Heavy-Duty Diesel

Emission Reduction Project

Retrofit/Rebuild Component

prepared by NESCAUM

for the U.S. Environmental Protection Agency

![](media/image1.png)

NESCAUM Recommendations for

Use of Urban Bus Program

certified retrofit/rebuild equipment

and

Third party verification system

and

Model state policies

for

The Retrofit/Rebuild of Heavy-Duty Diesel Engines

March 1999

Prepared by:

NESCAUM

Northeast States for Coordinated Air Use Management

129 Portland Street

Boston, MA 02114

Table of Contents

**Executive Summary ES-1**

**Introduction 1**

A. Background 1

B. Project Objective 2

C. Project Participants 2

**I. Use of Federal Urban Bus Program Certified Technologies**

**in Heavy-Duty Engines Not Affected by the Federal**

**Urban Bus Program 3**

A. Recommendations for Use of Oxidation Catalysts Certified

with the Urban Bus Program Use in Heavy-Duty Engines 3

B. Available Data on Emission Reductions from Oxidation Catalysts 4

C. Engine Specific Technologies Certified with the Urban Bus Program 8

D. Accuracy of Expected Emission Reduction Estimates 8

**II. Third Party Verification 11**

A. Third Party Verification Structure 11

B. Role of Third Party Verifier 14

**III. Testing Requirements 18**

A. Establishing Emission Reduction Potential (verification data) 18

B. In-use testing requirements 18

**IV. Protocol for Calculating SIP Credits 24**

A. Retrofit Website 24

B. SIP Credit Calculation Procedure 28

C. Baseline and Post-Baseline Emission Rates 29

D. Methods for SIP Credit Calculation 30

E. Credit Calculation Formulas 30

**V. Model State Guidance Policies 35**

A. Highway Vehicle Retrofit Strategies 39

B. Nonroad Retrofit Strategies 56

C. Funding Opportunities for Promoting the Retrofit of HD Engines 76

List of Tables & Charts

Table 1-1 Equipment Certified & Status of Notifications of Intent

to Certify Urban Bus Equipment 5

Table 1-2 Summary of Available Data for Oxidation Catalyst

Use in HDD 6

Table III-1 Detail of Requirements for Retrofit Technologies 22-23

Table V-1 Gasoline School Bus NOx Emissions in the NESCAUM Region 44

Table V-2 Cost Effectiveness of TWC NOx Credit Generation 44

Table V-3 1998 NESCAUM Region Construction Equipment Emissions 61

Table V-4 U.S. Primary Pollutant Emissions from Diesel Marine Engines 66

Table V-5 Proposed EPA Emissions Standards for Marine Vessels 67

Table V-6 Vessel Types in Boston Harbor 68

Table V-7 SCR Use in Marine Vessels Worldwide 69

Table V-8 Proposed Emissions Performance Standard 71

Table V-9 Costs of SCR Retrofit 72

List of Figures

Retrofit/Rebuild Program Flowchart 13

Figure One National Bus Population 40

Figure Two Boston Harbor Marine Vessel NOx Emissions by Vessel Type 68

Executive Summary

The purpose of this document is to expand the use of retrofit pollution
control technologies in heavy-duty engines through the development of
consistent guidelines for voluntary retrofit programs. Such programs
would be targeted to heavy-duty vehicles not affected by the federal
Urban Bus Program and would include control technologies not certified
under that program as well as Urban Bus Program certified technologies.
Specifically, this document recommends 1) a protocol for calculating
state implementation plan (SIP) credits for voluntary retrofit projects;
2) the structure of a third party retrofit verification system for
retrofit technologies; and 3) an in-use testing program to ensure that
emission reduction credits claimed are achieved in the field. The last
chapter of this document outlines model state policies to reduce
heavy-duty engine pollution through retrofit initiatives.

This effort builds on the above mentioned United States Environmental
Protection Agency (EPA) initiative begun in 1993 to reduce urban
residents' exposure to diesel exhaust, the Urban Bus Retrofit/Rebuild
program. The program requires that urban buses operating in metropolitan
areas with populations over 750,000 be equipped with EPA certified
retrofit pollution control devices such as oxidation catalysts or be
rebuilt using certified low emission components at the time of engine
overhaul. To date, approximately 10,000 of 42,000 eligible urban buses
have been retrofitted or rebuilt as a result of the program. Two states,
New Jersey and California, have undertaken retrofit programs or
guidelines as well. These efforts are intended to expand the significant
emission reductions gained through the federal Urban Bus Program by
promoting the use of pollution reducing technologies on the existing
heavy-duty fleets in those states.

The need for reducing emissions from the nation's in-use heavy-duty
diesel fleets is clear. Current inventories estimate that heavy duty
engine emissions comprise 33% of all nitrogen oxides (NOx) pollution and
80% of all particulates (PM) from mobile sources in the Northeast
states.[^1] Emissions from these engines contribute to serious air
pollution problems in the region. NOx causes eutrophication of lakes and
streams, acid rain, and is a precursor to ozone which aggravates lung
disease. Hydrocarbon (HC) emissions are also ozone precursors and are
made up, in part, of toxic substances such as benzene, toluene, and 1,3
butadiene, some of which are known carcinogens. PM emissions are very
high from diesel engines and are known to aggravate lung diseases such
as asthma, emphysema, and bronchitis. In addition, PM has been labeled a
probable human carcinogen by EPA and a toxic air contaminant by the
California Air Resources Board. In order for states to achieve air
quality goals, significant reductions in heavy-duty diesel emissions
will need to be made.

The recommendations contained in this document are based on discussions
of a workgroup organized by the Northeast States for Coordinated Air Use
Management (NESCAUM). The workgroup was created to provide guidance to
state and local agencies, as well as to private organizations that plan
to retrofit heavy-duty diesel vehicles with pollution control devices.
It included input from state and federal agency staff, testing
laboratories, and control equipment manufacturers. In addition, a draft
of these guidelines was distributed to EPA regional offices and the
heavy-duty engine manufacturers. Their comments and suggestions were
reviewed and incorporated by the workgroup into the recommendations
contained in this report.

Primary Recommendations

All of the recommendations detailed below represent the views of the
Retrofit/Rebuild workgroup and NESCAUM.

1\. Use of Urban Bus Program Certified Technologies

Oxidation catalysts certified with the Urban Bus Program should be
eligible without administrative or peer review for use in any highway
heavy-duty engine, with states being allowed to claim a 20 percent
reduction for PM, a 40 percent reduction for carbon monoxide (CO), and a
50 percent reduction for HC. These credits may be claimed before a
project is implemented. Verification of emission reductions should be
conducted during or after project implementation by 1) a review of
retrofitting records and 2) through in-use emissions testing. These
recommendations are detailed in Chapter I, section D and Chapter III.

For use of technologies certified with the Urban Bus Program that are
engine specific such as rebuild kits, the workgroup recommends that a PM
emission reduction credit of 20 percent be granted automatically when
the rebuild kits are used in engines that the technologies are certified
for under the Urban Bus Program. Chapter I, section B describes the
credit allowed for ".1" technologies. As with the use of oxidation
catalysts, reporting and in-use testing recommendations for rebuild kits
are detailed in Chapters I.D and III.

2\. Use of Technologies Not Certified with the Urban Bus Program

For all products that have not been certified with the Urban Bus
Program, emissions testing should be conducted by the manufacturer to
determine the emission reductions potential (percent reductions) of the
retrofit/rebuild product. Similar data should be required for the
voluntary program as are required for certification with the Urban Bus
Program (see Chapter III, section A for a detailed description). An
engineering analysis should be conducted by the manufacturer to
determine which engines the retrofit/rebuild equipment may be used on.
These data and analysis will be reviewed by the third party verifier to
establish the emission reduction level and applicability for engine
families for the voluntary retrofit program.

3\. Third Party Verification System

A third party verification system should be established which consists
of an administrator and a peer review committee. The workgroup
recommends that Environment Canada be the administrator for this
program. The administrator will process all applications to the
retrofit/rebuild program, review data for thoroughness, organize the
work of the peer review group, make decisions on the level of in-use
testing required, and communicate with EPA. The peer review committee
should consist of temporary volunteer members from industry,
laboratories, and trade organizations (such as the Society of Automotive
Engineers) with expertise in heavy-duty engines and retrofit equipment.
The committee will make determinations for emission control devices on
the level of in-use testing, completion of the in-use testing
requirement, acceptability of in-use testing method, emission reduction
potential of emission control products, and engine families that control
equipment can be used with.

4\. In-use Testing Requirement

In order to verify the emission reductions claimed from retrofit
projects and to assess control equipment durability a percentage of all
emission control products installed as part of a retrofit/rebuild
program should be tested in-use. The procedure for establishing the
number of units to be tested in the field is outlined in Chapter III and
is adapted from EPA's in-use compliance testing requirements for new
pleasure craft marine engines. An in-use testing trigger should be
established for different types of technologies based on unit sales. A
70% pass rate on tested units will be needed in order for devices to
"test out" of the in-use requirement.

5\. Calculating SIP Credits

In order to calculate SIP credits from retrofit projects, baseline
emission factors for heavy-duty engines to be retrofitted needs to be
established. The workgroup recommends that Federal Test Procedure (FTP)
certification data for engine families be used as baseline emission
rates for retrofitted engines. Emission reduction percentages (as
recommended in this document for devices certified with the Urban Bus
Program and as established by the third party verifier for devices not
certified with the Urban Bus Program) can be applied to these baseline
rates. Mass emissions reductions can be calculated for individual fleets
using the formulas detailed in Chapter IV and information available to
fleet operators such as vehicle mileage, hours in operation, or fuel
consumption. In some cases, states may choose to develop baseline
emission rates through testing of heavy-duty engines in-use. The states
will need to develop a testing plan in coordination with EPA to
determine these baseline levels.

6\. Retrofit/Rebuild Program Information/Website

The workgroup recommends that if possible all retrofit/rebuild devices
certified with the Urban Bus Program and all devices "verified" through
third party review be listed on a retrofit/rebuild website which states
and others interested in undertaking retrofit projects can easily
access. The retrofit website could provide SIP credit calculation
formulas, information on emission control products, applicable engines,
and EPA certification data for engine families.

7\. Model State Retrofit Policies

States have policy and funding options to increase the use of retrofit
devices to reduce heavy-duty diesel pollution. Retrofitting heavy-duty
vehicles and machines to reduce PM, HC, CO, toxics, and in some cases
NOx, can assist states in reaching air quality standards. Executive
orders, contract requirements, and agency policies represent potential
methods to increase the use of retrofit devices. Funding from federal
sources such as the Congestion Mitigation Air Quality Improvement
program (CMAQ), state funding in the form of bond issues and agency
budgets, and supplemental environmental monies can provide financial
support for retrofit projects. The last section of this report outlines
model retrofit policies that have been used in the region, funding
sources, and example strategies to increase the use of pollution control
equipment.

Introduction

A. Background

There are approximately 4.2 million heavy duty diesel vehicles (both
highway and nonroad) operating in the United States. These vehicles and
equipment emit millions of tons of fine particulates and ozone-forming
pollutants annually. Current inventories estimate that heavy duty diesel
emissions comprise 33% of all nitrogen oxides (NOx) and 80% of all
particulates (PM) from mobile sources in the Northeast states.[^2] The
contribution from this sector is rising as the nation's diesel fleets
continue to grow and as vehicle miles traveled increase. Emissions from
these engines contribute to serious air pollution problems experienced
in many areas of the country. NOx causes eutrophication of lakes and
streams, acid rain, and is a precursor to ozone which aggravates lung
disease. Hydrocarbon (HC) emissions are also ozone precursors and are
made up, in part, of toxic substances such as benzene, toluene, and 1,3
butadiene, some of which are known carcinogens. PM emissions are very
high from diesel engines and aggravate lung diseases such as asthma,
emphysema, and bronchitis. In addition, particulates have been labeled a
probable human carcinogen by the EPA. Furthermore, the California Air
Resources Board (CARB) has labeled PM a toxic air pollutant.

In the long term, reductions in heavy-duty diesel pollution will be
achieved through the implementation of more stringent federal emissions
standards for new engines. When implemented, EPA's rule for *Control of
Emissions of Air Pollution from Highway Heavy-Duty Engines* will reduce
NOx by 50% in the year 2020. Likewise, EPA's rule for *Control of
Emissions of Air Pollution from Nonroad Diesel Engines* to be phased in
between 1999 and 2008, will reduce NOx by 50% and PM by 16% by the year
2020. In the near term, however, much needs to be done to reduce
emissions from existing engines if state air quality goals are to be
met. Achieving emissions reductions from in-use diesels is needed
because older engines pollute at much higher rates than newer ones due
to deterioration and less stringent emission standards.

The Urban Bus Retrofit Program begun in 1993 was a first step in
addressing the problem of in-use heavy-duty diesel emissions. This
initiative was the first to require the retrofit of heavy-duty engines
to achieve emissions below the original certification levels for the
engines. The program was designed to take advantage of commercially
available retrofit/rebuild devices that reduce heavy-duty engine
emissions significantly. Examples of these devices are oxidation
catalysts, fuel borne catalysts, and new engine components configured
for low emissions such as pistons and cam shafts.

While oxidation catalysts have been used by heavy-duty engine
manufacturers to meet emission standards as original equipment (1.9
million medium and heavy-duty trucks have been equipped with catalysts
in recent years), retrofit of existing engines with the same emission
control devices have been, until the initiation of the Urban Bus
Program, uncommon in this country. As part of that program the emission
reduction potential of installing oxidation catalysts and other types of
add-on equipment in older engines was demonstrated. Engine dynamometer
testing has shown that certified technologies have the potential to
reduce particulate emissions by as much as 80%.[^3] In-use emissions
testing conducted at the time of retrofit/rebuild and one year later on
the same buses shows that significant PM, CO, and HC reductions are
achieved.[^4]

B. Project Objective

The purpose of the NESCAUM effort described in this report is to
encourage the use of both Urban Bus Program certified retrofit/rebuild
kits and non-certified technologies by developing a standardized method
for states to calculate SIP credits for retrofit projects. The current
lack of a standardized method hinders the use of retrofit technologies
in heavy-duty engines. Specifically, a protocol for actual credit
calculation is needed, a third party verifier to assume responsibilities
similar to EPA's in the federal Urban Bus Program, and lastly,
recommendations on technology matches between retrofit equipment and
heavy-duty engines are needed. This guideline document attempts to
address these gaps and in so doing, encourage the use of
retrofit/rebuild equipment to reduce emissions from heavy-duty engines.

C. Project Participants

The NESCAUM retrofit/rebuild workgroup was comprised of members from
state and federal regulatory agencies, emission control equipment
manufacturers, and testing laboratories. The recommendations in this
report reflect a consensus of the workgroup participants arrived at
during bi-weekly discussions over a period of eight months. The
resulting recommendations reflect the collective experience, opinions,
and judgment of the workgroup participants as well as opinions expressed
by the Engine Manufacturers Association.

In the next section, recommendations for the use of Urban Bus Program
certified technologies are detailed.

I. Use of Federal Urban Bus Program Certified Technologies in Heavy-Duty
Engines Not Affected by the Federal Urban Bus Program

Currently, seventeen products are certified with the Urban Bus Program
and three others are under review. Table I-1 on page 5 summarizes the
certified technologies and the types of engines that can be retrofitted
with the devices. The workgroup recommends that for the purposes of
voluntary retrofit projects, control technologies certified under the
federal Urban Bus Program be divided into two categories: engine
specific and non-engine specific. Currently, oxidation catalysts are the
only examples of technologies that are not engine specific because they
are applicable to broad categories of engines. Engine specific
technologies are rebuild kits that are manufactured for a certain engine
family. The recommendations for these two categories of control
equipment are described below.

A. Recommendations for Use of Oxidation Catalysts Certified with the
Urban Bus Program in Heavy-Duty Engines

The workgroup recommends that oxidation catalysts certified with the
Urban Bus Program be eligible without administrative or peer review for
use in any highway heavy-duty engine, with states being allowed to claim
a 20 percent reduction for PM, a 40 percent reduction for CO, and a 50
percent reduction for HC. These credits may be claimed before a project
is implemented. The workgroup recommends that states and/or emission
control manufacturers verify emissions reductions during or after
project implementation in two ways by 1) conducting a review of
retrofitting records and 2) in-use emissions testing. Details on these
recommendations are found in Chapter I, section D and in Chapter III.

The workgroup recommends that percent reductions be used, as opposed to
a gram per mile or gram per brakehorsepower hour reduction since mass
emission reductions will vary from engine to engine depending upon
"engine out" or baseline emissions. Using the percent reductions will
allow for different mass emissions reductions to be calculated for many
different engine families. States may calculate mass emissions
reductions for retrofitted engines by multiplying the baseline emission
rates by the percent reductions. This method is detailed in Chapter IV.
This method assumes that oxidation catalysts will achieve a minimum of
20 percent reduction for PM, 40 percent reduction for CO, and 50 percent
reduction for HC in all heavy-duty engines. These recommendations for
oxidation catalysts certified with the Urban Bus Program are based on
emission reduction data that are detailed in the next section.

B. Available Data on Emission Reductions from Oxidation Catalysts

Data on emission reductions attributable to oxidation catalysts are
available from several sources. The first are test results that were
provided to EPA by emission control manufacturers as part of the Urban
Bus Program. These data were gathered from both two and four stroke
engines and from worst case engines (highest emitters). Another source
of information is data that have been published in Society of Automotive
Engineering (SAE) journals. Four SAE papers have been written on
emission reductions achieved by the retrofitting of urban buses and
trucks with oxidation catalysts. Other sources of information on
catalyst function are engine manufacturers and emission control
equipment manufacturers (additional data not submitted to Urban Bus
Program). Lastly, several projects have been conducted in Europe to
assess the effectiveness of oxidation catalysts. Table I-2 on page 6
summarizes the results of the available studies.

Taken together, these studies provide data for 60 heavy-duty diesel two
and four stroke engines. The data support the assumption that use of
oxidation catalysts in both two and four stroke engines achieve PM
reductions ranging from 19 to 50% with an average PM reduction of
approximately 33%. The data also supports the assumption that reductions
of emissions ranging from 50 - 90% for HC and 45 - 90% for CO can be
achieved.

Establishing these percent reductions for Urban Bus certified oxidation
catalysts will mean that these technologies will be available for credit
generation in voluntary retrofit projects without review by the third
party verifier. The exemption of Urban Bus Program certified oxidation
catalysts (and possibly other broadly applicable technologies in the
future) from initial review by the third party verifier is based upon
the testing data summarized in table I-2 and attached to this report
showing that a minimum of 19 percent PM, 50 percent CO, and 45 percent
HC reductions are achieved when different types of highway heavy duty
engines are retrofitted with oxidation catalysts. The percent reductions
chosen by the workgroup represent nearly the lowest recorded emissions
reductions in all of the available studies and are thus conservative.

Use by the states of the recommended conservative reduction percentages
will compensate for possible lower than average emission reductions that
could occur when oxidation catalysts are installed in a wide variety of
engines. The workgroup does not anticipate that emissions will fall
below the recommended percent reductions, a more likely scenario will be
that reductions will be greater than estimated. However, the
conservative numbers provide a safety factor in case emission reductions
are lower in certain engines.

Table I-1

Equipment Certified & Status of Notifications of Intent

to Certify Urban Bus Equipment

March 18, 1999

Air Docket A-93-42

+---+-----------------+----------------------------+---+-------------------+
| * |                 | **Equipment Description**  | * |                   |
| * |                 |                            | * |                   |
| C |                 |                            | F |                   |
| e |                 |                            | e |                   |
| r |                 |                            | d |                   |
| t |                 |                            | e |                   |
| i |                 |                            | r |                   |
| f |                 |                            | a |                   |
| i |                 |                            | l |                   |
| e |                 |                            | R |                   |
| r |                 |                            | e |                   |
| * |                 |                            | g |                   |
| * |                 |                            | i |                   |
|   |                 |                            | s |                   |
|   |                 |                            | t |                   |
|   |                 |                            | e |                   |
|   |                 |                            | r |                   |
|   |                 |                            | N |                   |
|   |                 |                            | o |                   |
|   |                 |                            | t |                   |
|   |                 |                            | i |                   |
|   |                 |                            | c |                   |
|   |                 |                            | e |                   |
|   |                 |                            | : |                   |
|   |                 |                            | * |                   |
|   |                 |                            | * |                   |
|   |                 |                            |   |                   |
|   |                 |                            | * |                   |
|   |                 |                            | * |                   |
|   |                 |                            | E |                   |
|   |                 |                            | f |                   |
|   |                 |                            | f |                   |
|   |                 |                            | e |                   |
|   |                 |                            | c |                   |
|   |                 |                            | t |                   |
|   |                 |                            | i |                   |
|   |                 |                            | v |                   |
|   |                 |                            | e |                   |
|   |                 |                            | C |                   |
|   |                 |                            | e |                   |
|   |                 |                            | r |                   |
|   |                 |                            | t |                   |
|   |                 |                            | i |                   |
|   |                 |                            | f |                   |
|   |                 |                            | i |                   |
|   |                 |                            | c |                   |
|   |                 |                            | a |                   |
|   |                 |                            | t |                   |
|   |                 |                            | i |                   |
|   |                 |                            | o |                   |
|   |                 |                            | n |                   |
|   |                 |                            | D |                   |
|   |                 |                            | a |                   |
|   |                 |                            | t |                   |
|   |                 |                            | e |                   |
|   |                 |                            | * |                   |
|   |                 |                            | * |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | Engelhard 1     | Exhaust catalyst (CMX) for |   | 60 FR 28402,      |
| \ |                 | 2 stroke/cycle             |   | 05-31-95          |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 2 | Engelhard 2     | Exhaust catalyst (CMX) and |   | 60 FR 47170,      |
| \ |                 | cermatized engine parts    |   | 09-11-95          |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 3 | Detroit Diesel  | Engine upgrade kit for DDC |   | 60 FR 51472,      |
| \ | Corp. (DDC)     | 6V92TA MUI's               |   | 10-02-95          |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
|   |                 | Life Cycle Cost Evaluation |   | EPA Ltr, 06-24-96 |
|   |                 |                            |   |                   |
|   |                 |                            |   | 61 FR 37734,      |
|   |                 |                            |   | 07-19-96          |
+---+-----------------+----------------------------+---+-------------------+
| 4 | Cummins         | Engine upgrade for Cummins |   | 60 FR 64046,      |
| \ |                 | L10                        |   | 12-13-95          |
| . |                 |                            |   |                   |
|   |                 | 4 stroke/cycle             |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 5 | Twin Rivers     | Biodiesel, exh cat (CMX) & |   | EPA Ltr, 09-20-96 |
| \ | Technologies    | timing retard:             |   |                   |
| . |                 |                            |   | 61 FR 54790,      |
|   |                 | 2 stroke/cycle engines     |   | 10-22-96          |
+---+-----------------+----------------------------+---+-------------------+
| 6 | Johnson Matthey | Exhaust catalyst (CEM 1)   |   | EPA Ltr, 03-28-96 |
| \ | 1               | for 2 stroke/cycle         |   |                   |
| . |                 |                            |   | 61 FR 16733,      |
|   |                 |                            |   | 04-17-96          |
+---+-----------------+----------------------------+---+-------------------+
| 7 | DDC 2           | Engine upgrade kit for DDC |   | 61 Fr 37738,      |
| \ |                 | 6V92TZ DDECII's            |   | 07-19-96          |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 8 | Engelhard 3     | ETX 2002 kit: Exhaust      |   | EPA Ltr, 02-38-97 |
| \ |                 | catalyst, ceramitized      |   |                   |
| . |                 | parts, & engine upgrade    |   | 62 FR 12166,      |
|   |                 | parts for DDC 6V92TZ MUI   |   | 03-14-97          |
|   |                 | (0.10)                     |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 9 | Engine Control  | Exhaust catalyst (OCM) for |   | EPA Ltr, 12-02-96 |
| \ | Systems (ECS)   | 2 stroke/cycle             |   |                   |
| . |                 |                            |   | 62 FR 746,        |
|   |                 |                            |   | 01-06-97          |
+---+-----------------+----------------------------+---+-------------------+
| 1 | Johnson Matthey | Exhaust catalyst (CEM) &   |   | EPA Ltr, 09-08-97 |
| 0 | 2               | engine mods for DDC 6V92TA |   |                   |
| \ |                 | MUI (0.10)                 |   | 62 FR 60079,      |
| . |                 |                            |   | 11-06-97          |
+---+-----------------+----------------------------+---+-------------------+
| 1 | ECS 2           | Exhaust catalyst (OCM) for |   | 63 FR 4445;       |
| 1 |                 | 4 stroke/cycle             |   | 01-29-98          |
| \ |                 |                            |   |                   |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | Engelhard 4     | Exhaust catalyst (CMX) for |   | EPA Ltr, 02-12-98 |
| 2 |                 | 1992 -- 1993 Cummins L10   |   | 63 FR 13660;      |
| \ |                 | EC                         |   | 03-20-98          |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | Nelson          | Exhaust catalyst for 2     |   | EPA Ltr,          |
| 3 | Industries      | stroke/cycle               |   | 10-14-97, 62 FR   |
| \ |                 |                            |   | 63159; 11-26-97   |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | DDC 3           | TurboPac, exhaust catalyst |   | EPA Ltr, 04-06-98 |
| 4 |                 | (OCM), and engine upgrade  |   | 63 FR 26798;      |
| \ |                 | for DDC 6V92TA MUI (0.10)  |   | 05-14-98          |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | Johnson Matthey | Exhaust catalyst (CEM) &   |   | EPA Ltr, 10-21-98 |
| 5 | 3               | engine mods for DDC 6V92TA |   | 63 FR 66798;      |
| \ |                 | MUI (0.10)                 |   | 12-03-98          |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | Engelhard 5     | ETX 2002 kit: Exhaust      |   | EPA Ltr, 07-01-98 |
| 6 |                 | catalyst, ceramitized      |   | 63 FR 50225;      |
| \ |                 | parts and engine upgrade   |   | 09-21-98          |
| . |                 | parts for DDC 6V92TZ DDEC  |   |                   |
|   |                 | 2 (0.10)                   |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | Turbodyne       | TurboPac & exhaust         |   | Under review      |
| 7 | Systems, Inc.   | catalyst (OCM) 6V92TA MUI  |   |                   |
| \ |                 | (0.10)                     |   |                   |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | DDC 4           | TurboPac, exh cat (OCM,    |   | EPA Ltr, 10-02-98 |
| 8 |                 | and engine upgrade for     |   |                   |
| \ |                 | 6V92TA DDEC (0.10)         |   |                   |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 1 | Engelhard 6     | ETX Plus Technology for    |   | Under review      |
| 9 |                 | DDEC II engines (.1)       |   |                   |
| \ |                 |                            |   |                   |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+
| 2 | Johnson Matthey | CEM Cat Muffler for 4 s/c  |   | Under review      |
| 0 |                 | engines                    |   |                   |
| \ |                 |                            |   |                   |
| . |                 |                            |   |                   |
+---+-----------------+----------------------------+---+-------------------+

Table I-2

Summary of Available Data for Oxidation Catalyst Use in HDD

+------------+---------------+-------------+-------------+-------------+
| **Stud     | **Number and  | **PM        | **HC        | **CO        |
| y/Report** | Types of      | R           | R           | R           |
|            | Engines**     | eductions** | eductions** | eductions** |
+------------+---------------+-------------+-------------+-------------+
| Urban Bus  | 19 four       | 38% avg.    | 51% avg.    | n/a         |
| and        | stroke and 10 | for two     | for two     |             |
| Engelhard  | two stroke    | stroke      | stroke avg. |             |
| data       |               |             |             |             |
|            |               | 27% avg.    | 64% avg.    |             |
|            |               | for four    | for four    |             |
|            |               | stroke      | stroke      |             |
+------------+---------------+-------------+-------------+-------------+
| SAE        | 5 four stroke | 32.8% avg.  | 75.9% avg.  | 67.1% avg.  |
| 960134[^5] | and 2 two     | for all     | for all     | for all     |
|            | stroke        | vehicles    | vehicles    | vehicles    |
+------------+---------------+-------------+-------------+-------------+
| SAE        | 5 four stroke | 24% avg.    | 50-90% for  | 45-93% for  |
| 970186[^6] | and 5 two     | for all     | all         | all         |
|            | stroke        | vehicles    | vehicles    | vehicles    |
+------------+---------------+-------------+-------------+-------------+
| SAE        | 4 four stroke | 44-60% avg. | n/a         | n/a         |
| 932982[^7] |               | for all     |             |             |
|            |               | vehicles    |             |             |
+------------+---------------+-------------+-------------+-------------+
| SAE        | two stroke    | 32-41%      | 60-70%      | 90%         |
| 950155[^8] | buses         |             |             |             |
+------------+---------------+-------------+-------------+-------------+
| London     | 6 four stroke | 45%         | 86%         | 92%         |
| Bus[^9]    |               |             |             |             |
|            |               |             |             |             |
| Report MBK |               |             |             |             |
| 961165     |               |             |             |             |
+------------+---------------+-------------+-------------+-------------+
| Engelhard  | 1 four stroke | 49% avg.    | 93% avg.    | 98%         |
| Report     |               | for three   | for three   |             |
| #9         |               | catalysts   | catalysts   |             |
| 80342[^10] |               |             |             |             |
+------------+---------------+-------------+-------------+-------------+
| APTA       | two stroke    | 19-44%      | 50-90%      | 45-93%      |
| paper[^11] |               |             |             |             |
+------------+---------------+-------------+-------------+-------------+

Oxidation catalysts are the only broadly applicable technology currently
certified with the Urban Bus Program. In the future, however, other
broadly applicable technologies may become certified with the program.
If this is the case, the workgroup recommends that the third party
verifier (described in Section II) determine the level of percent
reductions for the technology by a careful analysis of emissions testing
data.

The above sections describe the available credit that can be claimed by
states when heavy-duty highway engines are retrofitted with oxidation
catalysts certified with the Urban Bus Program. In the case of retrofit
of heavy-duty nonroad engines both land-based (construction equipment,
agricultural equipment, gen sets, and locomotive engines) and marine
based (ship engines and auxiliary power units) with oxidation catalysts,
the review committee may need to establish the percent reductions that
can be claimed after an examination of available data. In this case,
oxidation catalysts certified with the Urban Bus program will be
considered as technologies not certified with the Urban Bus Program
(described in Section II).

Technologies certified with the Urban Bus Program will also be
considered with those that are not certified with the program in the
case of a request from the manufacturer for a greater percent reduction.
For example, a manufacturer of an Urban Bus Program certified technology
may want to verify a product to a greater emission reduction level than
is established in these guidelines. In this case, emission control
equipment manufactures will need to provide additional testing data
and/or an engineering analysis to the third party verifier to establish
the emission reduction level and applicable engines.

Fine Particulates

While the study of fine particle concentrations in the exhaust of
heavy-duty engines equipped with oxidation catalysts is relatively new,
three reports are available which have examined the numbers and size of
particulates in exhaust from oxidation catalyst equipped heavy-duty
engines. The studies compared the numbers and sizes of particles both
before and after installation of retrofit equipment. All three studies
showed that no increase in the number and no decrease in the size of
particulates was found. An excerpt from one of these studies, published
by the Health Effects Institute, is appended to this report. Since fine
particles are highly respirable and deliver toxins deep into the lung,
any decrease in the size of particles emitted from heavy-duty engines
increases the risk of aggravated lung disease. The three available
studies demonstrate that in an initial examination of this issue,
oxidation catalysts do not increase the number or decrease the size of
fine particles in diesel exhaust.

C. Engine Specific Technologies Certified with the Urban Bus Program

Technologies certified with the Urban Bus Program which are designed for
specific engines are rebuild kits. These kits contain components which
reduce emissions from heavy-duty engines. Typical components are pistons
and cam shafts. In the Urban Bus Program rebuild kits are certified to
one of two levels of emission reduction: 25% and .1 grams per brake
horsepower hour (g/bhp-hr). The workgroup recommends that these kits be
pre-approved for use with the engines they were certified for under the
federal Urban Bus Program without approval from the review committee.

For .1 g/bhp-hr certified kits using engine-specific components, the
workgroup recommends that these kits be pre-approved for the engines
they are certified for and that the emission reduction credits for PM be
calculated as a percentage derived from the engines' certification level
and .1. For the technologies which also employ an oxidation catalyst a
further credit of 40% CO and 50% HC is recommended by the workgroup.
However, if the manufacturer of the technology wishes to verify that the
retrofit/rebuild kits can be used in engines other than those specified
under the Urban Bus Program, then additional data must be given to the
third party verifier supporting the manufacturer's claim, the proposed
use of the technology, and the amount of credit to be granted.

For .1 certified technologies that are not engine specific, the review
committee should establish the emission reduction potential and the
applicable heavy-duty engines. This would be the same review process
used to verify all other non-engine specific emission control equipment
(other than oxidation catalysts).

For use of rebuild kits certified to the 25% PM emission reduction
level, the workgroup recommends that a 20% PM reduction credit be
automatically granted for the use of these kits in the engines they are
certified for use with under the Urban Bus Program.

D. Accuracy of Expected Emission Reduction Estimates

An important aspect of credit calculation is determining the level of
uncertainty in the estimated emissions reductions. While the above
referenced studies present data on emissions reductions from a
representative sample of two and four stroke engines, some uncertainty
exists in extrapolating the existing data on these engines to all heavy
duty engines. Two issues related to this are addressed below 1)
establishing accurate estimates of retrofit project emission reductions;
2) compensating for variability resulting from program implementation.

First, the goal of establishing accurate estimates of emissions
reductions will be furthered by state screening of engines to be
retrofitted and the exclusion of those that are not well suited for
retrofit equipment. For example, engines with extreme wear (those
engines that will soon need to be replaced) are not good candidates for
retrofitting. Additionally, manufacturers of emission control equipment
will need to carefully assess the engines which they retrofit. For
example, proper sizing of catalysts and use of appropriate pipe sizes
will be necessary to ensure that the maximum emission reduction is
achieved and backpressure is not increased beyond manufacturer
specifications.

Second, variability in the implementation of a retrofit program could
result, for example, from greater or lesser participation in the program
than anticipated. If a different number of vehicles are equipped with
emission control devices than expected this will change the emission
reductions achieved by a retrofit project. In order to compensate for
such variability, records will need to be kept by fleet operators so
that states may verify the numbers of vehicles that have been
retrofitted. States may need to revise SIP credit calculations according
to the actual number of vehicles retrofitted during the course of a
program.

The next sections describe the workgroup recommendations on record
keeping, reporting, labeling, and warranty provisions which should be
followed by states and emission control equipment manufacturers in order
to reduce the uncertainty in calculating emission reductions from
retrofit projects.

Reporting Program Results

In order to accurately evaluate retrofit program results, the workgroup
recommends that states or others initiating retrofit projects develop a
system for monitoring projects. Comparing projected emissions with
actual emission reductions achieved can be done by keeping careful
record of the numbers of vehicles retrofitted and if possible the miles
traveled in fleets of retrofitted vehicles. These records can be used to
re-calculate emission reductions mid-way through the project and at the
project's end. Reporting requirements are described below.

A state's obligations with respect to voluntary mobile emission
reduction programs (VMEPs) must be enforceable at the state and federal
levels. Under this policy, the state is not responsible, necessarily,
for implementing a program dependent on voluntary projects. This is so
since voluntary projects under VMEP can be conducted by private groups.
An example of such a project might be the retrofit of construction
equipment at the site of a large project which is intended to mitigate
emissions from the project. However, if the state is claiming SIP
credits from the project then the state is obliged to monitor, assess
and report on the implementation of voluntary actions and the emission
reductions achieved from the voluntary actions and to remedy in a timely
manner emission reduction shortfalls should the voluntary measure not
achieve projected emission reductions.

Careful reporting will allow for enforcement of retrofit projects. CFR
section 85.1404 outlines the reporting requirements for fleet operators
who are retrofitting fleets as part of the Urban Bus Program. These
requirements will be adopted for fleet operators retrofitting heavy-duty
engines as part of voluntary projects. The requirements state:

The operator of any (vehicle) for which this subpart is applicable shall
maintain and retain the following adequately organized \... records.
Each operator shall keep such records until the useful life of the
oxidation catalysts is achieved.. (1) General records. The records
required to be maintained under this paragraph shall consist of all
purchase records, receipts, and part number for parts and components
used in the rebuilding of (vehicle) engines.

In addition to reporting requirements, a warranty will be made by
emission control equipment manufacturers that guarantees emissions
reductions for a certain period of time to be set for each oxidation
catalyst by the manufacturer. This will also be used in credit
calculation.

Warranty of Emission Control Equipment

The same warranty that is required under the Urban Bus Program should be
required by retrofit emission control equipment manufacturers for
technologies being used as part of this voluntary retrofit program (as
detailed in section 85.1409). It reads:

> As a condition of certification the retrofit/rebuild equipment
> certifier shall warrant that if the certified equipment is properly
> installed and maintained as stated in the written instructions for
> proper maintenance and use, the equipment will not cause a (vehicle)
> engine to exceed the emission requirements of this subpart and the
> emission standards set forth in 40 CFR part 86. This retrofit/rebuild
> equipment warranty shall extend for (number of miles to be specified).
> (b) As a condition of certification, the retrofit/rebuild equipment
> certifier shall provide an emissions defect warranty that if the
> certified equipment is properly installed and maintained as stated in
> the written instructions for proper maintenance and use, the equipment
> certifier will replace all defective parts, free of charge. This
> emissions defect warranty shall extend for a period of (number of
> miles to be specified) miles from when the equipment is installed.

The period of credit life shall be no more than the emissions warranty.
User voiding of the mechanical warranty voids the emission warranty.

Monitoring vehicles for enforcement purposes will be made possible by
labeling all vehicles that have been retrofitted.

Labeling requirements

All retrofit equipment should be affixed with a label that states the
model and serial number of the emission control equipment and the name
of equipment certifier. The label must be durable and readable for the
in-use compliance period of the equipment.

II\. Third Party Verification

The workgroup recommends that a group be established to conduct third
party verifications. This section describes the third party verification
system and the role of the verifier. The responsibilities of the third
party verifier include 1) reviewing applications and screening
applicants; 2) making determinations on emission reduction potential and
which engines the technologies can be used with; and 3) overseeing the
in-use testing program.

A. Third Party Verification Structure

The workgroup recommends that the third party verifier be comprised of
three groups: 1) an administrative group; 2) a voting review committee;
and 3) a non-voting review group. In addition, we recommend that EPA
have oversight responsibilities in the program and veto power on any
decisions made in the retrofit program. The following sections describe
the roles of each of the three groups. The decision making processes in
the third party verification system are illustrated in the flowchart on
page 13. Arrows indicate how information will be exchanged between EPA,
the administrative group, and the review committee. Dotted lines
indicate points in the third party review process where information on
decisions or testing data is sent to EPA, but no response is needed in
order for further decisions to be made.

1\. The Administrative Group

The administrative would oversee the retrofit program, interact with
applicants and participants, organize the review committees (both voting
and non-voting), and communicate with EPA. The workgroup recommends that
Environment Canada's Emissions Research and Measurement Division (ERMD)
assume the responsibilities of the administrative body. ERMD has agreed
to do so and will devote two full time staff members to the retrofit
program once it is established. Environment Canada already has an
environmental technology verification program which will assist the ERMD
in its efforts to set up the retrofit verification system. In addition,
ERMD has conducted extensive testing of retrofitted heavy-duty diesel
vehicles and has much experience with both heavy-duty engine and
emission control technology. This experience provides the Division staff
with valuable insights that will be needed in the administration of the
voluntary program.

2\. The Review Committee

The committee would analyze data submitted to the program administrator
and have decision making authority on issues such as the level of in-use
testing required (within the guidelines set out in this document) and
types of engines that the retrofit/rebuild equipment can be used with.
The committee could be comprised of five voluntary, temporary experts in
the field of in heavy-duty engines and retrofit technology. Eligible
members could be, for example, automotive engineers, laboratory
personnel, and retired industry members (but not those currently
employed in the emission control equipment industry). The committee
should make decisions by a majority vote. At any time, a member of this
group may raise an objection about any matter related to the voluntary
retrofit program by sending a letter to EPA. EPA may elect to follow up
on the objection by investigating the matter further.

3\. Non-Voting Review Committee

In addition to the voting review committee, a non-voting review group
should be established by the administrator. This group should also
consist of volunteers with knowledge of heavy-duty engines and retrofit
equipment. State air pollution control program staff and industry
members could comprise this group which could be made up of up to ten or
twenty people. The group should have access to all of the data which the
review committee analyzes. At any time, a member of this group may raise
an objection about any matter regarding the voluntary retrofit program
by sending a letter to EPA. These objections and/or comments should be
made accessible to the public. EPA may elect to follow up on the
objection by investigating the matter further.

4\. EPA Role

The workgroup recommends that EPA provide oversight to the retrofit
program. The Agency should have access to all data included in
application packages, in-use testing data, and any other data submitted
to the administrator. We recommend the following: 1) although EPA would
not vote on a regular basis as part of the review committee, it will be
a member of the voting group; 2) when EPA votes, its vote should count
as six votes, i.e. if EPA decides to become involved on an issue, EPA
would have the final decision on that issue; and 3) EPA may occasionally
step in where needed, for example, if an audit of a testing lab is
deemed necessary.

In addition, the workgroup recommends that any member of the review
committee can submit an appeal to the committee and/or EPA at any time
regarding any aspect of the approval process. In other words, if a
problem becomes apparent on a previously approved product or procedure,
there will be an avenue to bring this to public scrutiny.

Last, the final decision to grant SIP credits to states for retrofit
projects will rest with the EPA regional authorities.

![](media/image2.png){width="5.721527777777778in"
height="8.997222222222222in"}

B. Role of Third Party Verifier

1\. Review of Applications and Screening Applicants (administrative
group)

The first step in the application process will be for the applicant to
submit a one page summary of the technology and testing procedure to the
administrator prior to and/or prior to conducting testing. The summary
will be reviewed by the group specifically to determine if special
approval needs to be made for alternative testing procedures (see
Chapter III, section A for a description of accepted testing
procedures). The administrative group will review this summary in a
timely manner and give comments to the submitting company.

Second, the administrator will receive and review all applications which
will include 1) engine or chassis dynamometer testing data, 2) an
engineering analysis which makes recommendations on the engine families
the control equipment can be used with, and 3) an application form. The
administrator will review the material for completeness and pass the
data on to the review committee and to EPA by print or electronic
format. The review committee and administrator will attempt to complete
their reviews within 60 days.

2\. Review Committee Decisions

The review committee will make five different types of decisions for all
emission control equipment products: 1) which "path" the control
equipment falls into; 2) which engines the control equipment can be used
with; 3) what percent reductions can be claimed by states when they use
the retrofit equipment in pre-determined engine families; 4)
acceptability of the in-use testing method as proposed by the emission
control equipment manufacturer; and last 5) a determination as to
whether the in-use testing requirement has been fulfilled for the
program.

a\. Path Determination

The committee will review information on a given product and will
designate it as belonging in one of three "paths" or groupings in the
retrofit program. The products will be designated as belonging to one of
the three paths according to how well established the technology is and
the available performance history for the product. The first path is
reserved for Urban Bus Program certified products and these products are
exempt from an initial review by the committee, except in certain
instances as described in the next paragraph. Therefore, some products
certified with the Urban Bus Program will not be reviewed by the third
party verifier in order to establish percent reductions or the types of
engines the products can be used with.

The second path is reserved for technologies not certified with the
Urban Bus Program which have an established performance history (such as
oxidation catalysts not certified with the Urban Bus Program and fuel
borne catalysts registered with EPA). The third path is for technologies
which are new and innovative and for which little field experience
exists, such as particulate filters and mobile source selective
catalytic reduction. The purpose of placing a technology or product into
one of the three paths is to designate different levels of in-use
testing. Technologies for which little field experience exists will
require in-use testing to begin sooner than for more established
technologies to guard against a possible shortfall of credits that could
occur if new technologies are less effective in reducing emissions than
anticipated.

As mentioned previously, path one technologies will be treated as path
two in some instances. For example, if manufacturers of Urban Bus
Program certified rebuild kits opt to establish that kits can be used in
different engines than they are certified for, testing data and/or an
engineering analysis to demonstrate the applicability to the different
engines will need to be submitted to the third party verifier. In this
case a review of the testing data and the engineering analysis will need
to be conducted by the third party verifier before information on the
product can be made available to states through the voluntary program.
Furthermore, a manufacturer may wish to demonstrate higher emission
reduction levels than the different values recommended in this report.
For example, if a manufacturer has data showing that an oxidation
catalyst certified with the Urban Bus Program can achieve a 30 percent
PM reduction in certain engines, that manufacturer may want the product
to be listed with the voluntary program at the higher PM reduction
level. Again, data to substantiate this will be required as well as a
review by the third party verifier. In this case, it may be possible to
apply for additional credit retroactively for up to five years.

b.  Engineering Analysis Demonstrating Applicability

> to Engine Families

The retrofit device manufacturer will submit to the administrator an
engineering analysis conducted either in-house or by an outside group.
The analysis will use sound engineering and judgment to determine what
engine families the retrofit/rebuild equipment can be used in.
Particulate matter composition soluble organic fraction estimates,
exhaust temperature, duty cycle and other operating conditions will be
considered in the engineering argument. Relational data may be used with
*logical and reasonable* assumptions. The committee will review the
engineering analysis to determine which engine families the control
equipment can be used with. In reviewing the submission, the review
committee will use good engineering and scientific judgment and analyze
all submitted data on a given product to make its determination. The
review committee will document each decision and submit records to the
administrator so that the analysis can be justified if EPA opts to
review the committee decision.

c\. Percent Reductions

The emission control equipment manufacturer will supply either engine or
chassis dynamometer testing data to support emission reduction claims
for a given product. The percent reduction levels will be established by
calculating the difference between baseline or engine out emissions and
post-baseline (or post retrofit) emissions. For example, post-baseline
PM emissions in gr/bhp-hr of .2 would be divided by baseline PM
emissions of .3. This figure would then be subtracted from one to arrive
at the percent reduction. The committee will review all data generated
by the applicant to determine the amount of credit that can be claimed
by states or others that retrofit heavy-duty engines with the
applicant's product. The data to be generated is specified in Section
III.A. The committee will chose conservative percent reductions for PM,
CO, HC, and NOx (if applicable) after reviewing all of the submitted
data.

d\. Overseeing In-use Testing

The committee will review the spot test method proposed by the emission
control equipment manufacturer. If it is approved, the manufacturer will
use this method in the field to test the emission control equipment
(in-use testing described in Section III.B.3). The manufacturer will not
be required to have the spot check method developed at the time of the
submission of the application materials. Rather, the method must be
approved by the time spot testing is triggered. The manufacturer will
also propose a method for dynamometer testing should it be triggered.

Once spot testing has been triggered, emission control equipment
manufacturers will begin testing units in the field. All of the data
from spot testing will be sent to the administrator and to the review
committee. The committee will be responsible for making a final decision
on whether or not the percent passing rate has been achieved. If the
spot testing rate is not achieved the review committee will decide if
dynamometer testing should begin. This decision will be made in
conjunction with the administrator and the emission control equipment
manufacturer. In some cases, further spot testing may be done before
dynamometer testing begins.

e\. Determination of Compliance with In-use Testing Requirement

The committee will review all of the spot testing (and possibly
dynamometer testing) data to determine if the required number of units
have been tested in the field and if the necessary passing rate has been
achieved. If the data shows that this rate has been achieved then the
review committee will notify the emission control equipment manufacturer
that the in-use testing requirement has been satisfied for a given
product.

f.  Test for Additional Credit Beyond that Established

> as a Minimum

States and emission control equipment manufacturers may want to conduct
additional testing to establish greater reductions from retrofit
projects than the default values previously recommended. This may occur
in two cases. First, emission control manufacturers could conduct
testing to establish that control equipment achieves higher than default
reductions. For example, oxidation catalysts certified with the Urban
Bus Program will receive a 20 percent PM reduction credit automatically.
If an emission control equipment manufacturer wants to establish that a
given technology can achieve a greater percent reduction, they will
provide additional data to the third party verifier and verified
information will be posted on the retrofit website. Testing data will
need to be collected either using chassis or engine dynamometer methods.

In a second case, states may want to conduct testing to show that
baseline emissions are higher than are assumed in the SIP credit
calculation. Since the credit calculation is based upon certification
testing data and could be different than emissions in-use, state testing
of fleet vehicles could determine a higher mass baseline emission rate.
Applying emission reduction percentages to this higher baseline rate
will result in a greater mass emissions reduction. Testing to determine
higher baseline emissions will need to be conducted in-use.

De-certification

The emission control equipment being used as part of this voluntary
program may be de-certified or de-listed as is the case in the Urban Bus
Program if: 1) the technology becomes de-certified under the Urban Bus
Program (as described in 40 CFR 85.1413); 2) use of the certified
equipment is causing engine emissions to exceed emission requirements
for any regulated pollutant; 3) use of the certified equipment causes or
contributes to an unreasonable risk to public health, welfare or safety
or severely degrades drivability operation or function; 4) in-use
testing requirements and subsequent dynamometer testing indicates the
technology is not performing as approved; or 5) a manufacturer opts out
of the program.

III\. Testing Requirements

This section describes workgroup recommendations on the testing
requirements for both technology verification and in-use testing. In
addition, the types of testing data that are recommended for submission
to the third party verifier are also detailed. Table III-1 summarizes
the requirements and sales volume triggers.

A. Establishing Emission Reduction Potential (verification data)

1\. Default Test Procedure for Verification

The testing data requirements for all technology verifications will be
equivalent to that which is specified for the federal Urban Bus
Retrofit/Rebuild program as described in CFR part 85.1406. As with the
federal urban bus retrofit program the accepted test method will be the
Federal Test Procedure (FTP). Any applicant submitting data generated
using the FTP test will not need prior approval from the review
committee of the testing procedure. The applicant will follow the data
generation requirements as outlined in part 85.1406.

If it is not appropriate to use the FTP cycle or if a technology
developer wants to generate data using a test cycle that is different
from the FTP, then the workgroup recommends the use of: 1) test methods
recommended by EPA, such as the 8-mode cycle for verification of a
technology with nonroad engines; 2) test methods recommended by CARB; 3)
the Central Business District cycle (CBD) or the New York Bus Composite
Cycle (NYBCC) for chassis dynamometer testing.

2\. Possible Alternative Testing Cycles

If a technology developer has already generated data using a cycle that
is not included as a default testing method then the cycle will need to
be reviewed by the administrative group and the review committee. Such
cycles could include, for example, the R49. In such a case the 60 day
review period limit will not be valid.

B. In-use testing requirements

Once a pre-determined number of retrofit/rebuild kits have been
installed in heavy-duty engines, a sales volume trigger will require
emission control equipment manufacturers to begin testing units in the
field to ensure they are working properly. Table III-1 describes the
volume triggers that apply to different types of retrofit/rebuild
equipment. The equipment will first be "spot-checked" using cost
effective methods to determine if emission reductions are being
achieved. For example, a potential method for testing CO emissions
reductions resulting oxidation catalysts in-use could be to use an
electrochemical portable analyzer with probes inserted both upstream and
downstream of the oxidation catalyst. The engine could be loaded using a
brake stall test, a rolling acceleration, or by driving the vehicle on a
normal operating route. Another potential in-use testing method could be
to measure hydrocarbon emissions with a flame ionizer detector (FID).

Other in-use testing methods will need to be devised for technologies
such as rebuild kits and fuel borne catalysts. Manufacturers of such
types of emission control equipment may need to pick a number of
vehicles that are candidates for engine rebuild or additive use (for
example) and designate those engines for baseline testing before the
retrofit/rebuild and then again after retrofit/rebuild to measure
post-baseline emissions. In these cases, issues such as engine drift or
the change in baseline emissions that can occur over time will need to
be addressed.

Engines to be spot-checked will be determined by (to the extent
possible) a random process. The results will be submitted to the review
committee. Should EPA determine strong bias in testing, EPA may require
corrective action, i.e. additional spot-checks of non-represented
engines. A random sample should include a mix of end-user entities as
well as mileage/usage accumulations.

1\. Spot-Testing Overview

The Workgroup recommends that the in-use testing requirements be modeled
after EPA's mandatory requirements for in-use testing of marine pleasure
craft engines. For each product (emission control equipment product)
once the number of units in the field have reached a certain sales
volume trigger (as outlined in Table 2) field testing of the product
will begin. After the pre-determined number of units have been put in
service, four units must be field tested in-use at a mileage or hours
accumulation of over half of the manufacturer's designated useful life.
The following sequence would then occur:

-   If testing is successful (i.e. all units pass) then in-use testing
    ceases;

-   If testing is unsuccessful and the cause can be attributed to the
    product and not to maintenance or other engine related problems,
    then for each failed unit, two or more units would be evaluated up
    to a maximum of ten. If the failure is engine or maintenance
    related, then the manufacturer could re-test on another vehicle.

For example,

1)  if one of four units fails, two more units must be evaluated. If
    both of these units pass, then testing would be considered
    successful (\>70% success rate) and in-use testing ceases;

2)  if both of these units fail, four more units would have to be field
    tested and all four units would have to pass in order to meet the 70
    percent requirement for in-use testing to cease. If any of the units
    fail, then the review committee would recommend dynamometer testing
    because the 70 percent success rate had not been achieved and a
    total of ten units have been tested which is the maximum limit
    (according to the marine rule). The manufacturer may have the option
    to request to extend the in-use testing program in order to achieve
    a 70 percent success rate in lieu of dynamometer testing. The review
    committee would be left to determine at what point during the
    extension, dynamometer testing should be performed. If the
    manufacturer demonstrates a 70 percent success rate during the
    extension, in-use testing would cease.

3)  If one of the two additional units fail (\<70 percent success rate),
    two more units would be tested.

4)  If both of these units pass (\>70 percent success rate), testing is
    considered successful and in-use testing ceases.

5)  If both fail (\<70 percent success rate), dynamometer testing would
    be recommended because a 70 percent success rate could not be
    achieved with in-use testing limited to ten units. Again, the
    manufacturer would have the option to request an extension to the
    in-use testing program.

The above is just one example. Consider the case where two of the
initial four units failed. This would mean that all ten units would have
to be evaluated in order to achieve the seventy percent criteria and
only one additional failure would be allowed. In the event that three of
the initial units failed, the seventy percent criteria could only be
achieved by testing all ten units with no additional failures. If all
four failed, the seventy percent criteria could not be achieved and
dynamometer testing would be recommended with the option for the
manufacturer to request an extension.

In the event of a failure on dynamometer testing, EPA would
automatically be notified.

2\. Dynamometer Testing

In addition to a "spot check" method such as using an electrochemical
portable analyzer, a more comprehensive testing method needs to be
developed by the product manufacturer in the case of dynamometer
testing. For example if an oxidation catalyst fails spot tests and must
then be tested in dynamometer tests, then a potential testing method
would be to remove the catalyst and attach it to a "slave" engine in a
testing lab. Another possibility could be to test on a mobile chassis
dynamometer. As in the case of verification testing, the third party
verifier will automatically approve of a method that uses either the FTP
or other EPA approved test cycles, CARB approved test cycles, the CBD,
and the NYBC cycles. Alternative cycles may be used, but must first be
approved of by the review committee. A pass rate of 66.7% must be
established or credit will be revoked. The manufacturer may conduct as
many tests as are necessary to achieve this percent pass rate.

3\. Backpressure Measurement

In addition to emissions testing, backpressure measurements will be
taken during field testing to ensure that retrofit equipment is not
increasing backpressure beyond manufacturer specifications in
retrofitted engines.

Table III-1

Detail of Requirements for Retrofit Technologies

+-------+-------------------+------------------+----------------------+
| **P   | **I**             | **II**           | **III**              |
| ATH** |                   |                  |                      |
+-------+-------------------+------------------+----------------------+
| Path  | Urban Bus         | Technology is in | New technology,      |
| D     | certified         | widespread use;  | little experience or |
| escri | retrofit/rebuild  |                  | use.                 |
| ption | kits              | demonstrated     |                      |
|       |                   | in-use           | Little               |
|       | Technologies      | durability       | in-use/durability    |
|       | certified with    | experience; good | experience.          |
|       | the Urban Bus     | knowledge of     |                      |
|       | Program in the    | emission         | Little knowledge of  |
|       | future will be    | reduction        | emission reduction   |
|       | included.         | mec              | mechanism/reduction  |
|       |                   | hanism/reduction | potentials           |
|       |                   | potentials       |                      |
+-------+-------------------+------------------+----------------------+
| Ex    | Current Urban Bus | Non-urban bus    | Selective catalytic  |
| ample | certified         | certified        | reduction            |
| Te    | technologies      | catalysts,       |                      |
| chnol |                   | registered fuel  |                      |
| ogies |                   | borne catalysts  |                      |
+-------+-------------------+------------------+----------------------+
| **    |                   |                  |                      |
| Pre-C |                   |                  |                      |
| redit |                   |                  |                      |
| Requ  |                   |                  |                      |
| ireme |                   |                  |                      |
| nts** |                   |                  |                      |
+-------+-------------------+------------------+----------------------+
| Cer   | Urban Bus         | FTP dynomometer  | FTP dynomometer      |
| tific | certified         | testing by a     | testing by a         |
| ation | product,          | recognized lab,  | recognized lab,      |
|       | Requirements      | or other         | applicability        |
|       | already completed | pertinent data;  | analysis, durability |
|       |                   | applicability    | analysis             |
|       |                   | analysis,        |                      |
|       |                   | durability       |                      |
|       |                   | analysis         |                      |
+-------+-------------------+------------------+----------------------+
| E     | Use of oxidation  | Engine family    | Engine family        |
| ngine | catalysts         | recommendation   | recommendation by    |
| F     | automatically     | by review        |                      |
| amily | approved for all  | committee        | review committee     |
|       | heavy-duty        |                  |                      |
|       | engines; for      |                  |                      |
|       | engine specific   |                  |                      |
|       | technologies only |                  |                      |
|       | specified engines |                  |                      |
|       | are approved; all |                  |                      |
|       | others must be    |                  |                      |
|       | supported by      |                  |                      |
|       | engineering       |                  |                      |
|       | analysis and      |                  |                      |
|       | approved by       |                  |                      |
|       | review committee. |                  |                      |
+-------+-------------------+------------------+----------------------+
| Spot  | Develop accepted  | Develop accepted | Develop accepted     |
| Check | spot-check        | spot-check       | spot-check procedure |
|       | procedure before  | procedure        |                      |
|       | 500 units are in  |                  |                      |
|       | the field         |                  |                      |
+-------+-------------------+------------------+----------------------+
| **I   |                   |                  |                      |
| nform |                   |                  |                      |
| ation |                   |                  |                      |
| P     |                   |                  |                      |
| osted |                   |                  |                      |
| on    |                   |                  |                      |
| Ret   |                   |                  |                      |
| rofit |                   |                  |                      |
| Webs  |                   |                  |                      |
| ite** |                   |                  |                      |
+-------+-------------------+------------------+----------------------+

Table III-1 (continued)

Detail of Requirements for Retrofit Technologies

  ---------------- -------------- -------------- -------------- -------------- -------------- --------------
  **PATH**         **I**                         **II**                        **III**        

  **Post-Credit                                                                               
  Requirements**                                                                              

  Number of Units  In-use         In-use Testing In-use         In-use Testing In-use         In-use Testing
  in Use by        Verification   Requirements   Verification   Requirements   Verification   Requirements
  Manufacturer     Requirements                  Requirements                  Requirements   

  Less than 100                                                                               spot testing
  Units                                                                                       begins

  101-1,000 Units                                               spot testing   Performance    
                                                                begins         review by      
                                                                               review         
                                                                               committee      

  1001+ Units      Performance    spot testing   Performance                   Confirmation   
                   review by      begins         review by                     of performance 
                   review                        review                        review by      
                   committee                     committee                     review         
                                                                               committee,     
                                                                               results        
                                                                               submitted to   
                                                                               EPA            

  10,000 plus      Confirmation                  Confirmation                                 
  units            of performance                of performance                               
                   review by                     review by                                    
                   review                        review                                       
                   committee,                    committee,                                   
                   results                       results                                      
                   submitted to                  submitted to                                 
                   EPA                           EPA                                          
  ---------------- -------------- -------------- -------------- -------------- -------------- --------------

IV\. Protocol for Calculating SIP Credits

In this chapter, methods for calculating SIP credits from retrofit
projects are described. The SIP credit calculations requires that
baseline emission rates be established and emission control equipment
reductions be applied to those baseline rates. In addition to baseline
emission factors and percent reduction levels other information will be
necessary in order for states to complete the SIP credit calculations.
Details of this information and where it can be obtained are described
in this chapter. The chapter has four sections:

1\) Section A describes a retrofit website to assist states in SIP
credit calculations;

2\) Section B provides an overview of the SIP credit calculation
procedure;

3\) Section C proposes baseline and post-baseline emission factors;

4\) Section D identifies three formulas for SIP credit calculation;

**A. Retrofit Program Information/Website**

The workgroup recommends that a retrofit website be developed which will
provide much of the information needed to complete SIP credit
calculations from retrofit projects. It is recommended that EPA maintain
this website and develop links to EPA databases containing heavy-duty
engine emissions factors, brake specific fuel consumption, and other
information needed for the calculation of SIP credits resulting from
heavy-duty retrofit projects. All of the information to be included on
the website is detailed below.

### Retrofit products verified through the voluntary program {#retrofit-products-verified-through-the-voluntary-program .unnumbered}

The website should include a list of the products certified with the
Urban Bus Program and all of those \"verified\" by the third party
system proposed in this report. For each product listed on the website,
the manufacturer name and contact information should be included. For
products which are verified by Environment Canada and the review
committee, as proposed in this report, information on retrofit/rebuild
products should be posted on the website after the review committee has
completed its analysis and approval of the manufacturer\'s application.
The site will need to be updated periodically to include newly verified
products. In addition to products which are approved by the Urban Bus
Program and by the proposed third party verification system another
avenue for inclusion in the program may be possible in the future.
Currently, several technology verification programs exist that are
organized by states, such as the Massachusetts \"STEP\" program, or by
professional organizations such as the Civil Engineering Research
Foundation. In the future, the proposed third party verifier may sign
reciprocity agreements with other certification/verification programs.
If this is the case, all of the products made available through the
reciprocity agreement/s should be posted on the retrofit website.
Specifically, the product name, manufacturer, contact person and
telephone number, and technology type should be listed.

### A list of engines which can be retrofitted with verified products  {#a-list-of-engines-which-can-be-retrofitted-with-verified-products .unnumbered}

In addition to information on verified retrofit products, engine models
which the emission control equipment may be used with will be posted on
the website. As mentioned in previous sections, these engine families
will be determined through an engineering analysis conducted either by
the emission control equipment manufacturer or by a contractor hired by
the manufacturer. The analysis will be reviewed by the third party
verifier and, if approved, information on the engines which can be
retrofitted with a given product will be posted on the retrofit website.
In some cases, this information may simply indicate that a product is
available for use with any highway heavy-duty engine. For example,
oxidation catalysts currently certified with the Urban Bus Program would
be in this category of control equipment. Other products may be listed
for use with a few specific engine models. This would be the case with
rebuild kits which are manufactured for certain engines.

### Percent reductions for each product {#percent-reductions-for-each-product .unnumbered}

As with applicable engines, approved emission reduction percentages for
each product will be included in the website. As mentioned previously,
data supporting the percent reductions will be gathered during engine
dynamometer or chassis dynamometer testing and be presented to the third
party verifier. Once the reductions are approved by the third party
verifier they will be posted on the retrofit website. For instance, if a
product is verified to reduce PM by 20 percent in all heavy-duty highway
engines then the 20 percent reduction figure should be listed next to
the product and applicable engines. In some cases, a product may be
verified to reduce PM by 20 percent (for example) in one engine family
and 27 percent in another engine family. If so, then the website will
indicate the different levels of reductions that can be achieved in the
various engines. While the above example mentions PM emissions, the same
level of detail for percent reductions will be provided for all
pollutants.

To the extent possible, each product should have the percent reductions
listed in a way that makes it easy for the website user to compare
different reductions for various products. In this way the user can
choose the equipment which will result in the highest pollution
reduction for the fleet to be retrofitted.

The information for engine families, applicable retrofit products, and
percent reductions may be organized in a table similar to the one found
on the next page. The table provides an idea as to the types of
information that will be posted on the website but does not necessarily
represent the most efficient method of presenting the information. For
example, it may prove easier to use the table if the data is organized
by engine family rather than retrofit product.

### Other information {#other-information .unnumbered}

In order to complete SIP credit calculations, states will need to have
access in some cases to fuel sulfur adjustment factors, factors to
convert between gr/bhp-hr to grams per mile, fuel density, a conversion
factor for grams to tons, and average load factors. The purpose of these
data will be described in Section D.

**Sample Retrofit Website Product and Engine Information Table**

+---------+--------+---------+---------+---------+---------+---------+
| **      | **Prod | *       | **PM    | **CO    | **NOx   | **HC    |
| Manufac | uct/** | *Engine | percent | percent | percent | percent |
| turer** |        | Appli   | redu    | redu    | redu    | redu    |
|         | **     | cations | ction** | ction** | ction** | ction** |
|         | Techno | **[^12] |         |         |         |         |
|         | logy** |         |         |         |         |         |
+---------+--------+---------+---------+---------+---------+---------+
| Cummins | R      | Cummins | 20%     | n/a     | N/a     | n/a     |
|         | ebuild | L-10    |         |         |         |         |
|         | kit    |         |         |         |         |         |
+---------+--------+---------+---------+---------+---------+---------+
| Detroit | R      | DD 6V92 | 20%     | n/a     | N/a     | n/a     |
| Diesel  | ebuild | TA MUI  |         |         |         |         |
|         | kit    |         |         |         |         |         |
+---------+--------+---------+---------+---------+---------+---------+
| Engine  | OCM    | all     | 25%     | 40%     | N/a     | 50%     |
| Control | cat    | heavy   |         |         |         |         |
| Systems | alytic | duty    |         |         |         |         |
|         | con    | diesel  |         |         |         |         |
|         | verter | e       |         |         |         |         |
|         |        | ngines. |         |         |         |         |
+---------+--------+---------+---------+---------+---------+---------+
| En      | CMX    | same as | 25%     | 40%     | N/a     | 50%     |
| gelhard | --5    | above   |         |         |         |         |
|         | cat    |         |         |         |         |         |
|         | alytic |         |         |         |         |         |
|         | con    |         |         |         |         |         |
|         | verter |         |         |         |         |         |
+---------+--------+---------+---------+---------+---------+---------+
| Johnson | CEM    | same as | 25%     | 40%     | N/a     | 50%     |
| &       | cat    | above   |         |         |         |         |
| Matthey | alytic |         |         |         |         |         |
|         | con    |         |         |         |         |         |
|         | verter |         |         |         |         |         |
+---------+--------+---------+---------+---------+---------+---------+
| Nelson  | e      | same as | 25%     | 40%     | N/a     | 50%     |
| Ind     | xhaust | above   |         |         |         |         |
| ustries | ca     |         |         |         |         |         |
|         | talyst |         |         |         |         |         |
+---------+--------+---------+---------+---------+---------+---------+

### Website Design {#website-design .unnumbered}

In the following sections, methods for calculating mass emission
reductions from retrofit projects are described. Ideally, once the
retrofit website is established, states will be able to calculate these
reductions on the site by using interactive forms. The purpose of
developing the interactive pages of the website is to create a "user
friendly" system that states will be able to use to estimate emission
reductions from retrofit projects. An interactive format would provide
menus of options, list the order in which information should be input,
and allow for the inclusion of data found in EPA databases. The
interactive site will allow the user to calculate SIP credits on the
website forms.

Several features will need to be developed for the website in order to
create this "user friendly" system. First, the workgroup recommends that
EPA link databases containing certification data on pollutant levels for
engine families. If this is done, the website user will not need to
research baseline emission rates but rather will have the information
readily available. Once the baseline emission rates are established for
individual engine families in a fleet the percent reductions for
retrofit products (found in another table in the retrofit website) will
then be applied to the baseline emission rates. Other information needed
to complete calculations such as fuel sulfur adjustment factors should
be automatically linked to engines certified in years prior to the
introduction of low sulfur diesel. Average load factors and tables of
conversion factors should be made available to the user through menus of
options. A means for easily incorporating data selected in linked files
should be developed. For example, double clicking on the data could
automatically incorporate it into credit calculations.

In the next sections the calculation procedure to be used to calculate
SIP credits is presented. Section B provides an overview of the protocol
and Section C details the specific formulas and their explanations.

B.  SIP Credit Calculation Procedure

> The general procedure for calculating SIP credits from retrofit
> projects will be as follows:

1)  Establish baseline emission factors for PM, HC, CO, and NOx (if
    applicable) for each engine family in a fleet to be retrofitted;

2)  Multiply the emission reduction percentages (as recommended in this
    document or as established by the third party verifier) for the
    control equipment that will be retrofitted onto fleet heavy-duty
    diesel engines to the baseline emission levels for those engines;

3)  Convert the mass emission reduction level from gr/bhp-hr to one that
    can be applied to hours of operation, fuel consumption, or miles
    traveled;

4)  Multiply the mass emission reduction level by the usage factor
    (miles to be traveled, remaining usage hours, or fuel to be
    consumed) to obtain total emission reductions for the engine
    families;

5)  Multiply this figure by the fraction of usage that will occur within
    the state;

6)  Repeat this process for all pollutants and all engine families in
    the fleet;

7)  Add the mass emission reductions for different engine families
    together for each pollutant to arrive at total mass emissions
    reductions for the retrofit project.

In the following sections the information and the formulas needed to
calculate the SIP credits are detailed.

C.  Baseline and Post Baseline Emission Rates

The first step in calculating SIP credits from retrofit projects will be
establishing baseline emission levels for engines that will be
retrofitted. Since in-use data for a wide variety of engines is not
available, the workgroup recommends that data for heavy-duty engine
families generated during Federal Test Procedure (FTP) certification
tests be used as default baseline emission levels for retrofitted
heavy-duty engines. Use of this data will provide emission factors for
specific engine families. The data will not account for emissions
deterioration that may occur over time and thus the baseline emissions
levels will be conservative.

The workgroup recommendation is based on the assumption that
establishing emissions for engines through in-use testing is too
expensive to be practical. States may opt, however, to conduct emissions
testing to establish baseline emissions rates for retrofitted heavy-duty
engines. In this case, the emission reduction credits that are generated
from a retrofit project are likely to be greater than if the default
baseline levels are used due to the fact that in-use testing will
account for emissions deterioration which occurs from variable
maintenance practices and engine wear. The number of engines to be
tested in order to establish the baseline levels will need to be
determined by states in coordination with EPA regional offices.

In some cases it may be appropriate for states or fleet operators to use
baseline emission factors that are available from in-use testing. For
example, if emission factors are available on a gram per gallon of fuel
or gram per mile basis for engines that will be included in a retrofit
project then these emission factors could be used. These emission
factors may be available from in-use testing projects conducted by
states, regional organizations, federal agencies, or testing
laboratories. For example, the federal Department of Transportation,
state environmental protection agencies, and Environment Canada have
conducted extensive emissions testing of urban buses. These data could
be used for baseline emission rates in lieu of the data gathered during
FTP certification for the engines. For example, a municipality not
required under the Urban Bus Program to retrofit its urban bus fleet
could retrofit its city buses and use existing in-use baseline emissions
levels. An advantage of using data gathered during chassis dynamometer
testing, as is the case with much of the available urban bus emissions
data, is that it is expressed in grams per mile units. These units allow
for a more simplified calculation of emission reductions than does the
use of certification data. This is because certification data needs to
be converted from gr/bhp-hr to gr/mi.

Other testing programs for marine engines, construction equipment, and
heavy-duty trucks could provide emission factors in grams per mile,
grams per gallon of fuel, or grams per hour which in some cases could be
used for baseline emission factors. States should coordinate with their
regional EPA offices on the use of emissions factors developed through
in-use testing.

In order to establish mass emission reductions from retrofit projects,
the workgroup recommends that baseline emission factors be multiplied by
the percent reductions established for each retrofit/rebuild product.
These percent reductions must first be established through emissions
testing by an established laboratory and be approved by the third party
verifier. The multiplication of baseline emission rates by reduction
percentages for each pollutant will yield a mass reduction amount for
each pollutant. For example, if a product is verified to reduce PM by 25
percent in a given engine and the baseline emission rate is .3
gr/bhp-hr, then the mass emission reduction level will be .3 \* .25 =
.08 gr/bhp-hr. This calculation is detailed in Section D.

The next two sections discuss several methods for SIP credit calculation
and present the formulas needed to estimate mass emission reductions
from retrofit/rebuild projects.

D. Methods for SIP Credit Calculation

The workgroup recommends that states use one of three methods to
calculate SIP credits that result from retrofit projects. The method
used will depend on the type of equipment retrofitted and the
information available to the operator. The recommended method is to use
fuel consumption to calculate SIP credits. If fuel consumption data is
not readily available then hours of operation should be the second
method used. Lastly, vehicle mileage can be used to determine SIP
credits. Providing the three possible methods for SIP credit calculation
will allow for the retrofitting of a variety of vehicles. For example,
nonroad equipment often do not have odometers, therefore fuel
consumption and hours of use are the only methods to determine emission
reductions. Additionally, these two methods provide a more accurate
estimate of emission reductions than does the calculation involving
mileage due to the difficulty in converting from gr/brhp-hr to grams per
mile. The three formulas for these calculations are detailed in the next
section.

E. Credit Calculation Formulas

This section details the credit calculation formulas that may be used to
determine emission reduction credits achieved from retrofit projects.
The first formula calculates emissions reductions using mileage data.

1\. Formula for calculating SIP credits using mileage data:

This formula requires a conversion from gr/bhp-hr to gr/mi. Information
to be provided by the fleet operator includes the number of vehicles to
be retrofitted, the fuel consumption for the vehicles, the model make
and year of the engines, the fraction of miles traveled within the
state, remaining mileage in the fleet vehicles, and the fuel economy of
the vehicles. Information linked to the retrofit website will include
baseline emissions data, brake specific fuel consumption, fuel density,
and the fuel sulfur factor for older engines.

**MERCpollutant**

**=**

**(CL - FSAF) \* % Reduction \* CFbhp-hr/mile \* Nvehicles \* FM \* FMWD
\* CFunits**

The different components of the equation are described below:

**CL** = The original EPA new engine certification level (g/bhp-hr) of
the engine family.

**FSAF** = The fuel sulfur adjustment factor (in g/bhp-hr). For some
older engine families

> certified with high sulfur fuel, this is the amount CL has already
> been reduced due
>
> to the use of low sulfur fuel. For all pollutants except PM, FSF = 0.

**Percent reduction** =

> This figure is the effectiveness of the retrofit equipment. For
> example, the percent reductions will be 20% for particulates, 50% for
> hydrocarbons, and 40% for carbon monoxide for oxidation catalysts.
> This value represents the effectiveness of the retrofit equipment and
> is always expressed as a fractional reduction.

**CFbhp-hr/mile** =

> This is the factor to use when converting form g/bhp-hr to g/mile.
> (Below a
>
> description of the calculation is provided).

**Nvehicles** = The number of vehicles with the same emissions
certification numbers.

**FM** = The remaining average vehicle(s) mileage. This value represents
the

> average expected vehicle life remaining until the fleet is retired or
>
> overhauled, whichever occurs first. The value should be determined
> from
>
> historical fleet records of similar vehicles in similar operations
> with
>
> similar histories. For example, if at the time the retrofit equipment
> is
>
> installed, a municipal agency\'s records indicate that it operates 12
> year old
>
> sanitation trucks and that historically their sanitation trucks
> operate for 17
>
> years then the remaining fleet mileage will be 5 years times the
> number of
>
> miles traveled per year times the number of vehicles to be retrofitted
> in the
>
> fleet.

**FMWD** = The fraction of mileage within the requesting district. This
value is always

> between 0 and 1.

**CFunits** = 1.1 \* 10-6 tons/gram or .0000011 tons/gram. The
appropriate conversion factor

> that converts the calculated reductions from grams into tons.

**Description of Conversion Calculations**

Two additional calculations will need to be conducted in order to
complete the above formula. The first calculation adjusts for differing
fuel sulfur levels used during engine certification. The second formula
is applicable only to the conversion of gr/bhp-hr to gr/mi when mileage
data is being used to calculate mass emission reductions.

**Fuel Sulfur Adjustment**

Engines originally certified prior to the 1994 model year may have been
certified with fuel which contains a higher sulfur content than
currently available fuels. A heavy-duty diesel engine currently being
fueled with a lower sulfur fuel than the fuel with which it was
originally certified, may already be emitting significantly less PM than
the original certification level documented. In this case, the baseline
PM emission level needs to be adjusted according to the fuel sulfur
adjustment factor. For HC, CO, or NOx the FSAF always equals zero
because these pollutants are not affected by the fuel sulfur level. PM
emissions, however, are affected by fuel sulfur levels and the
adjustment is calculated as follows:

**FSAF**

**=**

**BSFCb/bhp-hr \* .0917 \* (FSFcert - FSF in-use)**

where:

BSFCg/ bhp-hr = The brake specific fuel consumption of the engine family
in units of

> g/bhp-hr.

FSFcert = The fuel sulfur fraction of the fuel used to certify the
engine family.

> Typical value = .002(.2%)

FSFin-use = The fuel sulfur fraction of the fuel currently used with the
fleet. Typical

> value = .0005 (.05%).

**Conversion calculation from gr/bhp-hr to gr/mi (CF bhp-hr/mile)**

When the formula for calculating mass emission reductions using mileage
data is used, a conversion from gr/bhp-hr to gr/mi is needed. This
conversion is described below.

**CF bhp-hr/mi**

**=**

**fuel density/brake specific fuel consumption \* (fuel
economy\*(mi/gallon))**

These equations need to be calculated for each different engine family
that comprise a fleet. For example if there are three types of engine
families in one fleet the calculation will need to be done three times.
In addition, the calculation must be done for each pollutant. The
resulting reductions (for all engine families in a fleet) are added
together to obtain the total amount of pollutant reductions that can be
included as credit in a state SIP.

2\. Formula for calculating emission reduction credits using fuel
consumption

The formula that follows is similar to the one described above for
calculating emissions reductions using mileage data. Many of the terms
in the following formula are the same as in the mileage calculation
formula. Readers should refer to the description of the terms above for
clarification. The formula for calculating credits using fuel
consumption utilizes gallons of fuel consumed for fleet vehicles. Fleet
operators will need to know: the number of gallons of fuel consumed by
fleet vehicles (on a per engine family or model basis) per year; the
number of years the vehicles will be in operation; the number of gallons
consumed within state; the model year and make of engines; and the
number of vehicles to be retrofitted. Information to be provided on the
retrofit website will include: baseline emissions factors in gr/bhp-hr;
brake specific fuel consumption; fuel density; and the fuel sulfur
factor for older model years. The different elements of the formula are
described in the previous section with the exception of variables that
are described below.

**MERCpollutant**

**=**

**(CL - FSAF) \* % Reduction / BSFCg/ bhp-hr \* FD \* Nvehicles \* FG \*
FGWD \* CFunits**

Where FD is the fuel density and FG is the number of gallons expected to
be consumed during the vehicle life, and FGWD is the percent of gallons
to be consumed in the state.

Fleet operators who use gallons of fuel consumed during the remaining
useful life of the vehicle to estimate emission reductions will not need
to calculate the conversion from gr/bhp-hr to gr/mi. This will greatly
simplify the emission reduction credit calculation formula. In addition,
the uncertainty involved in converting to gr/mi will be eliminated, thus
the above formula provides a more accurate estimate of emission
reductions than does using fleet mileage data. For these reasons, the
above formula is recommended for use in calculating emissions reductions
from retrofit projects. The exception to the above statements would
occur if states used emission factors (in gr/mi) developed during in-use
chassis dynamometer testing. Using these emission factors would allow
for a simplified credit calculation using mileage data and would also
avoid the uncertainty involved in converting gr/bhp-hr to gr/mi.

The next formula requires that hours of operation be used to calculate
emission reductions from retrofit projects. Like the formula described
above which uses fuel consumption to calculate emission reductions, the
formula described below avoids the conversion from gr/bhp-hr to gr/mi.
In addition, this formula is well suited to nonroad machines and
equipment which often do not have odometers.

3\. Calculating SIP Credits using Hours of Use

The following formula can be used to calculate mass emissions reductions
from hours of operation data for fleet vehicles. The fleet operator will
need to provide the following information: number of vehicles to be
retrofitted, hours of useful life left for each vehicle, model year and
make of engines, fraction of hours driven in-state. The retrofit website
will provide information on baseline emissions factors; average load
factors; fuel density; and the fuel sulfur adjustment factor for older
model years.

**MERCpollutant**

**=**

**(CL - FSAF) \* % Reduction \* ALF \* Nvehicles \* H \* HWD \*
CFunits**

In this equation ALF is the average load factor, H is the number of
hours left to be traveled by the fleet and HWD is the percent of those
miles to be traveled in the state.

**Summary**

This chapter detailed three methods and three formulas for calculating
mass emission reductions that result from retrofit projects. Each of the
formulas assumed that FTP certification data gathered in emissions
testing of new engines would be used for baseline emission factors. As
mentioned in the chapter, other baseline emission factors could be used
that have been generated during in-use chassis dynamometer testing. If
in-use data are used by states for baseline emission factors, the above
detailed formulas would not be appropriate for the calculation of mass
emission reduction levels that result from retrofit projects. States
should coordinate on the development of appropriate credit calculation
formulas with their regional EPA offices if in-use baseline emission
factors are used.

In the next chapter, state policies to encourage and require the use of
retrofit equipment in highway and nonroad heavy-duty diesels are
described.

# V. Model State Retrofit Policies {#v.-model-state-retrofit-policies .unnumbered}

Chapter IV outlined how states could establish SIP credits for
heavy-duty retrofit projects. This chapter details ways in which states
can develop and fund retrofit projects to reduce heavy-duty engine
emissions. It does not cover options for retrofitting federally owned
heavy-duty vehicles. Heavy-duty engines used in highway and nonroad
applications are extremely durable and new emission standards for
engines are phased in over a relatively long period.[^13] Given that
diesel engines last up to 25 years in some cases, older, higher emitting
heavy-duty engines will be in service for the foreseeable future. Since
pollutants from these engines contribute to a host of air quality
problems, state regulators are exploring near-term options for reducing
emissions from this sector. One of the most promising strategies is the
use of retrofit kits to upgrade the emissions control capabilities of
older heavy-duty engines. This chapter discusses a broad range of
regulatory and market-based strategies to promote and encourage the
retrofit of heavy-duty engines.

The chapter is divided into three sections. Section A focuses on
retrofit strategies for highway vehicles, including mandatory and
incentive programs for both public and private vehicles. Section B
describes retrofit strategies for nonroad vehicles. Because states are
pre-empted by the federal government from mandating the retrofit of
nonroad engines, this section focuses on fee mechanisms and other
market-based strategies that can be used to encourage retrofits. In
sections A and B, three specific retrofit strategy examples are used to
augment the discussion by providing programmatic and technical details
for retrofit of different types of heavy-duty engines. Section C
describes federal and state funding opportunities for retrofit
initiatives. The section also describes federal incentive programs
(Voluntary Mobile Source Emission Reduction Program and the Economic
Incentives Program) allowing states to claim SIP credits from retrofit
projects.

## Highway Vehicle Retrofit Programs

Heavy-duty trucks and buses are well suited for retrofit initiatives.
This is the case because: 1) highway heavy-duty trucks and buses must
register with the state, and thus the size and composition of this fleet
is better known than that for the nonroad sector; 2) these vehicles are
predominantly fleet-based which lends to economies of scale for retrofit
projects; and 3) state and local governments own or contract with a
relatively large number of vehicles and therefore are positioned to
affect successful programs.

A variety of factors need to be considered in developing effective
retrofit strategies for highway vehicles, including: fleet mileage, the
number of vehicles participating in a retrofit project, the duty cycle
of these vehicles, current emission levels, and contractual arrangements
between state agencies and the fleet. Understanding these elements will
help to determine the type and quantity of pollutants to be reduced, the
type of retrofit equipment to be used, and the policy options to use for
initiating a retrofit project. While mandatory retrofit programs for
highway heavy-duty vehicles are possible, programs targeting public
fleets and/or voluntary programs may be more viable in the near-term.
Moreover, the experience gained through implementing public fleet
retrofit projects will provide regulators with information about the
appropriate application of these technologies with regard to private
fleets. Sub-section 1 describes several policy options for encouraging
or requiring the retrofit of state and local fleet vehicles. A specific
strategy analyzing technology and policy options for school buses is
included as an example of how to evaluate and structure an effective
program for retrofitting government owned or contracted fleets.
Sub-section 2 discusses retrofit strategies and mandatory programs for
privately owned heavy-duty highway vehicles.

### State Programs to Retrofit Publicly Owned Vehicles

Of the fleet vehicles on the road in the U.S. today, 25 percent are
government owned or operated.[^14] The percent is considerably larger if
all of the vehicles that operate under government contract for student
transport, construction, waste hauling, and other purposes are included.
Consequently, state and municipal owned/operated vehicles provide
important opportunities for emission reducing retrofit projects. In this
section, a number of policy options are presented for decision makers to
consider when initiating retrofit of state owned vehicles. This list is
not exhaustive but provides a starting point with which to consider
initiating a retrofit project. States have several options which fall
generally into the following two categories: 1) adopting agency policies
on the retrofit of state fleet vehicles; and 2) passing laws or issuing
executive orders requiring retrofit of state fleet vehicles.

State agencies such as transportation, highway and sanitation
departments have the authority to retrofit all or some of the vehicles
that they own. Many current retrofit projects have been initiated by
states and/or state agencies as a means to reduce emissions from diesels
in public fleets. Several mechanisms for both voluntary and mandatory
introduction of retrofit projects are discussed below.

#### a. Transit Authorities {#a.-transit-authorities .unnumbered}

Transit buses, while relatively small in total numbers, represent an
important target fleet since these vehicles operate in the most heavily
populated areas. Under EPA's Urban Bus Retrofit Program, transit buses
that operate in consolidated metropolitan statistical areas (CMSAs) with
populations of 750,000 or more are required to be retrofitted with
advanced emission control devices at the time of engine rebuild. Transit
buses operating in CMSAs with populations less than 750,000 are not
covered by the federal urban bus retrofit requirements.

Transit authorities could retrofit urban buses not covered by the
federal urban bus program with technologies certified under this program
to reduce diesel bus emissions. For example, those cities that have
populations less than 750,000 could opt to retrofit their urban buses.
Another approach would be to retrofit buses with technologies that
achieve even greater reductions than those certified with the Urban Bus
Program. The New York Transit Authority provides an example of such an
effort in its program to retrofit fifty urban buses in Manhattan with
continuously regenerating particulate traps. The traps will reduce PM,
HC, and CO pollution up to 90 percent. The use of very low sulfur diesel
is a key component of the project. Project participants include the trap
manufacturer, fuel suppliers, and the New York City Transit Authority.
Funding for the project is provided in part by the New York State
Environmental Bond Act discussed later in this chapter.

While the New York program does not involve the adoption of a specific
retrofit policy on the part of the Transit Authority, such a policy
could be adopted. Precedents for this type of policy exist in
alternative fuel programs. For example, the New York City Department of
Transportation (DOT) provides a model in its policy to replace all of
its 1,100 diesel powered urban buses with CNG vehicles. Transit
authorities could adopt similar policies on the retrofit or rebuild of
in-use heavy-duty diesels to low emission configurations.

#### b. Transportation, Sanitation, Highway, and Parks Departments {#b.-transportation-sanitation-highway-and-parks-departments .unnumbered}

Transportation, highway, sanitation, and parks departments operate
significant numbers of heavy-duty trucks. These trucks are used to
collect garbage, operate on public works projects, and maintain public
parks. These heavy-duty vehicles would be good candidates for retrofit
since the states and local governments have access to the vehicles and
generally maintain them at state or local facilities. Retrofitting could
take place at the time of regularly scheduled maintenance by mechanics
on site. In addition, funding for the retrofits could come directly from
the departments that are initiating the retrofit projects or the
departments/agencies could apply for federal grants or state funds (see
section C).

#### c. Airport, Port, and Bridge and Tunnel Authorities {#c.-airport-port-and-bridge-and-tunnel-authorities .unnumbered}

Authorities often operate heavy-duty vehicles which maintain roads,
airport runways, bridges, and other public facilities. These authorities
could opt to retrofit all publicly owned heavy-duty vehicles operating
at the facilities. An example of such a program is the Manchester
Airport retrofit project. Manchester airport in New Hampshire is
undergoing a major expansion funded by an airport bond issue. As part of
the expansion, all sixty of the airport's diesel vehicles will be
retrofitted with oxidation catalysts certified with the federal Urban
Bus Retrofit/Rebuild Program. Equipment to be retrofitted includes
deicers, pavers, scrapers, and dump trucks. In addition, specifications
for future new diesel vehicle purchases may include language requiring
that oxidation catalysts be installed before delivery.

An example of an initiative to retrofit all public vehicles operating in
school districts, public works, sanitation, parks, and other state and
local agencies is the New Jersey retrofit program. In February of 1998,
Governor Whitman issued an executive order establishing a retrofit
program for the states's entire public fleet of highway heavy-duty
diesels. Up to 10,000 vehicles will be retrofitted with oxidation
catalysts certified under the EPA Urban Bus Retrofit Program. All
government owned or operated diesel-powered trucks weighing over 18,000
pounds and built prior to 1994 are eligible to participate in the
program. Diesel-powered buses owned or operated by school districts are
also eligible. Retrofitting will be conducted free of charge to fleet
operators. New Jersey estimates that 400 tons of VOC and 130 tons of PM
will be reduced annually when the program is fully implemented. NOx
pollution will not be reduced since oxidation catalysts do not reduce
NOx.

The above described retrofit programs for state owned heavy-duty
vehicles are voluntary. Another means of achieving the retrofit of
public fleet vehicles is to mandate the retrofit of state and/or local
vehicles by law or executive order.

#### d. Mandatory Retrofit of State Vehicles: Laws and Executive Orders  {#d.-mandatory-retrofit-of-state-vehicles-laws-and-executive-orders .unnumbered}

While the above described New Jersey executive order does not require
the retrofit of all public vehicles (state and local agency
participation is voluntary) executive orders can establish mandatory
programs. Executive orders have been used in the Northeast states to
require the use of alternative fuel vehicles. In 1996, then
Massachusetts governor, William Weld issued an order requiring the
Department of Procurement and General Services (DPGS) to purchase
alternative fuel vehicles in the following percentages:

-   1997 -- 10% Alternative fuel

```{=html}
<!-- -->
```
-   1998 - 15% Alternative fuel and 5% zero emission vehicles (ZEVs)

-   1999 - 25% Alternative fuel and 5% ZEVs

-   2000 - 50% Alternative fuel and 10% ZEVs

-   2001 - (and later) 75% Alternative fuel and 10% ZEVs.

The Department of Environmental Protection and the Executive Office of
Transportation and Construction have the task of developing and
implementing the plan to purchase the minimum alternative fuel and ZEV
vehicles. The Massachusetts initiative covers only the purchase of new
light-duty government vehicles, however similar executive orders could
be issued to require the retrofit of heavy-duty fleet vehicles.

Like the Massachusetts executive order, New York City\'s Local Law 6
mandates the purchase of an increasing percentage of alternatively
fueled vehicles every year. The law states that in each year a
progressively greater percentage of alternative fuel vehicles must be
purchased by city agencies. The law aims to replace the entire city
fleet with alternative fuel vehicles over the next ten years. A similar
ordinance could be passed by New York or other cities requiring the
retrofit of all state or city owned heavy-duty vehicles.

##### (1) Structuring Mandatory Programs {#structuring-mandatory-programs .unnumbered}

A mandatory retrofit project of state owned vehicles might be structured
in two phases. In phase one, all state agencies would report back to the
agency organizing the retrofit project on the number of eligible
vehicles for the program and provide information on the eligible
vehicles (engine model year, size, and mileage). In phase two, a
schedule would be established requiring a certain percentage of fleet
vehicles to be retrofit in each year of the program. Another approach to
retrofitting public fleet vehicles would be to adopt a phase-in similar
to the proposed New Jersey program. In this initiative, emission control
equipment manufacturers are required as part of their contract with the
state to develop an inventory of state fleet vehicles, contact fleet
operators, and arrange for the retrofitting to take place with oversight
from state agencies.

Below, the first of the three example strategies, the retrofit of school
buses, is presented. Separate strategies are considered for gasoline and
diesel-powered buses due to different available technologies and funding
options for the two types of vehicles. A market-based incentive scheme
involving the generation of NOx credits which can be sold to finance a
retrofit project is discussed. The purpose of the example strategies is
to present a method to decide which vehicles to retrofit and how to
structure a program. As in the other examples in this chapter,
evaluating potential retrofit projects takes place in three steps:

1)  Determine the contribution of the source to the emissions inventory;

2)  Determine appropriate retrofit technologies and potential emissions
    reductions;

3)  Determine retrofit policy based upon contractual arrangements,
    ownership, and funding opportunities.

##   {#section .unnumbered}

## Example Strategy: Retrofit of School Buses {#example-strategy-retrofit-of-school-buses .unnumbered}

## Step One: Determine Contribution to Emissions Inventory {#step-one-determine-contribution-to-emissions-inventory .unnumbered}

With over 500,000 vehicles in operation nationwide school buses comprise
82% of the total bus fleet (see Figure 1). [^15]

![](media/image3.wmf)**Figure One: National Bus Population**

School buses tend to accumulate fewer miles annually then transit or
inter-urban buses but because of their substantial numbers the annual
miles traveled by this fleet is significant. Based upon TIUS data and
vehicle registration figures in the eight states that comprise the
NESCAUM region, there are an estimated 62,000 school buses that travel a
total of 682 million miles annually. Emissions data gathered during
in-use school bus testing provide a gram per mile NOx emission rate and
TIUS data provide an estimate of annual mileage traveled per bus. Using
these data, an approximate amount of pollution can be derived for the
Northeast school bus fleet. The following assumptions are made regarding
school bus operation:

1)  School buses drive 11,000 miles per year (TIUS data).

2)  School buses emit 11 grams of NOx per mile (in use testing data).
    [^16]

3)  There are 62,000 buses in the region (TIUS data).

Given these assumptions, the total NOx emissions for all school buses in
the NESCAUM states equals 8,255 tons per year, a significant contributor
to regional NOx pollution. In addition, the region's diesel powered
school buses emit a significant amount of PM.

This pollution disproportionately impacts children who represent a
particularly vulnerable group with regard to the adverse effects of air
pollution. Protecting school children from bus emissions has become an
even greater priority given that the EPA has labeled PM a probable human
carcinogen and CARB recently designated diesel particulate as a toxic
air contaminant. Further, the need to control school bus emissions is
underscored by recent regional monitoring data which indicate that
levels of benzene, formaldehyde, acrolein, acetaldehyde, and other toxic
compounds are above ambient concentrations that present potential public
health concern. Mobile sources, including school buses, are thought to
be large contributors to elevated levels of ambient toxic compounds.

Because particulate exposure increases exponentially with proximity to
the source, reducing emissions in the vicinity of children provides
critical public health benefits. For these reasons, retrofitting in-use
school buses with currently available PM, CO, and HC reducing
technologies such as oxidation catalysts and catalyzed particulate
filters can be an important strategy in minimizing harmful particulate
and toxics exposure to children and pedestrians. Furthermore, as
compared to other types of heavy-duty vehicles (such as long haul
trucks), diesel powered school buses could produce greater amounts of PM
due to their operation under "stop and go" conditions which results in
higher PM emissions on a gram per mile basis than does a more steady
state operation. Consequently for diesel buses, the installation of
emission control equipment to reduce PM should be a priority for
retrofit programs.

## Step Two: Evaluate Technology Options {#step-two-evaluate-technology-options .unnumbered}

Several retrofit technology options are available for school buses. The
case study will be split into two sections, the first dealing with
gasoline vehicles and the second with diesel powered vehicles.

### Gasoline Powered School Buses {#gasoline-powered-school-buses .unnumbered}

Approximately 44 percent of the NESCAUM school bus fleet is gasoline
powered. Options for retrofitting gasoline engines at this time are
limited to three way catalysts (TWCs) such as those used in passenger
cars. TWCs reduce NOx, CO, and HC. Gasoline powered heavy-duty engines
have historically not been equipped with TWCs (like passenger cars)
because emissions standards for these engines have not been stringent
enough to require the use of exhaust emission controls. In addition,
there has been a lack of federal pressure to reduce emissions from these
existing sources such as that provided for diesels through the Urban Bus
Retrofit Program.

At the federal level, gasoline and diesel engines have historically been
certified to the same emissions standards. In California, however, CARB
has established more stringent standards for gasoline powered vehicles
weighing less than 14,000 lbs than for the same weight diesel powered
vehicles.[^17] EPA is considering promulgating separate standards for
gasoline and diesel powered heavy-duty engines because of the different
potential reductions that can be achieved for diesel and gasoline
engines.[^18] The more stringent standards being considered by EPA are
based, in part, on the fact that TWCs can reduce NOx emissions in
gasoline powered heavy-duty engines by more than 80 percent. Existing
gasoline engines retrofitted with TWCs could also achieve an 80 percent
reduction in NOx emissions.

### Diesel Powered School Buses {#diesel-powered-school-buses .unnumbered}

A retrofit strategy for diesel powered school buses would aim to reduce
PM, HC, toxics, and CO. Currently there are no commercially available
technologies to reduce NOx from diesel powered school buses.
Commercially available retrofit devices and emerging technologies which
could in the near future reduce diesel school bus emissions are
discussed below.

Oxidation catalysts can reduce particulate emissions by 25% and HC and
CO emissions by 50%-90%. Oxidation catalysts are commercially available
at this time. Oxidation catalysts are often installed like a standard
muffler replacement on a vehicle and require no maintenance. The
installation process takes about one hour. The cost for oxidation
catalysts ranges from \$500 to \$2,000 per unit.

Catalyzed particulate filters can reduce PM emissions by as much as 90
percent, and HC and CO emissions 50 -- 90 percent. While filters have
been used widely in the mining and materials handling sectors, they have
not been used widely on highway diesel engines. There are two types of
particulate filters; passive and active. Passive filters can be
installed on vehicles which have high exhaust temperatures (380 degrees
centigrade for 25 percent of the time). Most school buses do not have
exhaust temperatures that reach these levels. However, a program to
determine whether or not this is the case would need to be undertaken
before deciding whether or not to proceed with a filter retrofit
project. The other type of particulate filter, active filters, do not
require high exhaust temperatures. The active particulate systems rely
on electrical regeneration of the filter each night and thus requires
the availability of shore power. New active filters are being designed
so that only twenty minutes of regeneration will be needed for every
eight hours of operation. This will still require that a retrofitted bus
be near an outlet once every two days (depending upon usage) for 20
minutes. Filters currently cost up to \$10,000, however, economies of
scale could reduce this cost to below \$1,000.

Certain fuel additives have been shown to reduce NOx and PM emissions in
heavy-duty engines. Increasing the cetane number from 42 to 50 can
achieve a 6 percent reduction in NOx emissions, as well as an 8 percent
reduction in PM. In addition, several additives are registered with EPA
that reduce heavy-duty diesel emissions. Another strategy, emulsion of
diesel fuel, has been shown to reduce NOx emissions 30 percent. The use
of low sulfur fuel reduces particulate pollution from heavy-duty engines
and enhances the performance capabilities of oxidation catalysts and
catalyzed filters.

Finally, other potential options for retrofitting diesel buses include
selective catalytic reduction and lean NOx catalysts. However, the
application of SCR in mobile sources is very new and thus there is a
need for significant pilot program implementation before a large scale
retrofit is considered. Similarly, lean NOx catalysts are still in the
development stage and pilot programs for in-use vehicles are needed to
evaluate the emission reduction potential of this technology.

## Step Three: Evaluate Policy and Funding Options {#step-three-evaluate-policy-and-funding-options .unnumbered}

School districts either own or contract out the operation of their bus
fleets. For school buses that are operated by contractors, retrofit
could be required as a condition of contract award. For those buses
operated by school districts, a retrofit policy could be adopted by the
district. Alternatively, legislation could be passed requiring the
retrofit of all school buses in-state.

Awareness and concern about school bus emissions varies considerably
among school districts. Some cities such as Syracuse, NY and Erie, PA
have funded the purchase of compressed natural gas powered school buses
in an effort to reduce student exposure to bus emissions. More
frequently, school districts have minimal budgets and do not place a
high priority on reducing school bus emissions. As a result, in most
instances, funding for retrofit projects will need to come from the
state or federal government. The need for state and/or federal funding
is underscored by the existence of statutes which require school
districts to be compensated for complying with mandatory programs. For
example, Proposition 2 1/2 in Massachusetts requires that the
Commonwealth of Massachusetts fund mandatory programs imposed on
municipalities. New Hampshire has similar legislation which reads:

"Any state agency, when administering federal mandates, shall not
mandate or assign to any political subdivision any new, expanded or
modified programs or responsibilities additional to the federal mandate
in such a way as to necessitate additional local expenditures by the
political subdivision unless such programs or responsibilities are fully
funded by the state or unless such programs or responsibilities are
approved for funding by a vote of the local legislative body of the
political subdivision" (Part 1, Article 28-a of the New Hampshire
Constitution ).

In the next section a market strategy for funding the retrofit of
gasoline powered school buses is discussed.

**Market strategy for funding gasoline powered school bus retrofit**

Since gasoline powered vehicles could be retrofitted with TWCs, it might
be possible to develop NOx credits from a gasoline powered school bus
retrofit program. Due to the large number of gasoline school buses
operating in the NESCAUM region, there is potential to generate
significant mobile source NOx emission reductions through such a
retrofit initiative. Table V-1 shows the potential NOx benefits from the
retrofit of gasoline powered school buses in the region. Consideration
needs to be given to the fact that gasoline powered school buses may not
operate during the entire ozone season. In order to properly estimate
potential benefits of this retrofit program, surveys of school bus
activity during the summer months should be undertaken.

**Table V-1: Gasoline School Bus NOx Emissions (NESCAUM Region)**

  -------------- ------------- ---------------------- ---------------------------
  **Number of    **NOx         **NOx emissions        **NOx emissions in
  gasoline buses emissions     tons/year/bus**[^19]   tons/year for the NESCAUM
  (NESCAUM       g/mi per                             bus fleet**
  region)**      bus**                                

  27,280         11 g/mi       .13 tons/yr            3,632 tons
  -------------- ------------- ---------------------- ---------------------------

Assuming a conservative NOx reduction rate of 80 percent, if the entire
fleet of gasoline powered buses in the region were retrofitted with
oxidation catalysts, 2,900 tons of NOx could be removed from the
region's air each year. Over the life of the buses in the region
(assuming they operate for six years after being retrofitted) this would
equal a total NOx emission reduction of 17,433 tons.

Below, an analysis of the cost effectiveness of funding retrofits
through NOx credit sales is presented. First, the cost of retrofitting
with TWCs must be estimated. TWCs can be installed for approximately
\$500 per unit on most engine models. For some engine configurations,
the retrofit of existing engines with TWCs may also require changes to
the fuel system to ensure that the engines run at stoichiometry
(balanced air/fuel ratio). These changes would increase the cost of
retrofitting from \$500 to \$1,500 per bus. Using these estimates, the
cost per ton of NOx reduced is calculated for the retrofit of gasoline
school buses and is presented in following table.

**Table V-2: Cost Effectiveness of TWC NOx Credit Generation**

  --------------------- --------------------- ----------------------------
  **Cost per bus        **Tons of NOx reduced **Cost per ton of NOx
  retrofit**            per bus (over six     reduced**
                        years)**              

  \$500 (without fuel   .62 tons              \$806 per ton
  system changes)                             

  \$1,500 (including    .62 tons              \$2,419 per ton
  fuel system changes)                        
  --------------------- --------------------- ----------------------------

At \$806 per ton, the retrofit of gasoline powered school buses
represents a very cost-effective NOx reduction strategy, especially
compared to other mobile source options. This cost falls within the EPA
definition of "highly cost effective" (defined as \$2,000 per ton)
methods for reducing NOx emissions under the 1998 Section 110 SIP
call[^20] Where fuel system changes are needed in addition to the
catalyst, the cost-effectiveness is calculated at \$2,419 per ton. In
this scenario, the cost per ton of NOx reduced is higher than the EPA
definition of highly cost effective and thus other options for reducing
NOx could be more cost competitive. The above calculations do not factor
in reductions in HC that will be achieved through retrofitting school
buses with TWC. If these reductions are factored in, the overall
cost-effectiveness of this strategy should be even more favorable.

For gasoline powered vehicles, states could initiate a retrofit program
which would quantify NOx reductions for possible sale as mobile source
emission reduction credits. In addition to selling or trading NOx
credits, federal and state funding such as CMAQ, bond initiatives, and
other sources could be used to fund a gasoline powered school bus
retrofit project.

Given the lack of experience in retrofitting heavy-duty gasoline
engines, a pilot program should be undertaken before attempting to
implement large-scale retrofit initiatives. A pilot program would: (1)
provide more reliable cost estimates for the retrofitting of gasoline
school bus engines with three way catalysts; (2) demonstrate the
durability and acceptability of the catalyst technology; and (3) verify
the emission reductions that can be achieved and the strategy's
cost-effectiveness.

**Funding options for diesel powered school buses**

Currently available retrofit strategies for diesel school buses do not
reduce NOx emissions and thus there is little opportunity to pay for
diesel vehicle retrofits through a sale of pollution credits. However,
such projects could be funded by CMAQ or other federal and/or state
mechanisms. The other options described later in this chapter such as
bond issues, supplemental environmental projects (SEP) funds, and
dedicated funds could all be used to finance the retrofit of diesel
powered school buses in the region.

### Summary {#summary .unnumbered}

The retrofit of school buses offers several advantages over other fleets
of heavy-duty vehicles. First, retrofitting school buses would reduce
direct exposure to children from heavy-duty vehicle emissions. Second,
the buses are publicly owned or operated thus simplifying regulatory
action to initiate a retrofit project for these vehicles. Third, the bus
engines are similar (approximately 4 models comprise the majority of the
600,000 vehicle engines nationwide). This fact would simplify any large
scale retrofit project. Fourth, the buses travel a substantial number of
miles and thus retrofitting would provide a significant environmental
benefit. Such retrofit projects would most likely have to be funded by
state and/or federal funds.

### Retrofit of Privately Owned Vehicles 

This section discusses strategies for designing, funding, and
implementing the retrofitting of private fleet vehicles. The section
focuses in part on the legal mechanisms that would be needed and on
mechanisms such as cap and trade programs to provide emissions
reductions in private fleets. Cap and trade and/or fee based programs
would require emissions reductions from fleets which could be complied
with through the use of a variety of means, retrofitting being one of
these mechanisms.

The federal programs adopted to encourage the use of incentives to
reduce mobile source emissions (EIP and VMEP which are described in
Section III) assume that states will provide incentives for private
fleet operators to reduce emissions from their vehicles. This section
discusses both incentives and mandatory programs that states can
implement to reduce heavy-duty engine emissions from private fleets.
Under VMEP and EIP, the emission benefits from both incentive and
mandatory programs could be used for SIP credit purposes. The first
section provides a discussion of various incentives that can be provided
to private fleets and the second section describes mandatory programs.

#### Market Incentives

Traditional "command and control" approaches to regulating pollution
yield emission reductions at a direct financial cost to the regulated
entity. Because companies are more competitive when their costs are
lower, they have a disincentive to reduce emissions. However, if
companies can realize financial benefits or competitive advantage from
emission control initiatives, they will have an economic incentive to
pursue such reductions. The goal of market-based programs is to provide
the incentive to utilize pollution control systems and approaches. From
an economic standpoint, market approaches can "internalize" the cost of
air pollution. These approaches offer three primary advantages over
traditional command and control regulation by:

1.  providing an incentive for companies to achieve reductions in excess
    of the level required by law or earlier than required;

2.  increasing compliance flexibility for regulated entities: those that
    can make reductions cost-effectively, do so; those for whom
    reductions are prohibitively expensive can turn to the market rather
    than apply technology; and

3.  creating financial value for additional emission reductions that
    will lead industry to find new solutions to reducing its emissions.

Although considerable progress has been made in developing effective
technologies to reduce vehicle pollution, control programs have often
fallen short of their full potential. This failure is related to the
fact that market signals tend not to reinforce regulations and often
actually work against these regulations. For the heavy-duty sector,
regulators should examine opportunities to use the market system to
induce private and public entities to make transportation choices that
are aligned with other societal objectives, including healthful air
quality and energy efficiency and diversity. This approach is designed
to incorporate the social and environmental costs, currently borne by
the general public, into business and government decisions related to
transportation.

To maximize the potential impact of incentive programs for heavy-duty
vehicles, it is important to understand the fundamental nature of this
sector and how it differs from that for light-duty vehicles. For
example, since a large portion of the emissions from light-duty vehicles
arise from "discretionary" vehicle use, incentives for this sector may
target reductions in vehicle use by encouraging individual to either
combine trips or pursue alternate, cleaner means of transportation. In
the case of heavy-duty vehicles operated almost exclusively for
commercial purposes, business-related incentives are already in place to
encourage the efficient use of these vehicles and typically have little
to do with concerns about air quality. Because the number of trips and
mileage accumulated by the fleet represent a basic cost of doing
business, companies seek to minimize both in order to maximize their
profits. Acknowledging this and other differences provides for a more
focused evaluation of market-based options for this sector.

###### (1) Preferential Parking {#preferential-parking .unnumbered}

Parking incentives programs could be initiated by municipalities to
provide "clean" heavy-duty vehicles preferential access to the most
conveniently located parking spaces. For example, retrofitted vehicles
could be given preferential parking on city streets, at airports and
other \"traffic magnets.\" Preferential parking status could be
triggered by an emissions level that approaches that of CNG engines (for
example). Vehicles meeting the criteria would be given some form of
identification for enforcement purposes. Because "time is money," the
provision of preferential parking to reduce travel and wait time could
serve as a viable incentive for companies to retrofit some segments of
their fleets with emission control devices. The incentive would
obviously be greater for fleets comprised of local delivery vehicles.

###### (2) "Green" Contracts {#green-contracts .unnumbered}

States and/or state agencies may require retrofitting of vehicles
operating on public works projects as a condition of contract award.
This strategy is important since it greatly expands the numbers of
eligible vehicles working on public works projects that can be
retrofitted, and it allows for introduction of retrofit devices into
private fleets. This approach will be detailed in example strategy B.
Another approach is to encourage retrofitting during the bidding process
for public works projects. For example, waste hauling, student
transport, and street repair/maintenance contracts are often awarded by
states and/or municipalities to private fleets. The heavy-duty vehicles
in these fleets could be retrofitted with emission control equipment.
State and city contracts could include provisions awarding additional
"points" on a bid by companies that include retrofitted vehicles in
their project fleets. Given the importance of government contract work
for many private fleets, properly constructed preferential contract
awards appear to represent a potentially strong incentive mechanism.
Those companies whose fleets are comprised partly or entirely of
retrofitted vehicles would have an advantage over companies with only
conventional diesel vehicles not equipped with emission control devices.

###### (3) Differential Tolls {#differential-tolls .unnumbered}

This approach is similar to congestion pricing programs that apply
differential usage fees for vehicles using roads, tunnels and bridges,
depending on the time of travel. Higher fees are charged during peak
traffic hours, with a sequential reduction in the fee as congestion
levels are reduced. Under an emissions-based scheme, "clean" heavy-duty
vehicles would pay lower tolls than comparable higher emitting vehicles.
A process would need to be designed to ensure that only trucks with
certified retrofit equipment receive a discount. Such a system would
require that electronic debit systems could "recognize" a retrofitted
vehicle. This might require significant changes be made to the toll
collection system. Program implementation would require up-front capital
for public awareness, the development of fee structures and an
enforcement program. If fees for dirtier vehicles were increased, the
program could be revenue neutral once established.

Recently, congestion pricing has become a reality with the construction
of new, private toll roads with variable fees and the installation of
electronic toll debit systems in several cities. In New York City, for
example, "EZ-Pass" is an automatic debit system used on the toll bridges
in the city. Recently, New York initiated a congestion pricing scheme on
the Tappan Zee bridge through the EZ-Pass system. During off peak times,
trucks are being charged a lower fee to enter the city than during peak
times. This fee system could be revised to automatically charge a lower
rate to trucks that are retrofitted. The EZ Pass administration would
need to keep records indicating which EZ Pass holding trucks are
retrofitted. In addition, a system of qualifying emission control
equipment would need to be developed. The third party verification
process described in Chapters I -- IV of this document could be one
option for the qualification of emission control devices.

###### (4) HOV Lane Use {#hov-lane-use .unnumbered}

High occupancy vehicle lanes are designated freeway lanes reserved for
use by vehicles with two or more passengers (buses/van/carpools), often
only during peak commuting hours. In some cities, natural gas vehicles
are being given access to HOV lanes, regardless of the number of
passengers, as an incentive to purchase and use these vehicles.
Heavy-duty vehicles retrofitted with certified or verified emission
control devices could also be given access to HOV lanes.

*(5) State Tax Incentives* for the Purchase of Retrofit Equipment

In some states, tax incentives have been established for fleet operators
who purchase alternative fuel vehicles. Similar incentives could be
adopted for the purchase of retrofit devices. A tax credit toward the
purchase of a retrofit device would reduce the taxable income for the
state taxpayer equivalent to a portion or the full cost of the retrofit
equipment. This measure would provide an incentive to taxpayers to
purchase retrofit devices which is not realized at the point of
purchase, but separately with submission of state income tax forms.
Under this measure, the potential savings are not reflected in the
purchase price. As a state-wide program, individuals and businesses who
do not support retrofit of heavy-duty diesels will be subsidizing
retrofit device use through their taxes since the costs of such a
measure would be in the reduction of the tax base for the state. As with
all state tax credits, the incentive would apply only to vehicles
registered in-state.

States could increase the benefit of the above described market
mechanisms by offering the incentives as a package. For example, the
economic benefit gained from enjoying a lower toll rate may be minimal
compared to the cost of retrofitting a truck. However, the economic
benefit of variable toll rates, tax incentives, and preferential parking
combined could more than compensate a truck owner for the initial cost
of a retrofit device.

###### (6) Emissions Budgets and Caps {#emissions-budgets-and-caps .unnumbered}

This section describes the use of budgets and caps to achieve reductions
in emissions from projects or activities that employ heavy-duty
vehicles. In a budget system, \"target\" emission levels are established
for regulated sources; incentives are offered to over-comply with target
levels and disincentives levied against those whose emissions exceed the
target. Such schemes are likely to be more cost-effective in the
presence of a trading system. Emissions trading among regulated entities
encourages the most cost-effective solutions by enabling the regulated
community the option of purchasing credits to offset emissions from
sources with fewer or more expensive control options. The ability to
generate, use and sell emission credits provides the incentive for
over-compliance through strategies such as engine retrofit. The primary
features of such a trading system include:

-   clearly identified source category(ies);

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-   a target emissions reduction goal for the affected sources over a
    prescribed time period;

-   an allocation system for the distribution of emissions allowances to
    the affected sources; and

-   a monitoring and "true-up" process.

Since the emissions budget approach provides certainty regarding the
level of emissions reductions from the targeted sources in a given time
period, states are able to rely on emissions budget programs as
enforceable control measures in their SIPs. Examples of some possible
heavy-duty emissions budget strategies are discussed below.

As explained, market-based strategies are intended to provide an
economic incentive to implement control options capable of reducing
emissions beyond required levels. Absent the incentive, a less expensive
control technology might be selected that nominally meets the emissions
limit but fails to achieve surplus reductions. The following examples
highlight programs that could be adopted to encourage the use of low
emission engine and aftertreatment technology.

####### Example Emissions Budget Programs

As states begin to implement inspection and maintenance (I/M) programs
for heavy-duty trucks and buses, they might consider options designed to
encourage the use of emission retrofit technologies. One such option
would be the establishment of a variable emission fee system whereby,
owners of vehicles not meeting the prescribed limit for a particular
pollutant would have to pay a fee and those with emissions significantly
below the standard would receive a rebate. To ensure the repair of gross
emitters, a maximum emissions level would have to be established.

One approach would involve a two-tiered emission standard concept. The
primary standard would represent the ultimate pass/fail level for NOx
and PM emissions; any vehicle failing this standard would have to have
the engine repaired and re-tested. The secondary, more stringent
standard would be used to assess an incremental emission fee or rebate.

The above described program would depend upon the existence of state
heavy-duty vehicle periodic inspection programs for gaseous and
particulate emissions. While such programs are likely sometime in the
future, states in the region are focused currently on developing smoke
inspection programs. A possible approach to establishing an inspection
program for NOx, HC, and CO could be to use existing water break
dynomometers in heavy-duty repair facilities in conjunction with the
purchase of electrochemical and/or non-dispersive infrared detectors for
NOx, CO, and HC emissions. Particulate emissions could be measured with
a gravimetric method. California has been directed by its legislature to
explore options for heavy-duty vehicle emissions testing. The results of
the California study could provide states in the Northeast with options
for the development of gaseous inspection programs in the region.

The emissions fee approach could also be used in conjunction with the
smoke opacity testing programs being implemented in some states and
considered in many others in the Northeast and elsewhere. A roadside
smoke testing program has the added advantage of covering both in-state
and out-of-state vehicles. This approach provides incentives for truck
operators to apply any number of control options to their vehicles to
limit emissions. Alternatives may include converting a portion of their
fleet to cleaner fuels, the purchase of low emitting engines, adding
aftertreatment devices, or through improved vehicle maintenance
practices. As in the above described program to establish a variable fee
system for particulate emissions, this program would establish an
incremental emission fee or rebate for smoke emissions from heavy-duty
diesel vehicles.

For example, the smoke standards might be set at 40 percent opacity
(primary) and 20 percent opacity (secondary). A vehicle emitting 60
percent opacity would fail the test and the owner would be required to
repair the emission failure. A truck with a PM measurement of 30 percent
opacity would pass the primary standard, but would be assessed an
emissions fee based on the product of 10 percent opacity (difference
between the measured emissions and the secondary standard) and the
number of miles traveled since the last inspection. A truck with a PM
measurement of 10 percent opacity would receive a rebate, based on the
10 percent emission rate difference multiplied by the number of miles
traveled since the last inspection. These programs could cover both
private and publicly owned vehicles. In this program standard
opacimeters being used at roadside heavy-duty vehicle inspection
stations would be used as the measurement technology. This option may be
difficult to implement for several reasons (for example, some states do
not test vehicles which are emitting very low levels of smoke) but it
does provide an example of how an emissions budget approach could be
taken.

### **b. Mandatory Retrofit Programs for Private Fleets** {#b.-mandatory-retrofit-programs-for-private-fleets .unnumbered}

The above described programs are all market based incentives and thus
private fleets would not be required by law to participate. This section
describes mandatory programs that states may be able to initiate under
the CAAA and state air pollution control laws. States are pre-empted
under Section 209 of the Clean Air Act Amendments from requiring
controls of new heavy-duty engine emissions. However, Section 209
provides states with the authority to require controls for in-use
heavy-duty vehicles. Under the Clean Air Act, states may be able to
undertake mandatory retrofit programs for in-use private fleet vehicles
as long as the burden of the program falls on vehicle owners, rather
than engine manufacturers. However, there is no case law on this subject
and thus a challenge to any mandatory program could constitute a test
case. State law must also provide the authority to require retrofit of
heavy-duty vehicles.

States have authority to regulate pollution under state air pollution
control laws which derive from the police powers of the state to
intervene in issues of health, safety, and welfare. Some state air
pollution control laws provide broad power to regulate sources which
cause or contribute to conditions of air pollution. States with broad
power to regulate under the state air pollution control laws have the
authority to establish mandatory retrofit programs. States without such
broad authority may need additional legislative authority to establish a
mandatory fleet retrofit program. States may also have the authority to
require the retrofit of heavy-duty vehicles under state motor vehicle
laws. Conversely, if a state mandatory retrofit program makes
registration contingent upon vehicle retrofit then research will be
necessary to ensure that the statute allows for such programs.

Several issues must be considered when states structure engine retrofit
strategies for private fleets of heavy-duty vehicles, including:
environmental and public health goals; fleet characterization; phase-in
mechanisms; and compliance/enforcement approaches. Each of the
considerations is discussed in some detail below.

###### (1) Environmental and Public Health Goals {#environmental-and-public-health-goals .unnumbered}

The size and nature of a heavy-duty engine retrofit program will largely
be a function of the pollutants targeted and the level of emission
reductions desired. For this sector, the primary concerns are NOx and
particulate emissions. States in the Northeast and elsewhere will need
to identify new control options for ozone precursors as part of the SIP
process related to the new eight-hour NAAQS for this pollutant. One
control option could be to reduce NOx emissions from diesel generators
using currently available SCR technology. There are hundreds of
generators located in the region which emit significant amounts of NOx.
Similarly, NOx reductions from a truck and bus retrofit might represent
a viable ozone control strategy.

In addition to NOx control, achieving reductions in particulates is of
interest both for future attainment of the new fine particle NAAQS and
to reduce direct exposure to the harmful constituents in diesel exhaust.
The first retrofit strategy detailed in this chapter (school buses)
would have as its main goal the reduction of children's direct exposure
to PM and toxics. This and other projects could be established to reduce
urban residents' exposure to PM (like the Urban Bus Program) and to
address environmental justice concerns. Given that different retrofit
technologies target different pollutants, the goals of the retrofit
program must be clearly articulated.

##### (2) Fleet Characterization {#fleet-characterization .unnumbered}

As a first step in crafting appropriate regulations for this sector,
states will need to develop detailed profiles of privately owned fleets
of trucks and buses. In many states, this represents a difficult
challenge since departments of motor vehicles often do not collect and
report fleet information to the level of detail needed for this type of
program. Fleet profiles are critical for several reasons. First, they
enable regulators to determine the breakdown of engine models powering
the fleet in order to assess the availability of appropriate retrofit
kits. Second, vehicles with newer and lower emitting engines may not
need to be included if the incremental reductions associated with the
installation of retrofit technologies cannot be cost-effectively
achieved. Finally, the fleet characterization enables regulators to
predict the emission benefits associated with a retrofit initiative.

A key challenge to developing accurate fleet profiles relates to the
inter-state travel typical of heavy-duty fleet vehicles. Since
individual states can only require retrofits for those vehicles
registered in their jurisdiction, a significant portion of the
heavy-duty vehicles operating on their roadways would not be subject to
these rules. Emission inventories for highway motor vehicles are often
based on traffic counts taken by state departments of transportation.
These counts do not distinguish between vehicles registered in-state and
out-of-state. Similarly, vehicles registered in a state with a retrofit
requirement may spend a considerable portion of their time operating in
other jurisdictions. Consequently, the benefit estimated for a private
fleet retrofit program must account for these factors. One approach to
this issue could be the establishment of a regional retrofit program.
Such a program would facilitate fleet characterization for states and
yield increased environmental benefits for all states in the region.

#### (3) Phase-in Mechanisms {#phase-in-mechanisms .unnumbered}

Given the potential adverse consequences of a requirement for all fleet
vehicles to comply according to the same time schedule, a phase-in
approach would appear preferable for mandatory engine retrofit programs.
Several models exist for structuring a phase-in component for such a
program. Retrofits could be required only at the time of rebuild or
according to a regular schedule based on a gradual retrofit of fleet
vehicles. This determination could be predicated on the age of engine
models used in fleet vehicles. Alternatively, the scope of the program
could be determined according to cost criteria or the availability of a
specified number of certified retrofit kits. For example, additional
geographic areas or smaller fleets could be brought into the program if
the cost of retrofit technology decreased by some pre-determined amount
or the number of certified kits exceeded a given threshold.

The phase-in approach used in Stage II vapor recovery programs
represents a model that may be adaptable for heavy-duty engine retrofit
programs. The Stage II program, requiring filling stations to install
evaporative emission control devices on gasoline filling nozzles, was
phased-in according to the gasoline throughput total of individual
gasoline retailers. While the cutpoints for station size tended to
differ in individual state programs, the concept of requiring earlier
installation at larger stations was used in most programs. This approach
served several purposes: (1) it spread out the compliance period to
minimize distribution impacts; (2) it accounted for the fact that only a
limited number of contractors existed to conduct the physical work; and
(3) it ensured that the bulk of the emission reductions were realized in
the early years of the program. Size thresholds could be incorporated in
a mandatory retrofit program using the number of vehicles to determine
when each fleet must comply. For example, large fleets of over 100
vehicles might be required to comply in the first year of the program,
medium size fleets within three years, and small fleets (under ten
vehicles) within five years of program adoption.

#### (4) Compliance and Enforcement {#compliance-and-enforcement .unnumbered}

Given the program similarities, the compliance and enforcement
strategies used in the federal Urban Bus Retrofit Program would appear
to represent viable options for retrofit programs targeting private
fleets of trucks and buses. The Urban Bus Program offers two primary
compliance options for fleet operators: a performance-based approach and
an emissions averaging scheme. While this initiative targets only
particulate emissions, the compliance approaches used would be suitable
for other pollutants of interest such as NOx.

The performance-based approach in the federal bus program requires
affected vehicles to meet a particulate emission standard of 0.1
g/bhp-hr, effective at the time of engine rebuild or replacement. The
requirement is automatically waived if no equipment with a cost of less
than \$7,940 has been certified to enable compliance with the 0.1
g/bhp-hr standard. The Urban Bus program contains fallback requirements
for "waived" engine families. These waived urban bus engines must be
retrofit with equipment that provides a 25 percent reduction in
particulate emissions, relative to levels emitted with the original
engine configuration. In 1998, the first 0.1 gram technology was
certified with the Urban Bus Program, thus providing the technology for
compliance with the more stringent standard for many engine families.

The second compliance option within the Urban Bus program is an
emissions averaging system requiring affected urban bus operators to
meet an annual average fleet particulate emissions level. Under this
scheme, each affected fleet operator must meet a declining annual
average emission target level for fleets (TLF). The TLF is calculated
(in grams per brake horsepower-hour) for each year of the program
beginning in 1996. For any given year, the average particulate emissions
level from all of the operator's pre-1994 model year urban buses must be
at or below the TLF established for that calendar year. An operator's
TLF for a particular calendar year is calculated as follows:

> ^1993^
>
> TLF~CY~ = ( Σ (B~MY~) x (WP~MY~))

~MY=CY-15~

~\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--~

~1993~

Σ (B~MY~)

~MY=CY-15~

Where:

*CY* is the calendar year

*MY* is the model year

*B~MY~* is the number of urban buses of that model year in the
operator's fleet as of January 1, 1995, plus any urban buses of that
model year added to the fleet after January 1, 1995.

*WP~MY~* is the weighted average of projected particulate emissions for
urban buses of that model year.

The TLF for a particular calendar year is calculated based on the EPA's
determination of the projected emission level for each engine model year
in the operator's pre-1994 model year urban bus fleet. Operators must
comply with a TLF until all pre-1994 urban buses have been retired from
the operator's fleet.

Either of these methods included in the federal Urban Bus program could
be adapted by states for enforcing a mandatory retrofit program for
private fleet vehicles. Another approach might involve the use of fleet
emissions caps as described on page 49. This approach is not necessarily
technology-based. Rather, the goal is to reduce total emissions from a
fleet through the establishment of an emissions cap and allowing the
fleet operator to comply through any combination of emission reduction
strategies. Retrofitting would be one of the possible strategies. A
detailed discussion of the emissions budget system is included in the
following section on nonroad engine retrofitting.

### **Summary of Highway Vehicle Retrofit Options** {#summary-of-highway-vehicle-retrofit-options .unnumbered}

This section described several options states can use to introduce
retrofit devices into the existing heavy-duty fleet and methods to
structure retrofit programs. Some of the descriptions were of actual,
ongoing projects and others were hypothetical examples (as in the
example school bus retrofit strategy). Some of the options presented can
be used now by states to achieve real reductions from heavy-duty
vehicles. Others require significant program development.

All of the current retrofit projects being undertaken by states (New
Jersey Department of Transportation, New York City Transit Authority,
Massachusetts Highway Department, and Manchester Airport programs) are
to retrofit public fleet vehicles or fleets that are under contract to
state and/or localities. Retrofit of public fleets poses few legal and
administrative challenges to states. For this reason, this approach is
currently the most viable and represents an important starting point for
states that desire to increase the use of retrofit devices. Since a
significant number of heavy-duty vehicles are publicly owned,
retrofitting these trucks and buses could provide significant emissions
reductions (as is seen from the New Jersey emission reduction estimates)
and could establish the viability of retrofit programs. Furthermore, if
state and local retrofit programs are expanded to include all vehicles
under contract to states, the emissions reduction benefits of retrofit
projects can be greatly increased. Expanding retrofit requirements to
state contracted fleets also allows for the introduction of retrofit
devices into private fleets without the legal and administrative
challenges associated with initiating mandatory programs.

The market incentive options outlined in this chapter were hypothetical
only but state development of such programs in the future could prove to
be important methods for encouraging retrofitting. Market incentive
programs, like programs to retrofit state fleet vehicles, do not pose
the legal challenges that mandatory programs do and would allow states
to encourage the retrofit of private fleet vehicles. Some of the market
incentive examples used in the chapter would require substantial program
development before they could be considered by states. For example, the
fleet emissions cap scheme would require the development of state-wide
inspection programs for gaseous and possibly particulate emissions.

The program outlined in this section which would be the most difficult
for states to initiate is a mandatory retrofit requirement for privately
owned heavy-duty vehicles. Initiating a mandatory program would require
legal research into authority to require retrofitting under the CAAA and
state air pollution control laws. In addition, such programs would
require inter-agency cooperation to set up the legal mechanism for
linking retrofit to registration renewal. This is not to say that such
programs cannot be undertaken. Rather, mandatory programs represent a
long term option as opposed to a near term option.

At this time, retrofit technologies for trucks and buses are limited to
oxidation catalysts and, for some vehicles, particulate filters. New
applications of existing technologies, i.e.: retrofit of HDD trucks with
selective catalytic reduction (as opposed to stationary generators); and
TWC use in heavy-duty gasoline engines (as opposed to gasoline passenger
cars) may in the future reduce truck emissions by 90 percent. However,
demonstrations need to be carried out before these technologies can be
broadly applied to truck engines.

The next section describes state programs to encourage the use of
retrofit devices in nonroad vehicles such as construction equipment and
marine vessels. Since a precedent setting lawsuit significantly
restricted states' abilities to require retrofit of nonroad engines,
retrofit strategies for these engines are somewhat different than for
highway engines.

## Nonroad Retrofit Strategies

NESCAUM's 1997 report entitled *Heavy Duty Engine Emissions in the
Northeast* concluded that nonroad engines emit twenty percent of all NOx
in the region. In addition, EPA estimates that nonroad engines emit 48
percent of mobile source particle pollution.[^21] Since nonroad
equipment powered by diesel engines tend to have relatively long useful
lives, retrofit of the in-use fleet appears to represent an important
tool for reducing nonroad engine pollution. This section focuses on
strategies for reducing emissions from in-use diesel engines used in
airport ground support vehicles, construction equipment and marine
vessels. These fleets are targeted because they are important components
of the NOx and PM emission inventories in the Northeast and because the
nature of their operation lends to a variety of feasible retrofit
options. An important constraint when developing in-use strategies for
nonroad equipment is the federal preemption precluding states from
mandating the retrofit of nonroad engines. The following section
describes this preemption and presents various alternatives to mandatory
retrofit.

### 1. State Preemption from Requiring Retrofit of Nonroad Engines {#state-preemption-from-requiring-retrofit-of-nonroad-engines .unnumbered}

Historically, states have been given authority under the CAAA to
regulate in-use engine emissions from mobile sources through inspection
and maintenance programs, in-use emissions standards, and other means.
However, a recent lawsuit brought by the Engine Manufacturers
Association (EMA) [^22] resulted in a change to the nonroad engine rule
which preempts states from requiring the retrofit of in-use nonroad
engines to control emissions. [^23]

In June, 1994, EPA issued regulations covering emissions from heavy-duty
nonroad engines. This regulation precluded individual states from
adopting regulations governing emissions from new engines. Two years
later, in the case [Engine Manufacturers Association v.
EPA]{.underline}, the DC Court of Appeals held that the preemption
extends to both new *and* in-use engines. In 62 FR, EPA states "EPA
believes that states are precluded from requiring retrofitting of used
nonroad engines..." While this decision imposes considerable constraints
on state authority to regulate emission from this sector, states retain
some options with regard to reducing in-use emissions from nonroad
engines. In the [EMA]{.underline} case, the court upheld that portion of
EPA's rule allowing states to regulate the use and operation of nonroad
engines. The rule reads:

"EPA believes that states are not precluded under section 209 from
regulating the use and operation of nonroad engines, such as regulations
on hours of usage, daily mass emission limits, or sulfur limits on fuel;
nor are permits regulating such operations precluded, once the engine is
no longer new."

According to the rule, while states cannot explicitly mandate the
retrofit of in-use nonroad engines, they can establish programs to
encourage the use of engine retrofit technology in construction,
agricultural and other nonroad equipment such as diesel generators. One
alternative is the use of emission caps and/or budgets. With regard to
nonroad engines, caps or budgets could be established for individual
fleets, for specific projects, or by activity. States are cautioned that
daily mass emission limits should not be set so low that it is
impossible to comply with them absent the use of retrofits. [^24]

### 2. Developing Emissions Budgets to Reduce Nonroad Emissions {#developing-emissions-budgets-to-reduce-nonroad-emissions .unnumbered}

This section describes the use of budgets and caps to achieve reductions
in emissions from projects or activities that employ heavy-duty nonroad
vehicles and equipment. The use of economic incentives is likely to be
most effective when combined with the establishment of emission caps
and/or budgets and they are likely to be more cost-effective in the
presence of a trading system. States might consider adopting NOx/PM
emissions budgets for nonroad fleets operating within the state or a
given nonattainment area. An emissions budget program for these fleets
would require: identifying target fleets; establishing a baseline of
emissions for the sector; assessing reduction needs and options;
establishing the future year emissions target; and allocating emissions
to each covered fleet.

To affect reductions from this source sector, the target budget must be
carefully calculated to ensure that actual emissions reductions take
place. The budget approach, a declining mass emission target, or a
declining fleet average emission rate gives the owner/operator the
discretion to obtain reductions wherever they can be achieved most
cost-effectively. Especially when implemented on a broad scale, this
flexibility allows the market to drive demand for cleaner technology and
fuels, without agencies mandating specific technologies or
reformulations.

Because of the aggregated emissions tracking used by the budget system,
reductions that are relatively expensive from some vehicle categories or
models can be foregone in favor of less expensive reductions from
others. Designing a declining total over time provides ongoing
incentives for improvements in emissions reduction options for the
affected sources. The effectiveness of this approach is contingent upon
the presence of a target source category with units that are of a known
quantity, whose ownership/operation is centralized, and that operate
within a limited geographic area. These characteristics can be met by
certain heavy-duty nonroad vehicles especially construction and marine
fleets such as water shuttle ferries.

The lack of good inventories for either nonroad equipment or emissions
from these units represents a difficult obstacle to the development of
accurate budgets for this sector. A budget system is not viable without
good emissions and fleet data. However, the recent work conducted by EPA
for their NONROAD emissions model and NESCAUM's efforts to characterize
and quantify nonroad fleets in the region, provide better data and
techniques for improving these inventories.[^25]

#### a. Retrofit of Airport Vehicles {#a.-retrofit-of-airport-vehicles .unnumbered}

The collective operations of airport vehicles contribute substantially
to emissions of several criteria pollutants. The ability to regulate
these emissions has recently become of greater interest to the USEPA,
which has begun to work cooperatively with the Federal Aviation
Administration (FAA) to evaluate airport-related activities and
emissions. Legislation exists that provides an important source of funds
to support emissions reductions at airports. In 1990, Congress passed
the Airport Improvement Program \[49 U.S.C. App. 2202(a)(2)\]. The
original program provided funding for \"any construction,
reconstruction, repair, or improvement of an airport (or any purchase of
capital equipment for an airport) which is necessary for compliance with
the responsibilities of the operator or owner of the airport\...\"
Further authorizing legislation in 1992 added the CAA as one of the
compliance obligations for which the program could fund improvements.

The vast majority of airport vehicles are typically fueled by gasoline
or diesel. However, pressure to reduce emissions from airport ground
service equipment and ground transportation vehicles has begun to mount
as a result of the desire to accommodate new flights and more parking.
In the 1970's the Massachusetts Federal Implementation Plan (FIP)
imposed a parking freeze at Logan Airport in order to reduce emissions
from the airport. This parking freeze is still in effect. Analysis
conducted for the California\'s Federal Implementation Plan determined
that airports in the affected areas would need to reduce emissions from
20% to 45% from their 1990 levels to meet FIP targets. Effective
approaches identified for airports in California could serve as a model
for airports in the NESCAUM region. Common airport support vehicles such
as forklifts, tugs, sweepers, mobile belt loaders, baggage tractors,
de-icing trucks, and push-back tractors could all be retrofitted with
commercially available emission control equipment. For vehicles which
are not suited to alternative fuel use, retrofits provide a means to
reduce emissions.

##### *(1) Airport Emission Budgets* {#airport-emission-budgets .unnumbered}

Because as a group ground service equipment at airports emit significant
amounts of air pollution, they could be a target sector for an emissions
budget strategy. For example, estimates from Logan Airport in Boston
indicate that ground service vehicles emit .68 tons of NOx per day or
278.2 tons per year.[^26] Where actual in-use data is lacking on
emissions from these equipment, the budget could still be designed using
best engineering judgement to quantify emissions and activity levels
associated with these vehicles. Over time, more accurate information can
be gathered and used to refine the budget and reduction targets.

As an example, a NOx emissions budget could be established for a ground
service fleet at an airport so that total annual emissions from these
units would have to be reduced by a specified amount over time. Assuming
a goal to reduce annual emissions by half, an annual cap would be
established accordingly. The airport authority or their contractors
would be allowed to comply through any combination of controls on the
vehicles comprising the regulated fleet. Converting some equipment to
very clean alternative fuels, may enable the operators to meet their
overall reduction targets without needing to achieve reductions from
other equipment where controls are more costly. Compliance
demonstrations would be based on hours of operation for these vehicles
derived either through monitoring or through a surrogate (e.g.,
equipment activity multiplied by either an actual emissions rate or an
average emissions rate) to determine total emissions.

##### **b. Other Budget Programs** {#b.-other-budget-programs .unnumbered}

In other budget programs, the company target would be derived from the
relative proportion of each individual company\'s operations or
emissions to the category total. The final process used for dividing up
total emissions among the affected sources is less important than the
ability of the sources and the state to determine whether companies meet
their respective targets in future years. For private fleets, such
reporting could be based on the use of an average emission rate per
vehicle, multiplied by seasonal or annual activity and idling levels.

Each year, the total tons represented by the emissions budget are
distributed in the form of allowances to the affected sources. This
distribution process can be proportional to each source\'s contribution
to the category\'s total, as measured by historical, current or expected
future emissions, or by historical, current or expected future activity
level. Alternatively, the distribution process could be undertaken using
an auction approach. At the end of each season or year, each company
must hold enough allowances to equal its total emissions. The original
allocation to the source may have been adequate to meet this
requirement, or it may not. Because the budget program may permit the
trading of the allowances, sources holding excess allowances may sell
them to sources in need of allowances.

Where a company is capable of making cost effective emissions
reductions, fewer allowances will be needed for the true-up step. If
allowances are valued at a cost-per-ton that exceeds the cost of
reducing emissions, companies have an incentive to undertake reduction
measures. As a result, companies with high emissions and high control
costs have the option of complying through the purchase of allowances
rather than by obtaining reductions in their own vehicles. Thus, the
budget program provides the emissions reductions needed by regulators in
a more cost-effective manner for the affected sources.

This approach is less effective for other heavy-duty source sectors
whose geographic range of operation would result in emissions occurring
beyond the jurisdiction of the regulatory authority implementing the
budget program. In such cases, identifying an appropriate emissions
budget, proportionally allocating allowances, and \"truing-up\" is much
more complex.

In the following case study an emissions budget approach is identified
for private construction projects in the region. An alternative strategy
is presented for public works projects.

**Example Strategy: Construction Equipment Retrofit**

As in the other case studies in this chapter, evaluating potential
retrofit projects takes place in three steps:

1.  Determine the contribution of the source to the emissions inventory;

2.  Determine the appropriate retrofit technologies and potential
    emissions reductions;

3.  Determine the appropriate policy based upon contractual
    arrangements, ownership, and funding opportunities.

**Step One: Determine the contribution of the source to the emissions
inventory:**

**Table V-3: 1998 NESCAUM Region Construction Equipment Emissions**

+----------+-----------+-----------+-----------+-----------+---------+
| ####     | **NOx     | **PM**    | **VOC     | **CO**    | **SOx   |
| {#sectio | (t        |           | (t        |           | (ton    |
| n-1 .unn | ons/yr)** | **(t      | ons/yr)** | **(t      | s/yr)** |
| umbered} |           | ons/yr)** |           | ons/yr)** |         |
+----------+-----------+-----------+-----------+-----------+---------+
| Con      | 12,475    | 1,527     | 2,282     | 14,665    | 3,098   |
| necticut |           |           |           |           |         |
+----------+-----------+-----------+-----------+-----------+---------+
| Maine    | 3,821     | 468       | 699       | 4,472     | 949     |
+----------+-----------+-----------+-----------+-----------+---------+
| Massa    | 34,447    | 4,219     | 6,302     | 40,519    | 8,553   |
| chusetts |           |           |           |           |         |
+----------+-----------+-----------+-----------+-----------+---------+
| New      | 4,462     | 547       | 816       | 5,248     | 1,108   |
| H        |           |           |           |           |         |
| ampshire |           |           |           |           |         |
+----------+-----------+-----------+-----------+-----------+---------+
| New      | 27,534    | 3,371     | 5,036     | 32,376    | 6,836   |
| Jersey   |           |           |           |           |         |
+----------+-----------+-----------+-----------+-----------+---------+
| New York | 52,884    | 6,476     | 9,674     | 62,192    | 13,131  |
+----------+-----------+-----------+-----------+-----------+---------+
| Rhode    | 2,597     | 317       | 474       | 3,050     | 645     |
| Island   |           |           |           |           |         |
+----------+-----------+-----------+-----------+-----------+---------+
| Vermont  | 2,086     | 255       | 381       | 2,434     | 518     |
+----------+-----------+-----------+-----------+-----------+---------+
| **Total  | **        | *         | *         | **        | **3     |
| tons**   | 140,310** | *17,184** | *25,668** | 164,960** | 4,841** |
+----------+-----------+-----------+-----------+-----------+---------+

The above table shows a breakdown of construction equipment emissions in
the eight NESCAUM states calculated using EPA's NONROAD model. According
to these estimates, construction equipment emits approximately ten
percent of all NOx pollution in the NESCAUM region. Although there are
fewer heavy-duty construction machines than registered heavy-duty
highway vehicles in the region, construction equipment emits almost as
much NOx pollution as the region's fleets of trucks and buses. This is
because control of nonroad equipment emissions has lagged behind highway
engines. Thus, reducing construction equipment emissions could represent
an important SIP strategy given the large contribution this sector makes
to the overall NOx inventory in the region. Furthermore, since
construction machines often operate in densely populated urban areas,
reducing NOx and PM emissions from this source is important to reducing
exposure to harmful emissions and for environmental justice concerns.

## Step Two: Determine Technology Options {#step-two-determine-technology-options .unnumbered}

Technology options differ for construction equipment depending upon the
duty cycle of the engines in-use. This section describes some of the
options for retrofitting different types of construction machines.

[Earth Moving and other Heavy-Duty Equipment]{.underline}

Typical earth moving equipment such as excavators, backhoes, and
bulldozers as well as other heavy equipment such as cranes operate under
transient conditions. While NOx reducing control strategies such as SCR
use on backhoes, wheeled loaders, and excavators may be possible in the
near future, no demonstrations have been made to date on construction
equipment. Since the technology is sensitive to transient modes of
operation, demonstrations of the technology need to be conducted prior
to widespread use of SCR with construction equipment.

Oxidation catalysts and catalyzed particulate filters can be used to
reduce PM, HC, and CO emissions from earth moving equipment. A recent
pilot project to retrofit construction machines conducted by NESCAUM,
New England Power, and MECA showed that oxidation catalysts reduced PM
emissions 23 percent, HC 42 percent, and CO 31 percent. Particulate
filters reduced PM by 89 percent and CO and HC 66 percent.[^27]

In addition to oxidation catalysts and particulate filters, other
emissions reduction technologies exist such as electronic turbochargers.
Turbochargers increase the transient response relative to traditional
turbochargers.

[Stationary Generators and Similar Equipment]{.underline}

The control options for stationary generators and air compressors
include PM, NOx, HC, and CO emission reduction technologies. Stationary
generators are suited to both PM and NOx reduction strategies due to the
steady state operations of the equipment. For PM, CO, and HC reductions
oxidation catalysts or catalyzed particulate filters can be used. Other
technologies such as electronic turbochargers and low sulfur fuel can be
used to reduce PM emissions. Unlike earth moving equipment that operate
under transient conditions, generators run at steady state conditions.
This makes them suited for retrofit with NOx and VOC reduction
technologies such as selective catalytic reduction. Several field
installations of SCR on stationary engines exist and have shown NOx
reductions up to 90 percent.

## Step Three: Evaluate Policy and Funding Options {#step-three-evaluate-policy-and-funding-options-1 .unnumbered}

In this example strategy, construction equipment is divided into two
categories: (1) equipment owned or contracted by the states,
municipalities, and authorities used on public works projects; and (2)
privately owned equipment used on private construction projects. The
reason for taking this approach is that policy options differ for
equipment used for public works projects and private construction work.

**Public Works Projects**

Roughly 20% of all heavy-duty construction equipment is involved in
public works projects such as road building and sewer/water
infrastructure. Such publicly funded construction

projects can require or provide incentives for emission reductions by
including preferential consideration for contractors with "clean"
construction equipment.

An example is the approach adopted by the Massachusetts Highway
Department for construction equipment working on the \$11 billion
Central Artery/Third Harbor Tunnel project (the "Big Dig") in Boston.
The Massachusetts Highway Department has begun requiring that some new
contracts include provisions stating that all diesel equipment will be
retrofitted with oxidation catalysts or catalyzed particulate filters.
The contract requirement states "contractors must retrofit all diesel
equipment 50 horsepower and greater with either oxidation catalysts or
catalyzed particulate filters." The retrofit requirement is placed in
the contract section which dictates measures needed for control of
diesel exhaust odor. Odor from construction equipment is a source of
significant public complaint, and oxidation catalysts and/or catalyzed
filters reduce or eliminate odor by lowering hydrocarbon emissions.

In addition to the contract requirement, Massachusetts Highway
Department has initiated a 70 machine retrofit initiative. As part of
the program, contractors are requested to retrofit approximately 25
percent of permanent equipment operating on the Big Dig. Backhoes,
wheeled loaders, excavators, and other machinery will be retrofitted.
Massachusetts Highway Department is funding this project. Over a period
of six years the project will reduce 203 tons of HC, PM, and CO
pollution and 70 percent of toxic emissions such as formaldehyde and
benzene.

**Emission Budgets for Privately Operated Construction Projects**

Retrofitting equipment being used on private projects, such as
construction of office and residential buildings, hotels, and other
types of construction requires a different strategy. Because states are
pre-empted from requiring the retrofit of construction equipment,
emissions budgets or caps and/or restrictions on hours of operation will
need to be used in order to encourage the use of emission retrofit
technology on private construction projects. For construction projects
financed by non-government entities, emissions budgets and daily mass
emissions limits could be established for projects exceeding a threshold
size, based upon a quantitative measure such as cost.

## Calculating Baseline Emissions from Construction Projects {#calculating-baseline-emissions-from-construction-projects .unnumbered}

Several methods could be used to calculate baseline emissions from
construction projects; one is described below. The method was developed
by EPA in its 1991 nonroad study ("NEVES") and is also used in the new
NONROAD model released last year.[^28] The following information would
be needed and could be used by state regulators to estimate baseline
emissions for construction projects:

1)  equipment type

2)  horsepower

3)  hours of use per project

4)  year of manufacture

The formula is as follows:

**HP X ALF X EF X HO**

=

**grams of pollutant per year per piece of equipment**

Where:

HP = horsepower of the engine

ALF = average load factor for that type of equipment (from NONROAD
model)

EF = emission factor (from NONROAD model)

HO = hours of operation during a given construction project

This formula would be used to calculate emissions for each type of
equipment, each horsepower category, and each criteria pollutant. Once
the individual calculations have been completed the emissions for each
criteria pollutant, equipment category and horsepower are summed to
derive a total emissions baseline figure for a construction project.

Once an emissions baseline has been established for a construction
project, a declining cap could be established to ensure decreased
emissions over time. The following reductions could be established as
part of a declining emissions cap:

-   Years 1999 - 2004 10% reduction for construction projects in a given
    nonattainment area

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-   Years 2005 - 2010 20% reduction

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-   Years 2011 - 2015 30% reduction

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-   Years 2016 and later 40% reduction

Total emissions from these projects could be capped according to the
above listed declining schedule or could be capped proportional to
project size, allowing the contractor to obtain the needed reductions in
the most cost effective manner. This approach could be extended through
the use of a trading mechanism, whereby a contractor would have an
incentive to bring the entire project to completion \"under budget\".
The difference between the budget level and actual emissions from the
project could be sold as credits to aid in offsetting potential excess
emissions associated with another project. Taking a different approach,
a bidder who may not be well-positioned to claim cleaner engines or
obtain cleaner fuel could achieve equivalent or even greater emissions
benefits by purchasing an amount of credits from another emissions
source over the life of the project that would equate to a substantial
environmental benefit. Construction companies could purchase alternative
fuel construction equipment, retrofit in-use engines, purchase equipment
with "Blue Sky" engines, or buy pollution credits under the
program.[^29]

### Retrofit of Marine Vessels

Although current inventory estimates suggest that marine vessels emit
approximately four percent of NOx emissions in the nation, the impact of
these emissions is potentially greater than for other sources for a
number of reasons. First, these vessels tend to operate in urban
non-attainment areas. Additionally, large marine engines used to power
barges, tankers, and other ocean going vessels burn residual fuel which
creates greater amounts of toxic emissions than does the burning of
number 2 diesel fuel commonly used in smaller marine vessels. Several
retrofit technologies are available to reduce criteria and toxic
emissions from these engines. As with other sectors, determining the
most effective retrofit strategy will entail identifying the appropriate
engines for retrofit, the emission control technology to match the
engine, and an implementation strategy. This section discusses marine
vessel retrofits and presents an example strategy as an example of how
such a program could be designed and implemented.

The emissions of primary concern from diesel marine engines are NOx,
PM~10~/smoke, VOCs, and toxics. They also emit CO and sulfur dioxide
(SO~2~) at relatively high rates. In the *National Air Pollutant
Emission Trends, 1900-1994*, EPA estimated that in 1994, marine diesel
engines emitted 158,000 tons of NOx, 17,000 tons of PM10, and 39,000
tons of VOC. Table V-4 provides a breakdown of national marine vessel
emissions by year.

**Table V-4: U.S. Primary Pollutant Emissions from Diesel Marine
Engines**

  ----------------- ----------------- ----------------- -----------------
  **Year**          **NOx (thousands  **PM10 (thousands **VOC (thousands
                    of short tons)**  of short tons)**  of short tons)**

  1970              34                4                 8

  1980              93                10                23

  1985              110               12                28

  1986              118               13                29

  1987              125               13                31

  1988              138               15                35

  1989              147               16                37

  1990              145               16                36

  1991              146               16                37

  1992              151               16                38

  1993              154               16                38

  1994              158               17                39
  ----------------- ----------------- ----------------- -----------------

In 1994, marine diesel engines in the NESCAUM region emitted 1,664 tons
PM~10~, 2,480 tons VOC and 11,464 tons of NOx. Marine vessel emissions
from New Jersey accounted for approximately 70% of all emissions from
this sector in the region. Of primary concern is the fact that emissions
from this sector are increasing, while those from many other sectors are
declining.

#### a. Marine Vessel Emissions Regulations {#a.-marine-vessel-emissions-regulations .unnumbered}

To address the problem of increasing marine vessel emissions, the US EPA
has proposed new emissions standards for marine diesel engines that will
take effect beginning in 2004.[^30] The rule will significantly reduce
emissions from marine engines similar to those used in land based
applications (construction and agricultural) and for those similar to
locomotive engines over the next two decades. However, for large marine
engines much less stringent International Maritime Organization (IMO)
regulations will apply. The IMO standards are close to uncontrolled
levels and imposition of these standards will only result in an eight
percent reduction in large marine vessel NOx emissions by the year 2030.
At the same time, emissions from these slow speed vessels represent the
majority of marine vessel pollution in some Northeast ports.

**TABLE V-5: Proposed EPA CI Marine Engine Emissions Standards**

+-----------------------+---------------------+-----------------------+
| **Engine size**       | **NOx standards     | **PM standards        |
|                       | (g/kWh)**           | (g/kWh)**             |
+-----------------------+---------------------+-----------------------+
| Category 1:           | Tier II: 7.2 g/kWh  | Tier II: .4,.3,.2     |
|                       |                     |                       |
| less than 5 litres    | Tier III: 4 g/kWh   | Tier III: no standard |
| displacement per      |                     |                       |
| cylinder              |                     |                       |
+-----------------------+---------------------+-----------------------+
| Category 2:           | Tier II: 7.2 g/kWh  | Tier II: .27          |
|                       |                     |                       |
| 5 --20 litres         | Tier III: 5 g/kWh   | Tier III: no standard |
| displacment per       |                     |                       |
| cylinder              |                     |                       |
+-----------------------+---------------------+-----------------------+
| Category 3:           | 9.8, 45\*n^(-0.2)^, | No standards          |
|                       | 17 g/kWh            |                       |
| Greater than 20       |                     |                       |
| litres displacement   |                     |                       |
| per cylinder          |                     |                       |
+-----------------------+---------------------+-----------------------+

While the proposed marine engine rule will reduce emissions over the
long term for category 1 and 2 engines, retrofitting can reduce
emissions in the near term from in-use vessels. Moreover, the proposed
EPA rule will not significantly reduce emissions from large marine ocean
going vessels and thus retrofitting provides one of the only options for
reducing emissions from these category of ships. Below, the third
retrofit strategy is presented which details options and technologies to
reduce marine vessel pollution.

As in the other case studies in this chapter, evaluating potential
retrofit projects takes place in three steps:

1)  Determining the relative emissions contribution from different types
    of vessels;

2)  Identifying appropriate technology options; and

3)  Assessing policy and funding options.

**Example Strategy: Retrofit of Marine Vessels**

**Step One: Determine the contribution to the emissions inventory**

In 1998, NESCAUM conducted a marine vessel emissions inventory for the
Boston Harbor. As part of the inventory, data was collected on the
numbers of ship arrivals and departures and the length of stay in the
Boston Harbor for 1996. Data was collected for commercial, pleasure
craft, fishing, and harbor vessels. The following table shows a summary
of the numbers and types of marine vessels operating in the Boston
Harbor. The table shows that most of the vessels operating in the harbor
are privately owned. The major exceptions are military ships and some of
the water shuttle ferries which provide commuter services to and from
Boston.

**Table V-6: Vessel Types in Boston Harbor**

  ---------------------- ------------------------- ---------------------------
  **Operation/Vessel     **Ownership/Operators**   **Number of Vessels**
  Type**                                           

  Military               U.S. Navy                 500

  Construction barges    Corporations              Variable

  Pleasure craft         Private owners            2,000

  Fishing boats          Private owners            300

  Harbor tugs            Boston Fuel Transport     20

  Commercial             Shipping companies        1,000 trips per year

  Sightseeing            Private tour companies    30

  Water shuttle          MBTA, Massport            27
  ---------------------- ------------------------- ---------------------------

Activity rates and fuel consumption data for the ships was used to
calculate emissions for the different types of vessels. Figure two shows
the NOx emissions contribution from the most common fleets of vessels
using Boston Harbor. Data on vessel activity in Boston Harbor was
obtained from "Waterborne Transportation Lines of the U.S." and from
surveys of vessel operators.

**Figure Two: Boston Harbor Vessel NOx Emissions by Vessel type**

![](media/image4.wmf){width="5.1in" height="1.6979166666666667in"}

The analysis shows that the majority of NOx emissions come from
commercial vessels weighing over 100 tons. While this is the case for
Boston Harbor, the composition of the fleet at other ports may vary
considerably. For example, Newport, Rhode Island is likely to have a
much higher contribution from pleasure craft than from commercial
vessels due to the fact that it is a primary destination for pleasure
craft boaters. Understanding the composition of the vessels using the
facility will help in crafting an appropriate and cost-effective
retrofit strategy for a given port.

**Step Two: Determine Technology Options**

The engines powering marine vessels are well suited to several types of
emission reduction technologies. First, commercially available devices
such as oxidation catalysts can reduce PM, HC, and CO emissions in
marine engines. Oxidation catalysts can be expected to reduce PM by 25
percent on average (if diesel fuel containing 500 ppm or lower sulfur is
used), HC 50 -- 95 percent, and CO by 45 -- 90 percent. Requirements
such as sufficient exhaust gas temperatures can generally be met when
retrofitting marine engines with oxidation catalysts. Particulate
filters could also be used in marine engines to reduce PM emissions by
90 percent where engine exhaust temperatures are sufficient.

Marine diesel engines are also well suited to the use of selective
catalytic reduction (SCR) because these engines frequently perform in
steady state modes while entering and leaving ports. Maneuvering into
berths can require transient operation but this represents a relatively
small percentage of the vessel operating time. SCR use in marine engines
can achieve extremely low NOx and HC emissions.[^31] When SCR is used in
conjunction with an oxidation catalyst, both low PM and NOx emissions
can be achieved. Recent incentives established in European ports have
spurred the installation of urea SCR systems in a limited number of
ships. Table V-7 lists marine SCR applications as of 1996 and shows the
level of emission reductions achieved. As indicated in this table, this
technology achieves greater than a 90% reduction in NOx.

**Table V-7: SCR Use in Marine Vessels Worldwide**[^32]

  ------------ ---------- ------------- --------- -------------- ---------------- -------------
  **Ship**     **Year**   **Operating   **Ship    **Engine       **Installation   **NOx
                          area**        type**    type**         type**           reduction**

  Pacific      1990       California    Bulk      Two stroke 7.8 New build        92%
  Success                               carrier   MW propulsion                   

  Pittsburgh   1990       California    Bulk      Two stroke 7.8 New build        92%
                                        carrier   MW propulsion                   

  Delta Pride  1991       California    Bulk      Two stroke 7.8 New build        92%
                                        carrier   MW propulsion                   

  New Horizon  1992       California    Bulk      Two stroke 7.8 New build        98%
                                        carrier   MW propulsion                   

  Aurora       1992       Baltic        Ferry     Four stroke    New build        98%
                                                  2.5 MW                          
                                                  propulsion                      

  Serenade     1994       Baltic        Ferry     Four stroke 3  Retrofit         90%
                                                  MW propulsion                   

  Symphony     1995       Baltic        Ferry     Four stroke 3  Retrofit         90%
                                                  MW propulsion                   

  Scandica     1995       Skagerrak and Supply    2 x 4 stroke   Retrofit         96%
                          Baltic                  1.3 MW                          
                                                  propulsion and                  
                                                  4 x 4 stroke                    
                                                  .25 MW                          
                                                  auxiliary                       
  ------------ ---------- ------------- --------- -------------- ---------------- -------------

SCR can be used with relatively high fuel sulfur levels (1 percent by
weight) but such high sulfur fuel may have an impact on the durability
of the emission control equipment. Four ships equipped with SCR
technology are currently running on 1 percent sulfur fuel. Other ships
are operating on lower sulfur fuel ranging from 1 percent to .05
percent.

The experience to date suggests that it takes from ten to fifteen days
in the shipyard to install an SCR unit. The SCR reactors can be
tailor-made for a particular application, with consideration for space
concerns. The SCR unit can be delivered in sections so as to fit through
existing passages. Equipping marine auxiliary and propulsion engines
with SCR is generally thought to be technically feasible and reasonable
in cost.

**Step Three: Determine Policy Options**

As indicated in Table V-6, most of the marine vessels operating in
Boston Harbor are privately owned. Figure Two showed that most of the
emissions come from commercial vessels, pleasure craft, and tugs.
However, commuter ferries represent a significant source of emissions at
this port. These ferries are operated by public entities: the
Massachusetts Port Authority (Massport) and the Massachusetts Bay
Transportation Authority (MBTA).

Different retrofit strategies might be considered for private and public
fleets operating in the Boston Harbor. State preemption of mandatory
nonroad engine retrofit limits the options for privately owned vessels.
Consequently, an emissions cap or fee program could represent the best
approach for reducing emissions from the private fleet. Conversely, more
direct strategies such as mandatory retrofit requirement may be viable
for publicly operated ferries.

**Retrofit of Publicly Operated Vessels**

Public agencies or quasi public authorities such as the MBTA and
Massport could set an emissions performance standard for vessels
operating under agency or authority contract. Currently, three companies
operate a total of twenty vessels year round and each have three year
contracts with the MBTA or Massport. A performance standard could be
adopted for new

contracts. The [EMA]{.underline} court decision specified that caps must
be set at a level which does not specifically require retrofit of marine
vessels. A sufficiently stringent performance standard could be
developed which could be complied with through the use of a variety of
technologies, such as compressed natural gas, retrofits, reformulated
diesel fuel, and other control strategies. The operator would choose
which control technology to use based on cost effectiveness and ease of
implementation. A potential model for commuter boat emissions standards
is as follows:

**Table V-8: Proposed Emissions Performance Standard**

+-----------------+-------------------+---------------+----------------+
| **Medium speed  | **Proposed        | **Current     | **Annual       |
| boats**         | Performance       | Annual        | Emissions with |
|                 | Standard**        | Emissions**   | new standard** |
| **130 rpm       |                   |               |                |
| [\<]{.un        | *                 |               |                |
| derline}n\<2000 | *(g/kW-hr)**[^33] |               |                |
| rpm**           |                   |               |                |
+-----------------+-------------------+---------------+----------------+
| NOx             | 1.95 -- 5.1       | 176 tons per  | 52 tons per    |
|                 |                   | year          | year           |
+-----------------+-------------------+---------------+----------------+
| VOC             | Ap42 \* .3        | 93 tons per   | 28 tons per    |
|                 |                   | year          | year           |
+-----------------+-------------------+---------------+----------------+

**Use of Emission Reduction Credits to Fund a Retrofit Project**

Another potential method to encourage retrofit of ferry boats would be
linking the ferry retrofit to emission reduction credit (ERC)
generation. The retrofit credit method established for EPA's VMEP
program could provide the basis for ERC calculation. Currently 30 power
plants in the region have or soon will request new permits. Some of the
emission reductions required for the permitting of these facilities
could be supplied by mobile source emission reduction credits.

Power plant operators could group several mobile source emission
reduction programs in order to generate enough emission reductions to
comply with their permit requirements. The mechanism for such a program
could occur in several steps. First, the power plant would agree to the
retrofit option and provide funding for the equipment purchase and
installation. Then a credit calculation would be developed. The retrofit
would be in place for one year at which time the power plant would
submit an estimate of emission reductions that occurred during the first
year. For every year afterward, the power plant would submit data on
hours of operation at full load and idle to substantiate emission
reduction claims. This option would only work in the case

where the ferries were operating close to a site that required offset
credits in order to be permitted by the state. Significant work would
need to be done to establish an enforcement mechanism for this credit
generation scheme. Below, the cost benefit of establishing NOx credits
through an SCR retrofit program are detailed.

**Table V-9: Costs of SCR Retrofit**

  -------------- -------------- -------------- -------------- -------------
  **Engine       **Catalyst     **Urea Tank    **Injection    **Annual Urea
  horsepower**   Cost**         Cost**         Cost**         Cost**

  750 hp         \$7,000        \$1 per gallon \$8,500        FC\*.06\*.7
                                capacity                      

  3,000 hp       \$20,000       \$1 per gallon \$12,500       FC\*.06\*.7
                                capacity                      
  -------------- -------------- -------------- -------------- -------------

Table V-9 details SCR system hardware, tankage, and injector system
costs as well as a method for calculating annual urea cost. The urea
cost is calculated by multiplying the annual gallons of fuel consumed
(FC) by six percent (the average consumption of urea is approximately 4
to 6 percent of total diesel fuel consumption). This product is then
multiplied by the cost per gallon of urea (70 cents) to predict annual
costs. For a boat that consumes 150 gallons of diesel per day, the urea
cost would be \$6.30 per day or \$2,299 per year. The capital costs for
the SCR retrofit would be approximately \$16,000 per 750 horsepower
engine.

Assuming all 27 of the Boston Harbor commuter ferries were to be
retrofitted to achieve a 70 percent NOx reduction rate, then
approximately 123 tons of NOx would be reduced each year. Over five
years this reduction would equal 616 tons of NOx. If all 27 vessels are
retrofitted at a cost of \$864,000 (assumes two 750 hp engines per ship
are retrofitted at a cost of \$16,000 per engine) then the cost per ton
of NOx reduced over the five years is \$1,402. If the SCR systems remain
on the ships for longer than five years then the cost would be reduced
substantially. For example, if the SCR systems are operational for seven
years the cost per ton is reduced to \$1,000. This estimate does not
include the annual cost of the urea or potential administrative costs.

**Fee based program for reducing emissions from private vessel**s

The credit generation scheme presented in the last section was developed
for publicly operated ships. The scheme relied in part on contract
requirements to reduce marine vessel emissions. In some ports, large
privately operated commercial vessels are the greatest source of NOx.
For example, ocean going tankers and cruise ships emit 60 percent of the
NOx and PM pollution in the Boston Harbor. As mentioned at the beginning
of this section, current IMO and EPA proposed emissions standards will
not significantly reduce pollution for these large vessel engines.
Therefore, state programs to encourage emission reductions from these
ships are needed if emissions reductions are to be achieved. The
following section describes an existing variable fee system that could
be used as a model for Northeast ports.

**Swedish Fee Program**[^34]

Over 95 percent of Sweden's foreign trade is seaborne and water ferry
traffic between Swedish and foreign ports is substantial. In 1996 The
Board of the Swedish Ports' and Stevedores' Association reached
agreement with the Swedish Maritime Administration (SMA) and the Swedish
Shipowner's Association to reduce marine vessel NOx and SOx emissions by
75 percent beginning in the year 2000. The agreement established
environmentally differentiated revenue neutral fees based upon NOx
emissions and the sulfur content of the fuel used to power the vessels.
In the first eight months of the program, nearly one thousand vessels
were operating on low sulfur fuel. SCR and other NOx reducing
technologies have also been introduced in several vessels as a result of
the program.

Ferries using 0.5 percent by weight sulfur fuel and commercial vessels
using 1.0 percent by weight sulfur fuel are given a rebate on fees.
Those using fuels with sulfur levels above 0.5 and 1.0 percent pay a fee
that is proportional to the sulfur content of the fuel. The
differentiation of shipping lane dues is intended to eliminate the
financial advantage of using high sulfur fuel and encourage more vessels
to convert to cleaner-burning fuel. Fees are also differentiated
according to NOx emissions. For ships with emission rates lower than 2
g/kWh NOx, fairway fees will be reduced by 95 percent. For ships with
NOx emissions between 2 g/kWh and 12 g/kWh, fees will be assessed in a
linear fashion at some level below historic rates. Vessels with emission
rates above 12 g/kWh, will be levied fees that are higher than historic
rates. Low NOx technologies being considered for use in this program
include SCR and emulsion.

The SMA, in conjunction with the Swedish Ports and Stevedore\'s
Association, is developing an information system for classifying ships
that harbor administrators will be able to access when they are
assessing fees. All ships using low sulfur fuel and those equipped with
catalyzers to reduce NOx will be certified and registered in the
information system. The SMA is also encouraging Swedish port
administrators to work with foreign ports which share frequent ferry
traffic to encourage the implementation of environmentally
differentiated fee systems in their ports.

**Defraying the Costs of Low NOx Technology Installation**

As an incentive to help defray the costs of installing SCR or other NOx
reducing technologies, ships with certified low emitting engines will be
exempt from paying certain fees (such as lighthouse fees) for two years.
These fee exemptions will refund 40 percent of the low NOx technology
cost if they are installed before the year 2000 and 30 percent if they
are installed afterward.

**Boston Harbor Fees**

Various fees are levied on commercial vessels entering and leaving the
Boston Harbor such as those for pilot assistance and for use of port
facilities and berths. Like the Swedish fee system, these charges could
be replaced with environmentally differentiated fees. As with other
mobile source market incentive programs, developing a regional fee
system would be preferable to a local incentive program. This is
especially true with ports since they often compete for shipping
traffic. Thus, it may be beneficial for port emissions fee systems or
emissions caps to be developed on a regional basis so that individual
ports will not be penalized for their efforts to reduce vessel
pollution.

**Summary of Nonroad Retrofit Strategy Options**

This section described several options states can use to introduce
retrofit devices into the existing heavy-duty nonroad fleet and possible
methods to structure retrofit programs. At this time, one nonroad
retrofit project is being undertaken in the region (Massachusetts
Highway Department program). Additionally, other states are considering
nonroad retrofit projects. All of the projects being considered or
undertaken are aimed at mitigating the environmental impacts of large
construction projects. The programs will rely on funding from public
agencies or on funding from companies who are undertaking the projects.
In order to initiate nonroad retrofit programs, states and localities
could retrofit their own nonroad equipment operating in public works
departments and landfills (for example). They may, as well, have leeway
in requiring the retrofit of nonroad equipment used on public works
projects. The Central Artery/Tunnel project in Massachusetts provides an
example of a state agency requiring retrofit of nonroad engines through
contractual arrangements. Retrofit projects can be also be encouraged as
part of an environmental impact review process. These types of
initiatives are the most viable at this time.

As described in this section, states are pre-empted from requiring
retrofit of nonroad equipment by the [EMA]{.underline} court decision of
1997. As a result of this decision, states cannot require retrofit of
nonroad engines as they can for highway heavy-duty vehicles (as a
prerequisite for vehicle registration, for example). The
[EMA]{.underline} court *did* allow for other emission reduction
strategies which could indirectly result in the retrofitting of nonroad
engines. For example, emissions caps can be established which could be
complied with through a number of approaches including: restricting
hours of use, retrofitting, use of vehicles powered by Blue Sky engines,
fuel improvements, and other means. While requiring retrofit of nonroad
machines as a condition of contract award may not fall under the state
preemption from requiring nonroad retrofit, the law has not yet been
tested.

The chapter provided ideas on how emissions caps could be developed
(construction example study, and declining caps for highway vehicle
fleets). However, these ideas are only theoretical at this point and
require considerable thought and development before they can be
initiated by states. Important issues to consider when developing
emissions budgets for construction projects are the short time frame of
the projects and the changing types of equipment used during
construction. States may wish to consider developing emissions budgets
and caps for other types of nonroad engines that may lend themselves
more easily to an emissions budget approach. For instance, marine
vessels on contract to states or state agencies may produce predictable
emissions over long periods of time (ferries or tug boats for example).
These vessels may be easier to develop emissions budgets and caps for
than construction machines.

The technologies available for retrofitting nonroad engines at this time
are oxidation catalysts, fuel changes, and in some cases particulate
filters. For stationary generators and some marine engines selective
catalytic reduction can be used to achieve significant NOx reductions.

## Funding Opportunities for Promoting the Retrofit of HD Engines

A variety of potential sources exist to fund the retrofitting of
heavy-duty diesel engines with emission control devices. The section
describes the following specific mechanisms and cites examples of
current initiatives that rely on these sources of funding:

-   Congestion Mitigation Air Quality Improvement Funds (CMAQ)

-   Clean Air Partnership Fund

-   State Bond Issues

-   Earmarked State Funds

-   Supplemental Environmental Projects (SEPs)

### 1. Congestion Mitigation Air Quality Improvement Funds (CMAQ) {#congestion-mitigation-air-quality-improvement-funds-cmaq .unnumbered}

The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and
the re-authorized 1998 Transportation Equity Act for the Twenty First
Century (TEA-21) include important planning and financial tools to
assist states in achieving the broad goals of the Clean Air Act (CAA).
ISTEA provided an enhanced transportation planning process for state and
metropolitan government that was both more flexible in terms of
multi-modal options and better integrated with the air quality planning
process. TEA-21 extends this planning process through the year 2004.

TEA-21 also continues the Congestion Mitigation and Air Quality
Improvement (CMAQ) program established under ISTEA. This program
provides states with substantial federal funds to support transportation
projects that reduce motor vehicle emissions and contribute to
attainment of the National Ambient Air Quality Standards (NAAQS). The
Act targets \$8 billion for CMAQ programs and projects. Funding is
apportioned to states according to a formula that accounts for the
population of nonattainment areas and the severity of their air quality
problem. CMAQ is funding the New Jersey retrofit project described in
the first section of this chapter and could be used to fund similar
retrofit programs for heavy-duty vehicles in other states.

### 2. Proposed Clean Air Partnership Fund  {#proposed-clean-air-partnership-fund .unnumbered}

EPA's proposed Clean Air Partnership Fund would earmark \$200 million
every year for five years in \"new resources for states, cities and
tribes to reduce soot, smog, air toxics and greenhouse gases that
contribute to climate change. The money would go to new anti-pollution
technologies. It would foster public-private partnerships that help
communities achieve their clean air goals sooner than required.\" The
establishment of this fund is contingent upon Congressional approval of
the proposed federal budget for the year 2000. If this fund is
established it could provide significant support for state retrofit
initiatives to reduce heavy-duty engine pollution.

### State and Authority Bond Issues 

State and municipal governments as well as authorities (such as port
authorities) can be granted the power to issue bonds from state
legislatures. In some states, state law requires that a ballot
initiative be approved by the public. The law varies state to state on
the types of entities that can propose a bond issue and the extent to
which bonds can be used to fund projects. Generally, state legislatures
either authorize a specific bond issue through legislation or they
establish a group, such as an authority, with the power to issue bonds.
Some combination of the above two options also takes place in some cases
when bonds are approved.

When specific bond issues or the authority to issue bonds has been
approved by the legislature, bonds are sold and the funds are used to
raise money for public works such as road, sewage and water system,
school, and public transportation improvement projects. In addition to
public works projects, bonds can be proposed to fund other programs,
such as environmental initiatives. State funding in the form of bond
issues can and are providing important support for state retrofit
projects. Specific bond initiatives supporting retrofit projects in the
Northeast are described below.

The New York legislature voted in 1998 to approve a 1.75 billion dollar
bond act to be used for environmental projects. The bond proposal was
submitted to the legislature by New York governor, George Pataki. Funds
for clean water and safe drinking water projects total \$1,145 billion,
\$230 million is allocated to air quality programs and \$375 million is
allocated to solid waste and municipal environmental restoration
projects. The clean air projects include government clean fueled
vehicles and associated infrastructure; the purchase of alternative fuel
buses or the conversion of diesel buses to alternative fuels and the
development of requisite infrastructure.

The Manchester Airport retrofit project described earlier in this
chapter is also being funded by a bond issue. The bond is funding the
expansion of the airport, and it will also be used to cover the costs of
the retrofit devices and installation.

### Dedicated or Earmarked Funds

Another option for financing retrofit projects is to dedicate a
percentage of registration fees and/or penalty moneys associated with
heavy-duty vehicles for the installation of emission control devices.
The California initiative described below explains how one such program
works. Other types of dedicated funds could be established from penalty
monies from parking and traffic violations. These funds could be used by
states and or private groups for retrofitting fleets. For example,
certain commercial fleets accrue millions of dollars in parking tickets
annually. A percentage of these fines could fund the retrofit of a
significant number of vehicles.

The California legislature recently passed two bills authorizing the
establishment of the Carl Moyer Memorial Air Standards Attainment
Program. The Program allocates over \$25 million for the purpose of
reducing emissions from heavy-duty highway and nonroad vehicles and
machines. SB 1857 describes the funding mechanism and AB 1368 describes
the types of technologies that are eligible for funding through the
program. The re-powering of diesel engines with cleaner, new engines,
alternative fuel vehicle purchases, and the retrofit/rebuild of in-use
engines are eligible for funding. Locomotive and marine vessel emission
reduction projects are also eligible.

SB 1857 delegates administration of the program to the air pollution
control districts, air quality management districts, and port
authorities who can apply for funds. The bill requires that civil
penalties recovered by the State Air Resources Board from owners and
operators of heavy-duty diesel motor vehicles with excessive smoke
emissions be deposited in a specified account in the general fund. In
addition, the bill would appropriate \$50 million from the general fund
to the Carl Moyer fund, which will be available for expenditure without
regard to fiscal year.

### Supplemental Environmental Projects

Violations of state and federal environmental statutes can result in the
levying of substantial civil penalties. Typically the penalties are in
the form of fines allocated to the general fund. Occasionally, a portion
of these fines are earmarked for Supplemental Environmental Projects
(SEPs) with a nexus to the violation. SEP funds from both federal and
state enforcement actions could in some cases be used to fund retrofit
projects, as in a recent federal enforcement action against seven
heavy-duty engine manufacturers. [^35]

The recent consent decree between the United States and seven heavy-duty
engine manufacturers may provide funds for retrofit projects to satisfy,
in part, injunctive relief sought by the federal government for excess
NOx emissions from highway heavy-duty diesel vehicles. The consent
decrees establishes \$109 million for the implementation of
environmental projects intended to mitigate the effects of over one
million heavy-duty engines that have or will emit 15 million tons of
excess NOx. Engine manufacturer proposed SEPs include nonroad and
highway SCR and lean NOx catalyst projects. In addition, compressed
natural gas projects have been proposed.

While some of the projects in this consent decree will be conducted
exclusively by the engine manufacturers, proposals received from states
and other interested groups will be considered for funding. A total of
\$22 million in potential funding for proposals submitted during the
comment period will be considered by the engine manufacturers and by EPA
for funding. Retrofit projects could be strong candidates for SEP
monies. The above described settlement is the largest in Clean Air Act
history and could provide millions of dollars for retrofit projects.

Another example of a litigation related environmental project is the
retrofit of marine vessels in California which resulted from labor
groups contesting an environmental impact statement. The retrofit of
marine vessels was carried out voluntarily by the company as a result of
the litigation. This program is described below.

In San Francisco, the Bay Area Air Quality Management District (BAAQMD)
imposed a limit of 220 kg of NOx for USS-POSCO Industries (UPI) ships as
part of a settlement related to the environmental impact statement for a
plant expansion. As a result, four vessels traveling from Korea to San
Francisco were equipped with SCR units. The vessels routinely travel 48
nautical miles within the BAAQMD jurisdiction which begins five miles
west of the Golden Gate bridge. Two to three hours before arrival at the
BAAQMD boundary, the main engine fuel is switched from normal heavy fuel
to an ultra low sulfur marine diesel oil. The use of low sulfur fuel
allows for the SCR system to be effective during a wider range of
exhaust gas temperatures than it normally would be. This is important
for the California bound ships because their operations are frequently
transient in nature while maneuvering in the Bay. This settlement and
the resulting environmental project is similar to a supplemental
environmental project.

### VMEP Program and SIP Credit Calculation

The policy and funding mechanisms described in this chapter outline ways
that state staff can think about and implement retrofit projects for
heavy-duty engines. The federal government has established significant
sources of funding to encourage this and other emissions reduction
projects. In addition, EPA recently established the Voluntary Mobile
Source Emission Reduction Credit Program which allows states to claim
SIP credits from voluntary mobile source emission reduction projects,
such as retrofit projects. The retrofit programs described in this
chapter could be eligible for SIP credit generation under this program.

In October 1997, the OMS released "Guidance on Incorporating Voluntary
Mobile Source Emission Reduction Programs in State Implementation
Plans." The voluntary measures guidance applies to innovative mobile
source air quality programs that are voluntary *or* that are operated by
a non-governmental entity. This is a pilot program currently undergoing
a 5-year trial, and will be re-examined in 2002. Potential voluntary
measures programs include employer-based commuter choice, mobile source
public education/outreach programs, small scale financial mechanisms
(those producing relatively small emission reductions), "ozone action
day" programs, and community-based transportation programs. State staff
may find either the Economic Incentives Policy (EIP) guidance or the
voluntary measures guidance to be more appropriate depending on the
specific nature of the program. If states submit a program to the EPA
under the *voluntary measures guidance*, they do not need to follow the
EIP guidance.

The EPA has limited the administrative requirements of programs
developed under the voluntary measures guidance because these programs
are smaller in terms of the emission reductions they produce, and
because they can increase public awareness. States may use the voluntary
measures guidance to achieve up to 3 percent of the required reductions
for each of the criteria air pollutants or precursor for any applicable
SIP requirement. The 3 percent cap per criteria pollutant was instituted
because states are not required to play a direct role in implementing
these programs, the programs are not directly enforceable against
participating parties, and there may less experience in quantifying the
emission benefits from these programs. Under the voluntary measures
policy, state agencies must make a commitment that the program is
conducted and monitored, and that states will make up for any reductions
which are claimed but not achieved by the program.

States may use the EIP guidance to implement programs which will
generate emission reductions beyond the 3 percent limit, or when state
programs have already reached the 3 percent limit under the voluntary
measures guidance. Under the EIP Guidance, states are directly
responsible for ensuring that program elements are implemented. A
program must be directly enforceable as described in sections 5.0, 7.1,
and 13.2 of the federal guidance. Actions and/or emission reductions by
identifiable sources are enforceable by states and/or by the EPA.

To determine the best policy for a program, consider the following.

>  Who will implement and operate the program.
>
>  The size of the program, and the cumulative size of all programs the
> state has developed under the voluntary measures guidance
>
>  The enforceability of the program.

In general states should use the EIP guidance to implement
transportation pricing programs (e.g., roadway pricing).

**Chapter Summary**

Heavy-duty engine emission control has lagged behind control of other
sources such as passenger cars and stationary sources. This lack of
emissions control is compounded by the durability of diesel engines. For
example, estimates from registration data in the Northeast indicate that
40% of trucks in the region are pre-1989 model year, and thus are
uncontrolled for particulates. In the case of nonroad engines, the
disparity is even greater, given that all pre-1996 engines are
uncontrolled. Due to this disparity in in-use emissions between
heavy-duty vehicles and other sources, heavy-duty engines contribute
disproportionately to the emissions inventory for NOx, PM, and toxics.
As states work to attain air quality standards for these pollutants they
will increasingly look to the heavy-duty engine sector for reductions.
Retrofit of in-use heavy-duty diesels provides a means for states to
reduce PM, CO, HC, and, in some cases NOx, emissions from these engines.
Controlling heavy-duty engine pollution could be the most cost effective
way to reduce NOx and PM at this time as compared with further control
options for cars and stationary sources.

Options for reducing PM, HC, CO and toxics include oxidation catalysts,
fuel changes, and particulate filters. While ambient standards for fine
particulates may not require states to reduce PM levels, public concern
over smoke, odor, toxics, and PM from diesels *has* spurred efforts to
reduce diesel emissions such as retrofit initiatives. States are
beginning to address public concern over diesel pollution by initiating
retrofit projects. Public concern over diesel emissions is often most
pronounced in urban areas where residents are disproportionately
impacted by construction projects, marine vessel emissions and highway
diesels. For this reason, targeting fleets or projects for retrofit for
which there will be substantial community support can be important to
the success of retrofit initiatives. The Central Artery/Tunnel project
is an example of a project which grew out of community concern over
diesel emissions.

While the retrofit projects to date are geared toward reducing PM, HC,
CO, and toxics, in the future retrofit projects to reduce NOx emissions
from heavy-duty diesels could achieve significant reductions. For
example, the studies in this chapter showed that reducing NOx from
school buses and from marine vessels costs approximately \$800 to 1,500.
The development of emulsified fuels, additives, lean NOx catalysts, and
NOx adsorbers may provide states with more options to reduce NOx from
heavy-duty engines in the future. While these options require research
and development, other options are feasible at this time. For example,
the retrofit of stationary generators with SCR provides an opportunity
to reduce NOx emissions from the hundreds of generators operating in the
region.

The development of mobile source emission reduction credits for NOx
could also encourage retrofit of heavy-duty diesels in the future. The
chapter listed several options for generating NOx credits. A
quantification mechanism and a method for trading these potential
credits, however, needs to be developed. Appendix A details CARB's
guidelines for credit generation which could be used by the Northeast
states as a starting point in developing a credit generation and trading
program.

In the case of all retrofit projects, states need to assess the
potential emissions reductions opportunities available and then choose
implementation strategies. The chapter provided a number of ideas as to
how this can be done.

The chapter listed a host of potential sources to fund heavy-duty engine
emission control retrofit initiatives. Some, like the federal CMAQ
program are already available to states. As outlined above, states and
local governments have a variety of other mechanisms at their disposal
to fund such projects. Bond issues, earmarked funds and supplemental
environmental penalties are currently being used by some states to fund
retrofit programs. These funds can and are being used by states to
initiate highway and nonroad retrofit projects to reduce in-use
heavy-duty diesel pollution.

Appendix A

**Credit Generation for Trading Purposes**

[CARB Guidelines for Mobile Source Emission Reduction
Credits]{.underline}

The California Air Resources Board has provided guidance to the 34 air
quality management districts of the state for the development of mobile
source emission reduction credit (MSERC) program. These guidelines are
substantively consistent with the 1986 USEPA Emission Trading Policy
Statement for Emission Reduction Credit (ERC) trading; that is, they
require that the reductions be surplus, quantifiable, permanent and
enforceable.

Specific district programs are discussed below.

South Coast Air Quality Management District

[Strategy #1: Rule 1612 - Clean On-Highway Vehicles (September,
1995)]{.underline}

Description: voluntary reductions of NOx, HC, CO, PM and SOx emissions
to create MERCs through the operation of low- or zero-emission
on-highway vehicles within the boundaries of the District.

Applicability: passenger cars, light-duty trucks, medium-duty vehicles
and heavy-duty vehicles that are registered and operated in the District
for which optional emission standards have been set by CARB.

Eligibility:

-   operation of a new heavy-duty vehicle, powered with engines
    certified to optional emission standards

-   operation of repowered heavy-duty vehicles with engines certified to
    optional emission standards

-   operation of heavy-duty vehicles, retrofitted to comply with
    optional emission standards using certified conversion kits and
    using manufacturer approved facilities for the installation of the
    certified conversion kits

-   operation of new low- or zero-emission heavy-duty vehicles that
    results in evaporative and marketing loss emission reductions.

The vehicle operator must submit an application for MERCs which includes
a description of the repowering, retrofitting or purchasing project, and
information characterizing both the baseline engine and the new engine.
Each year, the operator must submit actual vehicle miles traveled
documentation and ensure that all engine replacement and major engine
overhauls are performed in accordance with specifications and procedures
required by the engine or retrofit manufacturer throughout the engine\'s
life.

Credit life/discounts/design margin: MERCs are not discounted at the
time of creation. They expire two years after the date of issuance and
are discounted by 20% at the time of use, unless the use already
provides for an offset ratio of greater than 1.0. Use must occur in the
same District in which the MERCs were created.

[Strategy #2: Rule 1620 - Clean Nonroad Mobile Equipment (March,
1996)]{.underline}

Description: provides opportunity to generate NOx, HC, CO, PM and SOx
mobile source emission reduction credits on a voluntary basis through
the operation of low- or zero-emission off-road equipment within the
District.

Applicability: any off-road mobile equipment or vehicle for which
emission standards have been adopted by CARB or EPA and for which
optional emission standards have been specified. Such equipment and
vehicles would be used primarily off-highway to propel, move, or draw
persons or property in construction, commercial, industrial, mining,
agricultural or forestry applications within the District, including
dozers, loaders, tractors, scrapers, graders, off-highway trucks,
forklifts, and utility service vehicles. Not included are utility and
lawn and garden equipment, off-road motorcycles, all-terrain vehicles,
go-carts, golf carts, marine vessels, aircraft and locomotives.

[^1]: "Heavy-Duty Engine Emissions in the Northeast" NESCAUM May, 1997.

[^2]: "Heavy-Duty Engine Emissions in the Northeast" NESCAUM May, 1997.

[^3]: "Environmental Fact Sheet" U.S. Environmental Protection Agency,
    Office of Mobile Sources, March, 1997.

[^4]: "Urban Driving Cycle Results of Retrofitted Diesel Oxidation
    Catalysts on Heavy-Duty Vehicles: One Year Later," Kevin F. Brown,
    Greg R. Rideout, Jeffery E. Turner. SAE 970186, February, 1997 and
    "Urban Driving Cycle Results of Retrofitted Diesel Oxidation
    Catalysts on Heavy Duty Vehicles" in SAE 960134, Kevin Brown and
    Greg Rideout, 1996

[^5]: Brown, K., Rideout, G. "Urban Driving Cycle Results of Retrofitted
    Diesel Oxidation Catalysts on Heavy Duty Vehicles," SAE 960134,
    1996.

[^6]: Brown, K., Rideout, G., and Turner, J. "Urban Driving Cycle
    Results of Retrofitted Diesel Oxidation Catalysts on Heavy Duty
    Vehicles: One Year Later," SAE 970186, 1997.

[^7]: Clerc, J., Miller, R., McDonald, C., and Schlamadinger, H. "A
    Diesel Engine/Catalyst System for Pick-up and Medium-Duty Trucks"
    SAE 9329821993.

[^8]: Voss, Adomaitis, Feldwisch, Borg, Karlsson, and Josefsson,
    "Performance of Diesel Oxidation Catalysts for European Bus
    Applications," SAE 950155 1995.

[^9]: Millbrook Proving Ground Ltd. "Evaluation of a Reformulated
    Catalyst Developed by Lubrizol on Exhaust Emissions on London Double
    Decker Buses." Report No. MBK 961165, January 1997.

[^10]: Millbrook Proving Ground Ltd. "Evaluation of Catalysts developed
    by Engelhard on Exhaust Emissions on London Double Decker Buses,"
    Report No. 980342, April 21, 1998.

[^11]: Brown, K., Rideout, G., and Turner, J. "Long Term Emission
    Evaluation of In-Service Transit Buses at OC TRANSPO. Paper
    delivered at the 1997 APTA Bus Operations, Technology, and
    Maintenance Conference.

[^12]: In this table engine *models* are listed. Conversely, on the
    retrofit website engine *families* will be listed.

[^13]: New highway engine emission standards for NOx will be introduced
    in 2002 or 2004, and the PM standard as proposed, will remain at the
    current level (.1 g/bhp-hr) until 2007. For nonroad engines, phase
    in began in 1996 and will continue through 2008. Appendix B provides
    a table on phase-in of standards for nonroad engines.

[^14]: Commercial Carrier Journal, August, 1996

[^15]: "1992 Truck Inventory and Use Survey" (TIUS) Census of
    Transportation, U.S. Department of Commerce.

[^16]: Personal communication with Environment Canada and Southwest
    Research Institute staff.

[^17]: CARB, The California Low-Emission Vehicle Regulations for
    Passenger Cars, Light-Duty

    Trucks and Medium-Duty Vehicles, sections 1960.1, 1956.8, 1965,
    2061, 2062 and

    2101, title 13, California Code of Regulations, as of February 1,
    1999

[^18]: EPA, "Control of Emissions of Air Pollution from Highway
    Heavy-Duty Engines" Oct. 1997*.*

[^19]: assumes each bus runs 4 hours per day, 180 days per year

[^20]: FR Vol. 63 pp 57,355 -- 57,538, October 27, 1998.

[^21]: EPA, "Control of Emissions of Air Pollution from Nonroad Diesel
    Engines," 1997

[^22]: [Engine Manufacturers Association v. EPA]{.underline} 88 F 3d
    1075 (1996)

[^23]: "Control of Air Pollution: Emission Standards for New Nonroad
    Compression-Ignition Engines at or Above 37 Kilowatts; Preemption of
    State Regulation for Nonroad Engine and Vehicle Standards;
    Amendments to Rules" December, 1997, 62 FR 67733

[^24]: 40 CFR Part 89 Appendix A of Subpart A. 62 FR at 67736, December
    30, 1997

[^25]: EPA, \"June, 1998, Draft NONROAD Model,"Available Online;
    http://www.epa.gov/oms/nonrdmdl.htm , March 29, 1999 and "Nonroad
    Engine Emissions in the Northeast," draft NESCAUM report.

[^26]: Boston Logan International Airport 1997, Annual Update, EOEA
    #3247/5146, August, 1998, P 6-8.

[^27]: Ainslie, Cooper, McKinnon, Rideout "The Impact of Retrofit
    Exhaust Control Technologies on Emissions from Heavy-Duty Diesel
    Construction Equipment" In [Diesel Exhaust Aftertreatment,
    1999]{.underline}, SAE

[^28]: EPA "Nonroad Engine and Vehicle Emissions Study Report," Nov.,
    1991

[^29]: "Blue Sky" engines are EPA certified low emissions nonroad
    engines

[^30]: EPA "Control of Emissions of Air Pollution from New CI Marine
    Engines at or Above 37 kW, Proposed Rule," December, 1998.

[^31]: HC were reduced by 90% and NOx by 96% "Emission Control in Marine
    Engines" Diesel & Gas Turbine Worldwide, March 1994.

[^32]: Table reproduced from "Warship Application of Compact Selective
    Catalytic Reduction Plant for Diesel Exhaust Emission Control" Lt.
    Cdr B L Burlingham, BSc, Ceng, MlMarE, RN, The Institute of the
    Marine Engineers' Third International Naval Engineering Conference
    and Exhibition, April, 1996.

[^33]: EPA "Compilation of Air Pollutant Emission Factors" Vol. I:
    Stationary, Point, and Area Sources, Fifth Edition, January, 1995.

[^34]: "Environmental Differentiated Fairway and Port Dues" Swedish
    Maritime Administration, Sjofartsverkets tryckeri, Norrkoping
    3357-98

[^35]: U.S. v. Cummins Engine Co. Civil Action No. 98-2546, U.S. v.
    Detroit Diesel Corporation, Civil Action No. 98-2548, U.S. v.
    Caterpillar, Inc., Civil Action No. 98-2544, U.S. v. Mack Trucks,
    Inc. No. 98-1495 and U.S. v. Renault Vehicles Industriels No.
    98-2543; U.S. v. Navistar No. 98-2545, U.S. v. Volvo Truck Corp. No.
    98-2547.