UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

NATIONAL VEHICLE AND FUEL EMISSIONS LABORATORY

2565 PLYMOUTH ROAD

ANN ARBOR, MICHIGAN 48105-2498

 

 

MEMORANDUM

SUBJECT: Draft Regulatory Text for Voluntary Offset Program

FROM: Charles Moulis, Senior Environmental Engineer

Assessment and Standards Division

TO: Docket Number EPA-HQ-OAR-2010-0687

DATE: June 9, 2011

This memorandum provides additional information regarding a request for comment in EPA’s 

“Notice of Proposed Rulemaking (NPRM): Control of Air Pollution From Aircraft and Aircraft 

Engines; Emission Standards and Test Procedures.” In that NPRM, EPA is requesting comment 

on establishing a voluntary program by which manufacturers could earn NOx emission credits to 

offset higher emissions from exempted engines. Sample regulatory text is attached that would 

provide for such a program if adopted in the Final Rule. Commenters are encouraged to address 

these sample regulations as well as the issues described here.

Purpose of Potential Credit Program

In the preamble to the NPRM, EPA discusses possible uses for emission offsets – all of which are

related to exemptions that would allow the use of engine designs not meeting the revised emission 

standards on new aircraft after new more stringent standards take effect.1 Under the proposed 

regulations, such exemptions would have to be requested and justified by the engine manufacturer, 

and would likely be subject to a limit on the number of exempted engines a manufacturer would be 

allowed to produce over a fixed time period. (See §87.50 of the proposed regulations for more 

detail about this exemption allowance.) Specifically, the preamble text discusses using credits to 

justify exemptions from the Tier 6 production cutoff, or banking emission credits for later use 

against a possible future Tier 8 production cutoff.

2

From EPA’s perspective, the primary purpose of any such program would be to provide flexibility 

to allow manufacturers to justify using older non-complying engine models after the cut-off date 

by over-complying with the standards for other models. Thus exemptions for those engines could 

be granted without adversely affecting U.S. air quality. Central to this concept is the idea that 

manufacturers would receive credit only for going beyond what they otherwise would do with 

respect to emissions reductions. This issue is discussed further below.

 

1 Note that this memorandum is not related to exceptions for spare engines to be installed on in-use aircraft, which 

generally do not require justification.

2 The Tier 6 and Tier 8 NOx standards are equivalent to the CAEP/6 and CAEP/8 NOx limits adopted by ICAO.

OFFICE OF

AIR AND RADIATION
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Basic Structure

In the credit program being considered, manufacturers could receive credits for having emission 

rates (more specifically, characteristic levels) below an applicable g/kN/LTO emission threshold.3 

At its simplest, credits would be calculated as the product of the difference between the 

characteristic level and the threshold, the number of credit-generating engines produced, and the 

rated power output. These credits would be expressed in terms of kg/LTO, as shown in the 

following equation: 

Emission credits (kg/LTO) = (Threshold – CL) (Number) (Power) 10-3

Where: 

Threshold = the emission standard or threshold, in g/kN rated output per LTO.

CL = the characteristic level, in g/kN rated output per LTO.

Number = the number of engines eligible to generate emission credits.

Power = the rated output of the engine, in kN per engine.

This same equation could also be used to calculate credits needed by engines of the model for 

which the exemption was being requested. Such credits would be calculated as negative credits 

or credit deficits.

Credits would be calculated only for aircraft that are initially registered in the United States. 

Manufacturers should be able to determine this since credits would not be calculated until after the 

end of the production year. Commenters are encouraged to address how much time would be 

needed after production for the manufacturer to determine how many of the engines were actually 

installed on U.S. registered aircraft.

Credits could be further converted to kg/year by multiplying them by expected LTOs per year for 

the applicable aircraft type, or total lifetime kg by multiplying them by total LTOs expected for the 

applicable aircraft in their service lives. 

Issues

EPA sees four program design considerations that would need to be addressed in a credit program. 

These reflect the tradeoffs related to complexity, equity, and environmental protection. For 

example, programs designed to ensure that manufacturers always receive full credit run the risk of 

giving too much credit in some cases. On the other hand, very detailed programs designed to 

fully protect the environment while being fair to all manufacturers may be unworkable due to their 

complexity. The discussions that follow are intended to help commenters submit useful 

comments that fully consider these tradeoffs.

 

3 While emission standards are nominally expressed as g/kN, the standards are intended to represent the total amount 

of emissions that would result from one engine during one landing and take-off cycle divided by the rated output of the 

engine. Standards are expressed in this memorandum as g/kN/LTO to be consistent with actual units and allow for 

more transparent unit conversions.
3

Windfall Credits and Triggers

Emission credit programs are based on the premise that higher emissions from some engines can 

be offset by lower emissions from other engines so that the total combined emissions are the same 

as (or lower than) would have occurred without the emission credit program. This requires that 

credits only be given for emissions where a manufacturer intentionally designs the engines to have 

lower emissions (for the purpose of generating emission credits) than would otherwise have 

occurred. Credits inappropriately given for emission reductions that would have occurred 

without any credit program can be described as “windfall credits.” 

Aircraft engine manufacturers have generally certified their engines with characteristic levels at 

least ten percent below the applicable standards. In other words, when EPA sets an emission 

standard at a certain level, it generally expects manufacturers to design nearly all of their new 

engine models to have emission rates between 80 and 90 percent of that level. Thus calculating 

credits based on the difference between the characteristic level and the standard would result in the 

manufacturer receiving credits for reductions that would probably have occurred without a credit 

program or perhaps even receiving credits for it highest emitting engines. 

The most straightforward way to address this would be to set a trigger value which would have to 

be met to be eligible to generate credits. Consistent with the discussion above, a program could 

be based on a trigger emission value 10 percent below the most stringent applicable standard in our 

regulations (i.e., the Tier 8 standards in our proposed regulations). Credits would then be 

calculated from the characteristic level relative to a value representing ninety percent of the 

standard. For example, an engine that was certified to be 15 percent below the Tier 8 NOx standard 

would generate credits equivalent to 5 percent of the standard. For engines using credits, the 

characteristic level concept would also be used. However, in this case credits used or needed

would be calculated relative to the standard from which exemptions are being sought.

The following form of the earlier equation could be used for these calculations with F equal to 0.90

for credit generation and F equal to 1.00 for credit use. 

Emission credits (kg/LTO) = ([Standard F] – CL) (Number) (Power) 10-3

If F was set to 0.90, then engines with characteristic NOx levels less than 90 percent of the Tier 8 

NOx standard would generate positive credits; and engines between 90 and 100 percent of the 

standard would generate no credits. Credit deficits for exemptions from the Tier 6 production 

cutoff would be calculated with the Tier 6 NOx standard as the applicable standard and F equal to 

one.

Credit Banking and Trading

For engine manufacturers with broad product lines, exchanging credits between their exempt and 

non-exempt engines within a given year could be a workable program. However, such an 

intra-manufacturer averaging program would be less valuable for other manufacturers. Two 

ways to enhance the usefulness of the program would be to allow manufacturers to bank credits in 

one year for future use or to trade them (perhaps through a broker) to other engine manufacturers.
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Banking would allow a manufacturer to pull ahead its certification of a cleaner engine design to 

generate credits before a new standard takes effect and to use the credits later for a design that 

either is being phased-out of production or requires additional development work to meet the new

standards. EPA could also adopt a banking program in this rule that could allow manufacturers to 

bank credits for use against a possible Tier 8 production cutoff (when compliance with the Tier 8 

would be required for all newly manufactured engines). However, in either case, EPA could 

include a limit on credit life to limit the extent to which any manufacturer could bank large 

amounts of credits that could later be used to disrupt the market. For example, we limit the credit 

life to ten calendar years after generation in the sample regulations of this memorandum. We are 

asking for comment on this limit.

Trading could be advantageous for manufacturers meeting the standards on time for all of their 

engines. Since they would not be producing any engines that need credits, such credits may be of 

limited value to them. A trading allowance would enable them to reap some benefit from any 

over-compliance they achieve beyond the trigger level by allowing them to trade credits to other 

manufacturers. We are also requesting comment on a trading program structure that would allow 

credit trades to be brokered by third parties such as airframe manufacturers or end users. More 

specifically, should manufacturers be allowed to trade excess credits to third parties that are not 

certificate holders?

Credit Equivalency

Any credit program would need to ensure that emission benefits from a credit-generating aircraft 

model truly offset the higher emissions from the credit-using model. For example, LTO 

emissions from regional jet aircraft may not be directly equivalent to LTO emissions from 

twin-aisle aircraft designed for longer cross-country or international flights because the regional 

jet would likely have more LTOs during its lifetime. There are two obvious ways to address these 

concerns: averaging set restrictions and credit conversions.

The simplest way to address this would be to allow credit exchanges only between similar engines 

on similar aircraft. For example, engines with similar rated outputs on regional aircraft would be 

expected to have similar emission impacts. More precisely, a one kg/LTO reduction from one 

regional aircraft engine model could be assumed to be equivalent to a one kg/LTO exceedance 

from another similar regional aircraft engine model. While this would address the concerns, it 

would make the program less useful because of the relatively small number of engine models in 

production for each type of aircraft.

A more flexible (but also more complicated) approach would be to develop equivalency factors or 

to calculate credits as lifetime tons of reduction or exceedance. As noted earlier kg/LTO credits 

could be multiplied by the number of LTOs expected over the service life of the engine to convert 

them to total lifetime kg (assuming default LTO times in mode are accurate). However, the 

accuracy of the conversion would be limited by the accuracy of the estimation of the number of 

LTOs expected over the service life. 
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The table below gives EPA’s estimates of the number of LTOs that each type of aircraft would 

perform over a typical lifetime.4 These factors could be applied to the earlier equation to project 

kg of emission reductions that would be expected over the life of an aircraft. For example, if an 

engine on a regional jet would generate a NOx credit of one kg/LTO, it would generate 51,000 kg 

of credit over its lifetime. Commenters are encouraged to address the accuracy of the values in 

this table.

Example Calculations of Lifetime LTOs per Aircraft

Aircraft Type LTO/yr Life (yrs) LTO/Lifetime

Two-Engine Regional Aircraft 1,700 30 51,000

Two-Engine Narrow-Body 1,500 30 45,000

Three-Engine Narrow-Body 400 30 12,000

Two-Engine Wide-Body 500 30 15,000

Four-Engine Wide-Body 900 30 27,000

This approach would have the drawback of not addressing the timing of the emissions for aircraft

with different lifetimes in years. For example, a one kg/LTO emission reduction from a 2014 

engine projected to have 15,000 LTOs over a 30-year service life should not necessarily be 

considered equivalent to a one kg/LTO emission exceedance from a 2014 engine projected to have 

15,000 LTOs over a 15-year service life since half of the reduction would not occur until after the 

higher emitting engine was out of service.

Given the complexity of this issue it may be appropriate to consider these factors on a case-by-case 

basis when evaluating exemption requests instead of attempting to codify very specific restrictions 

or conversions in the regulations. Since this equivalency issue is at its core an analytical issue 

rather than a policy issue, it might be most appropriate to determine equivalency of the credits 

consistent with good engineering judgment based on the data and facts available at the time of the 

request to use the credits. Under this approach, equivalency would not need to be determined 

when manufacturers generate and bank credits. However, not including details on equivalency at 

this time would reduce program “certainty”, and this may be important in a manufacturer’s

decision making with regard to credit generation and use. 

 

4 Based on data from: “Historical Assessment of Aircraft Landing and Take-off Emissions (1986-2008),” Eastern 

Research Group, May 2011; and "FAA Aerospace Forecast, Fiscal Years 2010-2030," U.S. DOT, FAA, March 2010.
6

Effects on Competition

In adopting any credit program, EPA would need to consider its effects on the competitive balance 

in the market. A well designed program should provide incentives for manufacturers to produce 

cleaner engines and flexibility for manufacturers to apply developmental resources effectively, 

while not significantly disadvantaging any individual manufacturers. For example, a limit on the 

life of a credit would prevent a manufacturer from amassing an excessively large stockpile of 

credits over many years that could be used for competitive advantage. However, it is also 

possible that the nature of the market itself would limit this potential advantage. Emission caps 

on credit users could also be applied to ensure that every engine had to achieve at least some 

emission reductions or be below other specified limits.

As mentioned above, another way to avoid market disruptions would be to develop a program in 

which end users participate in the credit market. For example, in a program where credits are held 

by end users, an engine manufacturer seeking an exemption but that is unable to produce credit 

generating engines might be able to obtain credits from the end user that will purchase the aircraft 

with the exempted engines. 

Summary

EPA is considering adopting regulations to establish a voluntary program that would allow 

manufacturers to receive emission credits that could be used to justify exemptions from production 

cutoffs. Since such a program would deal only with offsetting the environmental impacts of 

exemptions, it would be managed by EPA rather than FAA. The program being considered 

would not include any changes to the proposed exemption provisions that would require credits to 

obtain exemptions, but would merely provide manufacturers another tool to justify that exempting 

some of their engines would be in the public interest.

An example of how a credit program might be structured is shown in the attached draft regulatory 

text. In the attached regulations (which could be finalized in 40 CFR part 87) manufacturers 

would notify EPA of their intent to generate credits before the first day of the production for that

credit generating engine within a given calendar year. Credits would be calculated as the amount 

that NOx emissions would be reduced over the life of the engines, relative to engines emitting at 90 

percent of the Tier 8 NOx standard. Manufacturers could bank these credits for use in the 

following ten model years. Manufacturers could include their credit information along with their 

annual production reports to EPA. Alternatively, a manufacturer could submit a separate report 

later if more time was needed. If a manufacturer continued to produce the cleaner engines in later 

years, it could bank additional credits during those years. As described in paragraph (c) of the 

sample regulations, credits could be used without adjustment to justify exemptions for similar 

aircraft types, or with adjustment to justify exemptions for different aircraft types. 

Commenters are encouraged to suggest modifications to the regulations to prevent manufacturers 

from receiving “windfall” credits and/or to make the program more useful. Commenters are also 

encouraged to address the issues of credit equivalency for different aircraft types and competitive 

issues for different manufacturers.
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Sample Regulations

§87.55 Emission credit provisions.

This section describes how engine manufacturers may generate and use emission credits to be 

considered as part of a request for exemptions under §87.50. An engine manufacturer may 

use these emission credits between two or more of its own models; credits may also be 

exchanged between manufacturers, with or without the involvement of a third party to broker 

the transaction.

(a) For purposes of an exemption granted under §87.50(c), you may generate (or otherwise 

obtain) emission credits as described in this section. Notify EPA of your intent to generate 

credits from a new engine model prior to the first day of the production of the engine model in 

a given calendar year.

(b) You may generate or use emission credits only if you are a certifying engine manufacturer. 

Calculate positive or negative emission credits relative to the otherwise applicable emission 

standard as follows:

(1) Use the following equation to calculate positive emission credits for a family that is 

generating credits or negative emission credits for a family that is using credits, without 

rounding:

Emission credits (kg) = [(STD) (F) - CL] (Number) (Power) 10-3(LTOs/Engine)

Where: 

STD = the emission standard, in g/kN rated output per LTO.

F = a dimensionless factor that equals 1.00 for engines using credits and 0.90 for engines 

generating credits.

CL = the characteristic level, in g/kN rated output per LTO.

Number = the number of engines eligible to generate or use emission credits within the 

given family during the model year, as described in this section.

Power = the rated output (kN) of the tested engine sub-model (not untested derivative 

sub-models).

LTOs/Engine = the total number of LTOs an engine is expected to have over its service 

life.

(2) Sum your previously banked or acquired by trade positive credits and negative credits 

for the production year. Round to the nearest 0.01 kg. For purposes of this section, the 

production year is January 1 through December 31.
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(3) Include in your calculations only engines that were purchased for aircraft registered in 

the United States.

(4) Credits may be generated only from engine models introduced after January 1, 2012.

(c) Paragraph (c)(1) of this section specifies restrictions on using emission credits. These 

restrictions apply, except as specified in paragraph (c)(2) of this section.

(1) Emission credits may generally be exchanged only within an averaging set. The default 

averaging sets are defined by the following restrictions:

(i) Engines with pressure ratios above 30 may not be included in the same averaging set 

with engines with pressure ratios at or below 30. Engines with pressure ratios below 

82.6 may not be included in the same averaging set with engines with pressure ratios at 

or above 82.6.

(ii) Engines with rated output above 89 kN may not be included in the same averaging 

set with engines with rated output at or below 89 kN.

(iii) Supersonic engines may not be included in the same averaging set with subsonic 

engines.

(iv) Engines used in regional aircraft may not be included in the same averaging set with 

engines used in non-regional aircraft. For purposes of this section a regional aircraft is 

a commercial passenger aircraft with no more than 100 seats, or a similar sized aircraft 

that is not used for commercial passenger service.

(2) We may allow exchange of credits across averaging sets if we determine such exchanges 

do not result in adverse environmental impacts. This may require adjustment of credit 

values. 

(d) The following provisions apply for averaging in which the credit-using and credit-generating 

engines are not produced by the same engine manufacturer:

(1) If you intend to use an engine to generate emission credits that will be transferred to an 

airframe manufacturer, engine operator, or consortium partner, you must notify the 

Designated EPA Program Officer.

(2) If you need emission credits for an engine exempted under §87.50(c), you may use 

credits generated from engines produced by a different engine manufacturer. Once these 

credits are transferred, they may no longer be used by the credit-generating manufacturer.

(e) You may bank unused credits at the end of the calendar year. Banked credits may be used 

only in the ten calendar years following the calendar year in which they are generated.

(f) Include in your annual production report to EPA the amount of credits generated by each

engine sub-model. Alternatively, you may submit this information in a separate report by the 

end of the subsequent production year. Report credit use in your report of exempted

engines.