May 25, 2010

Passenger Car and Light Truck Corporate Average Fuel Economy 2011-2015

Proposed Rule
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Additional details
Agency
Department of Transportation
Regulatory Identification Number
2127-AK29
Agency Name
Department of Transportation
Rule Publication Date
05/02/2008

RULE SUMMARY

This rulemaking would address Corporate Average Fuel Economy (CAFE) Standards for light trucks and for passenger cars for model years 2011–2015. CAFE standards must be set at least 18 months prior to the start of a model year. This action is also subject to a direction by the President of the United States to complete rulemaking in 2008.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
The RIA can't be found using the RIN, but can be found using keywords or docket number (four clicks); the agency website has direct links to NPRM, RIA, and regulations.gov.
4/5
2. How verifiable are the data used in the analysis?
Most references are linked; some sources which should be accessible online aren't linked.
3/5
3. How verifiable are the models and assumptions used in the analysis?
The are verifiable as in any RIA; peer-reviewed sources are given throughout, representing a best practice.
5/5
4. Was the analysis comprehensible to an informed layperson?
The analysis would get a 5 except that it is extremely technical. Although the technical tone may have been unavoidable, it is still probably incomprehensible to a layman and somewhat difficult to some (non-technical) economists.
3/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
4/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The outcomes are reducing vulnerability to oil price shocks, increased energy security, and greenhouse gas emissions avoidance, which are implicitly linked to human health and welfare.
3/5
Does the analysis identify how these outcomes are to be measured?
Every component turned into dollar equivalent; it also conducted separate environmental analysis.
4/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
Best practice—the analysis thoroughly presents the mechanisms to achieve the intermediate outcome, increased fuel economy, which is linked to the ultimate outcomes.
5/5
Does the analysis present credible empirical support for the theory?
Yes; it relies on a number of large studies performed by a variety of organizations and inputs from manufacturers. The analysis considers rebound effect of higher fuel economy.
5/5
Does the analysis adequately assess uncertainty about the outcomes?
The uncertainty analysis is thorough and ever-present. The RIA considers different technological outcomes that could have differing costs and effects, their likelihoods of achievement, etc.
5/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
4/5
Does the analysis identify a market failure or other systemic problem?
The primary goal in this RIA is to save oil, but the rule focuses on the actual externalities: GHG emissions contributing to global warming and energy security are both called externalities. The RIA mentions these too but not as explicitly as the rule.
4/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
The theory is clear: Drivers don't pay the cost of the externality cost (or they undervalue fuel economy). Previous research on taxing vs. mandating fuel economy is cited, as are the results of older CAFE standards, to make the case that that the undervaluation of fuel economy is systemic.
4/5
Does the analysis present credible empirical support for the theory?
Ample studies are cited.
5/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
It is acknowledged that gasoline taxes may already be sufficient to force internalization of the externality costs, but the likelihood of that being true is ignored.
3/5
7. How well does the analysis assess the effectiveness of alternative approaches?
4/5
Does the analysis enumerate other alternatives to address the problem?
Considering the mandate, a range of options of fuel economy standards is considered. No non-regulatory or market-based options are considered.
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
Alternatives are fairly narrow—there are no non-regulatory or market-based options.
2/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
Each option considered is thoroughly evaluated.
4/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
The baseline is projected using current CAFE standards, although the outcomes that would occur barely discussed.
4/5
8. How well does the analysis assess costs and benefits?
4/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Most costs seem to be well considered, except the possibility of induced technological lock-in.
4/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
Expenditures of manufacturers likely to arise are well considered based on confidential comments and data submissions.
5/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Yes, the costs passed along to consumers in costlier cars are considered. Potential loss of variety appears ignored.
4/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The rebound effect is particularly well analyzed. Studies on the effects of safety are referenced in discussions of the weight-rate tradeoff. DOT learned from previous rulemakings that safety could be sacrificed for higher fuel economy and attempted to prevent that by making the standard a function of weight.
4/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Simulations of various scenarios test the sensitivity, representing a best practice.
5/5
Does the analysis identify the alternative that maximizes net benefits?
Given the options considered, yes
5/5
Does the analysis identify the cost-effectiveness of each alternative considered?
The analysis does not address this topic.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Yes, although more in the rule than the PRIA. The incidence on various manufacturers, including small ones, is calculated, as well as to consumers.
4/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
It is not as specific as the costs breakdown.
3/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
Yes, representing a best practice. The rule frequently refers to the RIA, frequently asks for comments, and major decisions are clearly based on analysis.
5/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Yes; it calculated net benefits for all options and chose option with max benefits. The only argument against giving a 5 is that all alternatives are command and control and therefore not really broad; on the other hand, the agency had a congressional mandate to meet.
5/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
There is no major discussion about enforcement; however, the fines for non-compliance imply that there will be some enforcement mechanism.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
Presumably it would use the same CAFE calculations used presently, but this is not explicitly discussed.
1/5
Total 43 / 60