[Federal Register Volume 77, Number 165 (Friday, August 24, 2012)]
[Proposed Rules]
[Pages 51499-51503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-20838]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 535

[NHTSA 2012-0126]
RIN 2127-AK74


Greenhouse Gas Emissions Standards and Fuel Efficiency Standards 
for Medium- and Heavy-Duty Engines and Vehicles

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

ACTION: Denial of petition for rulemaking.

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SUMMARY: The National Highway Traffic Administration (NHTSA) is denying 
the petition of Plant Oil Powered Diesel Fuel Systems, Inc. (``POP 
Diesel'') to amend the final rules establishing fuel efficiency 
standards for medium- and heavy-duty vehicles. NHTSA does not believe 
that POP Diesel has set forth a basis for rulemaking. The agency 
disagrees with the petitioner's assertion that a failure to 
specifically consider pure vegetable oil, and technology to enable its 
usage, as a feasible technology in heavy-duty vehicles, led to the 
adoption of less stringent standards. NHTSA also disagrees with POP's 
assertion that the agency failed to adequately consider the rebound 
effect in setting the standards.

FOR FURTHER INFORMATION CONTACT:

    For Non-Legal Issues: James Tamm, Office of Rulemaking, National 
Highway Traffic Safety Administration, 1200 New Jersey Ave. SE., 
Washington, DC 20590, Telephone (202) 493-0515.
    For Legal Issues: Lily Smith, Office of Chief Counsel, National 
Highway Traffic Safety Administration, 1200 New Jersey Ave. SE., 
Washington, DC 20590, Telephone: (202) 366-2992.

SUPPLEMENTARY INFORMATION:

I. Background

    On September 15, 2011, NHTSA issued a final rule creating fuel 
efficiency standards for medium- and heavy-duty vehicles (``heavy-duty 
rule'') (76 FR 57106).

[[Page 51500]]

II. The Petition

    NHTSA received two petitions from POP Diesel. The first petition 
was dated November 15, 2011, and was received by the agency shortly 
thereafter. The second petition was dated February 12, 2012, and was 
received by the agency on February 27, 2012. Both petitions from POP 
Diesel were styled as petitions for reconsideration of the heavy-duty 
rule. Under 49 CFR part 553, a petition for reconsideration must be 
received within 45 days of the publication of a final rule; a petition 
received after that date is considered to be a petition for issuance, 
amendment or revocation of a rule under 49 CFR part 552, i.e., as a 
petition for rulemaking. As both petitions were received more than 45 
days after the final rule was published, they were considered by the 
agency as petitions for rulemaking under part 552. Based on the 
agency's review of the February 27 petition, the agency concluded that 
it contained sufficient original material to fully supplant (as opposed 
to simply amend) the November 15 petition. Therefore, this document 
responds to the February 27 petition (``POP Diesel Petition'') 
according to the process prescribed in 49 CFR part 552.
    In its petition, POP Diesel argued that NHTSA did not specifically 
consider pure vegetable oil, and POP Diesel's proprietary technology to 
enable its usage, as a feasible technology in medium- and heavy-duty 
vehicles. POP Diesel claimed that this, as well as a failure to 
consider the rebound effect,\1\ led to the adoption of significantly 
less stringent standards and could encourage more fossil fuel 
consumption.
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    \1\ The ``rebound effect'' refers to the fraction of fuel 
savings expected to result from an increase in fuel efficiency that 
is offset by additional vehicle use. If truck shipping costs 
decrease as a result of lower fuel costs, an increase in truck miles 
traveled may occur. See 76 FR 57326 (Sept. 15, 2011).
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    POP Diesel made the following specific arguments in support of its 
request for amending the standards:
    1. The standards should have considered GHG emissions on a life-
cycle basis, rather than focusing on tailpipe GHG emissions only. If 
the agencies had considered life-cycle GHG emissions, they would have 
apportioned credits to certain technologies and fuels differently.
    2. The standards did not take into account technology which POP 
Diesel designs, engineers, manufacturers, and sells, which would enable 
a diesel engine to operate on pure vegetable oil fuel, and if they had, 
the agencies could have considered an alternative regulatory approach 
of imposing a ``manufacturer GHG emissions average, like the corporate 
average fuel economy standards in place for light duty vehicles.'' \2\
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    \2\ NHTSA notes that the engine and vehicle standards are 
entirely separate in the heavy-duty rule. Aside from the class 2b-3 
pickups and van standards, which are based on a full vehicle test, 
no vehicle standard would take into account the performance 
measurement of the fuel that the vehicle would ultimately operate 
on.
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    3. The standards do not accomplish their purpose of reducing 
greenhouse gas (GHG) emissions because the GHG standards fundamentally 
regulate fuel efficiency, and increasing fuel efficiency creates a 
``rebound effect,'' which the agencies did not adequately consider as 
part of their final rule analysis.
    To address these concerns, POP Diesel specifically requested that 
the agency revise the final standards by doing the following:
    A. ``De-couple fuel efficiency policy from GHG emissions policy;''
    B. ``Impose a corporate fleet average for GHG emissions on all 
classes of manufacturers of engines and vehicles as the most effective 
way to ramp down such emissions across the medium- and heavy-duty 
market.'' \3\
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    \3\ See POP Diesel Petition at 2-3.
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    C. Re-evaluate ``the weight the Agencies give to various 
alternative technologies and fuels according to a [life-cycle] 
approach;''
    D. Revise its analysis of the impact of the standards, in terms of 
GHG emissions, due to the ``rebound effect,'' given information 
presented by POP Diesel;
    E. ``Recognize 100 percent plant oil as a viable renewable diesel 
engine fuel eligible to receive Renewable Identification Number (`RIN') 
credits under the Renewable Fuels 2 standard;''
    F. ``Grant POP Diesel's application for a RIN pathway for 100 
percent plant oil derived from jatropha oil feedstock;''
    The remainder of POP Diesel's petition contained background 
information on challenges that POP Diesel says pure vegetable oil has 
faced in the marketplace, regarding which the petitioner is involved in 
litigation. NHTSA does not believe that these portions of the petition 
necessitate a response, as they do not directly relate to or support 
POP Diesel's petition for rulemaking.
    Additionally, POP Diesel's requests regarding obtaining a Renewable 
Identification Number for plant oil (Requests E and F above) cannot be 
directed at NHTSA, given that they pertain to EPA's regulations 
implementing the Renewable Fuel Standard.
    NHTSA notes that POP Diesel has requested the agency to revise the 
``GHG standards'' throughout its petition.\4\ NHTSA has no authority 
to, and did not, set GHG standards. Accordingly, POP Diesel's petition 
is denied. In the alternative, assuming that POP Diesel intended to 
petition NHTSA for a revision of the agency's fuel consumption 
standards, POP Diesel's petition is denied for the reasons discussed 
below.
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    \4\ See POP Diesel Petition, passim.
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III. Discussion and Analysis

    The following section will consider POP Diesel's requests, to the 
extent that they appeared to be directed at NHTSA, in turn.

A. Decouple Fuel Efficiency Policy From GHG Emissions Policy

    If POP Diesel meant to argue that the agencies should have chosen 
to regulate GHG emissions from a life-cycle perspective, or one that 
included consideration of plant-based fuels like the one utilized by 
POP Diesel's technology, rather than setting harmonized, performance-
based fuel efficiency standards (NHTSA) and tailpipe GHG emissions 
standards (EPA), then the request is primarily directed at EPA, but 
NHTSA notes the following in response.
    As discussed throughout the final rule, close coordination in this 
first heavy-duty rule enabled EPA and NHTSA to promulgate complementary 
standards that allow manufacturers to build one set of vehicles to 
comply with both agencies' regulations, as envisioned by the President. 
This coordination was widely supported by stakeholders and provided 
benefits for industry, government, and taxpayers by increasing 
regulatory efficiency and reducing compliance burdens. The harmonized 
structure of the final rule is also consistent with Executive Order 
13563.\5\
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    \5\ EO 13563 states that an agency shall ``tailor its 
regulations to impose the least burden on society, consistent with 
obtaining regulatory objectives, taking into account, among other 
things, and to the extent practicable, the costs of cumulative 
regulations,'' and ``promote such coordination, simplification, and 
harmonization'' as will reduce redundancy, inconsistency, and costs 
of multiple regulatory requirements.
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    Second, as stated above, NHTSA's statutory obligation is to create 
and administer a fuel efficiency improvement program--the agency does 
not have the option of not regulating fuel efficiency. See 49 U.S.C. 
32902(k)(2). Insofar as NHTSA regulates fuel efficiency and EPA 
regulates GHG emissions, it makes sense for the agencies to harmonize 
their standards to the greatest extent possible--CO2 
represents the majority of GHG

[[Page 51501]]

emissions from motor vehicles, and is the natural by-product of carbon-
based fuel consumption, so the same technologies that increase fuel 
efficiency (by reducing fuel consumption for a unit of work performed) 
reduce CO2 emissions at the same time. Moreover, NHTSA has 
long maintained that a fundamental aspect of the country's need to 
conserve energy, which prompted the fuel efficiency standards, is to 
reduce GHG emissions associated with climate change in addition to 
securing energy independence through reduction of oil imports. Thus, 
NHTSA believes it is neither feasible nor desirable to ``decouple'' 
fuel efficiency policy from GHG emissions policy, given the extent to 
which the two are related.
    And finally, to the extent that POP Diesel argued that fuel 
efficiency and GHG emissions are not related because of the rebound 
effect, NHTSA disagrees. Even if it somewhat decreases the degree of 
the connection, the rebound effect does not make the connection between 
improved fuel efficiency and reduced GHG emissions any less real. POP 
Diesel has not demonstrated otherwise.

B. ``Impose a Corporate Fleet Average for GHG Emissions on All Classes 
of Manufacturers of Engines and Vehicles as the Most Effective Way To 
Ramp Down Such Emissions Across the Medium- and Heavy-Duty Market''

    POP Diesel argued that the agency should have accounted for the 
``feasibility of equipping engines to operate on 100 percent 
untransesterified plant oil,'' and that if it had, it would have 
concluded that it should ``regulate GHG emissions [by imposing] a 
manufacturer GHG emissions average, like the corporate average fuel 
economy standards in place for light duty vehicles * * *.'' \6\ 
Assuming that POP Diesel meant to say that NHTSA should have imposed 
average manufacturer fuel efficiency standards, the agency notes that 
no particular engine or vehicle model is subject to its own standard; 
rather each manufacturer of vehicles or engines must comply with 
standards for each regulatory category.\7\ NHTSA also notes, although 
it appears that POP Diesel referred to the corporate average fuel 
economy standards for light-duty vehicles more for the ``corporate 
average'' element than for the metric, that the medium- and heavy-duty 
standards are based on the ability of engines or vehicles to perform a 
certain amount of work (carry or haul weight) over a particular 
distance. This is a very different measurement than fuel economy, which 
is simply based on the amount of fuel consumed over a certain distance.
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    \6\ POP Diesel Petition at 2.
    \7\ This, along with the rule's allowance for averaging, 
banking, and trading of credits across ``averaging sets,'' makes the 
standards effectively corporate averages.
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    As discussed above, for this first regulatory phase of the medium- 
and heavy-duty vehicle fuel efficiency improvement program, NHTSA has 
adopted a fuel-neutral approach based on measurement of fuel 
consumption through measurement of tailpipe CO2 emissions. 
NHTSA does not agree that expressly including POP Diesel's proprietary 
technology in its rulemaking analysis would change the agency's 
analysis in any substantive way that would support an amendment to the 
rulemaking either in terms of the agency's decision regarding levels of 
standard stringency, or in terms of the structure of the standards. 49 
U.S.C. 32902(k)(2), the statutory provision granting NHTSA authority 
for the medium- and heavy-duty fuel efficiency improvement program, 
requires the agency to set maximum feasible standards that are 
``appropriate, cost-effective, and technologically feasible.'' The 
agency has neither the obligation to set standards under 49 U.S.C. 
32902(k)(2) based on all potentially feasible motor vehicle 
technologies, nor the capacity to do so. The existing standards are 
performance-based, and not expressly predicated on the use of any 
specific technology. Manufacturers are free to use whatever 
technologies they choose to meet the standards, including POP Diesel's 
technology. This allows for innovation.
    POP Diesel also mentioned EPA's Renewable Fuel Standards, and 
stated that because ``pure plant oil is not eligible for the RFS,'' 
therefore the final rule does ``not provide any incentive for the use 
of 100 percent plant oil or an engine specially equipped to run on this 
fuel.'' \8\ NHTSA presumes that POP Diesel's argument was that if NHTSA 
had considered that the RFS does not include specific incentives for 
pure vegetable oil, the agency would have compensated for this by 
creating incentives within the heavy-duty rule. As explained above, the 
final rule was designed to be fuel-neutral. If POP Diesel's technology 
helps manufacturers reduce fuel consumption, then it will have the same 
opportunities as any other technology that manufacturers will use to 
meet NHTSA's standards. Moreover, NHTSA notes that POP Diesel has not 
correctly characterized NHTSA's consideration of the interaction 
between the RFS program and the heavy-duty fuel efficiency standards. 
As explained in the final rule, NHTSA determined that the performance 
measurement of alternative fuels provides sufficient incentives for 
their use. While the agencies noted that incentives in the RFS pointed 
to a lack of a need for further incentives, the rule's treatment of 
alternative fuels was not premised on each alternative fuel being 
covered by the RFS Standard.\9\ Indeed, other alternative fuels are 
similarly not covered by the RFS standard, such as liquefied natural 
gas, compressed natural gas, propane, hydrogen and electricity.
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    \8\ POP Diesel Petition at 7.
    \9\ See 76 FR 57124.
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C. Re-Evaluate ``the Weight the Agencies Give to Various Alternative 
Technologies and Fuels According to a [Life-Cycle] Approach''

    NHTSA recognizes the potential benefits of increasing the use of 
any fuel type that reduces the nation's dependence on petroleum. As the 
President noted in his March 30, 2011 ``Blueprint for a Secure Energy 
Future,'' \10\ biofuels are one such fuel type with the potential to 
reduce the nation's demand for oil. NHTSA commends efforts to develop 
alternative fuels for light-, medium- and heavy-duty vehicles, and POP 
Diesel's work to make pure vegetable oil a more viable alternative fuel 
is in line with this goal.
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    \10\ http://www.whitehouse.gov/sites/default/files/blueprint_secure_energy_future.pdf.
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    POP Diesel's technology allows the use of fuels that it states are 
less carbon-intensive than other fuels, and POP Diesel argued in its 
petition that by considering only tailpipe rather than life-cycle GHG 
emissions of technologies and fuels, the agencies arbitrarily favor 
certain technologies and fuels and disfavor others. While reducing GHG 
emissions is a direct outcome of improving the fuel efficiency of the 
medium- and heavy-duty on-road fleet, the task that Congress gave to 
NHTSA was specifically to improve fuel efficiency. Therefore, any 
consideration that NHTSA may give to GHG emissions in general, and 
life-cycle GHG emissions in particular, is in the context of that 
directive. The final rule is performance-based and does not dictate 
particular technology. As the agency noted in the final rule,\11\ 
alternative fueled vehicles provide fuel consumption benefits that 
should be, and are, accounted for in the standard. However, the 
agencies' approach to fuels does not provide

[[Page 51502]]

additional incentives for fuels based on their petroleum content.
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    \11\ See 76 FR 57124.
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    As POP Diesel noted, the agency calculates the fuel consumption 
performance of engines and heavy-duty pickup trucks and vans by 
measuring tailpipe CO2 emissions and converting the measured 
value to an equivalent fuel consumption value. This method aligns with 
the EPA measurement method that is used to determine CO2 
emissions performance, and by aligning, promotes consistency in the 
national program. NHTSA recognized that it could have selected other 
methods of measuring fuel consumption, such as deriving fuel 
consumption performance based on gasoline or diesel energy 
equivalency.\12\ However, the agency decided that maintaining 
consistency with the EPA measurement of CO2 emissions to 
establish an aligned national program was the most appropriate approach 
for this first regulatory action.
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    \12\ Id. at 57124-25.
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    This approach makes it unnecessary to distinguish among alternative 
fuel types in setting the standards, and this first phase of NHTSA's 
medium- and heavy-duty regulation does not include reductions in GHG 
emissions that do not translate directly to fuel consumption. Even if 
this were not the case, NHTSA believes that POP Diesel's claims 
regarding the commercial viability of pure vegetable oil and POP 
Diesel's proprietary technology to enable its usage in medium- and 
heavy-duty vehicles are speculative.
    NHTSA recognized in the rule that this uniform approach to fuels 
may not take advantage of potential additional energy and national 
security benefits of increasing fleet percentages of alternative-fueled 
vehicles. More alternative-fueled vehicles on the road would arguably 
displace petroleum-fueled vehicles, and thereby increase both U.S. 
energy and national security by reducing the nation's dependence on 
foreign oil. However, for the reasons discussed above, the agency 
determined that the benefits of a harmonized initial program outweighed 
those potential benefits for this first phase of heavy-duty vehicle and 
engine standards.\13\
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    \13\ Id.
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    NHTSA continues to believe that the current fuel-neutral 
performance measurement is the most appropriate treatment of 
alternative fuels for this first phase of the heavy-duty fuel 
efficiency standards. As stated in the final rule, the agency intends 
to revisit this issue in the future to evaluate whether the fuel-
neutral approach continues to provide greater benefits than alternative 
approaches.

D. Revise the Final Rule Analysis of the Rebound Effect

    POP Diesel argued that due to the rebound effect, the final 
standards will in fact increase total GHG emissions beyond what would 
have occurred in the absence of the standards, rather than achieving 
the agencies' stated reductions in CO2 emissions and fuel 
consumption.\14\ POP Diesel stated that the agencies only considered 
the rebound effect in terms of improvements in ``fuel economy'' leading 
to increases in vehicle miles traveled (VMT), but should also have 
considered other direct effects,\15\ ``indirect'' rebound effects,\16\ 
and the ``frontier'' rebound effect, whereby improvements in energy 
efficiency promote the development or spread of new products that 
increase energy consumption and GHG emissions, such as when the 
availability of lower-cost trucking services leads to substitution of 
Internet shopping and home delivery via truck for conventional 
retailing.\17\ POP Diesel may have meant to suggest that an analysis of 
the rebound effect that incorporates these aspects would have led the 
agencies to promulgate different standards, specifically, GHG standards 
based on fuel CO2 content rather than fuel efficiency 
standards.
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    \14\ See POP Diesel Petition, at 3-4.
    \15\ See POP Diesel Petition, at 4; ``Exhibit 1'' to POP Diesel 
Petition. Examples of direct rebound effects include shifts of some 
freight shipments from rail, barge, or other transportation modes to 
trucking, reorganization of freight shippers' logistics operations 
in ways that substitute increased use of trucking services for 
warehousing and inventory holding, shifts to more distant sources of 
supply for raw materials and expansion of market areas for finished 
goods, which entail longer trucking distances, reorganization of 
trucking firms' operations to emphasize objectives other than 
minimizing fuel consumption, such as use of lower-cost but less 
fuel-efficient vehicles for some shipments, less intensive truck 
maintenance, and less careful optimization of vehicle load factors, 
routing, and scheduling.
    \16\ Id. Examples of indirect rebound effects include increases 
in consumption of energy-intensive products as consumers reallocate 
savings from lower prices for goods shipped by truck to purchase 
other products, and ``multi-factor productivity'' rebound effects, 
where firms increase output levels and substitute increased use of 
trucking services for other production inputs.
    \17\ Id.
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    NHTSA notes that its statutory obligation is to create and 
administer a fuel efficiency improvement program--the agency does not 
have the option of not regulating fuel efficiency.\18\ As for the 
question of whether the agency's analysis of the rebound effect in the 
final rule should have incorporated the aspects discussed in the POP 
Diesel petition, the agency believes that the agency's analysis of the 
rebound effect represents the most reliable basis on which to project 
the increases in commercial truck use that will occur in response to 
improvements in their fuel efficiency.
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    \18\ See 49 U.S.C. 32902(k)(2).
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    NHTSA believes that its estimates of the increased use of different 
classes of trucks that are likely to result from the improvements in 
their fuel efficiency required by the rule are based on sound data and 
reliable econometric methods. Moreover, the agency is confident that 
these estimates reflect the various components of the direct rebound 
effect that POP Diesel alleges they ignore, because the measures of 
aggregate nationwide truck use from which they are derived fully 
incorporate historical shifts of freight shipments from other 
transportation modes to trucking, continuing reorganization of freight 
logistics toward increased reliance on trucking services, and shifts to 
more distant sources of supply for raw materials and longer deliveries 
of finished goods to final markets. The agency's estimates also 
incorporate the historical response of the use of trucking services to 
measures of economic activity that generate demands for shipping of raw 
materials and finished products, including aggregate economic output, 
foreign trade, and retailing. As the agencies acknowledged in their 
analysis, however, research on the magnitude of the rebound effect for 
heavy-duty vehicles has been limited; \19\ for this reason, the 
agencies will monitor and conduct research on the subject in an ongoing 
effort to improve their estimates.
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    \19\ See 76 FR 57327-9.
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    NHTSA also notes that any increases in economy-wide energy 
consumption and GHG emissions resulting from indirect rebound effects 
cannot reasonably be ascribed to the requirement that vehicle 
manufacturers achieve higher fuel efficiency levels. If the indirect 
effects that cause those increases were included in the rulemaking 
analysis, however, they would undoubtedly add significantly to the 
economic benefits from the rule. Responses to lower-cost trucking 
services, such as consumers' use of savings from lower prices of goods 
that utilize trucking services for their production and distribution to 
purchase other products that embody energy, as well as any increases in 
multi-factor productivity or frontier rebound impacts stemming from 
reduced truck energy consumption and lower shipping costs, represent 
important sources of additional economic benefits from requiring trucks 
to achieve higher fuel efficiency. Therefore, NHTSA does not

[[Page 51503]]

believe that consideration of POP Diesel's claims regarding indirect 
rebound effects would have led the agency to promulgate different 
standards.
    For purposes of the final standards, we believe that the agency's 
analysis of the rebound effect represents the best available estimate 
of the increases in commercial truck use that may result from increases 
in their fuel efficiency, and the extent to which these increases in 
use will offset the fuel savings (and thus, CO2 emissions) 
projected to result from the recently-adopted rules. Thus, while NHTSA 
agrees that the rebound effect is present, we believe that it is 
adequately accounted for in the final rule. We do not believe that we 
would have promulgated different standards if our analysis of the 
rebound effect had been done differently, as POP Diesel recommended.

IV. Conclusion

    In consideration of the foregoing, NHTSA is denying the POP Diesel 
Petition. In accordance with 49 CFR part 552, this completes the 
agency's review of the petition for rulemaking.

    Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR 
1.95.

    Issued: August 13, 2012.
Christopher J. Bonanti,
Associate Administrator for Rulemaking, National Highway Traffic Safety 
Administration, Department of Transportation.
[FR Doc. 2012-20838 Filed 8-23-12; 8:45 am]
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