Average Fuel Economy Standards Passenger Cars and Light Trucks Model Year 2011, 14196-14456 [E9-6839]

Agencies

• National Highway Traffic Safety Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 74, Number 59 (Monday, March 30, 2009)]
[Rules and Regulations]
[Pages 14196-14456]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-6839]



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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, 531, 533, et al.



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

Federal Register / Vol. 74, No. 59 / Monday, March 30, 2009 / Rules 
and Regulations

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 523, 531, 533, 534, 536 and 537

[Docket No. NHTSA-2009-0062]
RIN 2127-AK29


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

AGENCY: National Highway Traffic Safety Administration (NHTSA), 
Department of Transportation (DOT).

ACTION: Final rule; record of decision.

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

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

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

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

SUPPLEMENTARY INFORMATION: 

Table of Contents

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

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

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

I. Executive Overview

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

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

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

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

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

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

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

B. Energy Independence and Security Act of 2007

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

    \6\ Public Law 110-140, 121 Stat. 1492 (Dec. 18, 2007).
---------------------------------------------------------------------------

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

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

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

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

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

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

  Table I-1--NPRM Key Economic Values for Benefits Computations (2006$)
                                   \9\
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Fuel Prices (average retail gasoline price per gallon, 2011-       $2.34
 30).........................................................
Discount Rate Applied to Future Benefits.....................         7%
Economic Costs of Oil Imports ($/gallon):
    ``Monopsony'' Component..................................     $0.182

[[Page 14201]]

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

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

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

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

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

    For passenger cars:

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

    For light trucks:

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

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

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

    The annual average increase during this five year period was 
approximately

[[Page 14202]]

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

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

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

D. Brief Summary of Public Comments on the NPRM

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

[[Page 14203]]

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

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

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

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

F. Final Rule for MY 2011

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

[[Page 14204]]

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

   Table I-2--Final Rule Key