2017 and Later Model Year Light Duty Vehicle GHG Emissions and CAFE Standards; Notice of Intent

2017 and Later Model Year Light Duty Vehicle GHG Emissions and CAFE Standards; Notice of Intent

Topics: National Highway Traffic Safety Administration, U.S. Department of Transportation

2017 and Later Model Year Light Duty Vehicle GHG Emissions and CAFE Standards; Notice of Intent

Lisa P. Jackson
October 13, 2010

[Federal Register: October 13, 2010 (Volume 75, Number 197)]
[Proposed Rules]
[Page 62739-62750]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13oc10-18]

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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 85, 86, and 600

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Parts 531 and 533

[FRL-9212-4]
RIN 2127-AK79

2017 and Later Model Year Light Duty Vehicle GHG Emissions and
CAFE Standards; Notice of Intent

AGENCIES: Environmental Protection Agency (EPA) and the National
Highway Traffic Safety Administration (NHTSA), Department of
Transportation (DOT).

ACTION: Notice of intent to conduct a joint rulemaking.

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

SUMMARY: On May 21, 2010, President Obama issued a Presidential
Memorandum requesting that the Environmental Protection Agency (EPA)
and the National Highway Traffic Safety Administration (NHTSA), on
behalf of the Department of Transportation develop, through notice and
comment rulemaking, a coordinated National Program under the Clean Air
Act (CAA) and the Energy Policy and Conservation Act (EPCA), as amended
by the Energy Independence and Security Act (EISA) to improve fuel
efficiency and to reduce greenhouse gas emissions of light-duty
vehicles for model years 2017-2025. President Obama requested that the
agencies issue a Notice of Intent to issue a proposed rule that
announces plans for setting stringent fuel economy and greenhouse gas
emissions standards for light-duty vehicles of model year 2017 and
beyond. This joint Notice describes the agencies' initial assessment of
potential levels of stringency for a National Program for model years
2017-2025, and describes additional work that the agencies will
undertake over the next two months to refine this assessment further.
This Notice fulfills that request and discusses the agencies' plans to
issue a Supplemental Notice of Intent by November 30, 2010 that will
describe plans for the National Program, including an updated analysis
of potential GHG and fuel economy standards for model years 2017-2025.
This joint Notice also announces the plans by the two agencies to
propose such a coordinated National Program by the fall of 2011.

DATES: Comments: In order for comments to be most helpful to this
ongoing process of ultimately developing a proposed rulemaking, the
agencies encourage parties wishing to comment on this Notice to submit
their comments by October 31, 2010. See the SUPPLEMENTARY INFORMATION,
Section I (Introduction), for more information about the rulemaking
process.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-0799 and/or NHTSA-2010-0131, by one of the following methods:
http://www.regulations.gov: Follow the on-line
instructions for submitting comments.
E-mail: a-and-r-Docket@epa.gov.
Fax: EPA: (202) 566-1741; NHTSA: (202) 493-2251.
Mail:
[cir] EPA: Environmental Protection Agency, Mailcode: 2822T, 1200
Pennsylvania Ave., NW., Washington, DC 20460, Attention: Docket ID No.
EPA-HQ-OAR-2010-0799.
[cir] NHTSA: Docket Management Facility, M-30, U.S. Department of
Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590.
Hand Delivery:
[cir] EPA: EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301
Constitution Ave., NW., Washington, DC 20004, Attention: Docket ID No.
EPA-HQ-OAR-0799. Such deliveries are only accepted during the Docket's
normal hours of operation, and special arrangements should be made for
deliveries of boxed information.
[cir] NHTSA: West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 4 p.m.
Eastern Time, Monday through Friday, except Federal Holidays.
Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-0799
and/or Docket ID No. NHTSA-2010-0131. NHTSA and EPA request comment on
all aspects of this joint Notice. See the SUPPLEMENTARY INFORMATION
section on ``Public Participation'' for more information about
submitting written comments.
Docket: All documents listed in the dockets are listed in the
http://www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., confidential business
information (CBI) or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, will
be publicly available only in hard copy. Publicly available docket
materials are available either electronically at http://
www.regulations.gov or in hard copy at the following locations: EPA:
EPA Docket Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Ave.,
NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to
4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Public Reading Room is (202) 566-1744. NHTSA:
Docket Management Facility, M-30, U.S. Department of Transportation,
West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue, SE.,
Washington, DC 20590. The Docket Management Facility is open between 9
a.m. and 5 p.m. Eastern Time, Monday through Friday, except Federal
holidays.

FOR FURTHER INFORMATION CONTACT: EPA: Tad Wysor, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number: (734) 214-4332; fax number: (734) 214-4816; e-
mail address: wysor.tad@epa.gov or Assessment and Standards Division
Hotline, telephone number (734) 214-4636; e-mail address
asdinfo@epa.gov. DOT/NHTSA: Rebecca Yoon, Office of Chief Counsel,
National Highway Traffic Safety Administration, 1200 New Jersey Avenue,
SE., Washington, DC 20590. Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION:

Public Participation

NHTSA and EPA request comment on all aspects of this Notice and the
accompanying Interim Joint Technical Assessment Report discussed below.

[[Page 62740]]

This section describes how you can participate in this process.

How do I prepare and submit comments?

For the convenience of all parties, comments submitted to the EPA
docket will be considered comments submitted to the NHTSA docket, and
vice versa. Therefore, the public only needs to submit comments to
either one of the two agency dockets. Comments that are submitted for
consideration by one agency should be identified as such, and comments
that are submitted for consideration by both agencies should be
identified as such.
Further instructions for submitting comments to either the EPA or
NHTSA docket are described below.
EPA: Direct your comments to Docket ID No EPA-HQ-OAR-2010-0799.
EPA's policy is that all comments received will be included in the
public docket without change and may be made available online at http:/
/www.regulations.gov, including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute.\1\ Do not submit information that you consider
to be CBI or otherwise protected through http://www.regulations.gov or
e-mail. The http://www.regulations.gov Web site is an ``anonymous
access'' system, which means EPA will not know your identity or contact
information unless you provide it in the body of your comment. If you
send an e-mail comment directly to EPA without going through http://
www.regulations.gov your e-mail address will be automatically captured
and included as part of the comment that is placed in the public docket
and made available on the Internet. If you submit an electronic
comment, EPA recommends that you include your name and other contact
information in the body of your comment and with any disk or CD-ROM you
submit. If EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment. Electronic files should avoid the use of special
characters, any form of encryption, and be free of any defects or
viruses. For additional information about EPA's public docket visit the
EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.
---------------------------------------------------------------------------

\1\ This statement constitutes notice to commenters pursuant to
40 CFR 2.209(c) that EPA will share confidential information
received with NHTSA unless commenters specify that they wish to
submit their CBI only to EPA and not to both agencies.
---------------------------------------------------------------------------

NHTSA: Your comments must be written and in English. To ensure that
your comments are correctly filed in the Docket, please include the
Docket number NHTSA-2010-0131 in your comments. Your comments must not
be more than 15 pages long. NHTSA established this limit to encourage
you to write your primary comments in a concise fashion. However, you
may attach necessary additional documents to your comments. There is no
limit on the length of the attachments. If you are submitting comments
electronically as a PDF (Adobe) file, we ask that the documents
submitted be scanned using the Optical Character Recognition (OCR)
process, thus allowing the agencies to search and copy certain portions
of your submissions. Please note that pursuant to the Data Quality Act,
in order for the substantive data to be relied upon and used by the
agencies, it must meet the information quality standards set forth in
the OMB and Department of Transportation (DOT) Data Quality Act
guidelines. Accordingly, we encourage you to consult the guidelines in
preparing your comments. OMB's guidelines may be accessed at http://
www.whitehouse.gov/omb/fedreg/reproducible.html. DOT's guidelines may
be accessed at http://www.dot.gov/dataquality.htm.

Tips for Preparing Your Comments

When submitting comments, remember to:
Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
Explain why you agree or disagree, suggest alternatives,
and substitute language for your requested changes.
Describe any assumptions and provide any technical
information and/or data that you used.
If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
Provide specific examples to illustrate your concerns, and
suggest alternatives.
Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.

How can I be sure that my comments were received?

NHTSA: If you submit your comments by mail and wish Docket
Management to notify you upon its receipt of your comments, enclose a
self-addressed, stamped postcard in the envelope containing your
comments. Upon receiving your comments, Docket Management will return
the postcard by mail.

How do I submit confidential business information?

Any confidential business information (CBI) submitted to one of the
agencies will also be available to the other agency. However, as with
all public comments, any CBI information only needs to be submitted to
either one of the agencies' dockets and it will be available to the
other. Following are specific instructions for submitting CBI to either
agency.
EPA: Do not submit CBI to EPA through http://www.regulations.gov or
e-mail. Clearly mark the part or all of the information that you claim
to be CBI. For CBI information in a disk or CD-ROM that you mail to
EPA, mark the outside of the disk or CD-ROM as CBI and then identify
electronically within the disk or CD-ROM the specific information that
is claimed as CBI. In addition to one complete version of the comment
that includes information claimed as CBI, a copy of the comment that
does not contain the information claimed as CBI must be submitted for
inclusion in the public docket. Information so marked will not be
disclosed except in accordance with procedures set forth in 40 CFR part
2.
NHTSA: If you wish to submit any information under a claim of
confidentiality, you should submit three copies of your complete
submission, including the information you claim to be confidential
business information, to the Chief Counsel, NHTSA, at the address given
below under FOR FURTHER INFORMATION CONTACT. When you send a comment
containing confidential business information, you should include a
cover letter setting forth the information specified in our
confidential business information regulation.
In addition, you should submit a copy from which you have deleted
the claimed confidential business information to the Docket by one of
the methods set forth above.

How can I read the comments submitted by other people?

You may read the materials placed in the docket for this document
(e.g., the comments submitted in response to this document by other
interested persons) at any time by going to http://www.regulations.gov.
Follow the online instructions for accessing the dockets. You may also
read the materials at the EPA Docket Center or NHTSA Docket Management
Facility by going to the

[[Page 62741]]

street addresses given above under ADDRESSES.

I. Introduction

This joint Notice announces plans by the Environmental Protection
Agency (EPA) and the National Highway Traffic Safety Administration
(NHTSA), on behalf of the Department of Transportation, to propose
stringent Federal greenhouse gas and fuel economy standards for light-
duty vehicles for the 2017-2025 model years (MY) as part of a
coordinated National Program. This rulemaking will build on the first
phase of the National Program for fuel economy and greenhouse gas (GHG)
emissions standards, for MY 2012-2016 vehicles, which was issued in
April 2010.\2\ This Notice of Intent does not propose specific
standards, but along with the accompanying Interim Joint Technical
Assessment Report (TAR) discussed later in this Notice, is an important
step in the process that will lead to a formal proposal.
---------------------------------------------------------------------------

\2\ See 75 FR 25324 (May 7, 2010).
---------------------------------------------------------------------------

NHTSA and EPA welcome comment on all aspects of this Notice and the
accompanying TAR. Although this Notice discusses important initial
assessments performed by the agencies, it also discusses the
significant additional work that must be done to provide the agencies
with information to support a joint Notice of Proposed Rulemaking
(NPRM). EPA and NHTSA will continue to seek input from a broad range of
stakeholders over the coming months, and we will continue to work
closely with the California Air Resources Board (CARB) in order to
ensure the continuation of a National Program. In an effort to guide
the eventual development of the NPRM, over the next two months, EPA and
NHTSA, working closely with CARB, will continue to analyze potential
GHG and fuel economy standards for MYs 2017-2025 by developing and
reviewing additional technical data and information and by considering
additional stakeholder input. Based on this additional work, EPA and
NHTSA expect to issue, by November 30, 2010, a Supplemental Notice of
Intent that will describe further design elements for the National
Program and present an updated analysis of potential stringencies for
model years 2017-2025 standards for GHGs and fuel economy. A principal
goal of the Supplemental Notice will be to narrow the range of
potential stringencies for the future proposed standards, as well as to
reflect new technical data and information and, as appropriate, further
analysis supplementing the Interim Joint TAR. While the agencies do not
intend to issue another TAR we do plan to do additional analysis and
make it available as a part of the Supplemental Notice of Intent. In
recent months, the agencies have had important discussions with many
individual automobile manufacturers and other stakeholders, and our
intention is to continue such discussions. In order for comments to be
most helpful to this ongoing process, the agencies encourage parties
wishing to comment at this stage of the process to submit their
comments by the end of October 2010. The May 21, 2010 Presidential
Memorandum discussed below called for EPA and NHTSA to include in this
Notice of Intent a ``schedule for setting those standards as
expeditiously as possible, consistent with providing sufficient
leadtime to vehicle manufacturers.'' The agencies plan to issue a joint
Notice of Proposed Rulemaking (NPRM) by September 30, 2011 and a Final
Rule by July 31, 2012.
As with any notice-and-comment rulemaking process, the agencies
will provide full opportunity for the public to participate in the
rulemaking process, consistent with the Administrative Procedure Act,
other applicable law, and Administration policies on openness and
transparency in government.\3\ EPA and NHTSA have established dockets
to receive such information: EPA's Docket is located at Docket ID No.
EPA-HQ-OAR-2010-0799 and NHTSA's docket is located at Docket ID No.
NHTSA-2010-0131. The ADDRESSES section at the beginning of this Notice
provides several methods for submitting information into these dockets.
---------------------------------------------------------------------------

\3\ Upon publication of the NPRM, the agencies will open a
public comment period for receiving written comments and will hold
at least one joint public hearing to receive oral comments. We will
announce all of these avenues for public involvement in the Federal
Register notice announcing the NPRM and we will post this
information on each agency's Web site associated with this
rulemaking.
---------------------------------------------------------------------------

A. President's May 21, 2010, Memorandum

On May 21, 2010, President Obama issued a Presidential Memorandum
requesting that the Environmental Protection Agency (EPA) and the
National Highway Traffic Safety Administration (NHTSA), on behalf of
the Department of Transportation, take ``* * * additional coordinated
steps * * * to produce a new generation of clean vehicles.'' He
specifically requested that the agencies develop ``, * * * a
coordinated national program under the CAA [Clean Air Act] and the EISA
[Energy Independence and Security Act of 2007] to improve fuel
efficiency and to reduce greenhouse gas emissions of passenger cars and
light-duty trucks of model years 2017-2025.'' \4\ The President
recognized that by acting expeditiously, our country could take a
leadership role in addressing the global challenges of improving energy
security and reducing greenhouse gas pollution, stating that ``America
has the opportunity to lead the world in the development of a new
generation of clean cars and trucks through innovative technologies and
manufacturing that will spur economic growth and create high-quality
domestic jobs, enhance our energy security, and improve our
environment.''
---------------------------------------------------------------------------

\4\ The Presidential Memorandum is found at: http://
www.whitehouse.gov/the-press-office/presidential-memorandum-
regarding-fuel-efficiency-standards.
---------------------------------------------------------------------------

As a first step in the process, the President requested EPA and
NHTSA to ``[t]ake all measures consistent with law to issue by
September 30, 2010, a Notice of Intent to Issue a Proposed Rule that
announces plans for setting stringent fuel economy and greenhouse gas
emissions standards for light-duty vehicles of model year 2017 and
beyond, including plans for initiating joint rulemaking and gathering
any additional information needed to support regulatory action. The
Notice should describe the key elements of the program that the EPA and
the NHTSA intend jointly to propose, under their respective statutory
authorities, including potential standards that could be practicably
implemented nationally for the 2017-2025 model years and a schedule for
setting those standards as expeditiously as possible, consistent with
providing sufficient lead time to vehicle manufacturers.''
The Presidential Memorandum also called on the agencies, working
with the State of California, to develop a technical assessment to
inform a potential rulemaking. The EPA, NHTSA, and CARB have completed
this assessment, which is discussed in Section I.E below.

B. Background on the MY 2012-2016 National Program

On April 1, 2010, NHTSA and EPA issued joint final rules
establishing standards for GHG emissions and fuel economy for MYs 2012-
2016 passenger cars, light-duty-trucks, and medium-duty passenger
vehicles (``light-duty vehicles''), collectively referred to as the
National Program.\5\ The agencies

[[Page 62742]]

concluded that the automobile industry will achieve the substantial
benefits of that first phase of the National Program based on
technology that is already being commercially applied in many cases and
that can be incorporated in these future model year vehicles at a
reasonable expense and with benefits far in excess of costs. This
initial phase of the National Program will result in large fuel savings
and large reductions in GHG emissions and oil use, and thus in
increased energy security and reductions in the rate of climate change.
This joint rulemaking was consistent with the President's announcement
on May 19, 2009 of a National Fuel Efficiency Policy for establishing
consistent, harmonized, and streamlined requirements that would reduce
GHG emissions and improve fuel economy for new cars and light trucks
sold in the United States.
---------------------------------------------------------------------------

\5\ The joint final rules were published at 75 FR 25324 (May 7,
2010).
---------------------------------------------------------------------------

In this recent rulemaking, EPA and NHTSA established two separate
but harmonized sets of standards, each under its respective statutory
authorities.\6\ The standards for both agencies begin with model year
2012, with standards increasing in stringency through model year 2016.
EPA set national CO2 emissions standards for light-duty
vehicles under section 202(a) of the Clean Air Act (CAA), and NHTSA set
corporate average fuel economy (CAFE) standards in accordance with the
Energy Policy and Conservation Act (EPCA), as amended by the Energy
Independence and Security Act of 2007 (EISA). The EPA standards will
require light-duty vehicles to meet an estimated combined average
emissions level of 250 grams/mile of CO2 in model year 2016,
equivalent to a fuel economy level of 35.5 miles per gallon if all the
reductions were achieved through improvements in fuel economy. The
CO2 standards also allow manufacturers to earn credits for
air conditioning system improvements that reduce GHGs other than
CO2.
---------------------------------------------------------------------------

\6\ For a detailed discussion of NHTSA's and EPA's respective
statutory authorities, see 75 FR 25324, 25348 (May 7, 2010) and 74
FR 49454, 49460 (September 28, 2009).
---------------------------------------------------------------------------

The NHTSA CAFE standards are only based on technologies that
improve fuel economy and are not based on consideration of air
conditioning improvements (which NHTSA cannot consider given that the
federal test procedures used to calculate fuel economy for passenger
cars may not include air conditioning usage). The maximum feasible CAFE
standards should require manufacturers of passenger cars and light
trucks to meet an estimated combined average fuel economy level of 34.1
mpg in model year 2016. These standards represent a harmonized approach
that will allow industry to build a single national fleet that will
satisfy both the GHG requirements under the CAA and CAFE requirements
under EPCA/EISA.
The NHTSA and EPA standards were informed in part by state
regulatory action. In 2004, the California Air Resources Board (CARB)
adopted GHG standards for new light-duty vehicles covering MYs 2009-
2016. Subsequently, thirteen states and the District of Columbia,
comprising approximately 40 percent of the light-duty vehicle market,
have adopted California's standards. On June 30, 2009, EPA granted
California's request for a waiver of preemption under section 209(b) of
the CAA.\7\ The granting of the waiver allows California and the other
states to proceed with implementing the California emission standards.
To promote the National Program for MYs 2012-2016 vehicles, in April
2010 California revised its GHG emissions program for MYs 2012-2016
vehicles such that compliance with EPA's GHG standards will be deemed
to be in compliance with California's GHG emission standards.\8\ This
action makes it possible for automakers to produce a single fleet of
vehicles nationwide that meets all the requirements of the two federal
programs as well as those of the California program.
---------------------------------------------------------------------------

\7\ See 74 FR 32744, July 8, 2009.
\8\ See CARB April 1, 2010 action at http://www.arb.ca.gov/
regact/2010/ghgpv10/ghgpv10.htm.
---------------------------------------------------------------------------

As described in the recent final rule, EPA and NHTSA expect that
automobile manufacturers will meet the MYs 2012-2016 CAFE and GHG
standards primarily by using currently-available technologies, and
simply incorporating these technologies more broadly across the light-
duty vehicle fleet. These technologies include improvements to engines,
transmissions, and vehicles, including increased use of start-stop
technology, improvements in air conditioning systems, and increased use
of hybrid and other advanced technologies. The program also provides
incentives for the initial commercialization of electric vehicles and
plug-in hybrids. NHTSA's and EPA's assessment of likely vehicle
technologies that manufacturers could employ to meet the MYs 2012-2016
standards provides an important foundation for the agencies'
consideration of potential 2017-2025 standards.
The MY 2012-2016 standards also provide a number of compliance
flexibilities to manufacturers. These flexibilities are discussed
further in Section III.B below. As noted above, the benefits of these
standards far exceed the costs.

C. Stakeholder Support for Continuing the National Program in 2017 and
Beyond

During the public comment period for the MY 2012-2016 proposed
rulemaking, many stakeholders strongly encouraged EPA and NHTSA to
begin working toward standards for MY 2017 and beyond that would
maintain a single nationwide program. Following the President's May
announcement, several major automobile manufacturers and the CARB sent
letters to EPA and NHTSA in support of the 2017 to 2025 MY rulemaking
initiative outlined in the President's Memorandum.\9\
---------------------------------------------------------------------------

\9\ These commitment letters are posted at http://www.epa.gov/
otaq/climate/regulations.htm and at http://www.nhtsa.gov/
Laws+&+Regulations/CAFE+-+Fuel+Economy/
Stakeholder+Committment+Letters.
---------------------------------------------------------------------------

D. Presidential Memorandum's Request for EPA, NHTSA, and California to
Develop a Technical Assessment

In addition to the President's request for EPA and NHTSA to issue
this Notice announcing plans ``for setting stringent fuel economy and
greenhouse gas emissions standards for light-duty vehicles of model
year 2017 and beyond,'' the May 21, 2010 Presidential Memorandum also
requested that the agencies work with the State of California to
develop a technical assessment to inform the rulemaking process. The
memorandum states that the report should reflect input from an array of
stakeholders on relevant factors, including ``viable technologies,
costs, benefits, lead time to develop and deploy new and emerging
technologies, incentives and other flexibilities to encourage
development and deployment of new and emerging technologies, impacts on
jobs and the automotive manufacturing base in the United States, and
infrastructure for advanced vehicle technologies.'' \10\
---------------------------------------------------------------------------

\10\ Presidential Memorandum, section 2(a).
---------------------------------------------------------------------------

EPA and NHTSA have worked collaboratively with CARB to develop this
technical assessment based on currently available data, consistent with
the President's request. The agencies are releasing an Interim Joint
Technical Assessment Report (TAR) in conjunction with this Notice.\11\
The

[[Page 62743]]

TAR provides an initial technical assessment for this Notice and
discusses the significant additional technical information and analysis
that will be needed to support the rulemaking development process.
While the TAR is an important step in a continuation of the National
Program, significant work remains to be done to support a future
federal rulemaking, as discussed below in Section I.E.4. The key
elements and findings of the TAR are discussed further in this Notice.
---------------------------------------------------------------------------

\11\ ``Interim Joint Technical Assessment Report: Light-Duty
Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel
Economy Standards for Model Years 2017-2025,'' issued jointly by
EPA, NHTSA and CARB, September 2010. Available at http://
www.nhtsa.gov/fuel-economy and http://www.epa.gov/OTAQ/climate/
regulations.htm.
---------------------------------------------------------------------------

1. Stakeholder Outreach Conducted To Inform the Technical Assessment
During June through August 2010, EPA, NHTSA, and CARB held numerous
meetings with a wide variety of stakeholders to gather input to
consider in developing the TAR, and to ensure that the agencies had
available to them the most recent technical information. These
stakeholders included the automobile original equipment manufacturers
(OEMs), automotive suppliers, non-governmental organizations, states
and state organizations, infrastructure providers, and labor unions.
The agencies sought these stakeholders' technical input and
perspectives, consistent with the President's request, on the key
issues that should be considered in assessing a continued National
Program to reduce greenhouse gas emissions and improve fuel economy for
light-duty vehicles in model years 2017-2025. The input from these
stakeholders is discussed in detail in Chapter 2 of the TAR.
In response to the agencies' request, OEMs provided detailed and
confidential input regarding several key areas including technology
development, key regulatory design elements, infrastructure issues,
perspective on the impacts on the U.S. manufacturing base and jobs,
costs, and potential regulatory incentives and flexibilities. A common
theme across the auto firms is that they are all heavily investing in
advanced technologies including hybrids (HEVs), plug-in hybrid electric
vehicles (PHEVs), electric vehicles (EVs), next generation internal
combustion engines, and mass reduction technologies, and companies
expect to increase their offerings and sales of these technologies
significantly in the future. The companies generally stated, however,
that the degree to which these advanced technologies will penetrate the
U.S. market in the MYs 2017-2025 timeframe is dependent upon a number
of challenges and factors, including future gasoline fuel prices,
future decreases in battery costs, future regulatory fuel economy/GHG
requirements, and government incentives for vehicle purchasers and
owners such as the existing tax credits for EVs and PHEVs. EPA, NHTSA
and CARB also met with a cross section of automotive suppliers as well
as advanced technology infrastructure providers.
The agencies also requested input from numerous non-governmental
organizations, including environmental organizations and labor
organizations, and from state and local governments and their
organizations. These stakeholders strongly supported the President's
call for continuing the National Program approach and setting new fuel
economy and greenhouse gas standards for light-duty vehicles for the
2017-2025 model years. Chapter 2 of the TAR provides an overview of the
input we received during discussions with these organizations.
2. Overview of Initial Assessment of Available Technologies, Costs,
Technology Effectiveness, and Lead-time
EPA and NHTSA, working with CARB, have conducted an initial
assessment of the expected technology costs, effectiveness, and lead-
time for potential MYs 2017-2025 GHG emission standards and the
equivalent fuel economy. The agencies and CARB assessed over 30 vehicle
technologies that manufacturers could use to improve the fuel economy
and reduce the CO2 emissions of their vehicles during MYs
2017-2025. The technologies considered fall into five broad categories:
Engine technologies, transmission technologies, vehicle technologies
(including mass reduction), electrification/accessory technologies, and
hybrid/vehicle electrification technologies. The agencies and CARB
considered not only technologies that are readily available today, but
also other technologies that may not currently be in production but are
beyond the research phase and under development, and which are expected
to be in production in the MYs 2017-2025 timeframe. To be sure, the
assessment of new technologies up to 15 years in the future has
uncertainties. Nonetheless, the agencies and CARB have determined, on
the basis of the initial analysis in the TAR, that automotive
technologies are available, or are expected to be available, to support
a reduction in greenhouse gas emissions and commensurate increase in
fuel economy in 2017-2025 MY timeframe for the full range of scenarios
examined in the TAR. The agencies have also determined, on the basis of
the initial analysis, that increases come at increasing incremental
cost. Of course the agencies must take into account the statutory
obligations that have not been fully considered in this analysis.
Consistent with stakeholder input obtained over the summer, we
believe that in addition to advanced gasoline and diesel vehicles,
electric drive vehicles can be an important part of the vehicle mix
that will likely be used to meet future fuel economy and GHG emission
standards. Electric drive vehicles including HEVs, PHEVs, EVs, and
hydrogen fuel cell vehicles (FCVs), can dramatically reduce petroleum
consumption and tailpipe GHG emissions compared to conventional
technologies.
The initial assessment by EPA, NHTSA, and CARB of technology costs,
effectiveness and lead-time issues is presented in Chapter 3 of the
TAR. The TAR introduces a number of new studies that are in progress
and several that have been completed since the 2012-2016 MY light duty
vehicle rule was issued. These studies have resulted in new estimates
for costs and effectiveness for a number of technologies including
engines, transmissions, batteries, and mass reduction. All of these are
critical technologies in the 2017-2025 MY timeframe. The agencies and
CARB expect to update these estimates going forward as more information
becomes available from on-going studies of technology, effectiveness,
and costs, as well as mass reduction and safety, as discussed in
Section I.E.4 below.
3. Other Issues Addressed in the Technical Assessment
Beyond the issues of the technology cost, effectiveness, and lead
time for potential MYs 2017-2025 standards, the Presidential Memorandum
requested that the technical assessment include input on some other
areas, including impacts on jobs and the automotive manufacturing
sector, and infrastructure for advanced vehicle technologies.
In the TAR, the agencies and CARB include a discussion of input
from stakeholders, including the OEMs and labor unions, on the
potential impacts of standards on jobs and the automotive sector.
Several OEMs and the labor unions noted that Federal government
Recovery Act investments, as well as incentives provided by some state
and local governments, were an important factor in locating
manufacturing operations for advanced battery, electric motor, and
vehicle assembly plants in the U.S., and that continuation of this type
of investment would be an important consideration in the decision
whether to locate future facilities in the U.S. Chapter 7 of the TAR
also includes

[[Page 62744]]

a discussion of the key issues surrounding the potential employment
impacts of more stringent light duty vehicle GHG and fuel economy
standards. With the global drivers of competitiveness and increased
importance of clean and efficient technologies, auto companies have
already begun to invest in new technologies that can help meet future
GHG/fuel economy standards. These investments will help the U.S. auto
sector to stay on the cutting edge of auto technology. The agencies
expect that the new standards will have effects on vehicle sales. For
the forthcoming rulemaking, EPA and NHTSA will further investigate the
impacts of the proposed standards on the auto industry, including
employment.
The TAR also includes a discussion of the electric charging and
infrastructure development needed to support successful deployment of
certain types of advanced technology vehicles. In the case of EVs and
PHEVs, electric charging systems are needed to facilitate market
penetration of these vehicle technologies. On the basis of stakeholder
input, the agencies expect that these charging systems will be located
most often at homes. In addition, charging systems at workplaces and
potentially also at public facilities such as parking lots or retail
stores could become important enablers for significant market
penetration of these vehicles. In the case of fuel cell vehicles,
hydrogen fueling stations are needed to support commercialization.
Chapter 4 of the TAR provides an assessment of current charging systems
and infrastructure technologies and costs, prospects for technology
improvement, infrastructure deployment programs underway, and further
infrastructure needs. The agencies and CARB worked closely with the
Department of Energy (DOE) in our assessment of infrastructure issues,
as well as other aspects of the TAR.
The agencies also discuss the major relevant factors which can
impact future automotive manufacturing jobs in the United States in
Chapter 7 of the TAR. The TAR does not provide a quantitative
assessment of these effects, rather, the agencies discuss the potential
impacts of advanced technologies on the auto industry in general and
employment in the auto sector. The automotive market is becoming
increasingly global. The U.S. auto companies produce and sell
automobiles around the world, and foreign auto companies produce and
sell in the U.S. As a result, the industry has become increasingly
competitive. Staying at the cutting edge of automotive technology,
while maintaining profitability and consumer acceptance, has become
increasingly important for the sustainability of auto companies. Trends
in the world automotive market suggest that investments in improved
fuel economy and advanced technology vehicles are a necessary component
for maintaining competitiveness in coming years. As automakers seek
greater commonality across the vehicles they produce for the domestic
and foreign markets, improving fuel economy and reducing GHGs in U.S.
vehicles should have spillovers to foreign production, and vice versa,
thus yielding the ability to amortize investment in research and
production over a broader product and geographic spectrum. The effects
of the use of advanced technologies on U.S. auto sector employment
depend on how the standards affect several factors: the number of
vehicles produced, the labor intensity of vehicle production, potential
changes in automotive sales, and any changes in market shares between
domestically produced and imported vehicles and auto parts. With
respect to this last factor, the location of production will depend on
how domestic production costs, especially for advanced technologies,
compare to foreign production costs, and on the cost of transporting
vehicles and parts between the U.S. and other countries. Investments in
advanced technology production facilities, such as battery
manufacturing and vehicle electrification projects, supported by the
Recovery Act (for example) reduce the need for importing these parts
from overseas.\12\ These investments by the Department of Energy have
created immediate jobs in building this capacity, and they also help
ensure that these components can be produced in the U.S. Tax breaks and
other manufacturing incentives provided by a number of local and state
governments for advanced vehicle technologies, such as in Michigan,
have also contributed incentives for domestic production. For the
forthcoming notice of proposed rulemaking for 2017-2025 GHG and CAFE
standards, EPA and NHTSA will further investigate the impacts of the
proposed standards on the auto industry and employment.
---------------------------------------------------------------------------

\12\ ``Recovery Act Awards for Electric Drive Vehicle Battery
and Component Manufacturing Initiative'' and ``Recovery Act Awards
for Transportation Electrification,'' http://www1.eere.energy.gov/
recovery/pdfs/battery_awardee_list.pdf.
---------------------------------------------------------------------------

The TAR also includes an initial assessment of the costs, benefits,
and technology that could be used to achieve a range of potential
future stringencies, as discussed in section II.A below.
4. Future Technical Work and Analysis for the Joint Federal Rulemaking
The two agencies have a number of significant, on-going projects
that will inform the joint proposed rule for MYs 2017-2025 vehicles.
These include new technical assessments of advanced gasoline, diesel,
and hybrid vehicle technology effectiveness; several new projects to
evaluate the cost, feasibility, and safety impacts of mass reduction
from vehicles; and an ongoing project to improve our cost estimates for
advanced technologies.\13\ For the MYs 2017-2025 rulemaking, NHTSA and
EPA will conduct an analysis of the effects of the proposed standards
on vehicle safety, including societal effects. EPA and NHTSA are
coordinating with CARB on their study of the safety effects of a future
vehicle designed for high levels of mass reduction. In addition, EPA
and NHTSA will continue to meet with and consider input from the full
range of stakeholders as we develop the joint Federal rulemaking. All
of this future information will enhance the accuracy of our
technological assessment.
---------------------------------------------------------------------------

\13\ This ongoing work is discussed in Chapter 3 of the TAR.
---------------------------------------------------------------------------

II. Key Elements of the MY 2017-2025 National Program

A. Initial Assessment of a Range of Potential MY 2017-2025 GHG and CAFE
Scenarios

1. Overview of Scenarios Analyzed and the Agencies' Approach to the
Analysis
In the technical assessment, the agencies and CARB conducted an
initial fleet-level analysis of improvements in overall average GHG
emissions and fuel economy levels. We analyzed a range of potential
stringencies for model years 2020 and 2025. Specifically, we analyzed
four potential GHG targets, representing a 3, 4, 5, and 6 percent per
year decrease in GHG levels from the MY 2016 fleet-wide average of 250
gram/mile (g/mi). Thus, the MY 2025 targets analyzed range from 190 g/
mi (equivalent to 47 mpg) under the 3 percent per year reduction
scenario to 143 g/mi (equivalent to 62 mpg) under the 6 percent per
year scenario.\14\ For purposes of an initial assessment, this range
represents a reasonably broad range of stringency increases for

[[Page 62745]]

potential future GHG emissions standards and is also consistent with
the increases suggested by CARB in its letter of commitment in response
to the President's memorandum.
---------------------------------------------------------------------------

\14\ The modeled stringencies, like the EPA's MY 2012-2016
standards, include the potential use of air conditioning emission
reductions, estimated at 15 grams (compared to a 2008 baseline) in
2025 for all four technology paths. The estimates for further air
conditioning reductions are largely due to an anticipated increase
in the use of alternative refrigerants.
---------------------------------------------------------------------------

The specific average required GHG and MPG equivalent levels
analyzed are shown in Table 1:

Table 1--GHG and MPG Equivalent Levels Analyzed for Scenarios \1\
------------------------------------------------------------------------
Level in MY
Scenario 2025 (gram MPG-
CO2/mile) equivalent
------------------------------------------------------------------------
3% per year................................... 190 47
4% per year................................... 173 51
5% per year................................... 158 56
6% per year................................... 143 62
------------------------------------------------------------------------
\1\ Real-world CO2 is typically 25 percent higher and real-world fuel
economy is typically 20 percent lower. Thus the 3% to 6% range
evaluated in this assessment would span a range of real-world fuel
economy values of approximately 37 to 50 mpg, which correspond to the
regulatory test procedure values of 47 to 62, respectively.

For each of these levels of stringency, we also analyzed four
``technological pathways'' by which they could be met. We chose this
``technological pathway'' approach to capture both the diversity in
strategies expressed by OEMs in this summer's stakeholder meetings, and
uncertainties in forecasting 10-15 years into the future the potential
costs and use of various advanced technologies in the light-duty
vehicle fleet. We defined each of these technology pathways to
emphasize a different mix of advanced technologies, by assuming various
degrees of penetration of advanced gasoline technologies, mass
reduction, hybrids, plug-in hybrids, and electric vehicles. For
purposes of the assessment, the agencies denominated the pathways as
Pathway A, Pathway B, Pathway C and Pathway D, respectively.
Pathway A represents an approach where the industry
focuses on HEVs, with less reliance on advanced gasoline vehicles and
mass reduction, relative to Pathways B and C.
Pathway C represents an approach where the industry
focuses most on advanced gasoline vehicles and mass reduction, and to a
lesser extent on HEVs.
Pathway B represents an approach where the industry
utilizes advanced gasoline vehicles and mass reduction at a more
moderate level, higher than in Pathway A but less than in Pathway C.
Pathway D represents an approach where the industry
focuses on the use of PHEV, EV, and HEV technology, and relies less on
advanced gasoline vehicles and mass reduction.\15\
---------------------------------------------------------------------------

\15\ Further information on the four technology pathways is
provided in Section II.A.3. below and Section 6.3 of the TAR.
---------------------------------------------------------------------------

All four of these technology pathways include significant amounts
of mass reduction, relative to 2008 model year vehicles, ranging from
15 to 30 percent in 2025. The ability of the industry to reduce mass at
the higher end of this range, while not adversely affecting safety and
other vehicle attributes, is an open technical issue which the agencies
are carefully evaluating and will continue to as we move forward. The
agencies and CARB note that these pathways are meant to represent ways
that manufacturers could respond to eventual standards, and do not
represent ways that they must or necessarily will respond to those
standards. We further believe it is appropriate to consider more than
one potential technology pathway, since NHTSA, EPA, and CARB have on-
going technology cost, effectiveness, and safety work which has not
been completed, as discussed further in Section I.E.4 above.
For this initial assessment, we analyzed the vehicle fleet as one
single industry-wide fleet, irrespective of individual manufacturer
differences. This analysis focuses on the technology itself,
independent of the individual manufacturer, and produces results that
indicate how the single fleet could hypothetically achieve greater GHG
reductions and improved fuel economy in the most efficient manner.
Treating the entire fleet as a single fleet assumes, for example,
averaging GHG performance across all vehicle platforms is possible
irrespective of who the individual manufacturer is for a particular
vehicle platform. This can be thought of as analyzing the fleet as if
there was a single large manufacturer, instead of multiple individual
manufacturers. In addition, this analysis assumes there are no
statutory or other limits on manufacturers' ability to transfer credits
between passenger car and light truck fleets, no limits on the ability
to trade credits between manufacturers, and that all manufacturers
fully utilize such flexibilities with no transfer costs in doing so.
This approach also allows an assessment to be performed without
consideration of the particular shapes of the passenger car and light
truck attribute-based curves.\16\
---------------------------------------------------------------------------

\16\ See section II.B.1 for more information on attribute based
curves.
---------------------------------------------------------------------------

These analyses build upon methods and information applied for the
final rule for MY 2012-2016 vehicles, as well as updated forecasts of
the future light-duty vehicle fleet, updated projections of technology
costs and effectiveness, and updates to several key inputs such as fuel
prices \17\ and vehicle miles traveled projections.\18\ We did not
explicitly model any crediting schemes in this analysis. However the
assumption of full car-truck credit transfer and inter-manufacturer
trading is inherent in analyzing a single industry-wide fleet. Air
conditioning emission reductions were also accounted for, as a
fundamental component of EPA's MYs 2012-2016 program. The agencies used
the OMEGA model, developed by EPA for the MY 2012-2016 light-duty
vehicle rulemaking.\19\ The key inputs for this analysis (e.g., the
technology costs and effectiveness) are a result of the joint technical
assessment of EPA, CARB, and NHTSA, as described in Chapter 3 of the
TAR.
---------------------------------------------------------------------------

\17\ The fuel prices used are based on the Energy Information
Administration's Annual Energy Outlook 2010, which includes an
estimated gasoline price in 2025 of approximately $3.50 per gallon.
\18\ See the TAR, Chapter 3 for a full discussion of technology
costs and effectiveness, Chapter 6 for a full description of the
modeling methods, Appendix A for a description of the future vehicle
fleet projections, and Appendix E for the key inputs used in the
modeling analysis.
\19\ See 75 FR at 25446 (May 7, 2010).
---------------------------------------------------------------------------

EPA and NHTSA believe that the approach used for these analyses
permits an initial and approximate evaluation of the potential costs
and benefits of the fleetwide stringency levels modeled. This approach
incorporates significant simplifying assumptions that are useful for
this initial assessment. However, the simplified analyses would not be
appropriate in the context of the future joint federal rulemaking,
taking into account each agency's respective statutory requirements.
Consequently, in the full rulemaking analysis, both EPA and NHTSA will
perform additional analyses before proposing standards. These
simplifying assumptions and their relationship to the future federal
rulemaking are discussed in detail in Section II.A.4 below and in
Chapter 6 of the TAR.
2. Summary of Preliminary Costs and Benefits for Potential Scenarios
The agencies and CARB assessed four scenarios for potential fleet-
wide average GHG levels, with annual CO2 reductions in the
range of 3 to 6 percent per year, which would be equivalent to 47 to 62
mpg if all improvements were due to fuel-economy improving
technologies, for MY 2025 light-duty

[[Page 62746]]

vehicles, and four potential technology pathways, as described above,
for each of these stringency levels.\20\ We evaluated the costs and
benefits of these scenarios based on five broad metrics: increased cost
per vehicle, lifetime fuel reductions, lifetime greenhouse gas
reductions, consumer net lifetime savings, and payback period.
---------------------------------------------------------------------------

\20\ In Chapter 6 of the TAR, the agencies also present results
for MY 2020 for Pathways A, B, and C.
---------------------------------------------------------------------------

The results presented in Tables 2 and 3 indicate that substantial
reductions in fuel consumption and GHGs can be achieved with the use of
advanced technologies. The preliminary estimated per-vehicle cost
increases for a MY 2025 vehicle ranged from $770 to $3,500 across the
range of stringency targets and technology pathways. Due to the fuel
savings consumers experience by purchasing vehicles with improved fuel
economy, the net lifetime owner savings would be $5,000 to $7,400, or a
payback period of 1.4 to 4.2 years, for these same scenarios.\21\ The
aggregate fuel reductions achieved by these scenarios would range from
0.7 to 1.3 billion barrels over the lifetime of MY 2025 vehicles.\22\
Total greenhouse gas reductions would range from 340 to 590 million
metric tons (MMT) over the lifetime of MY 2025 vehicles, depending on
the stringency target and technology pathway.\23\ It is also important
to recognize that the preliminary estimates in Tables 2 and 3 do not
include all relevant costs, which will be analyzed in detail in
connection with the rulemaking.
---------------------------------------------------------------------------

\21\ The gasoline price used for this estimate is $3.49/gallon
in 2025 and increases over time to a maximum of $4.34/gallon in
2050.
\22\ For comparison, the MY 2016 standards by themselves are
projected to result in fuel reductions of 0.6 billion barrels and
CO2-e reductions of 325 million metric tons (MMT) over
the lifetime of MY 2016 vehicles.
\23\ While fuel savings are the same for each technology pathway
at a given stringency level, CO2 reductions vary as a
function of the penetration of PHEVs and EVs projected for a given
technology pathway, due to an increase in upstream CO2
emissions.

Table 2--Projections for MY 2025 Preliminary Per-Vehicle Cost Estimates, Vehicle Owner Payback, and Net Owner
Lifetime Savings \1\
----------------------------------------------------------------------------------------------------------------
Preliminary per- Net lifetime
Scenario Technology path vehicle cost Payback period owner savings
estimates ($) (years) ($)
----------------------------------------------------------------------------------------------------------------
3%/year.......................... A................... 930 1.6 5,000
B................... 850 1.5 5,100
C................... 770 1.4 5,200
D................... 1,050 1.9 4,900
4%/year.......................... A................... 1,700 2.5 5,900
B................... 1,500 2.2 6,000
C................... 1,400 1.9 6,200
D................... 1,900 2.9 5,300
5%/year.......................... A................... 2,500 3.1 6,500
B................... 2,300 2.8 6,700
C................... 2,100 2.5 7,000
D................... 2,600 3.6 5,500
6%/year.......................... A................... 3,500 4.1 6,200
B................... 3,200 3.7 6,600
C................... 2,800 3.1 7,400
D................... 3,400 4.2 5,700
----------------------------------------------------------------------------------------------------------------
\1\ Per-vehicle costs represent the increase in costs to consumers from the MY 2016 standards, including the
direct manufacturing costs for the new technologies, indirect costs for the auto manufacturer (e.g., product
development, warranty) as well as auto manufacturer profit, and indirect costs at the dealership--see Chapter
3.2.5 of the TAR for additional detail on our estimation of indirect costs. Payback period and lifetime owner
savings use a 3% discount rate and AEO 2010 reference case energy prices. The gasoline price used for this
estimate is $3.49/gallon in 2025 and increases over time to a maximum of $4.34/gallon in 2050.

Table 3--Estimated Total CO2e and Fuel Reductions for the Lifetime of MY
2025 Vehicles 1, 2, 3
------------------------------------------------------------------------
Lifetime
CO2e Lifetime
reduction fuel
Scenario (million reduction
metric (billion
tons, MMT) barrels)
------------------------------------------------------------------------
3%/year....................................... 340 0.7
4%/year....................................... 440 0.9
5%/year....................................... 520-530 1.1
6%/year....................................... 530-590 1.3
------------------------------------------------------------------------
\1\ Fuel reductions are the same for each of the four technology
pathways, but CO2e reductions vary as a function of the penetration of
EVs and PHEVs in each of the four technology pathways evaluated (due
to an increase in upstream emissions).
\2\ For reference, the National Program in MY 2016 is projected to
reduce 0.6 billion barrels of fuel and 325 MMT CO2e over the lifetime
of MY 2016 vehicles.
\3\ We note that the total lifetime benefits of the program over MYs
2017-2025 will be significantly greater than those of MY 2025 alone.

The results in Table 2 shows high positive net lifetime fuel
savings are estimated to accrue to the vehicle owners, for each of the
stringency scenario's examined and for each of the technology paths.
Because these benefits will show up as direct savings to consumers who
buy these vehicles, the question arises whether private markets will
provide these benefits, or whether there may be unidentified additional
costs associated with these technologies or other economic assumptions
not included in the analysis. In the 2012-2016 light-duty GHG/CAFE
rule, both EPA and NHTSA discussed these issues in detail, and the
agencies will continue to evaluate this issue as we work towards the
development of a joint NPRM.\24\ The results presented for this initial
assessment represent what the agencies expect a hypothetical full-line
vehicle manufacturer could achieve, if the composition of the
manufacturer's fleet has the same vehicle types and sales mix as the
aggregate fleet and the availability, cost, and effectiveness of
various technologies are the same as estimated in this assessment. Note
that the results presented here assume trading between auto firms,
which may or may not occur in the future. The results also assume that
the transfer of credits between car and light truck fleets

[[Page 62747]]

are unlimited, whereas there are statutory limits for CAFE. Among
actual full-line vehicle manufacturers, we expect that a manufacturer-
specific assessment based on footprint-attribute standard curves will
result in costs which are in aggregate higher than those presented here
and will be higher for some manufacturers and lower for others due to
the differences among their offerings.\25\ With respect to smaller
volume manufacturers and very low volume manufacturers (many of whom
only produce high-performance luxury vehicles), the agencies would
expect that, in general, the level of technology they would require and
the costs they would incur would generally be higher than for full line
manufacturers.
---------------------------------------------------------------------------

\24\ See Environmental Protection Agency and Department of
Transportation, ``Light-Duty Vehicle Greenhouse Gas Emissions
Standards and Corporate Average Fuel Economy Standards; Final
Rule,'' Federal Register 75(88) (May 7, 2010): Section III.H.1 (pp.
25510-25513) and Section IV.G.6 (pp. 25651-25657).
\25\ All other things being equal, limiting credit transfers
between passenger cars and light trucks within a firm, and limiting
credit trading among manufacturers, are two factors that would
likely lead to higher cost estimates.
---------------------------------------------------------------------------

In the full analysis for the rulemaking, as required by EPCA/EISA
and as permitted by the CAA, the agencies will make more refined
assessments, including separate analyses for car and light truck
vehicle fleets, year-by-year attribute-based standards, and
manufacturer-specific estimates of potential attribute-based standard
targets and costs, and other statutory requirements. The agencies note
that consideration of these statutory factors may affect the potential
range of standards. NHTSA and EPA also will perform a more thorough
assessment of the impacts of proposed standards, as was done for the MY
2012-2016 rulemaking, including analysis of improved energy security,
monetized benefits of CO2 reductions, co-pollutant impacts,
an assessment of the societal costs and benefits of potential
standards, an assessment of potential safety impacts, an assessment of
impacts on automobile sales and related employment, and other relevant
impacts.
3. Potential Technology Penetration Estimates for Various Pathways
As described above, the agencies and CARB analyzed four potential
technology pathways to achieve more stringent targets, recognizing
there are a wide range of pathways manufacturers could pursue. To
illustrate several alternative ways that the industry as a whole could
achieve a given level of stringency, each of these four technology
pathways was applied to each of the four stringency targets. As noted
above, Pathway A focuses on HEVs, Pathway C focuses most on advanced
gasoline vehicles and mass reduction, Pathway B represents a more
moderate level of advanced gasoline vehicles, between Pathway A and
Pathway C, and Pathway D focuses most on PHEV, EV, and HEV
technology.\26\ The results of the assessment presented in the TAR are
presented in Table 4.
---------------------------------------------------------------------------

\26\ Further description of these technology pathways can be
found in Chapter 6 of the TAR.

Table 4--Technology Penetration Estimates for MY 2025 Vehicle Fleet
----------------------------------------------------------------------------------------------------------------
New vehicle fleet technology penetration
----------------------------------------------------------------
Mass Gasoline &
Scenario Technology path reduction diesel HEVs PHEVs \2\ EVs
\1\ vehicles (percent) (percent) (percent)
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
3%/year...................... Path A.......... 15 89 11 0 0
Path B.......... 18 97 3 0 0
Path C.......... 18 97 3 0 0
Path D.......... 15 75 25 0 0
4%/year...................... Path A.......... 15 65 34 0 0
Path B.......... 20 82 18 0 0
Path C.......... 25 97 3 0 0
Path D.......... 15 55 41 0 4
5%/year...................... Path A.......... 15 35 65 0 1
Path B.......... 20 56 43 0 1
Path C.......... 25 74 25 0 0
Path D.......... 15 41 49 0 10
6%/year...................... Path A.......... 14 23 68 2 7
Path B.......... 19 48 43 2 7
Path C.......... 26 53 44 0 4
Path D.......... 14 29 55 2 14
----------------------------------------------------------------------------------------------------------------
\1\ Mass reduction is the overall reduction of the 2025 fleet relative to MY 2008 vehicles.
\2\ Our assessment considered both PHEVs and EVs. These initial results indicate a higher relative percent of
EVs compared to PHEVs. The agencies do believe that PHEV technology may be used more broadly than what this
analysis indicates.

The penetration of HEVs, EVs, and PHEV in MY 2025 varies
considerably depending on the technology pathway and scenario, as can
be seen in Table 4. As discussed in Chapter 6.3 of the TAR, Pathway A
is intended to portray a technology path focused on HEV technology,
with less reliance on advanced gasoline vehicles mass reduction,
relative to Pathways B and C. Thus, in the 3%/year scenario, Pathway A
results in 11% HEV penetration, and the most stringent 6% scenario
increases HEV penetration to 68% for Path A, all with approximately a
15% reduction in mass for the new vehicle fleet. Pathway C represents
an approach where the industry focuses most on advanced gasoline
vehicles and mass reduction, and to a lesser extent on HEVs, resulting
in a penetration of HEVs that ranges from 3% up to 44% of the new
vehicle fleet. Given the approach that Pathway C represents, the
penetration of gasoline and diesel vehicles for each of the stringency
scenarios is highest for Pathway C, as is the degree of mass reduction.
Pathway B represents an approach where advanced gasoline vehicles and
mass reduction are utilized at a more moderate level, higher than for
Pathway A but less than for Pathway C. Pathway D represents an approach
focused on the use of PHEV, EV, and HEV technology, and less reliance
on advanced gasoline vehicle and mass reduction.

[[Page 62748]]

4. Future Analysis of Potential Standards for MY 2017-2025
The agencies emphasize that the analysis presented in this notice,
while reasonable for conducting an initial assessment, is a first step.
Much more work must be completed for the upcoming NPRM. As noted above,
we expect to issue updated assessments by November 30 of this year. The
upcoming rulemaking to develop the next phase of the National Program
will be based on a full analysis that is consistent with both the
statutory framework that NHTSA must account for, and the flexibilities
that EPA may account for, just as the detailed analysis for the MYs
2012-2016 was conducted.\27\ For purposes of this initial assessment,
the agencies examined stringencies in the 3% to 6% per year range.
However, the agencies have not reached any conclusions at this time
regarding the appropriate level of stringency for MY 2017 and later,
and the assessment presented in this Joint Notice does not preclude the
agencies from considering standards outside of this range for the
upcoming rulemaking. The future Joint NPRM will consider a number of
alternative levels of stringency, including an alternative which is
estimated to maximize net benefits. While the single fleet analysis
approach simplifies some aspects of the analysis and offers some
advantages, there are also important limitations which will be
addressed during the rulemaking process.
---------------------------------------------------------------------------

\27\ For further information on the kinds of comprehensive
analyses performed for the MYs 2012-2016 rulemaking, see 75 FR
25348-396.
---------------------------------------------------------------------------

For the same reasons discussed in detail in the MYs 2012-2016
rulemaking, NHTSA and EPA expect to develop new standards for CAFE and
GHG emissions that are consistent with each other and can be met by
each auto manufacturer through the production of one single fleet.
NHTSA and EPA believe the TAR provides a useful means of comparing the
scenarios discussed above.
As the agencies proceed to develop a joint proposed rulemaking for
light-duty vehicle GHG emissions and fuel economy, we will continue
technical and policy discussions with a broad range of stakeholders. We
expect to gain information through these conversations, as well as from
ongoing technical assessments by the agencies and other parties, that
will build on the work presented in this Notice and the TAR as we
continue to respond to the May 21, 2010 Presidential Memorandum.

B. Form of the Standards, Compliance and Flexibilities, and Other Key
Elements

EPA and NHTSA sought initial input about the appropriate design of
a MYs 2017-2025 National Program from a range of stakeholders. Most of
the program design input that we have received to date has come from
OEMs, although many of their suggestions relate to specific potential
compliance strategies that the companies consider confidential.
However, there was consensus among stakeholders that a National Program
should continue, and that the program's design should allow a single
national fleet to comply with Federal GHG standards, Federal CAFE
standards, and California GHG standards.
1. Form of the Standards
In the future rulemaking, the agencies plan to continue an
attribute-based approach to setting the MYs 2017-2025 standards, as was
done for the MYs 2012-2016 program and as required for CAFE standards
per EPCA/EISA. In our outreach with stakeholders, we heard general
support for continuing an attribute-based approach and for continuing
to use vehicle footprint as the attribute. Under an attribute-based
standard, each manufacturer has a required GHG and CAFE fleet average
unique to its fleet, depending on the attributes and production levels
of the vehicle models that a manufacturer produces. The MYs 2012-2016
rule was based on vehicle footprint, which is essentially the area
enclosed by the points at which the four wheels meet the ground. In
developing a proposed rule, we plan to consider continuing the
footprint-based attribute, for which most stakeholders generally
offered support.
A key consideration for the MYs 2017-2025 standards that has not
yet been addressed will be development of the separate attribute-based
standards, or ``curves,'' for passenger cars and light trucks. The
attribute-based curves for passenger cars and light trucks essentially
assign a GHG/fuel economy level or ``target'' to an individual
vehicle's footprint value. For each manufacturer, the CO2/
mpg values are then weighted, based on that manufacturer's production
mix to determine that manufacturer's fleet average standard for its
cars and trucks. Compliance is determined by comparing the actual
CO2 or mpg values for the vehicles, production-weighted, to
this fleet average standard.
In developing the MYs 2012-2016 footprint-based curves, the
agencies considered many key issues, including the steepness of the
slopes of the curves and the difference between the car and truck
curves for vehicles of the same footprint. We expect that these issues
will again be key considerations in developing the methodology and the
shape of the curves for the MYs 2017-2025 standards. Several OEMs
expressed support for the continuation of separate attribute-based
standards for cars and trucks, which is required for CAFE standards
under EPCA/EISA and which the agencies will also evaluate further for
the rulemaking.
2. Potential Regulatory Flexibilities
During the agencies' outreach discussions with stakeholders,
manufacturers provided early input that several of the flexibility
provisions in place for MYs 2012-2016 should be retained for MY 2017
and later. Environmental groups also provided early input, as discussed
below. As EPA and NHTSA develop the proposal for the MYs 2017-2025
program, the agencies will continue to consider the potential need for
and benefits of incentives and flexibility provisions beyond those
mandated by statute. The agencies will consider whether and how some of
the flexibility provisions included in the MYs 2012-2016 program might
be applied to the new program, consistent with each agency's statutory
authority.
The EPCA/EISA statutory framework for the CAFE program includes a
5-year credit carry-forward provision and a 3-year credit carry-back
provision. In the MYs 2012-2016 program, EPA chose to follow this
approach to maintain consistency between the agencies' provisions. Most
manufacturers support EPA's continuing to incorporate a 3-year credit
carry-back provision to cover prior debits, a 5-year credit carry-
forward provision, credit transfers between car and truck categories,
and credit trading between manufacturers. For EPA's purposes, these
kinds of provisions, collectively termed here as Averaging, Banking,
and Trading (ABT), have been an important part of many mobile source
programs under CAA Title II, both for fuels programs as well as for
engine and vehicle programs.\28\ Manufacturers have stated that ABT
options are important to address many issues of technological
feasibility and lead time, as well as considerations of cost. The
agencies plan to propose to continue flexibility provisions in the MYs
2017-2025 program, since these types of compliance flexibilities will

[[Page 62749]]

likely remain important as standards become more stringent.
---------------------------------------------------------------------------

\28\ See 75 FR 25412-413.
---------------------------------------------------------------------------

Several smaller volume manufacturers have expressed continued
concerns regarding lead-time, and support additional flexibility to
address the unique needs of small volume manufacturers. EPA's GHG
standards provided smaller volume manufacturers additional lead time to
meet the GHG standards, recognizing their higher CO2
baseline levels and more limited vehicle product lines across which to
average compared to other manufacturers. The need for this type of
flexibility for the standards will be tied closely to the level of
stringency of those standards.
Several manufacturers also have expressed support for the
continuation of air conditioning (A/C) system credits. EPA is strongly
considering A/C credits for the MYs 2017-2025 program. EPA has included
A/C reductions in the initial emissions modeling done to support the
technical assessment.\29\ EPA plans to evaluate further the methodology
used to determine A/C-related reductions, including A/C-related test
procedures.
---------------------------------------------------------------------------

\29\ See Chapter 6 and Appendix D of the TAR.
---------------------------------------------------------------------------

Some manufacturers also have expressed support for the continuation
of EPA's off-cycle credits program.\30\ This program provides an option
for manufacturers to generate credits for employing new and innovative
technologies that achieve GHG reductions that are not reflected on
current test procedures. Credits must be based on real additional
reductions of CO2 emissions and must be quantifiable and
verifiable with a repeatable methodology. The off-cycle credits for new
and innovative technologies are currently available only through MY
2016. Manufacturers have noted that as long as the credits represent
real-world off-cycle emissions reductions, the credits should be able
to be generated for innovations that are introduced after MY 2016,
providing additional incentives for investment in innovation and
research and development. EPA recognizes this perspective and will
evaluate the off-cycle credits provisions in the context of the MYs
2017-2025 program.
---------------------------------------------------------------------------

\30\ See 75 FR 25438-440 for more on the Federal Test Procedure
and Highway Fuel Economy Test.
---------------------------------------------------------------------------

Some manufacturers encouraged EPA to continue to offer flexible
fuel vehicle (FFV) credits. EPA finalized provisions in the MYs 2012-
2016 Final Rule to treat MY 2016 and later FFVs similarly to
conventional fueled vehicles, in that FFV emissions would be based on
actual CO2 results from emissions testing on the fuels on
which it operates.\31\ In calculating the emissions performance of an
FFV, manufacturers may base FFV emissions in part on vehicle emissions
test results on the alternative fuel, if they can demonstrate that the
alternative fuel is being used in the vehicles. EPA will consider
whether it is appropriate to retain this approach in the MYs 2017-2025
rulemaking, or to consider other approaches. NHTSA will continue to
provide incentives for dual fueled vehicles as defined in statute.\32\
Under the statute, for all dual fueled vehicles such as FFVs, the
maximum credit that a manufacturer can apply to CAFE compliance will be
limited to 0.6 mpg in 2017, 0.4 mpg in 2018, 0.2 mpg in 2019, and zero
in MY 2020 or after. Dual fueled electric vehicles, such as PHEVs, are
not subject to this limitation.
---------------------------------------------------------------------------

\31\ See 75 FR 25434.
\32\ See 49 U.S.C. 32905 and 49 U.S.C. 32906.
---------------------------------------------------------------------------

For EVs and PHEVs, manufacturers have generally expressed strong
support for a tailpipe-only CO2 measurement approach in the
form of a 0 g/mile compliance value for electric operation for the MY
2017-2025 program. Some manufacturers also expressed support for
additional credits in the form of ``bonus'' credits or multipliers for
EVs and PHEVs. EPA proposed a credit multiplier for MYs 2012-2016
electricity-based advanced technology vehicles but did not finalize it,
for a number of reasons described in the preamble to the Final
Rule.\33\ Some environmental and public interest groups expressed
concern that the 0 g/mi value does not capture upstream emissions from
the charging of electrified vehicles, and believe an upstream emissions
factor should be included in the compliance calculation for electrified
vehicles. The agencies understand that the treatment of upstream
emissions generated in the production of electricity and other energy
sources used to fuel vehicles in GHG compliance calculations is an
important issue for the upcoming rulemaking. EPA will fully evaluate
this issue for the MY 2017-2025 Joint NPRM based on the status of
commercialization of EVs, PHEVs, and FCVs, the potential of these
technologies to provide long-term GHG emissions savings, the status of
and outlook for upstream GHG control programs, and other relevant
factors. For CAFE, NHTSA will continue to follow EPCA/EISA statutory
guidance to calculate fuel economy for EVs and PHEVs, and will continue
to use a petroleum-equivalency factor (PEF) defined by the DOE to
determine fuel economy for EVs and a PEF and incentives for dual fueled
automobiles that are defined in 49 U.S.C. 32905(b) for PHEVs.
---------------------------------------------------------------------------

\33\ See 75 FR 25434-437.
---------------------------------------------------------------------------

3. Other Key Issues
a. Duration of NHTSA CAFE Standards
EPCA/EISA states that ``The Secretary [of Transportation] shall * *
* issue regulations under this title prescribing average fuel economy
standards for at least 1, but not more than 5, model years.'' NHTSA is
assessing how rulemaking will be structured to support the MYs 2017-
2025 National Program. In particular, we are examining how to ensure
that CAFE standards for MY 2017-MY 2025, while harmonized with final
EPA greenhouse gas emissions standards, would still meet the
independent standards development framework of EPCA/EISA.
b. Potential Mid-Term Standards Review
Many OEMs have stressed the importance of a mid-term technology
review that would occur after the MYs 2017-2025 standards are
promulgated.\34\ Some OEMs believe the future standards, especially
those for MY 2020 and beyond, should be reevaluated at some future
point based on the actual progress of advanced vehicle technology
development. Several environmental groups emphasized that a mid-term
technology review, if conducted, should not undermine innovation, and
may not be necessary if the MYs 2017-2025 standards can be achieved
through multiple technology pathways. The agencies believe it is
appropriate to consider a mid-term technology review. As we develop the
proposed standards, the agencies will consider the potential form that
such a review could take as well as other potential ways to address the
issues of uncertainty in longer-term standards setting.
---------------------------------------------------------------------------

\34\ The May 19, 2010 support letters from OEMs and the two
major automotive trade associations also supported the concept of a
mid-term technology review.
---------------------------------------------------------------------------

c. Non-Regulatory Incentives
The agencies recognize that there are many non-regulatory
approaches, outside of the scope of this rulemaking, that can help
promote the successful commercialization of low-GHG light-duty vehicle
technologies. Some automaker stakeholders told the agencies that
federal and state income tax credits and grants, targeted at consumers
who purchased new advanced technology vehicles, played an important
role in sparking the initial market for conventional hybrid electric
vehicles, and could play an even more

[[Page 62750]]

important role in promoting future technologies such as plug-in hybrid
electric and dedicated battery electric vehicles as well. Additional
examples of non-regulatory approaches include federal research and
development activities, federal financial assistance to the private
sector to support research and development, vehicle and component
manufacturing capacity, and infrastructure to support advanced
technologies, and non-economic incentives such as use of high occupancy
vehicle lanes and preferential parking, which are typically local
decisions. While these are useful approaches for promoting low GHG
technologies they cannot be accomplished by the agencies in the
upcoming rulemaking.

III. EPA's Evaluation of Need for Potential Further Standards for
Criteria Pollutants and Gasoline Fuel Quality

In addition to addressing GHGs and fuel consumption, the May 21,
2010 Presidential Memorandum also requested that EPA examine its
broader motor vehicle air pollution control program. In the Memorandum,
the President requested that ``[t]he Administrator of the EPA review
for adequacy the current nongreenhouse gas emissions regulations for
new motor vehicles, new motor vehicle engines, and motor vehicle fuels,
including tailpipe emissions standards for nitrogen oxides and air
toxics, and sulfur standards for gasoline. If the Administrator of the
EPA finds that new emissions regulations are required, then I request
that the Administrator of the EPA promulgate such regulations as part
of a comprehensive approach toward regulating motor vehicles. * * *''
EPA is currently in the process of conducting an assessment of the
potential need for additional controls on light-duty vehicles' non-
greenhouse gas emissions and gasoline fuel quality. EPA will engage in
technical conversations with the automobile industry, the oil industry,
non-governmental organizations, the states, and other stakeholders on
the potential need for new regulatory action, including the areas that
are specifically mentioned in the Presidential Memorandum. EPA expects
to coordinate the timing of any final action on new non-greenhouse gas
emissions regulations for light-duty vehicles and gasoline with the
final action on greenhouse gas emissions and CAFE regulations discussed
in this Notice of Intent.

IV. Conclusions

EPA and NHTSA believe that the recent final rule addressing MYs
2012-2016 light-duty vehicle GHG emissions and fuel economy provides an
important starting point for developing a continued National Program
for MY 2017 and later vehicles. The agencies have received important
input from a range of stakeholders to inform the extension of the
National Program to MYs 2017-2025. Auto manufacturers, states,
environmental groups and the United Auto Workers have expressed support
for a continuation of the National Program. All auto firms are
seriously committed to developing advanced technologies which can
reduce fuel consumption and GHGs significantly beyond the MYs 2012-2016
standards. Manufacturers are developing many technologies that would
enable them to eventually achieve appreciable improvements in fuel
economy levels, including advanced gasoline engines, hybrid electric
vehicles, EVs, and PHEVs.
As discussed in Section III above, the agencies and CARB have
performed an initial assessment of potential stringencies with annual
reductions in the range of 3 to 6% per year, or 47 to 62 mpg-equivalent
in 2025, which demonstrates that substantial reductions in fuel
consumption and GHGs can be achieved with the use of advanced
technologies. EPA and NHTSA emphasize that this is an initial
assessment, and significant data and additional analysis will be done
to support the future joint Federal rulemaking.
EPA and NHTSA will continue to meet with stakeholders and assess
new technical information as we develop the new proposed program. Over
the next two months, EPA and NHTSA will work to update our analysis of
potential standards for 2017-2025. EPA and NHTSA will work closely with
CARB in developing and reviewing additional technical data and
information as part of conducting this more refined joint analysis. EPA
and NHTSA expect to issue, by the end of November 2010, a Supplemental
Notice of Intent that will outline additional details regarding the
design of a National Program, including a more refined analysis of
potential scenarios for MY 2017-2025 standards for GHGs and fuel
economy. The agencies expect to issue a joint proposed rulemaking by
September 30, 2011 and to issue a final rule by July 31, 2012.

Dated: September 30, 2010.
Ray LaHood,
Secretary, Department of Transportation.
Dated: September 30, 2010.
Lisa P. Jackson,
Administrator, Environmental Protection Agency.
[FR Doc. 2010-25444 Filed 10-12-10; 8:45 am]
BILLING CODE 6560-50-P