
the Stage Analysis provide the basis for the Unreformed CAFE standards.
The Volpe model is then used to estimate benefits and costs of these
standards. The Volpe model analyzes what technologies can be added to
meet the standard determined by the Stage Analysis. More specifically,
the Volpe model uses a technology application algorithm developed by
Volpe Center staff in consultation with NHTSA staff to apply
technologies to manufacturers' baselines in order to achieve the fuel
economy levels produced under the Stage Analysis. This algorithm
systematically applies consistent cost and performance assumptions to
the entire industry, as well as consistent assumptions regarding
economic decision-making by manufacturers. Technologies are selected
and applied in order of ``effective cost,'' (total cost - fine
reduction - fuel savings value) / (number of affected vehicles).\55\
This formula is a private cost concept (i.e., it looks at costs to the
manufacturer). It is used to predict how a manufacturer would sequence
the addition of technologies to meet a given standard.
---------------------------------------------------------------------------
\55\ In the current model year, the system begins by carrying
over any technologies applied in the preceding model year, based on
commonality of engines and transmissions, as well as any identified
predecessor/successor relationships among vehicle models. At each
subsequent step toward compliance by a given manufacturer in the
current model year, the system considers all engines, transmissions,
and vehicles produced by the manufacturer and all technologies that
may be applied to those engines, transmissions, and vehicles, where
the applicability of technologies is governed by a number of
constraints related to engineering and product planning. The system
selects the specific application of a technology (i.e., the
application of a given technology to a given engine, transmission,
vehicle model, or group of vehicle models) that yields the lowest
``effective cost'', which the system calculates by taking (1) the
cost (retail price equivalent) to apply the technology times the
number of affected vehicles, and subtracting (2) the reduction of
civil penalties achieved by applying the technology, and subtracting
(3) the estimated value to vehicle buyers of the reduction in fuel
outlays achieved by applying the technology, and dividing the sum of
these components by the number of affected vehicles.
---------------------------------------------------------------------------
Although similar, the two analyses do not apply exactly the same
technologies. Both are merely technologically feasible ways of
achieving the given standard, not predictions of how manufacturers will
actually meet it. As discussed below, additional analysis was performed
to ensure that the Unreformed CAFE standards are economically
practicable for the industry.
We note that the standards adopted today are the same as those
proposed in the NPRM, even though the agency performed the Stage
analysis on updated product plans as provided by the manufacturers.
This result is largely due to the fact that there is a limited pool of
technology that can be applied to the manufacturers' fleets in the time
period subject to this rulemaking.
The updated product plans reflected that some technologies
previously applied by the agency in the Stage analysis were now applied
by the manufacturers in their product plans, which meant that these
technologies were no longer available for the Stage analysis. Because
the pool of feasible technologies that can be applied in the lead time
provided is limited, the agency projected fewer additional technologies
for the updated product plans beyond the improvements made by the
manufacturers.
As a result of having limited technologies and practical
constraints on how and when those technologies can be applied, the
difference between the NPRM improved fleet and the final rule improved
fleet is largely a matter of the level of technology voluntarily added
by manufacturers in their revised product plans submitted in response
to the NPRM. Consequently, the two improved fleets provide similar fuel
economies.
F. Economic Practicability and Other Economic Issues
As explained above, the agency has historically viewed the question
of whether a CAFE standard is economically practicable in terms of
whether the standard is ``within the financial capability of the
industry, but not so stringent as to threaten substantial economic
hardship for the industry.'' See, e.g., Public Citizen, 848 F.2d at
264. In the Stage analysis, technologies are applied to project fuel
economy levels that would be technologically feasible for a
manufacturer. When considering economic practicability, the agency
assesses whether technologically-feasible levels may lead to adverse
economic consequences, such as a significant loss of sales or the
unreasonable elimination of consumer choice. The agency must ``weigh
the benefits to the nation of a higher fuel economy standard against
the difficulties of individual automobile manufacturers.'' CAS, 793
F.2d at 1332.
The agency has estimated not only the anticipated costs that would
be borne by General Motors, Ford, DaimlerChrysler, Nissan and Toyota to
comply with the standards under the Unreformed CAFE system, but also
the significance of the societal benefits anticipated to be achieved
through fuel savings and other economic benefits from reduced petroleum
use. The baselines provided by Honda and Hyundai for MYs 2008-2010
exceeded the standards in each of those model years. In regard to
economic impacts on manufacturers and societal benefits, we have relied
on the Volpe model to determine a probable range of costs and benefits.
The Volpe model is used to evaluate the standards initially
produced under the Stage Analysis in order to estimate their overall
economic impact as measured in terms of increases in new vehicle prices
on a manufacturer-wide, industry-wide, and average per-vehicle basis.
Like the Stage Analysis, the Volpe model relies on the detailed product
plans submitted by manufacturers, as well as available data relating to
manufacturers that had not submitted detailed information. The Volpe
model is used to trace the incremental steps (and their associated
costs) that a manufacturer would take toward achieving the standards
initially suggested by the Stage Analysis. In applying technologies,
the Volpe model is programmed to be as consistent as practical with the
technology application method and constraints of the Stage analysis.
Based on the Stage and Volpe analyses, we have concluded that these
standards would not significantly affect employment or competition, and
that--while challenging--they are achievable and that they will benefit
society considerably. For this analysis, we have, where possible,
translated the benefits into dollar values and compared those values to
our estimated costs for this proposed rule.
In estimating the costs and benefits of this rulemaking, the agency
employed a variety of cost estimates (e.g., the cost of technology,
lead-time) and economic assumptions (e.g., price of fuel, rebound
effect). As the cost estimates and economic assumptions apply, in many
cases, equally to the Unreformed and Reformed CAFE system analyses, we
have addressed these comments below in Section VIII. Technology issues,
and Section IX. Economic assumptions. The discussion that follows
provides our estimates for the costs and benefits of the Unreformed
CAFE standards adopted today.
1. Costs
In terms of vehicle costs for complying with the Unreformed CAFE
standards, we estimate the average incremental cost per vehicle to be
$64 for MY 2008, $185 for MY 2009, and $195 for MY 2010. The total
incremental costs (the cost necessary to bring the corporate average
fuel economy for light
[[Page 17586]]
trucks from 22.2 mpg (the standard for MY 2007) to the final rule
levels are estimated to be $536 million for MY 2008, $1,621 million for
MY 2009, and $1,752 million for MY 2010.
Our cost estimates for the Unreformed CAFE system are based on the
application of technologies and the resulting costs to individual
manufacturers. We assumed that manufacturers would apply technologies
on a cost-effectiveness basis (as described above). More specifically,
within the range of values anticipated for each technology, as
estimated by the NAS study, we selected the mid-point for cost and fuel
consumption impacts during the model years under consideration.
Using the estimated costs and fuel savings for the different
technologies, the agency then examined the projections provided by
different manufacturers for their light truck fleet fuel economy for
MYs 2008-2010. Although the details of the projections by individual
manufacturers are confidential, we generally observed that present fuel
economy performance indicates that some manufacturers will, if their
planned fleets remain unchanged, be able to meet the proposed standards
without significant expenditures. In contrast, other manufacturers will
need to expend significantly more effort than they were planning to
meet the final Unreformed CAFE standards.
Some manufacturers might achieve more fuel savings than others
using similar technologies on a vehicle-by-vehicle basis due to
differences in vehicle weight and other technologies present. However,
this analysis assumes an equal impact from specific technologies for
all manufacturers and vehicles. The technologies were ranked based on
the cost per percentage point improvement in fuel consumption and
applied where available and appropriate to each manufacturer's fleet in
their order of rank. The complete list of the technologies and the
agency's estimates of cost and associated fuel savings can be found in
Table VI-4 of the FRIA.
2. Benefits
In Chapter VIII of the FRIA, the agency analyzes the economic and
environmental benefits of the Unreformed CAFE standards by estimating
fuel savings over the lifetime of each model year (approximately 36
years). Benefit estimates include both the benefits to consumers in
terms of reduced fuel usage and other savings, such as the reduced
externalities generated by the importing, refining, and consuming of
petroleum products.
The total benefits of the increases in the levels of the Unreformed
CAFE standards are estimated to be $577 million for MY 2008, $1,876
million for MY 2009 and $2,109 million for MY 2010, based on fuel
prices ranging from $1.96 to $2.39 in 2003 dollars per gallon and a
discount rate of seven percent.
3. Comparison of Estimated Costs to Estimated Benefits
Table 3 compares the incremental costs and benefits for the
Unreformed CAFE standards.
Table 3.--Comparison of Incremental Costs and Benefits for the Unreformed CAFE Standards
[In millions]
----------------------------------------------------------------------------------------------------------------
MY 2008 MY 2009 MY 2010
----------------------------------------------------------------------------------------------------------------
Total Incremental Costs*........................................ $536 $1,621 $1,752
Total Incremental Benefits*..................................... 577 1,876 2,109
----------------------------------------------------------------------------------------------------------------
* Relative to the 22.2 mpg standard for MY 2007.
These estimates are provided as present values determined by
applying a 7 percent discount rate to the future impacts.\56\ The
discount rate is intended to measure the reduction in the value to
society of benefits when they are deferred until some future date
rather than received immediately. The benefits are discounted to
provide an appropriate comparison of costs to the value of future
benefits. To the extent possible, we translated impacts other than
direct fuel savings into dollar values and then factored them into our
cumulative estimates. We obtained forecasts of light truck sales for
future years from AEO 2005.\57\ Based on these forecasts, NHTSA
estimated that approximately 8.6 million light trucks affected by this
final rule would be sold in MY 2008. For MYs 2009 and 2010, we
estimated 8.9 million and 9.0 million light truck sales, respectively.
---------------------------------------------------------------------------
\56\ In the FRIA, we also evaluated the final rule using a 3
percent discount rate for discounting benefits.
\57\ The agency relied on AEO 2005 projections for the total
sales figures. The manufacturers provided us with projected sales
for passenger cars and light trucks. However, taken together, the
sales projections provided by the individual companies to NHTSA
yielded unrealistically high industry-wide sales volumes. Percentage
of total sales per manufacturer was based on past sales data. A
complete discussion of light truck sales projections is provided in
the FRIA (FRIA p. VIII-8).
---------------------------------------------------------------------------
We calculated the reduced fuel consumption of MY 2008-2010 light
trucks by comparing their consumption under the final rule for those
years to either the manufacturers' plans if they were above 22.2 mpg,
or the consumption they would have if the MY 2007 CAFE standard of 22.2
mpg remained in effect during those years. First, the estimated fuel
consumption of MY 2008-2010 light trucks was determined by dividing the
total number of miles driven during the vehicles' remaining lifetime by
the fuel economy level they were projected to achieve under the 22.2
mpg standard.
Then, we assumed that if these same light trucks were produced to
comply with higher CAFE standards for those years, their total fuel
consumption during each future calendar year would equal the total
number of miles driven (including the increased number of miles driven
because of the ``rebound effect,'' the tendency of drivers to respond
to increases in fuel economy in the same manner as they respond to
decreases in fuel prices, i.e., by driving more),\58\ divided by the
higher fuel economy they would achieve as a result of that standard.
The fuel savings during each future year that will result from the
higher CAFE standard is the difference between each model year's fuel
use and the fuel use that would occur under either the manufacturer's
plans or if the MY 2007 standard remained in effect. This analysis
results in estimated lifetime fuel savings of 555 million, 1,813
million, and 2,023 million gallons for MYs 2008, 2009, and 2010,
respectively.
---------------------------------------------------------------------------
\58\ As described in detail in the FRIA, we use a 20 percent
rebound effect based on a thorough review of the literature (FRIA p.
VIII-45). We are nonetheless aware that there is ongoing research in
this area, and will continue to assess this assumption in future
rulemakings in light of new evidence.
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A more detailed explanation of our analysis is provided in Chapter
VIII of the FRIA and the final EA (see EA p. 26).
[[Page 17587]]
4. Uncertainty
The agency recognizes that the data and assumptions relied upon in
our analysis have inherent limitations that do not permit precise
estimates of benefits and costs. NHTSA performed a probabilistic
uncertainty analysis to examine the degree of uncertainty in its costs
and benefits estimates. Factors examined included technology costs,
technology effectiveness in improving fuel economy, fuel prices, the
value of oil import externalities, and the rebound effect. This
analysis employed Monte Carlo simulation techniques to examine the
range of possible variation in these factors. As a result of this
analysis, the agency thinks it very likely that the benefits of the
Unreformed CAFE standards will exceed their costs for all three model
years. A detailed discussion of the uncertainty analysis is provided in
Chapter X of the FRIA.
G. Unreformed Standards for MYs 2008-2010
We believe the standards established today are challenging enough
to encourage the further development and implementation of fuel-
efficient technologies and are achievable within the applicable
timeframe. Accordingly, we have concluded that the standards for the
Unreformed CAFE system are technologically feasible and economically
practicable for those manufacturers with a substantial share of the
light truck market (General Motors, Ford, and DaimlerChrysler), and are
capable of being met without substantial product restrictions, and will
enhance the ability of the nation to conserve fuel and reduce its
dependence on foreign oil. As noted above, we have concluded that the
standards set through this final rule represent the best overall
balance of the statutory factors, and in addition, are consistent with
the protection of motor vehicle safety and American jobs.
The Unreformed CAFE light truck standards for MYs 2008-2010 are as
follows:
MY 2008: 22.5 mpg
MY 2009: 23.1 mpg
MY 2010: 23.5 mpg
VI. The Reformed CAFE Standards for MYs 2008-2011
A. Overview of Reformed CAFE
The structure of Reformed CAFE for each model year, as adopted in
today's final rule, has two basic elements--
(1) a function that sets the target fuel economy levels for each
value of vehicle footprint; \59\ and
---------------------------------------------------------------------------
\59\ Footprint is an aspect of vehicle size--the product of
multiplying a vehicle's wheelbase by its average track width
---------------------------------------------------------------------------
(2) a Reformed CAFE standard based on each manufacturer's
production-weighted harmonic average of the fuel economy targets for
footprint value. Unlike the proposed Reformed CAFE system, which relied
on a step function and associated categories, the final Reformed CAFE
system relies on a continuous mathematical function relating fuel
economy targets to vehicle footprint.
The required level of CAFE for a particular manufacturer for a
given model year is calculated using the target-setting function for
that model year in conjunction with that manufacturer's actual total
production and its production at each footprint value for that model
year.\60\ The manufacturer's required CAFE level is calculated by
dividing its total production for the model year by the sum of the
values obtained by dividing the manufacturer's production of each
vehicle model included in its fleet by the fuel economy target for that
model.
---------------------------------------------------------------------------
\60\ Since the calculation of a manufacturer's required level of
average fuel economy for a particular model year would require
knowing the final production figures for that model year, the final
formal calculation of that level would not occur until after those
figures are submitted by the manufacturer to EPA. That submission
would not, of course, be made until after the end of that model
year.
---------------------------------------------------------------------------
B. Authority for Reformed CAFE
In the same manner as we explained the step function proposal to be
consistent with EPCA,\61\ the continuous function Reformed CAFE
standard similarly conforms to the mandate to establish maximum
feasible fuel economy standards. The continuous function standard is
applicable on a fleet average basis and reflects the agency's balancing
of the nation's need to conserve energy, the effect of other standards
on fuel economy, technological feasibility, economic practicability and
other public policy considerations. Further, like the proposed step
function standard, the continuous function achieves the congressional
policy objectives embedded in EPCA.
---------------------------------------------------------------------------
\61\ See 70 FR 51415, 51445.
---------------------------------------------------------------------------
The continuous function standard retains the fleetwide compliance
aspect mandated by the CAFE statute. By maintaining reliance on
harmonic averaging, the continuous function standard promotes the CAFE
statute's overriding goal of conserving energy in a manner that
preserves manufacturer flexibility and consumer choice. (H. Rpt. 94-
340, p. 87; S. Rpt. 94-179, p. 6.)
The discretion provided to the agency by Congress to determine
whether to establish a single fuel economy level applicable to all
manufacturers or to set a series of fuel economy levels applicable to
individual manufacturers equally supports using a step function or a
continuous function to establish fuel economy targets for vehicles of
different sizes.\62\ Under either type of function, a manufacturer's
required fuel economy level is dependent on the manufacturer's fleet
mix. Moreover, just as the category targets described in the NPRM are
equally applicable to all manufacturers, the fuel economy targets
defined by a continuous function are equally applicable to all
manufacturers for a given model year.
A continuous function standard is based on similar technological
and economic considerations employed in establishing the proposed step
function standard, and which we believe ensure the technological
feasibility and economic practicability of the proposed MY 2011
standard. Moreover, a continuous function is defined based on the
modeled capabilities of the same percentage of the fleet as in the step
function proposal (i.e., 97 percent of the light truck fleet). Reliance
on 97 percent of the fleet better reflects industry-wide considerations
than the primary focus on the ``least capable manufacturer with a
substantial share of the market'' in the Unreformed CAFE structure.
In the NPRM we recognized the financial challenges facing the motor
vehicle industry and that a substantial number of job losses had been
announced by large full-line manufacturers. Since publication of the
NPRM, two manufacturers of light trucks, each with a significant share
of the market, have continued to report financial difficulties. The
financial risks faced by these companies, including their workers and
suppliers, underscored the importance to full-line vehicle
manufacturers of establishing an equitable CAFE regulatory framework.
Compared to Unreformed CAFE, the Reformed CAFE will enhance overall
fuel savings while providing manufacturers the flexibility they need to
respond to changing market conditions. The reforms adopted today will
provide a more equitable regulatory framework by creating a level
playing field for manufacturers, regardless of
[[Page 17588]]
whether they are full-line or limited-line manufacturers.
C. Legal Issues Related to Reformed CAFE
1. Maximum feasible
EPCA requires that the light truck CAFE levels be established at
the ``maximum feasible average fuel economy level'' achievable by the
manufacturers in that model year (49 U.S.C. 32902(a)). When deciding on
the maximum feasible level, the agency must consider technological
feasibility, economic practicability, the effect of other motor vehicle
standards of the Federal government on fuel economy, and the need of
the nation to conserve energy (49 U.S.C. 32902(f)). The agency must
balance these considerations, along with other factors such as safety,
when determining the level of CAFE standards.
As indicated above, and described in greater detail below, the
Reformed CAFE system uses incremental cost-benefit analysis (as
implemented within the Volpe model) to establish standards. The
technology cost and benefit assumptions employed by the model are based
on those presented in the NAS report. However, consideration is given
to manufacturers' critiques of the technology assumptions employed by
NAS. The agency also relies on the product plans provided by
manufacturers when projecting potential technology applications. The
standard arrived at through this process is then evaluated to determine
potential sales and employment impacts. As explained in the following
discussion, the totality of this analysis results in a standard that is
both technologically feasible and economically practicable. As
discussed elsewhere in this notice, the standard reflects consideration
of the impact of other Federal motor vehicle standards on fuel economy,
and as evidenced by our estimates that the resulting standard for MY
2011 will save approximately 2.8 billion gallons of fuel, also
addresses the nation's need to conserve energy.
Vehicle manufacturers and the Alliance expressed concern that the
agency's new methodology for setting CAFE standards (i.e., using cost-
benefit analysis to identify the pattern and stringency of fuel economy
targets) risked losing the key economic practicability check that was
previously provided by assessing a proposed standard's effect on the
least capable manufacturer, an approach that had proven reasonable and
workable in many prior CAFE rulemakings. In general, these commenters
argued that the agency must continue to consider the ``least capable
manufacturer'' to ensure that standards set under the Reformed CAFE
system do not result in adverse economic impacts on any individual
manufacturer. General Motors and Ford argued that NHTSA's proposed
methodology does not sufficiently consider the capabilities of the
``least capable manufacturer,'' and thus violates its statutory duty to
set standards that are ``economically practicable.''
We noted in the NPRM that the term ``least capable'' manufacturer
is something of a misnomer under the Reformed system, since each
manufacturer's projected level of CAFE is determined by two factors:
(1) The extent to which small or large vehicles predominate in its
planned production mix, and (2) the type and amount of fuel-saving
technologies the manufacturer is deemed capable of applying. Two
manufacturers may apply the same type and amount of fuel-saving
technologies to their fleets, yet have differing CAFE levels, if their
fleet mixes are not identical. Thus, a full-line manufacturer could
have a lower overall CAFE than a manufacturer concentrating its
production in the smaller footprint range, even though the former
manufacturer has applied as much (or more) technology to the models it
produces as has the latter manufacturer. The manufacturer concentrating
its production in smaller vehicles would have a higher CAFE level due
to the higher fuel economies of smaller vehicles. Thus, ``large
manufacturer with the lowest fuel economy average'' might better
describe the former than ``least capable manufacturer.''
The Reformed CAFE system establishes standards with regard to the
capabilities of a wider range of manufacturers than just the ``least
capable manufacturer.'' The fuel economy capabilities of an individual
manufacturer are projected based on each of the seven largest
manufacturers' specific product plans. Consideration of what specific
technologies each manufacturer can apply and at what rate each
technology can be applied is also made at the individual manufacturer
level. Further, a manufacturer's required fuel economy level reflects
that manufacturer's actual fleet mix.
Instead of requiring a uniform level of CAFE--which is inherently
more challenging for manufacturers whose fleets have high percentages
of larger vehicles to meet than for those whose product lines emphasize
smaller models--the Reformed system specifies fuel economy targets that
vary according to vehicle footprint; these targets are higher for
smaller light trucks and lower for large ones. It uses these targets to
determine a required CAFE level for each manufacturer that reflects the
size distribution and production volumes of its light truck models. By
setting each manufacturer's required fleet-wide CAFE level to reflect
its size mix, the Reformed system requires some effort by each
manufacturer to improve the fuel efficiency of its individual models,
regardless of their size distribution.
As stated above, the Volpe model applies technologies to a
manufacturer's fleet until the cost of an additional technology
application equals the benefits of the resulting improvement in fuel
economy. Because these benefits include the value of reducing economic
and environmental externalities from producing fuel, this process
results in a ``socially optimal'' level of fuel economy. Before we
arrive at the level of optimal economic efficiency, it is important to
understand the assumptions relied on by the model when applying
technology.
As with the Stage analysis, the Volpe model's assumptions about
technology cost and effectiveness are based on estimates provided in
the NAS report, and incorporate information provided by manufacturers.
The agency continues to rely on the NAS report to determine technology
costs and effectiveness because the estimates developed in the NAS
study were developed by recognized experts in vehicle technology, and
were widely peer reviewed. This study is the most up to date peer
reviewed study available. While the agency is working to update the NAS
data, in a study conducted through an interagency agreement with the
Department of Energy, this update requires additional work. To that
end, the agency continues to rely on the NAS report.
Because the alternative estimates submitted by vehicle
manufacturers and others as part of their comments on the NPRM have not
been subjected to the same review process, the agency continues to view
those reported in the NAS study as the most reliable estimates
available. Further, because the Volpe model applies these technologies
to individual vehicle models described in the product plans provided by
manufacturers, this ensures that technologies are not added to vehicles
already employing them, and that the model reliably projects potential
fuel economy improvements for actual vehicle models that manufacturers
plan to produce during each future model year. As such, the standard is
based on actual characteristics of specific vehicle
[[Page 17589]]
models and fleet mixes from manufacturers' product plans.
The agency has also responded to information provided by
manufacturers concerning the practicability of applying various
technologies. As explained in greater detail below in Section XIII.
Comparison of the final and proposed standards, the revised assumptions
and constraints include: extending lead times provided for implementing
certain technologies, reducing annual phase-in percentages for certain
technologies, and reducing instances of mid-product cycle technology
applications. The model then relies on these revised assumptions in
conjunction with the NAS study's original estimates of technology costs
and effectiveness, to determine the ``socially optimal'' fuel economy
level.
Ford stated that by focusing on ``optimal economic efficiency,''
NHTSA has adopted a surrogate measure of economic practicability that
(as contrasted with its traditional assessment whose starting point is
the ``least capable manufacturer'') does not consider many of the
effects that the higher standards would have on individual
manufacturers. DaimlerChrysler noted that Congress specifically
directed NHTSA to consider industry-wide capabilities in setting CAFE
standards, not just cost-effectiveness for consumers. As such,
DaimlerChrysler argued that retaining a ``least capable manufacturer''
analysis would help ensure that the standard continues to be within the
industry's ability to afford in terms of capital costs and annual
expenditures.
In response to these comments, the agency notes that determining
the socially optimal level of fuel economy targets under the
assumptions inputted into the Volpe model provides a benchmark for
assessing the economic practicability of the resulting standard.
Because these socially optimal targets are determined by equalizing the
monetized social benefits of improved fuel economy further to the costs
of the technologies that would produce such benefits,\63\ this process
avoids the application of technologies whose benefits are insufficient
to justify their costs when the agency determines a manufacturer's
capability. In other words, this approach ensures that each identified
private technology investment projected by the model produces marginal
benefits at least equal to marginal cost.
---------------------------------------------------------------------------
\63\ For a discussion of the technology costs and determination
of the social benefits of improved fuel economy, refer to the FRIA.
---------------------------------------------------------------------------
The agency did identify and consider a variety of benefits and
costs that either could not be monetized or could not be quantified. On
the benefit side, for example, there is a significant reduction in
carbon dioxide emissions, which can not be monetized. There is no
agreement in the literature on values or range of values for monetizing
such a benefit to the United States. On the cost side, for example,
there is a risk of adverse safety impacts from downweighting, which
cannot be quantified. This is because the agency is unable to predict
to what extent manufacturers may rely on downweighting, and therefore
cannot quantify the number of additional deaths and injuries that may
occur as a result. Overall, the agency determined that there is no
compelling evidence that these unmonetized benefits and costs would,
taken together, alter its assessment of the level of the standard for
MY 2011 that would maximize net benefits. Thus, the agency determined
the stringency of that standard on the basis of monetized net benefits.
Standards set at a level more stringent than those set at the
socially optimal level would not be economically efficient for society.
Standards more stringent than those established under the Reformed CAFE
system adopted in this document would require the industry to continue
applying technology past the point at which doing so increases net
social benefits.
Standards set at a level less stringent than those set at the
socially optimal level would result in a lost opportunity for applying
cost-beneficial technologies. Under less stringent standards,
technologies that provide benefits at least equal to their costs would
not be projected onto manufacturers' product plans. As such, the
standards would not capture fuel savings that are cost-effective to
achieve.
In considering manufacturers' costs for applying technology, the
agency's analysis accounts for the opportunity costs associated with
investing in that technology. When a manufacturer invests its capital
in additional technology, those resources are unavailable for other
investment opportunities, and the returns the manufacturer could have
earned on alternative investments or other uses of its capital
resources (such as application to safety or performance attributes of a
vehicle, or retiring existing debt) represent an additional cost of
improving fuel economy. To ensure that this additional cost of using
capital resources is reflected in its assessment of the economic
practicability of improving fuel economy, the agency discounts the
future fuel savings and other benefits that result from higher fuel
economy using a 7 percent discount rate.
The agency is relying on a 7 percent discount rate partly because
this rate reflects the economy-wide opportunity cost of capital. The
agency believes that a substantial portion of the cost of this
regulation may come at the expense of other investments the auto
manufacturers might otherwise make. Several large manufacturers are
resource-constrained with respect to their engineering and product-
development capabilities. As a result, other uses of these resources
will be foregone while they are required to be applied to technologies
that improve fuel economy.
If a manufacturer were able to capture all of the benefits to both
vehicle buyers and society as a whole that result from improved fuel
savings, it would apply technology to the level where the present value
of increased future benefits when discounted at 7 percent just equaled
the costs of applying additional technology.\64\ Applying technology to
improve fuel economy beyond this level would entail costs--including
the opportunity cost of the additional capital resources devoted to
improving fuel economy--that would exceed the resulting benefits.
Failing to improve fuel economy to this level would leave opportunities
to obtain fuel savings and related benefits that exceeded the
associated costs of the technologies necessary to obtain them.
---------------------------------------------------------------------------
\64\ The main benefit of improving fuel economy is the savings
in fuel costs experienced by vehicle buyers, since as a light
truck's fuel economy increases, the amount and cost of the fuel
required to operate it decreases. At the same time, reducing the
amount of fuel light trucks consume also generates benefits to
society and the economy as a whole, including reduced emissions of
some criteria pollutants that occur during fuel refining and reduced
economic costs from importing and consuming petroleum. Because these
benefits accrue to individuals and firms other than those who
purchase new vehicles, they are referred to as external benefits.
---------------------------------------------------------------------------
In commenting on the Reformed CAFE system, the Alliance stated that
standards should not be set so high as the cost of the added technology
outweighs the societal benefits of the improved fuel economy. Because
the social optimal level of fuel economy ensures that the marginal
benefit (either to the consumer or to society) of an increase in fuel
economy is equal to cost of the technology producing the additional
benefit, the social optimum level is economically practicable for
society.
Ford suggested NHTSA's cost-benefit analysis has not properly
considered costs to manufacturers for making
[[Page 17590]]
necessary investments and for increasing employment levels, or
competitive forces that may cause domestic manufacturers to absorb
CAFE-related costs rather than passing them on to buyers. Ford argued
that the potential inability of producers to recoup such costs from
buyers (in the form of higher prices) must be taken into account
explicitly, not solely through its effect on sales. DaimlerChrysler
also argued that not all of the costs associated with improved fuel
economy can be passed on to consumers in the form of higher vehicle
prices.
As stated above, a cost-benefit analysis is not the sole factor in
the agency's consideration of economic practicability. The agency also
performs a sales impact analysis. In determining the sales impact of
higher prices from improved fuel economy, the agency assumes that
consumers will value improved fuel economy. However, the analysis does
not rely on the value of fuel savings realized over the life of the
vehicle. Our analysis considers the value of fuel savings realized in
the first 4.5 years of the vehicle's life. The 4.5 year period is the
average ownership period for new cars. We determined that the fuel
savings during this period will be recognized and valued by light truck
purchasers. Based on our analysis, which assumes that consumers value
fuel savings over 4.5 years, there are net benefits for the average
light truck purchasers. Thus, the average consumer will be willing to
pay higher prices for improved fuel economy, and manufacturers will be
able to raise prices to recoup their investments.
DaimlerChrysler further argued that the agency must explain how it
will decide whether a standard set at a ``maximum net benefits'' level
would exceed the level that is economically practicable if it does not
take into account the capabilities of the ``least capable
manufacturer'' with a substantial market share. DaimlerChrysler argued
that the agency has not provided sufficient detail as to its
methodology, as would permit informed public comment. This commenter
stated that in certain situations, economic practicability might
require the agency to set a lower standard than the maximum net
benefits methodology might otherwise dictate. For example,
DaimlerChrysler, along with the Alliance and Ford, stated that if gas
prices were to rise high enough, every technology would theoretically
be ``cost-beneficial.''
Gas prices are but one factor relied on in the agency's analysis
for setting fuel economy targets. As stated, the Volpe model also takes
into account other factors closely associated with economic
practicability, such as lead time and phase-in rates. While higher fuel
prices increase the benefits associated with improved fuel economy, the
marginal cost-benefit analysis is still bounded by the technological
and economic assumptions employed by the model. The agency has relied
on technologies determined by the NAS report to be ``currently in the
production, product planning, or continued development stage, or are
planned for introduction. * * * The feasibility of production is
therefore well known, as are the estimated production costs'' (NAS p.
40).\65\
---------------------------------------------------------------------------
\65\ Complete documentation of the Volpe fuel economy model is
available in the CAFE docket.
---------------------------------------------------------------------------
Additionally, the model relies on assumptions that reflect
manufacturers' comments regarding the applicability of technology.
Manufacturers provided detailed critiques of the agency's application
of technology in the NPRM, most of which were provided confidentially.
Manufacturers provided alternative assumptions that they deemed more
reasonable. Presumably, in providing comment on what were reasonable
assumptions for the agency to apply, the manufacturers' recommendations
inherently accounted for their capabilities, both technological and
economic.
Many of these assumptions are closely tied to the economic
capabilities of the manufacturers. For example, in response to
commenters, the agency employed longer lead time and longer phase-ins
for various technologies. These adjustments reduce the economic impact
of applying technology by providing greater flexibility as to when fuel
economy improvements are expected. Additionally, we limited the number
of mid-product cycle applications. Mid-product cycle changes typically
are more costly than changes at the beginning of a product cycle, as
mid-product cycle changes may necessitate changes to an established
manufacturing line. By limiting the availability of technologies using
these assumptions, the cost-benefit does not assume that manufacturers
will make improvements that would be unjustifiably costly.
The socially optimum level of fuel economy, as determined under the
Volpe analysis, is thus indicative of the fuel economy level that is
economically practical for both individual manufacturers and the light
truck industry as a whole, and provides a process for careful balancing
of the ``competing factors of EPCA'' (CEI v. NHTSA, 901 F.2d 107, 121
(DC Cir. 1990)). Further, the agency conducts an analysis of the
estimated sales and employment impacts on individual manufacturers from
a standard set at the level derived from the analysis applied through
the Volpe model to ensure the economic practicability of that standard.
We recognize the financial difficulties facing several light truck
manufacturers. It has been widely reported that General Motors and Ford
are facing financial difficulties. In 2005, gasoline prices rapidly
increased, causing a shift in consumer demand away from larger, more
profitable SUVs and toward smaller, more fuel-efficient cars and light
trucks, a segment of the market long dominated by Asian automobile
manufacturers. Sales of sport utility vehicles have fallen slightly in
each of the last few years, with the trend accelerated by a jump in gas
prices late in 2005. The increase in gasoline prices particularly
curbed sales of the biggest SUVs. In response, U.S. automakers
increased sales during the 2005 summer with discounts that let
consumers pay what was called the ``employee'' price. While this
marketing led to near-record sales, sales again dropped off in October
when the incentives ended. By December of 2005, General Motors and Ford
sales were down 10.2 percent and 8.7 percent respectively.
Aside from the recent sales losses, General Motors and Ford have
experienced erosion in their respective market shares. General Motors,
and to a lesser extent Ford, have seen their market share fall
drastically over the last several years in the last year, which has
resulted in operating losses. General Motors' market share dropped from
28.1 percent in 2003 to 26.9 in 2004, and to 24.7 percent in 2005. This
is compared to General Motors' market share of 35 percent in the early
1990's. Ford has experienced a drop from 19.3 percent in 2003 to 17.8
in 2005.\66\
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\66\ The market share values are from wardssuto.com. The 2005
values are estimates.
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These losses in market share have coupled with operating losses.
General Motors had an operating loss of $11.5 billion for its North
American operations in calendar year 2005, with automotive cash flows
related to operations at a negative $7.9 billion.\67\ During that same
year, Ford Motor Company experienced an operating loss of $1.5 billion,
with negative cash flows
[[Page 17591]]
from operations at $4.1 billion.\68\ In November 2005, General Motors
announced that it would cut 30,000 jobs and close 12 manufacturing
facilities by 2008. In January 2006, Ford announced that it would cut
up to 30,000 jobs by closing 14 manufacturing facilities over the next
six years. The financial difficulties facing these manufacturers was
given due consideration.
---------------------------------------------------------------------------
\67\ Source: SEC FORM 8-K submitted to the SEC on January 26,
2006, and General Motors' March 16, 2006 press release as reported
by Automotive Business Review (http://www.automotive-business-review.com/article_news.asp?guid=FE50808D-4915-4A6F-949F-7532C6F5CE75
).
\68\ Source: Ford's SEC Form 8-K submitted to the SEC January
23, 2006.
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In their comments to the NPRM, several commenters, including
General Motors and Ford, expressed concern that the marginal cost-
benefit analysis would not appropriately consider the capabilities of
individual manufacturers and may result in standards that impose harsh
economic impacts on an individual manufacturer. Ford specifically noted
that if standards increased further then the costs may be too high and
unrecoverable, further compounding the current economic hardship facing
the industry. According to Ford, when determining the economic
practicability of its CAFE standards, the agency must determine whether
technologically-feasible levels would lead to adverse economic
consequences, such as a significant loss of sales or the unreasonable
elimination of consumer choice, a determination that Ford claimed the
agency has not made in selecting its proposed Reformed CAFE targets.
The agency recognizes that we must consider the potential economic
and financial impacts of the CAFE standards on individual
manufacturers. Aside from incorporating manufacturers' comments
regarding the feasibility of technology applications, the agency has
also performed a sales and employment impact analysis. The sales
analysis looks at a purchasing decision from the eyes of a
knowledgeable and rational consumer, comparing the estimated cost
increases versus the payback in fuel savings over 4.5 years (the
average new vehicle loan) for each manufacturer. This relationship
depends on the cost effectiveness of technologies available to each
manufacturer. Some manufacturers are estimated to increase sales and
others to lose sales. Overall, based on a 7 percent discount rate for
future fuel savings, the maximum sales loss is less than 11,000
vehicles per year for the industry. We believe this will have a minor
impact on employment.
Further, we note that the regulatory philosophy set forth in
Executive Order 12866, ``Regulatory Planning and Review,'' is that a
rulemaking agency should set its regulatory requirements at the level
that maximizes net benefits unless its statute prohibits doing so. EPCA
neither requires nor prohibits the consideration of the fuel economy
level at which net benefits are maximized. Additionally, EPCA does not
require the agency to rely on the ``least capable manufacturer''
analysis as we have traditionally used. Reliance on the ``least
capable'' manufacturer analysis was in response to the direction in the
conference report on the CAFE statute language to consider industry-
wide considerations, but not necessarily base the standards on the
manufacturer with the greatest compliance difficulties.
Moreover, the very structure of Reformed CAFE standards makes it
unnecessary to continue to use the ``least capable manufacturer''
approach in order to be responsive to guidance contained in the EPCA
conference report. Instead of specifying a common level of CAFE, a
Reformed CAFE standard specifies a variable level of CAFE that varies
based on the production mix of each manufacturer. By basing the level
required for an individual manufacturer on that manufacturer's own mix,
a Reformed CAFE standard in effect recognizes and accommodates
differences in production mix between full- and part-line
manufacturers, and between manufacturers that concentrate on small
vehicles and those that concentrate on large ones. A Reformed standard
is also responsive to changes in fleet-mix that result from changes in
the market.
In contrast to comments from the manufacturers, environmental
commenters argued that the marginal cost-benefit analysis is contrary
to EPCA because it results in a standard that is lower than what they
deemed to be ``maximum feasible.'' The Union of Concerned Scientists
stated that the social optimum level is below ``maximum feasible''
because of the uncertainty surrounding many of the assumptions relied
on in the model. The Union of Concerned Scientists stated that the
model undervalues the benefits because not all externalities are
monetized (e.g., reduction in CO2 emissions). The Union of
Concerned Scientists recommends the agency rely on a break-even
approach, i.e., set fuel economy levels at the point at which total
costs equal total benefits. This commenter stated that the break-even
approach would result in targets an average of 6 mpg higher than those
in the proposed rule.
The agency considered an approach under which technology was
applied to the point of total cost equaling total benefit, but
determined that such a standard would violate the maximum feasible
requirement. The Volpe model was unable to achieve a level of total
cost equaling total benefit before running out of technologies to
apply. While the Union of Concerned Scientists stated that it performed
a ``break-even'' analysis, it did not explain the technologies it
relied upon in its analysis. In any event, the ``break even'' approach
necessitates adding technologies that cost more than the benefit they
provide.
ACEEE commented that NHTSA's approach of setting CAFE standards
that maximize net benefits is flawed because it is inconsistent with
the requirements of EPCA. ACEEE stated that under the statute, NHTSA
must set ``maximum feasible'' fuel economy standards after considering
the ``technological feasibility, economic practicability, the effect of
other motor vehicle standards of the Government on fuel economy, and
the need of the United States to conserve energy.'' \69\ According to
ACEEE, there is a range of fuel economy values that are technologically
feasible and another range of values that are economically practicable,
and the statute requires NHTSA to set the CAFE standard at the highest
value within the intersection of those ranges. ACEEE stated that
NHTSA's proposed maximum benefits approach would not yield the same
level of fuel economy, so the agency's current methodology is therefore
impermissible. Accordingly, ACEEE urged NHTSA to adopt an approach
whereby CAFE standards would be set at the maximum technically-feasible
level that has positive net total economic benefits, rather than a
level at which the added benefits from improving fuel economy further
are offset by the costs for doing so.
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\69\ 49 U.S.C. 32902.
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NRDC similarly stated that the agency's methodology ``falls short
of statutory compliance'' and argued that a cost-benefit analysis is
inappropriate because key benefits of the fuel economy standards are
``impossible to reduce to monetized quantities,'' such as ``the
national security benefits of reduced oil dependence and environmental
and societal benefits of reducing the severity of global warming.''
NRDC stated that the agency's rationale for relying on a cost-benefit
methodology was ``arbitrary and insupportable,'' in part because EPCA
provides for NHTSA to engage in ``technology-forcing.'' The Union of
Concerned Scientists argued that to account for undervaluing of
societal benefits, fuel economy targets should be established at the
level where total benefits exceed total costs.
[[Page 17592]]
As suggested by ACEEE, the agency establishes the standard at the
maximum feasible fuel economy level that is economically practicable.
The agency is not permitted to establish higher standards simply
because they might be technologically feasible. When such standards
would impose cost burdens on certain manufacturers that are not
economically practicable, such standards would violate EPCA.
Conversely, our statutory responsibility does not allow us to set lower
standards than those it has established using this process, because the
standards adopted today are demonstrably technologically feasible, and
more lenient standards would not represent the maximum feasible levels
that could be attained while remaining economically practicable.
NRDC commented that the marginal cost-benefit analysis is
inconsistent with a ``technology forcing standard'' \70\ and, further
that it is inappropriate for the purposes of CAFE because the benefits
are ``impossible to reduce to monetized quantities.'' NRDC stated that
the enhancement of national security and the reduction of potential
effects from reduced CO2 emissions may not fully be
quantifiable and monetizable.
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\70\ We assume NRDC is using the phrase ``technology forcing''
to indicate a level of a standard that would require manufacturers
to apply technologies beyond that assumed technologically feasible
under the Volpe model.
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We disagree with NRDC with regard to the degree of technology
forcing permitted under EPCA. The statute permits the imposition of
reasonable, ``technology forcing'' challenges on any individual
manufacturer, but does not contemplate standards that will result in
severe economic hardship by forcing reductions in employment affecting
the overall motor vehicle industry.\71\ A fuel economy standard ``with
harsh economic consequences for the auto industry * * * would represent
an unreasonable balancing of EPCA's policies'' (CAS, 793 F.2d at 1340).
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\71\ In the past, the agency has set CAFE standards above its
estimate of the capabilities of a manufacturer with less than a
substantial, but more than a de minimus, share of the market. See,
e.g., CAS, 793 F.2d at 1326 (noting that the agency set the MY 1982
light truck standard at a level that might be above the capabilities
of Chrysler, based on the conclusion that the energy benefits
associated with the higher standard would outweigh the harm to
Chrysler, and further noting that Chrysler had 10-15 percent market
share while Ford had 35 percent market share). On other occasions,
the agency reduced an established CAFE standard to address
unanticipated market conditions that rendered the standard
unreasonable and likely to lead to severe economic consequences. 49
FR 41250, 50 FR 40528, 53 FR 39275; see Public Citizen, 848 F.2d at
264.
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In response to arguments by the Union of Concerned Scientists and
ACEEE, NHTSA does not agree that the EPCA requires it to set CAFE
standards at the highest technically feasible level that would result
in positive net economic benefits. Although EPCA does not specify a
method for identifying standards that are economically practicable,
Executive Order No. 12866 establishes an overall goal of achieving the
highest net benefits, which occurs at the point where the additional
benefits from further increasing the standards (marginal benefits) just
equal the increase in costs for complying with a stricter standard
(marginal costs).\72\
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\72\ White House Office of Management and Budget, Circular A-4,
September 17, 2003, p. 10.
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NRDC also stated that the agency should use its authority to set
standards to be ``technology forcing.'' While NRDC did not define
``technology forcing'' we took their comment to mean that the agency
should establish standards that require investment in developing new
technologies. However, the agency would not be able to ensure that
standards set at such a level would be technologically feasible, as
these levels would require the use of technologies not yet proven.
The standards that result from the continuous function CAFE system
are technology-forcing in that the standards require manufacturers to
employ technologies beyond those in their product plans, to the extent
practicable within the lead time available. This is evidenced by the
fact that both the Stage and benefit-cost analyses for determining the
level of standards envision extensive application of fuel economy
technologies that are currently in their early stages of deployment,
but are not already included in manufacturers' product plans for the
model years to which the adopted standards apply.
Moreover, our cost-benefit analysis carefully considers and weighs
all of the benefits of improved fuel savings. The main source of
benefits from the standards is the fuel savings experienced by
consumers. With regard to the value of increased energy security, the
agency has estimated a monetized value of this security associated with
improved fuel savings. We have also determined that there is no
compelling evidence that the unmonetized benefits would alter our
assessment of the level of the standard for MY 2011. A discussion of
the benefit assumptions is provided in Chapter VIII of the FRIA.
Further, the marginal cost-benefit analysis ensures that we do not set
standards beyond what is economically optimal for society.
2. Backstop
Consistent with our proposal, the Reformed CAFE system adopted
today does not include a backstop or similar such mechanism. Several
commenters, ACEE, NRDC, the Union of Concerned Scientists, and
Environmental Defense, argued that EPCA requires the agency to
incorporate such measures under the Reformed CAFE system. However, a
backstop or similar mechanism as recommended by commenters would not be
consistent with the objectives of EPCA, and in some instances could
violate the statute.
``Backstop'' refers to a required fuel economy level that would be
applicable to an individual manufacturer (or to the industry) if the
required fuel economy level calculated under the Reformed CAFE system
for a manufacturer (or industry) was below a predetermined minimum. The
concept of a backstop is to prevent or minimize the loss of fuel
savings from one model year to the next. Such a requirement would
essentially be the same as an Unreformed CAFE standard. Stated another
way, the Reformed CAFE standard with a backstop would require
compliance with the greater of the following fleet-wide requirements:
(1) An average fuel economy level calculated under the Reformed CAFE
standard, or (2) an equal-cost fuel economy level calculated under the
Unreformed CAFE standard.
Under the Reformed CAFE system a manufacturer's required fuel
economy is reflective of that manufacturer's product mix. Fuel economy
targets are based on vehicle footprint; vehicles with a larger
footprint are compared to less stringent targets than vehicles with a
smaller footprint. As such, commenters stated that upsizing \73\ of
manufacturers' fleets through increased sales of larger vehicles would
reduce required fuel levels and fuel savings would decrease. It is this
potential for reduced fuel savings that these commenters assert
necessitates a backstop or fuel economy ratcheting mechanism.\74\
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\73\ ``Upsizing'' of a fleet refers to the increase in average
footprint that occurs through either an increase to the footprint
value of individual vehicles, an increase in the production of
vehicles with larger footprint values, or a combination of both.
\74\ As described by commenters, a ``ratcheting mechanism'' is a
regulatory mechanism that would automatically increase the
stringency of the required fuel economy level for a manufacturer or
the industry if fuel savings dropped below a predetermined level.
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As previously explained, EPCA requires the agency to establish fuel
economy standards with consideration given to four statutory criteria,
one of which is the Nation's need to conserve
[[Page 17593]]
energy. However, the agency has in the past reduced established fuel
economy standards because the previous balance of the four criteria no
longer gave sufficient consideration to the criteria of economic
practicability. This course of action was upheld by the U.S. Circuit
Court of Appeals for the District of Columbia, once with respect to
light trucks, and the other time with respect to passenger cars. See,
CAS, 793 F.2d 1322; Public Citizen, 848 F.2d 256. With regard to the
reduction of the light truck standard, the agency determined that
manufacturers had made reasonable efforts to comply with the standard,
but it was a shift in market demand that was hindering compliance.
Consumers were demanding larger vehicles with lower fuel economy
performance than manufacturers or the agency had projected. The Court
in CAS specifically held that EPCA permits the agency to consider
consumer demand and the resulting market shifts in setting fuel economy
standards. See, CAS at 1323. This precedent is contrary to the
commenters' assertion that a backstop or ratcheting mechanism is
statutorily required. The Courts have said that none of the four
criteria are preeminent. Instead the agency must balance the four
criteria in establishing fuel economy standards.
NRDC and the Union of Concerned Scientists stated that historic
rates of vehicle upsizing and the potential for fleet upsizing through
shifts in production towards vehicles with larger footprints
necessitate a backstop or ratcheting mechanism. These commenters stated
that historic increases in light truck foot print and a shift in
production of nameplates offered with longer wheelbases could result in
a 30 percent and one percent reduction in the projected fuel savings,
respectively. As such, commenters suggested that the agency adopt a
backstop or ratcheting mechanism that would apply if the light truck
fleet increased in size beyond some threshold, but did not identify
what such a threshold should be.
The regulatory mechanisms suggested by commenters would essentially
limit the ability of manufacturers to respond to market shifts arising
from changes in consumer demand. If consumer demand shifted towards
larger vehicles, a manufacturer potentially could be faced with a
situation in which it must choose between limiting its production of
the demanded vehicles, and failing to comply with the CAFE light truck
standard. Forcing such a choice would be contrary to the congressional
intent for establishing EPCA.
Congress directed that:
[A]ny regulatory program must be carefully drafted so as to
require of the industry what is attainable without either imposing
impossible burdens on it or unduly limiting consumer choice as to
the capacity and performance of motor vehicles.
H. Rep. 94-340 (p. 87). The Court's determination in CAS reflects this
congressional directive. These comments, on the other hand, seem
unaware of it. Consideration of consumer demand is a permissible one
under EPCA.
A backstop could also have the unintended consequence of resulting
in downsizing by manufacturers, which could have negative safety
implications. A manufacturer facing the potential of failing to comply
with a backstop might shift its production to smaller, lighter
vehicles.
Furthermore, a ratcheting mechanism could result in a manufacturer
required to comply with a fuel economy level that violates EPCA. Under
the Reformed CAFE system, a manufacturer's required fuel economy level
is based on targets that represent the fuel savings capabilities of
vehicles with a given footprint value. Targets are set with
consideration of the technological feasibility of improving the fuel
economy of vehicles given their footprint. As such, the Reformed CAFE
system encourages manufacturers to undertake reasonable efforts to
improve the fuel economy of all its light trucks. If the stringency of
targets were automatically increased due to a predetermined trigger,
the resulting changes to required fuel economy levels would be beyond
what was established after careful consideration of the statutory
criteria, including the technological and economic capabilities of the
industry. This result would violate EPCA.
Commenters also presented additional scenarios (i.e., upsizing at
category boundaries and upweighting to remove vehicles from the light
truck CAFE program) that they argued would likely result in some loss
of fuel savings. These additional scenarios are addressed below. As
discussed further below, concerns raised by these additional scenarios
are addressed through the Reformed CAFE system adopted today.
3. Transition Period
The agency is providing a transition period during MYs 2008-2010,
during which manufacturers may choose to comply with the Unreformed
CAFE standard or the Reformed CAFE standard. This transition period
will minimize the potential for unintended compliance burdens that may
be experienced by a manufacturer as the result of shifting to a new
regulatory structure. The transition period is critical given that this
is the first comprehensive reform of the light truck CAFE program since
its inception.
The transition period is consistent with the recommendation of the
NAS report. The NAS report stated that a restructuring of the CAFE
system should include a phase-in period in order to provide
manufacturers an opportunity to analyze the implications of the new
standards and to redo their product plans (see NAS Report at 108). The
Reformed CAFE standard will require certain manufacturers to improve
their fleets, when in the past these manufacturers did not need to be
concerned with the light truck CAFE program. These manufacturers are
those that produce fleets predominately comprised of small light
trucks, which by virtue of their small size have high fuel economies.
These manufacturers traditionally had high fleet wide fuel economies
that were above the standard. However, the Reformed CAFE system, by
comparing vehicles to footprint specific targets will require more
manufacturers to improve their fleets' fuel economy performance beyond
the baseline of the manufacturers' product plans.
Furthermore, the structure of the Reformed CAFE might require some
manufacturers to revise their compliance strategies. For example and as
explained below, the Reformed CAFE system minimizes the ability of
manufacturers to offset the low fuel economy performance of larger
vehicles by increasing the production of smaller vehicles with higher
fuel economies. Manufacturers that relied on such a compliance strategy
in the past might need to revise their product plans in order to comply
with the Reformed CAFE standard. The transition period is an
opportunity for manufacturers to gain experience with how the Reformed
CAFE system impact their fleets and compliance strategies, while still
providing manufacturers the option to comply under the more familiar
Unreformed CAFE system.
Several commenters questioned whether the agency had authority to
establish a transition period during which manufacturers could choose
to comply with one of two standards. The Union of Concerned Scientists
stated that the transition period would lead to a ``worst of both
worlds'' scenario; each manufacturer would comply with the CAFE system
that provided the lower of the two required fuel economy levels. The
Union of Concerned Scientists estimated that under this scenario, the
[[Page 17594]]
actual light truck fuel economy in the transition years would be as
much as 0.4 mpg lower than it would be under either the Reformed CAFE
system or the Unreformed CAFE system.
First, we are unable to predict how manufacturers will choose to
comply during the transition period. Some manufacturers might choose to
continue to comply under the Unreformed CAFE system, given that it is a
regulatory structure with which they are familiar. Some manufacturers
might plan to comply with the Unreformed CAFE program, but determine
that they comply with the Reformed CAFE, and therefore to gain
experience with the new system switch to the Reformed system. Other
manufacturers may choose to gain early experience with the Reformed
CAFE system and choose to comply with the Reformed CAFE system for all
3 years of the transition. We have concluded that it is prudent to
provide manufacturers this flexibility in order to provide for a more
orderly transition to Reformed CAFE.
Second, this is not the first time that the CAFE program provided
manufacturers a choice of standards under which to comply. In 1979,
manufacturers were given the option of complying with the 4x4 and 4x2
standards separately or combining all their trucks into one fleet and
complying with the 4x2 numerical level. In 1983-1991, manufacturers
were provided the option of complying with standards applicable to
their 4x4 light truck fleet and 4x2 light truck fleet separately, or
complying with a single combined standard applicable to their entire
fleet. In establishing the later option, we stated that it provides
manufacturers additional flexibility in complying (45 FR 81593, 81594
(December 11, 1980)). We also noted that such a compliance mechanism
provides a degree of stability in the standard setting structure of
CAFE (see, id.). Although the substance of the compliance options
adopted in this document differs from those that gave rise to
compliance options in previous model years, the rationale is the same.
Manufacturers commented that the flexibility of a transition period
is necessary for manufacturers to understand the new system and avoid
unintended consequences when revising compliance strategies and product
plans. Toyota noted that the current system has been in place for over
25 years, and therefore, a 3-year transition is appropriate for
manufacturers to better understand how to plan for and implement the
Reformed CAFE system. The Alliance, General Motors, and Mitsubishi
stated that 3 years of lead-time is the minimum necessary to comply
with the required fuel economy levels under the Reformed CAFE
structure. Nissan stated that the stringency of the required fuel
economy levels that results from the Reformed CAFE system will be
extremely challenging, given the significant changes to the CAFE system
that must be incorporated into a manufacturer's product planning
process. Nissan suggested that because the proposed regulatory changes
are so much more extensive than merely setting new CAFE levels, which
Nissan claims the agency has stated requires at least 30-36 months lead
time, an even longer phase-in may be appropriate.
General Motors stated that the availability of the traditional
standards during MY 2008-2010 would provide a safety net against
unintended consequences from the reform process. However, General
Motors stated that the agency need not establish the MY 2011 Reformed
CAFE standards in the current rulemaking. Instead, General Motors
urged, NHTSA should await the experience and data that the transition
period will produce. General Motors expressed concern that if the
Reformed CAFE targets begin to increase significantly because of new
analytical methodologies, time to fully address all of the relevant
issues may not be available due to statutory deadlines. In such an
instance, General Motors commented that a standard grounded in the
``least capable manufacturer'' might be preferable.
Manufacturers develop product plans for their fleets at least 5
years in advance, plans which incorporate consideration of CAFE
compliance. As such, manufacturers have already begun investing in
their fleets for some of the model years that are subject to today's
final rule. Some manufacturers may determine that it will be necessary
to adjust their product plans based on the new CAFE structure. Given
the uncertainty associated with how a manufacturer will perform under
Reformed CAFE, we are providing a transition period.
In addition to providing manufacturers the option of complying
under either CAFE system during the transition period, we adjusted the
Reformed CAFE standard such that the industry wide compliance costs are
approximately equal between the two systems. Cost equalization has an
important advantage. Since the Unreformed CAFE standards were judged to
be economically practicable and since the Reformed CAFE standards
spread the cost burden across the industry to a greater extent,
equalizing the costs between the two systems provides the agency with
confidence that the Reformed CAFE standards are also economically
practicable.\75\ Further, this approach promotes an orderly and
effective transition to the Reformed CAFE system since experience with
the new system will be gained prior to full implementation in MY 2011.
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\75\ We equalized aggregate industry costs between Reformed and
Unreformed CAFE. The costs are not borne by manufacturers in the
same way and costs for individual manufacturers may differ between
the two systems.
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Several commenters questioned whether the agency had the authority
to equalize compliance costs during the transition period. The Union of
Concerned Scientists and ACEEE stated that equalizing costs during the
transition years and not setting them at a level at which marginal
costs equaled marginal benefits, resulted in Reformed CAFE standards
are not set at the ``maximum feasible'' level. Therefore, these
commenters concluded that the Reformed CAFE standards during the
transition period would not comply with EPCA.\76\
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\76\ Additionally, the ACEEE recommended that the transition
period be structured so that all manufacturers pay compliance costs
equal to the least capable manufacturer, but did not provide details
as to how the standards would be set, or whether such standards
would be technologically feasible.
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With regard to the agency's authority for establishing standards
under EPCA, the agency is not limited to the considerations provided
for in the statute when determining what fuel economy levels will be
maximum feasible. For example, the agency also considers the effect
that the CAFE standards will have on safety.\77\ Just as safety is an
appropriate consideration in determining maximum feasible fuel economy
levels, so is the need for an orderly transition to a CAFE system that
provides greater fuel savings than the current system.
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\77\ The United States 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).
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Because we equalized aggregate industry costs between Reformed and
Unreformed CAFE, the costs are not borne by manufacturers in the same
way and costs for individual manufacturers may differ between the two
systems. Therefore, some manufacturers may have a cost incentive to
comply under the Reformed CAFE system beginning in MY 2008. This will
provide both the industry and the agency with
[[Page 17595]]
experience in compliance with and the administration of the new system.
Further, some manufacturers may chose to comply under the Reformed CAFE
in order to gain a familiarity with the new system. As such, the cost
equalization will promote an orderly and effective transition to the
Reformed system.
The equalization of costs provides the industry greater flexibility
in adjusting to the Reformed CAFE system. The three-year transition
period as adopted encourages experimentation by manufacturers, which we
conclude will effect a quicker transition than would result by either
implementing an abrupt change after providing appropriate lead time or
maintaining the status quo. The Reformed CAFE program provides for
greater fuel savings. By effecting a quicker transition period, greater
fuel savings will be realized over time, thereby furthering EPCA's goal
of improving fuel savings.
D. Structure of Reformed CAFE
1. Footprint Based Function
The proposed Reformed CAFE system was premised on using vehicle
footprint to establish fuel economy targets for light trucks of
different sizes. We noted that vehicle weight and shadow \78\ were
discussed in the ANPRM, but along with commenters to the ANPRM, we had
concerns that weight and shadow could more easily be tailored for the
sole purpose of subjecting a vehicle to a less stringent target (70 FR
51440). As a result, both of those attributes, if used as the
foundation of our program, could fail to achieve our goal of enhancing
fuel economy with a Reformed CAFE program, and use of weight could fail
to achieve our goal of improving the safety of the program.
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\78\ ``Shadow'' is the area defined as the vehicle's length
multiplied by the vehicle's width.
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Vehicle footprint is more integral to a vehicle's design than
either vehicle weight or shadow and cannot easily be altered between
model years in order to move a vehicle into a different category with a
lower fuel economy target. Footprint is dictated by the vehicle
platform, which is typically used for a multi-year model lifecycle.
Short-term changes to a vehicle's platform would be expensive and
difficult to accomplish without disrupting multi-year product planning.
In some cases, several models share a common platform, thus adding to
the cost, difficulty, and, therefore, unlikelihood of short-term
changes.
Vehicle footprint is the area defined by vehicle wheelbase
multiplied by vehicle track width. The proposal defined wheelbase as
the longitudinal distance between front- and rear-wheel centerlines.
The proposed track width definition was based on the Society of
Automotive Engineers (SAE) definition in W101 of SAE J1100, Surface
Vehicle Recommended Practice, revised July 2002, which reads as
follows:
The lateral distance between the centerlines of the base tires at
ground, including the camber angle.\79\ However, the agency was
concerned that a vehicle's track width could be increased by off-
setting its wheels,\80\ at minimal expense, and thus subjecting the
vehicle to a less stringent target. Therefore, the agency modified the
W101 definition for the proposal to read as follows:
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\79\ Camber angle is the angle between the vertical axis of the
wheel of an automobile and the vertical axis of the vehicle when
viewed from the front or rear. It is used in the design of steering
and suspension.
\80\ Wheel offset is the distance from where a wheel is mounted
to an axis to the centerline of the wheel. The offset can be one of
three types.
Zero Offset--The hub mounting surface is even with the
centerline of the wheel.
Positive--The hub mounting surface is toward the front or wheel
side of the wheel. Positive offset wheels are generally found on
front wheel drive cars and newer rear drive cars.
Negative--The hub mounting surface is toward the back or brake
side of the wheels centerline. ``Deep dish'' wheels are typically a
negative offset.
[T]rack width is the lateral distance between the centerlines of
the tires at ground when the tires are mounted on rims with zero
---------------------------------------------------------------------------
offset.
Commenters generally supported the use of footprint as a metric to
categorize light trucks. However, manufacturers raised a variety of
concerns with the proposed definition of track width. The Alliance
disagreed with the agency's concern regarding the potential for changes
made to wheel offset. The Alliance stated that manufacturers determine
wheel offsets based on suspension geometry, ride, and handling
characteristics, weight and vehicle drivability. As such, the Alliance
asserted that it would be unlikely for a manufacturer would alter a
vehicle's wheel offset in response to the light truck CAFE program.
The Alliance, Ford, General Motors, and BMW suggested that the
agency should define track width in accordance with W113 in SAE J1100,
which defines track width as:
[T]he lateral distance between the wheel mounting faces,\81\
measured along the spindle axis.\82\
\81\ A spindle axis is the rotating arm, or axis, unto which the
wheels are attached.
\82\ W113 was added to SAE J1100 in September of 2005, after the
agency published the NPRM. (A spindle axis is the rotating arm, or
axis, unto which the wheels are attached.)
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Conversely, Honda opposed use of W113, stating that W113 and wheel
offset are related to packaging issues inside the wheel area, but not
relevant to issues such as wear and dynamic performance. Honda stated
that the W113 measurement could be increased without any change to
vehicle size or dynamic performance by using wheels with a larger
positive offset.
Nissan recommended using SAE J1100 W101, which is based on the
centerline of a vehicle's tires at the ground. Nissan stated that it
relies on the W101 measurement for handling performance design
considerations as well as safety performance design. Nissan stated that
there is little incentive to manipulate the W101 measurement because
even minor adjustments affect handling. Honda added that use of the
tire centerline has more relevance to rollover risk.
The definition of footprint adopted in today's final rule
incorporates the definition of track width as defined in W101. The
agency has reviewed the three different definitions of track width and
has determined that there is the potential to affect the measurements
under each definition. The definition proposed by the agency can be
affected through changes to a wheel's camber angle and the thickness of
the wheel mounting face (e.g., through the addition of washers). The
measurement under W113 could be affected by the thickness of the wheel
mounting face. The measurement under W101 can be affected by changes to
wheel offset (positive or negative offset), camber angle, and the
thickness of the wheel mounting face.
However, W101 is most directly linked to safety in terms of
rollover risk, as stated by Honda. The W101 measurement is taken where
a vehicle's tires touch the ground and is used by NHTSA in calculating
a vehicle's Static Stability Factor. If a manufacturer were to increase
a vehicle's footprint through increasing its track width, there likely
would be a positive safety effect.
We also believe that use of the vehicle footprint attribute helps
us achieve greater fuel economy without having a potential negative
impact on safety. While past analytic work \83\ focused on the
relationship between vehicle weight and safety, weight was understood
to encompass a constellation of size-related factors, not just weight.
More recent studies \84\ have begun to consider
[[Page 17596]]
whether the relationship between vehicle size and safety differs. To
the extent that mass reduction has historically been associated with
reductions in many other size attributes and given the construct of the
current fleet, we believe that the relationship between size or weight
(on the one hand) and safety (on the other) has been similar, except
for rollover risks.
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\83\ See, Kahane (2003) and Van Auken, R.M. and J.W. Zellner, An
Assessment of the Effects of Vehicle Weight on Fatality Risk in
Model Year 1985-98 Passenger Cars and 1985-97 Light Trucks, Dynamic
Research, Inc. February 2002. Docket No. NHTSA 2003-16318-2.
\84\ See, Van Auken, R.M. and J.W. Zellner, Supplemental Results
on the Independent Effects of Curb Weight, Wheelbase, and Track on
Fatality Risk in 1985-1997 Model Year LTVs, Dynamic Research, Inc.
May 2005. Docket No. NHTSA 2003-16318-17.
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Developing CAFE standards based on vehicle footprint encourages
compliance strategies that decrease rollover risk. Manufacturers are
encouraged to maintain track width because reducing it would subject
the vehicle to a more stringent fuel economy target. Maintaining track
width potentially would allow some degree of weight reduction without a
decrease in overall safety. Moreover, by setting fuel economy targets
for light trucks with the smallest footprints that approach (or exceed)
27.5 mpg, the agency is providing little incentive, or even a
disincentive, to design vehicles to be classified as light trucks in
order to comply or offset the fuel economy of larger light trucks.
The influence of Reformed CAFE on track width is reinforced by our
New Car Assessment Program (NCAP) rollover ratings. As stated above,
track width as defined by SAE J100 W101 is one of the elements of our
Static Stability Factor, which constitutes a significant part of our
NCAP rollover ratings and which correlates closely with real world
rollover risk. The rollover NCAP program (as well as real world
rollover risk) reinforces Reformed CAFE by a separate disincentive to
decrease track width.
Overall, use of vehicle footprint is ``weight-neutral'' and thus
does not exacerbate the vehicle compatibility problem. A footprint-
based system does not encourage manufacturers to add weight to move
vehicles to a higher footprint category. Nor would the system penalize
manufacturers for making limited weight reductions. By using vehicle
footprint in lieu of a weight-based metric, we are facilitating the use
of promising lightweight materials that, although perhaps not cost-
effective in mass production today, may ultimately achieve wider use in
the fleet, become less expensive, and enhance both vehicle safety and
fuel economy.\85\ In Reformed CAFE, lightweight materials can be
incorporated into vehicle design without moving a vehicle into a
footprint category with a more stringent average fuel economy target.
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\85\ The Aluminum Association commented that using aluminum to
decrease a vehicle's weight by 10 percent could improve its fuel
economy by 5-8 percent. The commenter noted that the Honda Insight,
an all aluminum vehicle, is 40 percent lighter than a comparable
steel vehicle. It also provided data to demonstrate that all
aluminum vehicles have comparable performance in frontal barrier
crash tests as comparable steel vehicles. See comments provided by
the Aluminum Association, Inc. (Docket No. 2003-16128-1120, pp. 5
and 12).
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2. Continuous Function
In the NPRM, we proposed a Reformed CAFE structure utilizing a step
function that established fuel economy targets for vehicles within
specified ranges of footprint values. We also discussed and sought
comments on an alternative structure that would use a continuous
function to establish a different fuel economy target for each discrete
footprint value. In today's final rule, we are adopting a Reformed CAFE
structure that employs such a continuous function.
The process for establishing a continuous function is similar to
that for establishing a step function, which was described in detail in
the NPRM. Moreover, a CAFE system based on a continuous function will
provide fuel-saving benefits equivalent to those of the proposed step
function. By varying a vehicle's fuel economy target continuously but
gradually as its footprint changes, a continuous function will reduce
the incentive created by a step function to upsize a vehicle whose
footprint is near a category boundary. By comparison, the proposed step
function would have relaxed fuel economy targets significantly for any
vehicle that could be upsized so that it moves from one category up to
the next. At the same time, the continuous function will also minimize
the incentive to downsize a vehicle to improve its fuel economy since,
unlike under the proposed category system, any reduction of footprint
will raise a vehicle's fuel economy target. A continuous function also
provides manufacturers with greater regulatory certainty because there
are no category boundaries that could be redefined in future
rulemaking. These points are discussed in greater detail below.
a. Overview of Establishing the Continuous Function Standard
The continuous function standard is developed using a three-phrase
process substantially similar to that used to develop the step function
standard described in the NPRM. In ``phase one,'' the agency adds fuel
saving technologies to each manufacturer's fleet until the incremental
cost of improving its fuel economy further just equals the incremental
value of fuel savings and other benefits from doing so. This is done
for each of the seven largest manufacturers. Data points representing
each vehicle's size and ``optimized'' fuel economy from the light truck
fleets of those manufacturers are then plotted on a graph.
In ``phase two,'' a preliminary continuous function is
statistically fitted through these data points, subject to constraints
at the upper and lower ends of the footprint range. This contrasts with
the proposed step function standard, in which the vehicle models of the
improved fleets were placed in the pre-defined footprint categories and
the harmonic average fuel economy of the models assigned to each
category was used to determine the preliminary target for that
category. With a continuous function, the agency sets different fuel
economy targets for each increment or value of vehicle footprint,
rather than setting targets, that would each apply to a range of
footprint values.
However, establishing fuel economy targets that vary gradually by
vehicle footprint does not differ fundamentally from the proposal to
set different targets for specific footprint ranges. If the number of
footprint categories in a step function were steadily increased, the
relationship of fuel economy targets to vehicle footprint would
increasingly resemble that under a continuous function. In fact, as the
number of footprint categories in a step function increased, the fuel
economy targets it established would apply to progressively smaller
footprint ranges, until each category consisted of a single value of
footprint just as under the continuous function.
Once a preliminary continuous function has been statistically
fitted to the data for a model year, the level of the function is then
adjusted just as the step function is adjusted in ``phase three'' of
the proposed rule. That is, the preliminary continuous function is then
raised or lowered until industry-wide net benefits are maximized.
Maximization occurs when the incremental change in industry-wide
compliance costs from adjusting it further would be exactly offset by
the resulting incremental change in benefits.
Under a continuous function, the level of CAFE required for each
manufacturer (and its compliance with that level) is determined in
exactly the same fashion as under the proposed step function. Each
manufacturer's required CAFE level is the sales-weighted harmonic
average of the fuel economy
[[Page 17597]]
targets corresponding to the footprint of each of its light truck
models. Its compliance with that CAFE level is assessed by comparing
the sales-weighted harmonic average of each of its model's actual fuel
economy to this required level. The key difference is that under the
continuous function, any change in a vehicle's footprint subjects it to
a slightly different fuel economy target, thus changing a
manufacturer's required CAFE level slightly. Conversely, under the step
function, changing a vehicle's footprint would subject it to a new
target--and thus change a manufacturer's required CAFE level--only if
that change moved it to a smaller or larger footprint category.
B. Industry-Wide Considerations in Defining the Stringency of the
Standard
In setting standards under the proposed Reformed CAFE system, we
focused on the seven largest manufacturers of light trucks in selecting
the targets. This differs from the traditional focus on the
manufacturer with the lowest projected level of CAFE that also has a
significant share of the market (i.e., the ``least capable''
manufacturer). We have traditionally set the Unreformed CAFE standards
with particular regard to the ``least capable'' manufacturer with a
significant market share in response to language in the conference
report on the CAFE statute directing the agency to consider industry-
wide factors, but not necessarily to base the standards on the
manufacturer with the greatest compliance difficulties. As the NPRM
indicated, this ``least capable'' manufacturer approach was simply a
way of implementing the guidance in the conference report in the
specific context of Unreformed CAFE. While this approach has ensured
that the standards are technologically feasible and economically
practicable for all manufacturers with significant market shares, it
limits the amount of fuel saving possible under Unreformed CAFE.
As previously explained, by basing a manufacturer's required fuel
economy level on that manufacturer's individual product mix, the
Reformed CAFE system provides for a more individualized assessment of
the capabilities of each of the manufacturers. Thus, Reformed CAFE
permits the agency to carefully assess the capabilities of the ``least
capable manufacturer,'' as well as the capabilities of the other
manufacturers that comprise nearly all of the light truck market.
Instead of requiring a uniform level of CAFE--which is inherently more
challenging for manufacturers whose fleets have relatively high
percentages of larger vehicles to meet than for those whose product
lines emphasize smaller models--the Reformed system specifies fuel
economy targets that vary according to vehicle footprint. These targets
are higher for smaller light trucks and lower for large ones. By
setting each manufacturer's required fleet-wide CAFE level to reflect
its size mix, the Reformed system requires each manufacturer to ensure
the fuel efficiency of its individual models, regardless of their size
distribution.
Porsche expressed disagreement with NHTSA's decision to consider
only the performance and capabilities of the seven largest
manufacturers, while not considering the other four manufacturers of
light trucks (Volkswagen, BMW, Porsche, and Subaru). Porsche stated
that the Reformed CAFE standards do not truly represent industry-wide
considerations if they do not consider this remaining several percent
of the light truck market, particularly where many of these
manufacturers serve niche markets not served by the seven largest
manufacturers.
With regard to Porsche's suggestion that the agency consider all
manufacturers in setting the targets, we previously have addressed the
degree to which we consider manufacturers with small shares of the
light truck market. In our 1996 rulemaking setting light truck CAFE
standard for MY 1998, NHTSA faced a substantially similar argument from
Mercedes-Benz asserting that there is a need to set the CAFE standards
at a level achievable by all light truck manufacturers (i.e., even
those manufacturers with a very small market share). In rejecting that
suggestion, we cited the language from the Conference Report
accompanying EPCA that directs us to consider industry-wide
considerations and to not base the standards on the manufacturer with
the greatest difficulties. Even under Reformed CAFE, this aspect of
CAFE standard-setting has not changed since that time.
The target setting process in this rulemaking focuses on roughly 97
percent of the light truck market, a figure that reflects industry-wide
considerations. Inclusion of all manufacturers, even those with a very
small market share, has the potential to skew the resulting CAFE
targets so as to decrease the overall stringency of the standards. Such
an approach would depress the CAFE levels below the maximum feasible
capability of the rest of the industry and reduce overall fuel savings.
We recognize that under the Reformed CAFE system, the degree to which
the standard would be depressed by including the remaining very small
manufacturers likely would not be more than 0.1 mpg on any given
target. However, this reduction would result in a reduction in fuel
savings. Balancing the need of the Nation to conserve energy, we have
concluded to rely on the largest seven manufacturers as discussed.
c. Improving the Light Truck Fleet
The first phase in determining the footprint targets was to
determine separately for each of the seven largest manufacturers the
overall level of CAFE that would maximize the net benefits for that
manufacturer's vehicles.
To find the socially optimal point for each of these seven
manufacturers (i.e., the point at which the incremental or marginal
change in costs equals the incremental or marginal change in benefits
for that manufacturer), we used the Volpe model to compute the total
costs and total benefits of exceeding the baseline \86\ CAFE by
progressively larger increments. We began by exceeding the baseline by
0.1 mpg. We then used the model to calculate the total costs and total
benefits of exceeding the baseline by 0.2 mpg. The marginal costs and
benefits were then computed as the difference between the total costs
and total benefits resulting from exceeding the baseline by 0.1 mpg and
the total costs and benefits resulting from exceeding the baseline by
0.2 mpg. We then used the Volpe model to calculate the total costs and
total benefits of exceeding the baseline by 0.3 mpg and computed the
difference between the total costs and benefits between 0.2 mpg and 0.3
mpg to determine the marginal costs and benefits.
---------------------------------------------------------------------------
\86\ An important distinction needs to be made between the
baseline and the manufacturer's product plan mpg. As discussed
earlier, ``baseline'' is defined as the fuel economy that would
exist absent of the rulemaking (i.e., the model year 2007 standard
of 22.2 mpg). The 22.2 mpg baseline differs from the mpg level
reported in a manufacturer's product plan. Some manufacturers report
fuel economy levels that are below 22.2 mpg. In that case, the cost
and benefits of going from the product plan mpg to the baseline
(22.2) mpg are not counted as costs and benefits of the rulemaking,
as they were already counted in the MY 2005-2007 final rule. Only
costs and benefits associated with going from baseline mpg to a
higher standard are counted. It is important to note that since
technology is applied on a cost effective basis, the most cost
effective technologies will be used to get a manufacturer from the
product plan mpg to the baseline mpg.
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We continued making similar iterations until marginal costs equaled
marginal benefits for that manufacturer. Performing this iterative
process individually for each manufacturer pushed each of the seven
largest
[[Page 17598]]
manufacturers to a point at which net benefits are maximized for each
manufacturer's vehicles.
As a general concept, Toyota expressed support for the agency's use
of cost-benefit analysis in establishing proposed CAFE standards,
although it asserted that NHTSA may have underestimated costs and
overestimated potential benefits in developing its proposal. Toyota
also suggested that the agency had relied too heavily on its approach
of using cost-benefit analysis to determine a maximum feasible
standard, and in doing so had not considered other relevant factors.
Thus, Toyota recommended that NHTSA carefully review the assumptions in
its model in order to ensure that the economically efficient fuel
economy targets it identifies nevertheless fall within the practical
constraints and limitations of technology deployment. Finally, Toyota
also urged caution in assessing any potential changes to the CAFE
targets resulting from increased fuel prices.
As discussed previously, DaimlerChrysler argued that in order to
ensure the economic practicability of CAFE standards, NHTSA's procedure
of establishing standards that maximize net benefits must always be
tempered by considering the industry's ability to afford the required
technologies. DaimlerChrysler also argued that the agency's methodology
for determining ``maximum feasible'' fuel economy levels overestimates
the potential of technology to improve fuel economy, while
underestimating its costs. The commenter suggested that setting
standards based upon ``maximum feasible'' and ``maximum net benefits''
approaches will not necessarily yield identical results in all cases.
As discussed above, the marginal cost-benefit analysis is part of
the agency's consideration of economic practicability. Our analysis
also considered the financial condition of the industry in determining
technology applications. The marginal cost-benefit analysis, taken in
conjunction with these technology considerations, provided fuel economy
requirements that were then subject to a sales and job impact analysis.
The totality of this process, in conjunction with consideration of the
nation's need to conserve energy, the impacts of other Federal
standards, and societal impacts such as safety, provides us with a
determination of ``maximum feasible.''
The Alliance cautioned that while it is probably permissible for
NHTSA to use cost-benefit analysis in setting CAFE standards, the
agency should not rely solely on this tool in determining their
economic practicability. However, the Alliance provided no ``tool'' to
determine economic practicability or an individual manufacturer's
capability. The Alliance argued that the proposed CAFE standards pose
significant technical challenges and may be beyond manufacturers'
capabilities, and thus that NHTSA should not finalize standards any
higher than those proposed in the NPRM, because higher targets would be
unlikely to comply with the statutory criteria of technological
feasibility and economic practicability.\87\ The Alliance also noted
that the fuel economy improvements required by the proposed standard
would come at a time when vehicles are already significantly more fuel-
efficient than in recent years, thereby making such fuel economy
improvement much more difficult and costly to achieve. Finally, the
Alliance also commented that use of cost-benefit analysis makes the
agency's estimates of the costs, benefits, and applicability of certain
technologies more important than in setting previous rules, and these
assumptions should therefore be fully explained and documented.
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\87\ According to the Alliance, once finalized, the CAFE rule
would mark seven consecutive years of light truck fuel economy
increases. The Alliance argued that combined with previous increases
for MY 2005-2007, the current proposal would match the highest
seven-year rate of increase (2.2 percent per year, the average from
1982-1989) in the history of the light truck CAFE program, and it
would be more than 1.5 times the historical trend of fuel efficiency
improvements.
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Similarly, NADA commented that the success of NHTSA's CAFE reform
hinges upon the application of appropriate information and assumptions.
For example, NADA stated that because the cost-benefit analysis is so
critical to the establishment of CAFE targets under the agency's
proposal, there must be an accurate assessment of real costs and real
benefits. NADA argued that applying cost-benefit analysis to determine
the level of CAFE standards should be only one step in a rigorous
examination of their economic practicability.
Honda requested confirmation that once CAFE standards are set using
NHTSA's proposed benefit-cost approach, they will not be revised simply
because updated information affecting the benefit or cost estimates
becomes available (e.g., new fuel prices estimates), unless
overwhelming need can be demonstrated. According to Honda, such changes
would be extremely disruptive to manufacturers' product planning. Thus,
Honda argued that updated data should be considered only for setting
CAFE requirements that would apply to model years beyond those covered
by the current rule.
Environmental Defense raised specific objections to some of the
assumptions relied upon in the agency's analysis, but stated that the
Reformed CAFE standard-setting methodology itself is reasonable.
Environmental Defense stated that the Reformed CAFE approach provides
greater transparency than the Stage analysis relied upon in the
Unreformed CAFE system.
In response to the manufacturers' reservations about equating
``maximum feasible'' fuel economy standards with those that produce
maximum net benefits, the agency is aware of its continuing statutory
responsibility to establish maximum feasible fuel economy standards at
levels that simultaneously reflect consideration of technological
feasibility, economic practicability, the effects of other Federal
vehicle standards, and the need of the nation to conserve energy. The
approach for determining the continuous function sets the fuel economy
targets 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 such
technology.
These targets translate into required levels of average fuel
economy that are technologically feasible because manufacturers can
achieve them using available technologies. Those levels also reflect
the need of the nation to conserve energy 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 note that our assumptions for each
technology, its cost, and its effectiveness are in the FRIA (see FRIA
Table VI-4). (However, the application to each manufacturer is
confidential and therefore not included in the docketed FRIA.)
In answer to comments from various commenters that NHTSA's process
for establishing fuel economy targets overstates the fuel economy
improvements likely to result from specific technologies and
underestimates manufacturers' costs for adopting those fuel economy
technologies, the agency again notes that we have relied on the
technology cost and effectiveness estimates from the NAS report. The
estimates of fuel economy technology effectiveness and costs developed
by NAS represent the most reliable estimates that are available. The
alternative estimates of technology costs and effectiveness recommended
by some commenters
[[Page 17599]]
have not been subjected to the same level of expert review and public
scrutiny as those developed by NAS, and are thus not suitable for use
by NHTSA in establishing fuel economy standards.
In response to Honda's request for clarification regarding our
position on updating the standards when new data become available, new
data will be relied upon for consideration of standards beyond MY 2011.
If the agency were to consider increasing the established standards for
MY 2008-2011, we would need to be mindful of lead time constraints and
the need for regulatory certainty (i.e., the need for manufacturers to
be able to rely on today's final rule to adjust their product plans).
d. Defining the Function and the Preliminary Shape of the Curve
In the second phase, we plotted the results of phase one (i.e., the
light truck fleets of the seven largest manufacturers, each separately
``socially optimized''). Then, we calculated a statistical relationship
through the plotted data points (using production-weighted nonlinear
least squares regression). This relationship defines a preliminary
continuous function (a ``curve'') that, upon being adjusted, determines
the fuel economy targets for light trucks based on vehicle footprint.
Although adjusted, the shape of the curve remains unchanged throughout
the equal-increment adjustments in phase three below, because the
absolute differences (on a gallon-per-mile basis) between the targets
are unaffected by those adjustments.
In its report, NAS illustrated a function that set fuel economy
targets for vehicle based on weight. See Figure 2 below. Under the NAS
function, fuel consumption increased in a linear manner as vehicle
weight increased up to 4,000 lbs. At 4,000 lbs, the function leveled-
off. The leveling of the function at 4,000 lbs represented a ``safety
threshold,'' i.e., the NAS report determined that there was a safety
benefit in minimizing the incentive to up-weight vehicles beyond 4,000
lbs. Under the NAS function, increasing a vehicles weight beyond 4,000
lbs did not subject a vehicle to a less stringent fuel consumption
value.
[GRAPHIC] [TIFF OMITTED] TR06AP06.002
The agency considered relying on a function as illustrated by NAS,
but determined that the NAS function presented several problems. First,
the flattening of the function would be expected to produce a milder
form of the ``edge effects'' that are of concern under the step
function. At the ``safety threshold'' there would be an abrupt change
in the rate at which size increases are rewarded. This abrupt change
could distort the production of vehicles located near the threshold and
encourage manufacturers to potentially downsize some vehicles to the
threshold point. Second, it is not clear whether and, if so, where, in
terms of footprint, a true ``safety threshold'' occurs. Without a
``safety threshold'' the NAS function would be a simple linear
function, which as discussed below introduces several potential
problems. Finally, there is a possibility that a function based on the
NAS illustration could extrapolate to unreasonably high levels for
small vehicles.
As discussed below, the agency has decided to use a constrained
logistic function to set the targets. We have determined that a
constrained logistic function provides a good fit to the optimized
light truck fleet data, while not resulting in potentially
impracticable high targets for very small vehicles, or unreasonably low
targets for very large vehicles.
[[Page 17600]]
The agency evaluated a variety of mathematical forms to estimate
the relationship between vehicle footprint and fuel economy. The agency
considered a simple linear function, a quadratic function, an
exponential function, and an unconstrained logistic function. Each of
these relationships was estimated in gallons per mile (gpm) rather than
miles per gallon (mpg). As explained in the NPRM, the relationship
between fuel economy measured in mpg and fuel savings is not linear. An
increase in one mpg in a vehicle with low fuel economy (e.g., 20 mpg to
21 mpg) results in higher fuel savings than if the change occurs in a
vehicle with high fuel economy (e.g., 30 mpg to 31 mpg). Increasing
fuel economy by equal increments of gallons per mile provides equal
fuel savings regardless of the fuel economy of a vehicle. Increasing
the fuel economy of a vehicle from 0.06 gpm to 0.05 gpm saves exactly
the same amount of fuel as increasing the fuel economy of a vehicle
from 0.03 gpm to 0.02 gpm.\88\
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\88\ Lower fuel consumption represents a more stringent value
(i.e., a low gpm value equates to a high mpg value)
---------------------------------------------------------------------------
Given that the agency is concerned with fuel savings, gpm is a more
appropriate metric for evaluating the functions. Therefore, we plotted
the ``socially optimized'' fleets in terms of footprint versus gpm.
Once a shape of a function was determined in terms of ``gallons per
mile,'' the agency then converted the function to mpg for the purpose
of evaluating the potential target values. Figures 3A through 6B below
illustrate each of the functions as sales weighted estimates of the
relationship between fuel economy of the ``socially optimized'' fleets
and foot print, which were considered by the agency.
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[[Page 17601]]
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[[Page 17602]]
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[[Page 17603]]
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[[Page 17604]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.010
BILLING CODE 4910-59-C
After evaluating the functions above, we determined that none of
the functions as presented would be appropriate for the CAFE program.
Each of the four forms fit the data relatively well within the
footprint range observed in the manufacturers' product plans (from
about 40 square feet to about 85 square feet). However, at slightly
beyond the endpoints of the observed range, the functional forms tended
towards excessively high stringency levels at the smaller end of the
footprint range, excessively low stringency levels at the higher end of
the footprint end, or both. Excessively high stringency levels at the
smaller end of the footprint range potentially could result in target
values beyond the technological capabilities of manufacturers.
Excessively low stringency levels at the higher end of the footprint
range standards would reduce fuel savings below that of the socially
optimized fleet.
As Figure 3A shows, a simple linear functional form provides a
reasonably good fit for small vehicles, but results in very low
stringency for vehicles above 80 square feet would correspond to fuel
consumption values for very large vehicles greater than the fuel
consumption for those vehicles under the optimized fleet. Reliance on a
linear function would result in targets for large light trucks that are
well below the optimized fuel economy, in terms of mpg, for those
vehicles. These low target values would reduce fuel savings and provide
a fuel economy incentive for upsizing. Additionally, depending on the
distribution of the fleet, a simple linear relationship could also
produce targets for very small vehicles well above the corresponding
data points.
Polynomial relationships between footprint and fuel economy, such
as a quadratic function, result in fuel consumption values that deviate
substantially from the data points at either end of the footprint
range. Further, because of their inherent curvature, polynomial
functions often result in less stringent mpg targets for the smallest
models than for slightly larger vehicles, or mpg targets for the
largest models that are more stringent than those for slightly smaller
models. As illustrated in Figure 4B, the convex curvature of the
function results in increases in stringency for vehicles with a
footprint larger than about 70 square feet. This increase is contrary
to the data points of the socially optimized fleet.
Under an exponential relationship, the fuel economy targets tend
towards very high levels of stringency as footprint declines below 40
square feet (see Figure 5B). Under the exponential function for
footprint values smaller than the smallest vehicle in the planned fleet
are more a characteristic of the function, as opposed to representing
the technological capabilities of such vehicles. A similar increase in
targets occurs under a logistic function, although not to the extent as
with an exponential function (see Figure 6B).
Under either an unconstrained exponential or an unconstrained
logistic function, if a manufacturer were to introduce a vehicle with a
footprint smaller than that considered in the optimized fleet, that
vehicle would be compared to a fuel economy target potentially beyond
the level that would be achieved had the agency ``optimized'' that
vehicle. Such a target likely would be difficult to achieve using
available technology. If a market demand were to develop for light
trucks smaller than the smallest light truck currently planned by
manufacturers, targets based on an exponential relationship or a
logistic relationship could be technologically infeasible and limit
consumer choice.
To address this issue the agency determined that it is necessary to
constrain the chosen function at the end points of the footprint range.
However, imposing a constraint on an exponential function prevents the
curve from closely fitting the actual relationship between vehicle
footprint and fuel economy across much of the size spectrum. In
addition, exponential functions constrained to reach a maximum mpg
value tended to have inconsistent shapes when fitted to light truck
data for
[[Page 17605]]
different model years.\89\ Therefore, the agency decided to use a
constrained logistic function to fit the target curve to the data
points. The constrained logistic function is illustrated below in
gallons per mile and inverted in miles per gallon:
---------------------------------------------------------------------------
\89\ That is, the targets they established for models for some
footprint values declined rather than increased between successive
model years.
[GRAPHIC] [TIFF OMITTED] TR06AP06.011
[[Page 17606]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.012
The constrained logistic function provides a relatively good fit to
the data points without creating excessively high targets for small
vehicles, excessively low targets for large vehicles, or regions in
which targets for large vehicles exceed those for small vehicles. The
constrained logistic function also produces a curve that provides an
acceptable fit to the light truck data across all four model years.
Further, by constraining the function at the ends of the footprint
range, we limit the potential for the curve to be disproportionately
influenced by a single vehicle model located at either end of the
range. The vehicle population decreases as the curve moves away from
the middle of the footprint range. The low vehicle population levels
provide for a single vehicle model located at either end of the range
to have a greater influence on its target, than a vehicle with
comparable production numbers located in the middle of the range. This
greater influence translates to greater influence on the shape of the
curve. As demonstrated in the unconstrained logistic function, at a
footprint value of 40 square feet a single model produced in larger
numbers than other vehicles at or near this footprint value causes
associated fuel consumption values to sharply decrease. This translates
to rapidly increasing targets as footprint decreases below 40 square
feet. Constraining the function also minimizes the potential for a
disproportionate influence from a single vehicle model on the curve,
the agency has constrained the target values at the ends of the range.
Constraining the upper and lower bounds in this manner has the
additional benefit of generating a curve that closely tracks the shape
of the proposed step-function. We have constrained this function so
that the smallest/largest vehicles face similar stringency that was
found in the smallest/largest categories in the step function.
The constrained logistic function selected by the agency is defined
by four parameters. Two parameters establish the function's upper and
lower bounds (i.e., asymptotes), respectively. A third parameter
specifies the footprint at which the function is halfway between the
upper and lower bounds. The last parameter establishes the rate or
``steepness'' of the function's transition between the upper (at low
footprint) and lower (at high footprint) boundaries.
The agency determined the values of the parameters establishing the
function's upper and lower bounds by calculating the sales-weighted
harmonic average values of optimized fuel economy levels for light
trucks with footprints below 43 square feet and above 65 square feet,
respectively. Because these ranges respectively include the smallest
and largest models represented in the current light truck fleet, the
agency determined that these two segments of the light truck fleet are
appropriate for establishing the upper and lower fuel economy bounds of
a continuous function.
The remaining two parameters (i.e., the ``midpoint'' and
``curvature'' parameters) were estimated using production-weighted
nonlinear least-squares regression to achieve the closest fit to data
on footprint and optimized fuel economy for all light truck models
expected to be produced during each of model years 2008-2011.\90\
Described mathematically, the logistic function is as follows:
---------------------------------------------------------------------------
\90\ More precisely, these two parameters determine the range
between the vehicle footprints where the upper and lower limits of
fuel economy are reached, and the value of footprint for which the
value of fuel economy is midway between its upper and lower bounds.
---------------------------------------------------------------------------
[[Page 17607]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.013
Where,
T = the fuel economy target (in mpg)
a = the maximum fuel economy target (in mpg)
b = the minimum fuel economy target (in mpg)
c = the footprint value (in square feet) at which the fuel economy
target is midway between a and b
d = the parameter (in square feet) defining the rate at which the value
of targets decline from the largest to smallest values
e = 2.718 \91\
---------------------------------------------------------------------------
\91\ For the purpose of the Reformed CAFE standard, we are
carrying e out to only three decimal places.
---------------------------------------------------------------------------
x = footprint (in square feet, rounded to the nearest tenth) of the
vehicle model
The resulting curve is an elongated ``S''-shape, with fuel economy
targets decreasing as footprint increases.
e. Final Level of the Curve (and Targets)
The final step in the target setting process is to adjust the level
of the preliminary curve defined in step two to a level ``optimized''
for the entire fleet produced by the seven largest manufacturers. The
preliminary curve is gradually adjusted, by changing the values of
parameters (a) and (b) by equal increments of fuel savings \92\ until
the incremental change in total costs incurred by all manufacturers for
complying with their respective CAFE requirements (the sales-weighted
harmonic averages of the mpg targets for their individual models
specified by the function) from a further adjustment equals (within
precision limits of the analysis) the incremental change in the
benefits. Each light truck model's final fuel economy target can be
determined by entering its footprint (in square feet) into the function
with these revised parameter values appropriate for its model year, and
calculating the resulting value of fuel economy in miles per gallon.
---------------------------------------------------------------------------
\92\ Equal increments of mpg have differing energy values. A 0.1
mpg increment added to a vehicle with a higher mpg performance will
have a lower fuel savings value than an equal mpg increment added to
a vehicle with a lower mpg performance. As such, we adjust the curve
by equal increments of fuel savings as opposed to mpg.
---------------------------------------------------------------------------
Once targets are calculated for each vehicle in a manufacturer's
fleet under the continuous function, the corporate average fuel economy
level required of the manufacturer is calculated using a harmonic
average, as under the proposed step function. A manufacturer's actual
fuel economy is calculated according to the procedure used in the
current CAFE system, and compared to its required CAFE level in order
to assess whether it has complied with the standard. Penalties and
credits are also determined and applied as under the current and
proposed CAFE systems.
MYs 2008-2010. In each of the transition years, we did not adjust
the curve to the optimal level. Instead, we adjusted the curve until
the total industry costs under the Reformed CAFE program approximately
equaled the total industry costs under the Unreformed CAFE program.
Cost equalization has several important advantages, as explained above
in the discussion of the transition period. Since the Unreformed CAFE
standards were judged to be economically practicable and since the
Reformed CAFE standards spread the cost burden across the industry to a
greater extent, equalizing the costs between the two systems ensures
that the Reformed CAFE standards are within the realm of economic
practicability.\93\ Also, cost equalization promotes an orderly and
effective transition to the Reformed CAFE system by minimizing the cost
differences between the two choices.
---------------------------------------------------------------------------
\93\ We equalized aggregate industry costs between Reformed and
Unreformed CAFE. The costs are not borne by manufacturers in the
same way and costs for individual manufacturers may differ between
the two systems.
---------------------------------------------------------------------------
MY 2011. The Reformed CAFE standard for MY 2011 is set at the
social optimal level as described above, and is not constrained by the
costs of an Unreformed standard. As previously stated, all
manufacturers are required to comply with the Reformed CAFE standard in
MY 2011.
The parameter values for MYs 2008-2011 are as follows:
Table 4.--Parameter Values for Logistic Function
----------------------------------------------------------------------------------------------------------------
Model year
Parameter ---------------------------------------------------------------
2008 2009 2010 2011
----------------------------------------------------------------------------------------------------------------
a............................................... 28.56 30.07 29.96 30.42
b............................................... 19.99 20.87 21.20 21.79
c............................................... 49.30 48.00 48.49 47.74
d............................................... 5.58 5.81 5.50 4.65
----------------------------------------------------------------------------------------------------------------
3. Application of the Continuous Function Based Standard
The Reformed CAFE standard establishes a relationship between
vehicle footprint and the fuel economy target for light trucks with
different footprint values. In effect, today's final rule establishes a
category system like that proposed in the NPRM, in which each footprint
value is its own category, and has an associated fuel economy target.
The required level of CAFE for each manufacturer during a model
year is the production-weighted harmonic average of the fuel economy
targets for each model in its product line for that model year. While
individual manufacturers may face different requirements for their
overall CAFE levels depending on the distribution of footprint values
for the models making up their respective product lines, each
manufacturer is subject to identical fuel economy target for light
truck models with the same footprint value. Moreover, the same
[[Page 17608]]
formula is used to determine each manufacturer's required level of CAFE
using the fuel economy targets for different footprint values,
footprint values for its individual models, and the production levels
of each of its models. Individual manufacturers face different required
CAFE levels only to the extent that they produce different size mixes
of vehicle models.
To determine whether it has achieved its required overall CAFE
level, each manufacturer's production-weighted harmonic average of the
actual fuel economy levels for each model in its entire product line is
compared to this required CAFE level. If the weighted average of its
models' actual fuel economy levels is at least equal to the
manufacturer's required level of average fuel economy, then it has
complied with the Reformed CAFE standard. If its actual fleet-wide
average fuel economy level is greater than its required CAFE level, the
manufacturer earns credits equal to that difference that can be used in
any of the three preceding or following model years.
More specifically, the manner in which a manufacturer's required
overall CAFE for a model year under the Reformed system is computed is
similar to the way in which its actual CAFE for a model year has always
been calculated. Its required CAFE level is computed on the basis of
the production and the footprint target as follows:
[GRAPHIC] [TIFF OMITTED] TR06AP06.014
This formula can be restated as follows:
[GRAPHIC] [TIFF OMITTED] TR06AP06.015
Where:
N is the total number (sum) of light trucks produced by a manufacturer,
Ni is the number (sum) of the ith model light
truck produced by the manufacturer, and
Ti is fuel economy target of the ith model light
truck.
The required level is then compared to the CAFE that the
manufacturer actually achieves in the model year in question:
[GRAPHIC] [TIFF OMITTED] TR06AP06.016
Where,
N is the total number (sum) of light trucks produced by the
manufacturer,
Ni is the number (sum) of the ith model light
trucks produced by the manufacturer,
mpgj is the fuel economy of the ith model light
truck.
A manufacturer is in compliance if the actual CAFE meets or exceeds
the required CAFE.
The method of assessing compliance under Reformed CAFE can be
further explained using an illustrative example of a manufacturer that
produces four models in two footprint categories with fuel economy
targets assumed for the purposes of the example shown in Table 3:
Table 5.--Illustrative Example of Method of Assessing Compliance Under a Continuous Function Approach
----------------------------------------------------------------------------------------------------------------
Fuel economy Production Footprint Footprint
Model (mpg) (units) (sq. ft.) (mpg)
----------------------------------------------------------------------------------------------------------------
A............................................... 27.0 100,000 43.00 27.5
B............................................... 24.0 100,000 42.00 27.8
C............................................... 22.0 100,000 52.00 23.7
D............................................... 19.0 100,000 54.00 23.2
----------------------------------------------------------------------------------------------------------------
Under Reformed CAFE, the manufacturer would be required to achieve
an average fuel economy level of:
[[Page 17609]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.017
This fuel economy figure would be compared with the manufacturer's
actual CAFE for its entire fleet (i.e., the production-weighted
harmonic mean fuel economy level for four models in its fleet):
[GRAPHIC] [TIFF OMITTED] TR06AP06.018
In the illustrative example, the manufacturer's actual CAFE (22.6 mpg)
is less than the required level (25.4 mpg), indicating that the
manufacturer is not in compliance.
4. Why This Approach To Reform and Not Another?
a. Continuous Function vs. the Proposed Step-Function (Categories)
The NPRM proposed a Reformed CAFE system that would establish a
system of six size categories based on vehicle footprint, and specify a
target fuel economy level for the vehicles in each category. The
categories and their respective targets were incorporated into a step
function (see Figure 1, above). The CAFE level required of each
manufacturer then would be determined by computing the sales-weighted
harmonic average of the fuel economy targets for each light truck
category in which it produces light trucks.
The NPRM also discussed and sought comment upon the alternative of
incorporating the fuel economy targets into a continuous function based
on vehicle footprint, which could have some important advantages over a
stepwise function. However, we did not propose a specific mathematical
form for a continuous function.
As explained above, the agency has elected to adopt a Reformed CAFE
system that employs a continuous function to set fuel economy targets.
Use of a continuous function addresses three major concerns raised by
commenters with regard to the proposed Reformed CAFE structure.
Reliance on a continuous function (1) eliminates potential problems
associated with the need to redefine category boundaries in future
rulemakings; (2) substantially reduces the incentive for manufacturers
to ``upsize'' vehicles; and (3) substantially reduces the incentive for
manufacturers to respond to the CAFE requirements through downsizing, a
compliance option that can reduce a vehicle's safety. The following
explains these three benefits in detail.
First, reliance on a continuous function eliminates the footprint
based categories. By eliminating categories, we eliminate the need to
redefine categories as the light truck distribution changes.
In the NPRM, we prescribed a method for determining category
boundaries. The method was intended to reduce the potential for ``edge
effects.'' We noted that when the distribution of light trucks was
graphed such that footprint increased from left to right, vehicles just
to the left of a boundary faced the greatest incentive for upsizing.
These vehicles could be moved into a less stringent category with
relatively minor increases in size.
In order to minimize this potential, we defined the proposed
boundaries generally at points on the graph where there was relatively
low vehicle volume immediately to the left and high vehicle volume
immediately to the right. Identification of points between low and high
volume was based on the distribution of vehicles from the product plans
provided to the agency in response to the 2003 ANPRM. Based on this
distribution, the agency was able to readily identify appropriate
boundary locations, as illustrated in Figure 9 below.
[[Page 17610]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.019
A variety of commenters also recognized the potential for ``edge
effects.'' The Alliance asserted that the agency's selection of
boundaries under the step function effectively addressed this potential
problem, noting that it ``agrees with the agency's assessment that both
the number and the location of the boundaries for the footprint
categories would likely minimize any such edge effects.''
As previously indicated, manufacturers provided updated product
plans in response to the NPRM and RFC. The new product plans reflected
a new distribution of vehicles. When the proposed boundaries were
applied to the updated manufacturer plans, the boundaries did not align
with low and high volume points, as in the NPRM.
[[Page 17611]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.020
As illustrated in Figure 10 above, the distribution of the updated
light truck fleet does not provide clear points of low volume adjacent
to high volume as was the case with the older fleet that was the basis
for the NPRM. Because the updated fleet has a more uniform distribution
of vehicles across the footprint range, there are multiple potential
boundary assignments that would segment the light truck fleet into six
categories, and there is less opportunity to find boundaries that would
minimize ``edge effects'' to the same extent as in the NPRM. Figures 11
and 12 illustrate potential ways by which the agency might have
attempted to redefine the boundaries.
[[Page 17612]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.021
[GRAPHIC] [TIFF OMITTED] TR06AP06.022
However, it was clear that because of the distribution of the light
truck fleet in the revised product plans, there was not the opportunity
to provide category divisions that similarly minimize ``edge effects''
to the same degree as in the NPRM. Moreover, Toyota was concerned that
changes to boundaries could significantly alter a
[[Page 17613]]
manufacturer's compliance responsibility, and urged the agency to rely
on the proposed boundaries for the final rule.
As recognized by Toyota, the required fuel economy level of
individual manufacturers is highly influenced by boundary location.
Table 6 below illustrates the required fuel economy for a sampling of
manufacturers if boundaries were set according to the figures above.
Table 6.--Required Fuel Economy Levels Under Various Boundary Locations
----------------------------------------------------------------------------------------------------------------
Required fuel Required fuel
economy (mpg)-- economy (mpg)--
Manufacturer boundaries set boundaries set
according to according to
figure 11 figure 12
----------------------------------------------------------------------------------------------------------------
General Motors.......................................................... 23.3 23.2
Toyota.................................................................. 23.8 23.8
Nissan.................................................................. 24.2 23.7
----------------------------------------------------------------------------------------------------------------
The potential need to redefine category boundaries from one model
year to the next and one rulemaking to the next would create
uncertainty for manufacturers. Manufacturers would face not only the
potential of a vehicle facing a higher target resulting from shifts in
the function, but would also face the potential of a vehicle being
compared to a much more stringent target as the result of a boundary
shift. By utilizing a continuous function, the agency eliminates
boundaries and thus the potential difficulties associated with defining
and redefining category boundaries.
Second, reliance on a continuous function substantially reduces the
incentive for manufacturers to respond to Reformed CAFE by ``upsizing''
vehicles. IIHS said that although the boundaries in the proposed
categorical system were carefully chosen to minimize the number of
models that were just below them, the differences between fuel economy
targets for some adjacent categories were nevertheless large enough to
make upsizing an important potential concern. For vehicles just below
boundaries, small increases in footprint could produce a significant
reduction in fuel economy target. As an example, IIHS stated that based
on the proposed categories, General Motors could reduce the fuel
economy target applicable to the 2005 Chevrolet Trailblazer EXT by 1.5
mpg by increasing that model's track width by 1.5 inches. The Mercatus
Center echoed this concern, citing calculations showing that 14 of 55
light truck models could be moved to the next larger footprint category
with an increase in footprint of less than 2 percent.
Conversely, under a continuous function, significant reductions in
fuel economy targets cannot be achieved through small increases in
footprint. Fuel economy targets decrease gradually as vehicle size
increases, as compared to the punctuated changes under a step-function.
Again, using the Chevrolet Trailblazer as an example, IIHS noted that
in order to gain a 1.5 mpg difference in its fuel economy target, ``the
Trailblazer's footprint would have to change by about the entire range
of one of the proposed footprint categories.'' Natural Resources Canada
stated that although any erosion of fuel savings resulting from
upsizing is unlikely to be significant under a stepwise function, ``it
is our opinion that setting fuel economy targets using a continuous
function, based on footprint, would eliminate any concern in this
regard.''
In contrast to IIHS's assertions, Toyota argued that because a
continuous function relaxes a vehicle's fuel economy target for any
increase in size, a continuous function provides a greater incentive
for vehicle ``upsizing.'' Toyota stated that under a continuous
function, manufacturers have a small incentive to increase the size of
every vehicle model they produce, instead of a stronger incentive to
upsize only a few models.
The agency disagrees with Toyota. While the agency acknowledges
Toyota's argument that a continuous function reduces a model's fuel
economy target in response to any increase in its size, this feature
need not provide an incentive for manufacturers to upsize their
vehicles if the form of the function reflects the underlying
engineering relationship between size and fuel economy.
Under the continuous function, as a vehicle's footprint increases,
its applicable target decreases. However, the rate at which target
levels decrease is gradual. Further, an increase in a vehicle's
footprint is not without cost. Generally, as vehicle size increases,
its fuel economy performance decreases. The decrease in fuel economy
performance can result from additional weight added to achieve
increased size or result from design implications of upsizing the
vehicle (e.g., an increase drag resistance from increased frontal
area). As such, increasing footprint can decrease a vehicle's fuel
economy, further reducing the incentive to upsize.
Under the step function approach, some vehicles were located near
the upper boundaries of the categories despite agency efforts to
minimize the number. Under the step function approach, a small change
to the footprint of these vehicles would result in a substantial
decrease in their targets, as much as 1.2 mpg. The continuous function
approach does not provide an opportunity for substantial decreases in a
vehicle's target based on slight increases to footprint.
This point can be illustrated by comparing the proposed boundaries
and the adopted continuous function. When the agency plotted the
revised product plans against the proposed boundaries, we found that
there were approximately 1.25 million vehicles that could move to a
less stringent category with changes in footprint of less than one
square foot. These minor changes would reduce applicable target values
by 1.0-3.3 mpg. Under a continuous function, footprint increases of
similar magnitude would reduce applicable targets by no more than 0.2
mpg.
Third, reliance on a continuous function substantially reduces an
incentive present in the proposed step-function standard for
manufacturers to ``downsize'' vehicles. IIHS raised concern that under
the proposed step function system, manufacturers might reduce the sizes
of models within the limits of the footprint range for a category to
make it easier to comply with their required fuel economy levels. The
IIHS commented that there ``is room within NHTSA's proposed system of
footprint categories to retain the same fuel economy target but reduce
size * * *'' and that ``the safety of the resulting vehicle would be
compromised.'' General Motors also acknowledged this possibility,
stating that the category structure of the Reformed CAFE system:
[[Page 17614]]
[S]till may incentivize manufacturers to use reductions in track
width and/or wheelbase (to create a smaller and/or lighter vehicle)
to meet CAFE targets within a category or overall. While changes in
vehicle dimensions may not be the first choice for manufacturers,
they remain an option-one that can adversely affect safety.
In contrast, IIHS stated that any downsizing under a continuous
function would subject a vehicle to a more stringent target. As such,
IIHS stated that a continuous function would better minimize the
potential for manufacturers to respond to the CAFE program through
unsafe downsizing.
With respect to minimizing the incentive to downsize, the agency
agrees with IIHS. We concur with IIHS's concern over the potential to
downsize within a step function category, particularly within the
smallest size categories, where reducing vehicles' size or weight
likely would have the largest impact on occupant safety.
Commenters raised a variety of other procedural and administrative
concerns that the agency should take into account in choosing between
stepwise and continuous functions. General Motors and Nissan expressed
concern that setting fuel economy targets using a continuous function
could present an even greater challenge to public understanding of the
Reformed CAFE program than relying on a category system to set
vehicles' fuel economy targets. Neither commenter explained why they
believed a stepwise function would be more readily understood. Honda
commented that it would be easier for manufacturers of high fuel
economy vehicles to demonstrate the ``superiority of their products''
to potential buyers under a stepwise function than under a continuous
function.
We do not believe that a standard based on a continuous function is
harder to understand than one based on a step function. The main
difference is that instead of identifying an appropriate category to
determine a vehicle's target, a target under a continuous function
standard is located along a curve. Calculating a manufacturer's
required fuel economy is done in a similar manner under both systems
and calculating a manufacturer's compliance is performed in exactly the
same manner.
While manufacturers may not be able to advertise ``best in CAFE
category'' under a continuous function, the Reformed CAFE does not
prevent such comparisons from being made under non-CAFE
classifications. Manufacturers currently promote ``best in class''
claims based on industry and marketing classifications. For example,
Honda advertises that its Ridgeline is the ``only 4-door pickup to
achieve the highest government crash test rating (5 stars) for both
frontal and side-impact tests.''\94\ Under the current CAFE program,
light trucks are all within a single fleet, yet manufacturers still
advertise ``best in class.'' Presumably, such claims could continue to
be made under Reformed CAFE.
---------------------------------------------------------------------------
\94\ http://automobiles.honda.com/models/model_overview.asp?ModelName=Ridgeline
(last visited January 15, 2006).
---------------------------------------------------------------------------
Nissan asserted that compliance calculations would be ``unduly
cumbersome'' under a continuous function. Nissan also stated that the
agency's administration and enforcement process would be more
burdensome under a continuous function than under a stepwise function
because NHTSA would need to review complex compliance calculations
submitted by each manufacturer.
In the NPRM, we proposed requiring manufacturers to submit a
vehicle's footprint along with the CAFE data currently collected.
Manufacturers and the agency would rely on this data to determine
required fuel economy levels and compliance. An additional calculation
would be required to determine a vehicle's target, as opposed to
determining the appropriate category and corresponding target. However,
we do not believe that the additional calculation--one easily performed
using a programmable hand calculator or spreadsheet program--will be
overly cumbersome.
Ford indicated that the use of a harmonic average to calculate a
manufacturer's compliance obligation, combined with the use of
categories, would provide manufacturers the greater flexibility to make
improvements in an appropriate manner as opposed to use of a harmonic
average with a continuous function.
The standard adopted in this document retains the flexibility
provided by use of a harmonic average to determine a manufacturer's
compliance requirement and a manufacturer's actual fuel economy level.
Additional flexibility is provided by the fact that fuel economy
targets are more specific to a vehicle. As opposed to being compared to
a target representative of the capabilities of vehicles within a range
of footprint values, the final rule compares a vehicle to the potential
fuel economy achievable by vehicles of equal size. A manufacturer still
has the ability to compensate for a vehicle that performs below its set
fuel economy target by exceeding the target for one or more of its
other models.
Toyota argued that because the NPRM did not propose a specific
continuous function for review, ``additional notice and comment would
be necessary should NHTSA wish to pursue a continuous line function in
place of size-based targets, since it is simply not possible for
manufacturers or the public to determine the implications of such a
system in the context of new standards for model years 2008 through
2011.'' In contrast, Nissan asserted that switching to a continuous
function would ``result in little to no difference in fuel economy
compliance levels,'' suggesting that the NPRM's discussion of a
continuous function was sufficiently detailed to allow a manufacturer
to assess the costs and other challenges of complying with a Reformed
CAFE standard that uses a continuous function.
Although the agency is not adopting the category system as
proposed, the targets under today's final rule are consistent with the
category targets proposed in the NPRM. Figure 13 below shows the
resulting relationship between vehicle footprint and target fuel
economy level for 2011 described by the logistic function with
parameter values statistically calibrated for that model year and
subsequently optimized. The figure also compares its curved shape to
that stair step shape of the fuel economy targets established in the
previously proposed category system for that model year.
[[Continued on page 17615]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 17615-17664]] Average Fuel Economy Standards for Light Trucks Model Years 2008-
2011
[[Continued from page 17614]]
[[Page 17615]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.023
RMI favored a step-function, because its ``size neutrality''
provides a better foundation for replacing fuel economy standards with
a ``feebate'' system. In context of fuel economy, ``feebate'' refers to
a transportation initiative in which consumers of low-fuel economy
vehicles would pay into a fund from which payments would be made to
purchasers of high-fuel economy vehicles. In response to RMI's comment,
we note that EPCA does not provide for a feebate system, but instead
requires the agency to establish average fuel economy standards.
However, as discussed above, the continuous function adopted today
provides greater ``size neutrality'' than a step function (i.e., a
continuous function reduces incentives to downsize or upsize a
vehicle).
Although the continuous function standard adopted in today's final
rule eliminates the abrupt changes in fuel economy targets present in a
step-function standard, it is important to recognize that the function
does not ``smooth'' the targets as requested by some commenters.
Toyota, Porsche, BMW, and the Alliance questioned why the stringency in
Category 3 increased at a higher rate than the stringency levels of
other categories. Toyota stated that vehicles in this size category
tend to be fairly fuel-efficient unibody SUVs and minivans. Toyota also
noted that the proposed Category 3 target experienced a 5.4 percent
increase between 2008 and 2009, while the target for Category 6
actually went down from 2009 to 2010. Toyota suggested that the agency
consider ``smoothing'' the target levels for the interim model years by
linearly increasing the target levels between 2008 and 2011. Similarly,
Honda questioned the increases in stringency proposed for the smaller
footprint vehicles. Honda stated that, at least in theory, the agency's
methodology (i.e., adding technology to each vehicle until the marginal
cost exceeds the marginal benefits) should result in more stringent
standards for larger vehicles, since the higher baseline fuel
consumption would justify the addition of more technology. Honda
observed that under the proposed step function light trucks in the
smallest footprint category were projected to achieve an increase in
fuel economy of 22 percent, while the increase for light trucks in the
largest footprint category was only 16 percent. Honda questioned
whether technologies have been applied uniformly and fairly to all
vehicles.
As explained above, the stringency of the targets is based on the
opportunity to apply fuel savings technology to vehicles within the
light truck fleet. Differences in increases in stringency between
vehicles of different sizes reflect differences in the potential
improvements for those vehicles, and the costs and benefits of those
improvements. While larger vehicles typically have low fuel economy
performance, that does not mean that such vehicles are not equipped
with fuel saving technologies. Conversely, the higher fuel economy
performance of smaller vehicles is not necessarily reflective of fuel
savings technologies, but may be more indicative of the vehicles small
size. The reformed CAFE system recognizes variations in the baseline
fuel economy levels between vehicles, in the costs of improving fuel
economy, and in the resulting fuel savings and related benefits.
Manufacturers' efforts to improve fuel economy are reflected in the
degree of projected improvement across the range of footprint values.
Increases in stringency above a manufacturer's baseline are
consequences of the agency's improving the overall fuel efficiency of
the light truck fleet to a maximum feasible level.\95\
---------------------------------------------------------------------------
\95\ Additionally with regard to Honda's comment, it is also
important to distinguish between improvements in fuel economy (which
is measured in miles per gallon) and reductions in fuel consumption
(which is measured in gallons per mile). Because of differences
between their initial fuel economy levels, the improvements in fuel
economy that would be required by the proposed targets for the
smallest and largest categories of light trucks cited by Honda (22
and 16 percent, respectively) actually correspond to reductions in
fuel consumption of 18% and 14% percent, respectively.
---------------------------------------------------------------------------
[[Page 17616]]
b. Continuous Function and Targets vs. Classes and Standards
As explained in the NPRM, we considered an approach under which we
would establish separate classes based on footprint and establish a
standard for each class. However, there were two primary shortcomings
that led us to evaluate other approaches for our Reformed CAFE. Nothing
provided by the commenters caused us to re-evaluate our decision not to
establish a multi-class system based on footprint.
First, transfers of credits earned in a footprint class in a model
year to a different footprint class in a different model year would
have required a complicated process of adjustments to ensure that fuel
savings are maintained.\96\ This is because credits (denominated in
mpg) earned under the multiple classes and standards approach would
have differing energy value. Credits earned for exceeding the higher
fuel economy standard for the smaller footprint vehicles would have
less energy value than exceeding the lower fuel economy standard for
the larger footprint vehicles by an equal increment. In fact, if
credits were generated in a class with relatively high CAFE standards
and transferred to another class with relatively low CAFE standards,
total fuel use by all vehicles in the two classes might increase. That
result would undermine the entire reform effort by producing lessened
energy security.
---------------------------------------------------------------------------
\96\ The 2003 ANPRM on reforming CAFE noted that the agency had
previously concluded that the credits earned in one class could not
be transferred to another class, but re-examined the legislative
history of the CAFE statute and called that interpretation into
question.
---------------------------------------------------------------------------
One can calculate the appropriate adjustments for such a credit
transfer system to ensure no loss of fuel savings. This would ensure
equivalent energy savings. However, instituting a complicated new
process of credit adjustments would detract from the benefits of
reforming the CAFE program by making it more difficult to plan for and
determine compliance. Further, taking this step would not cure another
problem associated with credits. Credits earned by exceeding a standard
in a model year may be used in any of the three model years preceding
that model year and, to the extent not so used, in any of the three
model years following that model year (49 U.S.C. 32903(a)). They may
not, however, be used within the model year in which they were earned
(Id.).
Second, establishing separate standards for each class would
needlessly restrict manufacturer flexibility in complying with the CAFE
program. A requirement for manufacturers to comply with separate
standards, combined with the inability either to apply credits within
the same model year or to average performance across the classes during
a model year, could increase costs without saving fuel. This would
happen by forcing the use of technologies that might not be cost-
effective. Further, Congressional dialogue when considering the
enactment of the EPCA and amendments to it has repeatedly expressed the
view that manufacturers should have flexibility in complying with a
CAFE program so that they can ensure fuel savings, while still
responding to other external factors.
Reliance on a continuous function avoids these shortcomings just as
the proposed step function would have avoided these shortcomings.
Instead of establishing distinct standards for multiple classes, our
proposal establishes targets across the range of footprint values and
applies them through a harmonically weighted formula to derive
regulatory obligations. Credits are earned and applied under today's
final rule in the same way as they are earned and applied under
Unreformed CAFE and in a manner fully consistent with the statute.
Thus, no complicated new provisions for credits are needed. Further,
the use of targets instead of standards allows us to retain the
benefits of a harmonically weighted fleet average for compliance. This
ensures that manufacturers must provide the requisite fuel economy in
their light truck fleet, while giving the manufacturers the ability to
average performance across their entire fleet and thus the flexibility
to provide that level of fuel economy in the most appropriate manner.
c. Consideration of Additional Attributes
In the NPRM, the agency sought comment on whether Reformed CAFE
should be based on vehicle size (footprint) alone, or whether other
attributes, such as towing capability and/or cargo-hauling capability,
should be considered. The comments received in response to our request
were either strongly supportive or strongly opposed to including
additional attributes. Commenters supporting consideration of
additional attributes (General Motors, Nissan, DaimlerChrysler, Ford,
Alliance, Sierra Research, NADA, and SUVOA) stated that such
consideration is necessary to account for the varying degrees of
utility among vehicles with similar footprint values. Commenters
opposed to including additional attributes (NRDC, Environmental
Defense, ACEEE, NESCAUM, and Rocky Mountain Institute) stressed the
potential of using these attributes to manipulate vehicles into
categories with less stringent targets.
The most frequently mentioned attribute was towing capability.
However, Nissan stated that NHTSA should incorporate a mechanism
providing fuel economy credits for all optional safety and utility
features. The Alliance suggested 4WD/AWD capability in addition to
towing.
Among the commenters supporting a modification for towing ability,
the criteria for that classification differed. General Motors defined
``heavy-tow capable'' vehicles as a vehicle with a maximum towing
capacity that is equal to or greater than 8,000 pounds. The Alliance
suggested that the definition should be based on towing capacity equal
to or greater than a set percentage of the vehicle's curb weight. That
association argued that extra towing capacity means different things
for different size vehicles.
Among those supporting consideration of additional attributes, the
means suggested for providing credit for those attributes also
differed. Nissan presented a method for calculating credits based on
weight differences between a vehicle's base model and versions with
optional safety and utility enhancing equipment, such that each
additional 3 pounds of weight would provide a 0.01 mpg credit. Some
commenters suggested a set percentage reduction; 5 percent with respect
to towing capacity or 10 percent for 4WD/AWD. DaimlerChrysler suggested
a provision which essentially created a second category for any MY 2005
product that is at least 25 percent below the 2008 MY target for its
size class, rather than considering specific attributes. Under
DaimlerChrysler's provision, the fuel economy target for such a vehicle
would be set at its 2005 level plus 5 percent and would then increase
1.5 percent per year.
NRDC, Environmental Defense, ACEEE, NESCAUM, and Rocky Mountain
Institute opposed consideration of additional attributes in determining
a vehicle's target fuel economy. These commenters, along with Honda and
Toyota, were concerned with the potential for
[[Page 17617]]
manufacturers to ``game'' such considerations. These commenters argued
that manufacturers might find it more cost-effective to include
whatever attribute was relied upon for adjustment, even if not
requested or required by customers, rather than redesigning the vehicle
for increase fuel efficiency.
Toyota raised specific concern with the attribute of tow rating,
stating that there is not an objective method for quantifying this
metric. Toyota also opposed adjustments for attributes, arguing that
the targets already reflect the presence of such designs in the
vehicles. Toyota stated that if these vehicles were permitted
adjustments, the agency would essentially be ``double counting'' the
effect of the attribute considered. Toyota further stated that
depending on the attribute relied upon for adjustment, some
manufacturers might be provided a competitive advantage based on their
current fleet mix.
After reviewing these comments, NHTSA has decided not to consider
any additional attributes for MYs 2008-2011. First, NHTSA notes that
even some manufacturers noted the potential for abuse of a system that
provided credits or lower targets for vehicles with certain attributes.
Second, NHTSA believes the ``list of eligible features'' suggested by
Nissan would be very confusing for both manufacturers and the agency.
With regard to the suggestion that the agency consider 4WD/AWD
capability, the agency notes that it discontinued the option of a
separate standard for 2WD vs. 4WD light trucks beginning with the
standard for the 1992 model year.\97\ The agency noted that separate
standards were originally intended to provide an alternative means of
compliance for manufacturers that manufactured primarily 4WD vehicles,
and that these intended beneficiaries had disappeared. The agency noted
that most manufacturers were choosing to comply with the combined
standard. The agency also expressed concerns that separate standards
could decrease fuel economy by encouraging the production of less fuel-
efficient 4WD vehicles. Since there are no specialized manufacturers
that need relief to comply with the standard, NHTSA is not reversing
this decision.
---------------------------------------------------------------------------
\97\ 55 FR 12487, April 4, 1990.
---------------------------------------------------------------------------
With regard to towing capacity, in addition to the above concerns
the agency notes that manufacturers suggested different approaches on
how to define vehicles which would qualify for consideration. The
agency is aware that the SAE is working on a uniform metric to rate
towing capacity, and this may provide at least some of the information
NHTSA would need to reconsider this issue with regard to towing
capacity in the future.
d. Backstop and ``Fuel Saving'' Mechanisms
The agency is not establishing a backstop or fuel economy
``ratcheting'' mechanism under the Reformed CAFE system. As explained
above, incorporating a backstop or fuel economy ratcheting system would
be contrary to the intent of EPCA. The intent of the CAFE program is
not to preclude future mix shifts and design changes in response to
consumer demand. A backstop would likely have this influence. As
discussed, a backstop or a ratcheting mechanism would limit the ability
of a manufacturer to respond to market shifts arising from changes
consumer demand. Such a system would be in opposition to congressional
intent to establish a regulatory system that does not unduly limit
consumer choice.
Additionally, supplementing the Reformed CAFE standards with a
backstop would negate the value of establishing the attribute-based
standards for some manufacturers and perpetuate the shortcomings of
Unreformed CAFE. A backstop would essentially be a required fuel
economy level akin to the Unreformed CAFE standard that would apply to
a manufacturer if the required fuel economy for that manufacturer as
determined under the Reformed CAFE system was below some determined
threshold. For example, if consumer demand shifted to larger light
trucks such that a manufacturer's required fuel economy level under the
Reformed CAFE system was below the backstop fuel economy level, that
manufacturer would be required to comply with the backstop. By
requiring such a manufacturer to comply with the backstop, there would
be a risk that the backstop would not be economically practicable given
the change in the market, as occurred under the Unreformed CAFE
standards in the mid-1980s. With regard to a ``ratcheting'' mechanism,
an ``automatic'' increase in the stringency of targets or requirements
could potentially subject manufacturers to required levels of average
fuel economy level that are not technologically feasible.
Furthermore, the structure of the Reformed CAFE system addresses
concerns commenters cited as the rationale for establishing a backstop,
i.e., concerns with manufacturers' upsizing vehicles and their fleets
for the sole purpose of reducing the stringency of their light truck
CAFE requirement.
First, the structure of the Reformed CAFE system minimizes the
incentive for manufacturers to upsize vehicles, more so under the
continuous function approach. Second, manufacturers are limited in
their ability to increase the size of their vehicles beyond that extent
demanded by consumers. Finally, making vehicles larger for CAFE
compliance purposes is not cost-free. Market forces or fuel price
increases will restrain consumer demand for large light trucks with low
fuel economy. These reasons lead us to the conclusion, more so given
the structure of the adopted reform, not to establish a backstop. These
points apply equally to determination not to adopt a fuel economy
``ratcheting'' mechanism as recommended by several commenters.
With regard to the first point, reliance on a continuous function
minimizes the incentive for manufacturers to increase vehicle size
solely for the purpose of subjecting that vehicle to a less stringent
target. As explained in the discussion of continuous function versus
step function above, we explained that increases in vehicle size will
more likely be accompanied by a decrease in fuel economy performance
that offsets the reduction in target stringency. This is a result of
targets decreasing gradually as vehicle size increases across the
footprint continuum. This offset reduces the incentive for
manufacturers to increase vehicle size solely in response to the CAFE
program. The decrease in a vehicle's fuel economy performance from
increasing its footprint will offset, to a degree, the advantage of the
lower target.
With regard to the second point, manufacturers are limited in what
changes they can make based on what will be accepted by the market.
Changes in footprint result in perceptible changes in performance and
design (e.g., a longer and/or wider vehicle). As noted above, the
track-width component of footprint, as defined in today's final rule,
directly affects vehicle handling and stability. The connection between
footprint and vehicle performance limits the ability of manufacturers
to increase footprint in a manner not perceptible to the consumer. As
stated by IIHS, under a continuous based function, customers would be
more likely to notice any design changes that achieved a substantial
CAFE benefit, as opposed to small changes that would move a vehicle
into a less stringent category under the step-function approach.
Finally, making vehicles larger for CAFE compliance purposes is not
cost-
[[Page 17618]]
free. All else being equal, larger vehicles are more costly to build
and operate. Market forces or fuel price increases will restrain
consumer demand for large light trucks with low fuel economy, unless
the need for utility justifies the expense to the manufacturers of
producing and to the consumers of operating large trucks.
The agency did a preliminary evaluation of the cost associated with
increasing a vehicle's footprint. We relied on the databases provided
by manufacturers in which the manufacturers included a vehicle's
manufacturer's suggested retail price (MSRP). We identified 22
nameplate vehicles that had data indicating more than one footprint
value, either from a manufacturer offering different configurations of
a nameplate or as a result of changes between model years.
We then separated out the 22 nameplates into 44 pairs and compared
MSRP. Some of the price differences within the pairs appeared to
represent differences in levels of options as well as footprint. The
costs per square foot for these changes were in excess of $1000. These
data point pairs were excluded.
The remaining pairs were evaluated. The average cost per square
foot increase of the remaining 25 pairs was $119; the median cost was
$46. Deleting the 5 percent highest and lowest costs resulted in a mean
cost per square foot increase of $85. We note that this is a
preliminary evaluation and that these costs represent those associated
with increases in footprint that occur as part of a planned model
redesign. We expect that the costs associated outside a planned
redesign would be substantially higher.
We believe that the costs associated with increasing a vehicle's
wheelbase would be even greater than those associated with an increase
in track width. Based on a review of confidential information provided
by a manufacturer, we estimate that the cost of redesigning a vehicle
mid-product cycle such that the vehicle has a longer wheelbase would be
at least equal to 50 percent of the costs associated with introducing
the original vehicle design. Given this high estimate, it would be
unlikely that a manufacturer would extend a vehicle's wheelbase solely
in response to the CAFE program. The agency intends to further explore
the costs associated with changes in footprint.
Comments from the environmental organizations raised a number of
concerns, which they stated necessitated a back stop or ratcheting
mechanism. These concerns can be categorized into three areas: (1)
Increases in fleet size based on historic trends and potential market
shift, (2) increases in a vehicle's footprint to take advantage of a
less stringent category, and (3) upweighting of a vehicle to remove it
form the light truck CAFE program.
With regard to the environmental organizations' first concern, we
explained above that the light truck CAFE program is not intended to
constrain consumer choice. Any historic upsizing of manufacturers'
fleets occurred under Unreformed CAFE in response to market demands,
and market demands will continue to influence the size of the light
truck fleet. Moreover, the agency established the MYs 2008-2011
standards after evaluating the product plans provided by manufacturers.
Planned shifts in fleet mix have been taken into consideration in
establishing the final rule. Future standards will also rely, in part,
on product plans provided by manufacturers. As such, projected trends
in fleet mix and fleet size will continue to be a consideration in
establishing future CAFE standards.
With regard to the second concern, both NRDC and Union of Concerned
Scientists stated that a number of vehicles would need only changes
ranging from one-tenth of an inch to 1.5 inches in wheelbase and track
width to become subject to a less stringent category. The Union of
Concerned Scientists stated that an increase in vehicle size of 1-10
percent would be equivalent to a 0.05 to 1.18 mpg decrease in the fleet
wide average fuel economy, respectively. This concern was also echoed
by IIHS.
Again, as explained above, the agency is adopting a standard based
on a continuous function as opposed to the step function. Under the
continuous function small changes in vehicle footprint are not rewarded
with large decreases in target values. Target values decrease
gradually, as opposed the larger decreases that occur as a vehicle
moves between categories under the proposed system. As such, the
incentive for upsizing has been further minimized by adopting a
continuous function approach.
Environmental groups' third major concern was that of uprating,
i.e., manufacturers increasing the GVWR of vehicles beyond the 8,500
lbs GVWR boundary for the light truck CAFE program. As explained in
greater detail below, the agency is extending the definition of light
truck to MDPVs. By including MDPVs, we are capturing essentially all
SUVs with a GVWR less than 10,000 lbs.\98\
---------------------------------------------------------------------------
\98\ With MDPVs included in the definition of light truck, only
approximately 50,000 vehicles could be removed from the light truck
CAFE program with an uprating of 1,000 lbs or less.
---------------------------------------------------------------------------
Aside from our concerns with the legality of a backstop, the agency
has concluded that the potential for fuel loss from manufacturers
increasing the footprint values of vehicles or through shifting their
fleet mix has been substantially reduced by the structure of the final
rule. By gradually decreasing the value of targets as footprint
increase, minor increases to footprint do not result in significant
decreases in applicable target values. Further, increases to footprint
come at a cost in terms of fuel economy performance, vehicle handling,
and consumer acceptance.
5. Benefits of reform
a. Increased Energy Savings
The Reformed CAFE system increases the energy savings of the CAFE
program over the longer term because fuel saving technologies will be
required to be applied to light trucks throughout the entire industry,
not just by a limited number of manufacturers. The energy-saving
potential of Unreformed CAFE is limited because it requires only a few
full-line manufacturers to make improvements. In effect, the
capabilities of these full-line manufacturers, whose offerings include
larger and heavier light trucks, constrain the stringency of the
uniform, industry-wide standard. The Unreformed CAFE standard is
generally set below the capabilities of limited-line manufacturers, who
sell predominantly lighter and smaller light trucks. Under Reformed
CAFE, which accounts for fuel economy potential of the fleets of
individual manufacturers, virtually all light-truck manufacturers will
be required to improve the fuel economy of their vehicles. Thus,
Reformed CAFE continues to require full-line manufacturers to improve
the overall fuel economy of their fleets, while also requiring limited-
line manufacturers to enhance the fuel economy of the vehicles they
sell.
Our estimates indicate that the Reformed CAFE system will result in
greater fuel savings than the Unreformed CAFE system during the
transition period, even though the industry-wide compliance costs were
equalized for those model years:
[[Page 17619]]
Table 7.--Estimated Fuel Savings From Reformed and Unreformed CAFE Systems for MYs 2008-2010
[in billions of gallons]
----------------------------------------------------------------------------------------------------------------
MY 2008 MY 2009 MY 2010
----------------------------------------------------------------------------------------------------------------
Reformed CAFE system............................................ 0.7 1.9 2.2
Unreformed CAFE system.......................................... 0.6 1.8 2.0
----------------------------------------------------------------------------------------------------------------
The improvement in fuel savings made possible by the switch to the
Reformed CAFE system will be even greater beginning MY 2011. By
requiring improvements across the entire industry, the Reformed CAFE
system produces greater fuel savings at levels that remain economically
practicable. For comparison, the agency performed a cursory Stage
analysis for MY 2011. On the basis of that cursory analysis, the agency
determined that, under the Unreformed CAFE system, the fleet wide
(including MDPVs) fuel economy standard would be 23.3 mpg. We note that
the Stage Analysis for MY 2011 results in a lower Unreformed standard
for that year than the Unreformed standard for MY 2010. This is due to
the inclusion of MDPVs in MY 2011. MDPVs, which have low fuel
economies, are produced primarily by General Motors. Under the
Unreformed CAFE system, General Motors would be the least capable
manufacturer. Because of this, and because including the MDPVs lowers
the CAFE level projected for General Motors, the inclusion of MDPVs
would depress the Unreformed CAFE standard. Table 8 below illustrates
the difference in fuel savings between the Unreformed CAFE system and
the fully implemented Reformed CAFE system in MY 2011.
Table 8.--Comparison of the Estimated Fuel Savings From Reformed in MY
2011 and an Unreformed Standard of 23.3 mpg in MY 2011
[in billions of gallons]
------------------------------------------------------------------------
MY 2011
------------------------------------------------------------------------
Reformed CAFE system.......................................... 2.8
Unreformed CAFE system........................................ 2.1
------------------------------------------------------------------------
As illustrated above, the Reformed CAFE system saves an additional 700
million gallons of fuel over the Unreformed CAFE system over the
lifetime of the vehicles in the MY 2011 fleet. Further, we estimate
that the fuel savings under a 23.3 mpg Unreformed standard in MY 2011
would have come at a cost of approximately $ 1.9 billion. While the
cost of the Reformed fuel savings in MY 2011 is approximately $2.5
billion, this cost is distributed across a greater number of
manufacturers. Additional discussion of the Reformed CAFE costs is
provided below.
b. Reduced Incentive To Respond to the CAFE Program in Ways Harmful to
Safety
In the NPRM, we noted the key trends in the light vehicle
population and in the crashes that produce serious and fatal injuries
to highlight the safety impacts of reforming CAFE. Specifically, we
identified rollovers and crash compatibility. Both are related to
reforming CAFE.
Pickups and SUVs have a higher center of gravity than passenger
cars and thus are more susceptible to rolling over, if all other
variables are identical. Their rate of involvement in fatal rollovers
is higher than that for passenger cars--the rate of fatal rollovers for
pickups and SUVs is twice that for passenger cars. Rollovers are a
particularly dangerous type of crash. Overall, rollover affects about
three percent of light vehicles involved in crashes, but accounts for
33 percent of light vehicle occupant fatalities. Single vehicle
rollover crashes account for nearly 8,500 fatalities annually. Rollover
crashes involving more than one vehicle account for another 1,900
fatalities, bringing the total annual rollover fatality count to more
than 10,000.
Crash compatibility is the other prominent issue. Light trucks are
involved in about half of all fatal two-vehicle crashes involving
passenger cars. In the crashes between light trucks and passenger cars,
over 80 percent of the fatally injured people are occupants of the
passenger cars.
In regard to reducing regulatory incentives for design changes
adversely affecting safety, commenters generally supported the proposed
reliance on footprint, recognizing the safety concerns that led the
agency to base the Reformed CAFE system on a size metric. Both General
Motors and Nissan stated that weight provides the best correlation to
fuel economy, but given the safety concerns about downsizing and the
concerns about creating a potential for upsizing, these commenters
support the use of footprint. RVIA stated that vehicle weight does have
a direct impact on overall fuel economy, but the proposed reliance on
footprint is reasonable.
The Alliance also supported the size-safety correlation and stated
that use of footprint and the structure of Reformed CAFE would reduce
the incentive to produce small vehicles in order to offset larger light
trucks. However, the Alliance stated that the agency did not
acknowledge improvements made by manufacturers in the static stability
factor and industry's commitment to address the compatibility issue.
The Rocky Mountain Institute supported the use of footprint,
stating that the proposal would create an incentive for decoupling size
from weight by adopting lighter-but-stronger materials and would
encourage manufacturers to make vehicles that are ``big, hence
protective and comfortable, without also making them heavy, hence
hostile and inefficient.'' The Aluminum Association stated that use of
footprint would provide opportunities to increase safety while saving
fuel by substituting aluminum for steel.
The agency continues to believe that the manner in which fuel
economy is regulated can have substantial effects on vehicle design and
the composition of the light vehicle fleet. Reforming CAFE is important
for vehicle safety because the current structure of the CAFE system
provides an incentive to manufacturers to reduce the weight and size of
vehicles, and to increase the production of vehicle types (particularly
pickup trucks and SUVs) that are more susceptible to rollover crashes
and are less compatible with other light vehicles. For these reasons,
reforming CAFE is a critical part of the agency's effort to address the
vehicle rollover and compatibility problems.
The final rule based on footprint substantially reduces the
incentive to introduce smaller vehicles or to reduce vehicle size to
offset the lower fuel economy of larger vehicles. Adding the continuous
function concept to footprint eliminates the opportunity that existed
under the proposal to downweight by reducing vehicle size to the lower
edge of a category (which would have increased vehicle fuel economy
without subjecting the vehicle to a higher target). It does this by
[[Page 17620]]
eliminating the categories that covered a range of footprint sizes.
Thus, under the final rule, each change in footprint results in a
different target.
i. Reduces Incentive To Reduce Vehicle Size and To Offer Smaller
Vehicles
Without CAFE reform, significant increases in Unreformed light
truck CAFE standards, especially if accompanied by high fuel prices,
would likely induce a wave of shifting production mix toward smaller
light trucks and reducing the size and/or weight of light trucks. Such
a shift occurred in the 1970's and early 1980's when fuel price
increases and competitive pressures induced vehicle manufacturers to
shift their production mix toward their smaller and lighter vehicles to
offset the lower fuel economy of larger and heavier vehicles and to
redesign their vehicles by reducing their size and/or weight.\99\ The
need for manufacturers to make rapid and substantial increases in
passenger car and light truck CAFE in response to the CAFE standards in
late 1970's and early 1980's provided an added incentive for them to
take those actions.
---------------------------------------------------------------------------
\99\ Shifting production mix down toward smaller vehicles
involves decreasing the production volumes of vehicles that are
heavier or larger and thus have relatively low fuel economy and
increasing the production volumes of lighter or smaller vehicles.
---------------------------------------------------------------------------
The shift in production mix and reduction in vehicle size/weight
that occurred in the 1970's and early 1980's contributed to many
additional deaths and injuries.\100\ While the adoption of additional
safety performance requirements for those vehicles has saved lives,
even more lives would have been saved if the shifting of production mix
toward smaller vehicles and the reduction in size and/or weight had not
occurred.
---------------------------------------------------------------------------
\100\ NAS Report, p. 3.
---------------------------------------------------------------------------
By relying on vehicle size to determine required fuel economy
levels, the agency will minimize the incentive for manufacturers to
comply through downsizing vehicles or by increasing the production of
smaller vehicles solely to offset the sales of larger vehicles. These
compliance strategies reduce safety by reducing the crashworthiness of
individual vehicles, and compound the problem of fleet compatibility.
Reforming CAFE such that required fuel levels are determined
through the use of footprint-based fuel economy targets discourages
reductions in vehicle size. As a vehicle decreases in size, the fuel
economy target against which that vehicle is compared increases.
Several commenters raised concern that the structure as proposed
(i.e., a category-based system) would still reward downsizing. IIHS
stated that a manufacturer could rely on limited reduction in size as a
method to reduce weight, without moving a vehicle into a different
category.
The agency recognizes the potential for limited downsizing being
rewarded in a category based system. However, this potential reward is
substantially reduced and possibly eliminated under the continuous
function adopted today. Under the continuous function, any reduction in
size will result in a vehicle becoming subject to higher target. Where
a step-function would permit limited reduction in footprint within a
category, under a continuous function any reduction in footprint will
subject a vehicle to a more stringent target.
IIHS further stated that even if a manufacturer maintained a
vehicle's size, the manufacturer still could reduce a vehicle's weight
in order to improve the vehicle's fuel economy. IIHS cautioned that
such weight reduction would likely reduce a vehicle's crashworthiness
because decreased size and weight have separate effects on a vehicle's
ability to protect its occupants. IIHS, citing the NAS report and
Kahane study, stated that although the potential safety cost is greater
when both decrease, a decrease in mass alone will, on average, reduce
the crashworthiness of the light truck fleet.
The potential for downweighting through limited reductions in
footprint is minimized under the Reformed CAFE structure adopted in
this document. Reliance on a continuous function further discourages
footprint reduction because as a vehicle model's footprint is reduced,
the vehicle is subject to a higher target. Reformed CAFE, as adopted
today, links the level of the average fuel economy targets to the size
of footprint so that there is an incentive to reduce weight only to the
extent one can do so while also preserving size. Thus, we have
minimized the incentive for a compliance strategy that could increase
rollover propensity and cause further divergence in the size of the
light truck fleet.
By basing Reformed CAFE on a measure of vehicle size (footprint)
instead of weight, the agency is aware that the CAFE program will
continue to permit and to some extent reward weight reduction as a
compliance strategy. The safety ramifications of downweighting--
especially downweighting that is not achieved through downsizing--will
need to be examined on a case-by-case basis in future rulemakings.
Historically, the size and weight of light-duty vehicles have been so
highly correlated that it has not been technically feasible to fully
disentangle their independent effects on safety.\101\ The agency
remains concerned about compliance strategies that might have adverse
safety consequences.
---------------------------------------------------------------------------
\101\ Kahane, C.J., Response to Docket Comments on NHTSA
Technical Report, Vehicle Weight, Fatality Risk and Crash
Compatibility of Model Year 1991-99 Passenger Cars and Light Trucks,
Docket No. NHTSA-2003-16318-16, 2004 discusses the historic
correlation and difficulty of disaggregating weight and ``size.''
Except for a strong correlation of track width with rollover risk,
it shows weak and inconsistent relationships between fatality risk
and two specific ``size'' measures, track width and wheelbase, when
these are included with weight in the analyses. See also Kahane,
C.J., Vehicle Weight, Fatality Risk and Crash Compatibility of Model
Year 1991-99 Passenger Cars and Light Trucks, NHTSA Technical Report
No. DOT HS 809 662, Washington, 2003, pp. 2-6. Evans, L. and Frick,
M.C., Car Size or Car Mass--Which Has Greater Influence on Fatality
Risk? American Journal of Public Health 82:1009-1112, 1992,
discusses the intense historical correlation of mass and wheelbase
and finds that relative mass, not relative wheelbase is the
principal determinant of relative fatality risk in two-car
collisions. See also, Evans, L. ``Causal Influence of Car Mass and
Size on Driver Fatality Risk,'' American Journal of Public Health,
91:1076-81, 2001.
---------------------------------------------------------------------------
As explained in more detail below in Section VIII, Technology
issues, in determining the fuel saving potential of a manufacturer's
fleet, the agency employed weight reduction as a compliance strategy
only in limited instances. The agency only considered weight reduction
for vehicles with a curb weight greater than 5,000 lbs. This limitation
was based on the Kahane study, which indicated that weight reduction of
the heaviest vehicles would not negatively impact safety. If
downweighting were concentrated among the heaviest of the light trucks,
any extra risk to the occupants of those vehicles might be more than
offset by lessened risk in multi-vehicle crashes to occupants of
smaller light trucks and cars. IIHS agreed with the agency that
downweighting of the heaviest vehicles would likely not harm safety.
Additionally, it is possible that some of the lightweight materials
used in a downweighting strategy may have the strength and flexibility
to retain or even improve the crashworthiness of vehicles and the
safety of occupants. General Motors expressed some concern with the
practicality of using lightweight materials, stating that it does not
intentionally reduce mass by replacing it with advanced materials.
However, General Motors did state that it seeks to use advanced
materials and technologies in new generation vehicles. As stated above,
the agency used limited weight reduction in our modeling;
[[Page 17621]]
however, we cannot dictate which technologies a manufacturer must
employ in order to comply with the standards. The stringency of today's
standards should not make it necessary for any manufacturers to rely on
unsafe or unproven compliance strategies.
Reformed CAFE also reduces the incentive for manufacturers to
comply through increasing the number of smaller vehicles, with higher
fuel economies, to offset larger vehicles, with lower fuel economies.
The way in which Reformed CAFE dilutes the effect of this action as
compliance strategy can be seen by looking at a Reformed CAFE standard.
The fuel economy targets, as determined by the continuous function, are
constants. Regardless of what compliance strategy is chosen by a
manufacturer, nothing that the manufacturer does will change those
values.
The distribution of vehicle models along the continuous function
and the production volume of each model, however, are variables under
the control of the manufacturers. Further, they are variables not only
in the formula for calculating a manufacturer's actual level of CAFE
for a model year, but also in the formula for calculating a
manufacturer's required level of CAFE for that model year.
Thus, by changing the distribution of its production across the
footprint based-function, a manufacturer will change not only its
actual level of CAFE, but also its required level of CAFE. For example,
all other things being equal, if a manufacturer were to increase the
production of one of its higher fuel economy models and decrease the
production of one of its lower fuel economy models, both its actual
level of CAFE and its required level of CAFE would increase.
Likewise, again all other things being equal, if a manufacturer
were to redesign a model so as to decrease its footprint (thereby
presumably also decreasing its weight), the model will become subject
to a higher target. Again, as a result, both the manufacturer's actual
CAFE and required CAFE would increase. Thus, we have substantially
reduced the incentive for a compliance strategy that could cause
further divergence in the size of the light truck fleet and increase
rollover propensity.
The reduced effectiveness of those actions as compliance strategies
under Reformed CAFE increase the likelihood that manufacturers will
choose two other actions as the primary means of closing the gap
between those two levels: (1) Reducing vehicle weight while keeping
footprint constant, and (2) adding fuel-saving technologies. Both of
those actions would increase a manufacturer's actual CAFE without
changing its required CAFE. Nevertheless, since a change in a vehicle's
footprint will result in a change in both actual and required CAFE,
manufacturers will have more flexibility to respond to consumer demand
for vehicles with different footprint values without harming their
ability to comply with CAFE standards or adversely affecting safety.
ii. Reduces the Difference Between Car and Light Truck CAFE Standards
In discussing the proposed step-function CAFE standard, we stated
that the Reformed CAFE system would reduce the disparity between car
and light truck standards--the so called ``SUV loophole''--which in
turn would promote increased safety because the disparity has created
an incentive (beyond that provided by the market by itself) to design
vehicles to be classified as light trucks instead of cars.\102\ The
continuous function standard adopted today will operate in the same
manner. The fuel economy targets along the continuous function for the
smaller footprint categories of light trucks would, by MY 2011, be at
or near (and for the smallest light trucks above) the level of the
current 27.5 mpg CAFE standard for cars.
---------------------------------------------------------------------------
\102\ NAS Report (p. 88) noted that that gap created an
incentive to design vehicles as light trucks instead of cars.
---------------------------------------------------------------------------
One way to design vehicles so that they are classified as light
trucks instead of passenger cars is to design them so that they have
higher ground clearance and higher approach angles.\103\ Designing
vehicles so that they have higher ground clearance results in their
also having a higher center of gravity. Generally speaking, light
trucks have a higher center of gravity than cars, and thus are more
likely than cars to rollover. Moreover, in order to create a higher
approach angle, it is necessary to raise or minimize the front
structure below the front bumper, which increases the likelihood that a
light truck will override a car's body in a front or rear end crash. It
also increases the likelihood that when a light truck crashes into the
side of a car, its front end will pass over the car's door sill and
intrude farther into the car's occupant compartment. In addition to not
being structurally aligned with cars, light trucks are generally
heavier than passenger cars, which add to their compatibility problems
with cars.
---------------------------------------------------------------------------
\103\ The term ``approach angle'' is defined by NHTSA in 49 CFR
523.2 as meaning ``the smallest angle, in a plane side view of an
automobile, formed by the level surface on which the automobile is
standing and a line tangent to the front tire static loaded radius
arc and touching the underside of the automobile forward of the
front tire.''
---------------------------------------------------------------------------
Both NRDC and the Union of Concerned Scientists questioned the
effectiveness of the proposed Reformed CAFE system in limiting the
incentive to produce light trucks as opposed to passenger cars. The
Union of Concerned Scientists stated that not all passenger car-like
light trucks would be in the first two of the proposed categories. The
Union of Concerned Scientists listed the Ford Freestyle and the Dodge
Magnum as examples of passenger car-like light trucks that have
footprint values larger than proposed categories one and two, and thus
would be subject to fuel economy targets lower that the passenger car
standard. NRDC cited a forecast from The Planning Edge forecast which
suggested that 27 new models of small and crossover vehicles would be
added to the light truck fleet between MY 2005 and MY 2010, some of
which would not be in the first category of the proposed CAFE
structure. NRDC stated that the Reformed CAFE structure would still
provide an incentive for automakers to classify vehicles as light
trucks.
As stated above, the Reformed CAFE system will compare smaller
light trucks to fuel economy levels more comparable to the passenger
car standard. A vehicle such as the Ford Escape, with a footprint of
43.5 square feet, will be compared to a fuel economy target of 27.3 mpg
in MY 2011. This significantly minimizes the incentive to manufacturer
a vehicle as a light truck as opposed to a passenger car, solely for
CAFE purposes.
c. More Equitable Regulatory Framework
The Reformed CAFE system adopted today provides a more equitable
regulatory framework for full-line vehicle manufacturers and creates a
level playing field for all manufacturers.
The Unreformed CAFE system cannot match the Reformed CAFE system in
terms of providing an equitable regulatory framework for different
vehicle manufacturers. Under Unreformed CAFE, all vehicle manufacturers
are required to comply with the same fleet-wide average CAFE
requirement, regardless of their product mix. For full-line
manufacturers, this creates an especially burdensome task. We note that
these manufacturers often offer vehicles that have high fuel economy
performance relative to others in the same size class, yet because they
sell many vehicles in the larger end of the light truck market, their
overall CAFE is low relative to those
[[Page 17622]]
manufacturers that concentrate in offering smaller light trucks. As a
result, Unreformed CAFE is binding for such full-line manufacturers,
but not for limited-line manufacturers who sell predominantly smaller
light trucks. The full-line vehicle manufacturers have expressed a
legitimate competitive concern that the part-line vehicle manufacturers
are entering the larger end of the light-truck market with an
accumulation of CAFE credits. While this concern has merit, it is also
the case that some part-line manufacturers (e.g., Toyota and Honda)
have been industry innovators in certain technological aspects of fuel-
economy improvement.
As with the proposed step-function, the Reformed CAFE program
adopted today requires manufacturers to comply with a fuel economy
level that is representative of that manufacturer's actual production
mix. Under both functions, vehicles are compared to fuel economy
targets more representative of a vehicle's fuel saving capabilities
than comparison to a single flat standard. In fact, a required fuel
economy level under the continuous function is more representative of a
manufacturer's capabilities, because a target is established for each
specific vehicle footprint, as opposed to the proposed step function
for which a target would have been established for a range of footprint
values.
d. More Responsive to Market Changes
Reformed CAFE is more market-oriented because it respects economic
conditions and consumer choice. Reformed CAFE does not force vehicle
manufacturers to adjust fleet mix toward smaller vehicles unless that
is what consumers are demanding. As the industry's sales volume and
product mix changes in response to economic conditions (e.g., gasoline
prices and household income) and consumer preferences (e.g., desire for
seating capacity or hauling capability), the expectations of
manufacturers under Reformed CAFE will, at least partially, adjust
automatically to these changes. Accordingly, Reformed CAFE may reduce
the need for the agency to revisit previously established standards in
light of changed market conditions, a difficult process that undermines
regulatory certainty for the industry. In the mid-1980's, for example,
the agency relaxed several Unreformed CAFE standards because fuel
prices fell more than expected when those standards were established
and, as a result, consumer demand for small vehicles with high fuel
economy did not materialize as expected. By moving to a market-oriented
system, the agency may also be able to pursue more multi-year
rulemakings that span larger time frames than the agency has attempted
in the past.
E. Comparison of Estimated Costs To Estimated Benefits
1. Costs
In order to comply with the Reformed CAFE standards, we estimate
the average incremental cost per vehicle to be $66 for MY 2008, $201
for MY 2009, $213 for MY 2010, and $271 for MY 2011. Under the Reformed
CAFE system, a greater number of manufacturers will be required to
improve their fleets and make additional expenditures than under the
Unreformed CAFE system. The level of additional expenditure that would
be necessary beyond already planned investment varies for each
individual manufacturer. These individual expenditures are discussed in
more detail in Chapter VII of the FRIA. As stated above, these costs
are distributed across a greater share of the industry.
The total incremental costs (the costs necessary to bring industry
from 22.2 mpg, the level required by the standard for MY 2007, to the
final rule levels) are estimated to be $553 million for MY 2008, $1,724
million for MY 2009, $1,903 million for MY 2010, and $2,531 million for
MY 2011. A comparison between the Reformed and Unreformed CAFE system
costs is shown in Table 9. By policy design, the mpg levels under
Reformed CAFE were set so that the industry-wide costs of Reformed CAFE
are roughly equal to the industry-wide costs of Unreformed CAFE for MY
2008-2010.
Table 9.--Estimated Cost From Reformed and Unreformed CAFE Systems for MYs 2008-2010
[in millions of year 2003 dollars]
----------------------------------------------------------------------------------------------------------------
MY 2008 MY 2009 MY 2010
----------------------------------------------------------------------------------------------------------------
Reformed CAFE system............................................ 553 1,724 1,903
Unreformed CAFE system.......................................... 536 1,621 1,752
----------------------------------------------------------------------------------------------------------------
2. Benefits
The benefits analysis applied to the final standards under the
Unreformed CAFE system was also applied to the standards under the
final Reformed CAFE system. Benefit estimates include both the benefits
from fuel savings and other economic benefits from reduced petroleum
use. A more detailed discussion of the application of this analysis to
the required fuel economy levels under the Reformed CAFE system can be
located in Chapter VIII of the FRIA.
Adding benefits from fuel savings to other economic benefits from
reduced petroleum use as a result of the Reformed CAFE standards
produced an estimated incremental benefit to society. The total value
of these benefits is estimated to be $782 million for MY 2008, $2,015
million for MY 2009, $2,336 million for MY 2010, and $2,992 million for
MY 2011, based on fuel prices ranging from $1.96 to $2.39 per gallon.
These estimates are provided as present values determined by applying a
7 percent discount rate to the future impacts. We translated impacts
other than fuel savings into dollar values, where possible, and then
factored them into our total benefit estimates. The benefits analysis
for Reformed CAFE is based on the same assumptions as the benefits
analysis for Unreformed CAFE.
Based on the forecasted light truck sales from AEO 2005 and an
assumed baseline fuel economy (i.e., the industry wide fuel economy
level if the MY 2007 standard were to remain in effect), we estimated
the fuel savings from the Reformed CAFE program. This analysis resulted
in estimated lifetime fuel savings of 746 million, 1,940 million, 2,230
million, and 2,834 million gallons under the Reformed CAFE standards
for MY 2008, 2009, 2010, and 2011 respectively.
NHTSA estimates that the direct fuel-savings to consumers account
for the majority of the total benefits, and by themselves exceed the
estimated costs of adopting more fuel-efficient technologies. In sum,
the total incremental costs by model year compared to the incremental
societal benefits by model year are as follows:
[[Page 17623]]
Table 10.--Comparison of Incremental Costs and Benefits for the Reformed CAFE Standards
[In millions]
----------------------------------------------------------------------------------------------------------------
MY 2008 MY 2009 MY 2010 MY 2011
----------------------------------------------------------------------------------------------------------------
Total Incremental Costs*........................ $553 $1,724 $1,903 $2,531
Total Incremental Benefits*..................... 782 2,015 2,336 2,992
----------------------------------------------------------------------------------------------------------------
* Relative to the 22.2 mpg standard for MY 2007
These estimates are provided as present values determined by applying a
7 percent discount rate to the future impacts.
In light of these figures, we have concluded that the standards
established under the Reformed CAFE system serve the overall interests
of the American people and are consistent with the balancing that
Congress has directed us to do when establishing CAFE standards. For
all the reasons stated above, we believe the Reformed CAFE standards
represent fuel economy levels that are economically practicable and,
independently, that are a cost beneficial advancement for American
society. A more detailed explanation of our analysis is provided in
Chapter IX of the FRIA.
3. Uncertainty
As with the Unreformed CAFE standards, the agency recognizes that
the data and assumptions relied upon in our analysis have inherent
limitations that do not permit precise estimates of benefits and costs.
NHTSA performed a probabilistic uncertainty analysis on the Reformed
CAFE standards to examine the degree of uncertainty in its costs and
benefits estimates. Factors examined included technology costs,
technology effectiveness in improving fuel economy, fuel prices, the
value of oil import externalities, and the rebound effect. This
analysis employed Monte Carlo simulation techniques to examine the
range of possible variation in these factors. As a result of this
analysis, the agency thinks it very likely that the benefits of the
Reformed CAFE standards will exceed their costs for all four model
years. A detailed discussion of the uncertainty analysis is provided in
Chapter X of the FRIA.
F. MY 2008-2011 Reformed CAFE standards
The manner in which a manufacturer's required overall CAFE for a
model year under the Reformed system is computed is similar to the way
in which its actual CAFE for a model year has always been calculated.
Its required CAFE level is computed on the basis of the production and
the footprint target as follows.
[GRAPHIC] [TIFF OMITTED] TR06AP06.024
Where:
N is the total number (sum) of light trucks produced by a manufacturer,
Ni is the number (sum) of the ith model light truck produced
by the manufacturer, and
Ti is fuel economy target of the ith model light truck,
which is determined according to the following formula, rounded to the
nearest hundredth: where,
[GRAPHIC] [TIFF OMITTED] TR06AP06.025
a = the maximum fuel economy target (in mpg)
b = the minimum fuel economy target (in mpg)
c = the footprint value (in square feet) at which the fuel economy
target is midway between a and b
d = the parameter (in square feet) defining the rate at which the value
of targets decline from the largest to smallest values
e = 2.718
x = footprint (in square feet, rounded to the nearest tenth) of the
vehicle model
Table 11.--Calibrated Parameter Values for Target
----------------------------------------------------------------------------------------------------------------
Model year
Parameter ---------------------------------------------------------------
2008 2009 2010 2011
----------------------------------------------------------------------------------------------------------------
a............................................... 28.56 30.07 29.96 30.42
b............................................... 19.99 20.87 21.20 21.79
[[Page 17624]]
c............................................... 49.30 48.00 48.49 47.74
d............................................... 5.58 5.81 5.50 4.65
----------------------------------------------------------------------------------------------------------------
The following is a representative sample of footprint values for MY
2005 light trucks and their associated targets for MY 2011:
Table 12.--Representative Vehicles and Their Applicable Fuel Economy
Targets for MY 2011
------------------------------------------------------------------------
Footprint
Representative vehicle(s) (square feet) Target (mpg)
------------------------------------------------------------------------
Ford F-150 Super Cab.................... 75.8 21.81
GM Silverado Extended Cab............... 65.3 21.93
Lincoln Navigator....................... 55.4 22.84
Honda Odyssey........................... 54.7 22.98
Hummer H3............................... 50.7 24.16
GM Equinox.............................. 48.2 25.19
Saturn Vue.............................. 45.2 26.56
Ford Escape............................. 43.5 27.32
------------------------------------------------------------------------
Based on the product plans provided by the manufacturers, we
project that manufacturers will be required to comply with fuel economy
levels in MYs 2008-2011 under the Reformed CAFE system as follows:
Table 13.--Projected Required Fuel Economy Levels by Manufacturer
----------------------------------------------------------------------------------------------------------------
Manufacturer MY 2008 (mpg) MY 2009 (mpg) MY 2010 (mpg) MY 2011 (mpg)
----------------------------------------------------------------------------------------------------------------
General Motors.................................. 21.9 22.6 22.9 23.2
Ford............................................ 22.7 23.2 23.8 23.9
DaimlerChrysler................................. 23.2 23.7 24.1 24.3
Nissan.......................................... 22.3 23.3 23.7 23.9
Mitsubishi...................................... 25.1 25.8 26.3 27.0
Subaru.......................................... 25.4 26.4 26.3 26.8
Toyota.......................................... 22.6 23.0 23.2 23.8
Hyundai......................................... 23.9 25.0 25.0 25.4
BMW............................................. 24.5 25.1 25.5 25.8
Porsche......................................... 23.0 23.7 24.0 24.2
VW.............................................. 23.1 23.7 24.1 24.2
Isuzu........................................... 22.2 22.9 23.2 23.4
Honda........................................... 23.3 24.0 24.4 24.6
Suzuki.......................................... 25.5 26.3 26.6 27.1
----------------------------------------------------------------------------------------------------------------
The projected required industry wide fleet fuel economy levels for
MY 2008-2010 are 22.7 mpg, 23.4 mpg, and 23.7 mpg, respectively. These
levels are more stringent than those in the NPRM. The projected
required fleet wide required fuel economy levels in the NPRM for MYs
2008-2010 were 22.6 mpg, 23.1 mpg, and 23.4 mpg, respectively. The
increase in stringency is a result of higher compliance costs
associated with the Unreformed CAFE standards. Even though the
Unreformed CAFE standards are the same as those proposed in the NPRM,
the associated compliance costs have increased because the updated
product plans reflect the fact that manufacturers have already planned
to apply several of the lower cost fuel improvement technologies. As a
result, the Stage analysis applies technologies with higher costs in
order to achieve the same fuel economy level under the proposed
Unreformed CAFE system. Because the Reformed CAFE system is constrained
by costs of the Unreformed CAFE system in the transition period, the
Volpe model has more to ``spend'' (and spend more efficiently than
under an Unreformed standard) when applying technologies in the
Reformed CAFE system. The result is Reformed CAFE standards with higher
stringency than in the NPRM.
We estimate that the industry wide fleet fuel economy average in MY
2011 will be 24.0 mpg. Based on the product plans submitted in response
to the ANPRM, we estimated that manufacturers intended to achieve an
industry wide fuel economy level of approximately 22.0 mpg. In the NPRM
the proposed Reformed standard for MY 2011 would have been 23.9 mpg,
with MDPVs remaining unregulated. As a result of today's final rule, we
project a required industry wide fuel economy of 24.0 in MY 2011, with
MDPVs included in the light truck fleet.
While the reformed standards adopted today are more stringent than
those proposed, and we are regulating a larger fleet in MY 2011, we
have determined that the Reformed CAFE system and associated target
levels for MYs 2008-2011 will result in required fuel economy levels
that are both
[[Page 17625]]
technologically feasible and economically practicable for
manufacturers.
VII. Technology issues
A. Reliance on the NAS Report
The agency affirms our reliance on the cost and fuel saving
estimates provided in the NAS report for the technologies relied upon
in our analysis. The NAS cost and effectiveness numbers are the best
available estimates at this time. They were determined by a panel of
experts formed by the National Academy of Sciences. The report has been
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 Council. The purpose
of the independent review was to provide candid and critical comments
that assisted the authors and the NAS in making the published report as
sound as possible and to ensure that the report met institutional
standards for objectivity, evidence and responsiveness to the study
charge. The agency has reviewed other studies of technologies available
to improve fuel economy and have concluded that the estimates of fuel
economy technology effectiveness and costs developed by the NAS are the
most reliable available. Alternative estimates recommended by some
commenters have not been subject to the same level of expert and public
review, and thus are not suitable for use by NHTSA in establishing fuel
economy standards.
B. Technologies Included in the Manufacturers' Product Plans
The Alliance, DaimlerChrysler, Ford, General Motors, Nissan,
Toyota, and Sierra Research argued that the agency's analyses
incorrectly projected the use of certain technologies that were either
already featured on vehicles or were included in the manufacturer's
product plans. Because the benefits of these technologies are already
incorporated into the manufacturer's baseline capabilities, any further
projected fuel economy improvements were incorrectly attributed. The
commenters urged the agency to revise our analyses to account for
technologies that were already on vehicles or in the product plans
submitted to the agency.
In performing the Stage Analysis and the Reformed CAFE analysis to
determine the final CAFE standards, the agency relied on manufacturers'
comments and confidential product plan information to adjust our
calculations. Accordingly, the technologies that were already featured
on certain vehicles or already incorporated into the manufacturers'
baseline product plans were removed from the Stage Analysis. We note
that the detailed description of the adjustments made to the Stage
Analysis contains confidential information and is discussed in general
terms in the FRIA. However, this final rule provides a description of
the steps taken in order to address comments and discrepancies between
the product plan information available to NHTSA in preparing the August
2005 NPRM and this final rule.
C. Lead Time
In developing the proposal, the agency relied on lead time
assumptions for the introduction of technologies based on technology
availability and its fuel saving benefits. The Alliance, Sierra
Research, and most vehicle manufacturers argued that our application
rates and timing did not adequately consider technology readiness and
the typical automotive product lifecycle in proposing the Unreformed
CAFE standards. Honda and Toyota cited the NAS report, which stated
that ``the widespread penetration of even existing technologies will
probably require 4 to 8 years.'' \104\ Honda and Toyota supported the
NAS findings with regard to lead time assumptions.
---------------------------------------------------------------------------
\104\ Honda comment p. 6, and Toyota comment p. 3, quoting the
NAS report.
---------------------------------------------------------------------------
Underscoring the importance of lead time, Toyota asked NHTSA to
propose CAFE standards for model years beyond 2011 as soon as possible
in order to afford the manufacturers an opportunity for timely product
development and planning. Toyota argued that in Japan and Europe, fuel
economy targets for the 2008 to 2010 model years have been in place
since 1999 and 2000 respectively.
Manufacturers offered the following specific arguments in favor of
reduced phase-in rates and extending lead time.
Product cycles and finite engineering resources. The commenters
argued that technologies cannot be incorporated in every vehicle at the
same time due to capital costs, differing vehicle and powertrain
planning cycles, and engineering resource constraints, both at the
manufacturer level as well as at the supplier level. As DaimlerChrysler
explained, resource constraints dictate that a new technology is first
integrated into a single product and later deployed fleet-wide.
Similarly, Ford argued that there are not enough resources available to
develop and implement multiple technologies simultaneously across the
entire product lineup within a short period of time. Toyota stressed
that the lead time is not how long it takes to develop a given
technology, but how long it takes to incorporate this technology into
different vehicle configurations. The manufacturers stated that product
cycles are typically staggered so that not all light trucks undergo
changes in the same timeframe. These commenters argued that in order to
realistically reflect the manufacturers' capabilities, the Stage
Analysis should stagger technology application and avoid projecting
fleet-wide application of any one technology within a single model
year.
With respect to the actual duration of product cycles, different
manufacturers argued that for light trucks, they last from at least 5
to more that 8 years. Further, they argued that the product and
technology plans for each model are usually finalized several years
prior to their introduction. Manufacturers stated that after design
decisions affecting the powertrain are ``frozen,'' it is nearly
impossible to implement any major changes to address fuel economy.
Incorporating ``off-the-shelf'' technologies. The Alliance and
vehicle manufacturers argued that even readily available ``off-the-
shelf'' technology cannot be simply bolted onto an existing vehicle
because integrating any technology into the vehicle is a complex task
requiring advance preparations, not just with respect to vehicle
integration, but also with respect to the automated assembly lines.
They also argued that the manufacturers need time to ensure that the
new technology is optimized not just for vehicle integration and
assembly, but also for serviceability and customer satisfaction in-use.
The manufacturers also argued that NHTSA should not assume that
manufacturers can readily adopt ``off-the-shelf'' technologies from one
vehicle application to another.
Customer acceptance. The Alliance and vehicle manufacturers argued
that incorporation of specific technologies is also dependent upon
customer acceptance. For example, DaimlerChrysler argued that a
premature fleet-wide application of new technology could result in
widespread customer rejection, which can be avoided if a given
technology is slowly phased in and allowed to mature. Many commenters
also argued that simultaneous fleet-wide incorporation of new
technology raises product quality and durability concerns that could
affect customer acceptance. For example, Honda argued that new
technologies need to be ``piloted'' on a limited number of vehicles, to
ensure
[[Page 17626]]
adequate quality before being spread to a wider number of sales.
The agency recognizes that vehicle manufacturers must have
sufficient lead time to incorporate changes and new features into their
vehicles. In making its lead time determinations, the agency considered
the fact that vehicle manufacturers follow design cycles when
introducing or significantly modifying a product. For the final rule,
the agency based our lead time assumptions more closely on the findings
of the NAS report, typically relying on the mid-point of the NAS range
for full market penetration, i.e., 6 years or approximately a 17
percent phase-in rate. As illustrated in Appendix B of this document,
and as discussed further below, the agency made numerous adjustments to
timing when applying technologies in order to address lead time
concerns.
D. Technology Effectiveness and Practical Limitations
The Alliance, General Motors, DaimlerChrysler, Ford, Toyota, and
Sierra Research argued that the agency overstated potential fuel
economy benefits of certain technologies in its analyses. The
manufacturers argued that benefits assigned to a given technology are
not the same for every vehicle. Instead, these commenters asserted,
actual fuel economy benefits depend on vehicle characteristics.
Additionally, the Alliance, Toyota, DaimlerChrysler, Ford, and General
Motors argued that the agency's analyses incorporate a number of
technologies that have not yet been fully developed or have
implementation issues that limit their wide-spread availability.
Manufacturers provided the following examples of instances in which
they believe the agency overestimated fuel saving potentials or applied
technologies in an overly aggressive manner:
Aerodynamic Drag Reduction--Manufacturers stated that some
aerodynamic changes could impact vehicle compatibility and result in
styling constraints that could affect consumer demand;
Improved Rolling Resistance--These commenters stated that
recently improved Federal tire safety standards are so stringent they
limit the availability of low rolling resistance tires. Further, these
commenters stated that consumers demand all-season tires that perform
well in winter weather conditions but sacrifice rolling resistance.
Variable Valve Lift and Timing--Manufacturers stated that
benefits of this technology must be offset by friction due to the
increased number of sliding components required for a 2-step lift
system, and by increased oil pump losses due to the need for more oil
pump capacity. Further, these commenters stated that application of
this technology to a multi-valve base engine will not result in
sufficient incremental performance improvement to allow downsizing the
engine;
Hybrids and Diesels--Manufacturers asserted that the fuel
economy benefit of hybrids varies depending on the type of hybrid, the
application, and the driving cycle. With respect to diesels,
manufacturers stated that widespread customer acceptance is still to be
determined due to higher costs, past experience with older diesel
technology, and challenges faced by manufacturers regarding Tier 2 and
LEV II emissions compliance.
The manufacturers also argued that some estimates did not account for
synergy or ``system effects.'' That is, when multiple technologies that
address the same opportunity for improvement (e.g., pumping losses) are
combined, their effectiveness is diminished because they address the
same type of loss. Thus, the manufacturers argued that the lack of a
full examination of ``system effects'' has resulted in a set of
projected fuel economy improvements that overestimate the technologies'
combined capabilities. With respect to hybrid engines, several
manufacturers argued that the fuel economy benefit of hybrid vehicles
varies depending on the type of hybrid, the application, and the
driving cycle.
In contrast, environmental organizations generally stated that the
agency underestimated the availability of fuel saving technologies.
These commenters generally held that existing technologies could be
applied to manufacturers' fleets and result in fuel economy
performances in excess of 26 mpg. The Union of Concerned Scientists
stated that the agency underestimated the availability of hybrids, and
noted that Toyota has stated that it plans for hybrids to account for
25 percent of its sales by early next decade. The Union of Concerned
Scientists also cited Ford's goal of having the capacity to produce
250,000 hybrids by 2010. The comment provided by Sierra Club, U.S.
PIRG, and NET described a study in which ``existing fuel saving and
safety technology'' applied to a Ford Explorer would result in a 71
percent improvement in fuel economy.\105\
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\105\ Friedman et al., Building a Better SUV: A Blueprint for
Saving Lives, Money and Gasoline. Union of Concerned Scientists and
the Center for Auto Safety. September 2003.
---------------------------------------------------------------------------
We note that the hybrid numbers cited by the Union of Concerned
Scientists refer to Ford's goal for introducing hybrids in both its
light truck fleet and its passenger car fleet. With respect to the
study cited by Sierra Club et al., the technology applications applied
to the Ford Explorer have not all been proven to be feasible through
application in a production vehicle.
With respect to ``systems effects,'' NHTSA's analysis used fuel
economy benefit values that account for the diminished effectiveness
that one technology may have when used in concert with other similar
technologies. For instance, a number of technologies reduce an engine's
pumping losses. For these technologies, NAS offers two fuel economy
benefit values--a higher value for a ``baseline'' engine, with no such
technologies applied, and a lower value for a ``reference'' engine with
pumping loss partially reduced. The difference between the
``reference'' and ``baseline'' values is an estimate of the synergistic
effect that results from applying similar technologies to the same
vehicle. Whenever an additional technology is selected for a vehicle
that already has one or more similar technologies, NHTSA always chooses
the lower value to account for these synergies.
E. Technology Incompatibility
The Alliance, DaimlerChrysler, Ford, General Motors, Nissan, and
Toyota argued that certain technologies projected in the agency
analyses are incompatible with their vehicle or engine architecture.
While their specific comments regarding NHTSA's technology projections
are confidential, we are able to provide some generic examples.
Manufacturers argued that not all engines are readily compatible
with cylinder deactivation. For some, incorporation of this technology
would require substantial investment and engineering resources.
Similarly, manufacturers argued that switching from a single overhead
cam design to a dual overhead cam design would, in some instances,
require a complete engine redesign. Manufacturers also argued that
because of greater torque, CVTs are not compatible with heavier
vehicles equipped with large V8 engines. Instead, they work best on
lighter light trucks based on passenger car platforms. Similarly,
manufacturers argued that electrical power steering is compatible with
only smaller light trucks, unless the heavier vehicles were also
switched to 42-volt electrical systems. At least one manufacturer
asserted that low friction oil might be incompatible with some engine
designs
[[Page 17627]]
and expressed concerns about the availability of low friction oil in
some markets. Finally, the manufacturers argued that because of the
consumer demand and expectations for off-road capabilities, all-season
traction, and greater stopping performance, low rolling resistance
tires are incompatible with some light truck models.
In applying technology in the Stage Analysis and the Reformed CAFE
analysis to determine the final standards, the agency carefully
considered the manufacturers' comments and confidential product plan
information to adjust our calculations. In some instances, the
manufacturers' comments reflected strategies already employed in the
agency's analysis. For example, the NPRM analysis did not apply CVTs to
larger light trucks equipped with V8 engines. Further, the technologies
that turned out to be incompatible with certain vehicles were removed
from the Stage Analysis. When it was practicable to do so, the agency
substituted different technology applications that were compatible with
those vehicles. As explained above, the detailed description of the
adjustments made to the Stage Analysis contains confidential
information and is not publicly available. However, Appendix A of this
document and the FRIA provide a description of the steps taken in order
to address the issue of incompatible technologies (see FRIA p. VI-10).
F. Weight Reduction
In the analyses for the NPRM, we included the possibility of
limited vehicle weight reduction for vehicles over 5,000 lbs. curb
weight where we determined that weight reduction would not reduce
overall safety and would be a cost effective choice.\106\ Use of the
5,000 lbs cut-off point was based on analysis in the Kahane study. The
Kahane study found that the net safety effect of removing 100 pounds
from a light truck is zero for light trucks with a curb weight greater
than 3,900 lbs.\107\ However, given the significant statistical
uncertainty around that figure, we assumed a confidence bound of
approximately 1,000 lbs. and used 5,000 lbs. as the threshold for
considering weight reduction.\108\
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\106\ The amount of projected weight reduction was two percent
for light trucks with a curb weight between 5,000 and 6,000 lbs and
up to four percent for light trucks with a curb weight over 6,000
lbs.
\107\ Kahane, Charles J., PhD, Vehicle Weight, Fatality Risk and
Crash Compatibility of Model Year 1991-99 Passenger Cars and Light
Trucks, October 2003. DOT HS 809 662. Page 161. Docket No. NHTSA-
2003-16318 (http://www.nhtsa.dot.gov/ cars/rules/regrev/evaluate/
pdf/809662.pdf)
\108\ See the discussion of ``Effect of Weight and Performance
Reductions on Light Truck Fuel Economy'' in Chapter V of the PRIA.
---------------------------------------------------------------------------
Several commenters supported our assumption that manufacturers
could respond to the CAFE standards with limited weight reductions that
would not reduce safety. Conversely, several commenters stated that any
weight reduction will lead to a reduction in safety. These comments are
discussed below.
Before discussing the comments, we would like to clarify that our
analysis does not mandate weight reduction, or any specific technology
application for that matter. We performed the analysis for the NPRM and
the final rule on the assumption that manufacturers would find it cost-
effective to cut some weight out of light trucks that have a curb
weight greater than 5,000 lbs. Our analysis relied exclusively on other
fuel-saving technologies for lighter light trucks to demonstrate that
manufacturers can comply with the required fuel economy levels
established today without the need for unsafe compliance measures.
Honda cited several reports, which it asserted demonstrated that
limited weight reductions would not reduce safety and could possibly
decrease overall fatalities. Honda stated that the 2003 study by DRI
found that reducing weight without reducing size slightly decreased
fatalities, and that this was confirmed in a 2004 study by DRI that
assessed new data and methodology changes in the 2003 Kahane Safety
Study. Honda asserted that the DRI results tend to confirm ``that curb
weight reduction would be expected to decrease the overall number of
fatalities.''
DRI submitted an additional study, Supplemental Results on the
Independent Effects of Curb Weight, Wheelbase, and Track Width on
Fatality Risk in 1985-1998 Model Year Passenger Cars and 1985-1997
Model Year LTVs, Van Auken, R.M. and J. W. Zellner, May 20, 2005. This
DRI study concluded that reductions in footprint are harmful to safety,
whereas reductions in mass while holding footprint constant would
benefit safety. The DRI study disagreed with NHTSA's finding that mass
had greater influence than track width or wheelbase on the fatality
risk of passenger cars in non-rollover crashes.
The Union of Concerned Scientists stated that recent studies
indicate that increases in weight have very little impact. However, the
Union of Concerned Scientists did not cite any specific study. Further,
Environmental Defense stated that the Kahane study on which the agency
relied for determining the weight reduction limitations was flawed.
Environmental Defense stated that the Kahane study \109\ does not
adequately distinguish between the effects of size and weight on motor
vehicle accident mortality, despite the large body of evidence
suggesting that other factors besides vehicle weight, such as vehicle
size and design, have critical implications for vehicle safety.
---------------------------------------------------------------------------
\109\ See footnote 90.
---------------------------------------------------------------------------
While NHTSA agrees that limited weight reduction to heavier
vehicles will not reduce safety, we continue to disagree with DRI's
overall conclusion, cited by Honda, that weight reductions while
holding footprint constant would significantly benefit safety in
lighter vehicles. NHTSA's analyses of the relationships between
fatality risk, mass, track width and wheelbase in 4-door 1991-1999
passenger cars (Docket No. 2003-16318-16) found a strong relationship
between track width and the rollover fatality rate, but only a modest
(although significant) relationship between track width and fatality
rate in non-rollover crashes. Even controlling for track width and
wheelbase--e.g., by holding footprint constant--weight reduction in the
lighter cars is strongly, significantly associated with higher non-
rollover fatality rates in the NHTSA analysis. By contrast, the DRI
study of May 20, 2005 analyzed 4-door cars and found a strong
relationship between track width and fatality risk, and non-significant
associations of mass and wheelbase with fatality risk (Docket No. 2005-
22223-78, p. 31). In other words, when DRI analyzed the same group of
vehicles as NHTSA, they did not get the same results. This difference
indicates that DRI's analytical method and/or database are not the same
as NHTSA's.
The agency continues to stand by our analytical method and database
and we continue to believe that weight reduction in lighter vehicles
would reduce safety. We also continue to believe that weight reductions
in the heavier light trucks, while holding footprint constant, will not
likely result in net reduction in safety.
IIHS expressed similar concern with weight reduction as the agency,
stating that the safety cost of reduced mass would be most apparent if
the weight reductions were to occur among the smallest and lightest
vehicles. Referencing the 2003 Kahane report, IIHS indicated that
decreases in mass among vehicles weighing more than
[[Page 17628]]
5,000 pounds could result in a net safety benefit. However, IIHS
continued to caution that reducing mass reduces, on average, a
vehicle's ability to protect its occupants, noting that the effects of
mass on vehicle crashworthiness have been observed and documented
(Kahane, 1997; Partyka, 1996; O'Neill et al., 1974).
General Motors and the Alliance were more explicit in their
concerns over the safety impact associated with weight reduction. The
Alliance stated that the fundamental laws of physics dictate that
smaller and/or lighter vehicles are less safe than larger/heavier
counterparts with equivalent safety designs and equipment.
General Motors agreed that improvements in material strength,
flexibility, and vehicle design have helped improve overall vehicle and
highway safety. But, General Motors added, for a given vehicle,
reducing mass generally reduces net safety. Further, General Motors
stated that it does not intentionally reduce mass by replacing it with
advanced materials, presuming that such action alone will result in
improved protection for the occupants in a lighter vehicle: vehicles
with larger mass will provide better protection to occupants involved
in a crash than a vehicle of the same design with less mass, given
equivalent crashes.
General Motors also questioned the agency's reliance on a 5,000
lbs. minimum vehicle weight for considering weight reduction, which was
based on the finding of the 2003 Kahane report that reducing curb
weight negatively impacts safety only at curb weights under 3,900
pounds. General Motors stated that the agency's conclusion is
inconsistent with the sensitivity analysis performed by William E.
Wecker Associates, Inc. and submitted to the ANPRM docket. General
Motors stated that the inflection point on the Wecker report's graph
for General Motors light trucks in both the periods of MYs 1991-1995
and MYs 1996-1999 is higher than 5,000 pounds.
Additionally, General Motors stated that the NPRM did not
acknowledge or rationally respond to the main point of the Wecker
report, which was that Dr. Kahane's ``analysis alone does not support
the proposition that a crossover weight at or near 5,085 pounds is a
robust, accurate description of the field performance of the [light
truck] fleet[.]''
We believe that General Motors is confusing the 5,085 lbs.
crossover weight (where the safety effect of mass reduction in a
vehicle weighing exactly 5,085 lbs., is zero) with the breakeven point
described in the NPRM, which is the point where the total effect of
reducing all vehicles heavier than the breakeven weight by an equal
amount is zero. NHTSA estimated that the breakeven point as described
in the NPRM is 3,900 lbs., if footprint is held constant.
If the 3,900 lbs. estimate were perfectly accurate, we would be
confident that weight reductions in vehicles down to 3,900 pounds would
not result in net harm to safety. However, we agree with commenters
that there is considerable uncertainty about the crossover weight and
also the breakeven point. Therefore, in our analysis, we limited weight
reduction to vehicles with a curb weight greater than 5,000 pounds. We
believe that the 5,000 lbs. limit is sufficient so that we can be
confident that such weight reductions will not have net harm on safety.
SUVOA encouraged NHTSA to emphasize the importance of making sure
that CAFE requirements do not encourage vehicle downsizing ``or any
other action that might have an adverse effect on safety.'' SUVOA cited
several reports in support of its assertion that downsizing harms
safety.\110\. As explained above, the agency has applied weight
reduction only to those vehicles for which we are confident that such
reduction will not negatively impact safety.
---------------------------------------------------------------------------
\110\ SUVOA provided the following cites in support of its
assertion:
2001, the National Academy of Sciences affirmed that
earlier downsizing of vehicles following the imposition of CAFE
regulations resulted in an additional 1,300 to 2,600 deaths and an
additional 20,000 serious injuries per year.
A Harvard School of Public Health-Brookings Institution
study in the 1990s found that vehicle downsizing due to federal fuel
economy mandates increased occupant deaths by 14 to 27 percent.
An in-depth analysis by USA Today in 1999, using NHTSA
and automobile insurance industry data, found that since 1975, 7,700
additional deaths occurred for every mile per gallon gained. By
1999, vehicle downsizing had killed more than 46,000 Americans.
Factoring in the ensuing six years through 2005, the total
conservatively eclipses 55,000 deaths.
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The Competitive Enterprise Institute stated that the agency's own
rulemaking demonstrates the safety of weight, specifically the FMVSS
No. 216, Roof crush, rulemaking. The Competitive Enterprise Institute
noted that in that rulemaking, NHTSA determined that the proposed
requirement of more protective roofs would ``add both cost and weight''
to the vehicles. This commenter also stated that NHTSA found that the
stronger the roof crush standard, the more added weight it would
entail. The Competitive Enterprise Institute also cited the IIHS, March
19, 2005 Status Report on fatality risks in different vehicles, which
the commenter stated concluded that in each vehicle group, ``the
heavier vehicles, like bigger ones, generally had lower death rates.''
The weight safety analysis performed by the agency for this
rulemaking accounted for not only the occupant safety (crashworthiness)
of the vehicle, but also the rollover propensity of the vehicle, and
the safety of the occupants of other vehicles it strikes. While in some
instances, the crashworthiness of a vehicle can be improved through
design changes that add weight to a vehicle, design changes can also
reduce a vehicle's weight without reducing crashworthiness, and may in
some instances improve the safety of a vehicle (e.g., reduce rollover
propensity).
Environmental Defense commented that by limiting the use of weight
reduction to heavier vehicles, the agency disregarded the likelihood
that manufacturers would rely on weight reduction in smaller, lighter
vehicles. Environmental Defense suggested that the improved baselines
should reflect this weight reduction strategy.
Environmental Defense asserted that weight reduction is among the
most common and cost-effective options available to manufacturers for
improving vehicle fuel economy across the light truck fleet. However,
Environmental Defense referenced estimates presented in DeCicco (2005)
that suggest that the cost per pound of weight reduced through use of
high-strength steel and advanced engineering techniques has been as low
as, or lower than, 31 cents per pound reduced.
Moreover, Environmental Defense stated, the exclusion of mass
reduction in NHTSA's analysis bears no relation to what will actually
happen in the marketplace when standards are implemented. Environmental
Defense argued that absent safety regulations prohibiting the use of
mass reductions, manufacturers are likely to choose this compliance
alternative in vehicles of all weights as a cost effective way to
comply with CAFE. Environmental Defense stated that NHTSA should
include mass reduction among its compliance alternatives for all light
trucks.
As stated above, the agency does not dictate which fuel savings
technologies must be applied to vehicles. Mass reduction is a
compliance alternative for all light trucks. However, one of the
considerations in setting fuel economy standards is to set standards
that will not lead to a reduction in the safety of the light truck
fleet. The standards established by the agency are those capable of
being achieved by the manufacturers without the need to
[[Page 17629]]
reduce safety. If the agency were to consider weight reduction as a
compliance option for all light trucks, we are concerned that the
resulting increased stringency would force unsafe downweighting.
VIII. Economic Assumptions
A number of commenters raised global issues related to the agency's
proposed CAFE standards, questioning everything from how costs and
benefits were calculated to whether the standard is necessary or
beneficial at all. Aside from raising issues with specific economic
assumptions relied upon by the agency, commenters also more broadly
questioned the rationale of the light truck CAFE program in general.
The Competitive Enterprise Institute (CEI) argued that NHTSA's
proposed CAFE standards are unnecessary and that they could potentially
increase the nation's dependence on foreign oil. CEI argued that
particularly since the 2005 hurricane season dramatically drove up fuel
prices at the pump, vehicle sales of large SUVs and other relatively
inefficient vehicles have plummeted. According to CEI, market forces
have acted to improve the overall fuel economy of new vehicles without
the need for regulatory intervention. (General Motors made a similar
argument, as to how fuel economy standards are less efficient than
market forces in terms of achieving economically optimal levels of fuel
economy.)
Although the effect of market forces on fuel economy levels is a
matter of debate, NHTSA does not have the option of leaving fuel
economy to the markets. The agency is required by Congress to set light
truck fuel economy standards for every model year at the maximum
feasible level considering the need of the nation to conserve fuel,
technological feasibility and economic practicability.
A. Costs of Technology
The Alliance, Sierra Research and most vehicle manufacturers argued
that NHTSA has underestimated the costs of certain technologies.
Specific comments are set forth below.
First, General Motors stated that the costs relied upon by the
agency were derived from technologies designed for application to
passenger cars, but which are being applied to light-duty trucks
without consideration of the necessary adjustments for integrating such
technologies while maintaining the truck's utility and function. For
example, for heavier light trucks, installation of electric power
steering would also require a switch to a 42-volt electrical system,
and probably increased battery maintenance costs. General Motors argued
that the additional costs associated with integrating technologies
available on light vehicles into heavier vehicles was one of the
primary reasons for the discrepancy between their internal costs
estimates and NHTSA's costs estimates in the PRIA. General Motors
further argued that both NAS and the estimates of Energy and
Environmental Analysis (a consulting firm), inadequately document
sources for the costs they include.
The Alliance, Ford, Honda, Nissan and DaimlerChrysler reiterated
that technologies are not simply bolted onto the vehicle. Instead,
extensive modifications are often required. These modifications involve
a substantial investment. For example, the cost estimates of a given
piece of engine technology do not include the costs of redesigning the
engine, testing prototypes, mapping the engine, developing new vehicle
calibrations, and integrating the technology with the vehicle. For this
reason, Sierra Research and at least one vehicle manufacturer disagreed
with the NAS cost multiplier of 1.4 and argued that it should be
substantially greater.
For this rulemaking, the agency has decided to use the cost and
effectiveness numbers that appear in the NAS report. The NAS committee
reviewed many sources of information including presentations at public
meetings, and available studies and reports. It also met with
automotive suppliers and industry consultants including Sierra
Research. The committee then used its expertise and engineering
judgment aided by the information described above to derive its own
estimates of costs and effectiveness. After the prepublication copy was
released in July 2001, the committee reexamined its analysis.
Representatives from the industry and other stakeholders were invited
to critique the findings. Several minor errors were discovered and
corrected before publication of the final report.
The NAS cost and effectiveness numbers are presented as ranges that
reflect estimates for passenger cars, pickup trucks, and SUVs/minivans.
However, under the NAS report, the availability of these technologies
differs for various segments of the vehicle fleet. The NAS report
breaks down the availability of technology for two classes of pickups
(small and large) and four classes of SUVs/minivans (small SUV, midsize
SUV, large SUV, and minivan). Each class has a unique set of
technologies available to it. While some individual technologies can be
applied to any type of vehicle, the sets of technologies available to
passenger cars are not the same as the sets of technologies available
to light trucks. Thus, the costs assigned to passenger cars are not
being used for light trucks because the technologies differ and each
set of technologies has a unique cost estimate. Further, the cost
estimates in the NAS report include consideration of costs for light
trucks (NAS, p. 40).
Second, commenters argued that the agency did not consider
``stranded'' costs (General Motors, Sierra Research). For example, the
stringency of the Unreformed CAFE standard may force a manufacturer to
begin purchasing 6-speed transmissions from an external supplier
immediately. Consequently, in-house manufacturing efforts for which
considerable resources may have already been spent would be abandoned
without any return on that investment. Sierra Research also argued that
NHTSA has not properly accounted for costs associated with the
premature retirement of existing technology before its costs have been
fully amortized. Thus, commenters argued that NHTSA incorrectly assumed
costs of technologies introduced during normal product cycle turnover
even when the technologies were actually attributed to vehicles mid-
cycle.
Stranded costs are essentially one time write-offs that would be
difficult to identify and even more difficult to quantify, especially
in light of their offsetting tax savings implications. Write-offs of
stranded costs are likely to occur occasionally during the routine
course of business as manufacturers periodically find it necessary to
curtail production plans in response to unplanned regulatory or market
impacts. These write-offs will thus influence the long run cost of
doing business. Although manufacturers typically attempt to price
vehicles to maximize their profits, the impact of stranded costs on
vehicle prices will be constrained by market conditions, and measuring
their impact would be problematic.
As explained above in the technology discussion, the agency has
constrained its fuel economy model to give deference to manufacturers'
production plans. In determining manufacturer capabilities, significant
design changes are initiated in conjunction with redesigns and vehicle
introductions stipulated in production plans provided to NHTSA by
vehicle manufacturers. The potential for stranded costs is thus
minimized. Overall, NHTSA does not believe that the revised phase-in
schedule of technologies assumed in its
[[Page 17630]]
model would force manufacturers to incur significant stranded costs.
B. Fuel Prices
Many commenters stated that the fuel price estimates used in the
agency's analysis and modeling were too low and should be revised to
reflect the best current projections of market prices (SUVOA, NADA,
Mercatus Center, Union of Concerned Scientists, and California State
Energy Commission). Environmental organizations, citing the record
prices for fuel at the pump, went further, arguing that more stringent
standards are justified (Environmental Defense, NRDC, ACEEE).
In contrast, vehicle manufacturers requested that the agency not
rely solely on higher fuel price forecasts to automatically increase
the stringency of the CAFE standards (the Alliance, General Motors,
Mitsubishi). Such commenters urged the agency to not allow CAFE
standards to rise precipitously based upon a spike in oil commodity
prices, thereby disregarding technology costs and other limitations.
Specific comments related to fuel prices follow below.
Environmental Defense argued that NHTSA's fuel prices estimates in
its CAFE proposal, based upon AEO2005, are too low. While Environmental
Defense acknowledged NHTSA's stated intention to revise its fuel prices
estimates in light of AEO2006 projections, it argued that even this
forecast may be too low, particularly in light of private oil prices
estimates of $42 to $100 per barrel over the analysis period.
Accordingly, Environmental Defense urged NHTSA to utilize the best
available fuel price forecasts in revising the level of the standards
in the final rule.
NRDC made a similar argument regarding the proposal's fuel prices
estimates, which it perceives to be too low. To remedy this problem,
NRDC recommended that the agency use fuel price forecasts consistent
with the world oil price forecasts reported in EIA's ``High B Oil Price
Scenario'' or the International Energy Agency's World Energy Outlook
2005 ``Deferred Investment Scenario,'' forecasts which NRDC suggested
are more consistent with recent world oil prices and current petroleum
futures market prices.
As another suggestion for revising the NPRM's fuel prices
estimates, the California State Energy Commission stated that future
fuel prices are likely to be at least as high as the ``Base Case''
scenario adopted in the 2005 Integrated Energy Policy Report for
California, which forecasts retail fuel prices (including Federal and
California State taxes). The Commission recommended using this
forecast, which it argued is more consistent with current fuel prices.
According to the commenter, recent EIA forecasts (at least since 1996)
have significantly underestimated actual future fuel prices.
The Alliance stated that while higher gasoline price forecasts may
appear to justify further increases in fuel economy levels, ``NHTSA
must proceed carefully and consider all of the ramifications of moving
to higher levels than those proposed.'' Along the same lines, General
Motors commented that increased fuel prices could lead to significantly
higher CAFE standards under NHTSA's model; according to General Motors,
a recent study by Resources for the Future (RFF) found that increasing
the price per barrel of oil by $20 would lead to a CAFE target as much
as 4 mpg higher.
In its comments, General Motors also compared the American light
truck fleet with the European light truck fleet, stating that Europeans
pay approximately $5 per gallon for gasoline, yet their vehicles do not
use technologies beyond those present in the U.S. fleet. An appendix to
General Motors' comments further analyzed the differences in fuel
economy between American and European vehicles, suggesting that the
fuel economy of vehicles on both side of the Atlantic is roughly
comparable, once other relevant factors are taken into account (e.g.,
vehicle weight, transmission type, engine power, engine type, and
premium gas usage). General Motors asked the agency to explain this
apparent discrepancy between real world experience in Europe and
NHTSA's analysis.
General Motors also stated that NHTSA's analysis did use the proper
value for the tax on gasoline, which the American Petroleum Institute
(API) currently reports to be $0.46 per gallon.
Mitsubishi stated that fuel prices are currently in a state of flux
and recommended using AEO2006 in the final rule. However, Mitsubishi
cautioned that raising the fuel economy target levels, based upon
higher fuel prices, might not be economically practicable and could
force manufacturers to completely reanalyze their business strategies.
The Mercatus Center commented that as part of the final rule, the
agency should increase its fuel price forecasts and take steps to
adequately address likely future volatility on fuel prices.
Specifically, the Mercatus Center recommended adjusting the baseline
sale mix and fuel economy levels from manufacturer product plans for
future model years to reflect shifts in sales patterns toward more
fuel-efficient models resulting from current high fuel prices and buyer
concerns about continued fuel price volatility. It also urged NHTSA to
include a separate estimate of the economic value of reduced fuel price
volatility expected to result from lower fuel use.
Several commenters also noted that the State gasoline taxes in some
states were changing as of January 1, 2006 and that the agency should
update their gasoline tax estimates accordingly.
The agency will continue to rely on the most recent fuel price
projections from the EIA from the Department of Energy. We consider the
EIA projections to be the most reliable long-range projections. No one
can predict the impact of hurricanes and other external factors that
could affect the price of gasoline at particular points in time or in
the short term. However, what we need are long range projections for
2008 to 2011, when this CAFE standard takes effect. In addition, the
EIA's AEO2006 Early Release is the most recent projection available,
and considers the most recent events.
Further, while commenters recommended that the agency rely on
higher fuel prices, no commenter provided an alternative forecast that
the agency believes to be more reliable than those published by EIA as
part of its Annual Energy Outlook (AEO). NRDC did recommend that the
agency rely on fuel price forecasts consistent with the world oil price
forecasts reported in EIA's AEO 2005 ``High B Oil Price Scenario'' or
the International Energy Agency's World Energy Outlook 2005. The
``Reference Case Scenario'' presented in AEO 2006, which is relied upon
by the agency in the final rule, is on average almost 14 cents per
gallon higher than the scenario suggested by NRDC.
The latest fuel price projections are taken from the EIA's Annual
Energy Outlook 2006 (AEO2006 Early Release) reference case, which is
the most recent projection available, translated into 2003 economics to
match other cost estimates in the analysis, and are extended until 2047
to match the 36 year lifetime for light trucks produced for MY 2011.
The estimated gasoline price per gallon in 2003 economics varies over
the time period, starting at $2.16 in 2008, reducing to $1.96 in 2014,
and then increasing to $2.39 by 2047.
The agency will consider additional fuel price projections (higher
and lower than the reference case) from EIA in its uncertainty
analysis; however, there is
[[Page 17631]]
no way to adequately predict or analyze the volatility of fuel prices.
Since gasoline taxes are a transfer payment and not a societal
cost, the value of gasoline taxes is subtracted from the estimated
gasoline price to estimate the value of gasoline to society. The agency
has updated its estimates of gasoline taxes, using the January 1, 2006,
update in State gasoline taxes. In 2003 economics, Federal taxes are
$0.176 and State and local taxes average $0.262 for a total of $0.438.
As will be discussed in this document, the agency has carefully
considered the broad ramifications of the final rule and alternative
stringency levels, and has not increased the fuel economy levels solely
on the basis of a projection of higher gasoline prices.
The agency does not see the value of trying to explain the
difference in fuel prices and technology between Europe and the United
States, as requested by General Motors. As General Motors points out in
its comments, there are a variety of factors which differentiate the
U.S. and Europe. These jurisdictions have different legal/regulatory
frameworks, and their driving publics have different expectations, all
of which vehicle manufacturers endeavor to accommodate. Thus, the fuel
economy situations in Europe and the U.S. are not directly comparable
and any such effort would entail an extensive analysis, which is likely
to generate inconclusive results and which is well beyond the scope of
this rulemaking.
C. Consumer Valuation of Fuel Economy and Payback Period
Commenters differed in terms of their recommended approach for
properly assessing consumer valuation of fuel economy and the payback
period for fuel-saving technologies. As discussed below, some
commenters favored focusing on the preferences of individual consumers
using a short-term perspective, while others recommended focusing on
the societal benefits to all consumers over the long term.
General Motors requested that the agency compare consumer
preference for fuel economy versus vehicle utility, in order to
determine consumer valuation of improved fuel economy. General Motors
also asked NHTSA to consider how many vehicle sales would be deferred
due to CAFE-related price increases. According to General Motors,
history has shown that consumers value fuel economy increases of up to
1.2 percent per year, so any higher standard forces consumers to accept
a lower level of performance utility than they would otherwise choose.
However, General Motors did state that consumers are well informed and
extremely rational, arguing that car buyers are less concerned with
fuel economy improvements when gasoline cost $1.50 per gallon, as
compared to marginal improvements when gasoline costs $2.50 per gallon.
According to the NADA, recent new light truck sales data suggest
that, despite higher fuel prices, consumers continue to rank fuel
economy below other purchase considerations, such as capacity,
convenience, utility, performance, and durability. Thus, NADA suggested
that NHTSA's fuel economy standards should not be permitted to result
in undue constraints on light truck product availability or in
significant price increases, which could in turn result in reduced
sales, profits, and workforces, and the retention of older vehicles
with poorer fuel efficiency.
The California State Energy Commission commented that stringency
levels of fuel economy targets should be established by considering the
value of fuel savings from vehicle owners' perspective over the first
few years of each model year's lifetime, rather than from a society-
wide perspective. For example, the California State Energy Commission
argued that consumers appear to attach some value to owning hybrid
vehicles beyond the fuel savings they produce, sometimes paying large
price premiums (up to $3,500 compared to equivalent gasoline-powered
models) and waiting extended periods of time for such vehicles to
become available. The commenter stated that the size of the hybrid
vehicle market is expected to grow significantly by MY 2010. According
to the California State Energy Commission, such consumer valuation
considerations should be taken into account as part of the CAFE
standards.
Conversely, Environmental Defense argued that technology
application should be based on societal costs, not private costs, and
that the agency needs to consider benefits over the lifetime of the
vehicle, as opposed to the consumer time horizon of 4.5 years.
The CAFE program's most immediate impacts are on individual
consumers, but regulating fuel economy also has a broader societal
effect that must be considered. The agency believes that CAFE standards
should reflect the true economic value of resources that are saved when
less fuel is produced and consumed, higher vehicle prices, and, to the
extent possible, any externalities that impact the broader society.
Consumer's perceptions of these values may differ from their actual
impacts, but they will nonetheless experience the full value of actual
fuel savings just as they will pay the full increased cost when the
vehicle is purchased. Moreover, owners will realize these savings
throughout the entire on-road life of each vehicle. While initial
purchasers will only experience fuel savings for the limited time they
typically own a new vehicle (4.5 years), subsequent (used vehicle)
purchasers will continue to experience savings throughout the vehicle's
useful life. The agency does restrict its analysis of sales impacts to
the initial 4.5 year period under the assumption that initial buyer's
purchase behavior will be influenced only by their perception of
benefits they will receive while owning the vehicle, as opposed to
benefits flowing to subsequent owners. However, the agency believes
that the lifetime value of impacts from CAFE improvements should be
fully reflected in its analysis of societal impacts.
D. Opportunity Costs
The Alliance commented that, in proposing its fuel economy
standards, NHTSA did not consider the opportunity costs to consumers
who may be forced to forego incremental improvements in vehicle
performance, safety, capacity, comfort, and aesthetics (citing a 2003
study by the Congressional Budget Office (CBO) titled, ``The Economic
Costs of Fuel Economy Standards Versus a Gasoline Tax,'' Chapter 2,
pages 1-5). The Alliance also cited a recent study which found that a
CAFE increase of 3 mpg results in a hidden tax of $0.78 per gallon of
fuel conserved.\111\ General Motors added that to the extent the CAFE
standards force trade-offs between fuel economy and other vehicle
attributes that consumers value, consumer welfare will be reduced and
``lost opportunity costs'' will be imposed on vehicle manufacturers.
---------------------------------------------------------------------------
\111\ The Alliance cited this study as: Andrew N. Kleit,
``Impacts of Long-Range Increases in Fuel Economy (CAFE) Standard,''
Economic Inquiry (April 2004), pages 279-294.
---------------------------------------------------------------------------
Further, General Motors argued that NHTSA's engineering and
economic analyses are incomplete because they do not account for the
potential economic harm to automobile companies (which are already
facing difficult financial challenges) and their employees, and the
analyses do not include producer and consumer welfare losses. General
Motors stated the Congressional Budget Office estimated a consumer
welfare loss of $230 per vehicle.
In response, the agency notes that the CBO report cited by General
Motors and the Alliance is based on estimates of consumer's preferences
over a period
[[Page 17632]]
from roughly 1980 through 2001. The CBO report states that ``Consumers'
preferences over the past 15 or 20 years have led automakers to
increase vehicles' size and horsepower, while holding gasoline mileage
more or less constant.'' The CBO report also acknowledges that if
consumers' tastes change significantly, the report's conclusions would
be affected. The period examined by CBO corresponds to the period when
automakers created and successfully marketed SUVs as an alternative to
passenger cars for routine driving. For most of this period, gasoline
prices were stable and low by historical standards. Near the end of the
period, prices began to rise, but since that time they have reached
levels that are more than double the typical price during the period.
In response, consumers have shown a dramatic shift in their purchase
preferences. Sales of small passenger cars and fuel-efficient hybrids
have increased, while sales of large SUVs have dropped. Circumstances
have, thus, already overtaken the assumptions regarding consumer
preferences used in the CBO analysis. Moreover, the CBO analysis is
based on a CAFE regulation that achieves an assumed 10 percent
reduction in gasoline consumption, a greater reduction than that which
would be accomplished by this regulation. Thus, the agency does not
believe that the $230 loss in consumer welfare estimated in the CBO
report is an appropriate measure of the impact of CAFE reform.
NHTSA acknowledges that there are potential shifts in consumer
welfare which are not reflected in its model (e.g., if a manufacturer
reduced horsepower as a strategy to improve fuel economy, some
consumers would value that horsepower loss more than the fuel economy
gain). However, it believes that measuring these impacts is
problematic, especially in light of the recent dramatic shift in
gasoline prices and geopolitical events surrounding the world oil
supply. Moreover, the agency is using its model, not as an absolute
standard, but rather as an initial measure to consider in setting
standards. The agency is cognizant of the financial difficulty facing
automobile manufacturers and is striving to minimize costs by
scheduling improvements in such a way that they would coincide with
normal design cycles. Further, the agency believes that incrementally
improving fuel economy across the vehicle fleet will not deprive
consumers of their choice of vehicles. A wide variety of vehicle types
will continue to be available, and consumers' selection of vehicles
should still reflect their judgments of the relative value of fuel
economy versus horsepower at the margin.
E. Rebound Effect
The ``rebound effect'' refers to the tendency for vehicle owners to
increase the number of miles they drive a vehicle in response to an
increase in its fuel economy, such as would result from more stringent
CAFE standards. The rebound effect occurs because an increase in fuel
economy reduces vehicle owners' fuel cost per mile driven, which is the
typically largest component of the cost of operating a vehicle. Because
even with improved fuel economy this additional driving uses some fuel,
the rebound effect somewhat reduces the fuel savings (and related
benefits) that result when fuel economy increases. The rebound effect
is usually expressed as the percentage by which vehicle use increases
when the cost of driving decreases due to an increase in fuel economy
and/or a decrease in the price of fuel.
Commenters expressed a variety of views regarding the agency's
estimate of the rebound effect that would be anticipated in response to
the new CAFE standards. While some reviewers suggested that the
estimate of the rebound effect the agency used is too low (Alliance,
General Motors), others suggested that it is too high (Environmental
Defense, NRDC, ACEEE, Union of Concerned Scientists, California State
Energy Commission). Specific comments related to the rebound effect are
set forth below.
In general, manufacturers and their associations deemed the 20-
percent rebound rate relied upon by the agency to be conservative. For
example, the Alliance argued that a 20-percent rebound effect is overly
conservative, based upon recent studies. Specifically, the Alliance
stated that a recent study of variation in U.S. light-duty vehicle use
among different states over the period from 1966 to 2001 by Small and
Van Dender estimated a long-term rebound effect of 24 percent over the
entire period covered by the study.\112\ This estimate implies that a
10-percent increase in fuel economy, which translates into a 10-percent
decrease in fuel cost-per-mile driven, would ultimately stimulate a
2.4-percent increase in average annual miles driven using vehicles
whose fuel economy is improved. According to the Alliance, an
independent analysis by the Small and Van Dender data found that
despite those authors' claim that the rebound effect had declined
during the period they studied, the rebound effect remained at 24.6
percent at the end of this period.\113\ The Alliance opined that the
rebound effect is probably on the order of 35 percent, although it did
not supply any data to substantiate this estimate.
---------------------------------------------------------------------------
\112\ Kenneth A. Small and Kurt Van Dender, ``The Effect of
Improved Fuel Economy on Vehicle Miles Traveled: Estimating the
Rebound Effect Using U.S. State Data, 1996-2001, Paper EPE-014,
University of California Energy Institute, 2005; item 1702
in NHTSA Docket 22223. An earlier version of the study is item 15 in
the same docket.
\113\ Robert Crawford, ``Review and Assessment of VMT Rebound
Effect in California,'' RW Crawford Energy Systems, Sept. 2004.
---------------------------------------------------------------------------
According to General Motors, previous studies of changes in
household motor vehicle and appliance use in response to improvements
in their energy efficiency (which is measured by fuel economy in the
case of vehicles) have shown that the rebound effect lowers energy
savings by 20-50 percent. General Motors agreed with the agency that
the increased driving resulting from the rebound effect also imposes
various external costs, including increased collisions and traffic
congestion. General Motors stated that it commissioned four studies of
the rebound effect, each of which concluded that the rebound effect
would be approximately 25 percent. However, it did not provide copies
of the referenced studies. As General Motors did not provide these
studies, the agency was unable to evaluate them. Nevertheless, General
Motors stated that 20 percent is adequate for calculations related to
rebound effect. No other vehicle manufacturers commented on this issue.
The National Automobile Dealers' Association commented that fuel
savings should clearly be adjusted to reflect the rebound effect, but
did not recommend a specific value of the rebound effect.
In contrast to the above commenters, Environmental Defense argued
that the agency has overestimated the rebound effect because it relies
upon earlier studies in the literature that tended to miss significant
effects of variables such as income growth, and that did not have
sufficiently large datasets to capture long-term changes in vehicle
use. Citing the same 2004 study by Small and Van Dender referred to in
the Alliance comments,\114\ which combined data for each of the 50
states over a 36-year period, Environmental Defense noted the authors'
finding that the rebound effect had declined to 12.1 percent when
measured over the period from 1997-2001, primarily as a consequence
[[Page 17633]]
of the higher income levels that prevailed during those years than over
the entire period covered by the study. Environmental Defense argued
further that if income growth continues during the period analyzed
under the CAFE proposal, Small and Van Dender's analysis indicates that
the rebound effect would continue to decline. The analyses
Environmental Defense presented in its comments used an estimate of 5
percent for rebound effect, and it also urged NHTSA to adopt a
similarly low estimate of the rebound effect, which Environmental
Defense argued is in keeping with the most recent research in this
area.
---------------------------------------------------------------------------
\114\ See footnote 95.
---------------------------------------------------------------------------
Other commenters also urged NHTSA to adopt a lower rate for the
rebound effect, and they generally referred to the study by Small and
Van Dender to support their positions. For example, NRDC suggested
using a 6-percent rate for the rebound effect over the lifetime of MY
2008-2011 vehicles, which it argued would correctly recognize the
effect of anticipated future income growth. ACEEE urged the agency to
use a 10-percent rate, a change which it suggested would increase the
monetized social benefits of Reformed CAF[Eacute] for MY 2011 vehicles
by about $1.3 billion, or approximately 30 percent.
Again, relying on results from the Small and Van Dender study, the
Union of Concerned Scientists recommended that NHTSA reduce the rebound
effect rate to not more than 10 percent. The commenter stated that
NHTSA offered no justification for choosing the upper end of its
discussed range (10-20 percent), arguing that results for the last
years of the period analyzed in the study supported a long-run rebound
effect of 6.8 percent or lower. Accordingly, the Union of Concerned
Scientists stated that NHTSA should adopt 10 percent as a reasonable
and conservative estimate of the rebound effect, and asserted that
doing so would increase the ``social optimum'' fuel economy targets for
2011 by 1.4-1.9 mpg.
The California State Energy Commission called for a rebound effect
of 12 percent, which it believes is reflective of the long-term rebound
effect of 12.1 percent for California estimated by Small and Van
Dender.\115\
---------------------------------------------------------------------------
\115\ Kenneth A. Small and Kurt Van Dender, ``The Effect of
Improved Fuel Economy on Vehicle Miles Traveled: Estimating the
Rebound Effect Using U.S. State Data, 1996-2001, Paper EPE-014,
University of California Energy Institute, 2005, Docket 22223-1702,
Table 5, p. 19.
---------------------------------------------------------------------------
NHTSA notes that all commenters who recommended a lower value for
the rebound effect than the 20 percent estimate used in the NPRM
analysis relied exclusively upon the recent study by Small and Van
Dender as evidence supporting a smaller rebound effect. While the
agency regards the Small and Van Dender study as an important
contribution to the extensive literature on the magnitude of the
rebound effect, it does not regard the very low values for the rebound
effect reported in that study as persuasive for several reasons.
Unlike the studies relied upon by the agency in developing its
estimate of the rebound effect, the Small and Van Dender analysis
remains an unpublished working paper that has not been subjected to
formal peer review, so the agency does not yet consider the estimates
it provides to have the same credibility as the published and widely-
cited estimates it relied upon.\116\ The agency's interpretation of
previously published estimates is that they support a range of 10-30
percent for the rebound effect in vehicle use. The agency elected to
use the midpoint of that range in its analysis for the NPRM. If a peer-
reviewed version of the Small and Van Dender study is subsequently
published, the agency will consider it in developing its own estimate
of the rebound effect for use in subsequent CAFE rulemakings.
---------------------------------------------------------------------------
\116\ These include, among others, David L. Greene, ``Vehicle
Use and Fuel Economy: How Big is the Rebound Effect?'' The Energy
Journal, 13:1 (1992), 117-143; David L. Greene, James R. Kahn, and
Robert C. Gibson, ``Fuel Economy Rebound Effect for Household
Vehicles,'' The Energy Journal, 20:3 (1999), 1-21; Jonathan Haughton
and Soumodip Sarkar, ``Gasoline Tax as a Corrective Tax: Estimates
for the United States,'' The Energy Journal, 17:2, pp. 103-126; S.L.
Puller and L.A. Greening, ``Household Adjustment to Gasoline Price
Changes: An Analysis Using Nine Years of U.S. Survey Data,'' Energy
Economics, 21:1, pp. 37-52; Jones, Clifton T., ``Another Look at
U.S. Passenger Vehicle Use and the `Rebound' Effect from Improved
Fuel Efficiency, The Energy Journal, 14:4 (1993), 99-110; and
Goldberg, Pinelopi Koujianou, ``The Effects of the Corporate Average
Fuel Efficiency Standards in the U.S.,'' The Journal of Industrial
Economics, 46:1 (1998), 1-33.
---------------------------------------------------------------------------
After reviewing the various comments on the NPRM, the agency has
elected to continue using a value of 20 percent for the rebound effect
in its analysis of potential fuel savings from stricter CAFE standards
for MY 2008-2011 light trucks. The agency will continue to monitor
newly published research on the rebound effect (as well as on other
critical parameters affecting fuel savings from CAFE regulation), and
it will revise the estimates of the rebound effect it employs in future
analyses of fuel savings if it concludes that new evidence points
persuasively toward a different value.
F. Discount Rate
Discounting future fuel savings and other benefits is intended to
measure the reduction in the value to society of these benefits when
they are deferred until some future date rather than received
immediately. The discount rate expresses the percent decline in the
value of these benefits--as viewed from today's perspective--for each
year they are deferred into the future. The agency used a discount rate
of 7 percent per year to discount the value of future fuel savings and
other benefits when it analyzed the CAFE standards proposed in the
NPRM.
The Alliance, General Motors, the Mercatus Center, and Criterion
Economics all argued that in assessing benefits and costs associated
with the CAFE standards, the agency should rely on a discount rate
greater than 7 percent. The Alliance stated that the Congressional
Budget Office discounts consumers' fuel savings at a rate of 12 percent
per year and that other recent studies of CAFE standards have also used
that rate. According to the Alliance, that rate is slightly higher than
the average interest rate that consumers reported paying to finance
used car purchases in the most recent Consumer Expenditure Survey.\117\
The Alliance argued further that consumers can be expected to discount
the value of future fuel savings at a rate at least as high as their
cost for financing the purchase of a vehicle whose higher price was
justified by its higher fuel economy.
---------------------------------------------------------------------------
\117\ The Consumer Expenditure Survey (CE) program consists of
two surveys collected for the Bureau of Labor Statistics by the
Census Bureau--the quarterly Interview survey and the Diary survey--
that provide information on the buying habits of American consumers,
including data on their expenditures, income, and consumer unit
(families and single consumers) characteristics. http://www.bls.gov/cex/home.htm
.
---------------------------------------------------------------------------
The Alliance based its assertion for use of 12 percent because, as
it stated, this value was used in the NAS report and approximates the
used car loan rate published in the Consumer Expenditure Survey.
However, we note that the NAS report did not use a single discount
rate. Instead, the NAS used both 12 percent and 0 percent discount
rates due to the assumption that the proper discount rate was
``subjective.'' Therefore, NAS did not advocate a discount rate. As
explained below, the vehicle loan rate faced by consumers is an
appropriate measure of the discount rate.
General Motors suggested a discount rate of 9 percent, based on its
assertions that new vehicles are financed at 8 percent and used
vehicles at 10 percent. Essentially, General Motors is recommending
that the agency rely on the interest for a car loan as the discount
rate. General Motors also argued that fuel economy is not the only
thing
[[Page 17634]]
which consumers value and that the agency should take efforts to
separate private benefits from public externalities. While we are
uncertain as to what General Motors is recommending, we assume that its
comment suggests that a higher discount rate, based on car loan rates,
is appropriate for discounting private benefits (those to buyers),
while a lower rate is appropriate for social benefits (such as
reductions in externalities). Criterion Economics also recommended use
of a 9 percent discount rate in its comments, which it suggested is a
conservative rate between the average real rates for new and used cars
that adequately accounts for volatility in future energy prices.
As discussed further below, we agree in that loan rates for new and
used cars should be considered when determining the appropriate
discount rate. However, loan estimates made by both General Motors and
Criterion Economics are considerably higher than data provided by the
Federal Reserve Board, which estimates new loan rates (as of October
2005) of 6 percent for new cars and 9 percent for used cars.\118\
---------------------------------------------------------------------------
\118\ Federal Reserve Board, Statistical Release G.19: Consumer
Credit, http://www.federalreserve. gov/releases/g19/.
---------------------------------------------------------------------------
The Mercatus Center stated that the 7 percent discount rate
selected by the agency is too low, and as a result, it results in the
setting of standards that are inequitable, particularly to low-income
households. According to published academic research referenced by the
Mercatus Center, most households have discount rates higher than 7
percent, with low-income households having particularly high discount
rates. Therefore, the Mercatus Center urged NHTSA to rely on discount
rates of 12 percent for all households and as high as 20 percent for
low-income households in evaluating proposed standards. However, the
studies cited by Mercatus Center to justify these discount rates
examine the implied discount rate for future energy savings that result
when households purchase more energy-efficient appliances such as
furnaces and air conditioners. These studies were generally conducted
in the late 1970's and early 1980's and may not be representative of
the discount rates for motor vehicles of the economic conditions 20-25
years later.
Environmental Defense, NRDC, and the Union of Concerned Scientists
provided comments endorsing use of a lower discount rate. These
organizations expressed their belief that a 7-percent discount rate is
too high, proposing instead a rate of 3 percent. Environmental Defense
and NRDC stated that OMB Circular A-4, Regulatory analysis (2003),
recommends a discount rate of 3 percent when the regulation directly
affects private consumption. These commenters asserted that the
proposed CAFE regulation primarily and directly affects private
consumption (i.e., by affecting the sales price of new vehicles and
reducing the per-mile cost of driving). NRDC also argued that OMB
Circular A-4 further indicates that lower rates may be appropriate for
rules that produce benefits over multiple generations. Thus, these
commenters recommended that a discount rate reflecting the social rate
of time preference (i.e., a 3 percent real rate) should be used.
In response to Environmental Defense, the Union of Concerned
Scientists, and NRDC, the guidelines in OMB circular A-4, New
Guidelines for the Conduct of Regulatory Analysis, state that the
agency should analyze the costs and benefits of a regulation at 3
percent and 7 percent discount rates, as suggested by guidance issued
by the federal OMB.\119\ The 3 percent and 7 percent rates reflect two
potential evaluations of impacts: Foregone private consumption and
foregone capital investment, respectively. In accordance with these
guidelines, the agency analyzes the impacts of costs and benefits using
both discount rates. However, this guidance does not state what
discount rate should be used to determine the standards.
---------------------------------------------------------------------------
\119\ White House Office of Management and Budget, Circular A-4,
September 17, 2003, p. 34, http://www.whitehouse.gov/omb/inforeg/circular_a4.pdf
.
---------------------------------------------------------------------------
There are several reasons for the agency's choice of 7 percent as
the appropriate discount rate to determine the standards. First, OMB
Circular A-4 indicates that this rate reflects the economy-wide
opportunity cost of capital. The agency believes that a substantial
portion of the cost of this regulation may come at the expense of other
investments the auto manufacturers might otherwise make. Several large
manufacturers are resource-constrained with respect to their
engineering and product-development capabilities. As a result, other
uses of these resources will be foregone while they are required to be
applied to technologies that improve fuel economy.
Second, 7 percent is also an appropriate rate to the extent that
the costs of the regulation come at the expense of consumption as
opposed to investment. As explained below, the agency believes a car
loan rate is an appropriate discount rate because it reflects the
opportunity cost faced by consumers when buying vehicles with greater
fuel economy and a higher purchase price. The agency assumed that a
majority of both new and used vehicles is financed and since the vast
majority of the benefits of higher fuel economy standards accrue to
vehicle purchasers in the form of fuel savings, the appropriate
discount rate is the car loan interest rate paid by consumers.\120\
---------------------------------------------------------------------------
\120\ Empirical evidence also demonstrates that used car
purchasers do pay for greater fuel economy (Kahn, Quarterly Journal
of Economics, 1986).
---------------------------------------------------------------------------
According to the Federal Reserve, the interest rate on new car
loans made through commercial banks has closely tracked the rate on 10-
year treasury notes, but exceeded it by about 3 percent.\121\ The
official Administration forecast is that real interest rates on 10-year
treasury notes will average about 3 percent through 2016, implying that
6 percent is a reasonable forecast for the real interest rate on new
car loans.\122\ During the last five years, the interest rate on used
car loans made through automobile financing companies has closely
tracked the rate on new car loans made through commercial banks, but
exceeded it by about 3 percent.\123\ Consideration is given to the loan
rate of used cars because some of the fuel savings resulting from
improved fuel economy accrue to used car buyers. Given the 6 percent
estimate for new car loans, a reasonable forecast for used car loans is
9 percent. Since the benefits of fuel economy accrue to both new and
used car owners, a discount rate between 6 percent and 9 percent is
appropriate. Assuming that new car buyers discount fuel savings at 6
percent for 5 years (the average duration of a new car loan) \124\ and
that used car buyers discount fuel savings at 9 percent for 5 years
(the average duration of a used car loan),\125\ the single constant
discount rate that yields equivalent present value fuel savings is very
close to 7 percent.
---------------------------------------------------------------------------
\121\ See, http://www.federalreserve.gov/releases/g20/hist/fc_hist_tc.txt
.
\122\ See, http://www.federalreserve.gov/releases/h15/data/Monthly/H15_TCMNOM_Y10.txt
.
\123\ See, http://www.federalreserve.gov/releases/g20/hist/fc_hist_tc.txt
.
\124\ Id.
\125\ Id.
---------------------------------------------------------------------------
Further, reliance on the consumer borrowing rate is consistent with
that of the Department of Energy (DOE) program for energy efficient
appliances. For more than a decade, the Department of Energy has used
consumer borrowing interest rates or ``finance cost'' to discount the
value of future energy
[[Page 17635]]
savings in establishing minimum energy efficiency standards for
household appliances. This includes (1) the financial cost of any debt
incurred to purchase appliances, principally interest charges on debt,
or (2) the opportunity cost of any equity used to purchase appliances,
principally interest earnings on household equity. For example, for
appliances purchased in conjunction with a new home, DOE uses real
mortgage interest rates to discount future energy savings.\126\ This
approach is analogous to NHTSA's use of real auto loan rates to
discount future gasoline savings in establishing CAFE standards.
---------------------------------------------------------------------------
\126\ See, Residential Furnaces and Boilers ANOPR Technical
Support Document, Chapter 8, at http://www.eere.energy.gov/buildings/appliance_standards/residential/furnaces_boilers_1113_r.html
.
---------------------------------------------------------------------------
The Union of Concerned Scientists also commented that NHTSA's
methodology for calculating the discounted present value of certain
external costs and benefits appears to be inconsistent. Specifically,
the commenter stated that the benefits of petroleum market effects
(monopsony \127\ and disruption cost reductions) and reduced emissions
of particulate matter (PM) and sulphur oxides (SOX ) and the
external costs of increased congestion, noise, and crashes, appear to
be discounted differently from the fuel cost savings, driving time, and
refueling time savings. The Union of Concerned Scientists urged NHTSA
to utilize the same methodology for calculating the discounted present
value of all such CAFE-related elements.
---------------------------------------------------------------------------
\127\ Demand costs for imported oil (often termed market power
or ``monopsony'' costs) arise because the world oil price appears to
be partly determined through the exercise of market power by the
OPEC cartel, and because the U.S. is a sufficiently large purchaser
of foreign oil supplies that its purchases can affect the world
price. The combination of OPEC market power and U.S. ``monopsony''
power means that increasing domestic petroleum demand that is met
through higher oil imports can cause the world price of oil to rise,
and conversely that declining U.S. imports can reduce the world
price of oil.
---------------------------------------------------------------------------
In response to the Union of Concerned Scientists comment that the
agency appears to have discounted different categories of benefits
inconsistently, the agency notes that the three different categories
identified in its comment each bear a different relationship to total
fuel savings. As the commenter notes, fuel cost savings, the value of
increased driving range (identified incorrectly as ``driving time'' in
the PRIA), and the value of refueling time savings are directly related
to lifetime vehicle use, and the agency's estimates of the values of
these benefits reflect this relationship. However, benefits resulting
from lower emissions of the pollutants PM and SOX (which
occur during petroleum refining) also depend partly on the fraction of
fuel savings that is reflected in reduced domestic fuel refining
(rather than reduced imports of refined gasoline), and in turn on the
fractions of domestic refining that utilize domestically-produced and
imported crude petroleum.\128\ Similarly, the external costs of
congestion, accidents, and noise resulting from added vehicle use
depend on the magnitude of the rebound effect as well as on lifetime
fuel savings. Thus these three categories of benefits would be expected
to bear different relationships to total fuel savings, as confirmed by
the Union of Concerned Scientists' comments.
---------------------------------------------------------------------------
\128\ In the NPRM, benefits from reduced petroleum market
externalities were also incorrectly assumed to depend on the
fraction of fuel savings that is reflected in lower imports of crude
petroleum and refined gasoline (rather than on total U.S. petroleum
consumption). In response to comments by the Union of Concerned
Scientists and other reviewers, this error has been corrected in the
Final Regulatory Impact Analysis accompanying this Rule.
---------------------------------------------------------------------------
G. Import Externalities (Monopsony, Oil Disruption Effects, Costs of
Maintaining U.S. Presence and Strategic Petroleum Reserve)
General Motors commented extensively on the issue of externalities
associated with the agency's CAFE proposal. As a general observation,
General Motors stated that the CAFE proposal would result in a net
externality cost on consumer welfare, because the externality costs
(e.g., congestion, noise, highway fatalities/injuries) exceed the
externality benefits (e.g., reduction in oil import dependence,
reduction in pollution). General Motors stated that the agency's
proposal did not identify any specific market failures that would
justify its fuel economy regulation. The commenter asked the agency to
present empirical estimates of reduced economic and environmental
externalities resulting from the proposed CAFE standards, along with
supporting analyses demonstrating how these benefits were estimated.
In its comments, General Motors also challenged certain specific
figures related to externalities incorporated by the agency as part of
the CAFE proposal. For example, General Motors expressed disagreement
with the proposal's externality estimate of $0.106 per gallon, as well
as the estimate of costs related to pollution. The commenter stated
that the National Research Council estimates the total cost of economic
and environmental externalities from fuel production and use to be
$0.26 per gallon, and if this estimate is correct, consumers are
already paying fuel taxes (which it estimated at $0.46 per gallon) that
exceed the cost of these externalities. General Motors also asked the
agency to address the research finding by Dr. Kleit purporting to show
negative net benefits (i.e., it will have net costs) for the MY 2005-
2007 CAFE standards.\129\
---------------------------------------------------------------------------
\129\ Dr. Kleit's analysis simply assumes that manufacturers
have already made all applications of fuel economy technology to
their models for which the value of the resulting fuel savings
exceeds the cost of installing the technology. Andrew N. Kleit,
``Short- and Long-Range Impacts of Increases in the Corporate
Average Fuel Economy (CAFE) Standard,'' February 7, 2002, Docket
11419-168159.
Under this assumption, any increase in the stringency of CAFE
will always produce negative net benefits (i.e., net costs), because
the technology applications necessary to comply with the more
stringent standard will each have costs that exceed the value of
fuel savings they produce.
---------------------------------------------------------------------------
In addition, General Motors argued that higher steady-state oil
prices reduce any demand costs or monopsony power, and energy demand
from China and other emerging economies will only strengthen this
trend. The company disagreed with the monopsony estimate of $0.061 per
gallon relied upon by the agency. General Motors further argued that
the agency relied upon the monopsony value reported in a 1997 study by
Lieby et al., but stated that this study assumes no cartel of producers
such as OPEC. According to General Motors, in light of the potential
for OPEC to respond to U.S. efforts to decrease demand, the monopsony
value of $0.061 is too high. General Motors stated that like Resources
for the Future, it believes that using U.S. monopsony power has
marginal benefits at best, and that at worst, attempting to use it
could actually provoke retaliatory pricing or supply responses by OPEC
that would harm the U.S. economy.
General Motors also challenged the oil disruption cost of $0.045
per gallon included in the proposal. According to General Motors, the
agency has not addressed Congressional Research Service and the Bohi
and Toman studies which reported that the only reason for oil
disruption is an increase in price (i.e., an oil price ``shock''), so
because the CAFE standards do not affect the price of gasoline, there
should be no disruption effect.
General Motors expressed skepticism regarding the externality costs
related to pollution contained in the CAFE proposal. According to
General Motors, because U.S. refineries operate at 95 percent of
capacity and routinely
[[Page 17636]]
purchase pollution permits (credits) from others, any reduction in
demand for fuel would likely result in these refineries simply
purchasing fewer permits, rather than reducing emissions or capacity.
General Motors stated that the only pollution cost externality
resulting from the CAFE standards is likely to be increased tailpipe
emissions from the rebound effect.
Criterion Economics commented that NHTSA's CAFE proposal ``argued
the wrong case,'' in that externalities alone should be the determinant
of socially optimal CAFE levels (i.e., allowing the marketplace to
determine privately optimized CAFE targets). According to Criterion
Economics, mandatory increases in fuel economy above market-determined
levels would generate marginal private costs that exceed marginal
private benefits. In support of its position that only externalities
should be considered in setting CAFE standards, Criterion Economics
provided a figure illustrating the interaction of marginal social
benefits, marginal social costs, marginal private benefits, and
marginal private costs to argue that the market automatically
determines the optimal level for private benefits. Criterion Economics
recommended that the agency revise the CAFE standards to reflect
socially optimal levels based on externality costs and benefits.
In contrast, NRDC and Environmental Defense argued that monopsony
costs are underestimated in the proposal. Environmental Defense stated
that monopsony costs should range from $0.083 (under the EIA reference
scenario) to $0.198 per gallon (under a $65 per barrel oil price
scenario). Environmental Defense also commented that there is an
arithmetic error in NHTSA's application of disruption and adjustment
costs (which are otherwise conceptually correct), and it argued that in
setting final CAFE standards, the agency should address non-quantified
externalities such as strategic petroleum reserve and national security
costs, at least qualitatively if not quantitatively.
The California State Energy Commission argued that the agency's
estimate of $0.106 for oil import externalities is too low and should
be increased to $0.33 per gallon of gasoline. The California State
Energy Commission broke down this estimate as follows: $0.12 per gallon
for oil import externalities; $0.01 to reflect costs of gasoline spill
remediation; $0.02 to reflect damage from criteria pollutant emissions
resulting from fuel delivery volumes, and $0.18 to reflect damage costs
of greenhouse gas emissions. The Commission based its recommendation
upon values reported in a 2003 report titled ``Benefits of Reducing
Demand for Gasoline and Diesel.''
The agency believes that assessing the economic case for increasing
the stringency of the light truck CAFE standard requires a
comprehensive analysis of the resulting benefits and costs to the U.S.
economy, rather than simply comparing the external costs associated
with petroleum use and fuel production to current fuel taxes. The
benefits of more stringent CAFE standards include the market value of
the savings in resources from producing less fuel, together with the
resulting reductions in the costs of economic externalities associated
with petroleum consumption, and of environmental externalities caused
by fuel production. The costs imposed on the U.S. economy by more
stringent CAFE regulation include those costs for manufacturing more
fuel-efficient vehicles, as well as the increased external costs of
congestion, accidents, and noise from added driving caused by the
rebound effect.
Vehicle buyers value improved fuel economy using retail fuel prices
and miles per gallon, but may consider fuel savings only over the time
they expect to own a vehicle, while the value to the U.S. economy of
saving fuel is measured by its pre-tax price, and includes fuel savings
over the entire lifetime of vehicles. Thus it cannot simply be assumed
that the interaction of manufacturers' costs and vehicle buyers'
demands in the private marketplace will determine optimal fuel economy
levels, and that these levels should only be adjusted by Federal
regulation if the external costs of fuel production and use exceed
current fuel taxes.
The analysis reported in the FRIA estimates the value of each
category of benefits and costs separately, and it compares the total
benefits resulting from each alternative CAFE level to its total costs
in order to assess its desirability. This more complete accounting of
benefits and costs to the U.S. economy from reducing fuel use is
necessary to assess the case for CAFE regulation generally, and for
increasing the stringency of the current light truck CAFE standard in
particular.
In response to comments on the specific values of certain
externalities employed in the NPRM analysis, the agency agrees that
higher world oil prices increase the monopsony or demand costs imposed
by U.S. petroleum purchases, while greater sensitivity of the supply of
oil imported by the U.S. to variation in its price (a higher elasticity
of petroleum supply) reduces the monopsony costs associated with
variation in U.S. oil demand.\130\ Thus, the value of the monopsony
effect used in the FRIA analysis reflects the Energy Information
Administration's recent Annual Energy Outlook 2006 forecast of future
world oil prices, which is significantly higher than previously
projected by EIA (see FRIA p. VIII-31). The FRIA continues to use the
midpoint of the range of values for the elasticity of oil imports
suggested in the study by Leiby et al. to estimate the monopsony cost
of increased U.S. petroleum use (see FRIA p. VIII-33).
---------------------------------------------------------------------------
\130\ For the exact relationship among monopsony costs, oil
prices, and the elasticity of supply of imported oil, see Leiby et
al., p. 26 Docket No. NHTSA-2005-22223-27.
---------------------------------------------------------------------------
However, the agency also notes that only a fraction of the
monopsony cost of increased U.S. oil consumption is imposed on domestic
purchasers of petroleum and refined products, since part of the burden
of higher world oil prices is borne by foreign purchasers. As a result,
that same fraction of any reduction in monopsony costs resulting from
lower U.S. oil purchases is exactly offset by revenue losses to
domestic petroleum producers, so it does not represent a net savings to
the U.S. economy. Thus, in order to include only the fraction that
represents a net savings to U.S. purchasers, the savings in monopsony
costs from reduced fuel use must be adjusted by the percent of U.S.
petroleum consumption that is imported. This results in a monopsony
value of $0.044 per gallon.
In contrast, the entire reduction in total U.S. petroleum demand
that results from more stringent CAFE standards reduces potential costs
to the U.S. economy from rapid increases in world oil prices, because
(as the studies cited by reviewers of the NPRM point out) these costs
depend on total U.S. petroleum consumption rather than on the fraction
that is imported. The agency agrees that petroleum buyers' use of
hedging strategies and private oil inventories can reduce these costs,
but the significant costs of adopting these strategies will also be
reduced as declines in U.S. petroleum demand moderate the potential
effect of rapid fluctuations in world oil prices. Thus the analysis
presented in the FRIA continues to employ the agency's previous
estimate ($0.045 per gallon) of the reduction in the price shock
component of U.S. oil consumption externalities that is likely to
result from more stringent CAFE regulation (see FRIA VIII-34).
Finally, the agency believes that while costs for U.S. military
security in oil-
[[Page 17637]]
producing regions and for maintaining the Strategic Petroleum Reserve
will vary in response to long-term changes in U.S. oil imports, these
costs are unlikely to decline significantly in response to the modest
reduction in the level of U.S. oil imports that would result from the
proposed CAFE standard for MY 2008-2011 light trucks. The U.S. military
presence in world regions that represent vital sources of oil imports
also serves a range of security and foreign policy objectives that is
considerably broader than simply protecting oil supplies. As a
consequence, no savings in government outlays for maintaining the
Strategic Petroleum Reserve or a U.S. military presence are included
among the benefits of the light truck CAFE standard adopted for MY
2008-2011.
Combined, the externalities cost per gallon added to the pre-tax
price per gallon in the FRIA is $0.088.\131\ This compares to the PRIA
estimate of $0.106 per gallon.
---------------------------------------------------------------------------
\131\ The $0.088 value represents the value for reducing U.S.
demand on the world market plus the value for reducing the threat of
supply disruptions. See Table X-3 in the FRIA.
---------------------------------------------------------------------------
H. Uncertainty Analysis
The California State Energy Commission stated NHTSA's proposal does
not adequately deal with the primary source of uncertainty in setting
standards--the extent to which the application of additional technology
could be justified by higher future fuel prices. This commenter stated
that the agency's uncertainty analysis should first examine the
sensitivity of optimum standards to variation in retail fuel prices
only, and then analyze effect of alternative stringency levels on
social benefits.
In response, we note that the purpose of the uncertainty analysis
is to examine uncertainty surrounding the impact of the proposed and
final rules. OMB Circular A-4 requires formal probabilistic uncertainty
analysis of complex rules where there are large, multiple uncertainties
whose analysis raises technical challenges or where effects cascade and
where the impacts of the rule exceed $1 billion. CAFE meets these
criteria on all counts. However, the commenter appears to be concerned
primarily with uncertainty surrounding the CAFE standard selection
process, rather than that surrounding the impacts of the selected
standards. The agency believes that its selection of CAFE levels should
be based on its best estimates of all input variables used to estimate
optimized social benefits. An examination of the uncertainty of
outcomes in this process would produce information of academic interest
but would not alter the agency's reliance on the most probable outcome
for setting standards. It is also not clear that uncertainty
surrounding the price of gasoline is greater than that surrounding
other variables used in the NHTSA model. In fact, the range of
uncertainty for both the effectiveness and cost of technologies
includes more potential variation than the three fuel price scenarios
examined in the uncertainty analysis. Since each of these factors
influences the calculation of optimized social benefits, the agency
does not believe it would be useful to isolate only the uncertainty in
fuel prices.
I. The 15 Percent Gap
The agency assumes that there is a 15 percent difference between
the EPA fuel economy rating and the actual fuel economy achieved by
vehicles on the road. For example, if the overall EPA fuel economy
rating of a light truck is 20 mpg, the actual on-road fuel economy
achieved by the average driver of that vehicle is expected to be 17 mpg
(20*.85). NRDC and the Union of Concerned Scientists commented that the
15-percent reduction the agency applied to reported fuel economies to
adjust for in-use fuel economy performance is too low, and both
commenters recommended using an on-road gap of 20 percent. The Union of
Concerned Scientists stated that the EPA is in the process of revising
its estimates of real-world fuel economy in response to widespread
consumer dissatisfaction with the reliability of its present
adjustment. In support of its recommendation to use a 20-percent
reduction, NRDC cited the range of 20 to 23 percent relied upon by
EIA's National Energy Modeling System (NEMS) over the expected
lifetimes of MY 2008-2011 vehicles (See AEO2005 Table 47). General
Motors stated that it agrees with a 15 percent on-road fuel economy
gap.
On February 1, 2006, the Environmental Protection Agency proposed
test changes to their fuel economy testing to bring them closer to on-
road fuel economy (71 FR 5426). In its proposal, EPA estimated that the
actual highway driving fuel economy estimate would be 5 to 15 percent
lower than the EPA fuel economy rating and that the actual city driving
fuel economy estimate would be 10 to 20 percent lower than the EPA fuel
economy rating for most vehicles. However, the EPA has not issued a
final rule on this issue. NHTSA will continue to rely on an overall
fuel economy adjustment factor of 15 percent, consistent with current
EPA regulations. In future rulemakings the agency will consider new
regulations as issued by the EPA.
J. Pollution and Greenhouse Gas Valuation
In its comments, General Motors maintained that increases in
emissions of criteria pollutant resulting from the rebound effect are
not likely to be offset by reduced refinery emissions, as assumed in
the agency's analysis. As noted earlier, General Motors argued that
domestic refineries are subject to strict emission caps, and they must
buy permits (credits) in order to support current production. It
concluded that a small reduction in overall ``demand for fuel would
allow domestic refineries to simply buy fewer pollution permits without
changing the emissions at the refineries.''
General Motors also asserted that domestic refineries produce at
over 95 percent of capacity, and that all increases in demand for
refined products must be met by imports. Therefore, General Motors
concluded that a reduction in demand for fuel would not reduce domestic
refinery output and corresponding pollutants, but instead would cause a
reduction in imports of refined products such as gasoline.
In response to General Motors' comments, the agency notes that
there are currently two cap-and-trade programs governing emissions of
criteria pollutants by large stationary sources. The Acid Rain Program
seeks to limit NOX and SO2 emissions, but applies
only to electric generating facilities and thus will not affect
refinery emissions.\132\ The NOX Budget Trading Program is
also primarily intended to reduce electric utility emissions, but does
include some other large industrial sources such as refineries.
However, as of 2003, refineries participating in the program accounted
for less than 5% of total NOX emissions by U.S.
refineries.\133\ In addition, some refineries could be included among
the sources of NOX emissions that will be controlled under
the recently-adopted Clean Air Interstate Rule, which is scheduled to
take effect beginning in 2009.\134\ However, refinery NOX
[[Page 17638]]
emissions could only be affected in states that specifically elect to
include sources other than electric generating facilities in their
plans to comply with the rule. The EPA has indicated that it expects
states to achieve the emissions reductions required by the Clean Air
Interstate Rule primarily from the electric power industry.\135\ Thus
the agency continues to believe that any reduction in domestic gasoline
refining resulting from the adopted CAFE standard will be reflected in
reduced refinery emissions of criteria pollutants.
---------------------------------------------------------------------------
\132\ See http://www.epa.gov/airmarkets/arp/index.html.
\133\ Estimated from EPA, NOX Budget Trading Program
(SIP Call) 2003 Progress Report, Appendix A, http://www.epa.gov/airmarkets/cmprpt/nox03/NBP2003AppendixA.xls
, and National Air
Quality and Emissions Trends Report 2003, Table A-4, http://www.epa.gov/air/airtrends/aqtrnd03/pdfs/a4.pdf
.
\134\ The Clean Air Interstate Rule also requires reductions in
SO2 emissions and establishes an emissions trading
program to achieve them, but only electric generating facilities are
included in the rule's SO2 emissions trading program; see
EPA, Clean Air Interstate Rule: Basic Information, http://www.epa.gov/cair/basic.html#timeline
.
\135\ See EPA, Clean Air Interstate Rule: Basic Information,
http://www.epa.gov/cair/basic.html#timeline, and ``Fact Sheet: Clean Air Interstate Rule,'' http://www.epa.gov/cair/pdfs/cair_final_
dfs/cair_final_
---------------------------------------------------------------------------
Environmental organizations stated that the agency must attach some
value to reducing greenhouse gas emissions, and adjust the benefits of
more stringent CAFE standards accordingly. NRDC recommended a value of
$10 to $25 per ton of CO2 emissions reduced by fuel savings
from stricter CAFE, based on values assigned by the California Public
Utilities Commission, Idaho Power Co., and the European Union emissions
program. Environmental Defense stated that the agency should use a
value of $50 per ton of reduced CO2 emissions. The Union of
Concerned Scientists similarly objected to the zero value assigned to
reduced emissions of greenhouse gases in the CAFE proposal, and instead
recommended using a value of $50 per ton of carbon (corresponding to
approximately $0.15 per gallon of gasoline).
The estimated reductions in emissions of criteria pollutants from
gasoline refining and distribution used in the PRIA analysis were
adjusted to reflect only the fraction of fuel savings that is expected
to reduce domestic refining, rather than imports of refined gasoline.
They were also adjusted to include only reductions in emissions that
occur during domestic extraction and transportation of crude petroleum
feedstocks. The estimates of these reduced emissions from crude oil
extraction and gasoline refining used in the FRIA continue to reflect
these adjustments (see FRIA p. VIII-60).
The agency continues to view the value of reducing emissions of
CO2 and other greenhouse gases as too uncertain to support
their explicit valuation and inclusion among the savings in
environmental externalities from reducing gasoline production and use.
There is extremely wide variation in published estimates of damage
costs from greenhouse gas emissions, costs for controlling or avoiding
their emissions, and costs of sequestering emissions that do occur, the
three major sources for developing estimates of economic benefits from
reducing emissions of greenhouse gases.\136\ Moreover, as stated above,
commenters did not reliably demonstrate that the unmonetized benefits,
which include CO2 , and costs, taken together, would alter
the agency's assessment of the level of the standard for MY 2011. Thus,
the agency determined the stringency of that standard on the basis of
monetized net benefits.
---------------------------------------------------------------------------
\136\ Environmental Defense submitted studies regarding the
valuation of greenhouse gases. However, the studies were submitted
over three months after the close of the comment period and less
than one month before the agency's statutory deadline for issuing a
MY 2008 standard. These studies have been docketed (NHTSA-2005-2223-
2250, 2251).
---------------------------------------------------------------------------
Additionally, costs for remediating gasoline spills are highly
variable depending on the volume of fuel released, the environmental
sensitivity of the immediate environment, and the presence of specific
fuel additives. As a consequence, the agency has elected to include no
monetary value for reducing greenhouse gas emissions or remediating
fuel spills among the benefits of reducing gasoline use via more
stringent fuel economy regulation.
K. Increased Driving Range and Vehicle Miles Traveled
General Motors argued that the value of time spent refueling should
be zero. General Motors stated that during the fuel economy test EPA
requires fuel tanks to contain a fixed percentage of gasoline compared
to tank capacity and that manufacturers have reduced gasoline tank
volume on average in response to higher fuel efficiency.
Sierra Research added that range is a design criterion and that
there is no basis for assuming that this criterion will change in
response to an increase in CAFE standards. Sierra Research provided
illustrations purported to show the relationship between fuel capacity
and fuel economy standards, and fuel economy and range for 2004 light
trucks, in order to demonstrate that increased fuel economy standards
might not result in increased vehicle range.
The following reflects our understanding of vehicle driving range
and tank size. Typically, the tank size for a model is determined when
the model is designed, and the tank size does not change for small
incremental improvements in fuel economy (as would occur by virtue of
these standards) until the vehicle is redesigned. Thus, until redesign,
increased fuel economy would result in increased driving range, and the
value of time for reduced refueling is real. If tank downsizing does
occur, then there is a cost savings to manufacturers which could be
subtracted from technology costs. One way or another, there is a
benefit. Thus, the agency is retaining its benefit estimates for
increased driving range.
General Motors questioned whether NHTSA's estimate of the average
vehicle's lifetime mileage (152,032 miles) was overstated. NADA also
cautioned that the agency's fuel conservation predictions should
reflect an appropriate range of fuel price and vehicle-miles-traveled
assumptions.
In response to the comments by General Motors and NADA, the agency
notes that the lifetime mileage estimate reported in the NPRM does not
apply to the average vehicle; instead, it represents the average
accumulated mileage of a vehicle that survives for a full 36 years. As
the accompanying vehicle survival rates indicate, only a small fraction
of vehicles originally produced in any model year are expected to
survive to this age. The agency has recently updated its estimates of
survival probabilities and average annual mileage by vehicle age, and
these updated estimates are utilized to calculate the impacts of CAFE
standards reported in the FRIA accompanying this final rule.\137\
Further, as discussed below in Section XII. Comparison of the final and
proposed rule, the agency has adjusted the vehicle miles traveled
schedule to reflect increases in the fuel price forecasts.
---------------------------------------------------------------------------
\137\ The data sources and procedures used to develop these
updated estimates of vehicle survival and usage are reported in
NHTSA, ``Vehicle Survivability and Travel Mileage Schedules,''
Report DOT HS 809 952, National Center for Statistics and Analysis,
January 2006, Docket NHTSA-2005-22223-2218. See FRIA p. VIII-11.
---------------------------------------------------------------------------
L. Added costs from congestion, crashes and noise
General Motors agreed with the agency's cost estimates related to
traffic congestion, crashes, and noise. However, the commenter again
stated its belief that the proposed CAFE standards would result in a
net externality cost--not benefit--in terms of consumer welfare.
Specifically, General Motors stated that the costs associated with
increased congestion, noise, and highway fatalities and injury costs
resulting from increases in driving outweigh the benefits associated
with
[[Page 17639]]
decreased oil import dependence and pollution reduction.
NHTSA agrees that this is a true observation made by General Motors
on the agency's analysis, although we believe the commenter overstates
its significance. We say this because the savings in lifetime fuel
expenditures significantly outweigh the combined net externalities
costs and the costs of added technology, making this a cost-beneficial
rule.
M. Employment Impacts
The California State Energy Commission commented that the agency
mentioned the potential for the CAFE proposal to result in job losses,
but it did not discuss the issue of employment in detail. The
Commission stated that increasing CAFE stringency may actually increase
employment among automobile manufacturers and related sectors, although
union employment and employment in the petroleum manufacturing industry
might decline. Without going into detail, the commenter stated that
several previous studies have concluded that increasing CAFE standards
could increase U.S. employment and economic output. The Commission also
suggested that by requiring U.S. automakers to produce more fuel-
efficient vehicles, stricter CAFE standards could enhance the
competitive positions of those manufacturers in international markets
where fuel prices are typically higher, thereby increasing total sales,
production volumes, and domestic employment. The Commission asked the
agency to address the issue of the employment impacts of its CAFE
standards more explicitly in the final rule.
The Marine Retailers Association of America (MRAA) expressed
concern that increases in CAFE levels could lead to vehicle downsizing,
which in turn could have a negative impact upon the boating industry.
According to the MRAA, there are approximately 17 million recreational
boats in the U.S., about 80 percent of which are pulled by a light
truck or SUV. MRAA stated that to the extent vehicle downsizing occurs,
manufacturers may find it more difficult to produce a vehicle with
adequate horsepower and torque to tow a boat, and without an adequate
vehicle to tow a boat, many consumers may simply decide not to purchase
a boat. Accordingly, the MRAA asked NHTSA to carefully consider the
employment, sales, and other impacts of its CAFE proposal upon the
boating industry.
The agency believes that the CAFE impact on jobs is fairly minor
and there are counterbalancing impacts. The agency estimates that
higher prices will result in a small loss of sales, which negatively
impacts employment. On the other hand, in a few limited cases, the
requirements could result in the use of additional new technology,
which would increase employment. Both of these impacts on jobs are
anticipated to be very minor, and the counterbalancing impacts will be
near zero. Very few light trucks are exported for sale and we believe
that the proposed increases in fuel economy are unlikely to change
these sales volumes appreciably. Thus, we expect that there is little
chance of improving the competitive position of the manufacturers in
international markets as a result of revised light truck CAFE
standards.
The agency has not included changes in vehicle performance as part
of its strategy for the manufacturers to improve fuel economy and
changes in weight were not accompanied by changes in horsepower. Thus,
our assumptions include no changes that would affect the boating
industry. However, our assumptions do not require a manufacturer to
follow our predicted course of action.
IX. MY 2008-2010 Transition Period
As stated above, the agency is providing a transition period during
MYs 2008-2010. During this period, manufacturers have the option of
complying under the standard established under the Unreformed CAFE
system or the standard established under the Reformed CAFE system.
A. Choosing the Reformed or Unreformed CAFE System
As part of the transition to a fully phased-in Reform CAFE system
in MY 2011, during MYs 2008-2010, manufacturers have the option of
complying under the Reformed CAFE system or the Unreformed CAFE system.
Manufacturers are required to announce their selection for a model
year, and that selection will be irrevocable for that MY. However, a
manufacturer is permitted to select the alternate compliance option in
the following MY. Beginning MY 2011, a manufacturer must comply only
under the Reformed CAFE system.
In the NPRM, we proposed that a manufacturer would announce its
selection as part of its mid-model year report, as filed according to
49 CFR 537.7. In order to provide manufacturers a greater level of
flexibility, the final rule does not require a manufacturer to elect
one of the two compliance options until the end of the model year. This
will permit a manufacturer to determine its actual fuel economy before
determining whether to elect compliance under the Unreformed or
Reformed CAFE system. Within 45 days following the end of the model
year, a manufacturer must submit to the agency a report indicating
whether it has elected to comply with the Reformed or Unreformed CAFE
program for that model year.
B. Application of Credits Between Compliance Options
The EPCA credit provisions operate under the Reformed CAFE system
in the same manner as they do under the Unreformed CAFE system. The
harmonic averages used to determine compliance under the Reformed CAFE
system permit the amount, if any, of the credits earned to be
calculated as under the Unreformed CAFE system:
Credits = (Actual CAFE-Required CAFE) * 10 * Total Production
Credits earned in a model year can be carried backward or forward as
currently done in the Unreformed CAFE system.
Further, credits are transferable between the two systems. Both
Unreformed CAFE and Reformed CAFE use harmonic averaging to determine
fuel economy performance of a manufacturer's fleet. Under Reformed
CAFE, fuel savings from under- and over-performance with each category
are generated and applied almost identically to the way in which this
occurs under the Unreformed CAFE system. As a result, the two systems
generate credits with equal fuel savings value. Therefore, credits
earned in a model year under Unreformed CAFE are fully transferable
forward to a model year under the Reformed CAFE system, up to the
statutory limit of three years. Likewise, credits under Reformed CAFE
can be carried back to Unreformed CAFE.
X. Impact of Other Federal Motor Vehicle Standards
A. Federal Motor Vehicle Safety Standards
The EPCA specifically directs us to consider the impact of other
Federal vehicle standards on fuel economy. This statutory factor
constitutes an express recognition that fuel economy standards should
not be set without due consideration given to the effects of efforts to
address other regulatory concerns, such as motor vehicle safety and
emissions. The primary influence of many of these regulations is the
addition of weight to the vehicle, with the commensurate reduction in
fuel economy.
Several manufacturers commented on the evaluation of Federal motor
vehicle
[[Page 17640]]
standards, generally stating that the agency's estimated weight impacts
were too low. Our response to these comments and a summary of our
evaluation are provided below. A detailed discussion of the evaluation
is provided for in the FRIA (see FRIA p. IV-2).
The agency has evaluated the impact of the Federal motor vehicle
safety standards (FMVSS) using MY 2007 vehicles as a baseline. We have
issued or proposed to issue a number of FMVSSs that become effective
between the MY 2007 baseline and MY 2011. These have been analyzed for
their potential impact on light truck fuel economy weights for MYs
2008-2011: The fuel economy impact, if any, of these new requirements
will take the form of increased vehicle weight resulting from the
design changes needed to meet new FMVSSs.
The average test weights (curb weight plus 300 pounds) of the light
truck fleet for General Motors, Ford, and DaimlerChrysler in MY 2008,
MY 2009, MY 2010 and MY 2011 are 4,744, 4,800, 4,792, and 4,786,\138\
respectively. Thus, overall, the three largest manufacturers of light
trucks expect weight to remain almost unchanged during the time period
addressed by this rulemaking. The changes in weight include all
factors, such as changes in the fleet mix of vehicles, required safety
improvements, voluntary safety improvements, and other changes for
marketing purposes. These changes in weight over the three model years
would have a negligible impact on fuel economy.
---------------------------------------------------------------------------
\138\ This figure is for the fleet not including MDPVs for a
more accurate comparison to the fleet numbers for MYs 2008 through
2010. The figure including MDPVs is 4,832 lbs.
---------------------------------------------------------------------------
1. FMVSS 138, Tire Pressure Monitoring System
As required by the Transportation Recall Enhancement,
Accountability, and Documentation (TREAD) Act, NHTSA is requiring a
Tire Pressure Monitoring System (TPMS) be installed in all passenger
cars, multipurpose passenger vehicles, trucks and buses that have a
Gross Vehicle Weight Rating of 10,000 pounds or less. The effective
dates are based on the following phase-in schedule:
20 percent of light vehicles produced between September 1, 2005 and
August 31, 2006,
70 percent of light vehicles produced between September 1, 2006 and
August 31, 2007,
All light vehicles produced after September 1, 2007 are required to
comply.
Thus, for MY 2008, an additional 30 percent of the fleet will be
required to meet the standard as compared to MY 2007. We estimate from
a cost teardown study that the added weight for an indirect system is
about 0.156 lbs. and for a direct system is 0.275 to 0.425 lbs.
Initially, direct systems will be more prevalent, thus, the increased
weight is estimated to be average 0.35 lbs. (0.16 kilograms). Beginning
in MY 2008, the weight increase from FMVSS No. 138 is anticipated to be
0.11 pounds (0.05 kilograms).
As stated in the TPMS final rule,\139\ by promoting proper tire
inflation, the installation of TPMS will result in better fuel economy
for vehicle owners that previously had operated their vehicles with
under-inflated tires. However, this will not impact a manufacturer's
compliance under the CAFE program. Under the CAFE program, a vehicle's
fuel economy is calculated with the vehicle's tires at proper
inflation. Therefore, the fuel economy benefits of TPMS have not been
considered in this rulemaking.
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\139\ 70 FR 18136, 18139; April 8, 2005; Docket No. 2005-28506.
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2. FMVSS 202, Head Restraints
The final rule requires an increase in the height of front seat
outboard head restraints in pickups, vans, and utility vehicles,
effective September 1, 2008 (MY 2009). If the vehicle has a rear seat
head restraint, it is required to be at least a certain height.\140\
The initial head restraint requirement, established in 1969, resulted
in the average front seat head restraints being 3 inches taller than
pre-standard head restraints and adding 5.63 pounds \141\ to the weight
of a passenger car. With the new final rule, we estimate the increase
in height for the front seats to be 1.3 inches and for the rear seat to
be 0.26 inch, for a combined average of 1.56 inches.\142\ Based on the
relationship of pounds to inches from current head restraints, we
estimate the average weight gain across light trucks would be 2.9
pounds (1.3 kilograms).
---------------------------------------------------------------------------
\140\ The compliance date for the upgraded requirements
applicable to head restraints voluntarily installed at rear outboard
seating positions recently was amended from September 1, 2008, to
September 1, 2010 (see, 71 FR 12415; March 9, 2006).
\141\ Tarbet, Marcia J., ``Cost and Weight Added by Federal
Motor Vehicle Safety Standards for Model Years 1968-2001 in
Passenger Cars and Light Trucks'', NHTSA, December 2004, DOT-HS-809-
834. Pg. 51. (http://www.nhtsa.dot.gov/cars/rules/regrev/evaluate/809834.html
).
\142\ ``Final Regulatory Impact Analysis, FMVSS No. 202 Head
Restraints for Passenger Vehicles'', NHTSA, November 2004, Docket
No. 19807-1, p. 74.
---------------------------------------------------------------------------
3. FMVSS 208, Occupant Crash Protection (Rear Center Seat Lap/Shoulder
Belts)
This final rule requires a lap/shoulder belt in the center rear
seat of light trucks. There are an estimated 5,061,079 \143\ seating
positions in light trucks needing a shoulder belt, where they currently
have a lap belt. This estimate of seating positions is a combination of
light trucks, SUVs, minivans and 15 passenger vans that have either no
rear seat, or one to four rear seats that need shoulder belts. This
estimate was based on sales of 7,521,302 light trucks in MY 2000. Thus,
the average light truck needs 0.67 shoulder belts. The average weight
of a rear seat lap belt is 0.92 lbs. and the average weight of a manual
lap/shoulder belt with retractor is 3.56 lbs.\144\ Thus, the
anticipated weight gain is 2.64 pounds per shoulder belt. We estimate
the average weight gain per light truck for the shoulder belt would be
1.8 pounds (0.8 kilograms).
---------------------------------------------------------------------------
\143\ ``Final Economic Assessment and Regulatory Flexibility
Analysis, Cost and Benefits of Putting a Shoulder Belt in the Center
Seats of Passenger Cars and Light Trucks'', NHTSA, June 2004, Docket
No. 18726-2, p. 33.
\144\ Tarbet 2004, p. 84.
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A second, potentially more important, weight increase depends upon
how the center seat lap/shoulder belt is anchored. The agency has
allowed a detachable shoulder belt in this seating position, which
could be anchored to the ceiling or other position, without a large
increase in weight. If the center seat lap/shoulder belt were anchored
to the seat itself, typically the seat would need to be strengthened to
handle this load. If the manufacturer decides to change all of the
seats to integral seats, having all three seating positions anchored
through the seat, then both the seat and flooring needs to be
strengthened. The agency requested information about manufacturer plans
for complying with this requirement and after reviewing the
confidential submissions, NHTSA estimates that the average weight gain
per light truck for the shoulder belt would be 0.36 lbs (0.16 kg)
compared to MY 2007. For the anchorage, the average weight increase
would be 0.2 lbs (0.09 kg) or more.
The effective dates are based on the following phase-in schedule:
50 percent of light vehicles produced between September 1, 2005 and
August 31, 2006,
80 percent of light vehicles produced between September 1, 2006 and
August 31, 2007,
100 percent of light vehicles produced after September 1, 2007.
[[Page 17641]]
Thus, for MY 2008, an additional 20 percent of the fleet will be
required to meet the standard. We estimate the average weight gain per
light truck for the shoulder belt would be 0.36 lbs (0.16 kg) [1.8
pounds (0.8 kilograms) * 0.2] compared to MY 2007. For the anchorage,
the average weight increase would be 0.2 pounds (0.09 kg) or more.
4. FMVSS 208, Occupant Crash Protection (35 mph Frontal Impact Testing)
The advanced air bag rule requires 35 mph belted testing with the
50th percentile male dummy with a phase-in schedule of:
35 percent of light vehicles produced between September 1, 2007 and
August 31, 2008,
65 percent of light vehicles produced between September 1, 2008 and
August 31, 2009,
100 percent of light vehicles produced after September 1,
2009.\145\
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\145\ The standard will be fully effective on September 1, 2010
when it includes small manufacturers, multi-stage manufacturers and
alterers.
---------------------------------------------------------------------------
The impacts of this requirement were not considered in the
evaluation for the NPRM. Evaluation of the 35 mph belted test has been
added in response to comment from General Motors that raised the issue.
About 85 percent of the fleet already meets the test based on NCAP
results. It is assumed that pretensioners and load limiters would be
the countermeasures used to pass the test. The estimated combined
weight of these features is 2.4 pounds for the two front outboard
seats. Thus, the average incremental weight would be 0.36 lbs (0.16
kg).
5. FMVSS 301, Fuel System Integrity
This final rule amends the testing standards for rear end crashes
and resulting fuel leaks. Many vehicles already pass the more stringent
standards, and those affected are not likely to be pick-up trucks or
vans. It is estimated that weight added will be only lightweight items
such as a flexible filler neck. We estimate the average weight gain
across this vehicle class would be 0.24 lbs (0.11 kg).
The effective dates are based on the following phase-in schedule:
40 percent of light vehicles produced between September 1, 2006 and
August 31, 2007,
70 percent of light vehicles produced between September 1, 2007 and
August 31, 2008,
100 percent of light vehicles produced after September 1, 2008 are
required to comply.
Thus, 60 percent of the fleet must meet FMVSS 301 during the MY
2008-2010 time period. Thus, the average weight gain during this period
would be 0.14 lbs (0.07 kg).
B. Potential Future Safety Standards and Voluntary Safety Improvements
There are several safety standards that have recently been
proposed, or that the agency is required by Congress to propose in the
near future that could impact some of the MY 2008-2011 vehicles. In
most cases, these proposals or future proposals are already being met
voluntarily by a part of the fleet.
Additionally, the agency has historically considered the impact of
voluntary safety improvements. The agency has expressed concern that
overly stringent CAFE standards might discourage manufacturers from
pursuing voluntary improvements (53 FR 39275, 39296; October 6, 1988).
Currently, there are improvements that are being made voluntarily to
meet market demand and/or to perform better on government or insurance
industry tests involving vehicle ratings. In our analysis for this
final rule, the potential future safety standards and voluntary
improvements have been combined without regard to effective date, even
though the final effective dates for the potential future safety
standards may be later than MY 2011.
1. Anti-Lock Brakes and Electronic Stability Control (ESC)
Many manufacturers are planning to install ESC on all their light
vehicles. Recent congressional legislation contained in section 10301
of the Safe, Accountable, Flexible, Efficient Transportation Equity
Act: A Legacy for Users of 2005 (SAFETEA-LU)\146\ requires the
Secretary of Transportation to ``establish performance criteria to
reduce the occurrence of rollovers consistent with stability enhancing
technologies'' and to ``issue a proposed rule * * * by October 1, 2006,
and a final rule by April 1, 2009.'' A requirement by NHTSA in this
area could potentially be effective with MY 2011.
---------------------------------------------------------------------------
\146\ Pub. L. 109-59, 119 Stat. 1144 (2005).
---------------------------------------------------------------------------
The ESC system needs anti-lock brakes to work appropriately. Anti-
lock brakes add about 20 pounds to the weight of a light truck.
Currently, about 91 percent of all light trucks have anti-lock brakes.
Thus, if all light trucks added anti-lock brakes, average light truck
weight would increase by 1.8 pounds. ESC is estimated to add about 9
pounds to a vehicle. In 2005, an estimated 23 percent of light trucks
have ESC. Thus, if all light trucks added ESC, average light truck
weight would increase by 6.9 pounds. So, the total weight increase is
8.7 pounds (3.95 kg.).
2. Roof Crush, FMVSS 216
On August 23, 2005, NHTSA published an NPRM proposing to upgrade
the agency's safety standard on roof crush resistance. (70 FR 49223)
The NPRM proposed to extend the standard to vehicles with a GVWR of
10,000 pounds or less, increase the force applied to 2.5 times each
vehicle's unloaded weight, and replace the current limit on the amount
of roof crush with a requirement to maintain enough headroom for a mid-
size adult male occupant.
The Alliance, Ford, DaimlerChrysler and Toyota commented that the
agency should have included the weight impact of the FMVSS 216
amendments in its analysis. The agency agrees. Manufacturers' estimates
of the weight implications of compliance with the proposed FMVSS No.
216 ranged from minimal to tens of pounds.
As estimated at the time of the FMVSS 216 NPRM, the proposed
upgrade was estimated to increase average vehicle weight by 6.07
pounds. The proposed effective date was the first September 1 occurring
three years after publication of the final rule.
In addition to the comments on the CAFE NPRM, NHTSA received a
number of comments on the weight estimates in response to the Roof
Crush NPRM. Other manufacturers commented on the Roof Crush NPRM that
the agency's weight estimates were too low. However, other commenters
indicated that weight estimates were too high because they said that
the agency did not consider alternative, lighter, materials that
manufacturers could use to comply with the standard. The agency is
still evaluating all of the comments to the Roof Crush NPRM and
estimates that, if a final rule were issued, it would be in 2007.
Therefore, for purposes of this CAFE rule, the agency is using the
estimates made at the time of the Roof Crush NPRM and assuming an
effective date of September 1, 2010.
3. Side Impact and Ejection Mitigation Air Bags (Thorax and Head Air
Bags)
Many manufacturers are installing side impact air bags (thorax
bags, combination head/thorax bags, or window curtains). NHTSA proposed
an oblique pole test as part of FMVSS 214 on May 17, 2004 (69 FR
27990). Based on current technology, this NPRM would result in head
protection by either a combination head/thorax side
[[Page 17642]]
air bag or window curtains. SAFETEA-LU also requires the use of window
curtain air bags for ejection mitigation, which would result in taller
and wider window curtains that would be tethered or anchored low to
keep occupants in the vehicle.
Assuming in the future that the typical system will be thorax bags
with a window curtain, the average weight increase would be 11.55
pounds (4.77 + 6.78) or 5.25 kg (2.07 + 3.08). In MY 2005, about 31
percent of the fleet had thorax air bags, 7 percent had combination air
bags and, and 25 percent had window curtains. The combined average
weight for these systems in MY 2005 was 3.49 pounds (1.59 kg). Thus,
the future increase in weight for side impact air bags and window
curtains compare to MY 2005 installations is 8.06 pounds (11.55-3.49)
or 3.66 kg (5.25-1.59).
Another area that could result in an increase in weight is if the
manufacturers include structure to get a higher score in the IIHS
higher side impact barrier test. Public data is not available to
estimate what voluntary weight increases have been added or will be
added to get a better score in this test.
4. Offset Frontal Crash Testing
IIHS has been testing and rating vehicles using an offset
deformable barrier crash test at 64 km/h. Many manufacturers have
redesigned their vehicles to do better in these tests and have
increased the weight of their vehicles. Four light trucks that the
agency has tested, which improved from a poor rating to a marginal or
good rating in the IIHS testing, increased their weights, some with
other redesigns, as follows:
Table 14.--Increases in Weight To Improve Offset Frontal Testing
----------------------------------------------------------------------------------------------------------------
Before After redesign Increase in weight
----------------------------------------------------------------------------------------------------------------
SUV................................ 1997 Chevrolet Blazer 2002 Trailblazer (5,181 \147\ 495 lbs.
(4,686 lbs.). lbs.).
SUV................................ 1999 Mitsubishi Montero 2001 Mitsubishi Montero 69 lbs.
Sport (4,646 lbs.). Sport (4,715 lbs.).
Pickup............................. 2001 Dodge Ram 1500 2002 Dodge Ram 1500 39 lbs.
(4,930 lbs.). (4,969 lbs.).
Minivan............................ 1996 Toyota Previa 1998 Toyota Sienna 127 lbs.
(3,810 lbs.). (3,937 lbs.).
----------------------------------------------------------------------------------------------------------------
\147\ Part of the explanation for the weight increase between the Blazer and Trailblazer is an increase of
approximately 1,070 sq. in. in footprint.
These weight increases have an affect on the vehicle's fuel
economy. However, many vehicles have already been redesigned with this
offset frontal test in mind. Whether increases in weight like this will
continue for other vehicles in the future is unknown.
C. Cumulative Weight Impacts of the Safety Standards and Voluntary
Improvements
After making the changes in response to comments discussed above,
NHTSA estimates that weight additions required by FMVSS regulations
that will be effective in MYs 2008-2011, compared to the MY 2007 fleet
will increase light truck weight by an average of 4.07 pounds or more
(1.83 kg or more). Likely weight increases from future safety standards
or voluntary safety improvements will add 22.83 pounds or more (10.37
kg or more) compared to MY 2005 installations.
The Alliance, DaimlerChrysler, Ford, General Motors and Toyota
argued that the weight additions projected by NHTSA for FMVSS
regulations that will be effective in MYS 2008-2011 is too low. NHTSA
projected an average of 15.46 pounds (including both FMVSS requirements
and voluntary safety improvements) and a CAFE impact of 0.04 mpg. Only
Ford provided a total estimate which could be compared to this number,
and their estimate was significantly higher.
In some instances the manufacturers' weight estimates are similar
to NHTSA's, in some instances they are less than NHTSA's, but often
they are more than NHTSA's. The agency's estimates are based on cost
and weight tear down studies of a few vehicles and cannot possibly
cover all the variations in the manufacturers' fleets. The
manufacturer's estimates of the fuel economy impact of added weight on
mpg have typically been less than NHTSA's estimates. NHTSA estimated
that an increase of 3-4 pounds \148\ results in a decrease of 0.01 mpg,
the manufacturers' data show that an increase of up to 7 pounds results
in a decrease of 0.01 mpg. The combination of the manufacturers
estimating more safety weight impacts, but that weight having less
impact on miles-per-gallon, has resulted in similar impacts being
estimated by NHTSA and the manufacturers. The agency has not questioned
the manufacturers' estimates closely because the differences in the
overall fuel economy impact due to required safety standards as
estimated by Ford, General Motors, and NHTSA is small. A more detailed
discussion of the impact of safety improvements is provided in the FRIA
(see FRIA p. IV-2).
---------------------------------------------------------------------------
\148\ In reality, the fuel economy impact depends on the
baseline weight of the vehicle.
---------------------------------------------------------------------------
D. Federal Motor Vehicle Emissions Standards
1. Tier 2 Requirements
Pursuant to its authority under the Clean Air Act, on February 10,
2000, the Environmental Protection Agency (EPA) published a final rule
establishing new Federal emission standards for passenger cars and
light trucks (see 65 FR 6698). Known as the ``Tier 2'' Program, the new
emissions standards in EPA's final rule cover both light-duty vehicles
(i.e., passenger cars and light trucks with a GVWR of 6,000 pounds or
less) and medium-duty passenger vehicles (MDPVs) (i.e., vehicles with
either a curb weight of more than 6,000 pounds or a GVWR of more than
8,500 pounds and which otherwise meet the EPA definition (as discussed
previously in this notice)).
The ``Tier 2'' standards are designed to focus on reducing the
emissions most responsible for the ozone and particulate matter (PM)
impact from these vehicles (e.g., NOX and non-methane
organic gases (NMOG), consisting primarily of hydrocarbons (HC)) and
contributing to ambient volatile organic compounds (VOC). In addition
to establishing new emissions standards for vehicles, the Tier 2
standards also establish standards for the sulfur content of gasoline.
For new passenger cars and lighter light trucks (rated at less than
6,000 pounds GVWR), the Tier 2 standards' phase-in began in 2004, and
the standards are to be fully phased in by 2007. For MDPVs, the phase-
in schedule under the Tier 2 Program requires that 50 percent of the
MDPV fleet must comply in MY 2008 and that 100 percent comply by MY
2009.
Prior to model year 2008, EPA also regulates MDPVs under ``Interim-
Non-
[[Page 17643]]
Tier 2'' standards, applicable to MDPVs in accordance with a phase-in
schedule beginning with MY 2004. The phase-in schedule requires
compliance at the following levels: 25 percent in 2004, 50 percent in
2005, 75 percent in 2006, and 100 percent in 2007. Thus, beginning in
2008, half of new MDPVs are expected to comply with Tier 2 and the
other half with ``Interim Non-Tier 2 Standards.'' (Once the Tier 2
standards for MDPVs are fully implemented, the Interim-Non-Tier 2
standards will be eliminated.)
When issuing the Tier 2 standards, EPA responded to comments
regarding the Tier 2 standard and its impact on CAFE by indicating that
it believed that the Tier 2 standards would not have an adverse effect
on fuel economy.
In their confidential product plan submissions, several
manufacturers stated that the Tier 2 requirements have an effect on
fuel economy through additional weight and design requirements.
However, after careful consideration, we have concluded that the
impacts of the Tier 2 standards on fuel economy would not be
significant for the following reasons. First, manufacturers themselves
have estimated that the resulting reduction in fuel economy during MYs
2008-2010, in comparison to MY 2007, would be no greater than 0.04 mpg.
Furthermore, with the exception of MDPVs, the Tier 2 requirements will
be fully implemented in MY 2007, prior to the MYs that are the subject
of this rulemaking for CAFE.
2. Onboard Vapor Recovery
On April 6, 1994, EPA published a final rule controlling vehicle-
refueling emissions through the use of onboard refueling vapor recovery
(ORVR) vehicle-based systems (see 59 FR 16262). These requirements
applied to light-duty vehicles (cars) beginning in the 1998 model year,
and were phased in over three model years. The ORVR requirements also
apply to light-duty trucks with a GVWR of 6,000 pounds or less
beginning in model year 2001, being phased in over three model years.
For light-duty trucks with a GVWR of 6,001-8,500 lbs, the ORVR
requirements first applied in the 2004 model year and were phased in
over three model years.
The ORVR requirements impose a weight penalty on vehicles, as they
necessitate the installation of vapor recovery canisters and associated
tubing and hardware. However, the operation of the ORVR system results
in fuel vapors being made available to the engine for combustion while
the vehicle is being operated. As these vapors provide an additional
source of energy that would otherwise be lost to the atmosphere through
evaporation, the ORVR requirements do not have a negative impact on
fuel economy, despite the associated weight increase.
In its comments, Honda disagreed with the agency's assertion that
ORVR systems do not have a negative impact on fuel economy because the
systems make available for combustion vapors that would otherwise be
lost to the environment. Honda stated that the agency's assertion is
correct for ``in-use fuel economy,'' but it is not true for the test
procedures used to determine fuel economy under CAFE, because the fuel
economy test procedures rely on a carbon balance equation. Honda stated
that the measured fuel economy of a vehicle under the fuel economy test
procedures is exactly the same, whether or not the ORVR system makes
fuel vapors available to the engine for combustion.
NHTSA reiterates that ORVR provides a slight fuel economy benefit
with respect to in-use fuel economy. NHTSA acknowledges that Honda's
point is also correct--that this fuel economy benefit is not
distinguishable in the Federal test procedure (FTP) or highway test
cycle measurements. However, ORVR is not expected to have a significant
effect on the fuel economy values measured on the FTP and highway
tests. Further, the slight on-road fuel economy benefit realized is not
utilized by NHTSA to set fuel economy standards.
In its rulemaking proceedings for ORVR, EPA conducted an extensive
analysis on increases in vehicle weight due to the addition of ORVR
hardware and software. A discussion of the ORVR weight penalty is
contained in EPA's ``Final Regulatory Impact Analysis: Refueling
Emission Regulations for Light-Duty Vehicles and Trucks and Heavy-Duty
Vehicles,'' January 1994; Chapter 5 Economic Impact, section 5.3.2.1.
If mechanical seal ORVR systems are more widely used in the future than
liquid seal ORVR systems (which represent approximately 95-98 percent
of today's vehicles), the weight penalty could increase above that
discussed in EPA's RIA. However, any increase in vehicle weight due to
more widespread use of mechanical seal ORVR systems would be negligible
and not be expected to be a major fuel economy design consideration.
3. California Air Resources Board--Clean Air Act Section 209 Standards
The Clean Air Act (CAA) generally prohibits States or any other
political subdivision from adopting any standard relating to the
control of emissions from new motor vehicles (CAA section 209(a); 42
U.S.C. 7543(a)). However, the statute provides that the State of
California may issue such standards upon obtaining a waiver from the
EPA (CAA section 209(b); 42 U.S.C. 7543(b)). The State of California
has established several emission requirements under section 209(b) of
CAA as part of its Low Emission Vehicle (LEV) program. California
initially promulgated these section 209(b) standards in its LEV I
standards, and it has subsequently adopted more stringent requirements
under section 209(b) of the CAA in its LEV II regulations. The relevant
LEV II regulations are being phased in for passenger cars and light
trucks during the 2004-2007 model years.\149\
---------------------------------------------------------------------------
\149\ As of the end of 2005, ten states have adopted the LEV II
program, including Connecticut, Maine, Massachusetts, New Jersey,
New York, Oregon, Pennsylvania, Rhode Island, Vermont, and
Washington.
---------------------------------------------------------------------------
The LEV II amendments restructure the light-duty truck category so
that trucks with a GVWR rating of 8,500 pounds or less are subject to
the same low-emission vehicle standards as passenger cars. The LEV II
Program also includes more stringent (than LEV I) emission standards
for passenger car and light-duty truck LEVs and establishes standards
for ``ultra low emission vehicles'' (ULEVs).
The LEV II Program also has requirements for ``zero emission
vehicles'' (ZEVs) that apply to passenger cars and light trucks up to
3,750 lbs. loaded vehicle weight (LVW), beginning in MY 2005. Trucks
between 3,750 lbs. LVW and 8,500 lbs. GVWR are phased in to the ZEV
regulation from 2007-2012. The ZEV requirements begin at 10 percent in
2005 and ramp up to 16 percent for 2018 under different paths.
Compliance with more stringent emission requirements of the section
209 CAA requirements in the LEV II program is most often achieved
through more sophisticated combustion management. The associated
improvements and refinement in engine controls generally improve fuel
efficiency and have a positive impact on fuel economy.\150\ However,
such gains may be diminished because the advanced technologies required
by the program can affect the impact of other fuel-economy improvements
(primarily due to increased weight). The agency has considered this
potential impact in our evaluation of manufacturers' product plans.
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\150\ Northeast States for Coordinated Air Use Management,
``White Paper: Comparing the Emissions Reductions of the LEV II
Program to the Tier 2 Program,'' October 2003.
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[[Page 17644]]
XI. Need of the Nation To Conserve Energy
EPCA specifically directs the Department to balance the
technological and economic challenges related to fuel economy with the
nation's need to conserve energy. While EPCA grew out of the energy
crisis of the 1970s, the United States still faces considerable energy
challenges today. U.S. energy consumption has been outstripping U.S.
energy production at an increasing rate. This imbalance, if allowed to
continue, will undermine our economy, our standard of living, and our
national security. (May 2001 National Energy Policy (NEP) Overview, p.
viii)
As was made clear in the first chapter of the NEP, efficient energy
use and conservation are important elements of a comprehensive program
to address the nation's current energy challenges:
America's current energy challenges can be met with rapidly
improving technology, dedicated leadership, and a comprehensive
approach to our energy needs. Our challenge is clear--we must use
technology to reduce demand for energy, repair and maintain our
energy infrastructure, and increase energy supply. Today, the United
States remains the world's undisputed technological leader: but
recent events have demonstrated that we have yet to integrate 21st-
century technology into an energy plan that is focused on wise
energy use, production, efficiency, and conservation.
(Page 1-1)
The concerns about energy security and the effects of energy prices
and supply on national economic well-being that led to the enactment of
EPCA persist today. The demand for petroleum is steadily growing in the
U.S. and around the world.
The Energy Information Administration's International Energy
Outlook 2005 (IEO2005)\151\ and Annual Energy Outlook 2006 (Early
Release) (AEO2006) indicate growing demand for petroleum in the U.S.
and around the world. U.S. demand for oil is expected to increase from
21 million barrels per day in 2004 to 28 million barrels per day in
2030. In the AEO2006 reference case, world oil demand increases through
2030 at a rate of 1.4 percent annually, from 82 million barrels per day
in 2004 to 118 million barrels per day in 2030 (AEO2006). Approximately
67 percent of the increase in world demand is projected to occur in
North America and emerging Asia. Energy use in the transportation
sector is projected to increase at an annual rate of 1.8 percent
through 2025 (AEO2006).
---------------------------------------------------------------------------
\151\ See http://www.eia.doe.gov/oiaf/ieo/pdf/0484(2005).pdf.
---------------------------------------------------------------------------
To meet this projected increase in demand, worldwide productive
capacity would have to increase by more than 36 million barrels per day
over current levels. OPEC producers are expected to supply 40 percent
of the increased production. In contrast, U.S. crude oil production is
projected to increase from 8.4 million barrels per day in 2004 to 9.62
million in 2015, and then begin declining, falling to 8.9 million
barrels per day in 2025. By 2025, 60 percent of the oil consumed in the
U.S. would be imported oil. \152\
---------------------------------------------------------------------------
\152\ AEO2006, Table A20, International Petroleum Supply and
Disposition Summary.
---------------------------------------------------------------------------
Energy is an essential input to the U.S. economy, and having a
strong economy is essential to maintaining and strengthening our
national security. Secure, reliable, and affordable energy sources are
fundamental to economic stability and development. Rising energy demand
poses a challenge to energy security, given increased reliance on
global energy markets. As noted above, U.S. energy consumption has
increasingly been outstripping U.S. energy production.
Conserving energy, especially reducing the nation's dependence on
petroleum, benefits the U.S. in several ways. Improving energy
efficiency has benefits for economic growth and the environment, as
well as other benefits, such as reducing pollution and improving
security of energy supply. More specifically, reducing total petroleum
use decreases our economy's vulnerability to oil price shocks. Reducing
dependence on oil imports from regions with uncertain conditions
enhances our energy security and can reduce the flow of oil profits to
certain states now hostile to the U.S. Reducing the growth rate of oil
use will help relieve pressures on already strained domestic refinery
capacity, decreasing the likelihood of product price volatility.
We believe that the continued development of advanced technology,
such as fuel cell technology, and an infrastructure to support it, may
help in the long term to achieve reductions in foreign oil dependence
and stability in the world oil market. The continued infusion of
advanced diesels and hybrid propulsion vehicles into the U.S. light
truck fleet may also contribute to reduced dependence on petroleum. In
the shorter term, our Reformed CAFE final rule will encourage broader
use of fuel saving technologies, resulting in more fuel-efficient
vehicles and greater overall fuel economy.
We have concluded that the increases in the light truck CAFE
standards that will result from today's final rule will contribute
appropriately to energy conservation and the comprehensive energy
program set forth in the NEP. In assessing the impact of the standards,
we accounted for the increased vehicle mileage that accompanies reduced
costs to consumers associated with greater fuel economy and have
concluded that the final rule will lead to considerable fuel savings.
While increasing fuel economy without increasing the cost of fuel will
lead to some additional vehicle travel, the overall impact on fuel
conservation remains decidedly positive.
We acknowledge that, despite the CAFE program, the United States'
dependence on foreign oil and petroleum consumption has increased in
recent years. Nonetheless, data suggest that past fuel economy
increases have had a major impact on U.S. petroleum use. The NAS
determined that if the fuel economy of the vehicle fleet had not
improved since the 1970s, U.S. gasoline consumption and oil imports
would be about 2.8 million barrels per day higher than they are today.
Increasing fuel economy by 10 percent would produce an estimated 8
percent reduction in fuel consumption. Increases in the fuel economy of
new vehicles eventually raise the fuel economy of all vehicles as older
cars and trucks are scrapped.
Our analysis in the EA indicates that Reformed CAFE standards will
result in an estimated 73 million metric tons of CO2 over
the lifetime of the vehicles (see EA p. 31). They will further reduce
the intensity of the greenhouse gas emissions generated by the
transportation sector of the national economy, consistent with the
President's overall climate change policies. However, NHTSA has not
monetized greenhouse gas reduction benefits in this rule, given the
scientific and economic uncertainties associated with developing a
proper estimation of avoided costs due to climate change.
XII. Comparison of the Final and Proposed Standards
The standards established in today's final rule are more stringent
than those proposed in the NPRM. Moreover, the Final Rule subjects
MDPVs to the light truck CAFE program beginning in MY 2011, where as
the NPRM did not include the regulation of these vehicles. By applying
more stringent standards to a more encompassing definition of light
trucks, the final rule requires higher fuel efficiency from more
vehicles than was proposed in the NPRM. The fuel savings estimated to
result from the standards adopted today are 4.4 billion gallons from
the MYs 2008-2010 Unreformed standards, 4.9 billion gallons from the
[[Page 17645]]
MYs 2008-2010 Reformed standards, and an additional fuel savings of
over 2.8 billion gallons from the MY 2011 Reformed standard.
Table 15.--Industry-Wide Fuel Economy Levels Required by Proposed and
Final Reformed CAFE Standards
------------------------------------------------------------------------
MY Proposed Final Increase
------------------------------------------------------------------------
2008................................ 22.6 22.7 +0.1
2009................................ 23.1 23.4 +0.3
2010................................ 23.4 23.7 +0.3
2011................................ 23.9 24.0 +0.1
------------------------------------------------------------------------
The total fuel saving estimated to result from the Reformed CAFE
standards for MYs 2008-2011 is approximately 7.8 billion gallons.
However, in the NPRM the agency estimated that the Reformed CAFE
standards as proposed would potentially save 10.2 billion gallons of
fuel over the lifetimes of light trucks manufactured during these same
model years. The lower estimated fuel savings of the final rule despite
adopting more stringent standards can be explained by a number of
factors that affected the agency's analysis. These include: changes in
the Volpe model, higher fuel price forecasts, revisions to the Reformed
CAFE standard, and changes to manufacturers' product plans.
Some of these factors increased the estimated fuel savings for the
final rule compared to the level reported in the NPRM, while others
reduces the rule's estimated fuel savings. These factors are each
discussed below.
A. Changes in the Volpe Model
There were two changes made to the Volpe model between the analysis
reported in the NPRM and the analysis conducted for the final rule, a
revision to the maximum lifetime of light trucks and a revision to how
the model applied technologies. First, the maximum lifetime of light
trucks was extended from 25 to 36 years, and the fraction of vehicles
originally produced during a model year that remain in service at each
age was increased to reflect this longer lifetime. These changes were
made in response to NHTSA's detailed analysis of R.L. Polk registration
data for recent model year light trucks. These changes increase fuel
savings resulting from any increase in CAFE standards because they
increase the number of miles driven (and the amount of fuel consumed
under the Baseline standard) during a vehicle's expected lifetime. This
change increased the total fuel savings estimated to result from the
Reformed CAFE standards by 0.2 billion gallons.
The second change to the Volpe CAFE model was a revision to the way
it applied technology to achieve increased fuel economy. The Reformed
CAFE system establishes required fuel economy levels, in part, by
setting fuel economy targets through a marginal cost-benefit analysis.
As noted above, this analysis applies technologies until the marginal
cost of the technology equals the marginal benefits of that technology.
The higher fuel prices projected by EIA after the NPRM might be
expected to cause the model to apply a greater amount of fuel saving
technology in the final rule than in the NPRM, and potentially result
in final standards that are more stringent than those adopted today.
This did not occur, in part, because of the revised technology
assumptions incorporated in the Volpe model, as explained below.
The agency revised its technology assumptions to be more consistent
with the estimates in the NAS report about the number of years needed
to implement each of the various technologies and in response to
comments from manufacturers. To achieve consistency with the NAS
report, we reduced the projected rates of technology implementation
employed by the model. In their comments, several manufacturers stated
that greater leadtime than that provided in the NPRM is needed for the
introduction of technologies across a manufacturer's fleet of vehicles
and that some technologies would only be introduced or added to
vehicles in conjunction with a major vehicle redesign or a vehicle
introduction. Honda stated that it can take 10 years from the point of
initial introduction of a technology until the point at which that
technology is employed throughout a manufacturer's fleet. Honda and
Toyota cite the NAS report which concluded that application of existing
technologies will ``probably require 4 to 8 years.'' Honda further
stated that phase-in rates have a critical impact on lead time
requirements. Nissan, citing the NAS report, stated that overly
aggressive implementation of technologies has the potential to
``adversely affect manufacturers, their suppliers, their employees, and
consumers.'' These concerns were echoed by Ford and the Alliance.
In response to these comments, the agency re-evaluated the ``phase-
in'' assumptions used in the Volpe model. ``Phase-in'' caps represent
the maximum fraction of a manufacturer's model line or fleet to which a
technology can be applied when it is initially introduced. For example,
we assumed that low friction lubricants could be fully implemented in a
period of four years, with equal rates of implementation in each year.
This translates to a ``phase-in'' cap of 25 percent (100 percent phase-
in divided by 4 years).
The agency has decreased the implementation rate for most
technologies to provide implementation rates consistent with the NAS
estimate of 4 to 8 years. This resulted in decreasing phase-in caps,
with many ranging from 25 percent (4 year introduction) to 17 percent
(approximately 6 years, the midpoint of the NAS estimate). The agency
assumed shorter implementation rates for technologies that did not
require changes to the manufacturing line. For other technologies
(e.g., hybrid and diesel powertrains) we employed phase-in caps as low
as 3 percent, to reflect the major redesign efforts and capital
investments required to implement these technologies. A detailed
comparison of the phase-in caps used in the NPRM analysis and the final
rule analysis is provided in Appendix B of this document.
In addition to revisions based on the NAS report, the agency also
made revisions to the Volpe model in response to specific
manufacturers' comments. Changes to the Volpe model include deleting
the use of some technologies for specific manufacturers and delaying
implementation of some technologies to coincide with product redesigns/
model introduction. The changes instituted by the agency involve
technology phase-in schedules and deleting some technologies from
consideration. For the NPRM, the Volpe analysis excluded additional
application of automatic transmissions with aggressive shift logic. In
consideration of the extremely limited planned use of automatically-
shifted manual (i.e., clutch) transmissions (ASMTs) the revised Volpe
analysis also excludes additional applications of ASMTs. Although these
technologies may eventually appear on vehicles during the MY 2011
timeframe, the agency is aware of technical and regulatory burdens that
likely will be difficult to overcome during MYs 2008-2011.
Manufacturers' updated 2005 product data showed that they plan to
include some technologies on their MY 2008-11 light trucks that had
previously been utilized in the agency's NPRM analysis to increase fuel
economy from its baseline level originally specified in manufacturers'
2004 product plans. Manufacturers claimed that because they added these
technologies after submitting product plan data to the
[[Page 17646]]
agency in 2004, that the agency was double counting the effect of these
technologies. The agency disagrees. The analysis for the NPRM was based
on the product plans submitted in 2004. The analysis for the final rule
is based on the updated product plans manufacturers provided the agency
in response to the August 2005 RFC. If a technology was applied to a
vehicle model in the NPRM, and that same technology was utilized by
manufacturers on the same vehicle in their updated product plans, the
agency did not apply that technology to that vehicle in the analysis it
conducted for the final rule. In other words, the agency did not
project the use of a technology on a model that a manufacturer stated
was already equipped with that technology.
Manufacturers also provided information stating that certain
technologies, which the agency had projected in its NPRM analysis, were
incompatible with their products. In response, the agency hasn't
projected the use of certain technologies on specific products for
specific manufacturers that claimed technology incompatibility. In
almost all cases, these technologies were classified as being available
for use on other products, both for the specific manufacturers that
claimed incompatibility with some products and for other manufacturers'
products. The computer model used to implement the Volpe Analysis, as
well as the Stage analysis, used ``engineering constraints'' to apply
general (i.e., industry-wide) limits on the application of some
technologies in consideration of technical issues (as opposed to
product planning or lead time considerations, which are addressed
separately).
Further, the agency constrained the introduction of two
technologies (aerodynamic drag reduction and materials substitution) to
coincide with a major vehicle redesign or a vehicle introduction.
Constraining these technologies to major redesigns is consistent with
manufacturer practice, given that applying such technologies requires
changes to integral design components such as paneling. These
constraints are in addition to the ``engineering constraints''
discussed above.
Additionally, the agency itself has removed technologies included
in the NAS report from consideration due to indications that these
technologies will not be available for implementation nor are any
manufacturers planning to incorporate these technologies in their
vehicles during the MYs 2008-2011 time frame. For the NPRM, the Volpe
analysis excluded additional application of automatic transmissions
with aggressive shift logic. For the final rule the Volpe analysis also
excluded application of automatically-shifted manual (i.e., clutch)
transmissions in consideration of its limit planned application.
The changes to the technology assumptions relied upon by the Volpe
model reduced the estimated fuel savings for the final Reformed CAFE
standards, in comparison to the proposed Reformed CAFE standards, by
1.5 billion gallons of fuel. Considered together, the changes to the
Volpe model reduced the fuel savings estimated for the Reformed CAFE
standards, again in comparison with the proposed standards, by 1.3
billion gallons of fuel.
B. Higher Fuel Price Forecasts
As stated above, the agency is relying on the most recent EIA
forecasts for fuel prices for the final rule. In the NPRM, the agency
relied on gasoline prices ranging from $1.51-1.58 a gallon. In the
final rule, the agency is relying on the updated fuel price forecast,
which provides a range of gasoline prices of $1.96-2.39 a gallon. These
higher fuel prices had the effect of raising the optimized fuel economy
targets for MY 2011 under the Reformed CAFE standard.\153\ This, in
turn, raised the estimate of fuel savings resulting from the Reformed
standard by 0.7 billion gallons.
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\153\ Because the fuel economy targets for MY 2008-10 are set by
equating industry-wide compliance costs for the Reformed CAFE
standard to those under the Unreformed standard (rather than by the
optimization process used in MY 2011), higher fuel prices do not
affect the targets for those years.
---------------------------------------------------------------------------
However, as discussed in Chapter VIII, higher fuel prices increase
the per-mile cost of driving and therefore are expected to reduce the
average number of miles driven each year by light trucks (an impact of
the ``rebound effect,'' discussed above). The effect of the resulting
reduction in lifetime use of MY 2008-11 light trucks is to reduce fuel
savings resulting from the Reformed CAFE standard by 0.7 billion
gallons, offsetting the gain that occurred due to higher fuel prices.
However, this 0.7 billion gallon reduction results from the effect of
higher fuel prices on usage of all four model years of light trucks
affected by the Reformed CAFE standard (2008-11), while the 0.7 billion
increase in fuel savings resulting from higher fuel prices resulted
from higher fuel economy targets for only MY 2011 light trucks. The
impact of higher standards for MY 2011 was thus offset by the combined
impact of less driving over the 4 model years combined.
C. Revisions to the Reformed CAFE System
The fuel savings estimates for the Reformed CAFE system reported in
the NPRM and final rule also differ because the Reformed CAFE system
adopted by the final rule differs in certain details from the Reformed
CAFE system described in the NPRM. First, the Reformed CAFE system
adopted in the final rule replaces the footprint category system for
setting fuel economy targets with a continuous function. While the
continuous function closely follows the shape of the step function of
the category system, slight differences reduced the fuel savings
estimate for the Reformed CAFE standard reported in the NPRM by less
than 0.1 billion gallons.
Second, as stated above, the Reformed CAFE standards adopted in the
final rule set fuel economy targets for MY 2008-10 that are more
stringent than those proposed in the NPRM. This occurs because the
targets for those model years are set by equalizing total industry-wide
compliance costs with those of the Unreformed CAFE standards. Estimated
compliance costs for the Unreformed standards are higher in the final
rule than in the NPRM because manufacturers' updated product plans
already include several of the lower cost fuel improvement
technologies, and therefore, the analysis applies technologies with
higher costs in order to achieve the same fuel economy level under the
proposed Unreformed CAFE system. Setting fuel economy targets under the
Reformed CAFE system to equal these higher Unreformed CAFE compliance
costs therefore results in more stringent targets. This change
increased the estimated fuel savings resulting from the Reformed
standard described in the NPRM by 1.6 billion gallons.
Finally, the Reformed CAFE system adopted in the final rule
includes MDPVs beginning in MY 2011, while the NPRM excluded MDPVs in
all model years. Including MDPVs under the Reformed standard in MY 2011
increased the estimate of fuel savings by 0.3 billion gallons.
The net effect of changes to the Reformed CAFE system in the final
rule, as opposed to the Reformed CAFE system in the NPRM, accounts for
1.8 billion more gallons of fuel saved.
D. Updated Product Plans
The most important factor contributing to the difference between
the fuel savings estimated for the
[[Page 17647]]
proposed and final rules is changes in the product plans supplied by
the manufacturers between the NPRM and final rule. In developing the
NPRM, the agency relied upon manufacturer product plans provided in
response to the 2003 ANPRM. Following publication of the RFC in
association with the 2005 NPRM, manufacturers provided updated product
plans. These updated product plans indicate that in comparison to their
previous plans, several manufacturers intend to increase production of
smaller vehicles, which typically have higher fuel economies, and to
utilize more fuel-saving technologies across their fleets.
Table 16 below illustrates a sampling of the fuel-economy baselines
relied on in the NPRM and the baselines relied upon for the final rule.
Table 16.--Baseline Fuel Economies Relied Upon in the NPRM and Final Rule
----------------------------------------------------------------------------------------------------------------
MY 2008 (mpg) MY 2009 (mpg) MY 2010 (mpg)
Manufacturer -----------------------------------------------------------
NPRM Final NPRM Final NPRM Final
----------------------------------------------------------------------------------------------------------------
General Motors...................................... 21.2 21.3 21.4 21.4 21.4 21.6
Ford................................................ 21.7 21.7 22.1 21.9 22.4 22.9
DaimlerChrysler..................................... 21.9 22.0 22.3 22.0 22.3 22.4
Toyota.............................................. 22.9 22.5 22.9 22.4 22.9 22.9
Honda............................................... 24.5 24.5 24.5 24.5 24.5 24.5
Nissan.............................................. 20.7 21.0 20.8 21.0 21.3 21.2
----------------------------------------------------------------------------------------------------------------
The changes to product plans reflect a decrease in the planned
production of larger light trucks, which typically have lower fuel
economy performances. The product plans indicate that manufacturers are
planningto produce less of the ladder-frame type of SUVs and more
unibody crossover vehicles, which typically have higher fuel economy.
This shift in the mix of vehicle sizes results in a higher overall
average CAFE requirement for the entire vehicle fleet, which increases
lifetime fuel savings for MY 2008-2011 light trucks by 2.4 billion
gallons.
At the same time, many of the technology improvements that the
agency applied in setting standards for the NPRM are thus no longer
available to increase fuel economy, because they are now being utilized
to achieve the higher baseline fuel economy levels reflected in
manufacturers' revised product plans. These technologies include a
variety of engine improvements and upgraded transmissions, many of
which were applied by the agency to increase baseline fuel economy to
the level of the standards proposed in the NPRM, and others that
represent changes in manufacturers' plans for technology introduction.
Other changes in the revised product plans include an increase in the
projected number of hybrid vehicles that manufacturers plan to produce.
Not only do manufacturers plan to increase their production of current
hybrid models, but they also are planning to introduce hybrid versions
of both existing and new vehicles. As to be expected, the additional
hybrid vehicles had a beneficial effect on manufacturers' baseline CAFE
levels.
If the agency's analysis for the NPRM applied a technology to
improve the fuel economy of a light truck model but its manufacturer's
updated product plan indicated that it now planned to utilize the same
technology on that model, that technology was then unavailable to the
agency in its analysis of how manufacturers could improve fleet fuel
economy to meet the standards considered in the final rule. While the
effect of that technology is still reflected in the vehicle's lower
lifetime fuel consumption, that effect now appears to result from its
manufacturer's decision to utilize it even in the absence of any action
by the agency to increase CAFE standards, rather than from its efforts
to comply with the standard established by the final rule.
Thus the limited availability of technologies during the period
subject to this rulemaking, in part, has resulted in the final
standards being set at the same or similar levels as those initially
proposed. The fuel savings attributable directly to the rule is the
reduction in fuel consumption from the level that would occur with a
manufacturer's planned baseline. Because the level of the final
standards is close to what was proposed, but the fuel economy levels
represented in manufacturers' baselines have generally improved, the
amount of fuel savings directly attributable to the final standards
appears to be less than that projected in the NPRM.
The increase in baseline fuel economy of resulting from additional
technologies accounts for a lifetime fuel savings of 5.3 billion
gallons for MY 2008-2011 light trucks, which are no longer included in
the fuel savings estimated for the Final Rule. Thus the net effect of
revised manufacturer product plans is to reduce the fuel savings
attributed to the Reformed CAFE standard in the NPRM by 2.9 billion
gallons (5.3 minus 2.4 billion gallons).
E. Evaluating the Adopted Reformed CAFE System
The variety of factors that contributed to the revised fuel savings
estimate for the Reformed CAFE standard adopted in the final rule make
it difficult to compare the fuel savings estimate reported in the final
rule with the estimate reported in the NPRM for the proposed Reformed
CAFE standards. The combination of changes to manufacturers' product
plans with revisions to the Volpe model and its assumptions account for
a decrease in the agency's estimate of fuel savings that will result
from the Reformed CAFE standards from the 10.2 billion gallons reported
in the NPRM to 7.8 billion gallons in this rule. Had these changes not
been made, the adopted Reformed CAFE standards would likely have saved
significantly more fuel than the 10.2 billion gallons reported in the
NPRM.
In a broader sense, the fuel efficiency of the light truck fleets
that will be produced in MYs 2008-2011 will be significantly higher
than that of the fleets that were originally planned when manufacturers
submitted their initial product plans to NHTSA in 2004. This
improvement in fuel efficiency reflects manufacturers' response to the
higher fuel prices through fuel economy improvements to their fleets
and a shift towards smaller vehicles, as well as the improvements in
fuel economy required by the CAFE standards adopted in this rule.
Because current and forecasted gasoline prices have risen dramatically
since manufacturers submitted their initial plans, consumer preferences
have shifted away from the largest models toward more modestly-sized
and fuel efficient light trucks. Some of the fuel savings previously
attributed to the proposed CAFE standards now appear
[[Page 17648]]
to result from manufacturers' responses to changed market conditions.
In addition, the Reformed CAFE proposal announced in the NPRM put
manufacturers on notice that fuel efficiency standards for light trucks
would increase, and that future standards would challenge manufacturers
to improve fuel efficiency for all light truck models, regardless of
their size. The revised product plans that manufacturers submitted in
response to the NPRM responded to these factors, and the changes to
model assumptions discussed above, in conjunction with the more
stringent Reformed CAFE standards adopted by the final rule, will
significantly improve the fuel efficiency of light trucks produced in
MY 2008-2011. The revised product plans that manufacturers submitted
following publication of the NPRM responded to these changed
conditions, and together with the more stringent standards adopted by
this rule, the more fuel efficient vehicles that will be produced in
MYs 2008-2011 will consume approximately 11 billion fewer gallons of
fuel over their lifetimes than they would have based on the
manufacturers' initial product plans.
A more meaningful comparison can be made between the fuel savings
estimates for the adopted Reformed CAFE standard and the NPRM Reformed
CAFE standard when both are calculated using the modeling assumptions
and manufacturer product plan data that were used in the analysis
conducted for the Final Rule. We re-estimated fuel savings for the NPRM
Reformed CAFE standards using the revised Final Rule modeling
assumptions and product plans, and found that the Reformed standard
presented in the NPRM would save 5.5 billion gallons under these
revised assumptions. This contrasts with the previously-reported fuel
savings estimate of 7.8 billion gallons for the adopted Reformed CAFE
standard. Thus increasing the stringency of the final rule and
including MDPVs in 2011 together increased lifetime fuel savings
projected to result from the rule by 2.3 billion gallons (equal to 7.8
billion minus 5.5 billion gallons).
XIII. Applicability of the CAFE Standards
A. Inclusion of MDPVs in MY 2011
The agency is extending the applicability of the light truck CAFE
program to include vehicles defined by the EPA as ``medium duty
passenger vehicles'' (MDPVs) beginning in MY 2011. As explained below,
the agency finds that standards for these vehicles are feasible, and
that these vehicles are used for substantially the same purpose as
vehicles rated at not more than 6,000 lbs. GVWR. Further, the inclusion
of these vehicles in MY 2011 will result in a savings of 251 million
gallons of fuel over the lifetime of those vehicles. The regulation of
these vehicles under the CAFE program will begin with the 2011 MY.
In the NPRM, the agency requested comment on extending the
applicability of the CAFE program to include MDPVs. The EPA defines
``MDPV''as a ``heavy duty vehicle'' \154\ with a GVWR less than 10,000
lbs. that is designed primarily for the transportation of persons. The
MDPV definition excludes any vehicle which:
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\154\ The EPA defines ``heavy duty vehicle'' as a motor vehicle
that is rated at more than 8,500 lbs. GVWR; or that has a vehicle
curb weight of more than 6,000 lbs.; or that has a basic vehicle
frontal area in excess of 45 square feet.
(1) Is an ``incomplete truck'' as defined in this subpart; or
(2) Has a seating capacity of more than 12 persons; or
(3) Is designed for more than 9 persons in seating rearward of
the driver's seat; or
(4) Is equipped with an open cargo area (for example, a pick-up
truck box or bed) of 72.0 inches in interior length or more. A
covered box not readily accessible from the passenger compartment
will be considered an open cargo area for purposes of this
definition.\155\
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\155\ 40 CFR 86.1803-01.
The agency is incorporating the EPA MDPV definition into the
definition of ``automobile'' in 49 U.S.C. 523.3, such that these
vehicles will be regulated as light trucks. The MDPV definition
essentially includes SUVs, short bed pick-up trucks, and passenger
vans, which are within the specified weight and weight-rated ranges.
Under EPCA, the agency can regulate vehicles with a GVWR between
6,000 lb. and 10,000 lb. under CAFE if we determine that (1) standards
are feasible for these vehicles, and (2) either that these vehicles are
used for the same purpose as vehicles rated at not more than 6,000 lbs.
GVWR, or that their regulation will result in significant energy
conservation.
In the NPRM, the agency discussed its preliminary analysis of the
feasibility of including MDPVs and the impact of their inclusion on the
fuel savings of the CAFE standards. The agency expressed its belief
that fuel economy technologies applicable to vehicles with a GVWR below
8,500 lbs. might be applicable to MDPVs, e.g., low-friction lubricants,
6-speed transmissions and cylinder deactivation. In addition, since
MDPVs are already required by EPA to undergo a portion of the testing
necessary to determine fuel economy performance under the CAFE program
(See 40 CFR Part 600 Subpart F), the agency expressed its belief that
meeting the additional testing requirements would not be unreasonably
burdensome.
Moreover, the agency's preliminary estimate was that inclusion of
MDPVs in the MY 2011 Reformed CAFE standard could save additional fuel.
The agency stated that we were not considering inclusion of the heavier
rated vehicles in MYs 2008-2010, as our estimates indicated that their
inclusion would lead to a loss in overall fuel savings. The agency
sought comment on whether MDPVs should be included in the final rule
for MY 2011.
Commenters were divided as to whether MDPVs should be included in
the CAFE definition of light trucks. Although the NPRM requested
comment on the inclusion of MDPVs, most responses addressed all
vehicles up to 10,000 lbs. GVWR. Manufacturers and their trade
associations were opposed to including these heavier vehicles in the
CAFE program, stating that subjecting these vehicles to CAFE standards
was not feasible and that these vehicles are used for substantially
different purposes than vehicles with a GVWR under 6,000 lbs.
Environmental organizations, States, and state organizations supported
the inclusion of these vehicles, stating that including these vehicles
is feasible, will result in significant fuel savings, and is
appropriate as the primary use of most of these vehicles is to
transport passengers. No commenter addressed the questions concerning
alternate ways to encourage improving fuel economy of these vehicles.
The Alliance, Ford, Nissan, General Motors, and the Recreational
Vehicle Industry Association (RVIA) opposed establishing standards
applicable to any vehicle with a gross vehicle weight rating (GVWR)
greater than 8,500 lbs. (heavier light trucks). Manufacturers stated
that subjecting such vehicles to the CAFE program was not feasible and
that these vehicles are used for a substantively different purpose than
vehicles with a GVWR less than 6,000 lbs. (lighter light trucks).
Additionally, compared to the 120 billion gallons of fuel used by light
trucks per year, General Motors stated that the estimated fuel savings
cannot be considered significant. Moreover, the Alliance and Ford
stated that inclusion of these vehicles would primarily impact only one
manufacturer (a domestic manufacturer) and therefore would undercut the
agency's goal of establishing a more equitable regulatory
[[Page 17649]]
framework. Therefore, these commenters argued, inclusion of such
vehicles in the CAFE program is impermissible under EPCA.
The Union of Concerned Scientists, NRDC, NESCAUM, Environmental
Defense, U.S. PIRG, Sierra Club, National Environmental Trust, Rocky
Mountain Institute, SUN DAY, Connecticut Department of Environmental
Protection, AAA, Representatives Baldwin et al., Pennsylvania
Department of Environmental Protection, ACEEE and STAPPA and ALAPCO
supported expanding the definition of light truck to include all
vehicles with a GVWR between 8,500 lbs. and 10,000 lbs.
NRDC and Environmental Defense stated EPCA not only permitted the
expansion of the light truck definition, but that the statute's
directive to consider the Nation's need to conserve energy mandated an
expansion. First, NRDC stated that many of the technologies evaluated
in the NAS report could be applied to all vehicles with a GVWR between
8,500 lbs. and 10,000 lbs. Second, NRDC stated the fuel savings from
including MDPVs would be significant. However, NRDC did not provide any
discussion as to why the savings would be considered significant.
Third, NRDC stated that the EPA and CARB already recognize a segment of
these vehicles as primarily passenger-carrying vehicles through the
MDPV classification. UCS and Environmental Defense cited a Polk survey
to support the proposition that the heavier light trucks are used for
substantially the same purposes as the lighter light trucks.
Environmental Defense stated that a separate class could be
established for all vehicles with a GVWR between 8,500 lbs. and 10,000
lbs., so as not to detract from the fuel savings of the fleet currently
regulated. NESCAUM stated that by not including all vehicles with a
GVWR less than 10,000 lbs in the CAFE program, the structure would
maintain an incentive for manufacturers to ``upweight'' vehicles in
order to remove vehicles from the standards.
The agency concludes that inclusion of MDPVs in MYs 2008-2010 would
lower the fleet-wide required fuel economy level for those years by
approximately 0.3 mpg.\156\ The net effect of including MDPVs in the MY
2008-2010 Reformed CAFE standards would be a reduction in overall fuel
savings of almost 1.1 billion gallons.
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\156\ Under the Unreformed CAFE structure, maximum feasible
standards are set with particular consideration given to the least
capable manufacturer, which has been determined to be General Motors
for this proposed rule. A large percentage of the MDPVs are produced
by General Motors and, due to their weight, have very low fuel
economy. The inclusion of these vehicles would lead to greater fuel
savings by General Motors, but less by the other manufacturers. This
would occur because the addition of the low fuel economy MDPVs in
MYs 2008-2010 would depress the level of General Motors' CAFE and
therefore depress the level of the Unreformed CAFE standards. Since
the MY 2008-2010 Reformed CAFE standards are set so as to roughly
equalize industry-wide costs with the MY 2008-2010 Unreformed CAFE
standards, depressing the Unreformed CAFE standards for MYs 2008-
2010 would also depress the Reformed CAFE standards for those years.
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The agency has determined that regulation of the MDPV fuel economy
beginning MY 2011 is consistent with the criteria set forth in EPCA for
expanding the applicability of the light truck CAFE program. First,
regulation of these vehicles is feasible. Second, in establishing the
MDPV definition, the EPA determined that these vehicles are used
primarily to transport passengers,\157\ a use substantially similar to
vehicles with a GVWR less than 6,000 lbs. GVWR. Moreover, the analysis
performed for the final rule indicates that inclusion of MDPVs in the
light truck CAFE program for MY 2011 will lead to a savings of 251
million gallons of fuel.
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\157\ 65 FR 6698; February 10, 2000.
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In 1977, the agency extended the definition of ``automobile'' under
CAFE to include certain light trucks with a GVWR greater than 6,000
lbs. The agency stated that for regulation of these vehicles to be
feasible the expanded definition of ``automobile'' must be consistent
with that adopted by the EPA for emissions purposes (42 FR 63184,
63185-6; December 15, 1977). In 1976, the EPA established maximum curb
weight (6,000 lbs.) and maximum frontal area (45 ft3)
limitations on the trucks subject to emissions testing. The agency
noted that the EPA concluded that vehicles that exceed those
limitations are not used for the same type of service as those with
smaller cab areas and curb weights (42 FR 63186). Consistent with the
EPA regulations we amended the definition of automobile to include
light trucks with a GVWR up to and including 8,500 lbs., that have a
curb weight of less than 6,000 lbs. and a frontal compartment space
less than 45 ft\2\ (49 CFR 523.3). As General Motors noted in its
comments, the agency linked the feasibility of regulating vehicles to
the existence of EPA emission test procedures and data.
To generate data necessary to determine compliance with the fuel
economy requirements, vehicles representative of manufacturer's model
lines are subject to city and highway chassis dynamometer tests (40 CFR
Part 600). Vehicles classified as ``light trucks'' under the current
CAFE definition are required to undergo this testing for the EPA
emissions requirements. Because both the fuel economy and emissions
requirements rely on the same tests, the test burden to manufacturers
is minimized.
Under the EPA's Tier 2 requirements, requirements for MDPVs to
undergo city chassis dynamometer emission testing under Tier 2 are
being phased-in starting in MY 2008 (50 percent) with all MDPVs subject
to the testing in MY 2009 (40 CFR 86.1811-04(j)). The Tier 2 regulation
exempts MDPVs from highway chassis dynamometer testing. Therefore,
MDPVs are not subject under Tier 2 to the complete set of tests
necessary for the fuel economy requirements. However, we have
determined that this additional testing will not be burdensome for the
manufacturers.
The EPA estimates that regulating MDPVs under the fuel economy
standards would require approximately 50-100 city/highway paired tests
at a cost of $2,000 per pair, plus an additional $50,000-100,000 per
test vehicle for test preparation (i.e., a coast-down analysis \158\
and appropriate mileage accumulation). Based on these estimates, the
industry-wide compliance test costs for MDPVs range from $2.1 million
to $8.2 million. The EPA noted that this cost could potentially be
further reduced due to carry-over tests and the fact that a
manufacturer is permitted to certify up to 20 percent of its fleet
through an analytical process that does not require vehicle testing.
---------------------------------------------------------------------------
\158\ A coast-down analysis is used to determine a vehicle's
horsepower for running the chassis dynamometer tests.
---------------------------------------------------------------------------
The Alliance and Ford stated that the fuel economy of the heavier
light trucks is currently not known; therefore the agency has no
baseline from which to set standards. As MDPVs are not currently
required to undergo chassis dynamometer testing, several manufacturers
asserted that the agency did not have adequate information to determine
a baseline fuel economy for these vehicles from which potential fuel
savings could be projected. The EPA and several manufacturers provided
the agency with data that has allowed us to estimate a fuel economy
baseline for MDPVs. These data predominately cover MDPVs with gasoline
power trains. NHTSA has developed additional data for MDPVs, including
diesels, by extrapolating from the performance of sister vehicles with
a GVWR less than 8,500 lbs. Since the data supplied by the EPA was
based on emission testing
[[Page 17650]]
conducted on ``worst case'' vehicles, rather than best sellers as would
be done for fuel economy, the baseline derived from this data is
conservative.
Vehicles with a GVWR greater than 8,500 lbs that are not defined as
MDPVs (e.g., heavier rated long bed pick-up trucks) are not subject to
EPA testing that provides the data necessary to determine compliance
with the CAFE program. Inclusion of the heavier-rated-non-MDPVs would
increase the test burden for manufacturers. These vehicles would be
subject to a whole new testing regime. Moreover, because these vehicles
are not subject to comparable testing requirements, there is not
sufficient data to estimate a fuel economy baseline. Without a reliable
baseline, the agency is unable to determine fuel economy targets that
would result in required fuel economy levels that are economically
practicable and technologically feasible.
Aside from the ability to obtain test data and the determination of
a baseline, technologies are available that can be applied to MDPVs in
order to improve fuel economy performance. The agency recognizes that
not all technologies that are applied to vehicles with lighter weight
ratings are applicable to MDPVs. However, we have identified several
technologies that could be applied, for example, 6-speed transmissions,
multiple valves per cylinder, variable valve timing, and cylinder
deactivation.
Commenters provided a variety of survey data on the use of vehicles
with a GVWR greater than 8,500 lbs and less than 10,000 lbs. The
Alliance, General Motors, Ford, and Nissan stated that the heavier
light trucks are used for commercial, agricultural and utility reasons
distinct from the uses of vehicles with a GVWR less than 6,000 lbs.
Ford cited recent Ford New Vehicle Customer Studies (NVCS) that
determined that SUVs in the MDPV category are used for towing 80
percent more often than midsize SUVs. In addition, Ford stated that for
the 2004 MY, commercial and fleet users made up 63 percent of Ford
Excursion buyers. However, Ford did not indicate as to whether the use
of the Excursions in these fleets was primarily to transport people, or
to perform more ``work-like'' functions. Ford also stated that full
size vans in the MDPV category are used for significantly different
purposes; of all the E-Series trucks sold, 84 percent are purchased for
commercial purposes, and as commercial use of these full size vans
increases, consumer use of these vehicles as passenger or conversion
vans is decreasing. General Motors asserted that when considering
vehicle use, the agency must focus on ``peak'' use.
The Union of Concerned Scientists and Environmental Defense cited a
Polk survey to support the proposition that the heavier light trucks
are used for substantially the same purpose as the lighter light
trucks. According to the Polk survey, the daily use light trucks,
broken down by percentage, is as follows: Commuting (53.8 percent),
personal trips (33.6 percent), carrying passengers (29.6 percent),
hauling (4.3 percent), towing (4.0 percent), and off-road use (3.7
percent). Union of Concerned Scientists stated that the Polk study
found that use patterns of light, medium, and heavy pickup trucks are
substantially the same overall, with a few notable exceptions. The
Union of Concerned Scientists and Environmental Defense stated that
this data demonstrate that vehicles with a GVWR greater than 8,500 lbs.
and less 10,000 lbs are used for substantially similar purposes.
As stated above, the EPA determined that MDPVs are used primarily
to transport passengers. In establishing the definition, the EPA
stated:
We are defining medium-duty passenger vehicles as any complete
heavy duty vehicle less than 10,000 pounds GVWR designed primarily
for the transportation of persons. (65 FR 6698, 6849; February 10,
2000; emphasis added).
Additionally, the EPA noted that that in crafting the definition,
it made a distinction based on bed length,
[B]ecause a vehicle introduced with a shorter bed would have
reduced cargo capacity and would likely have increased seating
capacity relative to current pick-ups, making it more likely to be
used primarily as a passenger vehicle. Id.
In establishing the final rule, the EPA demonstrated an effort to
distinguish vehicles that are used primarily to transport people from
vehicles used for more ``work-like'' functions. The transportation of
passengers is a use that is substantially similar to the use of
vehicles with a GVWR less than 6,000 lbs. As in the 1977 final rule, we
are amending the definition of automobile consistent with the EPA's
determination.
The agency also considered Ford's comment that inclusion of MDPVs
would result in disparate impacts under Reform CAFE. Ford specifically
stated that the target for a category containing MDPVs would have to be
lowered to account for the reduction in the overall capability of the
category fleet. Therefore, manufacturers that do not produce MDPVs, but
that have other vehicles in that category, would receive a less
stringent target. On the other hand, Environmental Defense stated that
a separate class could be created for heavier vehicles so as to not
reduce the target for vehicles which are already regulated.
After considering these comments, the agency has decided not to
regulate MDPVs as a separate class of light truck. First, we note that
issues regarding the impact of MDPVs on the largest vehicle category
are no longer applicable. Under the continuous function, vehicles will
be compared to targets assigned to each vehicle's footprint value.
Further, as the agency has stated previously when deciding whether to
establish separate standards for 2WD and 4WD vehicles, ``the fact that
standards must be average fuel economy standards indicates that the
manufacturers should be given some opportunity to balance vehicles with
different fuel economies to ensure, consistent with the need to
conserve energy, that a reasonable variety of vehicle types can be
produced to satisfy consumer demand.'' (42 FR 13807, 13811; March 14,
1977)
Since the manufacturers of MDPVs are all full-line manufacturers,
the agency has decided that on balance it is advantageous to regulate
these vehicles with all light trucks in order to provide manufacturers
the flexibility of either improving the fuel economy of these vehicles,
relying on improvements in other vehicles to offset the fuel economy of
these vehicles, or some combination of these two strategies.
Finally, we have determined that inclusion of MDPVs in MY 2011 will
result in an additional fuel savings of 251 million gallons of fuel.
B. ``Flat-Floor'' Provision
In the NPRM, the agency tentatively decided to amend the ``flat
floor provision'' in the light truck definition (49 CFR 523.5) so that
the definition expressly includes vehicles with seats that fold and
stow in a vehicle's floor pan. The agency stated that we tentatively
determined that these seats are functionally equivalent to removable
seats and minimize safety concerns that arise from the potential to
improperly re-installed seats. The agency said that its goal was
treating passenger vans and mini vans in a similar fashion.
In response to commenters, the agency is amending the flat-floor
provision to accommodate certain folding seats, but also to restrict
the group of vehicles relying on the flat floor provision to qualify as
a light truck to those vehicles having at least 3 rows of designated
seating positions as standard equipment. That is, a vehicle would
qualify only if it had at least 3
[[Page 17651]]
rows of seats, the 2nd and 3rd of which are capable of creating a flat
cargo surface through either folding or detachment.
The current regulation classifies as a light truck any vehicle with
readily removable seats that, once removed, leave a flat floor level
surface. In pertinent part, the current regulatory text reads as
follows:
Permit expanded use of the automobile for cargo-carrying
purposes or other nonpassenger-carrying purposes through the removal
of seats by means installed for that purpose by the manufacturer or
with simple tools, such as screwdrivers and wrenches, so as to
create a flat, floor level, surface extending from the forwardmost
point of installation of those seats to the rear of the automobile's
interior.\159\
---------------------------------------------------------------------------
\159\ See 49 CFR 523.5(a)(5).
This definition is only one of several classifying light trucks,
and historically, it has operated, as originally intended, to bring
only minivans and full size passenger vans into the light truck
category. Sport utility vehicles qualify as light trucks because they
have the indices of off-road capability: a 4-wheel drive system and
certain dimensional characteristics.\160\ While the criteria used for
SUVs remain viable, the definition pertaining to minivans has become
outdated in that it does not bring all minivans and passenger vans into
the light truck category.
---------------------------------------------------------------------------
\160\ Sport Utility Vehicles of different sizes qualify as light
trucks because they are equipped with a 4-wheel drive system and
because they have higher ground clearance and steeper approach and
departure angles.
---------------------------------------------------------------------------
The Alliance, Ford, Nissan, AIAM, and General Motors stated that
the proposed revision to the flat floor provision reflects current
market conditions and that the agency properly acknowledged the risks
of improperly re-installed seats. However, Ford, Nissan, and General
Motors, requested that the agency clarify the term ``stowing of
foldable seats in the vehicle floor pan'' to appropriately capture
minivans and exclude passenger vehicles with seats that have only the
seatback fold (e.g., station wagons). DaimlerChrysler, Mitsubishi, and
Johnson Controls raised concern that the proposed amendment would not
capture all minivans, given that the design of folding seats is not
limited to those that stow under the floor pan. DaimlerChrysler and
Johnson Controls recommended that the agency adopt a flat loading
surface requirement in conjunction with a minimum volume criterion.
As discussed in the NPRM, minivans traditionally subject to light
truck CAFE standards began offering various seat designs that are
intended to be functionally similar to removable seats, while remaining
attached at some point to the vehicle. In the NPRM we recognized seats
that fold and stow in a vehicle's floor pan; i.e., flush with the
vehicle's floor, thereby creating a flat surface that is dimensionally
indistinguishable from the surface floor that would exist if the same
seats were removed instead of being stowed.\161\ There are still other
minivans that offer seats that fold so as to create a different/new
continuous flat cargo surface that is located above the floor level.
The current definition of light trucks has the potential of subjecting
minivans that offer stowable seats to passenger vehicle CAFE standards,
while subjecting very similar minivans featuring removable seats to
light truck standards.
---------------------------------------------------------------------------
\161\ For example, Chrysler Town and Country and Dodge Caravan
feature ``Stow `n Go'' seating.
---------------------------------------------------------------------------
In response to comments, we are adopting a revision to the flat-
floor provision that recognizes the various designs that permit seats
to fold and stow. The provision adopted today replaces the ``flat,
floor level surface'' language with a requirement that removal or
stowing of seats creates a ``flat, leveled surface extending from the
forwardmost point of installation of those seats to the rear of the
automobile's interior.'' This new language eliminates the need to
define ``floor pan'' and does not require seat designs to store in any
particular manner.
Several commenters raised concern with revising the flat-floor
provision. The Union of Concerned Scientists, Environmental Defense,
and the New York Department of Environmental Conservation opposed the
proposed revision, stating that it would widen the existing light truck
``loophole.'' Furthermore, the Union of Concerned Scientists stated
that the original justification for the flat floor provision no longer
applies. The Union of Concerned Scientists stated that the flat floor
provision was established to reflect that passenger vans were derived
from cargo vans, but that this is no longer true. (In the July 28, 1977
rulemaking, the agency stated that station wagons should not be
classified as light trucks because, in part, they are built on a car
chassis rather than a truck chassis (see 42 FR 38362, 38367). The Union
of Concerned Scientists stated that while cargo vans and pickup trucks
currently share the same platform, minivans do not.
First, the agency continues to conclude that in general, minivans
are appropriately classified as light trucks. Minivans offer fuel
economy compromising utility features normally associated with light
trucks. Specifically, unlike the smaller passenger cars, all minivans
feature three rows of seats, thus offering greater passenger carrying
capability.\162\ Further, data from http://www.Edmunds.com, NHTSA CAFE
Database, and the Automotive News Data Center indicate that minivans
offer significantly larger cargo carrying capacity compared to
passenger cars (see Table 17 below).
---------------------------------------------------------------------------
\162\ Only one minivan, the Chrysler Pacifica, does not offer a
third row as standard equipment.
Table 17.--Maximum Cargo Capacity of Minivans
----------------------------------------------------------------------------------------------------------------
Vehicle Type Maximum cargo capacity
----------------------------------------------------------------------------------------------------------------
DCX R-class............................ Minivan................... 85 cu. ft.
DCX Pacifica........................... Minivan................... 80 cu. ft.
DCX Caravan/Town & Country SWB......... Minivan................... 147 cu. ft.
Honda Odyssey.......................... Minivan................... 147 cu. ft.
Toyota Sienna.......................... Minivan................... 149 cu. ft.
Ford Freestar/Mercury Monterey......... Minivan................... 137 cu. ft.
GM Uplander/Terraza/Montana............ Minivan................... 120 to 137 cu. ft.
Nissan Quest........................... Minivan................... 149 cu. ft.
Mazda MPV.............................. Minivan................... 127 cu. ft.
Chevy HHR.............................. Wagon..................... 56 cu. ft.
Audi A4................................ Wagon..................... 59 cu. ft.
DCX E-class............................ Wagon..................... 69 cu. ft.
Saab 9-5............................... Wagon..................... 73 cu. ft.
[[Page 17652]]
Volvo V70.............................. Wagon..................... 71 cu. ft.
Volvo V50.............................. Wagon..................... 63 cu. ft.
Jaguar X-type.......................... Wagon..................... 50 cu. ft.
BMW 530 ix............................. Wagon..................... 58 cu. ft.
Dodge Magnum........................... Wagon..................... 72 cu. ft.
Pontiac Vibe/Toyota Matrix............. 5-door hatchback.......... 54 cu. ft.
Mazda 3................................ 5-door hatchback.......... 31 cu. ft.
----------------------------------------------------------------------------------------------------------------
Both of these capabilities affect fuel economy because in order to
accommodate additional seats and provide greater cargo carrying
capacity, Minivans are made larger and heavier than passenger cars. The
seats themselves add significant weight to these vehicles. In addition
to fuel economy compromising utility features, we previously explained
that continued inclusion of minivans in the light truck standard is
justified, in part, based on their good performance in crash
tests.\163\ The same cannot be readily said for a diverse population of
station wagons and hatchbacks that may have flat-folding seats, because
some of them are very small and potentially less safe.
---------------------------------------------------------------------------
\163\ See August 2005 NPRM (70 FR 51414 at 51456).
---------------------------------------------------------------------------
However, the agency recognizes the risk of expanding the light
truck definition to include vehicles not intended to be in that class,
i.e., station wagons and hatchbacks. In order to focus the definition
only on those vehicles that the agency believes should be included in
the light truck category, we believe it is appropriate to restrict the
group of vehicles relying on the flat floor provision to qualify as a
light truck to those also having at least 3 rows of designated seating
positions as standard equipment. That is, a vehicle could qualify only
if it had at least 3 rows of seats, the 2nd and 3rd of which are
capable of creating a flat cargo surface through either folding or
detachment. The regulatory text would read as follows:
For vehicles equipped with at least 3 rows of designated seating
positions as standard equipment, permit expanded use of the
automobile for cargo-carrying purposes or other nonpassenger-
carrying purposes through the removal or stowing of seats so as to
create a flat, leveled surface extending from the forwardmost point
of installation of those seats to the rear of the automobile's
interior.
The agency has chosen to adopt the ``third row'' criterion for four
reasons. First, this definition best advances our goal of subjecting
all minivans to one CAFE standard, and eliminates an artificial
distinction between minivans depending on whether they have folding
seats or removable seats. Second, an obvious advantage of this approach
is simplicity and objectivity. For example, this definition would not
require complicated cargo capacity measurements in order to determine
whether a vehicle is a light truck, as would be required under
DaimlerChrysler's suggestion. Third, compared to geometric criteria,
such as a minimum cargo volume, this approach is less susceptible to
gaming, as it is unlikely that smaller vehicles that the agency
believes should not be subject to the light truck standards would be
equipped with 3rd row seats. Finally, the 3rd row seat criterion
ensures that vehicles classified as light trucks continue to include
those that offer added utility features contemplated by Congress when
it created a separate CAFE standard for light trucks.
In addition to furthering our goal of subjecting all minivans to
the CAFE standard for light trucks, the provision adopted today limits
the number of vehicles that will be reclassified as light trucks. After
examining http://www.Edmunds.com, NHTSA CAFE Database, and the
Automotive News Data Center, we found that only a Volvo V70 (< = 10,000
annual sales) has a flat-folding 3rd row seat, and would thus qualify
as a light truck. By contrast, other alternatives considered by the
agency would not necessarily bring all minivans under one standard, and
could also have the unintended effect of reclassifying a more
substantial number of passenger cars as light trucks.
We note that small sport utility vehicles without 3rd row seats
would nevertheless qualify as light trucks based on other existing
criteria; i.e., availability of 4-wheel drive or approach angles and
minimum clearance. Thus, our approach is expected to have few
unintended consequences. Nevertheless, some vehicles previously
classified as light trucks would no longer be subject to the light
truck CAFE standard. One such vehicle is a Chrysler PT Cruiser, which
qualifies now as a light truck because it has a removable rear seat
which creates a flat floor. However, the PT cruiser does not have a 3rd
row of seats. Also, one minivan, the Chrysler Pacifica does not offer a
third row as standard equipment. To provide manufacturers adequate time
to adjust their product plans to the new provision we are making the
new definition effective beginning in MY 2012, the change will not have
any immediate impact on MYs 2008-2011 vehicles.
In order to provide additional flexibility we are permitting
manufacturers to rely on either the old or the revised definition of
light trucks until MY 2012. This will ensure that a vehicle previously
subject to light truck CAFE standards would not immediately become
subject to the pasenger car standard thus upsetting the manufacturers'
compliance plans. At the same time, those manufacturers currently
offering minivans with folding seats would be able to take advantage of
the new definition immediately.
We do not anticipate that the provision adopted today will result
in manufacturers installing third row seating for the sole purpose of
compliance with the light truck CAFE program. Installing third row
seats presents practical difficulties (e.g., limited headroom) and
costs associated with making this change in vehicles with smaller
interior volume. Specifically, we believe the costs of redesigning
small vehicles to feature 3rd row seats will outweigh potential
benefits of subjecting these vehicles to the light truck standard.
Further, small vehicles such as hatchbacks, will likely be compared to
fuel economy targets comparable to that of the passenger car CAFE
standard, thus further reducing the incentive to make major design
changes for the purpose of classifying such vehicle as a light truck.
XIV. Additional Issues
A. Limited-Line Manufacturer Standard
Porsche requested that the agency establish a separate standard for
limited-line manufacturers, stating that manufacturers that produce
only one or two light trucks are not afforded the flexibility provided
through fleet-wide
[[Page 17653]]
averaging. Porsche noted that it manufacturers only a single model of
light truck that Porsche stated is designed to ``satisfy a specific
consumer demand.'' Porsche argued that it would have even greater
difficulty in complying under the Reformed CAFE system, as its light
truck would fall within a category that has a target more stringent
than the Unreformed CAFE standard. Porsche stated that the agency had
authority to establish a limited-line manufacturer standard, and had
previously done so for ``limited product line trucks'' for MYs 1980 and
1981.
When the agency first established the light truck CAFE program, we
established a separate standard for limited product line light trucks.
This standard was to accommodate light trucks manufactured by companies
which did not produce passenger automobiles and thus did not have
access to passenger automobile engine and emission control technology
(43 FR 11995, 11996; March 23, 1978). The limited product line light
truck standard was established primarily to address the unique
compliance issues facing International Harvester, as International
Harvester's engines were derivatives of medium duty trucks (above
10,000 lbs GVWR). We noted that International Harvester did not have
experience with ``state-of-the-art'' emission controls, which other
manufacturers had obtained in the passenger car market, and that
International Harvester would be at a disadvantage attempting to comply
with both the emission and fuel economy standards then being
established (43 FR 11995, 11998).
While the limited product line light truck standard was established
to address compliance difficulties of a limited line light truck
manufacturer, the light truck class was defined, in part, by vehicle
characteristic, i.e., it applied only to trucks with basic engines, as
that term was defined by the EPA. The agency discontinued the limited
line truck classification beginning in MY 1982, stating that the
vehicle class was designated merely to provide a transition period (45
FR 20871, 20877; March 31, 1980).
The agency does not agree with Porsche's suggestion that the
company's particular circumstances support establishment of a separate
fuel economy standard for limited-line manufacturers, or for vehicles
of the type manufactured by limited-line manufacturers as was
previously done in response to issues faced by International Harvester.
Porsche stated that it faces a disadvantage because it makes only a
single high performance truck and has no ``legitimate'' opportunity to
comply, and that compliance is made more difficult by the reforms
established today. Although some manufacturers have chosen to
participate in market segments that make it easier for them to meet
CAFE, we note that all manufacturers must meet particular challenges
when complying with a standard.
Porsche is correct in that in the very first years in which CAFE
standards were in effect, the agency established a separate light truck
standard for light truck manufacturers who did not use passenger car
engines in their trucks. This separate standard, promulgated in 1978,
offered a degree of relief to International Harvester, a company
struggling to meet both CAFE and emissions standards with limited
resources. As indicated above, the separate standard was not intended
to provide International Harvester permit relief, but to provide it
with additional time to gain the expertise necessary to comply with the
standards.
NHTSA finds it difficult to equate Porsche's present position with
that of International Harvester in 1978. Unlike International
Harvester, which had been producing a family of larger light trucks
whose basic design remained unchanged from the early 1960's, Porsche
began the design process knowing that CAFE standards would apply to its
product. Porsche presumably entered the light truck market after
determining that the costs of compliance or paying penalties were
offset by the benefits of doing so. While the increase in CAFE
standards established by this final rule will require that Porsche
increase its efforts to build more fuel efficient light trucks, the
company cannot state that its designs pre-date CAFE, that an increase
in CAFE standards was not foreseeable or that it is not technologically
feasible for Porsche to meet the standards.
As indicated above, NHTSA does not believe that present market
conditions dictate establishing a separate fuel economy standard for
Porsche or other limited-line manufacturers. We are also not convinced
by Porsche's argument that doing so would be consistent with
Congressional intent. Porsche has correctly noted that the House Report
for EPCA stated that ``the Secretary could, in setting classes of non-
passenger automobiles, establish separate classes for types of non-
passenger automobiles manufactured by small manufacturers.'' (H.R. Rep.
No. 94-340 at 90.) However, we point out that the report refers to
``types of vehicles.'' We question whether Congress intended for the
agency to set standards based on manufacturer characteristics, as
opposed to vehicle characteristics.
When the agency established CAFE standards for limited product line
light trucks, that class included only vehicles with a specific engine
type. While the reform established today results in different required
fuel economy standards for different manufacturers based on product
mix, the standard still relies on differentiating vehicles based on a
vehicle characteristic, i.e., footprint.
B. Credit Trading
Nissan recommended that the agency implement a credit trading
program that permits manufacturers to buy and sell credits. Nissan
stated that such a program would allow manufacturers to earn credits
for exceeding their fleet-wide fuel economy target, and sell or trade
those credits to other manufacturers. Nissan believes that such a
program is consistent with the goals of the EPCA statute and would
improve overall fuel economy by providing added incentives for the
achievement of greater fuel economy improvements. Nissan asserted that
such a program also would allow greater flexibility in CAFE compliance
without causing a negative overall impact on fuel economy, and in fact,
it could successfully benefit the environment. Nissan provided an
analysis in support of the agency's authority to establish such a
credit trading program.
The agency is not adopting a credit trading program as suggested by
Nissan. While the agency has not explored in detail a credit trading
program, we question whether the agency has authority for such a
program. A review of 49 U.S.C. 32903--the specific provision addressing
CAFE credits for exceeding fuel economy standards--does not appear to
support credit trading. That section persistently refers only to ``a
manufacturer'' or ``the manufacturer,'' thereby suggesting to us that
Congress intended that only the particular manufacturer who earned the
credits be permitted to use them. For example, section 32903(a)
provides that
When the average fuel economy of passenger automobiles manufactured
by a manufacturer . . . exceeds an applicable average fuel economy
standard . . . the manufacturer earns credits. The credits may be
applied to--(1) any of the 3 consecutive model years immediately
before the model year for which the credits are earned; and (2) to
the extent not used under clause (1) of this subsection, any of the
3 consecutive model years immediately after the model year for which
the credits are earned.
(Emphasis added.) Also, section 32903(d) states that,
[[Page 17654]]
The Secretary of Transportation shall apply credits to a model year
on the basis of the number of tenths of a mile of gallon by which
the manufacturer involved was below the applicable average fuel
economy standard.
(Emphasis added.) Moreover, we believe that the Reformed CAFE program
adopted today provides manufacturers with sufficient flexibility as to
obviate the need for a credit trading program.
C. Reporting Requirements
Today's final rule requires manufacturers to report on a model and
configuration level, a vehicle's footprint. This information will be
used to determine a vehicle's applicable fuel economy target.
The Alliance opposed reporting footprint on at a vehicle-
configuration level. The Alliance suggested that footprint values
should be reported by model on a body style and wheelbase level along
with associated projected sales volumes. The Alliance stated that body-
style and wheelbase level of detail could be easily compiled and
submitted. Conversely, for some manufacturers, the Alliance stated,
reporting on a configuration level would require programming changes in
corporate databases and reports.
The agency is maintaining the footprint reporting requirements as
proposed. If reporting were to be required at the level suggested by
the Alliance, models that are offered with varying footprint values may
not be captured. For example, the Ford base F150, is offered with in
several versions with different body styles and wheelbases. However,
these versions are each offered in with different engine, transmission,
and drive type configurations. Each of these configurations may have a
different fuel economy performance. Under the Alliance's suggestion,
these configurations would not be captured.
The Alliance also stated that the agency should eliminate some of
data required for the CAFE reports, specifically: Catalytic converter,
SAE net rated power in kilowatts, total drive ratio, axle ratio,
frontal area, optional equipment, number of forward speeds (already
indicated by transmission class). The Alliance stated that this
information is no longer relevant.
The NPRM did not propose to revise the data reporting requirements
aside from requiring the footprint related data and elimination of data
currently required to be reported is outside the scope of this
rulemaking. Moreover, consideration of such revisions would require
coordination with the EPA to ensure consistency between the two
agencies' regulatory programs, given the joint responsibilities under
EPCA. However, the agency will work to evaluate the necessity of the
data currently required to be reported and will consider potential
revisions in future rulemakings.
D. Preemption
Summary of NHTSA's position
In mandating federal fuel economy standards under EPCA, Congress
has expressly preempted any state laws or regulations relating to fuel
economy standards. A State requirement limiting CO2
emissions is such a law or regulation because it has the direct effect
of regulating fuel consumption. CO2 emissions are directly
linked to fuel consumption because CO2 is the ultimate end
product of burning gasoline. Moreover, because there is but one pool of
technologies for reducing tailpipe CO2 emissions and
increasing fuel economy available now and for the foreseeable future,
regulation of CO2 emissions and fuel consumption are
inextricably linked. It is therefore NHTSA's conclusion that such
regulation is expressly preempted.
A State requirement limiting CO2 emissions is also
impliedly preempted under EPCA. It would be inconsistent with the
statutory scheme, as implemented by NHTSA, to allow another
governmental entity to make inconsistent judgments made about how
quickly and how much of that single pool of technology can and should
be required to be installed, consistent with the need to conserve
energy, technological feasibility, economic practicability, employment,
vehicle safety and other relevant concerns.
NHTSA's statement in the NPRM about preemption
In the NPRM, NHTSA reaffirmed its judgment that State regulation of
motor vehicle tailpipe emissions of CO2 is both expressly
and impliedly preempted by statute:
We reaffirm our view that a state may not impose a legal
requirement relating to fuel economy, whether by statute, regulation
or otherwise, that conflicts with this rule. A state law that seeks
to reduce motor vehicle carbon dioxide emissions is both expressly
and impliedly preempted.
Our statute contains a broad preemption provision making clear
the need for a uniform, federal system: ``When an average fuel
economy standard prescribed under this chapter is in effect, a State
or a political subdivision of a State may not adopt or enforce a law
or regulation related to fuel economy standards or average fuel
economy standards for automobiles covered by an average fuel economy
standard under this chapter.'' 49 U.S.C. 32919(a). Since the way to
reduce carbon dioxide emissions is to improve fuel economy, a state
regulation seeking to reduce those emissions is a ``regulation
related to fuel economy standards or average fuel economy
standards.''
Further, such a regulation would be impliedly preempted, as it
would interfere [with] our implementation of the CAFE statute. For
example, it would interfere the careful balancing of various
statutory factors and other related considerations, as contemplated
in the conference report on EPCA, we must do in order to establish
average fuel economy standards at the maximum feasible level. It
would also interfere with our effort to reform CAFE so to achieve
higher fuel savings, while reducing the risk of adverse economic and
safety consequences.\164\
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\164\ 70 FR 51414, 51457.
During the comment period on the NPRM, some commenters questioned
the correctness of NHTSA's judgment as well as the appropriateness of
reaffirming it in the NPRM.
The appropriateness of our discussing preemption in the NPRM
We discussed our views about preemption in the NPRM for several
reasons. First, the agency was guided by Executive Order 13132,
Federalism, and by Section 3(b)(1)(B) of Executive Order 12988, Civil
Justice Reform. Second, we were guided by a desire to obtain comments
from State and local officials and other members of the public in order
to inform fully the agency's position on this important issue.
Third, we were also guided by statements of the Supreme Court,
which has encouraged agencies to consider the preemptive effects of
their rulemakings during the rulemaking process, rather than waiting
until litigation ensues to do so.\165\ Finally, from time to time over
the years, NHTSA has raised the issue of preemption in its rulemaking
notices when the agency judged it appropriate to do so, as have other
agencies within the Department of Transportation. E.g., 54 FR 11765
(March 1989); 58 FR 68274 (December 1993) and 70 FR 21844 (April 2005).
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\165\ See, e.g., Hillsborough County v. Automated Medical
Laboratories, Inc., 471 U.S. 707, 718 (1985); Medtronic, Inc., v.
Lohr, 518 U.S. 470, 506 (1996) (Justice Breyer, in concurrence); and
Geier v. American Honda Motor Co., 529 U.S. 861, 908 (2000) (Justice
Stevens, in dissent).
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Public Comments About the Merits of Our Views on Preemption
The motor vehicle manufacturers and their associations agreed with
the agency's position regarding federal preemption under Sec. 32919(a)
of EPCA. Nissan supported that position with a detailed legal analysis.
Conversely, several of the environmental groups and
[[Page 17655]]
States,\166\ and a number of U.S. Senators and Representatives,
disagreed with the agency's position that a State carbon dioxide
(CO2 ) standard is expressly and impliedly preempted.
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\166\ California, Connecticut, Maine, Massachusetts, New York,
New Jersey, Oregon, Pennsylvania, and Vermont.
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Nissan argued that California's proposed CO2 standard is
expressly preempted by EPCA's broadly worded preemption provision. A
State standard is preempted even if it does not directly address fuel
economy; it is sufficient if it simply relates to fuel economy.
That commenter noted that the text of EPCA's preemption provision
is similar to that of the preemption provision in the Employee
Retirement Income Security Act (ERISA). The Supreme Court has found
that a state law is ``related to'' a benefits plan under ERISA and thus
preempted by ERISA's preemption provision ``if it has a connection with
or reference to such a plan.''
Nissan said that California's greenhouse gas standard is connected
to fuel economy. California's greenhouse gas regulation is, in effect,
a fuel economy regulation. The emission of one greenhouse gas,
CO2 , is related to fuel economy. The only means for vehicle
manufacturers to reduce vehicular CO2 emissions is through
making improvements to fuel economy. This is evident from CARB's
report, which discusses the maximum feasible and cost effective
technologies available and the identification of technologies that are
in fact fuel economy improvements.
Nissan also said that California's standard also interferes with
the nationally uniform plan that CAFE establishes for governing the
fuel efficiency of the U.S. fleet and is therefore impliedly preempted.
A state law or standard may be impliedly pre-empted because the federal
interest is so dominant that Congress intends to occupy a regulatory
field with no room for state supplementation (field preemption) or
because the federal government has enacted a complete regulatory scheme
in an area such that any state action would be inconsistent with the
federal legislation (conflict preemption).
Nissan concluded by arguing that individual state laws setting fuel
economy standards would be impliedly as well as expressly preempted. It
argued that those laws would conflict with EPCA, which authorizes DOT
to develop and administer a national CAFE program. Neither the EPA, nor
States are permitted to interfere with the CAFE regulatory regime
currently established by Congress under EPCA. Because, as noted above,
the emission of CO2 is related to fuel economy and because
the only way to reduce CO2 is through fuel economy
technologies, any effort to do so by EPA or the States would interfere
with Congressional objectives under EPCA.
Taken together, the primary arguments of the opponents of
preemption were as follows:
The opponents argued that the preemption waiver provision of the
Clean Air Act expressly recognizes the right of California to adopt and
enforce its own standards for ``air pollutants'' emitted by motor
vehicles (i.e., emissions standards), and the right of the other States
to adopt and enforce standards identical to California's
standards.\167\ They said that Congress ratified and strengthened the
preemption waiver provision in 1977, two years after the enactment of
EPCA in 1975. Thus, they argue, Congress could not have intended EPCA
to limit the rights they believe are recognized by the Clean Air Act.
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\167\ Clean Air Act Sec. Sec. 209(b), 177, 42 U.S.C. 7543 and
7507.
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The opponents believe further that a State CO2 standard,
including California's GHG/CO2 equivalent emissions
standard, is not preempted under EPCA's express preemption provision,
Section 32919(a). They offered two arguments in support of this belief.
First, they argued that EPCA does not expressly preempt a State
CO2 standard. They believe that statute's express preemption
provision should be read narrowly, preempting State standards that
regulate fuel economy itself, but not State standards that have a
stated purpose other than improving fuel economy (i.e., reducing
emissions) and merely have the effect of increasing fuel economy.
Second, they argued that the intent of Congress concerning the
relationship between State motor vehicle emissions standards and CAFE
standards under EPCA is expressed in the Act's provision setting out
the factors to be considered in setting CAFE standards
(``decisionmaking factors provision''), Section 32902(f), not its
express preemption provision. The decisionmaking factors provision
requires NHTSA to consider technological feasibility, economic
practicability, the effect of other Government standards on fuel
economy, and the need of the nation to conserve energy, in determining
the level at which it should set each CAFE standard. The opponents said
the decisionmaking factors provision subordinates the CAFE standards to
all State emissions standards, not vice versa.
In addition, the opponents of preemption appear to have argued that
there is no implied (conflict) preemption because State CO2
standards and CAFE standards have different objectives and because
NHTSA did not show how a State CO2 standard would adversely
affect the CAFE standards. They argue further that, in the event of a
conflict, CAFE standards must give way to the emissions standards per
the decisionmaking factors provision.
NHTSA's Response to Public Comments on the Merits
Background
Fuel Economy Provisions of the Energy Policy and Conservation Act
EPCA established the CAFE program, mandating the issuance and
implementation of standards for passenger cars and light trucks. The
statute specifies that the passenger car standard is 27.5 mpg unless
the agency finds that the maximum feasible level for a model year is
different, and sets it at that level. It directs NHTSA to establish
light truck standards at the maximum feasible level, subject to four
statutorily specified factors.\168\
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\168\ 49 U.S.C. 32902(a).
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The Act specifies that the agency is to determine the maximum
feasible level after considering technological feasibility, economic
practicability, the effect of other motor vehicle standards on fuel
economy, and the need of the Nation to conserve energy.\169\ The agency
has historically included the potential for adverse safety consequences
when deciding upon a maximum feasible level. The overarching principle
that emerges from the enumerated factors and the court-sanctioned
practice of considering safety and links them together is that CAFE
standards should be set at a level that will achieve the greatest
amount of fuel savings without leading to significant adverse economic
or other societal consequences.\170\
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\169\ 49 U.S.C. 32902(f).
\170\ Average Fuel Economy Standards for Light Trucks; Model
Years 2008-2011, 70 FR 51414, 51424 (August 30, 2005) (to be
codified at 49 CFR pt. 533).
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EPCA specifies that compliance with CAFE standards is to be
determined in accordance with test and calculation procedures
established by EPA. 49 U.S.C. 32904(c). Under the procedures
established by EPA, compliance with the CAFE standards is based on the
rates
[[Page 17656]]
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.
Congress explicitly and broadly preempted all state laws and
standards relating to fuel economy standards:
[w]hen an average fuel economy standard prescribed under this
chapter [49 U.S.C.S. Sec. Sec. 32901 et seq.] is in effect, a State
or a political subdivision of a State may not adopt or enforce a law
or regulation related to fuel economy standards or average fuel
economy standards for automobiles covered by an average fuel economy
standard under this chapter.\171\
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\171\ 49 U.S.C. 32919(a).
Congress did not include a provision authorizing any waivers of
that preemption provision for any State for any reason.
Clean Air Act
Congress has also preempted all state standards relating to the
control of motor vehicle emissions:
[n]o State or any political subdivision thereof shall adopt or
attempt to enforce any standard relating to the control of emissions
from new motor vehicles or new motor vehicle engines.\172\
---------------------------------------------------------------------------
\172\ 42 U.S.C. 7543 (a).
However, Congress has also expressly authorized EPA to waive the
preemption provision under the Clean Air Act for states that adopted
emissions control standards before 1966.\173\ While California is the
only State that meets that criterion, and thus is the only state that
can obtain a waiver of the preemption provision, the Clean Air Act
permits other States to adopt California emission standards.\174\
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\173\ 42 U.S.C. 7543 (b).
\174\ 42 U.S.C. 7507.
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Current State GHG Standards \175\
The GHG standard purports to regulate four motor vehicle climate
change emissions:
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\175\ According to the National Academy of Sciences,
Massachusetts, New York, New Jersey, Connecticut, Rhode Island,
Vermont, and Maine have adopted the California GHG emissions
standard. In addition, Washington State has adopted the standard
contingent upon Oregon's adoption of it. Oregon ``has adopted
temporary rules . . . and is scheduled to propose permanent rules in
the summer of 2006.'' State and Federal Standards for Mobile Source
Emissions, prepublication copy, 145 (2006).
This discussion of preemption focuses on the details of the
California standard in order to provide the clearest possible
expression of the underlying technical rationale for why that
standard is not consistent with NHTSA's authority to regulate fuel
economy. This specific discussion should not be interpreted to mean
that other standards would be acceptable.
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CO2 , CH4 and N2 O
emissions resulting directly from operation of the vehicle,
CO2 emissions resulting from operating the air
conditioning system,
HFC (refrigerant) emissions from the air conditioning
system due to either leakage, losses during recharging, or release from
scrappage of the vehicle at end of life, and
Upstream emissions associated with the production of the
fuel used by the vehicle.\176\
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\176\ Title 13, California Code of Regulations (CCR) Sec.
1961.1(a)(1)(B)1.a. For vehicles certified on conventional fuels
(e.g., gasoline), CARB's regulation does not encompass upstream
emissions (i.e., emissions associated with the production and
transportation of the fuel used by the vehicle). California
Environmental Protection Agency, Air Resources Board, Regulations To
Control Greenhouse Gas Emissions From Motor Vehicles, Final
Statement Of Reasons (FSOR), at 6-7.
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As is shown later in the discussion of preemption, compliance with
the GHG standards will be based primarily on the CO2
emission rates of vehicles. The States will measure the amounts of
emissions of these four gases and then convert them into
``CO2 -equivalent'' emissions.\177\ This reflects the status
of CO2 as the reference gas for measuring the global warming
potential of greenhouse gases.
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\177\ California Environmental Protection Agency, Air Resources
Board, Regulations To Control Greenhouse Gas Emissions From Motor
Vehicles, Initial Statement Of Reasons (ISOR), p. 48.
---------------------------------------------------------------------------
Constitutional basis for preemption
Preemption results from Article VI of the U.S. Constitution, which
provides that federal law ``shall be the supreme Law of the Land; and
the Judges in every State shall be bound thereby, any Thing in the
Constitution or Laws of any State to the Contrary notwithstanding.''
Principles of preemption
The Supreme Court has held that preemption may be express or
implied:
State law may be preempted by express language in a
congressional enactment,* * * by implication from the depth and
breadth of a congressional scheme that occupies the legislative
field * * *, or by implication because of a conflict with a
congressional enactment.\178\
\178\ Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 540 (2001).
---------------------------------------------------------------------------
Discussion
In response to the public comments and letters from members of
Congress, we have re-analyzed all issues carefully as set forth below,
and determined, based on existing and foreseeable technologies for
reducing CO2 emissions from motor vehicles, that the effect
under EPCA and the Supremacy Clause of the U.S. Constitution is that
State regulation of those emissions is preempted.
Any Regulation Governing Carbon Dioxide Emissions From Motor Vehicles
Relates to Average Fuel Economy Standards and Is Expressly Preempted
Under 49 U.S.C. Chapter 329
EPCA contains a broadly worded provision expressly preempting any
State standard or regulation that is ``related to'' a fuel economy
standard:\179\
---------------------------------------------------------------------------
\179\ 70 FR, at 51457 (August 30, 2005).
---------------------------------------------------------------------------
[49 U.S.C.] 32919. Preemption
(a) General. When an average fuel economy standard prescribed
under this chapter [49 U.S.C.S. Sec. Sec. 32901 et seq.] is in
effect, a State or a political subdivision of a State may not adopt
or enforce a law or regulation related to fuel economy standards or
average fuel economy standards for automobiles covered by an average
fuel economy standard under this chapter.
(Emphasis added.)
While the express preemption provision on its face uses expansive
language, any ambiguity regarding the appropriate reading of the
provision, particularly in relation to other statutory provisions, must
be resolved in light of the policy considerations embodied in EPCA. In
NHTSA's judgment, this language includes, but is not limited to,
explicit fuel economy standards issued by States. Because the only
technologically feasible, practicable way for vehicle manufacturers to
reduce CO2 emissions is to improve fuel economy,\180\
NHTSA's considered view is that a State regulation that requires
vehicle manufacturers to reduce those emissions is a ``regulation
related to fuel economy standards or average fuel economy standards.''
\181\ This view is consistent with the legislative history of the
preemption provision, and with the
[[Page 17657]]
Supreme Court's interpretation of similar provisions.
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\180\ NHTSA recognizes that regulating the producers of motor
vehicle fuels can contribute to the reduction of CO2
emissions. The preemption provision of EPCA does not preempt State
regulation of those fuels. However, it does preempt State regulation
of the manufacturers of motor vehicles directly related to fuel
economy, including regulation of CO2 emissions of their
vehicles.
\181\ Id.
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The legislative history of that provision confirms that Congress
intended to be broadly preemptive in the area of fuel economy
regulation. The Senate bill \182\ would have preempted State laws only
if they were ``inconsistent'' with federal fuel economy standards,
labeling, or advertising, while the House bill \183\ would have
preempted State laws only if they were not ``identical to'' a Federal
requirement. The express preemption provision as enacted preempts all
State laws that relate to fuel economy standards. No exception is made
for State laws on the ground that they are consistent with or identical
to federal requirements.
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\182\ S. 1883, 94th Cong., 1st Sess., Section 509.
\183\ H.R. 7014, 94th Cong., 1st Sess., Section 507 as
introduced, Section 509 as reported.
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In interpreting the express preemption provisions of other statutes
containing the identical ``relates to'' language found in EPCA, the
Supreme Court has found this language to be very expansive. A State law
relates to a Federal law if the State law ``has a connection with or
refers to'' the subject of the Federal law. The Court made the latter
finding first under ERISA \184\ and then, based on its ERISA cases and
the use of identical language, under the Airline Deregulation Act
(ADA).\185\ ``Since the relevant language of the ADA is identical, we
think it appropriate to adopt the same standard here * * * ''\186\
Particularly since the Airline Deregulation Act's situation is a law
involving transportation, we think its interpretation of the phrase
``relates to'' is instructive here.
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\184\ Shaw v. Delta Airlines, Inc., 463 U.S. 85, 97 (1983).
\185\ Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384
(1992).
\186\ Ibid.
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In particular, the Court has provided guidance on the ultimate
limits of a strictly textual approach in interpreting either the phrase
``relates to'' or the phrase ``has a connection with,'' given the
existence of unending relationships and ``infinite connections'' and
the resulting potential for an overly extensive application of ERISA's
preemption provision, the Court declined to take that approach in
interpreting that provision in Blue Cross & Blue Shield Plans v.
Travelers Ins. Co.\187\ The Court said that to determine whether a
State law has a forbidden connection, it would instead look ``both to
the objectives of the ERISA statute as a guide to the scope of the
state law that Congress understood would survive, as well as to the
nature of the effect of the state law on ERISA plans. California Div.
of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519
U.S. 316, 325 (1997), quoting Travelers, * * * , at 656 * * * ''
(Emphasis added.) (Internal quotations omitted.) \188\
---------------------------------------------------------------------------
\187\ 514 U.S. 645, 656, 658-662 (1995),
\188\ Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001).
---------------------------------------------------------------------------
Even under that sort of analysis, however, the results would be
unchanged here. Congress had a variety of interrelated goals in
enacting EPCA and has charged NHTSA with balancing and achieving them.
Among them was the overarching one of improving motor vehicle fuel
economy.\189\ To achieve that goal, Congress did not simply mandate the
issuance of fuel economy standards set at whatever level NHTSA deemed
appropriate. Nor did it simply say that levels must be set consistent
with the criteria it specified in Section 32902(f). It went
considerably further, mandating the setting of standards at the maximum
feasible level.
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\189\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1340 (D.C.
Cir. 1986).
---------------------------------------------------------------------------
Congress also sought national uniform fuel economy standards ``[i]n
order to avoid any manufacturer being required to comply with differing
State and local regulations with respect to automobile or light-duty
truck fuel economy.'' \190\ To that end, it expressly preempted State
and local laws and regulations relating to fuel economy standards.
---------------------------------------------------------------------------
\190\ S. Rep. No. 94-179, 25 (1975).
---------------------------------------------------------------------------
Other congressional objectives underlying EPCA include avoiding
serious adverse economic effects on manufacturers and maintaining a
reasonable amount of consumer choice among a broad variety of vehicles.
Congress was explicitly concerned that the CAFE program be carefully
drafted so as to require levels of average fuel economy that do not
have the effect of either ``imposing impossible burdens or unduly
limiting consumer choice as to capacity and performance of motor
vehicles.'' \191\ These concerns are equally applicable to the manner
in which that program is implemented.
---------------------------------------------------------------------------
\191\ H. Rep. No. 94-340, 87 (1975).
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To guide the agency toward the selection of standards meeting these
competing objectives, Congress specified four factors that NHTSA must
consider in determining which level is the maximum feasible level of
average fuel economy and thus the level at which each standard must be
set.
These are technological feasibility, economic practicability, the
effect of other Government standards on fuel economy, and the need of
the Nation to conserve energy. In addition, ``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.'' \192\
---------------------------------------------------------------------------
\192\ Competitive Enterprise Institute v. NHTSA, 901 F.2d 107,
120 at n.11 (D.C. Cir. 1990).
---------------------------------------------------------------------------
While the Court in Travelers said State laws found to have ``only a
tenuous, remote, or peripheral connection'' to ERISA's purposes,
especially in areas of traditional State regulation, are not
preempted,\193\ NHTSA has concluded that a State GHG standard is not
such a law. As explained at length below, to the extent that it
regulates tailpipe CO2 emissions, a State GHG standard has a
direct and very substantial effect on EPCA's objectives, placing it
virtually at the very center of the reach of EPCA's express preemption
provision, not at or even near its periphery. Thus, there is no need
here to address issues about the definition or location of the outer
reaches of the provision's application.
---------------------------------------------------------------------------
\193\ Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514
U.S. 645, 658-662 (1995).
---------------------------------------------------------------------------
As explained below, CO2 emissions account for over 90
percent of all CO2 equivalent emissions from a motor
vehicle. Accordingly, a State standard regulating GHG emissions
expressed as CO2 equivalent emissions is, to a very
substantial extent, a State CO2 emissions standard. To that
extent, a State GHG standard is fuel economy standard in almost all but
name and stated purpose. It would have virtually the same effects as a
fuel economy standard. Thus, NHTSA has concluded that a State GHG
standard does not incidentally affect vehicle manufacturers; it
directly targets them.
Likewise, in NHTSA's view, such a standard does not incidentally
affect decisions by manufacturers to add fuel saving technologies to
their vehicles. Because the only currently practical way for vehicle
manufacturers to reduce CO2 tailpipe emissions is through
application of fuel saving technologies \194\ and no technologies are
even under development that would make possible reduction of
CO2 emissions independent of reducing fuel consumption,\195\
such a standard directly targets manufacturers and compels the use of
those technologies. Therefore, the agency has concluded
[[Page 17658]]
that the effect of a State GHG standard on vehicle design and
performance is the same as that of fuel economy standards.
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\194\ Essentially all of the technologies identified by the
California Air Resources Board for reducing CO2 emissions
are among the technologies listed by the National Academy of Science
in its 2002 report on reforming the CAFE program and improving fuel
economy. The essential identity of the two lists confirms the fact
that, currently, the only method for reducing CO2
emissions is to reduce fuel consumption.
\195\ EPA has reached a similar conclusion. See 68 FR 52922,
52929.
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Commenters opposing preemption suggested that the purpose of a
State law, not its effects, should determine whether there is
preemption. Since the purpose of a State GHG regulation for motor
vehicles is regulating CO2 and other GHG emissions from
motor vehicles, not fuel economy, they suggest that there can be no
preemption under EPCA's express preemption provision. This limited view
regarding the extent of preemption under that provision is inconsistent
with NHTSA's expert analysis, which is guided by and comports with the
Supreme Court's discussion of the similarly worded express preemption
provisions in ERISA and the ADA. As noted above, in resolving ambiguity
regarding preemption under a Federal law, the Court looks at the
effects of a State law on the subject addressed by the Federal law to
aid in determining if there is preemption.\196\
---------------------------------------------------------------------------
\196\ Egelhoff, at 147.
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A federal statute's broadly worded express preemption provision
does not lose its preemptive effect because a State cites a purpose
other than or in addition to the purpose of that federal statute.\197\
In Gade, the Supreme Court said that ``[i]n assessing the impact of a
state law on the federal scheme, we have refused to rely solely on the
legislature's professed purpose and have looked as well to the effects
of the law.'' \198\
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\197\ Gade v. National Solid Wastes Management Ass'n., 505 U.S.
88, 105 (1992).
\198\ Id., at 106; see also Morales, at 386: ``petitioner
advances the notion that only state laws specifically addressed to
the airline industry are pre-empted, whereas the ADA imposes no
constraints on laws of general applicability. Besides creating an
utterly irrational loophole (there is little reason why state
impairment of the federal scheme should be deemed acceptable so long
as it is effected by the particularized application of a general
statute), this notion similarly ignores the sweep of the `relating
to' language. We have consistently rejected this precise argument in
our ERISA cases: `[A] state law may ``relate to'' a benefit plan,
and thereby be pre-empted, even if the law is not specifically
designed to affect such plans, or the effect is only indirect.' ''
(Citations omitted.)
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The agency's conclusions here that the EPCA preemption provision is
expansive and preempts State emissions regulations that have the
practical effect of regulating fuel economy are fully in keeping with
earlier views expressed by the government. Further, they are consistent
with views that EPA has articulated.
In June 2002, the U.S. District Court for the Eastern District of
California issued an order granting plaintiff automobile manufacturers'
and dealers' motion for preliminary injunction and issuing a
preliminary injunction in Central Valley Chrysler-Plymouth v.
California Air Resources Bd., No. CV-F-02-5017 REC/SMS, 2002 U.S. Dist.
LEXIS 20403 (E.D. Cal. June 11, 2002) (enjoining California zero-
emission-vehicle (ZEV) rule). The court found that the plaintiffs had
shown that the ZEV rule was ``related to'' fuel economy standards
because it had the purpose and practical effect of regulating fuel
economy. The court also found that ``preemption cannot be avoided by
intertwining preempted requirements with nonpreempted requirements.''
In October 2002, the United States filed an amicus curiae brief in
support of affirming the June 2002 order in Central Valley Chrysler-
Plymouth, Inc. et al. v. Michael P. Kenny, No. 02-16395, (9th Cir.
2002), pointing out that EPCA contains a broadly stated provision
expressly preempting state regulations ``related to'' fuel economy
standards. The government further pointed out that, unlike the Clean
Air Act, EPCA does not contain an exception allowing a state law that
regulates fuel economy, regardless of the purpose of the law. Given
that Congress had included some exceptions, but not that particular
one, the government said that it would be inappropriate to read in or
imply that exception.
In December 2002, NHTSA published a CAFE NPRM for MY 2005-2007
light trucks in which the agency addressed certain court filings by the
State of California relating to CAFE preemption. The agency noted that
California had:
[I]n recent court filings, asserted that NHTSA has not treated
the CAFE statute as preempting state efforts to engage in CAFE
related regulation, stating that ``time and time again, NHTSA in
setting CAFE standards has commented on the fuel economy effects of
California's emissions regulations, and not once has it even
suggested that these were preempted.'' See Appellants Opening Brief
filed on behalf Michael P. Kenny in Central Valley Chrysler-
Plymouth, Inc. et. al. v. Michael P. Kenny, No. 02-16395, at p. 33
(9th Cir. 2002). As a result, the State suggests that it may,
consistent with federal law, issue regulations that relate to fuel
economy.
The State misses the point. The agency reviews emissions
requirements to ensure that we do not establish a standard that is
infeasible in light of other public policy considerations, including
federal and state efforts to regulate emissions. Thus, we consider
potential fuel economy losses due to more stringent emissions
requirements when we determine maximum feasible fuel economy levels.
This does not mean that a state may issue a regulation that
relates to fuel economy and which addresses the same public policy
concern as the CAFE statute. Our statute contains a broad preemption
provision making clear the need for a uniform, federal system:
``When an average fuel economy standard prescribed under this
chapter is in effect, a State or a political subdivision of a State
may not adopt or enforce a law or regulation related to fuel economy
standards or average fuel economy standards for automobiles covered
by an average fuel economy standard under this chapter.'' 49 U.S.C.
32919(a).
The fact that NHTSA had not expressly addressed this particular
aspect of California's requirements should not have been interpreted
as tacit acceptance. Indeed, the United States has taken the express
position in the Kenny case that it has a substantial interest in
enforcing the federal fuel economy standards and in ensuring that
states adhere to the Congressional directive prohibiting them from
adopting or enforcing any law or regulation related to fuel economy
or average fuel economy standards.\199\
---------------------------------------------------------------------------
\199\ Light Truck Average Fuel Economy Standards Model Years
2005-2007, 67 FR 77015, at 77025 (Proposal to establish standards
December 16, 2002).
In its CAFE final rule for MY 2005-07 light trucks, NHTSA stated
that its ``position with regard to the relationship between state laws
and our federal fuel economy responsibility was set forth in the
[December 2002] NPRM and has not changed. The EPCA statute contains a
preemption provision intended to ensure a unified federal program to
address motor vehicle fuel economy.''
In September 2003, the Environmental Protection Agency specifically
discussed the relationship between CO2 standards and fuel
economy. In denying an October 1999 petition by the International
Center for Technology Assessment (ICTA) asking the EPA to regulate
CO2 and other greenhouse gas emissions from motor vehicles
under the Clean Air Act for the purpose of addressing global climate
change, the EPA included a discussion of how regulating CO2
emissions would cause ``[i]nterference with Fuel Economy Standards:''
Even if GHGs were air pollutants generally subject to regulation
under the CAA, Congress has not authorized the Agency to regulate
CO2 emissions from motor vehicles to the extent such
standards would effectively regulate the fuel economy of passenger
cars and light duty trucks. No technology currently exists or is
under development that can capture and destroy or reduce emissions
of CO2 , unlike other emissions from motor vehicle
tailpipes. At present, the only practical way to reduce tailpipe
emissions of CO2 is to improve fuel economy. Congress has
already created a detailed set of mandatory standards governing the
fuel economy of cars and light duty trucks, and has authorized DOT--
not EPA--to implement those standards. The only way for EPA to
proceed with CO2 emissions standards without upsetting
this
[[Page 17659]]
statutory scheme would be to set a standard less stringent than CAFE
for cars and light duty trucks. But such an approach would be
meaningless in terms of reducing GHG emissions from the U.S. motor
vehicle fleet.\200\
---------------------------------------------------------------------------
\200\ Control of Emissions from New Highway Vehicles and
Engines, 68 FR 52922, 52929 (denial of petition September 8, 2003).
EPA further explained this position in its brief filed in early
2005 in the Court of Appeals for the D.C. Circuit in Commonwealth of
Massachusetts v. EPA, No. 03-1361, in which 12 states and a number of
environmental groups filed a petition for review challenging EPA's
---------------------------------------------------------------------------
denial of ICTA's petition:
Further reinforcing both the legal and policy rationales for the
ICTA Petition Denial is the fact that at present, the only practical
way of making a meaningful reduction in motor vehicle emissions of
CO2 (the most significant greenhouse gas) is by
increasing fuel economy. See 68 FR at 52929. Consequently, even if
EPA possessed CAA authority to regulate CO2 for climate
change purposes, any motor vehicle standard EPA might set under the
Act that required meaningful reductions in CO2 emissions
would effectively require a corresponding increase in fuel economy.
However, in the Energy Policy and Conservation Act (''EPCA''), 49
U.S.C. 32901-18, Congress established a detailed program for
regulating the fuel economy of passenger cars and light trucks--the
bulk of the motor vehicle fleet--and it authorized DOT, not EPA, to
implement that program. EPA thus reasonably concluded that it would
be inconsistent with EPCA for EPA to set CO2 emission
standards under the CAA that would effectively require significant
increases in the fuel economy of vehicles subject to EPCA. 68 FR at
52929. In arguing that EPCA does not expressly abrogate EPA's
authority under the CAA, see Pet. Br. at 38-43, Petitioners ignore
those EPCA provisions that clearly signal Congress' intent that
regulation of motor vehicle fuel economy be governed by EPCA alone.
NHTSA Has Concluded That Any Effort to Regulate Carbon Dioxide
Emissions From Motor Vehicles Is Related to Average Fuel Economy
Standards for Motor Vehicles Under 49 U.S.C. Chapter 329
1. Motor Vehicle Fuel Economy Is Directly Related to Emissions of
Carbon Dioxide
Fossil fuels such as petroleum contain mostly hydrocarbons
(compounds containing hydrogen and carbon). In the combustion process,
these fuels are oxidized to produce heat. In perfect combustion, the
oxygen (O2 ) in the air combines with all of the carbon (C)
in the fuel to form carbon dioxide (CO2 ) and all of the
hydrogen (H) in the fuel to form water (H2 O).
Most light trucks are powered by gasoline internal combustion
engines. The combustion of gasoline produces CO2 in amounts
that can be readily calculated. Based on its content (carbon and
hydrogen), as a matter of basic chemistry, the burning of a gallon of
gasoline produces about 20 pounds of CO2 .\201\ \202\
---------------------------------------------------------------------------
\201\ Most of that weight comes from the oxygen in the air. A
carbon atom has an atomic weight of 12, and each oxygen atom has an
atomic weight of 16, giving each single molecule of CO2
an atomic weight of 12 + (16 x 2) or 44. Therefore, to calculate the
weight of the CO2 produced from a gallon of gasoline, the
weight of the carbon in the gasoline is multiplied by 44/12 or 3.7.
Since gasoline is about 87% carbon and 13% hydrogen by weight, and
since a gallon of gasoline weighs about 6.3 pounds, the carbon in a
gallon of gasoline weighs (6.3 lbs. x .87) or 5.5 pounds. If the
weight of the carbon (5.5 pounds) is then multiplied by 3.7, the
answer is about 20 pounds. (Source: http://www.fueleconomy.gov/feg/co2.shtml The website, http://www.fueleconomy.gov., is operated
jointly by the Department of Energy and the Environmental Protection
Agency.)
\202\ In addition, CO2 emissions can be determined
from the carbon content of the fuel by using a carbon content
coefficient that reflects the amount of carbon per unit of energy in
each fuel. CO2 emissions = energy consumption [e.g., in
Btu] x carbon content coefficient for the fuel x fraction of carbon
oxidized [99% for petroleum] x 3.67 [conversion of carbon to carbon
dioxide (44/12) based on molecular weights]. T.J. Blasing, G.
Marland and C. Broniak, Estimates of Annual Fossil-Fuel
CO2 Emitted for Each State in the U.S.A. and the District
of Columbia for Each Year from 1960 through 2001, at http://cdiac.ornl.gov/trends/emis_mon/stateemis/emis_state.htm.
The
carbon content coefficients for petroleum products have varied very
little over time--less than one percent per year since 1990. Id.
Reformulated gasoline introduced in the 1990s pursuant to the Clean
Air Act Amendments of 1990 has a carbon emissions coefficient
approximately one percent smaller than that of standard gasoline.
---------------------------------------------------------------------------
In practice, the combustion process is not 100 percent efficient
and engines produce several types of emissions as combustion byproducts
or as a result of incomplete combustion. In an internal combustion
engine, these include nitrogen oxides (NOX ) (from nitrogen
and oxygen in the atmosphere), carbon monoxide (CO) and hydrocarbons
(HC), including methane. These emissions do not alter the fact that
combustion of gasoline produces CO2 . Moreover, the amounts
of CO2 emitted per mile are far greater than the amounts of
HC, CO, and NOX , singly or combined.\203\ \204\
---------------------------------------------------------------------------
\203\ U.S. EPA, Average Annual Emissions and Fuel Consumption
for Passenger Cars and Light Trucks, EPA420-F-00-013, April 2000.
Available on the Internet at http://www.epa.gov/otaq/consumer/f00013.pdf
.
\204\ Good, David, U.S. EPA, 2006 test-car-list-and analysis for
DD 206.xls, February 2006. (unpublished analysis of 2006 test car
list available at http://www.epa.gov/otaq/tcldata.htm).
---------------------------------------------------------------------------
CO2 emissions are always and directly linked to fuel
consumption because CO2 is the ultimate end product of
burning gasoline.\205\ The more fuel a vehicle burns or consumes, the
more CO2 it emits.\206\ Viewed another way, fuel economy is
directly related to emissions of greenhouse gases such as
CO2 .\207\ Fuel consumption and CO2 emissions from
a vehicle are two ``indissociable'' parameters.\208\
---------------------------------------------------------------------------
\205\ See also EPA's denial of petition to regulate
CO2 tailpipe emissions from motor vehicles, 68 FR 52922,
52931, September 8, 2003; Center for Biological Diversity (November
22, 2005, NHTSA 2005-22223-1382) (p. 2-3); RAND Europe, Preparation
of Measures to Reduce CO2 Emissions from N1 Vehicles,
Final Report, at 4, prepared for the European Commission, 11th April
2003.
\206\ ``Vehicles with lower fuel economy burn more fuel,
creating more CO2 . Your vehicle creates about 20 pounds
of CO2 (170 cu. ft.) per gallon of gasoline it consumes.
Therefore, you can reduce your contribution to global climate change
by choosing a vehicle with higher fuel economy. By choosing a
vehicle that achieves 25 miles per gallon rather than 20, you can
prevent the release of about 17 (260 thousand cu. ft.) tons of
greenhouse gases over the lifetime of your vehicle.'' Model Year
2006 Fuel Economy Guide, at 2, Department of Energy and
Environmental Protection Agency, DOE/EE-0309.
\207\ 68 FR 52922, 52931; Light-Duty Automotive Technology and
Fuel Economy Trends: 1975 through 2005--Executive Summary, EPA420-S-
05-0001, July 2005, at http://www.epa.gov/otaq/cert/mpg/fetrends/420s05001.htm
.
\208\ P. Leduc, B. Dubar, A. Ranini and G. Monnier, Downsizing
of Gasoline Engine: an Efficient Way to Reduce CO2
Emissions, at 2, Institut Francais du Petrole, Division Techniques
d'Applications Energetiques, 92852 Rueil-Malmaison Cedex--France).
---------------------------------------------------------------------------
2. The Most Significant Factor in Determining the Compliance of Motor
Vehicles With NHTSA's Fuel Economy Standards Is Their Rate of Carbon
Dioxide Emissions
A manufacturer's compliance with the federal average fuel economy
standards is based on the collective fuel economies of its covered
vehicles. For purposes of determining compliance with federal fuel
economy standards, EPA and manufacturers measure the amount of
CO2 , CO, and HC emitted from the vehicle. The regulations
requiring this approach do so because of the scientific relationship
between fuel consumption and carbon emissions.
As noted above, gasoline is comprised of carbon and hydrogen in the
form of HC compounds. Carbon and hydrogen are basic elements that are
not converted to other elements in either internal combustion engines
or catalytic converters. As a component of the fuel, the carbon is
conveyed to the engine, where combustion occurs. Thereafter, the
carbon, largely in different compounds than in gasoline, is emitted
through the tailpipe. Thus, if the carbon content of the fuel is known,
the amount of fuel consumed by the engine can be determined by
measuring tailpipe emissions of carbon-containing compounds.\209\ Fully
combusted carbon
[[Page 17660]]
takes the form of CO2 . Partially combusted carbon takes the
form of CO or HC (generally unburned hydrocarbons). Therefore, fuel
consumption may be determined by measuring tailpipe emissions of
CO2 , CO, and HC.
---------------------------------------------------------------------------
\209\ DOT FHWA, Perspectives on Fuel Consumption and Air
Contaminant Emission Rates by Highway Vehicles. http://
http://www.tfhrc.gov/structur/pdf/01100.pdf.
---------------------------------------------------------------------------
As a result of incomplete combustion, CO and HC are emitted from a
vehicle's engine. However, in the years since vehicle manufacturers
were first required to meet federal fuel economy standards, the
manufacturers have also been required under the Clean Air Act to meet
increasingly stringent standards for emission of CO, HC,
NOX , and particulates.\210\ They have been able to meet
these standards because fuels have been reformulated to burn cleaner,
and vehicle manufacturers have applied many significant technological
advances to the engines and vehicles (e.g., multipoint fuel injection,
closed-loop computer-controlled mixture control, and close-coupled 3-
way exhaust catalysts). As a result, emissions of CO and HC have fallen
dramatically. Moreover, the technologies that produce these reductions
in air pollution do so by more completely converting CO and HC to
CO2 (and water).\211\ Over the same time period, there has
not been a corresponding decline in CO2 emissions, which, as
noted above, are the necessary result of gasoline consumption. CO and
HC play an increasingly and extremely minor role in the measurement of
fuel economy, such that fuel economy has become virtually synonymous
with CO2 emission rates.
---------------------------------------------------------------------------
\210\ As explained below in the final section of the discussion
of preemption, NHTSA does not believe that regulation of these
emissions is preempted by EPCA since it is the agency's judgment
that such regulation only tangentially affects fuel economy.
\211\ Because carbon dioxide is, like water, an ultimate
byproduct of combustion, it cannot be further converted on the
vehicle to some other compound through any practical means.
---------------------------------------------------------------------------
The fuel economy of a particular vehicle is determined by a formula
promulgated by EPA. That formula (an equation) calculates fuel economy
based on carbonaceous emissions from the vehicle, taking into account
the normalization of the fuel to a standardized test fuel. Under the
formula, in determining fuel economy, all carbon emissions--i.e., the
CO2 emission rate, HC emission rate, and CO emission rate--
are considered.
Significantly, as demonstrated by the example below, in determining
fuel economy the role of CO2 emissions greatly outweighs
that of these other exhaust gases. This is reflected by the relative
magnitudes of the CO2 term and non-CO2 terms in
the equation. In other words, calculating fuel economy is largely a
function of CO2 emissions.
Under 40 CFR 600.113, fuel economy (mpg) is calculated using the
following equation:
[GRAPHIC] [TIFF OMITTED] TR06AP06.026
Where:
HC = hydrocarbon emission rate (grams per mile)
CO = carbon monoxide emission rate (grams per mile)
CO2 = carbon dioxide emission rate (grams per mile)
CWF = carbon weight fraction of test fuel
NHV = net heating value (by mass) of test fuel
SG = specific gravity of test fuel
Under the regulation, separate measurements and calculations under
the Federal Test Procedure (i.e., city cycle) and Federal Highway Fuel
Economy Test Procedure (i.e., highway cycle) are required, with the
resultant city (mpgc ) and highway (mpgh ) fuel
economy values being harmonically averaged using weights of 0.55 and
0.45, respectively.\212\
---------------------------------------------------------------------------
\212\ 40 CFR 600.206-93.
---------------------------------------------------------------------------
Determining the characteristics of a test fuel and inserting them
into the above equation is a preliminary step toward assessing the
relative importance of CO2 emissions in determining
compliance with the fuel economy standards.
For this purpose, we will use the characteristics of a test fuel
set forth in the sample calculation in Appendix II to 40 CFR part 600:
CWF = 0.868
NHV = 18,478 Btu per pound
SG = 0.745
These values are within about 8 percent of other values in the
record (given relatively minor variations, particularly in heating
value, in gasolines) and are reasonable for the purposes of this
assessment, although very precise data would be collected for a test
for compliance with the rule.\213\
---------------------------------------------------------------------------
\213\ See, e.g., Fuel economy impact of reformulated gasoline
(energy (NHV) of fuel, at http://www.epa.gov/otaq/rfgecon.htm; Motor Gasolines Technical Review, at http://www.chevron.com/products/
/A>
http://www.eia.doe.gov/oiaf/1605/87-92rpt/appa.html; and Specific Gravity--
Liquids, at http://www.engineeringtoolbox.com/specific-gravity-liquids-d_336.html
.
---------------------------------------------------------------------------
Substituting these values into EPA's general equation for fuel
economy shown above yields
[GRAPHIC] [TIFF OMITTED] TR06AP06.027
which algebraically reduces to the following:
[GRAPHIC] [TIFF OMITTED] TR06AP06.028
[[Page 17661]]
Based on EPA data \214\ averaged across all MY 2006 truck test data
available at http://www.epa.gov/otaq/tcldata.htm (which does not
include production data), model year 2006 light trucks have the
following city cycle emission rates as determined by testing by the
Federal Test Procedure:
---------------------------------------------------------------------------
\214\ Good, David, op. cit.
HC = 0.042 g/mi
CO = 0.056 g/mi
CO2 = 471 g/mi
Substituting these values and the fuel characteristics noted above
into the algebraically reduced equation shown above,
[GRAPHIC] [TIFF OMITTED] TR06AP06.029
which produces the following city fuel economy in miles per gallon:
[GRAPHIC] [TIFF OMITTED] TR06AP06.030
The average model year 2006 light truck emission rates on the
highway cycle were as follows: \215\
---------------------------------------------------------------------------
\215\ Ibid.
HC = 0.011 g/mi
CO = 0.17 g/mi
CO2 = 316 g/mi
which, using the formula above, yields the following highway fuel
economy in miles per gallon:
[GRAPHIC] [TIFF OMITTED] TR06AP06.031
For both the city and highway calculations, the controlling
independent variable is the large number (term) in the denominator,
given that the numerator is a fixed number. That number is the
CO2 term (86.268). The other numbers (denominated the HC
term and the CO term) are not significant. More particularly, for the
2006 model year light trucks, the typical city and highway
CO2 terms for light trucks are more than four hundred and
one thousand, respectively, times the magnitude of the corresponding
non-CO2 terms. NHTSA has concluded that this proportion will
not change, especially in light of its conclusion that emission
limitations on the other types of emissions are permissible under EPCA.
As shown above, in the measurement and calculation of a given
vehicle model's fuel economy for purposes of federal fuel economy
standards, the role of CO2 is controlling and far greater
than the combined role of the other two relevant exhaust gases (CO and
HC). A manufacturer's compliance with the applicable CAFE standard is
determined by averaging model-specific fuel economy values. This
demonstrates that compliance with federal fuel economy standards is
based primarily on CO2 emission rates of covered
vehicles.\216\
---------------------------------------------------------------------------
\216\ The vast majority of vehicles covered by NHTSA's light
truck CAFE standard are powered by gasoline fueled engines. Hybrids
are expected to comprise from 1.7 to 2.9 percent of the fleet of new
vehicles, while diesels are expected to comprise from 0 to 2.6
percent. These non-gasoline fueled vehicles will have a minor effect
on the average fuel economy of the overall fleet of new vehicles.
---------------------------------------------------------------------------
3. NHTSA Has Concluded That a Reduction of CO2 Emissions
From Motor Vehicles Is Possible Only Through the Incorporation of the
same Technologies That Would Be Employed To Increase Fuel Economy
The technologies that would be employed to reduce CO2
emissions are, in all relevant ways, the same technologies as underlie
NHTSA's judgment about the appropriate CAFE standards for light trucks,
as explained below.\217\
---------------------------------------------------------------------------
\217\ The agency has not identified any technologies, let alone
realistic ones, that could be added to vehicle exhaust pipes to
reduce CO2 emissions. Above and beyond the application of
the technologies addressed in this discussion of preemption, to meet
CO2 standards, in theory the manufacturer could make the
vehicle much smaller or substantially reduce the size of its engine,
depending on the stringency of the CO2 regulation. P.
Leduc et al., op cit. see fn above; see also, http://
www4.nationalacademies.org/ news.nsf/isbn/ 0309076013?OpenDocument
---------------------------------------------------------------------------
The CAFE standards promulgated by NHTSA are performance standards.
As such, they do not require the employment of any particular
technology. But the standards are the maximum feasible average fuel
economy level that NHTSA decides the manufacturers can achieve in a
particular year.\ 218\ They are based on various technologies. Those
technologies are addressed in the NHTSA CAFE rulemaking record. In
large measure, they are summarized in Table 3-2 of the 2002 National
Academy of Sciences (NAS) CAFE study, which is reproduced below in
Tables 18 and 19 (numbered as Tables 3-2 and 3-3, respectively, in the
NAS study).
---------------------------------------------------------------------------
\218\ See 49 U.S.C. 32902(a).
---------------------------------------------------------------------------
[[Page 17662]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.032
[[Page 17663]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.033
If a state regulation required manufacturers to reduce
CO2 emissions from motor vehicles, the state regulation
would be predicated on the manufacturers' employment of the same
technologies they would employ to meet federal fuel economy standards.
As an example, for discussion purposes, we will consider a California
regulation. In 2005, CARB adopted amendments to its regulations that it
referred to as ``California Exhaust Emission Standards and Test
Procedures for 2001 and Subsequent Model Passenger Cars, Light Duty
Trucks and Medium Duty Vehicles.''\219\ In support of its regulations,
CARB released a report that listed more than 20 technologies that
manufacturers could be applied in order to achieve compliance with its
CO2 -based standards.\220\ The technologies identified in the
State's report with respect to large trucks are identified in the
second column of the table reproduced below from its report, which
employs acronyms that are explained below.
---------------------------------------------------------------------------
\219\ See http://www.arb.ca.gov/regact/grnhsgas/grnhsgas.htm.
The regulations are codified at Title 13 of the California Code of
Regulations (CCR). See 13 CCR Sec. 1961.1 (2006).
\220\ California Environmental Protection Agency, Air Resources
Board, Regulations To Control Greenhouse Gas Emissions From Motor
Vehicles, Initial Statement of Reasons.
\221\ California Environmental Protection Agency, Air Resources
Board, Regulations To Control Greenhouse Gas Emissions From Motor
Vehicles Initial Statement of Reasons (CARB ISOR) at 68.
[[Page 17664]]
Table 20.--CARB ``Technology Packages'' To Reduce CO2 Emissions From a Large Truck \221\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Potential Potential
CO2 Retail CO2 Retail
reduction price reduction price
Light truck Combined technology packages CO2 (g/mi) from 2002 equivalent from 2009 equivalent
baseline 2002 baseline 2009
(percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Near........................................... CCP, A6, (2009 baseline).............. 484 -5.5 $126 0 0%
Term 2009-2012................................. DVVL, DCP, A6......................... 442 -13.6 549 -8.6 $423
CCP, DeAct, A6........................ 433 -15.4 480 -10.5 354
DCP, DeAct, A6........................ 430 -15.9 845 -11.0 931
DeAct, DVVL, CCP, A6, EHPS, ImpAlt.... 418 -18.4 789 -13.6 663
DeAct, DVVL, CCP, AMT, EHPS, ImpAlt... 396 -22.6 677 -18.1 551
Mid Term 2013-2015............................. CCP, DeAct, GDI-S, AMT, EHPS, ImpAlt.. 416 -18.6 827 -13.9 701
DeAct, DVVL, CCP, A6, ISG, EHPS, eACC. 378 -26.2 1885 -21.9 1759
ehCVA, GDI-S, AMT, EHPS, ImpAlt....... 381 -25.5 1621 -21.2 1495
Long Term 2015-................................ GDI-L, AMT, EHPS, ImpAlt.............. 354 -24.4 1460 -20.0 1334
Mod HEV............................... 372 -44.5 2630 -41.3 2504
dHCCI, AMT, ISG, EPS, eACC............ 362 -29.3 2705 -25.2 2579
GDI-L, AMT, ISG, EPS, ImpAlt.......... 354 -30.7 2537 -26.7 2411
HSDI, AdvHEV.......................... 244 -52.2 8363 -49.5 8237
AdvHEV................................ 241 -52.5 5311 -49.8 5185
--------------------------------------------------------------------------------------------------------------------------------------------------------
The acronyms in the table above refer to the following
technologies: \222\
---------------------------------------------------------------------------
\222\ The acronyms appear in the CARB ISOR report at 205-06.
A5: 5-speed automatic transmission
A6: 6-speed automatic transmission
AdvHEV: Advanced hybrid
AMT: Automatic Manual Transmission
CCP: Coupled cam phasing
CVVL: Continuous variable valve lift
DCP: Dual cam phasing
DeAct: Cylinder deactivation
dHCCI: Diesel homogeneous charge compression ignition
DVVL:Discrete variable valve lift
eACC: Improved electric accessories
ehCVA: Electrohydraulic camless valve actuation
EHPS: Electrohydraulic power steering
EPS: Electric power steering
GDI-S: Stoichiometric gasoline direct injection
GDI-L: Lean-burn gasoline direct injection
HSDI: High-speed (diesel) direct injection
ImpAlt: Improved efficiency alternator
ISG: Integrated starter-generator systems
ModHEV: Moderate hybrid
Turbo: Turbocharging
As is evident from a comparison of the excerpt from the NAS report
above with the excerpt from the CARB statement of reasons above, nearly
all of the technologies relied upon by CARB are technologies that NHTSA
largely relies on in formulating the federal average fuel economy
standards. Thus, vehicle manufacturers would have to install many of
the same types of technologies under the NHTSA CAFE rule and under the
CARB greenhouse gas rule.
California's Regulation of Greenhouse Gas/Carbon Dioxide Equivalent
Emissions From Motor Vehicles Is Related to Average Fuel Economy
Standards for Motor Vehicles Under 49 U.S.C. Chapter 329 and Therefore
Preempted
California's GHG regulations include new requirements on greenhouse
gas emissions from motor vehicles including model year 2009 and
subsequent model year light duty trucks (LDT) and medium duty passenger
vehicles (MDPV). The CARB greenhouse gas rules include two sets of
standards for motor vehicles. One set applies to all passenger cars and
to LDTs with a loaded vehicle weight (LVW) up to 3750 pounds. The other
set applies to LDTs with a loaded vehicle weight of greater than 3750
pounds and to MDPVs with a gross vehicle weight of less than 10,000
pounds.
NHTSA's CAFE rulemaking covers MY 2008-2011 light trucks. It also
includes MY 2011 MDPVs. Thus, the CARB regulations cover vehicles
covered by NHTSA's rulemaking.
As noted above, CARB's regulations govern the emission of
greenhouse gases from passenger cars, light duty trucks and medium duty
passenger vehicles. Greenhouse gases (GHG) is defined to ``mean[] the
following gases: CO2 , methane, nitrous oxide, and
hydrofluorocarbons.'' \223\
---------------------------------------------------------------------------
\223\ 13 CCR Sec. Sec. 1961.1(d), (e)(4)
---------------------------------------------------------------------------
CARB's GHG regulation states that the fleet average greenhouse gas
exhaust emission values from passenger cars, light-duty trucks and
medium-duty passenger vehicles that are produced and delivered for sale
in California shall not exceed specified values.\224\ Table 21 provides
the following requirements for Fleet Average Greenhouse Gas Exhaust
Emissions, specified in terms of grams per mile CO2 --
equivalent:
---------------------------------------------------------------------------
\224\ 13 CCR Sec. 1961.1(a)(1)(A).
Table 21.--CARB Fleet Average Greenhouse Gas Exhaust Emission
Requirements
[In grams/mi CO2-equivalent]
------------------------------------------------------------------------
LDTs 0-3750 lbs LDTs 3751 LVW-
Model year LVW and passenger 8500 GVW and
cars MDPVs
------------------------------------------------------------------------
2009.............................. 323 439
2010.............................. 301 420
2011.............................. 267 390
[[Continued on page 17665]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 17665-17679]] Average Fuel Economy Standards for Light Trucks Model Years 2008-
2011
[[Continued from page 17664]]
[[Page 17665]]
2012.............................. 233 361
2013.............................. 227 355
2014.............................. 222 350
2015.............................. 213 341
2016+............................. 205 332
------------------------------------------------------------------------
As explained in CARB's ``Final Statement of Reasons'' for its
vehicular GHG regulations, the following emission sources are covered:
Vehicle climate change emissions comprise four main elements (1)
CO2 , CH4 , and N2 O emissions
resulting directly from the operation of the vehicle, (2)
CO2 emissions resulting from operating the air
conditioning system (indirect AC emissions), (3) refrigerant
emissions from the air conditioning system due to either leakage,
losses during recharging, sudden releases due to accidents, or
release from scrappage of the vehicle at the end of life (direct AC
emissions), and (4) upstream emissions associated with the
production of the fuel used by the vehicle. The climate change
emission standard incorporates all of these elements.\225\
\225\ California Environmental Protection Agency, Air Resources
Board, Regulations To Control Greenhouse Gas Emissions From Motor
Vehicles, Final Statement Of Reasons (FSOR), at 7-8.
---------------------------------------------------------------------------
For vehicles certified on conventional fuels (e.g., gasoline), CARB's
regulation does not encompass upstream emissions (i.e., emissions
associated with the production and transportation of the fuel used by
the vehicle).\226\
---------------------------------------------------------------------------
\226\ CARB, FSOR at 8.
---------------------------------------------------------------------------
More particularly, under the CARB regulation, for each GHG vehicle
test group, a manufacturer shall calculate both a ``city'' grams per
mile average of CO2 equivalent value and a ``highway'' grams
per mile average of CO2 equivalent value.\227\ The use of
CO2 equivalence is an approximation that CARB used to place
the gases included in CARB's definition of greenhouse gas on the same
scale so that they could be added together. CARB based this on a
statement of global warming potential: \228\
---------------------------------------------------------------------------
\227\ 13 CCR 1961.1(a)(1)(B)1.a.
\228\ The global warming potential is a relative index used to
compare the climate impact of an emitted greenhouse gas, relative to
an equal amount of carbon dioxide.
Table 22.--GWP Values From CARB Initial Statement of Reasons, p. 48
------------------------------------------------------------------------
Global
Greenhouse gas compound warming
potential
------------------------------------------------------------------------
Carbon Dioxide............................................. 1
Methane.................................................... 23
Nitrous Oxide.............................................. 296
HFC 134a................................................... 1300
HFC 152a................................................... 120
------------------------------------------------------------------------
Under the CARB GHG regulation, the basic calculation of a given
vehicle model's GHG emission rate is as follows: \229\
\229\ Ibid.
---------------------------------------------------------------------------
CO2 equivalent value = CO2 + 296 x N2 O
+ 23 x CH4 - A/C Direct Emissions Allowances - A/C Indirect
Emissions Allowances.
This calculation may be expressed as follows:
[GRAPHIC] [TIFF OMITTED] TR06AP06.034
Where:
GHG = CO2 -equivalent greenhouse gas emission rate (per FTP
and highway tests)
CO2 = tailpipe carbon dioxide emission rate
N2 O = tailpipe nitrous oxide emission rate
CH4 = tailpipe methane emission rate
[Delta]ACdirect = credit for reducing direct emissions from
air conditioning system (refrigerant emissions from the air
conditioning system)
[Delta]ACindirect = credit for reducing indirect emissions
from air conditioning system use CO2 emissions resulting
from operating the air conditioning system,
As detailed in its ``Initial Statement of Reasons,'' CARB estimates
demonstrated that of the total covered GHG emissions, vehicle tailpipe
CO2 emissions would be a much larger component than
CO2 -equivalent baseline emission rates for all the other
components combined. The following table shows CARB's estimates of the
baseline emission rate for each covered GHG component \230\ (column 2)
along with the NHTSA's arithmetic calculation of corresponding shares
of baseline emissions reported by CARB (column 3).
---------------------------------------------------------------------------
\230\ CARB ISOR at 48, 59, 70-72, 75 and 79.
Table 23.--CARB Estimates of Baseline Greenhouse Gas Emission Rates
------------------------------------------------------------------------
Calculated
GHG emissions component Rate (CO2- share (percent
equiv. g/mi) total)
------------------------------------------------------------------------
CO2 emissions resulting directly from 291-512 92-95
the operation of the vehicle...........
CH4 emissions resulting directly from 0.1 0.02-0.03
the operation of the vehicle...........
N2O emissions resulting directly from 1.8 0.3-0.6
the operation of the vehicle...........
[[Page 17666]]
CO2 emissions resulting from operating 13.5-19.0 4
the air conditioning system............
Refrigerant emissions from the air 8.5 2-3
conditioning system....................
------------------------------------------------------------------------
As is evident from the above table, CO2 emissions
resulting directly from the operation of the vehicle account for more
than ninety two percent of the emissions potentially covered by CARB's
vehicular GHG regulation.\231\ This demonstrates that CO2
emissions from the operation of the vehicle are the predominant factor
under CARB's greenhouse gas regulation.
---------------------------------------------------------------------------
\231\ A CARB memorandum recognizes that CO2 emissions
are by far the largest amount of emissions produced by motor
vehicles. http://www.arb.ca.gov/msei/on-road/downloads/pubs/co2final.pdf
.
---------------------------------------------------------------------------
This is corroborated by data in the record. As discussed above, a
reasonably representative MY2006 light truck emits 471 g/mi and 316 g/
mi of CO2 on the city and highway test cycles respectively.
Like federal fuel economy standards, CARB's GHG regulation weights
these cycles at 55% and 45% respectively,\232\ such that representative
CO2 value would be 401 gr/mile for a MY 2006 light truck.
According to CARB's ``Initial Statement of Reasons'',\233\ a typical
baseline vehicle emits 0.005 grams per mile of CH4 . Under
the regulation, manufacturers may use a default value of 0.006 grams
per mile for N2 O in lieu of actually measuring emissions of
that gas.\234\ Also according to the regulation, manufacturers could be
granted as much as 9 and 11 grams per mile in direct and indirect
emissions allowances, respectively, for improvements to air
conditioners.\235\
---------------------------------------------------------------------------
\232\ 13 CCR 1961.1.
\233\ ISOR at 48.
\234\ 13 CCR Sec. 1961.1(a)(1)(B)1.a.
\235\ California Code of Regulations, Title 13, Sec.
1961.1(a)(1)(B)(1)(b) allows a direct emissions allowance of up to 9
grams per mile. Section 1961.1(a)(1)(B)(1)(c) allows an indirect
emissions allowance of up to 11 grams per mile.
---------------------------------------------------------------------------
Therefore, the CO2 -equivalent GHG emission rate for a
typical light truck granted the maximum credit for air conditioner
improvements might be computed as follows:
[GRAPHIC] [TIFF OMITTED] TR06AP06.035
which reduces, with rounding, to:
[GRAPHIC] [TIFF OMITTED] TR06AP06.036
Therefore, for a typical light truck, the term representing
CO2 emissions that are also subject to regulation under
federal CAFE standards (in the above equation, the term labeled
``CO2 term'') would have a magnitude about 200 times that of
the term representing its other emissions (``non-CO2 term''
in the above), and about 20 times that of the term account for
improvements to its air conditioning system (``AC term'' in the above).
Consistent with CARB's estimate, discussed above, that tailpipe
CO2 emissions dominate total GHG emissions considered by
CARB, this calculation indicates that CO2 emissions account
for on the order of 95 per cent (1 -22/(401 + 2 + 20) = 0.95) of the
emissions that enter into the calculation of total GHG emissions under
CARB's regulation.
Alternatively, using the MY2011 values of CARB's standards for
total GHG emissions--267 and 390 grams per mile for lighter and heavier
vehicles, respectively, corresponding CO2 emissions
resulting directly from vehicle operation would be 285 and 408 grams
per mile, respectively:
[GRAPHIC] [TIFF OMITTED] TR06AP06.037
Solving these two equations for CO2 yields values of 285
and 408 grams per mile, respectively. At these rates, CO2
accounts for either 93% (1 -22/(285 + 2 + 20) = 0.93) or 95% (1-22/(408
+ 2 + 20) = 0.95) of the emissions that enter into the calculation of
total GHG emissions under CARB's regulation.
Just as in the case of compliance with federal fuel economy
standards, compliance with CARB's regulation is largely a function of
tailpipe CO2 emissions.\236\ The same emissions provide the
primary basis for determining compliance with federal fuel economy
standards. In addition, CARB's own analysis anticipates that
manufacturers would comply with its GHG regulation primarily by
applying technologies that increase fuel economy.
---------------------------------------------------------------------------
\236\ This conclusion follows even if the CO2
emission rates in the examples are changed considerably, in line
with the baseline estimates in CARB's ISOR.
---------------------------------------------------------------------------
With only one exception--improvements to air conditioning systems--
those technologies would have a parallel impact on fuel economy as
measured for purposes of determining compliance with federal fuel
economy standards.\237\ For purposes of determining compliance with
federal CAFE standards, testing is run with the air conditioning turned
off. Thus, the federal CAFE rules do not ``credit'' improved air
conditioning efficiency or reduced losses from air conditioners. CARB
has included reductions in emissions associated with air conditioning
(direct and indirect) in its GHG regulation, so the technologies it
relies upon are in this one limited respect broader than those NHTSA
relies on. However, those technologies are nevertheless fuel economy
technologies in that they reduce CO2 emissions by reducing
the load on a vehicle's engine and in turn reduce fuel consumption.
Further, air conditioning improvements are not the predominant factor
in reducing CO2 -equivalent
[[Page 17667]]
emissions under the CARB regulation.\238\
---------------------------------------------------------------------------
\237\ As demonstrated above, the CARB regulation would have the
substantially the same effect as the Federal fuel economy regulation
in terms of many of the technologies that manufacturers likely would
have to install to meet the requirements. In addition to covered
large trucks, addressed above, CARB's ISOR addressed the
technologies that likely would be installed in small trucks and
minivans. (ISOR, pp. 66-7). In general, those technologies are the
same as in the NAS report referred to above.
\238\ Based on its own analysis of warming-potential weighted
emissions, CARB estimates that upgrading to a low-leak HFC-152a air
conditioning system or a CO2 system would reduce GHG
emissions by ``approximately 8.5 or 9 CO2 -equivalent
grams per mile, respectively.'' (ISOR, p. 72). CARB further states
that ``upgrading to a VDC with external controls, air recirculation,
and HFC-152a as the refrigerant, the estimated indirect emission
reduction is 7 CO2 -equivalent grams per mile for a small
car, 8 CO2 -equivalent grams per mile for a large car, and
9.8 CO2 -equivalent grams per mile for minivans, small
trucks, and large trucks.'' (ISOR, p. 75). According to the
regulation, combined direct and indirect emissions allowances for
air conditioners could total as much as CO2 -equivalent 20
grams per mile. California Code of Regulations, Title 13, section
1961.1(a)(1)(B)(1)(b) allows a direct emissions allowance of up to 9
grams per mile. Section 1961.1(a)(1)(B)(1)(c) allows an indirect
emissions allowance of up to 11 grams per mile.
---------------------------------------------------------------------------
CARB's vehicle greenhouse gas regulation is, therefore, clearly
related to fuel economy standards \239\ and thus subject to the
preemption provision in EPCA.
---------------------------------------------------------------------------
\239\ A CARB memorandum recognizes that CO2 emissions
are related to fuel economy. It points out that CO2
emissions can be modeled to estimate fuel economy. It also noted in
the context of CO2 that emission rates for vehicles from
a certain period (MY 1990--MY 1997) were assumed to be the same as
the preceding model year (1989) because CAFE standards did not
change dramatically after the initial model year (MY 1989). http://www.arb.ca.gov/msei/
on-road/downloads/pubs/co2final.pdf (this
document apparently was prepared in the late 1990s, based on its
reference to the EMFAC7G model, which was approved by EPA on April
16, 1998.) Similarly, a National Academies Press (NAP) release on
Automotive Fuel Economy, recognized the relationship between
automotive fuel economy and CO2 emission rates: ``Fuel
economy improvements in new light-duty vehicles will reduce carbon
dioxide emissions per mile because less fuel will be consumed per
vehicle mile driven.'' http://www.nap.edu/openbook/0309045304/html/7html.
(NAP was created by the National Academies to publish the
reports issued by the National Academy of Sciences, the National
Academy of Engineering, the Institute of Medicine, and the National
Research Council.) See also NAP report at http://www.nap.edu/books/0309076013/html/7.html.
In addition, CARB recognized that the GHG
(CO2 -equivalent emission standards are related to fuel
economy in another way. CARB recognized that the standards would
result in savings in reduced operating costs. Those lower costs are
based on lower costs for fuel based on improved fuel efficiency.
(ISOR, p. 196; FSOR, pp. 166, 168).
---------------------------------------------------------------------------
NHTSA Has Also Concluded That Regulation of Carbon Dioxide Emissions
From Motor Vehicles Conflicts With and Is Impliedly Preempted Under 49
U.S.C. Chapter 329
Pre-emption principles also provide that if a state law or
regulation stands as an obstacle to the accomplishment and execution of
the full purposes and objectives of Congress in enacting a statute,
that law or regulation may be preempted.\240\ The presence of an
express preemption provision in a statute neither precludes nor limits
the ordinary working of conflict pre-emption principles, particularly
in the absence of a saving clause.\241\ Therefore, NHTSA has concluded
that these principles are also fully operative under EPCA, in addition
to its express preemption provision.
---------------------------------------------------------------------------
\240\ Spriestma v. Mercury Marine, 537 U.S. 51, 64-5 (2002).
\241\ Geier v. Honda, 529 U.S. 861, 869 (2000).
---------------------------------------------------------------------------
NHTSA has concluded that the State GHG standard, to the extent that
it regulates tailpipe CO2 emissions, would frustrate the
objectives of Congress in establishing the CAFE program and conflict
with the efforts of NHTSA to implement the program in a manner
consistent with the commands of EPCA. Congress had a variety of
interrelated objectives in enacting EPCA and has charged NHTSA with
balancing and achieving them. Among them was improving motor vehicle
fuel economy. To achieve that objective, Congress did not simply
mandate the issuance of fuel economy standards set at whatever level
NHTSA deemed appropriate. Nor did it simply say that levels must be set
consistent with the criteria it specified in Section 32902(f). It went
considerably further, mandating the setting of standards at the maximum
feasible level.
Other congressional objectives underlying EPCA include avoiding
serious adverse economic effects on manufacturers and maintaining a
reasonable amount of consumer choice among a broad variety of vehicles.
Congress was explicitly concerned that the CAFE program be carefully
drafted so as to require levels of average fuel economy that do not
have the effect of either ``imposing impossible burdens or unduly
limiting consumer choice as to capacity and performance of motor
vehicles.'' \242\ These concerns are equally applicable to the manner
in which that program is implemented.
---------------------------------------------------------------------------
\242\ H. Rep. No. 94-340, 87 (1975).
---------------------------------------------------------------------------
To guide the agency toward the selection of standards meeting these
competing objectives, Congress specified four factors that NHTSA must
consider in determining which level is the maximum feasible level of
average fuel economy and thus the level at which each standard must be
set. These are technological feasibility, economic practicability, the
effect of other Government standards on fuel economy, and the need of
the Nation to conserve energy.\243\ In addition, the agency had
traditionally considered the safety consequences in selecting the level
of future CAFE standards.
---------------------------------------------------------------------------
\243\ 49 U.S.C. 32902(f).
---------------------------------------------------------------------------
Congress expected the agency to balance these factors in a fashion
that ensures the standards are neither too low, nor too high. The
Conference Report for EPCA states that the fuel economy standards were
to be the product of balancing the benefits of higher fuel economy
levels against the difficulties individual manufacturers would face in
achieving those levels:
Such determination should take industry-wide considerations into
account. For example, 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. Rather, the Secretary must weigh the benefits to the
nation of a higher average fuel economy standard against the
difficulties of individual automobile manufacturers. Such
difficulties, however, should be given appropriate weight in setting
the standard in light of the small number of domestic automobile
manufacturers that currently exist, and the possible implications
for the national economy and for reduced competition association
[sic] with a severe strain on any manufacturer. However, it should
also be noted that provision has been made for granting relief from
penalties under Section 508(b) in situations where competition will
suffer significantly if penalties are imposed.\244\
\244\ S. Rep. No. 94-516, 154-155 (1975).
---------------------------------------------------------------------------
NHTSA has concluded that were a State to establish a fuel economy
standard or de facto fuel economy standard, e.g., a CO2
emission standard, it would not choose one that has the effect of
requiring lower levels of average fuel economy than the CAFE standards
applicable under EPCA or even one requiring the same level of average
fuel economy. Given that the only practical way to reduce tailpipe
emissions of CO2 is to improve fuel economy, such a State
standard would be meaningless since it would not reduce CO2
emissions to an extent greater than the CAFE standards.\245\ Instead, a
State would establish a standard that has the effect of requiring a
higher level of average fuel economy.
---------------------------------------------------------------------------
\245\ This is also EPA's conclusion. See 68 FR 52922, 52929.
---------------------------------------------------------------------------
Setting standards that are more stringent than the fuel economy
standards promulgated under EPCA would upset the efforts of NHTSA to
balance and achieve Congress's competing goals. Setting a standard too
high, above the level judged by NHTSA to be consistent with the
statutory consideration after careful consideration of these issues in
a rulemaking proceeding, would negate the agency's analysis and
decisionmaking. NHTSA makes its judgments only after considering
extensive technical
[[Page 17668]]
information such as detailed product information submitted by the
vehicle manufacturers and NAS' report on the future of the CAFE program
and conducting analyses of potential impacts on employment and safety.
As noted above, manufacturers confronted with requirements for the
reduction of tailpipe CO2 emissions would look at the same
pool of technology used to reduce fuel consumption. NHTSA concludes
that it is disruptive to the orderly implementation of the CAFE
program, and to NHTSA's reasonable balancing of competing concerns, to
have two different governmental entities assessing the need to conserve
energy, technological feasibility, economic practicability, employment,
vehicle safety and other concerns, and making inconsistent judgments
made about how quickly and how much of that single pool of technology
could and should be required to be installed consistent with those
concerns. EPCA does not specify how to weight each concern; thus, NHTSA
determines the appropriate weighting based on the circumstances in each
CAFE standard rulemaking. More important, ignoring the judgments made
by NHTSA at the direction of Congress could result in setting standards
at levels higher than NHTSA can legally justify under EPCA, increasing
the risk of the harms that that body sought to avoid, e.g., serious
adverse economic consequences for motor vehicle manufacturers and
unduly limited choices for consumers.
Through EPCA, Congress committed the reasonable accommodation of
these conflicting policies and concerns to NHTSA.\246\ ``Congress did
not prescribe a precise formula by which NHTSA should determine the
maximally-feasible fuel economy standard, but instead gave it broad
guidelines within which to exercise its discretion.'' \247\ A state's
adoption and enforcement of a CO2 standard for motor
vehicles would infringe on NHTSA's discretion to establish CAFE
standards consistent with Congress' guidance and threaten the goals
that Congress directed NHTSA to achieve. The process of achieving those
goals involves great expertise and care. The fuel economy standards
delegated to NHTSA are to be the product of balancing the benefits of
higher fuel economy levels against the difficulties individual
manufacturers would face in achieving those levels.\248\
---------------------------------------------------------------------------
\246\ 901 F.2d 107, 120-21.
\247\ 901 F.2d 107, 120-21.
\248\ 793 F.2d 1322, 1338.
---------------------------------------------------------------------------
As EPA observed in its notice denying the petition to regulate
motor vehicle CO2 emissions, its issuance of standards for
those emissions would ``abrogate EPCA's regime,'' \249\ rendering
NHTSA's careful balancing of consideration a nullity. This is equally
true for State standards for those emissions.
---------------------------------------------------------------------------
\249\ Id.
---------------------------------------------------------------------------
There appear to be two misconceptions that have clouded proper
analysis of these implied preemption issues. One is that since the term
``average fuel economy standard'' is defined in EPCA as meaning ``a
performance standard specifying a minimum level of average fuel economy
applicable to a manufacturer in a model year'' \250\ (emphasis added),
there can be no conflict or incompatibility between CO2
standards and CAFE standards. Indeed, it has been suggested that in
defining this term in this fashion, Congress endorsed the setting of
other standards having the effect of regulating fuel economy.\251\
NHTSA does not interpret the statute in this manner, because EPCA
requires that CAFE standards be set at the maximum feasible level,
consistent with the agency's assessment of impacts on the nation,
consumers and industry.
---------------------------------------------------------------------------
\250\ 49 U.S.C. 32901(a)(6).
\251\ This suggestion cannot be reconciled with Congress'
decision to include an express preemption provision in EPCA. 49
U.S.C. 32919(a).
---------------------------------------------------------------------------
An interpretation that allowed more stringent State fuel economy
standards would nullify the statutory limits that Congress placed in
EPCA on the level of CAFE standards, and the efforts of NHTSA in its
CAFE rulemaking to observe those limits. Congress expressly listed four
analytical, decision guiding factors in EPCA because fuel economy was
not the only value that Congress sought to protect and promote in the
mandating the setting of CAFE standards. Congress did not want improved
fuel economy to come at the price of adverse effects on sales, jobs,
and consumer choice. Further, in choosing the level of future CAFE
standards, NHTSA has traditionally considered the potential impact on
safety.
In selecting the maximum feasible level, NHTSA strives to set the
standards as high as it can without causing significant adverse
consequences for the manufacturers or consumers. Since NHTSA should
not, as a matter of sound public policy, and in fact may not as a
matter of law, set standards above the level it determines to be the
maximum feasible level, EPCA should not be interpreted as permitting
the States to do so. Indeed, NHTSA has concluded that, under EPCA,
States may not set actual or de facto fuel economy standards at any
level.
Second, as noted above, regulating fuel economy and regulating
CO2 emissions are inextricably linked, given current and
foreseeable automotive technology. There are not two different pools of
technology, one for reducing tailpipe CO2 emissions, and the
other for improving fuel economy. Thus, there is nothing to be gained
by setting both tailpipe CO2 standards and CAFE standards.
If the technology does not improve fuel economy, it does not reduce
tailpipe CO2 emissions. The technologies listed in Part 5 of
CARB's Initial Statement of Reasons for its GHG standard for reducing
tailpipe CO2 emissions reduce those emissions by improving
fuel economy.
This dichotomy of perception or characterization about fuel economy
and CO2 emissions does not appear to exist in other
countries. According to the International Energy Agency:
The existing approaches for achieving CO2 reduction
through fuel economy improvement in new cars vary considerably, with
both regulatory approaches (China, Japan, US, CA) and voluntary
approaches (EU). Some systems include financial incentives as well
(Japanese tax credit for hybrids, U.S. gas guzzler tax, various EU
member country differential taxation schemes based on fuel economy,
such as in the UK and Denmark).\252\
---------------------------------------------------------------------------
\252\ FUELING THE FUTURE: Workshop on Automobile CO2
Reduction and Fuel Economy Improvement Policies, WORKSHOP REPORT, 13
October, 2004, Shanghai, China, http://www.iea.org/textbase/work/2004/shanghai/UNEP_IEA.PDF
.
Further, in Europe, the studies conducted for the European Commission
in support of efforts to provide public information on fuel economy and
CO2 emissions to induce consumers to purchase vehicles with
lower CO2 emissions uniformly reflect the view that fuel
economy and CO2 emissions are directly related.\253\
---------------------------------------------------------------------------
\253\ RAND Europe, at 4; D. Elst, N. Gense, I.J. Riemersma, H.C.
van de Burgwal, Z. Samaras, G. Frontaras, I. Skinner, D. Haines, M.
Fergusson, and P. ten Brink, Measuring and preparing reduction
measures for CO2 -emissions from N1 vehicles-final report
the European Commission, Directorate-General for Environment, at 90,
TNO TPD, (part of the Netherlands Organisation for Applied
Scientific Research TNO), in partnership with Aristotle University
of Thessaloniki and Institute for European Environmental Policy,
Contract no. B4-3040/2003/364181/MAR/C1, December 2004 (observing
that `` * * * reduction of CO2 is equivalent to fuel
economy improvement * * * ''); and A. Gartner, Study on the
effectiveness of Directive 1999/94/EC relating to the availability
of consumer information on fuel economy and CO2 emissions
in respect of the marketing of new passenger cars, Final report to
the European Commission, Directorate-General for Environment,
Contract No.: 07010401/2004/377013/MAR/C1, at 45 and 70, Allgemeine
Deutsche Automobil-Club ADAC e.V., March 2005 (observing `` * * *
that most consumers are not aware of the correlation of fuel
consumption and CO2 emissions of passenger cars * * * ''
and that `` * * * the CO2 emissions (g/km) can be
calculated from fuel consumption * * * '').
---------------------------------------------------------------------------
[[Page 17669]]
Similarly, in 2001, one of the leading U.S. environmental groups
participating in this rulemaking issued a report that identified a
vehicle's fuel consumption rate as the single vehicle design factor
---------------------------------------------------------------------------
determining the amount of a vehicle's CO2 emissions:
The CO2 emitted by a motor vehicle is the product of
three factors: the amount of driving, the vehicle's fuel consumption
rate and the carbon intensity of the fuel consumed. The fuel
consumption rate (e.g., the number of gallons needed to drive 100
miles) is the inverse of fuel economy (miles per gallon, or
mpg).\254\
---------------------------------------------------------------------------
\254\ J. DeCicco and A. Feng, Automakers' Corporate Carbon
Burden, Reframing Public Policy on Automobiles, Oil and Climate, at
7-8, Environmental Defense, 2001. The article explained that carbon
intensity is how much CO2 is emitted per unit of fuel
consumed. For gasoline, this amounts to 19.4 pounds per gallon. Id.
at 8.
Later, in the same report, it was observed in a footnote
(26) that ``it is actual CAFE that determines fuel consumption
and CO2 emissions.'' \255\
---------------------------------------------------------------------------
\255\ Ibid, at 22-23.
---------------------------------------------------------------------------
EPCA's Provision Specifying Factors To Be Considered in Setting Average
Fuel Economy Standards Does Not Limit Preemption Under 49 U.S.C.
Chapter 329
EPCA does not include any exception to its preemption provision
that would cover State GHG and CO2 standards. Nevertheless,
some commenters opposing preemption suggested that Section 32902(f),
which lists the factors that NHTSA must consider in determining the
level at which to set fuel economy standards, prevents preemption by
requiring consideration, by NHTSA, of the effect of other Government
standards, including emissions standards, on fuel economy.
EPCA's decisionmaking factor provision is neither a saving clause
nor a waiver provision. Nor does NHTSA interpret it as saving state
emissions standards that effectively regulate fuel economy from
preemption. The agency interprets that provision only to direct NHTSA
to consider those State standards that can otherwise be validly adopted
and enforced under State and Federal law.
The decisionmaking factors provision does reflect an expectation by
Congress that some state emissions standards would not be preempted
under the express preemption provision. However, as an initial matter,
NHTSA does not read the provision to imply a savings clause. This is
particularly so given that Congress has considered and provided a
different saving clause, i.e., the one for a State law or regulation on
disclosure of fuel economy or fuel operating costs for an automobile.
Moreover, even if EPCA did contain the saving clause desired by
those commenters, NHTSA would not give it effect here, as doing so
``would upset the careful regulatory scheme established by federal
law.'' \256\
---------------------------------------------------------------------------
\256\ Geier v. American Honda Motor Co., 529 U.S. 861, 869
(2000). (Citations omitted.)
---------------------------------------------------------------------------
First, and most important in this context, such a reading would
upset the carefully calibrated CAFE regulatory program under which
NHTSA is with setting CAFE standards at the maximum feasible level,
taking care neither to set them too high nor too low. Because of the
need to conserve energy, Congress did not simply mandate the setting of
appropriate fuel economy standards. Instead, it mandated the setting of
maximum feasible ones. At the same time, Congress was aware that
setting overly stringent standards would excessively reduce consumer
choice about vehicle design and performance and threaten adverse
economic consequences. As noted by EPA in its Federal Register document
denying ICTA's petition to regulate CO2 emissions from motor
vehicles, the setting of standards for CO2 tailpipe
emissions would displace NHTSA and upset EPCA's regulatory regime for
CAFE.
Second, the requirement to consider these decisionmaking factors
must be reconciled with the express preemption provision. NHTSA has
concluded that reading the express preemption provision in the manner
suggested by commenters opposing preemption would irrationally limit
that provision and leave NHTSA's role in administering the CAFE program
open to a substantial risk of abrogation. By the same token, in NHTSA's
view, it is equally important that the ``relates to'' language in the
express preemption provision should not be given so broad a reading
that even State emissions standards having only an incidental effect on
fuel economy standards are deemed to be preempted by it.
NHTSA has concluded that these two extreme readings, with their
unacceptable impacts on EPCA and on the Clean Air Act, including its
waiving preemption provision, can be avoided under a carefully
calibrated interpretation of EPCA's express preemption provision that
harmonizes the two acts to the extent possible. NHTSA does not
interpret EPCA's express preemption provision as preempting State
emissions standards that only incidentally or tangentially affect fuel
economy. These standards include, for example, given current and
foreseeable technology, the existing emissions standards for CO, HC,
NOX , and particulates. They also include the limits on
sulfur emissions that become effective in 2007. NHTSA considers such
standards under the decisionmaking factors provision of EPCA since,
under applicable law, they can be adopted and enforced and therefore
can have an effect on fuel economy.
However, two groups of State emissions standards do not qualify
under NHTSA's interpretation of the decisionmaking factors provision,
and therefore would not be considered. One is State standards that
cannot be adopted and enforced because there has been no waiver for
California under the preemption waiver provision of the Clean Air Act.
The other is the State emissions standards that are expressly or
impliedly preempted under EPCA, regardless of whether or not they have
received such a waiver. Preempted standards include, for example:
(1) A fuel economy standard; and
(2) A law or regulation that has essentially all of the effects of
a fuel economy standard, but is not labeled as one (example: State
tailpipe CO2 standard).
This reading of EPCA's express preemption provision allows that
provision to function in a consistent way, without irrational
limitation, to protect the national CAFE program from interference by
any State standard effectively regulating fuel economy. It also
simultaneously maximizes the ability of EPCA and the Clean Air Act to
achieve their respective purposes.
NHTSA's judgment is that the agency should distinguish between
motor vehicle emission standards for emissions other than
CO2 (e.g., HC, CO, NOX and PM) and motor vehicle
emission standards for CO2 . Those other emissions are not
directly and inextricably linked to fuel economy. NHTSA's current view
is that standards for emissions other than CO2 merely affect
the level of CAFE that is achievable and thus only incidentally affect
fuel economy standards. Accordingly, we believe that regulation of
these emissions is not rulemaking inconsistent with the operation of
preemption principles under EPCA.
HC, CO, and PM all result from incomplete combustion. Therefore,
the first step toward controlling emissions of these pollutants
involves improving
[[Page 17670]]
the combustion process. Doing so increases the production and emission
of carbon dioxide. All three pollutants can also be substantially
eliminated from tailpipe emissions by placing catalytic converters
between the engine and the tailpipe. Catalytic converters reduce
emissions of these pollutants through oxidation, which also increases
the production and emission of carbon dioxide. PM emissions can also be
controlled using PM traps, which temporarily trap and store PM. PM
traps periodically regenerate by oxidizing away the stored PM. Doing so
increases the production and emission of carbon dioxide.
NOX results from the oxidation of nitrogen at the high
peak temperatures that occur in an efficiently-operating engine. The
exposure of nitrogen to peak temperatures can be reduced by increasing
turbulence in the combustion chamber, changing ignition and/or
injection timing, and recirculating some exhaust gases through the
engine. Increased turbulence and changes to ignition and/or injection
timing tend to increase the production and emission of carbon dioxide.
Catalytic converters can substantially eliminate NOX from
the exhaust stream. However, doing so requires chemical reduction--
oxidation in reverse. Modern catalytic converters perform both
reduction and oxidation, reducing NOX to oxidize HC and CO,
and further oxidizing HC and CO with oxygen available in the exhaust
stream. These processes increase the production and emission of carbon
dioxide.
Gasoline vehicles also emit HC through the evaporation of fuel.
These emissions are controlled using canisters that temporarily store
evaporated fuel. Periodically, these canisters are purged, releasing
the stored fuel vapors to the engine to be combusted. Compared to
simply releasing evaporative emissions to the atmosphere, these
processes increase the formation and emission of carbon dioxide.
To summarize, the processes used to control HC, CO, NOX ,
and PM emissions increase the formation and emission of carbon dioxide.
Because carbon dioxide is, like water, an ultimate byproduct of
combustion, it cannot be further converted on the vehicle to some other
compound through any practical means. Plants use sunlight to convert
carbon dioxide and water to biomass (and oxygen) through
photosynthesis, but vehicles produce far too much exhaust to be
consumed by plants that could conceivably be sustained by the amount of
sunlight to which vehicles are exposed. Even if enough sunlight were
available, biomass would be produced at a rate requiring impractically
frequent removal from the vehicle. Theoretically, on-board scrubbers
could be used separate carbon dioxide from the exhaust stream. Chemical
processes for removing carbon dioxide are currently used in underwater
rebreathers and space applications (e.g., the international space
station), and are contemplated for stationary applications (e.g.,
electric utilities). (See, e.g., http://www.nas.nasa.gov/About/Education/SpaceSettlement/teacher/course/co2.html, http://
http://
proceedings/01/carbon--seq/5a5.pdf.) However, for a variety of reasons
(e.g., size, cost, energy demands, use of dangerous reactants such as
calcium hydroxide), these processes would not be even remotely
practical for motor vehicles.
Even if a practical process to separate carbon dioxide from the
exhaust stream were available, the carbon dioxide would, to prevent its
release, need to be compressed or solidified for temporary onboard
storage, and frequently removed for disposal (e.g., in underground
facilities). For example if fifteen gallons of gasoline are added at
each refueling of a vehicle, about 290 pounds of carbon dioxide (or,
without any separation of the carbon dioxide, about 1,400 pounds of
exhaust gases) would be produced through the combustion of that fuel.
(This example assumes gasoline with a density of 6 pounds per gallon
and a carbon content (by mass) of 87%. Each pound of carbon dioxide
contains 0.273 pounds of elemental carbon. The combustion of 1 pound of
gasoline requires about 14.7 pounds of air.) At these rates of
production, no practical means of onboard storage and periodic removal
are foreseeable.
For these reasons, a CO2 emissions standard stands apart
from those other emissions standards. NHTSA has concluded that such a
standard functions as a fuel economy standard, given the direct
relationship between a vehicle's fuel economy and the amount of
CO2 it emits. In contrast, no such relationship exists
between a vehicle's fuel economy and the emissions currently regulated
by EPA.
Interpreting EPCA's preemption provision as preempting only those
State regulations that directly regulate or have the effect of directly
regulating fuel economy gives, to the extent possible, maximum effect
both to EPCA and to the preemption waiver provision in the Clean Air
Act. This is necessary and appropriate, especially considering the
importance of the goals of the Clean Air Act and the attention paid by
Congress in drafting EPCA to the relationship of the CAFE program to
the Clean Air Act. EPCA's express preemption provision cannot be
interpreted as preempting all State laws relating to a fuel economy
standard, no matter how tangential the relationship. Such an
interpretation would largely, if not wholly, negate the Clean Air Act's
preemption waiver provision and leave few, if any, emission standards
to be considered by NHTSA under EPCA's decisionmaking factor provision.
Our approach to reconciling EPCA and the Clean Air Act appropriately
distinguishes between emissions other than CO2 and
CO2 . The Clean Air Act authorizes the States to regulate
emissions other than CO2 , but not CO2 itself,
because of the nature of combustion and the availability of different
technologies for regulating those other emissions.
Our approach also avoids interpreting EPCA's express preemption
provision so narrowly as to produce the absurd and destructive result
of preempting State fuel economy standards, but not State standards
that are fuel economy standards in effect, but not in name. Giving EPCA
this degree of primacy is particularly appropriate given the regulatory
authority in this statute is quite narrow and specific: fuel economy
standards, and their functional equivalents, CO2 standards
and GHG standards, to the extent that the latter regulate
CO2 emissions.
XV. Rulemaking Analyses and Notices
A. Executive Order 12866 and DOT Regulatory Policies and Procedures
Executive Order 12866, ``Regulatory Planning and Review'' (58 FR
51735, October 4, 1993), provides for making determinations whether a
regulatory action is ``significant'' and therefore subject to OMB
review and to the requirements of the Executive Order. The Order
defines a ``significant regulatory action'' as one that is likely to
result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or Tribal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the
[[Page 17671]]
President's priorities, or the principles set forth in the Executive
Order.
The rulemaking adopted in this document is economically
significant. Accordingly, OMB reviewed it under Executive Order 12866.
The rule is also significant within the meaning of the Department of
Transportation's Regulatory Policies and Procedures.
We estimate that the total benefits under the Unreformed CAFE
standards for MYs 2008-2010 and the Reformed CAFE standard for MY 2011
will be approximately $7,554 million at a 7 percent discount rate and
at fuel prices (based on EIA long-term projections) ranging from $1.96
to $2.39 per gallon: $577 million for MY 2008, $1,876 million for MY
2009, $2,109 million for MY 2010, and $2,992 million for MY 2011. We
estimate that the total costs under those standards, as compared to the
MY 2007 standard of 22.2 mpg, will be a total of $6,440 million: $536
million for MY 2008, $1,621 million for MY 2009, $1,752 million for MY
2010, and $2,531 million for MY 2011.
Under the Reformed CAFE standards for MYs 2008-2011, as compared to
the MY 2007 standard of 22.2 mpg, we estimate the total benefits under
the Reformed CAFE system for MYs 2008-2011 at $8,125 million: $782
million for MY 2008, $2,015 million for MY 2009, $2,336 million for MY
2010, and $2,992 million for MY 2011. We estimate the total costs to be
similar to the total costs under the Unreformed CAFE system, $6,711
million: $553 million for MY 2008, $1,724 million for MY 2009, $1,903
million for MY 2010, and $2,531 million for MY 2011.
Because the final rule is significant under both the Department of
Transportation's procedures and OMB's guidelines, the agency has
prepared a Final Regulatory Impact Analysis and placed it in the docket
and on the agency's Web site.
B. National Environmental Policy Act
Consistent with the requirements of the National Environmental
Policy Act (NEPA),\257\ the regulations of the Council on Environmental
Quality,\258\ and relevant DOT regulations and orders,\259\ the agency
has prepared a final Environmental Assessment (EA) of this action and
concludes that this rulemaking action will not have a significant
effect on the quality of the human environment. Both the final EA and a
Finding of No Significant Impact (FONSI) have been placed in the
docket.
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\257\ 42 U.S.C. 4321 et seq.
\258\ 40 CFR part 1500.
\259\ 49 CFR part 520, DOT Order 5610.1C, and NHTSA Order 560-1.
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In comments on the draft EA, the Attorneys General and the Center
for Biological Diversity challenged the adequacy of the environmental
analysis performed by the agency. These commenters stated that the
agency is required to prepare an EIS.
The agency disagrees that an EIS was required. Although not
required to do so under NEPA, the agency first published a draft EA for
comment, and carefully reviewed all comments.\260\ Appropriate
adjustments have been made in the final EA.
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\260\ None of the commenters provided specific data to indicate
that impacts from the proposed rule, final rule, or considered
alternatives, would be significant.
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Based on the analysis in the final EA, which led to a determination
that this rulemaking action will not have a significant effect on the
quality of the human environment, the agency determined that it was not
required to prepare an Environmental Impact Statement (EIS). The
function of an EA is to present and analyze various alternatives so
that an agency can consider the environmental concerns related to a
particular action and other possible actions ``while reserving agency
resources to prepare full EISs for appropriate cases.'' Sierra Club v.
DOT, 753 F.2d 120, 126 (D.C. Cir. 1985). An EIS is required only when
an agency has first determined that a major federal action will
``significantly affect [] the quality of the human environment.'' 42
U.S.C. 4332(2)(C). See also Sierra Club, 753 F.2d at 126, Town of Cave
Creek, Arizona v. FAA, 325 F.3d 320, 327 (D.C. Cir. 2003) and Fund for
Animals v. Thomas, 127 F.3d 80, 83 (D.C. Cir. 1997). This limitation
reflects the courts' awareness of the time and expense involved in the
preparation of an EIS. See River Road Alliance v. Corps of Engineers of
the United States Army, 764 F.2d 445, 449 (7th Cir. 1985) (the decision
to prepare an EIS is based on ``whether the time and expense of
preparing an environmental impact statement are commensurate with the
likely benefits from a more searching evaluation than an environmental
assessment provides'') and Metropolitan Edison Co. v. People Against
Nuclear Energy, 460 U.S. at 766, 776 (1983) (noting scarcity of time
and resources in limiting the scope of NEPA review). The agency
conducted a careful inquiry and assessed the potential environmental
impacts of a variety of alternatives including the action adopted in
this final rule. With respect to each alternative, the agency
determined that projected impacts would be very small and generally
constitute improvements compared to the baseline for this
rulemaking.\261\
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\261\ See Section 4 Environmental Consequences, in the final EA,
which has been placed in the docket for this rulemaking.
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The Attorneys General and the Center for Biological Diversity
stated that the agency did not consider a reasonable number of
alternatives, and therefore did not take the requisite ``hard look''
when analyzing environmental impacts.\262\ In particular, they asserted
that Reformed CAFE creates incentives for manufacturers to build larger
vehicles, ``which will jeopardize air quality and the climate'' and
that NHTSA did not ``consider the environmental impact of its choices
or the possibility of making other choices.''
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\262\ The term ``hard look'' refers to whether the agency fully
evaluated, rather than cursorily examined, a particular issue. See
Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 374 (1989).
Elements of a hard look include whether an agency demonstrated that
``it had responded to significant points made during the public
comment period, had examined all relevant factors, and had
considered significant alternatives to the course of action
ultimately chosen.'' Merrick B. Garland, Deregulation and Judicial
Review, 98 Harv. L. Rev. 505, 526 (1985). See also Home Box Office
v. FCC, 567 F.2d 9, 35 (D.C. Cir.) (requiring agencies to consider
all relevant factors and demonstrate a ``rational connection between
the facts found and the choice made'') (citing Burlington Truck
Lines v. United States, 311 U.S. 156, 168 (1962)), cert. denied, 434
U.S. 829 (1977).
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In determining the impacts of this rulemaking, the agency analyzed
a reasonable number of alternative actions, as required under NEPA. As
the Supreme Court has recognized, an agency is required to examine only
reasonable alternatives, not those that might result in the worst-case
scenario and that are unlikely to occur. See Robertson v. Methow Valley
Citizens Council, 490 U.S. 332, 354-55 (1989).
The agency recognizes that numerous alternatives exist, including
alternatives with more stringent fuel economy requirements.\263\
However, the agency did not analyze these alternatives in the final EA
because we determined from our analytical model that they would not be
consistent with the statutory criteria of EPCA. We note that the agency
is required to set fuel economy standards at the ``maximum feasible''
levels achievable by manufacturers in the applicable model years,
taking into consideration four statutory factors: Technological
feasibility; economic practicability; the impact of other Federal
standards on fuel economy; and the need of the nation to conserve
[[Page 17672]]
energy. EPCA does not permit the agency to establish fuel economy
standards at any chosen level, but instead requires NHTSA to balance
these factors when setting an appropriate standard. For example, a fuel
economy standard ``with harsh economic consequences for the auto
industry * * * would represent an unreasonable balancing of EPCA's
policies.'' Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1340 (D.C.
Cir. 1986).
---------------------------------------------------------------------------
\263\ Commenters suggested that the agency consider more
stringent standards, but provided no substantive data to support the
general assertion that unspecified, but more stringent, standards be
adopted.
---------------------------------------------------------------------------
The evaluated alternatives represent standards set under the
traditional Unreformed CAFE process and under the marginal cost-benefit
analysis previously described. These alternatives analyzed by the
agency, which are described in greater detail in the final EA (see EA
pp. 8-15), represent options that were reasonable, given the agency's
authority under EPCA. All of these options were projected to result
primarily in small emission reductions. We evaluated the selected
alternatives against a reasonable baseline and we have evaluated the
estimated cumulative impacts resulting from the alternative ultimately
adopted in the final rule.\264\ The alternative adopted today reflects
the technological capabilities of the industry within the applicable
time frame and does not result in harsh economic consequences for the
industry. After carefully considering the statutory criteria, the
agency has determined that the standards adopted today represent the
``maximum feasible'' levels achievable by manufacturers.\265\
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\264\ While a baseline typically represents the impact that
would occur if an agency took no action (i.e., if NHTSA did not
establish standards at all for MYs 2008-2011), 49 U.S.C. Sec.
32902(a) precludes this possibility by affirmatively requiring the
Secretary of Transportation to prescribe, by rule, average fuel
economy standards for light trucks--in other words, the agency must
promulgate some standard to apply to light trucks. For these
purposes, we chose to use the MY 2007 (22.2 mpg) standard as the
baseline to assess the impacts of the various alternatives.
\265\ Separately, NRDC provided several scenarios purportedly
demonstrating the impact of upsizing on fleet-wide fuel economy.
While the agency does not agree that the scenarios presented by NRDC
are probable, we note that the fleet-wide fuel economy estimates for
each one remains within the range of alternatives considered in the
Environmental Assessment. That is, under NRDC's analysis, the fleet-
wide fuel economy was not lower than the No Action Alternative
evaluated in the final EA. Additionally, as discussed in the final
EA, the range of impacts from the considered alternatives is very
narrow and minimal. The projections for each of the alternatives
examined by the agency indicated that none of them would result in a
significant impact. An agency is only required to examine reasonable
alternatives, not those that might result in the worst-case scenario
and that are unlikely to occur. See Robertson v. Methow Valley
Citizens Council, 490 U.S. 332, 354-55 (1989).
---------------------------------------------------------------------------
Further, we considered, but did not evaluate, an alternative that
would incorporate a backstop or ratcheting mechanism. There are several
reasons for not including such a mechanism within the context of the
Reformed CAFE system that we are adopting today. The suggestion that
NHTSA must incorporate a backstop does not consider the fact, noted
above several times, that CAFE does not command that NHTSA, in
administering the CAFE program, either to ignore or seek to preclude
mix shifts and design changes made due to consumer demand. NHTSA has
traditionally considered consumer demand in setting new CAFE standards
and likewise has considered it as necessary and appropriate in amending
existing standards. The proponents of a backstop did not consider that
the proposed Reformed CAFE system minimized the incentive for
manufacturers to upsize vehicles. The Reformed system adopted in this
final rule reduces that incentive even more. Further, manufacturers are
limited in their ability to increase vehicle size by consumer demand
and by other market forces, such as potential fuel prices. Adoption of
a backstop would also undermine the benefits of attribute-based
standards for some manufacturers and perpetuate the shortcomings of the
Unreformed system.
The Attorneys General also expressed concern about the potential
for vehicle upsizing and stated that the agency should analyze the
impact on fuel savings that would occur if manufacturers enlarged their
vehicles, making them subject to a less stringent requirement. As
explained above, the agency chose footprint as the vehicle metric on
which to base the standard because it would be difficult for
manufacturers to make short term adjustments solely in response to the
fuel economy levels. We based our analysis on manufacturer product
plans, which reflect vehicle designs through MY 2011. As also explained
above, footprint is closely tied to a vehicle's platform, which
manufacturers typically rely upon without change for a multi-year
product cycle.
The Center for Biological Diversity argued that the agency did not
properly analyze the cumulative impacts of the light truck rule
relative to greenhouse gas emissions and global warming. The commenter
asserts that past, present and future actions must be adequately
catalogued and considered, including a list and description of
``sources of United States [greenhouse gas] emissions by category and
percent of the total to place the [greenhouse gas] emissions into
perspective.'' The Center for Biological Diversity also stated that the
agency needs a full understanding of how its proposed action impacts
the overall ability of the U.S. to reduce its greenhouse gas emissions.
In the final EA, the agency has provided a discussion of the
greenhouse gas emissions in the U.S. transportation sector, as well as
in the U.S. generally, based on available data (see EA pp. 21, 31).
Although the commenters urge the agency to promulgate a standard that
results in larger reductions in CO2 emissions, such a course
of action would not be consistent with the EPCA constraints discussed
earlier. The extent of NHTSA's analysis is dictated by the goals and
requirements of EPCA. Metropolitan Edison Co., 460 U.S. at 776 (noting
that ``[t]he scope of the agency's inquiries must remain manageable if
NEPA's goal of `ensur[ing] a fully informed and well considered
decision' * * * is to be accomplished.'') (citations omitted). The
agency considered the impacts to greenhouse gas emissions from fuel
economy standards set according to the statutory directive of EPCA.
Moreover, as illustrated in the final EA, all of the analyzed
alternatives were projected to reduce CO2 emissions (see EA
p. 30).
The commenters also contend that the agency has not taken into
account changed circumstances that have occurred since the last EIS was
completed. In addition to citing the passage of time since the agency
last prepared an EIS for the CAFE program, commenters said that higher
gas prices, heightened concerns about foreign oil dependence, climate
changes, and advances in hybrid technologies constitute ``changed
circumstances'' that dictate a full evaluation of environmental impacts
in an EIS.
While we appreciate that changes have occurred since the last EIS
was performed, we note that there must be sufficient information to
show that this action will affect the quality of the human environment
``in a significant manner or to a significant extent not already
considered'' to require an EIS. Further, as explained in the FRIA,
higher gasoline prices were factored into the model relied on by the
agency (see FRIA p. VIII-26). The incorporation of hybrid technology is
addressed elsewhere in this notice and in the FRIA (see FRIA p. V-12).
Consideration of the nation's dependence on foreign oil raises policy
questions that lie outside the scope of NEPA. We address that matter
elsewhere in this notice.
The setting of the MY 2005-2007 light truck standards in April 2003
(68 FR 16868) was the agency's first effort to set CAFE standards since
the lifting of prior
[[Page 17673]]
Congressional restrictions (other than the ministerial setting of
standards at already prescribed levels during the intervening years).
Based on the EA for that action,\266\ the agency concluded that no
significant environmental impact would result from the rule. As
explained in the MY 2005-2007 EA, we believe that adopting that
approach in that rulemaking action is consistent with our prior
evaluations assessing the impacts of changes to CAFE.
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\266\ See Docket NHTSA-2002-11419-18360 (Final Environmental
Assessment for MY 2005-2007 Light Truck CAFE Standards).
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The final EA in the current action also considered the effects of
the different alternatives on nonattainment areas as well as on those
areas that could be at risk of nonattainment status (see EA p. 31). The
agency determined that the changes projected from the various
alternatives that were considered would not increase the risk of any
geographic areas incurring nonattainment status. As the projections in
the final EA show, the levels of criteria pollutants are expected to
decrease, with the exception of CO, and the projected increases in CO
are not sufficient to result in an increase in nonattainment areas (see
EA p. 30).
NRDC and the Center for Biological Diversity stated that the agency
did not consider the impacts of the regulation on human health and
endangered species. The final EA addresses human health issues. The
final EA demonstrates that the changes in the emissions of criteria
pollutants are not projected to result in any additional violations of
the primary air standards, which are set at levels intended to protect
against adverse effects on human health (see EA p. 31).
With regard to endangered species, the commenters expressed concern
about the potential impact of increased greenhouse gas emissions and
global warming on various species and their habitat. We first note that
the Endangered Species Act does not require review in every instance
that could have an impact on a particular endangered or threatened
species, however remote. 16 U.S.C. 1531 et seq. Rather, review is
triggered in instances where it is likely that such an impact will
occur. See Babbitt v. Sweet Home Chapter of Communities for a Great
Oregon, 515 U.S. 687, 703 (1995). As noted in the final EA, the agency
projected that the final rule would produce, compared to U.S. emissions
of CO2 , a small decrease in emissions of CO2 , the
primary component of greenhouse gas emissions, under the selected
alternative (see EA p. 32). Accordingly, the agency determined that the
action we are adopting today will not have a significant impact on the
environment.
In addition to commenting on the EA, the Center for Biological
Diversity asserted that the Global Change Research Act (GCRA) requires
the agency to rely on specific research in our analysis. The agency
disagrees. The GCRA calls for the publication of a study on the effects
of global climate changes every four years and to make these research
findings available to agencies to use. It does not mandate, however,
that Federal agencies rely on the research report. Instead, the statute
only imposes a requirement that the report be made available to
agencies. See 15 U.S.C. 2938 (ensuring that research findings are made
available for use by Federal agencies in formulating policies
addressing human-induced and natural processes of global change).
C. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a notice
of rulemaking for any proposed or final rule, it must prepare and make
available for public comment a regulatory flexibility analysis that
describes the effect of the rule on small entities (i.e., small
businesses, small organizations, and small governmental jurisdictions).
The Small Business Administration's regulations at 13 CFR part 121
define a small business, in part, as a business entity ``which operates
primarily within the United States.'' (13 CFR 121.105(a)). No
regulatory flexibility analysis is required if the head of an agency
certifies the rule will not have a significant economic impact on a
substantial number of small entities.
I certify that the final rule will not have a significant economic
impact on a substantial number of small entities. The following is the
agency's statement providing the factual basis for the certification (5
U.S.C. 605(b)).
The final rule directly affects fourteen single stage light truck
manufacturers. According to the Small Business Administration's small
business size standards (see 5 CFR 121.201), a single stage light truck
manufacturer (NAICS code 336112, Light Truck and Utility Vehicle
Manufacturing) must have 1,000 or fewer employees to qualify as a small
business. None of the affected single stage light truck manufacturers
are small businesses under this definition. All of the manufacturers of
light trucks have thousands of employees. Given that none of the
businesses directly affected are small business for purposes of the
Regulatory Flexibility Act, a regulatory flexibility analysis was not
prepared.
D. Executive Order 13132 Federalism
Executive Order 13132 requires NHTSA to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' The Order defines the term ``Policies that
have federalism implications'' to include regulations that have
``substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.'' Under
the Order, NHTSA may not issue a regulation that has federalism
implications, that imposes substantial direct compliance costs, and
that is not required by statute, unless the Federal government provides
the funds necessary to pay the direct compliance costs incurred by
State and local governments, or NHTSA consults with State and local
officials early in the process of developing the proposed regulation.
The agency has complied with Order's requirements.
The issue of preemption of State emissions standard under EPCA is
not a new one; there is an ongoing dialogue regarding the preemptive
impact of CAFE standards whose beginning pre-dates this rulemaking.
This dialogue has involved a variety of parties (i.e., the States, the
federal government and the public) and has taken place through a
variety of means, including rulemaking. This issue was explored in the
litigation over the California ZEV regulations in 2002 (in which the
federal government filed an amicus brief) and addressed at great length
in California's 2004-2005 rulemaking proceeding on its GHG
regulation.\267\ NHTSA first addressed the issue in its rulemaking on
CAFE standards for MY 2005-2007 light trucks.
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\267\ FSOR, pp. 358-68.
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In the current rulemaking proceeding, we sought again to engage the
public in a discussion of the relationship between CAFE standards and
State CO2 standards and the applicability of EPCA's
preemption provision to the latter. In response to our discussion of
preemption in the August 2005 NPRM, the agency received communications
from a variety of States and their representative organizations.
States objected generally to the preemption discussion in the NPRM.
CARB, New Jersey Department of Environmental Protection, New York
[[Page 17674]]
Department of Environmental Conservation, STAPPA/ALAPCO, NESCAUM, and
the Attorneys General (California et al.) each stated that the
preemption discussion was irrelevant or beyond the scope of the light
truck CAFE rulemaking. These commenters requested that the agency not
address this issue in the final rule. The Connecticut Department of
Environmental Protection, Pennsylvania Department of Environmental
Protection, and STAPPA/ALAPCO made similar requests. These commenters
also asserted that the issue of preemption should be left to the
courts.
The Attorneys General (California et al.) stated that Executive
Order 13132 directs the agency to be ``deferential to States when
taking action that affects the policymaking discretion of the States
and should act only with the greatest caution where State or local
governments have identified uncertainties regarding the constitutional
or statutory authority of the national government.''
We have carefully considered these comments, as well as closely
examined our authority and obligations under EPCA and that statute's
express preemption provision. For those rulemaking actions undertaken
at an agency's discretion, Section 3(a) of Executive Order 13132
instructs agencies to closely examine their statutory authority
supporting any action that would limit the policymaking discretion of
the States and assess the necessity for such action. This is not such a
rulemaking action. NHTSA has no discretion not to issue the CAFE
standards established by this final rule. EPCA mandates that the
``Secretary of Transportation * * * prescribe by regulation average
fuel economy standards'' for light trucks (49 U.S.C. 32902). Given that
a State CO2 regulation is the functional equivalent of a
CAFE standard, there is no way that NHTSA can tailor a fuel economy
standard for light trucks so as to avoid preemption. Further, EPCA
itself precludes a State from adopting or enforcing a law or regulation
related to fuel economy (49 U.S.C. 32919(a)).
For these reasons and those stated at greater length in the section
above on preemption, we have not adopted the views presented by the
States. Nevertheless, the agency continues to examine these issues and
welcomes continued input.
E. Executive Order 12988 (Civil Justice Reform)
Pursuant to Executive Order 12988, ``Civil Justice Reform'' (61 FR
4729, February 7, 1996), the agency has considered whether this
rulemaking will have any retroactive effect. This final rule does not
have any retroactive effect.
F. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires Federal agencies to prepare a written assessment of the costs,
benefits, and other effects of proposed or final rules that include a
Federal mandate likely to result in the expenditure by State, local, or
tribal governments, in the aggregate, or by the private sector, of more
than $100 million in any one year (adjusted for inflation with base
year of 1995 to $115 million for 2003). All cost estimates in the FRIA
are in 2003 economics. Before promulgating a rule for which a written
statement is needed, NHTSA is generally required by section 205 of the
UMRA to identify and consider a reasonable number of regulatory
alternatives and adopt the least costly, most cost-effective, or least
burdensome alternative that achieves the objectives of the rule. The
provisions of section 205 do not apply when they are inconsistent with
applicable law. Moreover, section 205 allows NHTSA to adopt an
alternative other than the least costly, most cost-effective, or least
burdensome alternative if the agency publishes with the final rule an
explanation why that alternative was not adopted.
This final rule will not result in the expenditure by State, local,
or tribal governments, in the aggregate, of more than $115 million
annually, but it will result in the expenditure of that magnitude by
vehicle manufacturers and/or their suppliers. In promulgating this
proposal, NHTSA considered whether average fuel economy standards lower
and higher than those proposed would be appropriate. NHTSA is
statutorily required to set standards at the maximum feasible level
achievable by manufacturers and has tentatively concluded that the
proposed standards are the maximum feasible standards for the light
truck fleet for MYs 2008-2011 in light of the statutory considerations.
G. Paperwork Reduction Act
Under the procedures established by the Paperwork Reduction Act of
1995 (44 U.S.C. 3501 et seq.), a person is not required to respond to a
collection of information by a Federal agency unless the collection
displays a valid OMB control number. For the transition period
reporting requirements, and the additional pre-model year reporting
requirements, NHTSA is submitting to OMB a request for approval of the
following collection of information.
In compliance with the Paperwork Reduction Act, this notice
announces that the Information Collection Request (ICR) abstracted
below has been forwarded to the Office of Management and Budget (OMB)
for review and comment. The ICR describes the nature of the information
collections and their expected burden. This is a request for an
amendment of an existing collection.
Agency: National Highway Traffic Safety Administration (NHTSA).
Title: 49 CFR Part 537, Automotive Fuel Economy Reports (F.E.)
Reports
Type of Request: Amended collection.
OMB Clearance Number: 2127-0019.
Form Number: This collection of information will not use any
standard forms.
Requested Expiration Date of Approval: Three years from the date of
approval.
Summary of the Collection of Information: So that NHTSA can ensure
that light truck manufacturers are complying with the CAFE
requirements, NHTSA would require light truck manufacturers to provide
information on their election of a compliance option during model years
2008-2010, and provide light truck footprint data beginning model year
2008.
NHTSA established a transition period during MYs 2008-2010 during
which manufacturers may opt to comply with light truck fuel economy
standards established under the Reformed CAFE system. For each year of
the transition period, manufacturers must, within 45 days after the end
of the model year, provide to NHTSA information identifying the light
truck CAFE system with which the manufacturer chooses to comply. The
choice is irrevocable.
Further, the Reformed CAFE system relies on vehicle footprint to
determine a manufacturer's required average fuel economy level.
Beginning in MY 2008, the agency would need to collect data on vehicle
footprint to determine manufacturers' compliance with the Reformed CAFE
system and to evaluate the new system.
Description of the Need for the Information and Proposed Use of the
Information: NHTSA need this information to ensure that vehicle
manufacturers are complying with the light truck CAFE program and to
evaluate the Reformed CAFE system.
Description of the Likely Respondents (Including Estimated Number,
and Proposed Frequency of Response to the Collection of Information):
NHTSA estimates that 14 light truck manufacturers will be impacted by
this amendment. The manufacturers are
[[Page 17675]]
makers of light trucks have gross vehicle weight ratings of 4,536 kg
(10,000 pounds) or less. For each pre-model report currently required
under 49 CFR 537.7, the manufacturer will provide data on vehicle
footprint. Further, during MYs 2008-2010, the manufacturers will
provide, in addition to its identity, a statement as to which light
truck CAFE standard with which it has chosen to comply, 49 CFR 533.5(f)
or 49 CFR 533.5(g).
During the transition period, each manufacturer will provide 1
additional report per year for three years, for a total of 3 additional
reports over 3 years.
Estimate of the Total Annual Reporting and Recordkeeping Burden
Resulting from the Collection of Information: NHTSA estimates that each
manufacturer will incur an additional 10 burden hours per year. This
estimate is based on the fact that data collection will involve only
computer tabulation. Further, this is consistent with the range of
burden hours suggested by the Alliance in its comments. Thus, as a
result of this final rule each manufacturer will incur an additional
burden of ten hours or a total on industry of an additional 140 hours a
year (assuming there are 14 manufacturers).
NHTSA estimates that the recordkeeping burden resulting from the
collection of information will be 0 hours because the information will
be retained on each manufacturer's existing computer systems for each
manufacturer's internal administrative purposes.
NHTSA estimates that the total annual cost burden will be 0
dollars. There would be no capital or start-up costs as a result of
this collection. Manufacturers can collect and tabulate the information
by using existing equipment. Thus, there would be no additional costs
to respondents or recordkeepers.
Comments are invited on:
Whether the collection of information is necessary for the
proper performance of the functions of the Department, including
whether the information will have practical utility.
Whether the Department's estimate for the burden of the
information collection is accurate.
Ways to minimize the burden of the collection of
information on respondents, including the use of automated collection
techniques or other forms of information technology. A comment to OMB
is most effective if OMB receives it within 30 days of publication.
Send comments to the Office of Information and Regulatory Affairs,
Office of Management and Budget, 725 17th Street, NW., Washington, DC
20503, Attention NHTSA Desk Officer. PRA comments are due within 30
days following the publication of this document in the Federal
Register.
The agency recognizes that the amendment to the existing collection
of information contained in today's final rule may be subject to
revision in response to public comments and the OMB review. For
additional information contact: Ken Katz, Lead Engineer, Fuel Economy
Division, Office of International Policy, Fuel Economy, and Consumer
Programs, National Highway Traffic Safety Administration, 400 Seventh
St., SW., Washington, DC 20590. Mr. Katz can also be contacted at:
telephone number (202) 366-0846, facsimile (202) 493-2290, electronic
mail kkatz@nhtsa.dot.gov.
H. Regulation Identifier Number (RIN)
The Department of Transportation assigns a regulation identifier
number (RIN) to each regulatory action listed in the Unified Agenda of
Federal Regulations. The Regulatory Information Service Center
publishes the Unified Agenda in April and October of each year. You may
use the RIN contained in the heading at the beginning of this document
to find this action in the Unified Agenda.
I. Executive Order 13045
Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any
rule that: (1) Is determined to be economically significant as defined
under E.O. 12866, and (2) concerns an environmental, health or safety
risk that NHTSA has reason to believe may have a disproportionate
effect on children. If the regulatory action meets both criteria, we
must evaluate the environmental health or safety effects of the planned
rule on children, and explain why the planned regulation is preferable
to other potentially effective and reasonably feasible alternatives
considered by us.
This rule does not have a disproportionate effect on children. The
primary effect of this rule is to conserve energy resources by setting
fuel economy standards for light trucks.
J. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act (NTTAA) requires NHTSA to evaluate and use existing voluntary
consensus standards in its regulatory activities unless doing so would
be inconsistent with applicable law (e.g., the statutory provisions
regarding NHTSA's vehicle safety authority) or otherwise impractical.
Voluntary consensus standards are technical standards developed or
adopted by voluntary consensus standards bodies. Technical standards
are defined by the NTTAA as ``performance-based or design-specific
technical specification and related management systems practices.''
They pertain to ``products and processes, such as size, strength, or
technical performance of a product, process or material.''
In meeting the requirement of the NTTAA, we are required to consult
with voluntary, private sector, consensus standards bodies. Examples of
organizations generally regarded as voluntary consensus standards
bodies include the American Society for Testing and Materials (ASTM),
the Society of Automotive Engineers (SAE), and the American National
Standards Institute (ANSI). If NHTSA does not use available and
potentially applicable voluntary consensus standards, we are required
by the Act to provide Congress, through OMB, an explanation of the
reasons for not using such standards.
The final rule incorporates a function based on light truck
footprint (average track width X wheelbase). For the purpose of this
calculation, the agency based these measurements on those by the
automotive industry. Determination of wheelbase is consistent with
L101-wheelbase, defined in SAE J1100 SEP2005, Motor vehicle dimensions.
The agency adopted a definition of track width consistent with SAE
J1100 W101 SEP2005.
There are no voluntary consensus standards on fuel economy
performance.
K. Executive Order 13211
Executive Order 13211 (66 FR 28355, May 18, 2001) applies to any
rule that: (1) Is determined to be economically significant as defined
under E.O. 12866, and is likely to have a significant adverse effect on
the supply, distribution, or use of energy; or (2) that is designated
by the Administrator of the Office of Information and Regulatory
Affairs as a significant energy action. If the regulatory action meets
either criterion, we must evaluate the adverse energy effects of the
planned rule and explain why the planned regulation is preferable to
other potentially effective and reasonably feasible alternatives
considered by us.
The final rule establishes light truck fuel economy standards that
will reduce the consumption of petroleum and will not have any adverse
energy effects. Accordingly, this rulemaking action is
[[Page 17676]]
not designated as a significant energy action.
L. Department of Energy Review
In accordance with 49 U.S.C. 32902(j), we submitted this rule to
the Department of Energy for review. That Department did not make any
comments that we have not addressed.
M. Privacy Act
Anyone is able to search the electronic form of all comments
received into any of our dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act Statement in the Federal Register published on
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit
http://dms.dot.gov.
Regulatory Text
List of Subjects in 49 CFR Parts 523, 533, and 537
Fuel economy and Reporting and recordkeeping requirements.
0
In consideration of the foregoing, 49 CFR Chapter V is amended as
follows:
PART 523--VEHICLE CLASSIFICATION
0
1. The authority citation for part 523 continues to read as follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.50.
0
2. Section 523.2 is amended by adding a definition of ``footprint'' and
``medium duty passenger vehicle'' to read as follows:
Sec. 523.2 Definitions.
* * * * *
Footprint means the product, in square feet rounded to the nearest
tenth, of multiplying a vehicle's average track width (rounded to the
nearest tenth) by its wheelbase (rounded to the nearest tenth). For
purposes of this definition, track width is the lateral distance
between the centerlines of the tires at ground when the tires are
mounted on rims with zero offset. For purposes of this definition,
wheelbase is the longitudinal distance between front and rear wheel
centerlines. In case of multiple rear axles, wheelbase is measured to
the midpoint of the centerlines of the wheels on the rearmost axle.
* * * * *
Medium duty passenger vehicle means a vehicle which would satisfy
the criteria in Sec. 523.5 (relating to light trucks) but for its
gross vehicle weight rating or its curb weight, which is rated at more
than 8,500 lbs GVWR or has a vehicle curb weight of more than 6,000
pounds or has a basic vehicle frontal area in excess of 45 square feet,
and which is designed primarily to transport passengers, but does not
include a vehicle that:
(1) Is an ``incomplete truck'' as defined in this subpart; or
(2) Has a seating capacity of more than 12 persons; or
(3)Is designed for more than 9 persons in seating rearward of the
driver's seat; or
(4) Is equipped with an open cargo area (for example, a pick-up
truck box or bed) of 72.0 inches in interior length or more. A covered
box not readily accessible from the passenger compartment will be
considered an open cargo area for purposes of this definition.
* * * * *
0
3. Section 523.3(b) is amended by adding (b)(3) to read as follows:
Sec. 523.3 Automobile.
* * * * *
(b) * * *
(3) Vehicles that are defined as medium duty passenger vehicles,
and which are manufactured during the 2011 model year or thereafter.
0
4. Section 523.5(a)(5) is revised to read as follows:
Sec. 523.5 Light Truck.
(a) * * *
(5) Permit expanded use of the automobile for cargo-carrying
purposes or other nonpassenger-carrying purposes through:
(i) For light trucks manufactured prior to model year 2012, the
removal of seats by means installed for that purpose by the
automobile's manufacturer or with simple tools, such as screwdrivers
and wrenches, so as to create a flat, floor level, surface extending
from the forwardmost point of installation of those seats to the rear
of the automobile's interior; or
(ii) For light trucks manufactured in model year 2008 and beyond,
for vehicles equipped with at least 3 rows of designated seating
positions as standard equipment, permit expanded use of the automobile
for cargo-carrying purposes or other nonpassenger-carrying purposes
through the removal or stowing of foldable or pivoting seats so as to
create a flat-leveled cargo surface extending from the forwardmost
point of installation of those seats to the rear of the automobile's
interior.''.
* * * * *
PART 533--LIGHT TRUCK FUEL ECONOMY STANDARDS
0
5. The authority citation for part 533 continues to read as follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.50.
0
6. Part 533.5 is amended by:
0
A. In paragraph (a) by revising Table IV and adding Figure I and Table
V; and
0
B. Adding paragraphs (g) and (h).
The revisions and additions read as follows:
Sec. 533.5 Requirements.
(a) * * *
Table IV
------------------------------------------------------------------------
Model year Standard
------------------------------------------------------------------------
2001........................................................ 20.7
2002........................................................ 20.7
2003........................................................ 20.7
2004........................................................ 20.7
2005........................................................ 21.0
2006........................................................ 21.6
2007........................................................ 22.2
2008........................................................ 22.5
2009........................................................ 23.1
2010........................................................ 23.5
------------------------------------------------------------------------
[GRAPHIC] [TIFF OMITTED] TR06AP06.038
Where:
N is the total number (sum) of light trucks produced by a manufacturer,
Ni is the number (sum) of the ith model light
truck produced by the manufacturer, and
Ti is fuel economy target of the ith model light
truck, which is determined according to the following formula, rounded
to the nearest hundredth:
[[Page 17677]]
[GRAPHIC] [TIFF OMITTED] TR06AP06.043
Where:
Parameters a, b, c, and d are defined in Sec. 533.3 Table V;
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the
vehicle model
Table V.--Parameters for the Reformed CAFE Fuel Economy Targets
----------------------------------------------------------------------------------------------------------------
Parameters
Model year ---------------------------------------------------------------
a b c d
----------------------------------------------------------------------------------------------------------------
2008............................................ 28.56 19.99 49.30 5.58
2009............................................ 30.07 20.87 48.00 5.81
2010............................................ 29.96 21.20 48.49 5.50
2011............................................ 30.42 21.79 47.74 4.65
----------------------------------------------------------------------------------------------------------------
* * * * *
(g) For model years 2008-2010, at a manufacturer's option, a
manufacturer's light truck fleet may comply with the fuel economy level
calculated according to Figure I and the appropriate values in Table V,
with said option being irrevocably chosen for that model year and
reported as specified in Sec. 537.8.
(h) For model year 2011, a manufacturer's light truck fleet shall
comply with the fuel economy level, calculated according to Figure I
and the appropriate values in Table V.
0
7. Part 533 is amended by adding Appendix A to read as follows:
Appendix A--Example of Calculating Compliance Under Sec. 533.5
Paragraph (g)
Assume a hypothetical manufacturer (Manufacturer X) produces a
fleet of light trucks in MY 2008 as follows:
------------------------------------------------------------------------
Fuel Footprint
Model economy Volume (ft \2\)
------------------------------------------------------------------------
A...................................... 27.0 1,000 42
B...................................... 25.6 1,500 44
C...................................... 25.4 1,000 46
D...................................... 22.1 2,000 50
E...................................... 22.4 3,000 55
F...................................... 20.2 1,000 66
------------------------------------------------------------------------
Note to Appendix A Table 1. Manufacturer X's required corporate
average fuel economy level under Sec. 533.5(g) would be calculated
by first determining the fuel economy targets applicable to each
vehicle as illustrated in Appendix A Figure 1.
Appendix A Figure 1
------------------------------------------------------------------------
MY 2008 fuel
Model Footprint (ft economy target
\2\) (mpg)
------------------------------------------------------------------------
A....................................... 42 26.2
B....................................... 44 25.5
C....................................... 46 24.8
D....................................... 50 23.3
E....................................... 55 21.7
F....................................... 66 20.3
------------------------------------------------------------------------
Note to Appendix A Figure 1. Accordingly, vehicle models A, B,
C, D, E, and F would be compared to fuel economy values of 26.2,
25.5, 24.8, 23.3, 21.7, and 20.3 mpg, respectively. With the
appropriate fuel economy targets calculated, Manufacturer X's
required fuel economy would be calculated as illustrated in Appendix
A Figure 2.
[GRAPHIC] [TIFF OMITTED] TR06AP06.040
[[Page 17678]]
Note to Appendix A Figure 2. Manufacturer X's required fuel
economy level is 23.1 mpg. Its actual fuel economy level would be
calculated as illustrated in Appendix A Figure 3.
[GRAPHIC] [TIFF OMITTED] TR06AP06.041
Note to Appendix A Figure 3. Since the actual average fuel
economy of Manufacturer X's fleet is 23.2 mpg, as compared to its
required fuel economy level of 23.1 mpg, Manufacturer X complies
with the Reformed CAFE standard for MY 2008 as set forth in Sec.
533.7(g).
PART 537--AUTOMOTIVE FUEL ECONOMY REPORTS
0
8. The authority citation for part 537 reads as follows:
Authority: 49 U.S.C. 32907; 49 CFR 1.50.
0
9. Section 537.7 is amended by revising paragraphs (c)(4)(xvi) through
(xxi) to read as follows:
Sec. 537.7 Pre-model year and mid-model year reports.
* * * * *
(c) Model type and configuration fuel economy and technical
information * * *
(4) * * *
(xvi)(A) In the case of passenger automobiles:
(1) Interior volume index, determined in accordance with subpart D
of 40 CFR part 600, and
(2) Body style;
(B) In the case of light trucks:
(1) Passenger-carrying volume,
(2) Cargo-carrying volume;
(3) Beginning model year 2008, track width as defined in 49 CFR
523.2,
(4) Beginning model year 2008, wheelbase as defined in 49 CFR
523.2, and
(5) Beginning model year 2008, footprint as defined in 49 CFR 523.2
(xvii) Performance of the function described in Sec. 523.5(a)(5)
of this chapter (indicate yes or no);
(xviii) Existence of temporary living quarters (indicate yes or
no);
(xix) Frontal area;
(xx) Road load power at 50 miles per hour, if determined by the
manufacturer for purposes other than compliance with this part to
differ from the road load setting prescribed in 40 CFR 86.177-11(d);
(xxi) Optional equipment that the manufacturer is required under 40
CFR parts 86 and 600 to have actually installed on the vehicle
configuration, or the weight of which must be included in the curb
weight computation for the vehicle configuration, for fuel economy
testing purposes.
* * * * *
0
10. Section 537.8 is amended by adding paragraph (e) to read as
follows:
Sec. 537.8 Supplementary reports.
* * * * *
(e) Reporting compliance option in model years 2008-2010. For model
years 2008, 2009, and 2010, each manufacturer of light trucks, as that
term is defined in 49 CFR 523.5, shall submit a report, not later than
45 days following the end of the model year, indicating whether the
manufacturer is opting to comply with 49 CFR 533.5(f) or 49 CFR
533.5(g).
Note: The following Appendices will not appear in the Code of
Federal Regulations
Appendix A--Comparison of Engineering Constraints Employed by the NPRM
and the Final Rule Analyses
----------------------------------------------------------------------------------------------------------------
Engineering constraint
Technology -------------------------------------------------- Reason for change
NPRM Final
----------------------------------------------------------------------------------------------------------------
Low-Friction Lubricants.............. Do not apply if engine Do not apply if engine Availability of lower
oil is 5W30 or better. oil is better than friction (e.g., 0W)
5W30. oils.
Variable Valve Timing (VVT).......... Do not apply to engines Do not apply to OHV OHV engines more likely
with displacement engines. to use cylinder
greater than 4.7 l. deactivation.
Variable Valve Lift and Timing (VVLT) Do not apply to engines Do not apply to engines Next logical step from
with displacement that do not already VVT.
greater than 3.0 l. have VVT.
[[Page 17679]]
Cylinder Deactivation................ Do not apply to engines As a general rule, do Multivalve OHC engines
with VVT, VVLT, and/or not apply to engines more likely to use VVT
fewer than 6 cylinders. with VVT, VVLT, or VVLT.
multivalve OHC, and/or
fewer than 6 cylinders.
Continuously Variable Transmission... Do not apply to frame Apply only to FWD Less likely to
vehicles or 4WD SUVs. unibody vehicles. mistakenly apply CVT
to some RWD SUVs.
Front Axle Disconnect................ Apply only to 4WD Apply only to 4WD Expected to be more
vehicles. vehicles with cylinder applicable to large
count greater than six. vehicles.
Electric Power Steering.............. No universal For vehicles with curb Higher power demands
constraints. weights over 4,000 for large vehicle
pounds, do not apply steering.
unless 42-Volt systems
are already present.
Integrated Starter-Generator......... No universal Start application with Mild hybridization
constraints. the largest vehicles, expected to be more
which have lower fuel suitable for large
economy, prior to vehicles due to
applying to smaller, packaging issues and
more fuel efficient fuel savings
vehicles. potential.
Weight Reduction..................... Do not apply to Do not apply to Correction to placement
vehicles with curb vehicles with curb of safety threshold.
weights below 3,900 weights below 5,000
pounds. pounds.
----------------------------------------------------------------------------------------------------------------
Appendix B--Changes to Technology ``Phase-In Constraints'' Employed by
the Volpe Model
------------------------------------------------------------------------
NPRM Final
Technology (percent) (percent)
------------------------------------------------------------------------
Low Friction Lubricants................. 50 25
Improved Rolling Resistance............. 50 25
Low Drag Brakes......................... 50 17
Engine Friction Reduction............... 33 17
Front Axle Disconnect (for 4WD)......... 5 17
Cylinder Deactivation................... 25 17
Multi-Valve, Overhead Camshaft.......... 33 17
Variable Valve Timing................... 33 17
Electric Power Steering................. 33 17
Engine Accessory Improvement............ 33 25
5-Speed Automatic Transmission.......... 33 17
6-Speed Automatic Transmission.......... 25 17
Automatic Transmission w/Aggressive 33 17
Shift Logic............................
Continuously Variable Transmission (CVT) 33 17
Automatic Shift Manual Transmission (AST/ 10 17
AMT)...................................
Aero Drag Reduction..................... 33 17
Variable Valve Lift & Timing............ 25 17
Spark Ignited Direct Injection (SIDI)... 3 3
Engine Supercharging & Downsizing....... 25 17
42 Volt Electrical Systems.............. 33 17
Integrated Starter/Generator............ 33 5
Intake Valve Throttling................. 25 17
Camless Valve Actuation................. 25 10
Variable Compression Ratio.............. 25 10
Advanced CVT............................ 25 17
Dieselization........................... 3 3
Material Substitution................... 20 17
Midrange Hybrid Vehicle................. 3 3
------------------------------------------------------------------------
Issued: March 28, 2006.
Jacqueline Glassman,
Deputy Administrator.
[FR Doc. 06-3151 Filed 3-29-06; 1:29 pm]
BILLING CODE 4910-59-U