EPA420-R-98-016

Final Regulatory Impact Analysis:

Control of Emissions from 

Nonroad Diesel Engines

 EPA

U.S. Environmental Protection Agency

Office of Air and Radiation

Office of Mobile Sources

Engine Programs and Compliance Division

August 1998
Table of Contents

CHAPTER 1: INTRODUCTION .......................................... 1

CHAPTER 2: INDUSTRY CHARACTERIZATION ............................ 3

I. Characterization of Engine Manufacturers ........................... 4

A. Engines Rated Under 37 kW .................................. 4

B. Engines Rated Between 37 and 75 kW .......................... 6

C. Engines Rated Between 75 and 130 kW ......................... 7

D. Engines Rated Between 130 and 450 kW ........................ 7

E. Engines Rated Over 450 kW .................................. 7

II. Characterization of Equipment Manufacturers ........................ 8

A. Equipment Using Engines Rated Under 37 kW .................... 9

B. Equipment Using Engines Rated between 37 and 75 kW . . . . . . . . . . . 10

C. Equipment Using 75 to 130 kW Engines . . . . . . . . . . . . . . . . . . . . . . . . 12

D. Equipment Using 130 to 560 kW Engines . . . . . . . . . . . . . . . . . . . . . . . 14

E. Equipment Using Over 560 kW Engines . . . . . . . . . . . . . . . . . . . . . . . . 16

CHAPTER 3: TECHNOLOGICAL FEASIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

I. Background on Diesel Technology and Emission Formation . . . . . . . . . . . . 20

II. General Description of Emission Control Strategies . . . . . . . . . . . . . . . . . . . 21

A. Combustion Optimization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

B. Advanced Fuel Injection Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

C. Exhaust Gas Recirculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

D. Improving Charge Air Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

E. Exhaust Aftertreatment Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

III. Specific Description of Emission Control Strategies by Power Category . . . 27

A. Engines Rated over 75 kW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

B. Engines Rated between 37 and 75 kW . . . . . . . . . . . . . . . . . . . . . . . . . 28

C. Engines Rated under 37 kW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

IV. Impact on Noise, Energy, and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

CHAPTER 4: ECONOMIC IMPACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

I. Cost of Engine Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

A. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

B. Technologies for Meeting the New Standards . . . . . . . . . . . . . . . . . . . . 35

C. Cost of Engine Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

D. Projected Cost of Technology Packages . . . . . . . . . . . . . . . . . . . . . . . . 55

E. Summary of Engine Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

II. Cost of Redesigning Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

A. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

B. Equipment Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

C. Cost of Equipment Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

D. Summary of Total Projected Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

III. Aggregate Costs to Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
IV. Final Regulatory Flexibility Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

A. Requirements of SBREFA and RFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

B. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

C. Characterization of Small Equipment Manufacturers . . . . . . . . . . . . . . . 73

D. Estimated Impacts on Small Equipment Manufacturers . . . . . . . . . . . . . 76

E. Summary of Projected Economic Impacts for Small Businesses . . . . . . 78

F. Regulatory Alternatives to Reduce Impacts . . . . . . . . . . . . . . . . . . . . . . 79

CHAPTER 5: ENVIRONMENTAL IMPACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

I. Health and Welfare Effects of Pollutants from Nonroad Engines . . . . . . . . . . 84

A. Ozone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

B. Particulate Matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

C. Carbon Monoxide and Smoke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

II. The NONROAD Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

A. Emission Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

B. In-Use Operation Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

C. Equipment Population Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

D. Growth Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

III. Emission Inventory Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

A. Equipment Manufacturer Allowance Impacts . . . . . . . . . . . . . . . . . . . . . 94

B. Emission Model Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

IV. Emission Reductions Per Piece of Equipment . . . . . . . . . . . . . . . . . . . . . . 102

A. Per-Engine Emission Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

B. Average Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

C. Average Load Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

D. Average Annual Hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

E. Projected Annual Emissions Levels and Emission Reductions . . . . . . 105

F. Average Lifetime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

G. Lifetime Emission Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

V. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

CHAPTER 6: COST-EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

I. Cost-Effectiveness of the New Emission Standards . . . . . . . . . . . . . . . . . . 112

A. NMHC + NOx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

B. PM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

II. Comparison with Cost-Effectiveness of Other Control Programs . . . . . . . . . 120

Appendix to the Regulatory Impact Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Chapter 1: Introduction

 aDiesel-cycle engines, referred to simply as “diesel engines” in this analysis, may also be

referred to as compression-ignition (or CI) engines. These engines typically operate on diesel

fuel, but other fuels may be also be used. This contrasts with otto-cycle engines (also called

spark-ignition or SI engines), which typically operate on gasoline.

CHAPTER 1: INTRODUCTION

EPA is setting significantly more stringent standards for emissions of oxides of nitrogen,

hydrocarbons, and particulate matter from diesel-cycle engines used in land-based nonroad

equipment and in some marine applications.a This Final Regulatory Impact Analysis (Final RIA)

provides technical, economic, and environmental analyses of the new emission standards for the

affected engines. The anticipated emission reductions will translate into significant, long-term

improvements in air quality in many areas of the U.S. For engines in this large category of pollution

sources, NOx and PM standards are reduced by up to two-thirds compared with current standards.

Overall, these requirements provide much needed assistance to states and regions facing ozone and

particulate air quality problems that are causing a range of adverse health effects, especially in terms

of respiratory impairment and related illnesses.

Chapter 2 contains an overview of the manufacturers, including some description of their

engines and equipment, that may be affected by the new requirements. Chapter 3 provides a

description of the range of technologies being considered for improving emission controls from these

engines, including detailed projections of a possible set of compliance technologies. Chapter 4

applies cost estimates to the projected technologies for several different power categories and

contains the Final Regulatory Flexibility Analysis. Chapter 5 presents the calculated reduction in

emission levels resulting from the new standards; Chapter 6 compares the costs and the emission

reductions for an estimation of the cost-effectiveness of the rulemaking.

Table 1-1 lists the new standards and the affected model years. References in the text of the

document to the engine power ratings listed in Table 1-1 identify only the kilowatt rating. The reader

may refer to the table for horsepower equivalent ratings. Other values are listed with English units

in parentheses.
Regulatory Impact Analysis



Table 1-1

Emission Standards in g/kW-hr (g/hp-hr)

Engine Power Tier

Model

Year

NMHC+

NOx CO PM

kW<8

(hp<11)

Tier 1 2000 10.5 (7.8) 8.0 (6.0) 1.0 (0.75)

Tier 2 2005 7.5 (5.6) 8.0 (6.0) 0.80 (0.60)

8kW<19

(11hp<25)

Tier 1 2000 9.5 (7.1) 6.6 (4.9) 0.80 (0.60)

Tier 2 2005 7.5 (5.6) 6.6 (4.9) 0.80 (0.60)

19kW<37

(25hp<50)

Tier 1 1999 9.5 (7.1) 5.5 (4.1) 0.80 (0.60)

Tier 2 2004 7.5 (5.6) 5.5 (4.1) 0.60 (0.45)

37kW<75

(50hp<100)

Tier 2 2004 7.5 (5.6) 5.0 (3.7) 0.40 (0.30)

Tier 3 2008 4.7 (3.5) 5.0 (3.7)

75kW<130

(100hp<175)

Tier 2 2003 6.6 (4.9) 5.0 (3.7) 0.30 (0.22)

Tier 3 2007 4.0 (3.0) 5.0 (3.7)

130kW<225

(175hp<300)

Tier 2 2003 6.6 (4.9) 3.5 (2.6) 0.20 (0.15)

Tier 3 2006 4.0 (3.0) 3.5 (2.6)

225kW<450

(300hp<600)

Tier 2 2001 6.4 (4.8) 3.5 (2.6) 0.20 (0.15)

Tier 3 2006 4.0 (3.0) 3.5 (2.6)

450kW560

(600hp750)

Tier 2 2002 6.4 (4.8) 3.5 (2.6) 0.20 (0.15)

Tier 3 2006 4.0 (3.0) 3.5 (2.6)

kW>560

(hp>750)

Tier 2 2006 6.4 (4.8) 3.5 (2.6) 0.20 (0.15)
Chapter 2: Industry Characterization



CHAPTER 2: INDUSTRY CHARACTERIZATION

In understanding the impact of emissions standards on regulated industries, the nature of the

regulated and otherwise affected industries must be accurately assessed. This chapter characterizes

the nonroad engine and equipment industry based on the different manufacturers and their products,

the size and degree of vertical integration of the companies, and the diversity of the manufacturer

pool for the various types of equipment.

Nonroad engines are generally distinguished from highway engines in one of four ways: (1) the

engine is used in a piece of motive equipment that propels itself in addition to performing an

auxiliary function (such as a bulldozer grading a construction site); (2) the engine is used in a piece

of equipment that is intended to be propelled as it performs its function (such as a lawnmower); (3)

the engine is used in a piece of equipment that is stationary but portable, such as a generator or

compressor; or (4) the engine is used in a piece of motive equipment that propels itself, but is

primarily used for off-road functions.

This category is also different from other mobile source categories because: (1) it applies to a

wider range of engine sizes and power ratings; (2) the pieces of equipment in which the engines are

used are extremely diverse; and (3) the same engine can be used in widely varying equipment

applications (e.g., the same engine used in a backhoe can also be used in a drill rig or in an air

compressor). 

Nonroad equipment can be grouped into several categories. This Final RIA considers the

following seven categories: agriculture and logging, construction, general industrial, lawn and

garden, utility, material handling, and small marine. Engines used in locomotives, large marine

applications (rated over 37 kW), aircraft, underground mining equipment, and all spark-ignition

engines within the above categories are not included in this rulemaking. Table 2-1 contains

examples of the types of nonroad equipment regulated by this rulemaking, arranged by category. A

more detailed list would include many more entries.

A major challenge in regulating nonroad engines is the lack of vertical integration in this field.

Although some nonroad engine manufacturers also produce equipment that rely on their own

engines, most engines are sold to various equipment manufacturers over which the original engine

manufacturer has no control. A characterization of the industry affected by this rulemaking must

therefore include equipment manufacturers as well as engine manufacturers.
Regulatory Impact Analysis



Table 2-1

Sampling of Nonroad Equipment Applications

Segment Applications

Agriculture Ag Tractor

Baler

Combine

Sprayer 

Swather

Other Ag Equipment

Skidder

Construction Backhoe

Bore/drill Rig

Cement Mixer

Crawler Tractor

Excavator

Grader

Off-highway Truck

Paver

Paving Equipment

Plate Compactor

Roller

Rubber-Tired Dozer

Rubber-Tired Loader

Scraper

Signal Board

Skid-Steer Loader

Trencher

Feller/buncher

General Industrial Concrete/Ind. Saw

Crushing Equipment

Oil Field Equipment

Refrigeration/AC

Scrubber/sweeper

Rail Maintenance

Lawn and Garden Garden Tractor Rear Engine Mower Chippers/Grinder

Utility Air Compressor

Hydro Power Unit

Pressure Washer

Pump

Generator Set

Aircraft Support

Irrigation Set

Welder

Material Handling Aerial Lift

Crane

Forklift 

Terminal Tractor

Rough-Terrain Forklift

Marine <37 kW Propulsion Auxiliary

I. Characterization of Engine Manufacturers

For purposes of discussion, the characterization of nonroad engine manufacturers is arranged

by the power categories used to define the new emission standards. The information detailed in this

section was derived from the Power Systems Research database and trade journals.1 EPA recognizes

that the PSR database is not comprehensive, but EPA has not identified a better source to provide

consistent data for identifying additional companies. 

A. Engines Rated Under 37 kW

In 1995, sales of engines in this category comprised approximately 35% (approximately 182,000

units) of the nonroad market. Emission standards for this category are further separated into three

power ranges to provide more appropriate phase-in and standard levels. These ranges are under 8

kW, between 8 and 19 kW, and between 19 and 37 kW.

The largest manufacturers of engines in this category are Yanmar and Kubota. Yanmar Diesel

America Corporation markets diesel engines with ratings ranging from 4 to 3700 kW (5 to 5000 hp).

Most of their engines are four-cycle, water-cooled direct injection models. Kubota makes diesel

engines with ratings ranging from 3 to 70 kW (4 to 90 hp.) Most of their engines are liquid-cooled

indirect injection models. Kubota also markets a 16 kW (21 hp) gaseous fueled engine which is
Chapter 2: Industry Characterization



designed to meet the new standards. 

1. Under 8 kW

In 1995, total sales were 21,000 engines, which is approximately 12% of the market for engines

rated under 37 kW. Of these engines, direct injection (DI) diesel engines comprise 90%

(approximately 18,900 units) of the market and indirect injection (IDI) diesel engines make up the

remaining 10% (approximately 2,000 units). Yanmar has the largest share of the DI market at

approximately 41%, followed by Robin America (22%), Lombardini (13%), Lister Petter (10%) and

Hatz (7.5%). Other DI manufacturers are Acme, Onan, Farymann, Deutz, Honda, and Ruggerini.

The largest selling direct injection engines in this range are used in pumps, generator sets and

refrigeration units. Kubota has the largest share of the IDI market with 87%, the remaining 13%

being sold by Yanmar. Commercial turf mowers and general industrial engines are the largest selling

applications for IDI engines. 

2. 8-19 kW

This is the largest category of engines rated under 37 kW, with approximately 101,000 units

sold in 1995. IDI engines dominate this category with 81% of the market (82,000 units). Yanmar

is the leading manufacturer with 55% of IDI sales and 51% of DI sales. Kubota is ranked second

with 36% of the IDI market. Other manufacturers in this category include Mitsubishi, IHI-Shibaura,

Perkins, Lombardini, Lister Petter, Deutz, Onan, Acme, Hatz and Teledyne-Wisconsin. The largest

selling engines in this category are primarily used in refrigeration units, commercial turf mowers,

welders, and generator sets.

3. 19-37 kW

This category comprises the remaining 32% of engines rated under 37 kW, with approximately

58,600 units sold in 1995. There is a fairly even split between IDI and DI engines, with IDI

capturing 55% of the market with 32,000 units. Kubota dominates the IDI market with 84 percent

of sales, followed by Perkins (7%), Isuzu (3%) and Yanmar (2%). Deutz and Yanmar each have

approximately 32% of the DI market, followed by Perkins (10%), Lister-Petter (8%), Hatz (8%),

Isuzu (3%) and Onan (3%). As with the smaller power ranges, commercial turf mowers and

refrigeration units are the largest selling engines, but skid-steer loader sales are also growing rapidly

in this power range. 

B. Engines Rated Between 37 and 75 kW

In 1995, approximately 130,000 engines in this power range were sold. This represents the

second largest category of nonroad engines with 22% of the total market. Approximately 90% of

these engines are DI. Engines used in construction equipment comprise the largest segment in this

range. Of the construction segment, the largest selling piece of equipment is the skid-steer loader.

The single largest selling engine, however, is that used in refrigeration/air conditioning units. 
Regulatory Impact Analysis

 bEngine sales by Consolidated Diesel, a subsidiary company that manufactures Cummins

engines, are included in the total engine sales for Cummins.



There are three manufacturers which represent approximately two-thirds of total DI sales: John

Deere with 27% of the DI market, followed by Isuzu with 20% and Cummins with 17%. Kubota,

Deutz, and Perkins each have approximately 10% of the market. John Deere sells engines with

ratings ranging from 16 to 370 kW (21 to 500 hp). John Deere's Power Systems Group has

developed engines in Deere's Power Tech Series. Key features of the Power Tech Series engines

are a Lucas electronically controlled unit injection system, a cam-in-head engine design, high

pressure injection (1500 to 1800 bar (23,000 - 27,000 psi)) and a two-piece articulated steel piston.

An option on some engines is an electronic control unit that monitors engine functions through

remote-mounted engine sensors, resulting in added performance through improved low-end torque,

fuel efficiency and application flexibility due to programmable power curves. 

Isuzu makes engines with ratings ranging from 8 to 230 kW (11 to 314 hp). Key features of

Isuzu's L series IDI engines are Bosch unit injection pumps, swirl-type combustion chambers, and

a single cam-driven overhead valve system to actuate the unit injection pumps and intake and

exhaust valves. Isuzu has also expended considerable effort to reduce the overall noise level of these

engines.

Cummins manufacturers diesel engines with ratings ranging from 54 to 4500 kW (72 to 6000

hp).b

 Most of Cummins’ sales are in midrange engines, which were redesigned for the 1996 model

year to achieve greater power density as well as lower noise and exhaust emissions. The new design

features include a new Bosch "A" in-line fuel pump that provides injection pressures to 1100 bar

(16,000 psi), new three-ring pistons and a new Holset turbocharger for improved performance. More

recently, Cummins completed additional design changes for its 6-liter engine to introduce fullauthority electronic controls with four valves per cylinder.2

In the IDI market, Wis-Con and Isuzu each have approximately a 20% share, followed by PSA

(15%), Mitsubishi (15%), and Mazda (10%). Wis-Con sells diesel engines with ratings ranging from

19 to 60 kW (26 to 80 hp).

C. Engines Rated Between 75 and 130 kW

Engines in this power range rank fourth in total nonroad diesel engines sales with approximately

68,000 units sold in 1995. Direct injection engines comprise 94% of this category. The top three

manufacturers are Cummins (36%), John Deere (25%), and Caterpillar (17%). Other manufacturers

include Perkins, Deutz, New Holland, Detroit Diesel, Hino, Mazda, Volvo, Komatsu, Hercules,

Isuzu, and Mitsubishi. The engines in this power range are used mostly in construction equipment

such as backhoes, rubber-tired loaders, and forest equipment. The second largest use for these

engines is in utility equipment such as air compressors and generator sets. 

In this power range, it is expected that engine manufacturers will transfer the technological
Chapter 2: Industry Characterization



advancements from highway engines to their nonroad counterparts. In fact, Caterpillar, which

makes diesel engines with ratings ranging from 60 to 6000 kW (80 to 8000 hp), is already using the

Hydraulically actuated, Electronically controlled Unit Injection (HEUI) fuel system with Advanced

Diesel Engine Management on some nonroad Tier 1 engines. 

D. Engines Rated Between 130 and 450 kW

This is the third largest nonroad category with 1995 sales approaching 107,000 units. Most of

the engines in this category are used in agricultural equipment, followed by construction and utility

equipment. There are two separate standards in this category: one for ratings between 130 and 225

kW and one for ratings between 225 and 450 kW. As with the previous category, it is expected that

manufacturers will utilize highway technology to meet the new standards. 

1. 130-225 kW

This market includes about 8 percent IDI engines, but DI engines are dominant. The two largest

manufacturers are Cummins (38%) and John Deere (31%). Other major manufacturers include

Caterpillar (14%), Navistar (6%), New Holland (4%), and Detroit Diesel (4%). The engines used

in agricultural tractors comprise the largest category of equipment, followed by construction

equipment such as excavators, crawlers, and rubber-tired loaders. 

2. 225-450 kW

The three largest manufacturers in this range are Caterpillar (34%), Cummins (33%), and

Detroit Diesel (25%). Other manufacturers include John Deere and Deutz. Engines used in

construction equipment (scrapers, crawlers, off-highway trucks) comprise the largest category in this

range.

E. Engines Rated Over 450 kW

This is the smallest nonroad category with approximately 3% of the total nonroad market.

There are two separate standards for engines rated above and below 560 kW. Caterpillar is the

largest manufacturer (46%), followed by Detroit Diesel (27%) and Cummins (26%). Generator sets

are the principal application in this range, followed by off-highway trucks and other types of

construction equipment.

II. Characterization of Equipment Manufacturers

For purposes of discussion, nonroad equipment is grouped into five power ranges similar to

those used for characterizing engine manufacturers. This section explores the characteristics of

nonroad equipment applications and the companies involved in manufacturing that equipment. This

analysis includes several numerical summaries of different categories. A more detailed treatment

is contained in a memorandum to the docket.3
Regulatory Impact Analysis



In the range of ratings under 37 kW, engines and equipment are manufactured for all the major

market segments: agricultural, construction, general industrial, lawn and garden, material handling,

utility, and marine. The applications with the most manufacturers in this power range are pumps,

generator sets, commercial turf equipment, pressure washers, rollers, skid-steer loaders, and light

plants/signal boards. About 14% of the equipment in this power range is manufactured by a single

original equipment manufacturer (OEM). There are 58 total applications with engines rated under

37 kW. All market segments are also represented in the 37 to 75 kW range. There are 59 total

applications and about 12 % of these are made by a single OEM. The applications with the most

manufacturers, in descending order, are generator sets, pumps, rough terrain forklifts, standard

forklifts, other general industrial, rubber-tired loaders, drill rigs, rollers, and pavers. The major

market segments are also represented in the 75 to 130 kW range. With 54 total applications, less

than 8% are manufactured by a single OEM. The equipment pieces with the largest manufacturing

diversity (largest number of OEMs) are generator sets, pumps, other general industrial equipment,

forest equipment, other agricultural equipment, drill rigs, cranes, rough terrain forklifts, and rubbertired loaders. The 130 to 560 kW market has the largest number of OEMs producing generator sets,

forest equipment, cranes, chippers/grinders, pumps, and excavators. The applications with the

fewest number of OEMs (two-wheeled tractors, cement mixers, tillers, gas compressors, and

welders) include only a single manufacturer in the database. All of the major nonroad market

segments are represented in this power range. The largest engines, those rated over 560 kW, are only

produced for the nonroad market segments of construction, general industrial, material handling, and

utility equipment. Of the equipment in this power range, those pieces with the largest number of

OEMs are generator sets, chippers/grinders, off-highway trucks, and rubber-tired loaders. About

36% of the equipment in this power range is manufactured by a single OEM. 

Most equipment manufacturers must buy engines from another company. For most power

categories, the PSR OELink database estimates that between 5 and 25 percent of equipment sales

are from equipment manufacturers that also produce engines.4

 Equipment with engines rated

between 130 and 450 kW have the greatest degree of vertical integration, with over 40 percent of

sales coming from these companies. Since vertically integrated manufacturers are typically very

large companies, such as John Deere and Caterpillar, the companies that make up this fraction of the

market are in a distinct minority.

A. Equipment Using Engines Rated Under 37 kW 

Engines rated under 37 kW are predominantly indirect injection (63% of the market) engines

that are water-cooled (77% of the market). About 20% and 4% of equipment in this power range

uses engines that are air-cooled and oil-cooled, respectively. The six leading manufacturers produce

45% of the equipment in this category. Their collective sales volume over five years (1991 to 1995)

was approximately 350,000 pieces of equipment in a market which has a five year total sales volume

of 770,000. These manufacturers are shown in Table 2-2.

Of these top six OEMs, their sales are typified by welders, generators, excavators, tractors,

commercial turf, and refrigeration/air conditioning units. The uses of the equipment are listed in

Table 2-3. These top six manufacturers have engines that are typical of the market. Sixty-three
Chapter 2: Industry Characterization



OEMs produce 90% of the equipment in this horsepower range. 

Table 2-2

Characterization of the Top 6 Manufacturers under 37 kW 

Original Equipment

Manufacturer

Major Equipment

Manufactured

Percentage of

Market

1991 to 1995

Equipment Sales

Engine 

Characterization*

Average

Annual Sales

Deere & Co. Commercial Turf,

Lawn/Garden

Tractors

21% 165,062 W,NA, D/I 33,012

ThermoKing

Corporation

Refrigeration, A/C 8% 65,099 W,NA,I 13,020

Carrier Transicold Refrigeration, A/C 7% 50,138 W,NA,D/I 10,028

Melroe Company Skid-Steer Loaders

and Trenchers

4% 30,405 W,NA,I 6,081

Gillette Mfg., Inc. Generator Sets 3% 19,884 W/A,NA,I/D 3,977

Lincoln Electric Welders 2% 19,081 W,NA,D 3,816

*W = water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect injection, D = direct

injection.
Regulatory Impact Analysis



Table 2-3

Equipment Sales Distribution under 37 kW 

Application Description Five-Year Sales Volume

(1991-1995)

Average

 Annual Sales

Percentage of Total

Sales

Commercial Turf 200,698 40,140 30%

Refrigeration / AC 111,742 22,348 16%

Generator Sets 62,505 12,501 9%

Skid-Steer Loaders 60,875 12,175 9%

Pumps 41,229 8,246 6%

Welders 36,173 7,235 5%

Lawn and Garden Tractors 33,452 6,690 5%

Agricultural Tractors 25,082 5,016 4%

Light Plant/Signal Boards 19,695 3,939 3%

Trenchers 14,680 2,936 2%

Other General Industrial 9,645 1,929 1.4%

Scrubber/Sweeper 8,635 1,727 1.3%

Rollers 5,584 1,117 0.8%

Air Compressors 5,170 1,034 0.8%

Plate Compactors 4,376 875 0.7%

Pressure Washers 4,329 866 0.6%

Aerial Lifts 3,165 633 0.5%

Excavators 2,998 600 0.4%

Hydraulic Power Units 2,946 589 0.4%

Paving Equipment 2,833 567 0.4%

Listed Total 657,803 131,163 96.8%

Grand Total 679,549 135,910 100%

B. Equipment Using Engines Rated between 37 and 75 kW 

For the 37 to 75 kW range, almost all equipment uses direct injection engines that are watercooled and naturally aspirated. The six leading manufacturers produce 55% of the equipment in this

category. These manufacturers are listed in Table 2-4.
Chapter 2: Industry Characterization



Table 2-4

Characterization of the Top 6 Manufacturers between 37 and 75 kW 

Original Equipment

Manufacturer

Major Equipment

Manufactured

Percentage of

Market

1991 to 1995

Equipment Sales

Engine 

Characterization*

Average

Annual Sales

Thermo King

Corporation

Refrigeration, A/C 13% 74,256 W,NA,D 14,851

Melroe Company Skid-Steer Loader,

Sprayers

11% 60,715 W,NA/T,D 12,171

Deere & Co. Ag Tractors, Crawlers,

Backhoe-loaders

11% 59,830 W,NA,D 11,966

J.I. Case Crawlers, Backhoeloaders10% 56,009 W,NA,D 11,202

Lincoln Electric Welders 6% 33,404 W/O,NA,D/I 6,681

Ingersoll-Rand Co. Air Compressors,

Rollers

4% 21,904 W/A/O, NA,D 4,381

*W = water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect injection, D = direct

injection.

The 37 to 75 kW range of engines has the following typical applications: skid-steer loaders,

refrigeration/AC, tractors, loaders, backhoes, generator sets, welders, agricultural tractors, pumps,

and forklifts. These top selling applications represent about 66% of the market as seen in Table 2-5.

The top 90% of the market is supplied by 73 different companies.
Regulatory Impact Analysis



Table 2-5

Equipment Sales Distribution Across Application between 37 and 75 kW 

Application Description

Five-Year Sales

Volume (1991-1995)

Average Annual

Sales

Percentage of 

Total Sales

Skid-Steer Loader 87,180 17,436 16%

Refrigeration, A/C 74,256 14,851 14%

Tractor/Loader/Backhoe 51,448 10,290 10%

Generator Set 44,043 8,809 8%

Welder 33,854 6,771 6%

Ag Tractor 26,951 5,390 5%

Pump 17,876 3,575 3%

Forklift 17,675 3,535 3%

Air Compressor 14,442 2,888 3%

Commercial Turf 14,260 2,852 3%

Crawlers 12,730 2,546 2%

Roller 12,693 2,539 2%

Rough Terrain Forklift 12,620 2,524 2%

Trencher 12,601 2,520 2%

Chippers/grinder 12,176 2,435 2%

Unknown 9,298 1,860 2%

Scrubber/sweeper 9,187 1,837 2%

Irrigation Set 9,121 1,824 2%

Swather 7,251 1,450 1.4%

Other General Industrial 5,423 1,085 1.0%

Listed Total 487,076 97,017 91%

Grand Total 532,825 106,565 100%

C. Equipment Using 75 to 130 kW Engines

 For equipment using 75 to 130 kW engines, the OEMs use predominantly direct injection (82%),

water cooled (95%), turbocharged (58%) engines. The six leading manufacturers produce 48% of

the equipment in this category. These manufacturers are shown in Table 2-6. The market as a whole

has a very similar sales distribution as that of the top six manufacturers. 
Chapter 2: Industry Characterization



Table 2-6

Characterization of the Top 6 Manufacturers between 75 and 130 kW 

Original Equipment

Manufacturer

Major Equipment

Manufactured

Percentage of

Market

1991 to 1995

Equipment Sales

Engine

Characterization*

Average

Annual Sales

LTV Aerospace &

Defense Company

Military 17% 56,303 W, NA/T, I/D 11,261

Caterpillar, Inc. R/T Loader 10% 33,703 W, T/NA, D 6,741

Deere and Co. Tractor/Loader/

Backhoe, Swathers

8% 27,303 W,T/NA,D 5,461

J.I. Case Tractor/Loader/

Backhoe 

Rubber-Tired Loader

7% 23,156 W,T/NA,D 4,631

Ingersoll-Rand Air Compressors,

Rollers

3% 10,440 W/A,T/NA,D 2,088

Onan Corporation Gen Sets, Marine

Auxiliary

3% 9,997 W,T/NA,D 1,999

*W = water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect injection, D = direct

injection.

The applications listed in Table 2-7 represent about 70% of the market. The top 90% of this

market is supplied by 98 OEMs. The 75 to 130 kW range is characterized by a wide distribution of

applications as shown in Table 2-7.
Regulatory Impact Analysis



Table 2-7

Equipment Sales Distribution Across Application between 75 and 130 kW 

Application Description

Five-Year Sales

Volume (1991-1995)

Average Annual

Sales

Percentage of 

Total Sales

Generator Set 26,353 5,271 13%

Tractor/Loader/Backhoe 25,569 5,114 12%

Rubber-Tired Loader 16,966 3,393 8%

Ag Tractor 9,878 1,976 5%

Grader 9,399 1,880 5%

Forklift 8,332 1,666 4%

Forest Equipment 8,053 1,611 4%

Air Compressor 7,637 1,527 4%

Irrigation Set 7,603 1,521 4%

Pump 7,265 1,453 3%

Roller 6,825 1,365 3%

Cranes 6,627 1,325 3%

Rough Terrain Forklift 6,429 1,286 3%

Swather 5,342 1,068 3%

Scrubber/Sweeper 5,059 1,012 2%

Crawler 4,882 976 2%

Sprayer 4,844 969 2%

Excavator 3,821 764 2%

Aircraft Support 3,677 735 2%

Chipper/Grinder 3,316 663 2%

Listed Total 177,877 35,575 68%

Grand Total 208,801 41,760 100%

D. Equipment Using 130 to 560 kW Engines

For 130 to 560 kW engines, the OEMs use almost exclusively direct injection, water-cooled,

turbocharged engines. The six leading manufacturers produce 55% of the equipment in this

category. These manufacturers are shown in Table 2-8. Typical applications include agricultural

tractors, combines, crawlers, graders, and generator sets. About 45 OEMs produce 90% of the

equipment in this power range. Table 2-9 lists the most common applications, led by farm tractors,
Chapter 2: Industry Characterization



generator sets, and combines.

Table 2-8

Characterization of the Top 6 Manufacturers between 130 and 560 kW 

Original Equipment

Manufacturer

Major Equipment

Manufactured

Percentage of

Market

1991 to 1995

Equipment Sales

Engine

Characterization*

Average

Annual Sales

Deere & Co. Ag Tractors, 

Combines

26% 130,906 W, T, D 26,181

Caterpillar, Inc. Generator Sets,

Graders

12% 60,151 W,T,D 12,030

Case IH Ag Tractors,

Combines

12% 59,812 W,T,D 11,962

New Holland Ag Tractors,

Combines

4% 19,719 W,T,D 3,944

Wayne Wheeled

Vehicles

Tactical Military

Equipment 

3% 15,505 W,T, D 3,101

Kohler Company Generator Sets 3% 13,050 W,NA/T,D 2,610

*W = water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect injection, D = direct

injection.
Regulatory Impact Analysis



Table 2-9

Equipment Sales Distribution Across Application between 130 and 560 kW 

Application Description

Five-Year Sales Volume

(1991-1995)

Average Annual

Sales

Percentage of

Total Sales

Agricultural Tractor 77,306 15,461 22%

Generator Sets 58,526 11,705 16%

Combines 39,025 7,805 11%

Rubber-Tired Loader 16,517 3,303 5%

Graders 16,008 3,202 5%

Crawlers 15,969 3,194 4%

Air Compressors 14,763 2,953 4%

Off-Highway Truck 13,085 2,617 4%

Forest Equipment 9,609 1,922 3%

Scrapers 8,932 1,786 3%

Excavators 8,322 1,664 2%

Cranes 8,162 1,632 2%

Terminal Tractors 8,140 1,628 2%

Special Vehicle/ Carts 7,217 1,443 2%

Chippers/Grinders 6,210 1,242 2%

Sprayers 5,419 1,084 2%

Pumps 4,564 913 1.3%

Other Agricultural Equipment 4,278 856 1.2%

Off-highway Tractors 3,983 797 1.1%

Surfacing Equipment 3,081 616 0.9%

Listed Total 331,107 65,823 92.5%

Grand Total 355,590 71,118 100%

E. Equipment Using Over 560 kW Engines

As in the previous category, equipment rated over 560 kW uses turbocharged, direct injection

engines that are water-cooled. The leading six manufacturers produce 70% of the equipment in this

power range. These manufacturers are shown in Table 2-10. Generator sets make up the majority

of equipment in this range, while off-highway trucks and crawler tractors also have significant sales

(see Table 2-11).
Chapter 2: Industry Characterization



Table 2-10

Characterization of the Top 6 Manufacturers over 560 kW 

Original Equipment

Manufacturer

Major Equipment

Manufactured

Percentage of

Market

1991 to 1995

Equipment Sales

Engine

Characterization*

Avg. Annual

Sales

Caterpillar, Inc. Crawlers,

Off Highway Truck

41% 6,816 W,T,D 1,363

Onan Corporation Generator Sets 10% 1,677 W,T,D 335

Kohler Company Generator Sets 8% 1,249 W,T,D 250

Detroit Diesel

Distributors

Generator Sets 5% 824 W,T,D 165

Fermont Division Generator Sets 3% 572 W,T,D 114

Komatsu-Dresser Off Highway Truck,

Rubber-Tired Loader

3% 494 W,T,D 99

*W = water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect injection, D = direct

injection.

Table 2-11

Equipment Sales Distribution Across Application over 560 kW 

Application Description Five-Year Sales Volume

(1991-1995)

Average 

Annual Sales

Percentage of Total

Sales

Generator Sets 7,116 1,423 72%

Off-highway Trucks 1,257 251 13%

Crawlers 837 167 8%

Off-highway Tractors 218 44 2%

Oil Field Equipment 148 30 1.5%

Chippers/Grinders 118 24 1.2%

Bore/Drill Rigs 91 18 0.9%

Rubber-Tired Loaders 68 14 0.7%

Locomotives 37 7 0.4%

Excavators 28 6 0.3%

Cranes 9 2 0.1%

Listed Total 11,918 1,986 100%
Regulatory Impact Analysis



1. Information in the literature was taken principally from the July 1996 issue of Diesel

Progress.

2. “Big Changes for Cummins’ B Series,” Diesel Progress, May 1997, page 14.

3. “Industry Characterization Support Data,” EPA memorandum from Cleophas Jackson to

Docket A-96-40, August 5, 1997.

4. Power Systems Research, OELink Database, 1996.

Chapter 2 References
Chapter 3: Technological Feasibility



CHAPTER 3: TECHNOLOGICAL FEASIBILITY

The nonroad emission source category encompasses a large and diverse population of engines

and equipment, as described in Chapter 2. Setting emission standards that apply to all the

participating manufacturers for all the applications is not straightforward. EPA has, however,

attempted to take into account the needs and constraints of the affected industries to develop a set

of emission standards that can be met in the specified time frame. The Agency believes there are

several factors that will enable manufacturers to successfully meet the new standards. First, and

perhaps most importantly, EPA believes that manufacturers will be able to draw from the experience

in the development of advanced highway engine technology when determining their strategies to

meet the new standards. Second, market demand is driving engine manufacturers to greater use of

advanced technologies that also provide improved capability for controlling emissions.

Manufacturers are expected to continue to improve engine performance by redesigning combustion

chambers, increasing the use of turbocharging and aftercooling, modifying fuel injection hardware,

and introducing electronic controls. Third, manufacturers have acknowledged that the majority of

their research and development efforts will be focused on meeting the most stringent standards (Tier

2 for engines rated under 37 kW and Tier 3 for larger engines). Even though these stringent

standards present significant challenges and will require a substantial effort on the part of industry,

EPA believes that the long lead time, coupled with the experience gained with highway engines, will

allow manufacturers to comply with the most stringent emission standards. Fourth, various

provisions are included to ease the burden of complying with the new standards, including a phase-in

schedule with considerable lead time, flexibility options for equipment manufacturers, and an

enhanced program of averaging, banking, and trading. EPA therefore believes that manufacturers

will be capable of achieving the new emission standards within the allotted lead time at a reasonable

cost. 

This chapter first briefly reviews the principles of diesel engine combustion and emission

formation, then discusses in general terms the types of emission control strategies that may be

utilized by manufacturers to meet the standards. The application of these strategies to each of the

engine categories is considered next. The chapter concludes with an evaluation of the noise, energy,

and safety impacts associated with the rulemaking. A discussion of the effects of the suggested

engine modifications on equipment is discussed in the context of economic impacts in the next

chapter. 

I. Background on Diesel Technology and Emission Formation

In a diesel engine, the liquid fuel is injected into the combustion chamber after the air has been

heated by compression. In the case of indirect injection engines, the fuel is injected into a

prechamber, where combustion initiates before spreading to the rest of the combustion chamber. The

fuel is injected in the form of a mist of fine droplets that mix with the air. Power output is controlled
Regulatory Impact Analysis



by regulating the amount of fuel injected into the combustion chamber, without throttling (limiting)

the amount of air entering the engine. The compressed air heats the injected fuel droplets, causing

the fuel to evaporate and mix with the available oxygen. At several sites where the fuel mixes with

the oxygen, the fuel autoignites and the multiple flame fronts spread through the combustion

chamber.

NOx and PM are the emission components of most concern from diesel engines. Incomplete

evaporation and burning of the fine fuel droplets result in emissions of the very small particles of

PM. Small amounts of lubricating oil that escape into the combustion chamber can also contribute

to PM. The high temperatures and excess oxygen associated with diesel combustion can cause the

nitrogen in the air to combine with available oxygen to form NOx. Because of the presence of

excess oxygen, hydrocarbons evaporating in the combustion chamber tend to be completely burned

and HC and CO are not emitted at high levels. Evaporative emissions from diesel engines are

insignificant due to the low evaporation rate of diesel fuel. 

Controlling both NOx and PM emissions requires different, sometimes opposing strategies. The

key to controlling NOx emissions is reducing peak combustion temperatures. In contrast, higher

temperatures in the combustion chamber or faster burning lower rates of PM emissions, either by

decreasing the formation of particulates or by oxidizing those particulates that have formed. To

control both NOx and PM, manufacturers need to combine approaches using the many different

variables to achieve optimum performance.

II. General Description of Emission Control Strategies

In general, nonroad engine manufacturers are expected to apply similar emission control

strategies to those utilized by the manufacturers of heavy-duty highway diesel engines, even though

the application of these strategies could differ because of some unique aspect of the operating

environment or performance needs of the nonroad engines. While both highway and nonroad

engines experience frequent changes in load and speed caused by work fluctuations, nonroad

operators typically do not change engine speeds as often as highway vehicles. Also, nonroad engines

often power both nonmotive and motive functions. Another factor affecting the choice of emission

control strategies is the fact that many nonroad engines are used in multiple equipment applications,

many of which have low sales volumes. Nonroad engine manufacturers are, however, currently in

the process of introducing models that have been certified to the Tier 1 standards and are

successfully demonstrating their ability to meet the first level of emission standards. Based on a

review of current emissions research, EPA believes that emission control improvements from engine

design changes have not yet leveled off and that further emission reductions are possible. 

The remainder of this section discusses in more detail potential engine control strategies,

including combustion optimization, better fuel control, exhaust gas recirculation, improved charge

air characteristics, and aftertreatment devices. A more detailed analysis of the application of these

strategies to individual categories of nonroad engines is discussed in Section III. The costs

associated with these systems are considered in the next chapter.
Chapter 3: Technological Feasibility



A. Combustion Optimization

Several parameters in the combustion chamber of a heavy-duty diesel engine affect its efficiency

and emissions. These engine parameters include charge (or intake) air temperature and pressure,

peak cylinder temperature and pressure, turbulence, valve and injection timing, injection pressure,

fuel spray geometry and rate, combustion chamber geometry and compression ratio. Many

technologies that are designed to control the engine parameters listed above have been investigated.

As mentioned previously, however, a positive influence on one pollutant may have a negative

influence on another. For example, charge air cooling reduces NOx emissions, but increases PM.

 Manufacturers will need to integrate all of these variables into optimized systems to meet the new

standards. 

1. Timing retard 

The effect of injection timing on emissions and performance is well established.1,2,3,4 Retarded

timing is the strategy most likely to be used by manufacturers of engines rated under 37 kW to meet

the new Tier 1 standards. NOx is reduced because the premixed burning phase is shortened and

because cylinder temperature and pressure are lowered. Timing retard increases HC, CO, PM, and

fuel consumption, however, because the end of injection comes later in the combustion stroke where

the time for extracting energy from fuel combustion is shortened and the cylinder temperature and

pressure are too low for more complete oxidation of PM. One technology that can offset this trend

is higher injection pressure, which is discussed further below. 

2. Combustion chamber geometry

While manufacturers are already achieving emission reductions through modifications to the

combustion chamber, EPA believes there are additional changes that may provide further

improvements in emission control. The parameters being investigated include (1) the shape of the

chamber and the location of injection; (2) reduced crevice volumes; and (3) compression ratio.

These parameters have been thoroughly explored for highway engines and should be readily

adaptable to nonroad engines.

Efforts to redesign the shape of the combustion chamber and the location of the fuel injector for

highway and nonroad engines have been primarily focused on optimizing the relative motion of air

and injected fuel to simultaneously limit the formation of both NOx and PM. Piston crown design

must be carefully matched with injector spray pattern and pressure for optimal emission behavior.5

One strategy, reentrant piston bowl design, focuses on optimizing the radius of the combustion bowl,

the angle of the reentrant lip, and the ratio of the bowl diameter to bowl depth to optimize air motion.

An alternative is the use of higher pressure injection systems that decrease the need for turbulent incylinder charge air motion. While higher pressure systems raise concerns of durability, there has

been a significant amount of progress in this area and it is expected that manufacturers will be able

to develop a durable system.6 

The second parameter being investigated is reducing crevice volumes by moving the location
Regulatory Impact Analysis



of the top piston ring relative to the top of the piston.7 A reduced crevice volume can result in

reduced HC emissions and, to a lesser extent, reduced PM emissions. Costs associated with the

relocation of the top ring can be substantial because raising the top of the piston ring requires

modified routing of the engine coolant through the engine block and lube oil routing under the piston

to prevent the raised ring from overheating. It is also important to design a system that retains the

durability and structural integrity of the piston and piston ring assembly, which requires very precise

tolerances to avoid compromising engine lubrication. 

Compression ratio is another engine design parameter that impacts emission control. In general,

higher compression ratios cause a reduction of cold start PM and improved fuel economy, but can

also increase NOx. Several methods can be employed to increase the compression ratio in an

existing diesel engine. Redesign of the piston crown or increasing the length of the connecting rod

or piston pin-to-crown length will raise the compression ratio by reducing the clearance volume.8

There is a limit to the benefit of higher compression ratios because of increased engine weight (for

durability) and frictional losses, which could somewhat limit fuel economy improvements.

3. Swirl

Increasing the turbulence of the intake air entering the combustion chamber (i.e., inducing swirl)

can reduce PM by improving the mixing of air and fuel in the combustion chamber. Historically,

swirl was induced by routing the intake air to achieve a circular motion in the cylinder.

Manufacturers are, however, increasingly using "reentrant" piston designs in which the top surface

of the piston is cut out to allow fuel injection and air motion in a smaller cavity in the piston to

induce additional turbulence. Manufacturers are also changing to three or four valves per cylinder,

which reduces pumping losses and can also allow for intake air charge motion. The effect of swirl

is often engine-specific, but some general effects may be discussed.

At low loads, increased swirl reduces HC, PM, and smoke emissions and lowers fuel

consumption due to enhanced mixing of air and fuel. NOx emissions might increase slightly at low

loads as swirl increases. At high loads, swirl causes slight decreases in PM emissions and fuel

consumption, but NOx may increase because of the higher temperatures associated with enhanced

mixing and reduced wall impingement.9

 A higher pressure fuel system can be used to offset some

of the negative effects of swirl, such as increased NOx, while enhancing the positive effects such as

a reduction in PM.10 

B. Advanced Fuel Injection Controls

Control of the many variables involved in fuel injection is central to any strategy to reduce

diesel engine emissions. The principal variables being investigated are injection pressure, nozzle

geometry (e.g., number of holes, hole size and shape, and fuel spray angle), the timing of the start

of injection, and the rate of injection throughout the combustion process (e.g., rate shaping). 

Manufacturers continue to investigate new injector configurations for nozzle geometry and

higher injection pressure (in excess of 2300 bar (34,000 psi)).11,12 Increasing injection pressure
Chapter 3: Technological Feasibility



achieves better atomization of the fuel droplets and enhances mixing of the fuel with the intake air

to achieve more complete combustion. Though HC and PM are reduced, higher cylinder pressures

can lead to increased NOx formation.13 Retarding the start of fuel injection in conjunction with

higher fuel injection pressures can, however, lead to reduced NOx because of lower combustion

temperatures. HC, PM, or fuel economy penalties from this strategy can be avoided because the

termination of fuel injection need not be delayed. Nozzle geometry is used to optimize the fuel spray

pattern for a given combustion chamber design in order to improve mixing with the intake air and

to minimize fuel condensation on the combustion chamber surfaces.14 Minimizing the leakage of

fuel droplets is critical for reducing HC emissions. Valve-closed orifice (VCO) tips are more

effective than sac-type nozzles, because they eliminate any droplets remaining after injection, which

would increase HC emissions. Although VCO tips are subject to very high pressures, EPA believes

progress will continue in developing a durable injector tip prior to implementation of the Tier 2

standards.

The most recent advances in fuel injection technology are the systems that use rate shaping or

multiple injections to vary the delivery of fuel over the course of a single injection. Igniting a small

quantity of fuel initially limits the characteristic rapid increase in pressure and temperature that leads

to high levels of NOx formation. Injecting most of the fuel into an established flame then allows for

a steady burn that limits NOx emissions without increasing PM emissions. Rate shaping may be

done either mechanically or electronically. Rate shaping has been shown to reduce NOx emissions

by up to 20 percent.15

For electronically controlled engines, multiple injections may be used to shape the rate of fuel

injection into the combustion chamber. Recent advances in fuel system technology allow highpressure multiple injections to be used to reduce NOx by 50 percent with no significant penalty in

PM. Two or three bursts of fuel can come from a single injector during the injection event. The

most important variables for achieving maximum emission reductions with optimal fuel economy

using multiple injections are the delay preceding the final pulse and the duration of the final pulse.16

This strategy is most effective in conjunction with retarded timing, which leads to reduced NOx

emissions without the attendant increase in PM. 

A promising fuel injection design is that developed by Caterpillar and Navistar, the

Hydraulically Actuated Electronically Controlled Unit Injection (HEUI) system.17 The HEUI system

utilizes a common rail of pressurized oil to provide high injection pressures throughout an engine's

operating range. The HEUI system provides full electronic control of injection timing and duration,

along with the possibility for rate shaping. The most attractive aspect of this system is that it

operates largely independent of engine speed. This could be an important strategy for nonroad

engine manufacturers because of the use of a single engine in a wide range of applications. Some

manufacturers are already utilizing this system on production engines. It is expected that

manufacturers will be able to develop and produce a full-authority electronic fuel injection system

for a reasonable cost in time for some engines meeting Tier 2 standards; many more models are

expected to incorporate electronic controls in engines designed for Tier 3 standards. 
Regulatory Impact Analysis



C. Exhaust Gas Recirculation

Exhaust gas recirculation (EGR) is the most recent development in diesel engine control

technology for obtaining significant NOx reductions. EGR reduces peak combustion chamber

temperatures by slowing reaction rates and absorbing some of the heat generated from combustion.

While NOx emissions are reduced, PM and fuel consumption can be increased, especially at high

loads, because of the reduced oxygen available during combustion.18,19 One method of minimizing

PM increases is to reduce the flow of recirculated gases during high load operation, which would

also prevent a loss in total power output from the engine. Recent experimental work showed NOx

reductions of about 50 percent, with little impact on PM emissions, using just 6 percent EGR in

conjunction with a strategy of multiple injections.20

Another challenge facing manufacturers is the potential negative effects of soot from the

recirculated exhaust being routed into the intake stream. Soot may form deposits in the intake

system, which could cause wear on the turbocharger or decrease the efficiency of the aftercooler.

As the amount of soot in the cylinder increases, so does the amount of soot that works its way past

the piston rings into the lubricating oil, which can lead to increased engine wear. One thing that has

been developed to reduce soot in the recirculated exhaust gas is a low-voltage soot removal device.21

Engine wear was shown to be greatly reduced as a result of this device. Another strategy is to

recirculate the exhaust gas after it has passed through a particulate trap or filter. Demonstrations

have shown that some prototype traps can remove more than 90 percent of particulate matter.22

D. Improving Charge Air Characteristics

Charge air compression (turbocharging) is primarily used to increase power output and reduce

fuel consumption from a given displacement engine. At rated power, a typical diesel engine loses

about 30 percent of its energy through the exhaust. A turbocharger uses the waste energy in the

exhaust gas to drive a turbine linked to a centrifugal compressor, which then boosts the intake air

pressure. By forcing more air into the cylinder, more fuel can also be added at the same air-fuel

ratio, resulting in higher power and better fuel consumption while controlling smoke and particulate

formation. To prevent increased NOx emissions, an aftercooler is typically installed to reduce the

temperature of the charge air after it has been heated during compression. 

While aftercooling reduces NOx emissions, it was initially developed to improve the specific

power output of an engine by increasing the density of air entering the combustion chamber. There

are two kinds of aftercooling strategies—air-to-water or air-to-air. Air-to-water aftercoolers use

engine coolant to lower the intake air temperature. This method, however, can only reduce the

temperature of the compressed intake air to the operating temperature of the engine and significantly

adds to the heat load on the cooling system. The temperature of the intake air after compression by

the turbocharger is approximately 300°F. An air-to-water aftercooler can only cool the charge air

to approximately 200°F.

Air-to-air aftercoolers use a stream of outside air flowing through a separate heat exchanger to

cool the intake air. An air-to-air aftercooler can cool the compressed intake air to a temperature
Chapter 3: Technological Feasibility



approaching that of the ambient. Air-to-air aftercoolers are widely used with highway engines, but

nonroad engines complying with Tier 1 standards generally have not incorporated air-to-air

aftercooling, due to limits on dust tolerance and space constraints. Ground-level dust is becoming

less of an issue because recent developments have improved dust resistance, primarily through

greater fin spacing on the heat exchanger. Over time, equipment manufacturers are expected to

modify their designs to make space for air-to-air aftercooling technology. While introducing air-toair aftercooling requires a greater degree of engine and equipment modification, the benefits for

improved fuel efficiency, greater engine durability, and better control of NOx emissions make a

compelling case for their widespread use in the long term.23

E. Exhaust Aftertreatment Strategies

Researchers in industry and academia have explored various technologies for treating engine-out

exhaust emissions. In general, EPA does not expect that manufacturers will need to utilize exhaust

aftertreatment to meet the new standards; however, further work on these technologies may lead to

development of an approach that provides effective control at a lower cost than today’s anticipated

technologies. This may be especially true in certain niche markets. For example, some nonroad

applications that involve operation in confined areas are currently using some form of exhaust

aftertreatment. This analysis considers in detail only oxidation catalysts and particulate traps. Other

technologies being pursued include selective and nonselective catalytic reduction, various plasma

and electrochemical approaches, and fuel additives.

1. Oxidation catalysts

The flow-through oxidation catalyst provides relatively moderate PM reductions by oxidizing

both gaseous hydrocarbons and the portion of PM known as the soluble organic fraction (SOF). The

SOF consists of hydrocarbons adsorbed to the carbonaceous solid particles and may also include

hydrocarbons that have condensed into droplets of liquid.34 The carbon portion of the PM remains

largely unaffected by the catalyst. Although recent combustion chamber modifications have reduced

SOF emissions, the SOF still comprises between 30 and 60 percent of the total mass of PM. 

Catalyst efficiency for SOF varies with exhaust temperature, ranging from about 50 percent at 150°C

to more than 90 percent above 350°C.24 Because exhaust gas temperatures typically fluctuate

between 100°C and 400°C during the Federal Test Procedure for highway diesel engines, the

reduction in tested total particulate mass provided by the oxidation catalyst is relatively modest. 

Another challenge facing catalyst manufacturers is the formation of sulfates in the exhaust. At

higher exhaust temperatures, catalysts have a greater tendency to oxidize sulfur dioxide to form

sulfates, which contribute to total PM emissions. In addition to the introduction of low-sulfur fuel

by EPA, catalyst manufacturers have been successful in developing catalyst formulations that

minimize sulfate formation.25 Catalyst manufacturers have also adjusted the placement of the

catalyst to a position where the needed SOF reduction is achieved, but sulfate formation is

minimized.26 Nonroad fuel with sulfur concentrations higher than 0.05 weight percent may prevent

the use of more active oxidation catalysts with higher conversion efficiencies.
Regulatory Impact Analysis



2. Particulate traps

Use of a particulate trap is a very effective way of reducing particulate emissions, including the

carbon portion. Particulate traps have been extensively developed for highway applications, though

very few engines have been sold equipped with traps, primarily because of the complexity of the

systems needed to remove the collected particulate matter. Continued efforts in this area may lead

to simpler, more durable designs that control emissions cost-effectively. Research in this area is

focused on developing new filter materials and regeneration methods. Some designs rely on an

additive acting as a catalyst to promote spontaneous oxidation for regeneration, while other designs

aim to improve an active regeneration strategy with microwave or other burner technology.

III. Specific Description of Emission Control Strategies by Power

Category

In developing the various numerical standards and implementation dates, EPA depended heavily

on extending the analysis of technological feasibility for the earlier rulemaking to set emission

standards for highway heavy-duty engines. While the 2004 standards for highway engines apply

equally to all sizes of engines starting in the same year, the standards established in this rulemaking

are a complex combination of numerical values and applicable model years. Varying numerical

standards were considered necessary to account for the very wide range of engines represented in

nonroad applications. Also, because of the range of engines offered by individual manufacturers,

EPA believes that new standards can be implemented most expeditiously by phasing the standards

in at different times for different power ranges. EPA applied a similar phase-in for the first tier of

nonroad emission standards in 1994.

Because the new emission standards depend on the evaluation of technologies for complying

with the standards for highway engines, the discussion of technological feasibility in that rulemaking

is central to supporting the feasibility of complying with standards for nonroad engines. This

analysis of diesel engine technologies is contained in Chapter 4 of the Final RIA for the highway

rule.27

By setting multiple tiers of standards that extend well into the next decade, EPA is providing

engine manufacturers with substantial lead time for developing, testing, and implementing emission

control technologies. This lead time and the coordination of standards with those for highway

engines allows time for a comprehensive R&D program to integrate the most effective emission

control approaches into the manufacturers’ overall design goals related to durability, reliability, and

fuel consumption. The following sections describe a set of projections related to the technologies

manufacturers may ultimately implement.

A. Engines Rated over 75 kW

Although this category of engines extends over a very large range, EPA expects manufacturers

to use similar emission control strategies previously identified for highway diesel engines. In fact,

some manufacturers currently use the same engine for both their highway and nonroad applications.
Chapter 3: Technological Feasibility



The difference between models lies primarily with charge air compression and cooling, and

electronic control software where applicable. The expected increasing use of electronic controls

allows manufacturers to tailor the engine to specific applications with minimal modification to the

rest of the engine. 

To meet Tier 2 standards, manufacturers will continue optimizing the combustion chamber and

modifying injection timing. Manufacturers are expected to increase their use of electronic controls

to improve both emission control and engine performance. Certification data for the 1996 model

year indicates that some manufacturers have already upgraded their systems to incorporate advanced

high-pressure electronic fuel injection systems.28 There are even a few engines certified in 1996 with

emission levels close to the Tier 2 standards.

The Tier 3 standards will likely lead to very widespread use of full authority electronic systems

with very high-pressure unit injector or common rail fuel systems. The technology for electronic fuel

injection is advancing at a rapid pace, driven by market demand for improved performance and

increasingly stringent emission standards. Manufacturers may also utilize EGR to further reduce

NOx emissions. EPA believes manufacturers can meet the Tier 3 standards for these engines by

transferring and adapting these technologies developed for highway engines.

B. Engines Rated between 37 and 75 kW

This category is somewhat transitional in nature, because some current engines are naturally

aspirated and resemble smaller engines, while others are turbocharged and resemble highway and

larger nonroad engines. In discussions that led to the proposed Tier 2 and Tier 3 emission standards,

manufacturers placed a high priority on being able to continue to produce naturally aspirated engines

in this size range. Since that time, however, increased use of turbochargers for light-duty highway

applications (in the U.S. and abroad), among other things, has advanced the technology and reduced

costs enough that turbocharging has become a viable near-term option for engines in this size range.

Most of these engines have certified Tier 1 emission levels that are near or below the new Tier

2 levels. Compliance with Tier 2 standards will therefore require incremental change in injection

or other combustion variables, though some bigger steps such as turbocharging and introducing a

low level of EGR may be adopted for some engines, primarily in anticipation of Tier 3 standards.

Meeting Tier 3 standards will involve more extensive changes. Manufacturers are expected

to make broad use of turbocharging (or supercharging) in conjunction with either aftercooling or

EGR for controlling both NOx and PM emissions. Further fuel injection upgrades, perhaps

including electronically controlled injection, will also be needed to meet emission standards. The

Tier 3 standards are comparable to, but less stringent than, the highway standards that will become

effective in model year 2004. EPA believes that implementation of the Tier 3 standards in 2008 for

these engines gives manufacturers sufficient time to adapt highway technologies as appropriate and

optimize the systems for controlling emissions at a relatively low cost.
Regulatory Impact Analysis



C. Engines Rated under 37 kW

The design features of these small engines and their greater cost sensitivity constrain the

targeted level of emission control. These engines are therefore subject to less stringent emission

standards. 

Engines using indirect injection (IDI) are already controlled to levels below the new Tier 1

standards and, in many cases, below even the Tier 2 standards. Certification data submitted to the

California ARB for diesel engines rated under 19 kW show most IDI engines controlling NMHC +

NOx emissions well below 7 g/kW-hr (5.2 g/hp-hr), with PM levels between 0.3 and 0.4 g/kW-hr

(0.2 and 0.4 g/hp-hr).29 Those engines that need additional control can use currently available, lowcost upgrades to fuel injection systems to meet the new emission standards. An additional advantage

of IDI engine technology is the relatively quiet engine operation. Since fuel consumption in IDI

engines is 10 to 15 percent higher than in their direct-injection counterparts, shifting to IDI

technology to comply with emission standards is not an optimal solution.

For direct injection engines, EPA expects that manufacturers will be able to meet the Tier 1

standards by optimizing the combustion chamber and retarding the timing. These control

technologies are well established for diesel engines and should be readily adaptable to the small

engines. Additional certification data from the California ARB show emission rates for some DI

engines rated under 19 kW to be between the Tier 1 and Tier 2 standards.30 To meet the Tier 2

standards, some manufacturers could replace the existing rotary pump fuel injection systems with

a more sophisticated rotary pump, some designs of which have already been developed, or perhaps

an in-line pump system.31 Current trends, though, indicate that consumers are requesting more

sophisticated electronics on their machinery for improvements in performance.32 For this reason,

it is possible that by 2004 an electronically controlled engine will be available at a reasonable cost.

Electronic controls enable the engine designer to more carefully control the engine, especially the

fuel injection parameters, to optimize engine operation for the best combination of emission control,

power, and fuel economy. At any rate, limited electronics should be available for governing and for

some improvements in performance. Finally, some applications may employ EGR to ensure

sufficiently low NOx emission levels.

Many of the air-cooled diesel engines rated under 8 kW face unique design challenges. The

small size and low cost of these engines limit the flexibility of designing or adapting technologies

to control emissions. For example, increasing injection pressure in very small cylinders involves

tradeoffs resulting from the greater impingement of fuel spray on cylinder walls. Also, for some

approaches, such as reducing injector hole diameters, scaling a technology down to the smallest

engines may not be feasible due to machining or other production limitations. Tier 1 standards for

these engines are therefore set at less stringent levels than those for larger engines. To reach these

levels, manufacturers will need to rely on several of the strategies used for other engines. For

example, increasing swirl and redesigning piston head geometries can be an effective way of

improving fuel air mixing in small engines, with the additional benefit of allowing higher injection

pressures without increasing fuel wetting on the cylinder walls. The position and design of piston
Chapter 3: Technological Feasibility



rings can be improved to reduce the contribution of engine oil to particulate emissions.

Incorporating fuel injectors that provide mechanically controlled rate shaping would allow

substantial control of NOx emissions at a low cost. Using injectors with valve-closed-orifice nozzles

would similarly control HC emissions. Engines that operate within a relatively narrow range of

engine speeds can achieve a degree of charge-air compression with intake manifold designs that rely

on pulse tuning. These types of strategies have been shown to reduce emission levels to that of the

new Tier 2 standards; EPA believes that despite the more difficult characteristics of these engines,

manufacturers will be able to incorporate such strategies to achieve compliance with Tier 2

standards.

IV. Impact on Noise, Energy, and Safety

The Clean Air Act requires EPA to consider potential impacts on noise, energy, and safety when

establishing the feasibility of emission standards for nonroad diesel engines. One important source

of noise in diesel combustion is the sound associated with the combustion event itself. When a

premixed charge of fuel and air ignites, the very rapid combustion leads to a sharp increase in

pressure, which is easily heard and recognized as the characteristic sound of a diesel engine. The

conditions that lead to high noise levels also cause high levels of NOx formation. Fuel injection

changes and other NOx control strategies therefore typically reduce engine noise.

Combustion-related noise reductions may be as great as 8 or 10 decibels, which is much greater than

that anticipated from increasing the size or speed of the cooling fan.1

Another principle source of noise is the cooling fan. Any engine changes that increase the heat

load to the heat exchangers would increase the need for fan cooling, either with larger fans or with

higher fan speeds, which quickly increases noise levels. Fans are typically positioned to provide

cooling air for three heat exchanger applications: engine coolant, hydraulic working fluid, and air

conditioning. Applying cooled EGR to an engine would likely require the engine coolant to absorb

the heat from the recirculating exhaust gases. Heat rejection from the EGR system, however, would

generally occur during lower-power operation. During periods of high-power operation, and

therefore high heat rejection from combustion, there is little or no EGR flow. As a result, EGR

cooling is expected to have a small effect on total cooling capacity. EPA believes that any increase

in noise from a cooling fan resulting from increased heat rejection would be more than offset by a

reduction in combustion noise related to controlling NOx emissions. The need and ability of

manufacturers to maintain low noise levels from diesel engines is therefore not compromised by the

new standards.

The impact of new emission standards on energy is measured by the effect on fuel consumption

from complying engines. Manufacturers of engines rated under 37 kW are expected to retard

injection timing, which increases fuel consumption somewhat. Most of the technology changes

anticipated in response to the new standards, however, have the potential to reduce fuel consumption

as well as emissions. Redesigning combustion chambers, incorporating improved fuel injection

systems, and introducing electronic controls provide the engine designer with powerful tools for

improving fuel efficiency while simultaneously controlling emission formation. To the extent that

manufacturers shift from air-to-water aftercooling to air-to-air aftercooling, there will be a marked
Regulatory Impact Analysis



improvement in fuel efficiency. A moderate degree of cooled EGR can be incorporated with little

or no increase in fuel consumption, especially with the anticipated use of EGR cooling.

Manufacturers of highway diesel engines have been able to steadily improve fuel efficiency even as

new emission standards required significantly reduced emissions. 

There are no apparent safety issues associated with the new standards. Manufacturers will likely

use only proven technology that is currently used in other engines, especially in diesel trucks. 
Chapter 3: Technological Feasibility



1.Herzog, P., Burgler, L., Winklhofer, E., Zelenda, P., and Carterllieri, W., "NOx Reduction

Strategies for DI Diesel Engines," SAE Paper 920470, 1992.

2.Uyehara, O., "Factors that Affect NOx and Particulates in Diesel Engine Exhaust," SAE Paper

920695, 1992.

3.Durnholz, M., Eifler, G., Endres, H., "Exhaust-Gas Recirculation - A Measure to Reduce

Exhaust Emission of DI Diesel Engines," SAE Paper 920715, 1992.

4.Bazari, Z., French, B., "Performance and Emissions Trade-Offs for a HSDI Diesel Engine - An

Optimization Study," SAE Paper 930592, 1993.

5.“Estimated Economic Impact of New Emission Standards for Heavy-Duty On-Highway

Engines," Acurex Environmental Corporation Final Report (FR-97-103), March 31, 1997, page

4-11.

6.See reference 4--SAE 930592

7.“Emission Control Technology for Diesel Trucks,” U.S. EPA Report to Congress, October

1993.

8.See reference 5 - Acurex Environmental Final Report, page 4-10

9.See reference 4--SAE 930592

10.See reference 1--SAE 920470

11.See reference 4--SAE 930592

12.Pierpont, D., Reitz,R., "Effects of Injection Pressure and Nozzle Geometry on DI Diesel

Emissions and Performance," SAE Paper 950604, 1995.

13.See reference 1--SAE 920470

14.See reference 12--SAE 950604

15.Ghaffarpour, M. and Baranescu, R., “NOx Reduction Using Injection Rate Shaping and

Intercooling in Diesel Engines,” SAE Paper 960845, 1996

16.Piepont, D., Montgomery, D., Reitz, R., “Reducing Particulate and NOx Using Pilot

Injection,” SAE Paper 950217, 1995.

17.“CAT’s HEUI System: A Look at the Future?,” Diesel Progress, April 1995, page 30.

Chapter 3 References
Regulatory Impact Analysis



18.See reference 1--SAE 920470

19.See reference 17--SAE 950217

20.Montgomery, D. and Reitz, R., “Six-Mode Cycle Evaluation of the Effect of EGR and

Multiple Injections on Particulate and NOx Emissions from a D.I. Diesel Engine,” SAE Paper

960316, 1996

21.Yoshikawa, H., Umehara, T., Kurkawa, M., Sakagami, Y., Ikeda, T., “The EGR System for

Diesel Engine Using a Low Voltage Soot Removal Device,” SAE Paper 930369, 1993.

22.Khalil, N., Levendis, Y., Abrams, R., “Reducing Diesel Particulate and NOx Emissions via

Filtration and Particle-Free Exhaust Gas Recirculation,” SAE Paper 950736, 1995.

23.See reference 4--SAE 930592

24.Meeting between EPA and Manufacturers of Emission Controls Association, April 1995.

25.Voss, K., Bulent, Y., Hirt, C., and Farrauto, R., "Performance Characteristics of a Novel

Diesel Oxidation Catalyst," SAE Paper 940239, 1994.

26.Johnson, J., Bagley, S., Gratz, L., Leddy, D., "A Review of Diesel Particulate Control

Technology and Emissions Effects - 1992 Horning Memorial Award Lecture," SAE Paper

940233, 1994.

27.“Final Regulatory Impact Analysis: Control of Emissions of Air Pollution from Highway

Heavy-Duty Engines,” U.S. EPA, September 16, 1997.

28.“Certification Data for Nonroad Diesel Engines,” EPA memorandum from Phil Carlson to

Docket A-96-40, August 8, 1997.

29.See reference 28

30.See reference 28

31.“Pump Evolution Meets Emissions Standards,” OEM Off-Highway, March 1996, Page 138.

32.“Build It and They Will Come,” OEM Off-Highway, November 1996, page 74.
Chapter 4: Economic Impact



CHAPTER 4: ECONOMIC IMPACT 

The new emission standards are set in a far-reaching schedule extending well into the next

decade. This will help manufacturers plan and conduct a comprehensive, efficient, and orderly R&D

program. For engine models that have heavy-duty highway counterparts, much of the R&D focus

will be on transferring emission control technology from highway engines to work in nonroad

applications. Even engines that are smaller or bigger than the highway engines are expected to

benefit from the technological development for highway engines, which face similar emission

standards two to five years earlier than comparable standards for nonroad engines. Manufacturers

that produce engines for both highway and nonroad markets will have an advantage in transferring

technology development, but dedicated nonroad engine manufacturers are also expected to learn

from highway technologies, either by accessing publicly available information, by working with

consultants or contractors that have been involved in developing the highway technologies, or by

inspection of manufactured engines. Basic research on highway engines will likely go a long way

toward narrowing the list of design options, so that designers of nonroad engines can work more

directly toward final solutions. 

The time available for conducting R&D and the potential for transferring highway technology

play significantly in the analysis of costs for complying with the new emission standards. Learning

from this experience and applying additional R&D will enable manufacturers to optimize a

combination of control strategies and techniques that control emissions at the lowest cost, with

minimum effects on operating costs and engine durability. Also, the program review scheduled for

2001 provides manufacturers and EPA an opportunity to review the feasibility and cost of complying

with the Tier 3 standards for engines rated over 37 kW, and Tier 2 standards for smaller engines.

This chapter lays out EPA’s estimates of the cost of complying with the new standards, first for

incremental engine prices, then incremental equipment prices. The estimated aggregate cost to

society is also considered, followed by an analysis of the impact on small businesses.

I. Cost of Engine Technologies

A. Methodology

Using the technical information in Chapter 3, EPA identified packages of technologies that

engine manufacturers could use to meet the new emission standards. To quantify the costs of these

technologies, EPA relied extensively on the contracted study of the cost of highway engine

technologies conducted by ICF, Incorporated and Arcadis Geraghty & Miller.1 In addition, Arcadis

developed cost estimates for utilizing electronic controls for nonroad engines.2 

While the following analysis projects a relatively uniform emission control strategy for
Regulatory Impact Analysis



designing the different categories of engines, this should not suggest that EPA expects a single

combination of technologies will be used by all manufacturers. In fact, depending on basic engine

emission characteristics, EPA expects that control technology packages will gradually be fine-tuned

to different applications. Furthermore, EPA expects manufacturers to use averaging, banking, and

trading programs as a means to deploy varying degrees of emission control technologies on different

engines. EPA nevertheless believes that the projections presented here provide a cost estimate

representative of the different approaches manufacturers may ultimately take.

Costs of control include variable costs (for incremental hardware costs, assembly costs, and

associated markups) and fixed costs (for tooling, R&D, and certification). Variable costs are

marked up at a rate of 29 percent to account for manufacturers' overhead and profit.3 For

technologies sold by a supplier to the engine manufacturers, an additional 29 percent markup is

included for the supplier's overhead and profit. The analysis also includes consideration of lifetime

operating costs where applicable. 

B. Technologies for Meeting the New Standards

The following discussion provides a description and estimated costs for those technologies EPA

projects will be needed to comply with the new emission standards. For some technologies, it is

difficult to make a distinction between the benefits related to reduced emissions and the benefits for

improved fuel economy and engine performance. Modifications to fuel injection systems, for

example, have the potential to improve engine performance in addition to the expected reductions

in NOx, HC, and PM emissions. 

The technology packages in the analysis include multiple sets of projections. EPA has

information about technologies for those engines already complying with the Tier 1 standards

finalized in 1994. For engines not yet subject to Tier 1 standards, some judgment is required to

project the technology packages for complying with finalized Tier 1 standards; these Tier 1

projections serve as the baseline scenario for estimating the impact of the new emission standards.

Specification of these technologies is based on an observation of the technologies used with certified

engines and a set of technical judgments about the most likely control steps manufacturers will use

to meet Tier 1 emission standards. Tier 1 standards do not apply to engines rated under 37 kW, so

current designs provide the technology baseline for those engines. 

Cost estimates based on these projected technology packages apply to engines starting in the

first year of production under the new standards. Costs in subsequent years should be reduced as

manufacturers pursue innovations to streamline production and simplify designs. EPA has attempted

to quantify the cost savings associated with this ongoing development, which is well established in

the literature, as described in Section I.E. below.

A variety of technological improvements are anticipated for complying with the multiple tiers

of emission standards. The fact that manufacturers have nearly a full decade before implementation

of the most challenging of the new standards ensures that technologies will develop significantly

before reaching production. This ongoing development will lead to reduced costs in additional ways.
Chapter 4: Economic Impact



First, research will lead to enhanced effectiveness for individual technologies, allowing

manufacturers to use simpler packages of emission control technologies than would be predicted

given the current state of development. Similarly, the continuing effort to develop different

technologies may ultimately provide a lower-cost alternative. Finally, manufacturers will focus

research efforts on any potential drawbacks, such as increased fuel consumption or maintenance

costs, attempting to minimize or overcome any negative effects. Because the analysis does not

explicitly factor in any cost savings for these efforts, actual costs for some technologies ten years

from now may be substantially lower than are estimated here. 

A combination of technology upgrades are anticipated for complying with the new emission

standards. Achieving very low NOx emissions will require basic research on reducing in-cylinder

NOx, HC, and PM. Modifications to basic engine design features, such as piston bowl shape and

engine block and head geometry, can improve intake air characteristics and distribution during

combustion. For this analysis, EPA projects large R&D expenditures for these basic engine

modifications to be spread over the applicable tiers of new emission standards. Manufacturers are

expected to introduce electronic controls or exhaust gas recirculation on some engines. Advanced

fuel-injection techniques and hardware will allow designers to modify various fuel injection

parameters for higher pressure, further rate shaping, and some split injection. Most engines rated

over 75 kW are expected to also incorporate air-to-air aftercooling, either for Tier 2 or Tier 3

standards. 
Regulatory Impact Analysis



Similar developments in highway diesel engines have shown that most of these technologies

not only can reduce emissions, but also can greatly enhance engine performance. As a demonstration

of this, truck drivers and trucking companies currently enjoy the benefits of using sophisticated, new,

high-performance electronic engines that have much lower emissions than engines from fifteen years

ago. Similarly, EPA has observed a clear increase in the deployment of electronic controls in

nonroad engines independent of changes to emission standards, which results from a willingness for

engine and equipment consumers to pay a premium for these more capable engines. A difficulty in

assessing the impact of new emission standards then is establishing the appropriate technology

baseline from which to make projections. Ideally, the analysis would establish the mix of

technologies that manufacturers would have introduced absent the changes in emission standards,

then make a projection for any additional changes in hardware or calibration required to comply with

those standards. The costs of those projected technology and calibration changes would then most

accurately quantify the impact of setting new emission standards.

While it is difficult to take into account the effect of ongoing technology development, EPA

believes that assessing the full cost of the anticipated technologies as an impact of the new emission

standards would inappropriately exclude from consideration the observed benefits for engine

performance, fuel consumption, and durability. Short of having sufficient data to predict the future

with a reasonable degree of confidence, EPA faces the need to devise an alternate approach to

quantifying the true impact of the new emission standards. EPA believes the observed value of

performance improvements in the field justifies the use of a discount based on equal weighting of

emission and non-emission benefits of those technologies which clearly have substantial nonemission benefits, namely electronic controls, fuel injection changes, turbocharging, and engine

modifications. For some or all of these technologies, a greater value for the non-emission benefits

could likely be justified. The following analysis describes current engine technologies as the

baseline scenario, from which are made technology projections and cost estimates. Appendix A

explores the sensitivity of discounting the estimated costs to account for non-emission benefits.

1. Baseline technology packages

An important technology distinction in the baseline packages is the difference between direct

and indirect injection, because of the inherently lower NOx emissions associated with indirect

injection. About 70 percent of engines rated under 37 kW use indirect injection technology,

according to the PSR OE Link database. Similarly, about 15 percent of engines rated between 37

and 75 kW employ indirect injection. Bigger engines use almost exclusively direct injection.

Fuel injection hardware is another important consideration, because these systems represent

such a big portion of the total engine cost. Engines rated under 75 kW typically use rotary fuel

pumps, which have a relatively lower cost, but have less potential for increasing injection pressure

or maintaining sophisticated control of injection variables. Bigger engines typically use in-line or

unit pumps, which cost more than rotary pumps, but offer the advantages of higher pressure and

greater control.
Chapter 4: Economic Impact



Another engine parameter to consider relates to charge air compression and cooling. Almost

all engines rated under 37 kW are naturally aspirated (i.e., no turbocharging or aftercooling). For

engines rated over 37 kW, EPA’s certification records for engines complying with Tier 1 emission

standards provide information on these engines’ aspiration parameters. As shown in Table 4-1,

substantial numbers of engines rated under 130 kW are currently naturally aspirated. For

turbocharged engines, most have either no aftercooling or air-to-water aftercooling, though 10 to 20

percent of engines rated over 130 kW are equipped with air-to-air aftercooolers. 

The certification data shows that almost all engines under 450 kW have mechanical controls,

even though bigger engines almost all have electronic controls. Apparently the additional cost of

developing electronic controls for these large engines is justified with the higher total cost of the

product.

Table 4-1

Distribution of Engine Technologies in 1998 EPA Certification Data*

Power Rating

Aspiration Aftercooling

Electronic

natural turbo- Controls

charged

none air-towaterair-to-air

37kW<75 67% 33% 33% 0% 0% 0%

75kW<130 25% 75% 20% 55% 0% 0%

130kW<450 0% 100% 30% 50% 20% 4%

450kW560 0% 100% 0% 90% 10% 86%

*Distributions based on manufacturers’ projected sales volumes.

2. Projected technologies for Tier 1

The new Tier 1 standards, which apply only to engines rated under 37 kW, follow the Tier 1

standards already adopted for larger engines. Direct injection engines will likely be able to meet the

standards through retarded injection timing and other modifications to engine design, such as reentrant piston bowls, increased swirl, reduced crevice volume, and better ring packs for reduced oil

consumption. 

Indirect injection engines are already performing at levels that comply with the new Tier 1

standards and are therefore not expected to change in this time frame. Certification data from the

California ARB for indirect injection engines rated under 19 kW, subject to a standard of 16 g/kW-hr

(12 g/hp-hr) NMHC + NOx, show that these engines are typically emitting between 5 and 9 g/kW-hr

(4 and 7 g/hp-hr). Engines rated between 19 and 37 kW are expected to have comparable emission

levels.4
Regulatory Impact Analysis



3. Projected technologies for Tier 2

Compliance with the Tier 2 standards, which apply to all power categories, will require a

combination of engine technologies and design strategies. First, engine manufacturers are expected

as much as possible to make an extensive review of engine design to reduce emissions and to

incorporate a variety of changes for improved performance, fuel consumption, durability, or

serviceability. These modifications will result in engines designed for optimum air flow and fuel-air

mixing. With sufficient lead time, introducing a redesigned engine model gives the manufacturer

opportunity to integrate several changes not directly related to emission control. 

Second, electronic controls will likely play a role in controlling emissions from some engines.

EPA expects that there will be an increasing demand for electronic controls in some sectors of the

nonroad market, especially for the larger engines. In addition, electronic controls provide the

designer with a very important tool for managing fuel injection and combustion processes to achieve

optimum performance while controlling emissions. To reflect this, EPA projects that all direct

injection engines rated over 37 kW will adopt electronic controls, either for Tier 2 or Tier 3

standards. 

Improved fuel injection systems account for the third major change expected in response to Tier

2 standards. To account for the better emission control performance from indirect injection models,

EPA has projected neither a cost nor an emission benefit related to the Tier 2 standards. Direct

injection engines rated under 75 kW will likely continue to use rotary fuel pumps, which can be

upgraded to increase fuel injection pressures to about 1,000 bar (15,000 psi) and to incorporate rate

shaping of the fuel charge (either mechanically or electronically). Such fuel pumps are already

available. For engines rated between 75 and 560 kW, the analysis projects improved unit injection

systems that similarly provide the capability for higher injection pressures and injection strategies

such as rate shaping or split injection. Common rail fuel injection systems, with increased control

of fuel injection pressure, timing, and rate shaping, provide an attractive technology option for

engines rated over 560 kW.

All engines rated between 75 and 560 kW are projected to utilize air-to-air aftercooling to meet

either Tier 2 or Tier 3 emission standards. Whether engines currently have no aftercooling or air-towater aftercooling, deploying air-to-air aftercooling provides a very big advantage in limiting NOx

formation. In addition, the upgraded aftercooling system carries substantial benefits for improved

fuel consumption and improved engine durability.

Finally, manufacturers may take a different approach for engines rated between 37 and 75 kW

because of the greater cost sensitivity of these engines. Some manufacturers have indicated a

preference to rely on turbocharging for these engines, but to use uncooled EGR instead of

aftercooling to reduce NOx emissions. Relative to aftercooling, the fuel economy penalty associated

with uncooled EGR is thought to be outweighed by its lower initial cost.

The result of engine modifications, new electronic controls, improved fuel injection,

turbocharging, and aftercooling will be engines with better performance in addition to enhanced
Chapter 4: Economic Impact



emission control. To estimate the impact of the new emission standards, EPA has therefore

discounted the cost of these technologies and design strategies by one-half. Halving the projected

costs of technological changes is intended to provide a distinction between benefits related to

emission controls and benefits related to other aspects of engine performance. This approach is

described more completely in the Final RIA for the emission standards for 2004 model year heavyduty highway engines.5

4. Projected technologies for Tier 3

The engine changes for complying with Tier 3 standards will in many cases follow directly from

the developments needed to meet emission standards for 2004 model year highway engines.

Accordingly, these projections rely extensively on the analysis developed for highway engines,

adapting the information as needed to apply to nonroad models. The Tier 3 standards, scheduled to

take effect between 2006 and 2008 for engines rated between 37 and 560 kW, will also require

multiple technological improvements.

Engines rated between 75 and 560 kW are projected to complete the shift to electronic controls

and air-to-air aftercooling, while introducing cooled EGR and common rail fuel injection. Engines

rated between 37 and 75 kW are expected to use an increased degree of uncooled EGR with further

emission control resulting from new electronically controlled fuel injection systems.

C. Cost of Engine Technologies 

The analysis includes cost estimates for the six power categories listed in Table 4-2, which are

based generally on the standards specified for various engine sizes. Grouping engines this way is

necessary to make distinctions in the cost of compliance based on engine size. Each power category

nevertheless encompasses a rather wide range of engines. The analysis develops a cost estimate for

a single engine near the middle of the range represented. Costs for engines on the high end of the

power range would generally be higher than the nominal value presented and vice versa. Costs for

engine sizes near the boundaries of the ranges can best be approximated by interpolation. 
Regulatory Impact Analysis



Table 4-2

Power Categories for 

Estimating Incremental Costs

Power 

Range

Nominal 

Engine Power

0-37 kW

(0-50 hp)

20 kW

(25 hp)

37-75 kW

(50-100 hp)

50 kW

(75 hp)

75-130 kW

(100-175 hp)

100 kW

(150 hp)

130-450 kW

(175-600 hp)

250 kW

(300 hp)

450- 560 kW

(600-750 hp)

500 kW

(650 hp)

560+ kW

(750+ hp)

750 kW

(1000 hp)

EPA believes it is appropriate to use cost estimates for highway engines as the starting point

for estimating nonroad engine costs for two main reasons. First, manufacturers have generally

confirmed EPA's understanding that emission controls from diesel engines will rely on similar

technology development, regardless of the application. The analysis therefore projects the use of

similar technologies for different sizes of engines, with some variations to reflect the different

characteristics of the smaller and bigger engines. The analysis also adjusts the variable costs

according to the size of the engine. Second, the timing to introduce the new standards is intended

to maximize the potential for transferring technology from highway to nonroad engines. An

additional important factor is EPA's belief that manufacturers will increasingly sell single engine

models into both highway and nonroad markets. Using an engine for both highway and nonroad

applications is a very appealing way to minimize costs by reducing technology development efforts.

Especially with the advent of electronic controls, the differences between highway and nonroad

engines can be limited to the software driving the electronic controls and perhaps the specifications

for bolt-on components such as turbochargers and aftercoolers.

R&D expenditures for emission-control development for engines with highway counterparts are

therefore typically estimated at 10 percent of the total previously estimated for highway engines. A

greater effort is anticipated to transfer and adapt technology development to smaller and bigger

engines. Retooling costs are somewhat harder to predict, but are generally projected to be 10 to 20

percent of the total R&D expenditure for the same engines. Since tooling costs are consistently

smaller than R&D, the retooling estimates are not a sensitive component of the total cost projections.
Chapter 4: Economic Impact



To adapt the highway cost estimates to nonroad engines, the analysis anticipates light heavyduty vehicle technology to transfer most directly to 100 kW engines, while medium heavy-duty

vehicle technology will transfer most directly to 250 kW engines. With somewhat greater

adaptation, the heavy heavy-duty vehicle estimates can be applied to 500 kW engines. Cost

estimates for 20, 50, and 750 kW engines were in most cases developed by using engineering

judgment to extrapolate the previously developed cost estimates.
Regulatory Impact Analysis



1. Engine modifications

All engines are projected to go through a significant upgrade over the course of the

implementation of the new emission standards. Manufacturers are expected in some cases to

conduct a major redesign either for the first or second tier of new standards, depending on the need

for near-term reductions and the opportunities for improvements unrelated to emission controls

(among other things). Furthermore, some manufacturers may make engine modifications to a

smaller degree for both tiers of new standards. To reflect this distribution of effort between the tiers

of standards, costs for engine modifications are divided between tiers. 

Engine modifications, including retarded injection timing, involve substantial fixed costs for

R&D and retooling and may add to the operating cost through higher fuel consumption, but EPA

estimates no variable cost associated with these changes. Estimated costs for highway engines were

$5 million for R&D and $350,000 for retooling per engine family. Projected R&D costs for nonroad

engines range from $500,000 for engines rated between 75 and 450 kW to $3,300,000 for engines

rated over 560 kW. Additional R&D expenditures are allocated for individual technologies, as

described below.

Fixed costs are calculated on a unit basis by amortizing the total outlays over several years of

production. A five-year amortization was selected as representative for most engines.

Manufacturers are expected to amortize fixed costs for Tier 3 engines rated between 450 and 560

kW and for Tier 2 engines rated over 560 kW over 10 years to spread the costs over a greater number

of engines. Annual domestic sales volumes are derived from the PSR OE Link database by adding

up average annual sales over a five-year period for current engine models (Table 4-3). Under a

scenario of harmonized emission standards, manufacturers can mitigate the impact of incurred fixed

costs by distributing those costs over international sales volumes. Engine manufacturers provided

data showing that on average they sell about 20 percent of their product in the U.S., with the rest

going to foreign markets.6

 Table 4-3 shows the effect of increasing average sales volumes per

model to reflect global markets. 

Manufacturers would minimize the per-engine cost impact by distributing fixed costs over total

worldwide sales, even though globally harmonized emission standards are not expected in the

foreseeable future. This may nevertheless be appropriate if manufacturers choose to simplify

production by offering a single low-emitting engine even in countries that have either no emission

standards or less stringent emission standards. On the other hand, quantifying the fraction of engine

sales going to those countries anticipated to have harmonized emission standards (Canada, Japan,

and European Union members) would be very difficult. To test the sensitivity of different

amortization calculations, Appendix A shows the effect of distributing fixed costs over only half of

engine sales outside the U.S.
Chapter 4: Economic Impact



Table 4-3

Analytical Assumptions for Domestic and Global 

Average Sales Volumes per Engine Model

Power 

Range

Domestic Sales

Volume

Global Sales

Volume

0-37 kW 1286 5787

37-75 kW 2237 10,067

75-130 kW 2409 10,841

130-450 kW 1322 5949

450- 560 kW 99 446

560+ kW 154 693

The widely varying cost estimates and sales volumes for different size engines cause very wide

disparities in the per-engine costs of making the expected engine modifications (see Table 4-4). The

low values of under $100 for a complete redesign for engines rated at or below 250 kW reflects the

effect of technology transfer and relatively high sales volume. The higher values for engines rated

over 450 kW show that high per-engine costs result from amortizing large fixed costs over very

small sales volumes. Table 4-4 shows that amortizing costs over a longer period allows

manufacturers to soften the sharp effect of low sales volumes. 

The anticipated increase in operating costs for engines rated under 37 kW is focused on the

minority of engines that need design improvements, as described above, totaling about $130 in net

present value (npv) over the lifetime of those engines. The calculated sales-weighted composite

increase in operating costs for all engines rated under 37 kW is about $30 in the Tier 1 time frame,

with an additional $30 projected for the tier 2 time frame.
Regulatory Impact Analysis



Table 4-4

Cost Calculation for Engine Modifications

20 kW 50 kW 100 kW 250 kW 500 kW 750 kW

 R&D $2,000,000 $2,000,000 $500,000 $500,000 $2,000,000 $3,300,000

 tooling $200,000 $200,000 $100,000 $100,000 $200,000 $330,000

Unit fixed cost (5-yr) $93 $53 $13 $25 $1204 —

Unit fixed cost (10-yr) — — — — $703 $746

Tier 1 percentage 33% — — — — —

Composite engine cost $31 — —— — —

Operating cost $44 — — — — —

Tier 2 percentage 33% 15% 50% 50% 50% 100%

Composite engine cost $31 $8 $7 $12 $602 $746

Operating cost $44 — — — — —

Tier 3 percentage — 85% 50% 50% 50% —

Composite engine cost — $45 $7 $12 $352 —

2. Electronic controls

Electronic controls have revolutionized engine design for light-duty and, more recently, heavyduty highway engines. The experience with these engines has shown that electronic controls provide

the engine designer with a tool that greatly enhances the emission control, engine performance, and

fuel consumption characteristics of the engine. As electronic controls have seen increasing

application, the cost of introducing electronics has decreased dramatically. The growing base of

experience has reduced the development time to prepare the software to integrate the information

from multiple sensors in managing the combustion process for an additional application. Also, the

cost of designing and manufacturing the electronic control modules (ECMs), sensors, and other

pieces of hardware has decreased as the engineering and production developments transfer to

component development and manufacture for new applications. For example, for one recent engine

conversion to electronic controls, an estimated 80 to 85 percent of the software was copied from

other engine models.7

Arcadis has prepared a memorandum to characterize the variable and fixed costs of adopting

electronic controls for the various sizes of nonroad engines.8 Hardware costs include consideration

of several components. Sensors are anticipated for measuring fuel pressure, crank angle, ambient

temperature, intake air temperature (for turbocharged engines), and coolant temperature. Engines

rated between 37 and 75 kW are expected to incorporate solenoids directly into the existing rotary

fuel pumps, while bigger engines are expected to use electronically controlled fuel injectors. 

Finally, wiring harnesses and ECMs are needed to tie everything together. Based on information
Chapter 4: Economic Impact



received during the comment period, EPA has reduced the estimated cost of adopting electronic

controls for engines rated between 37 and 75 kW; the simpler design and operation of these engines

allows a greater than anticipated cost savings relative to the bigger engines.

All direct injection engines are projected to adopt electronic controls, though several engine

models with higher power ratings already utilize electronics (see Table 4-1). Engines rated between

37 and 75 kW are already certified at or below Tier 2 emission levels and would therefore be

expected to have electronic controls starting in the Tier 3 time frame. Larger engines are expected

to shift deployment of electronic controls more into the Tier 2 time frame, largely because of the

greater potential for transferring technology from similar engine models already equipped with

electronic controls. 

Hardware costs for incorporating electronic controls depend on the number of cylinders or fuel

injectors. Engines rated between 37 and 75 kW typically have four cylinders. For 100 kW and 250

kW models, almost all engines have six cylinders, while bigger engines are highly varied. The PSR

OE Link database shows that engines rated between 450 and 560 kW have about 12 cylinders on

average. Hardware costs are increased by 10 percent to account for a potential increase in warranty

claims resulting from introduction of these substantially new systems.

Estimated R&D expenditures are based on development of multiple ratings for each engine

model to reflect the multiple applications served by nonroad engines. The number of ratings was

estimated by assigning one rating for each separate application for an engine model. EPA

understands that the number of ratings for an engine model varies greatly from one model to another

and from one manufacturer to another. The high costs contemplated for R&D reinforce EPA's belief

that manufacturers will make a great effort to streamline their engine offerings to reduce the number

of ratings offered for each engine. Reducing the number of ratings will lead to large savings in

development costs.

Combining variable and fixed costs results in cost estimates that again vary widely according

to engine size, as shown in Table 4-5. Total estimated costs for introducing electronic controls range

from $400 for 50 kW engines to $2,200 for 500 kW engines.
Regulatory Impact Analysis



Table 4-5

Cost Calculation for Electronic Controls

50 kW 100 kW 250 kW 500 kW

 ECM

 modified fuel injectors

 electronic fuel pump

 sensors

 wiring harness

 assembly

 markup @ 29%

 warranty @ 10%

$100

$115

$43

$5

$13

$80

$28

$150

$180

$104

$20

$16

$136

$47

$175

$180

$114

$20

$16

$146

$51

$250

$420

$120

$25

$20

$242

$84

Total hardware RPE $383 $653 $702 $1,161

 R&D $1,250,000 $2,400,000 $2,250,000 $1,800,000

 tooling $220,000 $150,000 $155,000 $105,000

Fixed cost (per engine) $36 $57 $99 $1043

Total engine cost $419 $711 $801 $2204

Percentage applied—Tier 2 — 75% 75% 15%

Composite cost—Tier 2 — $533 $600 $331

Percentage applied—Tier 3 85% 25% 20% —

Composite cost—Tier 3 $356 $178 $160 —

3. Improved fuel injection hardware

Fuel injection is central to any analysis of diesel engine emission control. Engines of different

sizes will experience very different improvements in fuel injection hardware. Three types of

improvements are considered below.

a. rotary fuel pumps

For direct injection engines rated under 75 kW, EPA expects manufacturers to use rotary pumps

designed with larger plungers or with modified cam profiles to achieve higher injection pressures.

Other parts and assemblies will need to be stronger to accommodate the higher pressures. A

multiple-spring assembly in the injector can be added to provide rate-shaping capability. 

EPA estimated R&D costs for rotary pumps by allotting $3 million for a fuel pump supplier to

design each of two pumps, one for engines rated under 37 kW and the other for engines rated

between 37 and 75 kW. Fixed costs are amortized assuming that two companies supply injectors

to all these engines. Hardware costs are marked up for both the suppliers' and the manufacturers'

overhead and profit. Engine retail prices are estimated to increase by about $120 as a result of these

upgraded fuel pumps (see Table 4-6). For engines rated under 37 kW, improved fuel pump costs
Chapter 4: Economic Impact



are applied to all direct injection models and half of indirect injection models. Incremental fuel

pump costs for engines rated between 37 and 75 kW are included as one of the cost elements for

incorporating electronic controls.

Table 4-6

Cost Calculation for Improved Rotary Fuel Pumps

20 kW 50 kW

 incremental material

 markup @29%

$60

$17

$60

$17

Supplier’s variable cost $77 $77

 R&D $3,000,000 $3,000,000

 tooling $500,000 $500,000

 engines per year 95,000 75,000

Fixed cost (per engine) $13 $11

Total cost from supplier $91 $89

Mfr. markup @ 29% $26 $26

Total engine cost $117 $115

Percentage applied—Tier 2 67% —

Composite cost $78 —

b. unit injection

Engines rated between 75 and 450 kW are projected to need upgraded unit injection systems.

Previously developed costs were based on electronically controlled engines, but mechanically

controlled engines will likely need a comparable degree of modification; the same cost estimates

are therefore applied to both types of engines. The increased cost for stronger materials and

additional components adds about $20 per injector to the price of these engines. Total incremental

engine costs related to these improvements range from $100 to $630 (see Table 4-7).
Regulatory Impact Analysis



Table 4-7

Cost Calculation for Improved Unit Injectors

100 kW 250 kW 500 kW

 incremental material

 improved solenoid

 markup @ 29%

$18

$45

$21

$24

$51

$25

$40

$80

$39

Total hardware RPE $95 $113 $174

 R&D $150,000 $150,000 $600,000

 tooling $56,000 $35,000 $230,000

 cylinders per engine 6 6 8

Fixed cost (per engine) $5 $8 $454

Total engine cost $99 $120 $629

c. common rail

Several highway engines have clearly demonstrated the benefits and the feasibility of using

common rail injection systems. Common rail systems provide a constant supply of pressurized fuel

at the injectors, which greatly increases control of the injection process. Available injection pressure

does not decrease at low engine speeds, though the designer can in some cases vary the injection

pressure based on the particular characteristics of different engine operating modes. 

Engines converting to common rail need a high-pressure pump to maintain a consistent pressure

of a fuel or oil reservoir. Injectors would have to be reconfigured to handle different actuation and

pressures and solenoid control valves would be needed to control the timing and degree of fuel

delivery to the combustion chamber. Cost estimates are developed for an engine that has been

equipped with electronic controls. Engines rated between 450 and 560 kW are projected to adopt

common rail technology on an earlier schedule, rather than continuing to modify unit injection

systems. Resulting engine cost increases range from $120 to $600 (see Table 4-8).
Chapter 4: Economic Impact



Table 4-8

Cost Calculation for Improved Common Rail Fuel Systems

100 kW 250 kW 500 kW 750 kW

 solenoid control valves

 higher pressure oil pump

 markup @ 29%

$30

$60

$26

$36

$65

$29

$56

$75

$38

$108

$85

$56

Total hardware RPE $116 $130 $169 $249

 R&D $150,000 $150,000 $600,000 $1,000,000

 tooling $64,000 $40,000 $160,000 $270,000

 cylinders per engine 6 6 8 12

Fixed cost (per engine) $5 $8 $416 $261

Total cost $121 $138 $585 $510

Percentage applied—Tier 2 — — 50% 100%

Composite engine cost — — $293 $510

Percentage applied—Tier 3 100% 100% 50% —

Composite engine cost $121 $138 $293 —

4. Exhaust gas recirculation

The biggest technology change anticipated in response to the new standards is adoption of

cooled EGR systems for engines in the Tier 3 time frame. Extensive R&D effort will be required

to develop EGR technologies that control emissions without compromising engine performance or

durability. The timing of the Tier 3 standards, however, is based on the expectation that

manufacturers will be able to adapt well-developed EGR systems from highway engines to work in

nonroad engines. The analysis therefore leaves out the costs of basic research, but includes

considerable R&D costs for tailoring these basic EGR system designs to nonroad engines. EGR

designs are expected to include a valve and sufficient tubing to route exhaust gases into the engine's

air intake. A heat exchanger will likely be installed to cool the recirculated exhaust with engine

coolant. Total EGR-related price increases, detailed in Table 4-9, range from $90 to $800.

As described earlier, engines rated between 37 and 75 kW are expected to take a somewhat

different approach to EGR, introducing the technology sooner, but omitting EGR cooling. This has

the effect of reducing the impact on initial purchase price, but will likely correspond with an increase

in fuel consumption. EPA expects manufacturers to use a relatively light degree of EGR to comply

with Tier 2 standards with direct-injection engines, then increase the extent of exhaust recirculation

to comply with Tier 3 standards. The analysis incorporates this effect by assessing a one-half percent

penalty in fuel consumption for Tier 2 and an additional one-half percent penalty for Tier 3. The

estimated effect of the combined tiers of standards is an increase of $120 in lifetime fuel costs (net
Regulatory Impact Analysis



present value).

Table 4-9

Cost Calculation for Exhaust Gas Recirculation

Tier 3

50 kW 100 kW 250 kW 500 kW

 electronic EGR valve

 EGR tubing

 EGR cooler

 assembly

 markup @ 29%

 warranty @ 10%

$30

$7

$7

$13

$4

$35

$9

$48

$7

$29

$10

$35

$14

$53

$7

$31

$11

$50

$30

$75

$7

$47

$16

Total hardware RPE $60 $137 $151 $224

 R&D $1,000,000 $1,000,000 $1,000,000 $1,000,000

 tooling $40,000 $40,000 $40,000 $40,000

Fixed cost (per engine) $25 $23 $43 $569

Total engine cost $86 $160 $193 $794

 rebuild cost impact $44 $48 $56 $121

 improved oil impact $4 $6 $9 $15

 fuel economy impact $62 — — —

Total Operating Cost (npv) $110 $55 $65 $135

Percentage applied—Tier 2 45% — — —

Composite engine cost $39 — — —

Composite operating cost $50 — — —

Percentage applied—Tier 3 40% 100% 100% 100%

Composite engine cost $34 $160 $193 $794

Composite operating cost $44 $55 $65 $135

The EGR cooler goes a long way toward resolving the potential deleterious effects of EGR on

fuel consumption and engine durability for the bigger engines. Recirculating particulate matter

through the engine remains an issue. As described in the highway analysis, EPA believes that the

great concern for these potential negative effects will drive manufacturers to make additional R&D

investments in the intervening years to overcome these concerns. EPA anticipates that the effort to

design acceptable EGR technology for highway engines will resolve these concerns for fuel

consumption and durability effects. As in the analysis for highway engines, an estimated 2 percent

increase in the cost of engine oil is included to reflect the outcome of the R&D effort. The increased
Chapter 4: Economic Impact



cost of oil changes are calculated over the lifetime of the engines; the net present value of increased

operating costs range from $4 to $15 per engine. 

Engines rated between 37 and 75 kW 

EPA anticipates that EGR systems will be serviced at the point of rebuild, including

replacement of the EGR valve and solvent cleaning of the EGR tubing. The aftermarket cost of an

EGR valve is estimated at three times the manufacturer's long-term cost. Cleaning time for a

mechanic is estimated at 30 minutes. For this analysis, rebuilding for engines equipped with EGR

is expected to occur after 10 years of operation. Median lifetimes developed from PSR’s PartsLink

database lead EPA to conclude that 40 percent of engines rated at or below 250 kW will be rebuilt,

while 60 percent of larger engines are expected to continue operation until the point of rebuild. The

resulting net present value of the increased rebuild burden is estimated as an average for all engines

between $40 and $120 per engine.

5. Turbocharging and Aftercooling

Manufacturers are expected to rely on new or improved turbochargers and aftercoolers to reduce

both NOx and PM emissions. Turbochargers increase the amount of air entering the cylinder by

compressing the charge air. To offset the heating of the charge air coming out of the turbocharger,

aftercoolers extract heat from the compressed charge air, further increasing its density. Air-to-water

aftercoolers use the engine’s main cooling system to cool the air approximately to the engine

operating temperature. Air-to-air aftercoolers use fan-driven ambient air to more effectively cool

the charge air. 

Used together, turbochargers and aftercoolers allow manufacturers to produce more power with

greater thermal efficiency, while suppressing NOx and PM emission formation. These performance

advantages have led to common use of these technologies in relatively large nonroad diesel engines.

Most of these engines, however, typically use turbocharging either with no aftercooling or with airto-water aftercooling. Almost all highway diesel engines, which are subject to more stringent

emission standards and have the added benefit of naturally high air speeds, have long relied on

turbocharging and air-to-air aftercooling to achieve the maximum benefit from these systems. 

The added cost and complexity of charge air compression and cooling have so far prevented

most nonroad engines rated less than 100 or 150 kW from using turbocharging and aftercooling. The

growth in the market for light-duty automotive diesel engines has contributed to the development

of low-cost turbochargers sized for nonroad engines of comparable power ratings. Manufacturers

have expressed an interest or intent to adopt turbocharging for engines currently rated as low as 40

or 60 kW. EPA has therefore incorporated into the cost analysis a projection that all direct injection

engines rated over 37 kW will use turbochargers. For engines rated between 37 and 75 kW it may

be more appropriate to consider supercharging, which would provide better low-speed and transient

performance at the expense of some fuel economy improvement. The emission control potential and

cost impact would be somewhat different for turbocharging and supercharging, but such distinctions

are relatively minor and are not quantified in this analysis. Also, as described above, these engines
Regulatory Impact Analysis



are expected to rely on EGR instead of aftercooling to control emissions

Engines rated over 75 kW are all projected to adopt air-to-air aftercooling. Considering the

reluctance of some equipment manufacturers to accept such a major change in engine system

configuration, some engine manufacturers may attempt to meet Tier 2 and Tier 3 standards with airto-water aftercooling systems. Aside from such redesign considerations, engine manufacturers are

expected to add or convert to air-to-air aftercooling as broadly as possible for the emission control

and performance benefits described above. Table 4-1 characterizes the deployment of turbocharging

and aftercooling variations for current engines and provides a basis for calculating the percentage

of engines in each power range that will make specific technology changes. 

Table 4-10 lays out the cost components involved for adding a turbocharger to an engine,

including the turbocharger itself, a waste gate, additional material, R&D, and a markup. The

resulting incremental cost per engine is $300 and $550 for 50 and 100 kW engines, respectively.

The calculation of aftercooling is more complex, both because of the complexity of the systems

and because of the potential for conversion from one type of aftercooling to another. Table 4-11

details the cost of adding an air-to-air aftercooler to an engine that previously had no aftercooling.

The principal cost component is a new heat exchanger dedicated to the aftercooling system. The

dramatically higher price estimated for the largest engines reflects the effect on costs from producing

large units with very low sales volumes. Including the cost of other components, assembly, R&D,

and markup leads to total engine costs for adding air-to-air aftercooling that range from $350 for a

100 kW engine to $4,000 for a 500 kW engine. 

To determine an estimated cost for converting from air-to-water to air-to-air aftercooling, the

analysis develops a cost for adding air-to-water aftercooling to an engine that previously had no

aftercooling. Those costs, when subtracted from the air-to-air aftercooling costs in Table 4-11, yield

a net cost to upgrade aftercooling systems. Estimated costs for upgraded aftercooling range from

$120 for a 100 kW engine to $1300 for a 500 kW engine. These much lower costs for upgrading

aftercooling systems result from the savings involved in decreasing the size of the main heat

exchanger, which can then be dedicated to engine cooling.

As described earlier, turbocharging and aftercooling offer compelling performance benefits

independent of the better control of emissions. EPA attempted to incorporate these benefits into the

analysis, though much differently for turbocharging and aftercooling. For turbocharging,

performance benefits are difficult to quantify in monetary terms; the analysis therefore discounts the

total cost of turbocharging by 50 percent, as for fuel injection improvements and general engine

modifications. EPA believes this discounted cost is the best way of isolating the effects of emission

controls for an estimate of the impact of the new standards. 

For aftercooling, it is possible to estimate an improvement in fuel economy, which can be

calculated directly as a cost credit. The hardware costs for aftercooling are therefore included in the

analysis with no discount. Manufacturers have expressed an expectation that upgrading from air-towater aftercoolers to air-to-air aftercoolers at Tier 1 emission levels would allow them to improve
Chapter 4: Economic Impact



fuel economy by 6 to 8 percent. That benefit would decrease at lower NOx emission levels. EPA’s

best estimate of the fuel economy improvement is therefore 3 percent for upgraded aftercooling

systems and 6 percent for those engines that currently have no aftercooling. The resulting cost

savings is in all cases greater than the incremental cost of adopting the technology, which is

consistent with engine manufacturers’ eagerness to move toward air-to-air aftercooling. 

Table 4-10

Cost Calculation for Turbocharging

50 kW 100 kW

 turbocharger hardware

 waste gate

 additional materials

 markup @ 29%

$150

$55

$30

$68

$300

$75

$50

$123

Total hardware RPE $303 $548

Engine R&D $250,000 $250,000

 engines per year $50,000 $30,000

Fixed cost (per engine) $1 $2

Total engine cost $304 $550

Percentage deployment—Tier 2 50% 50%

Composite cost $152 $138
Regulatory Impact Analysis



Table 4-11

Cost Calculation for Air-to-Air Aftercooling

100 kW 250 kW 500 kW

 heat exchanger

 plumbing

 hardware

 assembly

 markup @29 %

 warranty @ 10 %

$210

$18

$5

$10

$70

$24

$700

$23

$6

$10

$214

$74

$2800

$29

$7

$10

$825

$285

Total hardware RPE $338 $1027 $3956

 R&D $300,000 $300,000 $300,000

 tooling $30,000 $30,000 $30,000

Fixed cost (per engine) $7 $14 $181

Total engine cost (AA) $345 $1041 $4137

Total operating cost (npv) ($1177) ($2097) ($5988)

Percentage applied—Tier 3 45% 30% —

Composite cost—Tier 3 $155 $312 —
Chapter 4: Economic Impact



Table 4-12

Cost Calculation for Converting from 

Air-to-Water to Air-to-Air Aftercooling

100 kW 250 kW 500 kW

Air-to-Water Aftercooling: 

 incremental radiator

 supplier’s markup @ 29 %

 plumbing

 hardware

 assembly

 markup @29 %

$120

$35

$9

$2

$3

$49

$400

$116

$12

$3

$3

$155

$1600

$464

$15

$4

$3

$605

Total hardware RPE $218 $688 $2690

 R&D $200,000 $200,000 $200,000

 tooling $30,000 $30,000 $30,000

Fixed cost (per engine) $5 $9 $126

Total engine cost (AW) $223 $698 $2816

Total engine cost (AA) $345 $1041 $4137

Net engine cost $122 $343 $1320

Net operating cost (npv) ($588) ($1048) ($2994)

Percentage applied—Tier 2 25% 25% 40%

Composite cost—Tier 2 $31 $86 $594

Percentage applied—Tier 3 30% 25% 45%

Composite cost—Tier 3 $37 $86 $594

6. Closed crankcase

Naturally aspirated engines will be required to have closed crankcases. The necessary hardware,

a simple tube with a PCV valve to route the crankcase vapors into the engine's air intake, can be

readily adapted from highway engine models. The estimated cost for these components is $10, with

no additional amount allocated for R&D (see Table 4-13). Due to the small number of naturally

aspirated engines with high power ratings, costs are estimated only for 20 and 50 kW engines. As

described above, several of these engines will be turbocharged in the future, thereby eliminating the

need for a closed crankcase.
Regulatory Impact Analysis



Table 4-13

Cost Calculation for Closed Crankcases

20 kW 50 kW

 PCV valve

 tubing

 assembly

 markup @29%

$5

$2

$1

$2

$5

$2

$1

$2

Total hardware RPE $10 $10

Total engine cost $10 $10

D. Projected Cost of Technology Packages

Added to the cost of incorporating the new engine technologies is the cost of certifying engine

families. To factor in certification costs, the analysis uses a figure of $60,000 per engine family,

allowing for two emission tests, two months of engineering time, and miscellaneous fees and

expenses. Distributing those costs across the different engine categories, amortizing the costs over

five years, and dividing by the number of projected sales results in per-engine costs of less than $15

for engines rated below 450 kW. Dividing the same costs over the larger engines with lower sales

volumes leads to calculated costs of up to $150 per engine, as shown in Table 4-14.

The cost of combining the above technology elements to comply with the new standards is

shown in Table 4-14. Where costs are discounted to reflect benefits unrelated to emission control

requirements, this is factored into the individual technology costs shown. Tier 1 standards for

engines rated under 37 kW have estimated incremental costs below $50 per engine for both retail

price and increased operating expenses.

Tier 2 standards involve generally higher cost impacts than are expected from Tier 1 standards.

The incremental cost to engines rated 250 kW or less is expected to be $70 to $460, while bigger

engines may face incremental costs of $700 to $1400. The cost of complying with Tier 3 standards

is similar to that for Tier 2, though the Tier 3 standards apply only to engines rated between 37 and

560 kW. The effect of improved fuel economy resulting from air-to-air aftercooling is shown by the

projected reduction in operating costs, which for several engines completely offsets the projected

incremental cost of incorporating new technologies.
Chapter 4: Economic Impact



Table 4-14

Incremental Unit Cost of Complying 

with New Emission Standards—Engines

 Em. 

Std.

Engine 

Technology

Percent

Attributed to Em.

Standards

Weighted Unit Cost

20 kW 50 kW 100 kW 250 kW 500 kW 750 kW

Tier 1

Engine modifications

 operating cost (NPV)

75% $23

$44

—— — — —

Certification 100% $11 — — — — —

Total first-year costs

 operating cost (NPV)

— $34

$44

—— — — —

Tier 2

Engine modifications

 operating cost (NPV)

50% $15

$44

$4

$9

$3

$0

$6

$0

$301

$0

$373

$0

Electronic controls 50% — — $267 $300 $165 —

Improved injection 50% $39 — $50 $60 $146 $255

EGR

 operating cost (NPV)

100% — $39

$50

— — ——

Turbocharger 50% — $76 $69 — — —

AA Aftercooler upgrade

 operating cost (NPV)

100% — — $31

($147)

$86

($262)

$594

($1347)

—

Closed crankcase 100% $10 — — — — —

Certification 100% $8 $6 $6 $12 $148 $55

Total first-year costs

 operating cost (NPV)

— $72

$44

$124

$59

$425

($147)

$463

($262)

$1355

($1347)

$683

$0

Tier 3

Engine modifications 

 operating cost (NPV)

50% — $23

$53

$3

$0

$6

$0

$176

$0

—

Electronic controls 50% — $178 $89 $80 — —

Common rail systems 50% — — $60 $69 $146 —

EGR 

 operating cost (NPV)

100% — $34

$44

$160

$55

$193

$65

$794

$135

—

AA Aftercooler upgrade

 operating cost (NPV)

100% — — $37

($177)

$86

($262)

$594

($1347)

—

New AA Aftercooler

 operating cost (NPV)

100% — — $155

($530)

$312

($629)

— —

Certification 100% — $6 $6 $12 $148 —

Total first-year costs

 purchase price

 operating cost (NPV)

— — $240

$97

$511

($652)

$758

($826)

$1858

($1212)

— 
Regulatory Impact Analysis



Characterizing these estimated costs in the context of their fraction of the total purchase price

is helpful in gauging the economic impact of the new standards. ICF conducted a study to

characterize the range of current prices for nonroad engines by collecting quoted list prices on a

variety of engines.9

 Taking a straight average of these prices, and allowing a 40 percent discount off

of list price results in a best estimate of actual prices for the various sizes of nonroad diesel engines,

as shown in Table 4-15. The incremental costs estimated in this analysis for engines over 450 kW

seem particularly high, but in fact represent a comparable price change relative to the total price of

the engine. The estimated cost increases for all engines are between 1 and 13 percent of actual sales

prices. Moreover, the cost savings described below further reduce the anticipated impact of the

emission standards; long-term cost increases are expected to be less than 8 percent of total engine

price.

Table 4-15

Estimated Prices for New Nonroad Diesel Engines

Power Range List Price

Estimated 

Sale Price

0-37 kW

(0-50 hp)

$4,000 $2,400

37-75 kW

(50-100 hp)

$5,900 $3,500

75-130 kW

(100-175 hp)

$6,700 $4,000

130-450 kW

(175-600 hp)

$12,600 $7,500

560+ kW

(750+ hp)

$79,800 $47,900

E. Summary of Engine Costs

The per-engine cost figures presented above are used in Chapter 6 to calculate the costeffectiveness of the program by comparing the costs to lifetime emission reductions. Included in that

calculation are the costs developed for first-year engines above, with the following modifications for

later model year production.

First, the analysis anticipates that manufacturers recover their initial fixed costs for tooling,

R&D, and certification over a five-year period. Fixed costs are therefore applied only to the first five

model years of production.

The second modification is related to the effects of the manufacturing learning curve. This is
Chapter 4: Economic Impact



a well documented and accepted phenomenon dating back to the 1930s. The general concept is that

unit costs decrease as cumulative production increases. Learning curves are often characterized in

terms of a progress ratio, where each doubling in cumulative production leads to a reduction in unit

cost to a percentage "p" of its former value (referred to as a "p cycle"). The organizational learning

which brings about a reduction in total cost is caused by improvements in several areas. Areas

involving direct labor and material are usually the source of the greatest savings. These include, but

are not limited to, a reduction in the number or complexity of component parts, improved component

production, improved assembly speed and processes, reduced error rates, and improved

manufacturing process. These all result in higher overall production, less scrappage of materials and

products, and better overall quality.

Companies and industry sectors learn differently. In a 1984 publication, Dutton and Thomas

reviewed the progress ratios for 108 manufactured items from 22 separate field studies representing

a variety of products and services.10,11 As shown in Figure 4-1, of the 108 progress ratios observed,

8 were less than 70 percent, 39 were in the range of 71 to 80 percent, 54 were in the range of 81 to

90 percent, and 7 were above 90 percent. The average progress ratio for the whole data set falls

between 81 and 82 percent. The lowest progress ratio of 55 percent shows the biggest improvement,

representing a remarkable 45 percent reduction in costs with every doubling of production volume.

At the other extreme, except for one company that saw increasing costs as production continued,

every study showed cost savings of at least 5 percent for every doubling of production volume. This

data supports the commonly used p value of 80 percent, i.e., each doubling of cumulative production

reduces the former cost level by 20 percent. As each successive p cycle takes longer to complete,

production proficiency generally reaches a relatively stable level, beyond which increased production

does not necessarily lead to markedly decreased costs.

EPA applied a p value of 20 percent in this analysis. That is, the variable costs were reduced

by 20 percent for each doubling of cumulative production. To avoid overly optimistic projections,

however, EPA included several additional constraints. Using one year as the base unit of production,

the first doubling occurs at the start of the third model year and the second doubling at the start of

the fifth model year. To be conservative, EPA incorporated the second doubling at the start of the

sixth model year. Recognizing that the learning curve effect may not continue indefinitely with

ongoing production, EPA used only two p cycles.
Regulatory Impact Analysis



0

5

10

15

Progress Ratio

Frequency

55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101 103 105 107

Figure 4-1

Distribution of Progress Ratios

From 22 field studies (n = 108).
Chapter 4: Economic Impact



EPA believes the use of the learning curve is appropriate to consider in assessing the cost impact

of diesel engine emission controls. The learning curve applies to new technology, new

manufacturing operations, new parts, and new assembly operations. While all the technologies

projected in this analysis specify either upgraded existing designs or transferred highway

developments, the changes envisioned nevertheless require manufacture of new components and

assemblies, involving new manufacturing operations. As manufacturers gain experience with these

new systems, comparable learning is expected to occur with respect to unit labor and material costs.

Table 4-16 lists the projected schedule of costs over time for each power category. The

estimated long-term cost savings are most pronounced for those engines whose costs are attributed

mostly to R&D and other fixed costs. In particular, the initial estimated costs of $800 to $1900 for

the biggest engines are reduced to levels $500 or less by the sixth year of production. The estimated

impact on operating costs does not change over time and is therefore not shown in Table 4-16.

Table 4-16

Projected Long-Term Increase in Prices 

Due to Tier 3 Standards—Engines

Years of

Production*

Power (kW)

50 100 250 500

1-2 $240 $511 $758 $1858

3-5 $203 $418 $623 $1691

6+ $120 $297 $435 $535

*Year 3 costs are adjusted by reducing variable costs by 20 percent (fixed costs remain unchanged). Year

6 costs are adjusted by reducing variable costs an additional 20 percent and eliminating fixed costs.

II. Cost of Redesigning Equipment

As discussed earlier in this chapter for engine costs, the final rule sets a long-term schedule of

emission standards extending well into the next decade, helping both engine and equipment

manufacturers to plan and execute a comprehensive R&D program. The following section presents

EPA’s analysis of the costs that equipment manufacturers will incur as a result of the new emission

standards.

A. Methodology

Using the engine technology and cost information provided in the preceding section, EPA was

able to develop estimates for the costs expected for equipment manufacturers to accommodate the

newly redesigned engines. According to the PSR OE Link database and discussions with equipment
Regulatory Impact Analysis



and engine manufacturers, there are about 1,000 nonroad equipment manufacturers using diesel

engines in many thousands of different applications. EPA realizes that the time needed for

equipment manufacturers to make these changes will vary significantly from manufacturer to

manufacturer and from application to application. As with the analysis of engine costs, EPA

assessed the cost of equipment changes by evaluating a relatively uniform emission control strategy.

Actual strategies may differ from those presented here, but EPA believes that the estimated costs in

this analysis are representative of a wide range of equipment redesign scenarios. The provisions

granting compliance flexibility to equipment manufacturers are intended to reduce the potential for

anomalously high costs for individual equipment models.

As described earlier in this chapter, costs of control to equipment manufacturers include fixed

costs (for R&D and tooling) and variable costs (for incremental hardware costs, assembly costs, and

associated markups). Also, as for the engine costs, variable costs for equipment are marked up at

a rate of 29 percent to account for equipment manufacturers' overhead and profit. Cost estimates for

redesigning equipment are presented as the first-year production costs for the new emission

standards. Costs in subsequent years will decrease based on an expected learning curve for

equipment manufacturers and the eventual recovery of fixed costs. 

B. Equipment Changes

The modifications to equipment due to the new standards relate to packaging (installing engines

in equipment engine compartments), power train (torque curve), and heat rejection effects of the

newly complying engines. The anticipated changes to nonroad equipment are drawn from the

preceding analysis of projected changes to engine technology. EPA’s emphasis on ongoing

technological development is doubly important in the context of equipment impacts. Absent new

emission standards, both engine and equipment manufacturers would be expected to pursue

technological developments for improving product lines. To the extent that manufacturers have time

to coordinate changes, the burden of redesigning equipment for emission standards can be minimized

by including those changes as part of a comprehensive effort to develop and produce an improved

product. 

All engines rated under 560 kW face two tiers of new emission standards. Equipment

manufacturers are expected to redesign their equipment models for the first tier of standards to

minimize further changes for the next tier of engines to the greatest extent possible. To analyze costs

for equipment, EPA projected one comprehensive redesign for each model. To reflect the possibility

of splitting costs between the tiers or deferring significant redesign until the second tier of new

engines, EPA divided costs between the two tiers of new emission standards. To divide costs, EPA

allocated three-fourths of total costs (fixed plus variable costs) to Tier 2 standards and one-fourth

of total costs to Tier 3 standards. In making this assumption for the analysis, EPA is not in any way

stating an expectation that the standards will, in fact, produce this particular redesign schedule.

The projections of effort needed to make equipment changes were generally developed by

considering the manufacturer’s past experience in accommodating redesigned engines, applying

engineering judgment as needed to quantify the projected changes. The following section details
Chapter 4: Economic Impact



EPA’s assessment of costs to equipment manufacturers.

C. Cost of Equipment Changes

The analysis includes cost projections for nonroad equipment in the six power categories

described in Table 4-2. The equipment is grouped this way to make distinctions in compliance cost

based on the size of the equipment and their engines. Even with these groupings by power category,

each category includes a wide array of equipment and engine combinations for the various

applications. The analysis presents costs at several points to represent, as much as possible, the

whole range of equipment. 

 The R&D and tooling costs are estimated for modifying equipment based on those changes

needed to accommodate the anticipated engine technology modifications for each power category.

The principal cost to equipment manufacturers resulting from the new standards will be related to

a general redesign of engine compartments and engine-related auxiliary devices. In some cases, the

overall function of an equipment model will have to be reviewed to ensure satisfactory performance.

Equipment design challenges will be greatest if engines are adopting air-to-air aftercooling. The

effort to make space for the additional hardware and to account for the changes in heat rejection and

other engine parameters will require a broad effort to maintain an effective product.

Variable costs are also considered. Many nonroad equipment models are expected to require

some additional steel for new or reinforced brackets, modified location and shape of sheet metal, and

other similar changes. An additional cost is assessed for various other materials required to

accommodate new engines. 

1. Fixed costs 

a. methodology for estimating level of effort for fixed costs

For all the power categories, EPA generally matched the estimated fixed cost of compliance (a

measure of the R&D and tooling effort required to accommodate new engines) with the equipment

application. Thus, certain applications of equipment were considered to be more difficult than others

for the purpose of accommodating complying engines. This estimation of difficulty was based a

combination of engine packaging constraints and anticipated technology changes. The space

available for engine changes and the degree of air-to-air aftercooling were thus used as indicators

of the difficulty in redesigning an equipment model. 

To calculate fixed costs for equipment applications, the following steps were taken. First, the

applications were generally separated into the following two categories within the parameters of

EPA's definition of nonroad engine (see 40 CFR 89.2): motive (e.g., agricultural tractors, excavators,

forklifts, etc.) and portable (e.g., pumps, generators, air compressors, etc.). Second, within these

two categories the applications were generally differentiated into "extensive" and "moderate"

categories to indicate the level of effort needed to accommodate complying engines. EPA’s

assessment of the level of effort for the different groups is developed in a separate memorandum and
Regulatory Impact Analysis



summarized in Table 4-17.12 For example, some equipment without challenging constraints for

engine packaging may need little or no modification to accommodate a new engine. Third, a fixed

cost per equipment product line (model) was determined for each of these two distinctions within

motive and portable categories for a total of four separate fixed costs per product line. Fourth, these

fixed costs per product line were amortized over ten years at a 7 percent discount rate. The longer

period for amortization reflects the smaller sales volumes and the longer product development cycles

for nonroad equipment. Fifth, using the annual sales per equipment product line, the fixed cost in

the first year was determined for both motive and portable applications for a total of four separate

fixed costs per unit. Finally, these four fixed costs per unit were weighted based on the number of

units in each of the four different categories for a weighted average fixed cost per unit for that power

category.

Motive equipment is generally expected to require more effort in accommodating complying

engines compared with portable equipment, because motive equipment on the whole has more

engine compartment packaging constraints and is therefore more sensitive to changed engine

specifications. Motive equipment also has more operator view and serviceability constraints for the

equipment manufacturer to accommodate than portable equipment. In addition, for both motive and

portable categories, smaller equipment was more often considered to be difficult for manufacturers

(see Table 4-12). Because a compact design is often most important for smaller equipment, these

designs generally have disproportionately smaller engine compartments. In addition, all equipment

models undergoing a change to air-to-air aftercooling were considered to need extensive redesign.

Table 4-17

Breakdown for Level of Effort in 

Estimating Fixed Costs

HP Range Motive Portable 

0-37 kW

(0-50 hp)

extensive= 80%

moderate= 20%

extensive= 50%

moderate= 50%

37-75 kW

(50-100 hp)

extensive= 70%

moderate= 30%

extensive= 50%

moderate= 50%

75-130 kW

(100-175 hp)

extensive= 100%

moderate= 0%

extensive= 100%

moderate= 0%

130-450 kW

(175-600 hp)

extensive= 80%

moderate= 20%

extensive= 80%

moderate= 20%

450- 560 kW

(600-750 hp)

extensive= 90%

moderate= 10%

extensive= 90%

moderate= 10%

560+ kW

(750+ hp)

extensive= 10%

moderate= 90%

extensive= 10%

moderate= 90%

The number of sales per equipment product line was an important parameter in determining the

amortized unit fixed costs from the fixed cost per product line. These sales volume estimates were
Chapter 4: Economic Impact



extracted from the PSR database by adding up average annual sales over a five-year period for those

equipment models that had sales in 1995, with adjustments for stationary applications and global

sales volumes.13 The PSR sales database excludes imported equipment data, and thus, the equipment

sales numbers are based on domestic (U.S.) sales only. It is estimated that imported equipment could

account for as much as 20 percent of the total sales. Incorporating this missing data may change the

calculations somewhat, but it is not clear whether the average sales volumes would increase or

decrease. On the other hand, as for engine costs, equipment manufacturers will be able to amortize

fixed costs over global sales volumes to reduce the cost impact of redesigning equipment. On

average, approximately half of manufacturers’ equipment sales go to other countries.14 As described

for engine costs, to test the sensitivity of different amortization calculations, Appendix A shows the

effect of distributing fixed costs over only half of equipment sales outside the U.S. 

b. effort needed for re-engineering equipment 

As described above, the fixed cost was determined only for the effort needed by equipment

manufacturers to accommodate the emissions control of complying engines. First, for each product

line of motive applications needing extensive redesign, EPA estimated that the combined R&D and

tooling level of effort needed by equipment manufacturers, which includes the effort needed for

testing, would be approximately 4,600 hours of effort. This includes 1,600 hours of junior engineers'

time and 450 hours of senior engineers' time. In addition, 2,500 hours of technicians' time is

included for testing, operating, repairing, and maintaining equipment, machines, and tools. This

level of effort is equivalent to about $315,000. Second, for each product line of motive applications

needing moderate redesign, EPA estimated that the combined R&D and tooling level of effort

needed by equipment manufacturers would be approximately 2,400 hours of effort distributed

similarly, including the effort needed for testing, which is equivalent to about $150,000. 

Third, for each product line of portable applications needing extensive redesign, EPA estimated

that the combined R&D and tooling level of effort needed by equipment manufacturers, which does

not include testing, would be approximately 750 hours of effort. This includes 450 hours of junior

engineers' time, 120 hours of senior engineers' time, and 230 hours for technicians' time, which is

equivalent to about $60,000. Lastly, for each product line of portable applications needing moderate

redesign, EPA estimated that the combined R&D and tooling level of effort needed by equipment

manufacturers, which does not include testing, would be approximately 270 hours of effort

distributed similarly, which is equivalent to about $21,000.

c. effort needed for changing product support literature 

In addition, EPA added to the R&D cost (and thus the fixed cost) the effort for equipment

manufacturers to modify product support literature (dealer training manuals, operator manuals,

service manuals, etc.) due to the product changes resulting from the new emission standards. For

each product line of motive applications, EPA estimated that the level of effort needed by equipment

manufacturers to modify the manuals for retraining their dealers to be about 100 hours, with the

needed clerical and printing support (about 80 hours of junior engineering time, 20 hours of senior

engineering time, and 4 hours of clerical time ), which is equivalent to about $10,000. For each
Regulatory Impact Analysis



product line of portable applications, EPA estimated two separate costs of literature changes for

extensive and moderate redesigns. EPA projected that the level of effort needed by equipment

manufacturers to modify manuals for each product line of portable equipment needing extensive

redesign to be about 50 hours (distributed similarly), which is equivalent to about $5,000. For each

product line of portable equipment needing moderate redesign the effort needed by equipment

manufacturers would be about 30 hours, which is equivalent to about $2,500.

d. total fixed costs

In summary, the total fixed costs for each product line of motive equipment were estimated to

be about $330,000 and $165,000 for the extensive and moderately redesigned product lines,

respectively, and the total fixed costs for each product line of portable equipment were estimated to

be about $70,000 and $23,000 for the extensive and moderately redesigned product lines,

respectively. Using these figures, EPA calculated an amortized fixed cost per unit, as shown in

Table 4-18.
Chapter 4: Economic Impact



Table 4-18

Total Fixed Costs per Equipment Piece for Both Tiers of Standards Combined

Power Type

No. of

Product

Lines

Annual

Sales per

Product

Line

Effort Distribution

of Effort

First Year

Unit Cost

Weighted

 First Year Unit

Cost

<37 kW

(<50 hp)

Motive 401 363

Extensive 80% $53

$48

Moderate 20% $27 $33

Portable 535 210

Extensive 50% $19

$13

Moderate 50% $6

37-75 kW 

(50-100 hp)

Motive 625 188

Extensive 70% $250

$213

Moderate 30% $125 $151

Portable 342 183

Extensive 50% $53

$35

Moderate 50% $18

75-130 kW 

(100-175 hp)

Motive 503 75

Extensive 100% $630

$630

Moderate 0% $315 $565

Portable 255 34

Extensive 100% $284

$284

Moderate 0% $95

130-450 kW 

(175-600 hp)

Motive 926 104

Extensive 80% $452

$406

Moderate 20% $226 $422

Portable 523 13

Extensive 80% $753

$652

Moderate 20% $251

450-560 kW

(600-750 hp)

Motive 70 24

Extensive 90% $1921 

$1825

Moderate 10% $961 $1707

Portable 75 7

Extensive 90% $1408

$1314

Moderate 10% $469

560+ kW

(750+ hp)

Motive 68 70

Extensive 10% $675

$371

Moderate 90% $337 $357

Portable 19 81

Extensive 10% $468

$187

Moderate 90% $156

For < 37 kW equipment, the cost per product line is first discounted by 2/3 since most indirect engines in this power category already meet the

standards, and second this discounted cost per model is increased by 25 percent since the standards are the first and the lead time is short for this

power category.
Regulatory Impact Analysis



Similar to costs described above in the engine cost section of this chapter, the widely varying

fixed cost estimates and sales volumes for different size equipment create broad diversities in the

estimated unit costs. The low cost of about $30 for equipment utilizing engines rated under 37 kW

is due primarily to the expectation that many of the engines already meet Tier 1 or even Tier 2

standards. In addition, the low costs for equipment with engines rated between 37 and 75 kW reflect

the relatively high sales volume of this range even though the equipment is expected to need a

greater level of effort to accommodate complying engines than bigger equipment. The highest cost

of $1,707 for equipment utilizing engines rated between 450 and 560 kW demonstrates that high unit

costs are due to amortizing large fixed costs over small sales volumes, even though product lines of

large equipment are expected to need relatively less redesign effort. 

 3. Variable costs 

EPA expects that the significant effort to redesign nonroad equipment to accommodate new

engines will be reflected primarily in the fixed costs for R&D and retooling. While variable costs

resulting from the new emission standards will likely be much smaller, the analysis next considers

hardware costs for additional or more expensive materials that may be required as a result of changes

to engine size or performance.

For the engine compartment modifications, EPA projects that about 50 percent of the affected

equipment will require slightly more steel. This increase in steel would be done for miscellaneous

steel changes that may include increasing the amount of material in side panels, hoods, brackets,

mounts, etc. More specifically, for this portion of the equipment, EPA estimates a 10 percent

increase in the amount of steel used, at a cost of approximately 30 cents per pound. Including

markup for overhead and profits, the total incremental retail price equivalent (RPE) hardware costs

related to these steel modifications range from $3 to $6 per unit for those units that need more steel

(see Table 4-19).

In addition, the analysis accounts for additional expenses for other materials, such as weldments,

plastics, castings, gaskets, seals, and hoses. As with the projection for additional steel, not all

equipment is expected to require changes to the amount or type of these materials. Considering the

complexity of designs and the potential for any or all of these materials to involve additional costs,

the analysis factors in an estimated cost five times greater than that for the steel alone.

Table 4-19

Estimated Incremental Variable Costs

0-37 kW 37-75 kW 75-130 kW 130-450 kW 450-560 kW 560+ kW

 steel

 miscellaneous hardware

 markup 

$2

$10

$3

$2

$10

$3

$3

$15

$5

$4

$20

$7

$6

$30

$10

$6

$30

$10

Total hardware RPE $15 $15 $23 $31 $46 $46
Chapter 4: Economic Impact



D. Summary of Total Projected Cost

1. First-year costs

Fixed and variable costs are combined in Table 4-20 to show the total unit cost for equipment

modified to accommodate engines designed to new tiers of emission standards. As described above

in Section II.B of this chapter, EPA then allocated three-fourths of these total costs to the first tier

of standards and one-fourth of these total costs to the second tier of standards. For engines rated

over 560 kW, the analysis attributes all costs to Tier 2, which is the only set of new standards for

these engines. The costs shown in Table 4-20 reflect this breakdown between the two tiers. For

example, for the equipment between 130 and 450 kW, three-fourths of the $453 total cost ($340)

would be the Tier 2 cost per unit, and one-fourth ($113) would be the Tier 3 cost per unit. 

In summary, for the new Tier 1 standards that only apply to equipment with engines rated under

37 kW, EPA projected the incremental cost on this equipment to be about $25. For the Tier 2

standards, equipment with engines rated between 37 and 75 kW are expected to have incremental

costs up to $125, and the equipment with larger engines may incur incremental costs up to $400 or

even $1300. The incremental costs of the Tier 3 standards are expected to range from $40 to $400.

Table 4-20 shows these costs for the various power ranges and adds the projected engine costs for

a total cost impact for purchasers of new equipment.
Regulatory Impact Analysis



Table 4-20

Incremental Unit Cost of Complying 

with New Emission Standards—Equipment

Equipment

Modification

Weighted Unit Cost

0-37 kW 37-75 kW 75-130

kW

130-450

kW

450-560

kW

560+

kW

Tier 1

Total hardware $8 — — — — —

Total fixed costs $16 — — — — —

Total first-year costs

 equipment changes

 engine changes

 total

$24

$34

$56

— — — ——

Tier 2

Total hardware $3 $12 $17 $23 $35 $46

Total fixed costs $5 $113 $424 $317 $1281 $357

Total first-year costs

 equipment changes

 engine changes

 total

$8

$72

$80

$125

$124

$249

$441

$425

$866

$340

$464

$804

$1315

$1354

$2670

$404

$683

$1087

Tier 3

Total hardware — $4 $6 $8 $12 —

Total fixed costs — $38 $141 $106 $427 —

Total first-year costs

 equipment changes

 engine changes

 total

— $42

$241

$282

$147

$511

$658

$113

$758

$872

$439

$1858

$2296

—

To better understand the economic impact of the new standards on equipment manufacturers,

the incremental costs are viewed in the context of their fraction of the total purchase price of

equipment. Equipment prices vary widely, but comparing total costs with a sampling of the

equipment list prices is illustrative. EPA collected quoted list prices on a several types of equipment

with high sales volume representing the low and high end of prices for different engine ratings. Two

ranges of engine power ratings were chosen: under 37 kW and between 185 and 335 kW (250 to 450

hp), the latter is in the middle of the 37 to 450 kW range. Using a range of these prices and

accounting for an estimated 20 percent discount from list prices, EPA determined a best estimate of

actual prices for nonroad diesel equipment (see Table 4-21).15 Comparing the estimated unit costs

for engines and equipment with the current purchase prices shows cost increases are almost all under

2 percent of purchase price, while most are well below 1 percent. 
Chapter 4: Economic Impact



Table 4-21

Estimated Prices for New Nonroad Diesel Equipment

Power Range Portable Equipment

Estimated Sale Price

Motive Equipment

Estimated Sale Price

0-37 kW

(0-50 hp)

$1,600-12,000 $16,000-20,000

185-335 kW

(250-450 hp)

$24,000-40,000 $130,000

2. Long-term costs

The long-term cost savings described above for engine costs also apply to equipment cost

estimates. Fixed costs only apply until those costs are fully recovered. Also, EPA believes it is

appropriate to use the manufacturing learning curve when assessing the economic impact to

equipment manufacturers of accommodating complying engine technologies. EPA believes that the

modifications expected for equipment manufacturers due to the new standards will require

manufacture of new components and assemblies, which will lead to new manufacturing processes.

Furthermore, as manufacturers learn more about these new manufacturing processes, they are

expected to reduce their unit labor and material costs. These cost savings are calculated the same

as for engine costs (i.e., a 20 percent reduction in year 3 and a further 20 percent reduction in year 6).

The estimated long-term costs for each equipment-power category for Tier 3 standards are

shown in Table 4-22. The projected cost savings is small for the medium term due to the

predominance of fixed costs. After those fixed costs are fully recovered though, the analysis projects

a great reduction in the impact of the new standards.
Regulatory Impact Analysis



Table 4-22

Projected Long-Term Increase in 

Prices Due to Tier 3 Standards

Scenario Years of

Production* 

Power (kW)

37-75 75-130 130-450 450-560 

Equipment 

1-2 $42 $147 $113 $439

3-5 $41 $146 $112 $436

6-10 $40 $145 $111 $434

11+ $3 $4 $5 $7

Engine and

Equipment

1-2 $282 $658 $872 $2296

3-5 $244 $564 $734 $2127

6-10 $160 $442 $545 $1991

11+ $122 $301 $440 $543

*For equipment, year 3 costs are adjusted by reducing variable costs by 20 percent (fixed costs remain unchanged). 

Year 6 costs are adjusted by reducing variable costs an additional 20 percent and eliminating fixed costs for

engines (fixed costs for equipment remain unchanged). Year 11 costs are adjusted by eliminating fixed costs for

equipment changes.

III. Aggregate Costs to Society

The above analysis develops per-unit estimates of engine and equipment costs for each

power category. With current data for engine sales for each category and projections for the

future, these costs can be translated into a total cost to the nation for the emission standards in

any year.16 Accounting for the projected favorable impact of the new standards on operating

costs, primarily from fuel savings in larger engines, would produce negative aggregate costs (net

economic gains) in future years. However, because it is difficult to accurately assess the fuel

economy impacts of hardware changes and the degree to which these savings would have

developed in the absence of new emission standards, EPA has conservatively chosen to present

aggregate costs to society without factoring in the expected changes in operating costs presented

earlier in this chapter. Using only the increased purchase prices presented in this chapter leads to

aggregate costs of about $5 million in the first year the new standards apply, increasing to a peak

of about $550 million in 2010 as increasing numbers of engines become subject to the new

standards. The following years show declining aggregate costs as the per-unit cost of compliance

decreases, as described earlier in the chapter, resulting in a minimum aggregate cost of about

$390 million in 2017. After 2017, stable engine costs applied to a slowly growing market lead to

slowly increasing aggregate costs.

IV. Final Regulatory Flexibility Analysis
Chapter 4: Economic Impact



This section presents the results of the EPA’s Final Regulatory Flexibility Analysis (Final

RFA), which evaluates the impacts on small businesses expected from new nonroad diesel

emission standards. As described below, the Final RFA largely confirms the conclusions of the

Initial RFA performed as a part of the proposed rule. This analysis has the following objectives:

(1) to specify an appropriate definition for “small business” for entities subject to the final rule,

(2) to characterize small participants in the nonroad diesel equipment manufacturing industry

(the industry evaluated in this analysis, as described below), (3) to assess the impact of the final

rule standards on small equipment manufacturers, and (4) to evaluate the relief provided by

regulatory alternatives.

A. Requirements of SBREFA and RFA

When proposing and promulgating rules subject to notice and comment under the Clean Air

Act, EPA is generally required under the Regulatory Flexibility Act (RFA) to conduct a

regulatory flexibility analysis unless EPA certifies that the requirements of a regulation will not

cause a significant impact on a substantial number of small entities. The Regulatory Flexibility

Act was amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA),

which was signed into law on March 29, 1996, to strengthen its analytical and procedural

requirements. 

In developing the NPRM, EPA concluded that a significant impact on a substantial number

of small entities was likely and completed the initial analysis on which this Final RFA is based. 

In responding to the provisions of SBREFA, EPA may use a variety of economic measures to

assess economic impacts on small entities. The analyses in the Initial and Final RFAs use a

measure known as the “sales test” to evaluate the impacts on small entities. The sales test

involves calculation of the annualized compliance costs as a function of sales revenue.

B. Methodology

1. Data sources

The Power Systems Research (PSR) database OE Link is the primary data source for this

analysis for product information about small and large equipment manufacturers. It includes the

number of equipment models produced, the types of engines used, and annual sales for each

equipment model. EPA believes that the PSR database is the most comprehensive source

available on the nonroad equipment manufacturing industry. Dun and Bradstreet (D& B) was the

main source of financial information, specifically for numbers of employees and the dollar value

of annual sales. Financial information on 334 of the 581 equipment manufacturers listed in the

PSR database was located (approximately 60 percent). These 334 equipment manufacturers

produced 63 percent of the total 1995 diesel equipment from the PSR database. Because the

ratio of total companies and ratio of total production represented by the 334 equipment

manufacturers are nearly equal, this sample likely contains a proportionate number of large and

small equipment manufacturers. This sample should therefore reflect the financial and

production characteristics of the equipment manufacturers that may be affected by the final rule. 
Regulatory Impact Analysis



2. Definition of small equipment manufacturer

SBA defines a small business differently for different lines of business. In order to simplify

the analysis, EPA looked at the effect of assuming, for the sake of the analysis, that a single

definition using the threshold of 500 or fewer employees could be used to characterize all small

nonroad diesel equipment manufacturers. This is the most commonly occurring among the SBA

definitions that apply to these companies. Of the 334 nonroad diesel equipment manufacturers

considered in the analysis, there were a total of 286 small manufacturers identified based on the

specific line-of-business definitions of small business from SBA, and there were a total of 283

small manufacturers found according to the general 500-employee threshold. The 286 small

equipment manufacturers identified based on the specific line-of-business definitions produced

25 percent of the total 1995 equipment, and the 283 small equipment manufacturers found using

the general 500 employee threshold produced 24 percent of the total 1995 equipment. Because

the differences in total number of small equipment manufacturers and the differences in percent

of total production that these small manufacturers produce are so small, the more general

definition of small business (500 or fewer employees) as defined by SBA for manufacturing

companies was considered acceptable. Thus, the analysis focuses on the impacts of the final rule

for 283 small businesses. 

C. Characterization of Small Equipment Manufacturers

1. Generating model companies

EPA’s analysis was based on a contract study performed by ICF, Incorporated.17 The

EPA/ICF study characterized the equipment industry by classifying industry segments in a

manner that would be useful for the subsequent evaluation of potential impacts of compliance

costs using the model company approach. To generate model small companies, nonroad diesel

equipment manufacturers (from market data described above) were segmented by size, measured

by sales (dollar value of annual sales) and total power. Total power is the product of individual

engine power and the number of units sold. Total power for a nonroad equipment manufacturing

company would be the sum of the products of the number of units of equipment produced and the

power rating of the engine used in each piece of equipment. This measure helps provide insight

into the amount of revenue generated from sales of equipment using diesel engines, and it

highlights equipment manufacturers that are probably generating revenue from other lines of

business and those companies that likely add minimal value to diesel engines when producing

equipment. The segmentation produced six groups of small companies, each group represented

by one model company. Small equipment manufacturers outside of these groups were not further

evaluated in the model company analysis, which left 238 small companies remaining within the

groups making up model companies.

2. Characterizing model companies

Table 4-23 provides summary data for characteristics of each group of small companies (or

each model company), such as number of equipment types, number of models, number of engine
Chapter 4: Economic Impact



types, total power, number of employees, number of units sold, and sales revenue. Each model

company is developed from the median values of characteristics for each group of small

companies; mean values were not chosen to avoid skewing the data. Although each group

contains companies that manufacture multiple equipment types (applications), typical companies

in all groups of small companies produce one type of equipment. In addition, each group

contains at least one company that manufactures only one equipment model. Typical companies

in all groups have fewer engine models than equipment models, indicating that engine models are

shared by different equipment models within the companies.

Many applications are spread across multiple company groupings. For example, generator

sets contribute to the top two thirds of sales (measured by total power sold) in Groups 1, 2, and 3. 

The high volume of these typically low-power units leads to companies in Groups 1, 2 and 3

producing an order of magnitude greater total power compared to companies in Groups 4, 5 and

6 (comparing 1 with 4, 2 with 5, and 3 with 6). Also, companies in Groups 1, 2 and 3 have

greater total power-to-dollar sales ratios compared to companies in Groups 4, 5 and 6. Cranes

account for the greatest portion of Group 6 sales (13 percent, measured by total power). These

low-volume units have high value added (for example, a complex piece of equipment with

several functions run by one engine), explaining why companies in Group 6 have similar dollar

sales to those in Group 3, even though median unit sales for Group 6 are only 15 percent those of

Group 3. These high value added companies require a similar number of employees to produce a

much lower volume of units compared to the companies with less value added products. 

Comparing mean and median number of employees of Groups 1, 2, and 3 to Groups 4, 5 and 6,

respectively, the values are very similar. Median sales for the same groups are also very similar. 
Regulatory Impact Analysis



Table 4-23

Characteristics of Model Company Groups

Characteristic Model Company Number

 1 2 3 4 5 6 

 Median Equipment Types 1 1 1 1 1 1 

 Average Equipment 1 1 1 1 1 1 

 Max Equipment Types 3 3 3 2 3 4 

 Min Equipment Types 1 1 1 1 1 1 

 Median No. of Models 2 5 7 2 3 4 

 Average No. of Models 4 6 9 3 3 6 

 Max No. of Models 13 22 29 12 9 17 

 Min No. of Models 1 1 2 1 1 1 

 Median Engine Models 2 5 7 2 3 4 

 Average Engine Models 4 6 9 2 3 6 

 Max Engine Models 11 22 29 5 9 17 

 Min Engine Models 1 1 1 1 1 1 

 Median Total hp 4,985 20,579 121,744 926 2,695 15,915 

 Average Total hp 9,318 33,291 136,150 896 3,801 29,461 

 Max Total hp 64,785 150,794 321,192 2,719 13,237 231,361 

 Min Total hp 430 5,550 32,138 105 294 1,540 

 Median Units Sold 55 222 1,022 15 41 155 

 Average Units Sold 154 462 1,424 40 66 390 

 Max Units Sold 1,241 2,259 4,793 438 258 3,377 

 Min Units Sold 5 33 174 2 3 10 

 Med. Units Sold <50hp - - 2 10 10 - 

 Avg. Units Sold <50hp 79 227 615 35 39 164 

 Max Units Sold <50hp 1,241 1,932 2,994 438 258 3,377 

 Min Units Sold <50hp - - - - - - 

 Median Equipment hp 78 100 122 38 74 104 

 Average Equipment hp 61 72 96 23 57 76 

 Min Equipment hp 4 15 20 4 7 8 

 Max Equipment hp 900 578 540 250 444 794 

 Median Employees 6 45 150 8 35 135 

 Average Employees 8 43 194 11 43 185 

 Max Employees 30 140 500 28 130 500 

 Min Employees 2 3 30 1 7 25 

 Median Sales $ 550,966 $ 4,550,000 $ 20,000,000 $ 927,260 $ 4,163,873 $ 24,000,000 

 Average Sales $ 724,816 $ 4,759,557 $ 26,946,453 $ 901,328 $ 5,128,141 $ 37,531,852 

 Max Sales $ 1,900,000 $ 10,000,000 $ 85,555,429 $1,900,000 $ 10,000,000 $ 350,604,000 

 Min Sales $ 120,000 $ 2,000,000 $ 12,000,000 $ 130,000 $ 2,000,000 $ 10,200,000 

 The EPA/ICF study found that the unit production and sales revenue data shows that some

small companies in Groups 1 and 2 are currently facing financial hardship without the effects of

new nonroad diesel regulations. This present financial condition of some companies provides an

indication of the current effects on small companies from competition in the market. 
Chapter 4: Economic Impact



D. Estimated Impacts on Small Equipment Manufacturers

1. Projected costs of the final standards

The original EPA/ICF study evaluated the impacts on small manufacturers of nonroad

equipment by examining the effect of projected fixed costs resulting from the rule. (In the

analysis, it was assumed that variable costs could generally be passed along as price increases

without significant economic consequences.) On the basis of comments and further analysis,

EPA has adjusted its estimates of fixed costs (see Section 6 of the Summary and Analysis of

Comments document associated with this rule for a discussion of EPA’s decision to revise the

projected costs). As a result of these changes, EPA has reanalyzed the economic impacts of the

rule on small equipment manufacturers, incorporating the revised fixed cost values.18 Table 4-24

presents the revised fixed costs per product line. The presented cost figures are the total fixed

costs that would be amortized in the first year of a five-year amortization.

As in the case of variable costs, manufacturers may also be successful in passing on fixed

costs to the final consumer. To the extent that manufacturers are able to recover their fixed costs,

the impacts estimated here would be mitigated. However, the costs presented in the table assume

that manufacturers are not able to pass on any of the fixed costs to their customers.

Table 4-24 

Compliance Cost by Engine Power Range

Power Range Fixed Cost per 

Product Line

0-37 kW $9,000

37-75 kW $28,000

75-130 kW $34,000

130-450 kW $30,000

450- 560 kW $26,000

560+ kW $21,000

As in the original analysis, this analysis evaluates the economic impacts under two

scenarios, the “base case” and “flexibility case.” The base case provides a measure of the

effectiveness of these provisions by analyzing the impacts of the final rule if the regulatory

flexibilities which are a part of this rule are ignored. The flexibility case is based on the

availability and use of provisions that provide flexibility to equipment manufacturers in meeting

the new standards by allowing them to exempt from the new emission standards certain

percentages of the equipment pieces they sell for the first seven years after the standards are
Regulatory Impact Analysis



implemented. The flexibility case also incorporates the availability and use of an additional

provision which will allow equipment manufacturers with lower-volume production lines to

exempt a specific number of pieces of equipment for each power category. 

It should be noted that the two flexibility provisions considered in this analysis have been

revised in the final rule to be more advantageous to equipment manufacturers; in addition, there

are additional flexibility provisions in the final rule that for simplicity were not considered in this

analysis. As a result, the complete package of flexibility provisions established by this final rule

can be expected to ease the economic burdens on small businesses to a greater extent than the

two provisions considered in this analysis.

2. Sales test

As with the original analysis in the Initial RFA, the “sales test” was conducted for each of

the 334 companies (small and large). The number (and percent) of large and small manufacturers

are shown in Table 4-25 for the ratio ranges of less than one percent, one to three percent, and

more than three percent. These show that the impact of the final rule without flexibility

provisions would be that more than 30 percent of small businesses would be economically

impacted by greater than or equal to 1 percent. 

 Table 4-25

Compliance Cost Impacts as a Percentage of Sales Revenue by Company Size

Company Type

Number of

Companies

< 1% 1-3% >3%

Small 283 177 57 49

63% 20% 17%

Large 51 51 0 0

100% 0% 0%

Total 334 288 57 49

 As demonstrated in Table 4-26, the flexibility provisions are projected to mitigate the

impact of the final rule such that only 13 percent of small businesses are estimated to have an

economic impact greater than 1 percent. Furthermore, the flexibility provisions reduced the

number of small equipment manufacturers impacted by 1 percent or more from 106 to 32,

approximately a 60 percent decrease. Thus, the analysis indicates that these flexibility provisions

will dramatically reduce the impacts of the emission standards. 
Chapter 4: Economic Impact



Table 4-26

Compliance Cost Impacts with Flexibility Provisions 

as a Percentage of Sales Revenue by Company Size

Company Type Total < 1% 1-3% >3%

Small 283 251 11 21

89% 4% 7%

Large 51 51 0 0

100% 0% 0%

Total 334 302 11 21

Some of the small companies that are projected to experience an impact of 3 percent or

greater with the flexibility provisions were Group 1 and 2 companies. Based on the finding that

some of these companies are already likely experiencing financial difficulty, it is not surprising

that a small number of companies are estimated to experience a greater impact from the

standards. ICF’s study further describes the circumstances surrounding the likely current

financial instability of small companies in Groups 1 and 2.

E. Summary of Projected Economic Impacts for Small Businesses

The flexibility provisions dramatically reduce the estimated economic impacts of the

regulations on small equipment manufacturers, decreasing the percentage of small equipment

manufacturers that would experience a 1 percent or greater impact from 37 to 11 percent of small

companies. EPA considers the flexibility provisions to be a significant regulatory alternative

because they enable the Agency to accomplish the objectives of the final rule while minimizing

significant economic impacts on small equipment manufacturers.

In addition, the impact on small equipment manufacturers in comparison to large

manufacturers is not substantially greater. Generally, small companies with low sales revenue

that produce a large number of units (measured as the sum of power times units) would have the

greatest relative impact. For those small companies that did appear to experience the greatest

relative impact by the final rule (i.e., from Group 1 and 2 companies), it is important to note that

this analysis did not focus on the present financial health of equipment manufacturers, which

would provide an element of uncertainty in the evaluation of estimated impacts. Based on

production and sales information, some companies in Groups 1 and 2 seem to be currently in

poor financial health, because they have a low revenue based on total power production. The

rule would therefore be expected to have a small effect on the financial health of small

equipment manufacturers compared with the current effects of competition in the market.
Regulatory Impact Analysis



F. Regulatory Alternatives to Reduce Impacts

Under section 609(b) of the Regulatory Flexibility Act as added by SBREFA, EPA

convened a Small Business Advocacy Review Panel on March 25, 1997. The purpose of the

Panel was to collect the advice and recommendations of representatives of small entities that will

be affected by the rule and to report on those comments and the Panel’s findings as to issues

related to the key elements of an initial regulatory flexibility analysis under section 603 of the

Regulatory Flexibility Act. Those elements of an initial regulatory flexibility analysis are:

- The number of small entities to which the proposed rule will apply.

- Projected reporting, record keeping, and other compliance requirements of the proposed

rule, including the classes of small entities which will be subject to the requirements and the

type of professional skills necessary for preparation of the report or record.

- Other relevant federal rules which may duplicate, overlap, or conflict with the proposed rule.

- Any significant alternatives to the proposed rule which accomplish the stated objectives of

applicable statutes and which minimize any significant economic impact of the proposed

rule on small entities.

Once completed, the Panel report was provided to the Agency and included in the rulemaking

record. The Panel, consisting of representatives of the Small Business Administration, the Office

of Management and Budget, and EPA, issued a report on May 23, 1997 entitled, Final Report of

the SBREFA Small Business Advocacy Review Panel for Control of Emissions of Air Pollution

from Nonroad Diesel Engines, which may be found in the docket for this rulemaking.19 The

Panel findings and recommendations on these issues and EPA’s response to these findings are

described below in summary. 

Accordingly, during the development of the proposal, EPA and the SBREFA Panel were in

contact with representatives of four separate but related industries that will be subject to this rule

and that contain small businesses as defined by regulations of the Small Business Administration

(SBA): nonroad diesel engine manufacturing, manufacturing of nonroad diesel equipment, the

rebuilding or remanufacturing of diesel nonroad engines, and post-manufacturer marinizing of

diesel engines. (Post-manufacture marinizers generally purchase complete or partially complete

engines and add parts to adapt them for propulsion or auxiliary marine use.) According to SBA’s

regulations (13 CFR 121), businesses with no more than the following numbers of employees or

dollars of annual receipts are considered "small entities" for purposes of a regulatory flexibility

analysis (the definition of small manufacturer of nonroad diesel equipment is discussed further in

Section IV.B.2. above):

Manufacturers of engines (including marinizers) 1000 employees

Equipment manufacturers 

- Manufacturers of construction equipment 750 employees

- Manufacturers of industrial trucks (forklifts) 750 employees

- Manufacturers of other nonroad equipment 500 employees

Rebuilders/Remanufacturers of engines $5 million 
Chapter 4: Economic Impact



There are several hundred small nonroad equipment manufacturers, one small nonroad

engine manufacturer, many small nonroad engine rebuilders/remanufacturers, and an estimated

ten small post-manufacture engine marinizers subject the rule. 

Regarding the proposed reporting and record keeping requirements, only equipment

manufacturers commented. Equipment manufacturers commented that under the flexibility

provisions, they should only be required to maintain accurate records of the engine types installed

in equipment. These records would not be routinely submitted to EPA, but would be available

upon request. The commenters believe this approach would minimize the administrative burden

on equipment manufacturers while providing for market-driven “self-policing” among competing

companies (due to the likelihood that competitors would alert EPA to abuses of the flexibility

provisions). It should be noted that no record keeping requirements would be imposed on

equipment manufacturers that choose not to take advantage of the voluntary flexibility

provisions. The panel encouraged EPA to minimize the need for reporting and record keeping. 

As described in the final rule, EPA will require that equipment manufacturers maintain accurate

records of the production of equipment, installed engines, and calculations used to determine the

percent-of-production allowances. Manufacturers are required to make these records available to

EPA upon request. EPA intends to conduct only limited audits of these records; the Agency

anticipates that scrutiny by equipment manufacturers of their competitors’ products will help

identify potential candidates for audits.

Again, only equipment manufacturers commented about the proposed rule’s overlap with

other federal rules. A representative of the diesel forklift industry stated that Occupational Safety

and Health Administration (OSHA) ambient carbon monoxide (CO) limits, especially as applied

in the state of Minnesota, need to be evaluated for any overlap with the engine-based standards. 

No other potential overlaps with other federal rules were noted. The panel encouraged EPA to

consider this potential overlap with OSHA CO limits. EPA has considered the potential overlap

with OSHA requirements and has concluded that no changes to this final rule are appropriate

because OSHA CO limits (and state requirements for CO monitoring such as those in place in

Minnesota), focus on indoor ambient air concentrations, expressed in parts per million. 

Coordination of these requirements with EPA CO standards, which are focused on per-engine

emission reductions to achieve National Ambient Air Quality Standards, would have to account

for highly variable activities that greatly influence indoor CO concentrations, such as room

ventilation rates and machine operating hours. These activities are beyond the scope of the final

rule. Comments received on the NPRM provided no additional information or suggestions for

coordinating federal regulations.

Small manufacturers of nonroad equipment and their representatives suggested alternative

ways in which the provisions of the draft proposal might be improved. The Panel believed that a

set of five alternatives, considered as an integrated package, would provide significant flexibility

and burden reduction for small entities subject to the draft proposed rule. The Panel believed

that EPA should consider conducting further analysis on these five alternatives and proposing or
Regulatory Impact Analysis



soliciting comment on them in the proposal. The five alternatives were: (1) flexibility for

equipment manufacturers to aggregate and use exemption allowances on a schedule that best

suited their needs, (2) equivalent flexibility for manufacturers of equipment using small engines

as for those using larger engines, (3) provision for equipment manufacturers to purchase credits

in the averaging, banking, and trading program and to use those credits to exempt more

equipment, (4) dropping of the requirement that the small volume allowance be restricted to a

single equipment model, and (5) adoption of a hardship relief provision. EPA proposed all 5

recommended provisions.

After evaluating the comments received on the proposed regulatory alternatives, EPA is

adopting some of the provisions put forward by the Panel, as well as several alternative

provisions that, as a whole provide small businesses with equivalent or better flexibility

compared to the program embodied in the Panel recommendations. These final flexibility

provisions, and EPA’s rationale for adopting them, are discussed in detail in the final rule

preamble and in the Summary and Analysis of Comments. EPA believes that the set of

provisions established in the final rule will provide adequate compliance flexibility for

equipment manufacturers, including those that are small, while meeting the Agency’s air quality

goals. The Agency believes that these provisions represent a very significant mitigation of the

economic impacts on small equipment manufacturers compared to the impacts that might

otherwise have occurred.
Chapter 4: Economic Impact



1.“Estimated Economic Impact of New Emission Standards for Heavy-Duty On-Highway

Engines,” Acurex Environmental Corporation Final Report (FR 97-103), March 31, 1997. The

Acurex Environmental Corporation has since changed its name to Arcadis Geraghty & Miller.

2.“Incremental Costs for Nonroad Engines: Mechanical to Electronic,” Memorandum from Lou

Browning, Acurex Environmental, to Alan Stout, EPA, April 1, 1997.

3."Update of EPA's Motor Vehicle Emission Control Equipment Retail Price Equivalent (RPE)

Calculation Formula," Jack Faucett Associates, Report No. JACKFAU-85-322-3, September

1985.

4.“Certification Data from Nonroad Diesel Engines,” EPA memorandum from Phil Carlson to

Docket A-96-40, August 8, 1997.

5.“Final Regulatory Impact Analysis: Control of Emissions of Air Pollution from Highway

Heavy-Duty Engines,” September 16, 1997.

6. “Economic Evaluation of Regulations on Exhaust Emissions from Large Nonroad,

Compression Ignition Engines,” David Harrison, et al, National Economic Research Associates,

October 29, 1997.

7.“Big Changes for Cummins’ B Series,” Diesel Progress, May 1997, page 14.

8.“Incremental Costs for Nonroad Engines: Mechanical to Electronic,” Memorandum from Lou

Browning, Acurex Environmental, to Alan Stout, EPA, April 1, 1997.

9.“Engine Price, On-Highway and Nonroad,” Memorandum from Thomas Uden, ICF, Inc., to

Alan Stout, EPA, August 7, 1997.

10.“Treating Progress functions as a Managerial Opportunity,” J. Dutton and A. Thomas,

Academy of Management Review, Vol. 9, No. 2, page 235, 1984.

11.“Learning Curves in Manufacturing,” L. Argote and D. Epple, Science, February 1990, Vol.

247, page 920.

12.“Methodology to Develop the Categories for the Effort Needed by Nonroad Equipment

Manufacturers in Accommodating Complying Diesel Engines,” EPA memorandum from Bryan

J. Manning to Public Docket A-96-40.

13.“Methodology to Determine Number of Product Lines and their Sales Volume for Nonroad

Diesel Equipment Cost Analysis,” EPA memorandum from Alan Stout to Public Docket

A-96-40.

Chapter 4 References
Regulatory Impact Analysis



14. “Economic Evaluation of Regulations on Exhaust Emissions from Large Nonroad,

Compression Ignition Engines,” David Harrison, et al, National Economic Research Associates,

October 29, 1997.

15.“Methodology to Develop Nonroad Diesel Equipment Sales Prices,” EPA memorandum from

Bryan J. Manning to Public Docket A-96-40.

16.Engine sales data is from the PSR OE Link database.

17.“Small Business Impact Assessment: Nonroad Compression-Ignition Equipment

Manufacturers,” Draft Final Report from ICF Incorporated, prepared for U.S. EPA under

Contract Number 68-C5-0010, Work Assignment Number 211, June 1997.

18.“Revised Results for the Small Business Impact Assessment: Nonroad Compression Ignition

Equipment Manufacturers;” Memorandum from Thomas Uden, ICF Kaiser, to Tad Wysor, EPA,

July, 1998.

19.“Final Report of the SBREFA Small Business Advocacy Review Panel for Control of

Emissions of Air Pollution from Nonroad Diesel Engines,” May 23, 1997. 
Chapter 5: Environmental Impact



CHAPTER 5: ENVIRONMENTAL IMPACT

Nonroad diesel equipment performs a large portion of our nation's work, and also has been

shown to contribute to decreased air quality in our nation's cities. To more fully understand both

the contributions that nonroad equipment makes toward various atmospheric pollutants and the

benefits that can be derived from more stringent emission standards, EPA developed a new

computer model for projecting nonroad emissions inventories called NONROAD. This chapter

has several purposes. First, the chapter reviews the latest scientific information relating to

adverse health and environmental effects of the regulated pollutants. Then, it analyzes the results

of the new NONROAD model to understand the impact the new emission standards are projected

to have on the emissions of oxides of nitrogen (NOx), primary and secondary particulate matter

(PM), and volatile organic compounds (VOCs), both on a nationwide basis and a per-machine

basis.

I. Health and Welfare Effects of Pollutants from Nonroad Engines

As part of the periodic review of the ozone and PM air quality standards required under the

Clean Air Act, EPA has recently assessed the impacts of ozone and PM on human health and

welfare, taking into account the most relevant, peer-reviewed scientific information available. 

The paragraphs below review some of EPA’s key concerns at this time, as compiled in the

Agency’s Criteria Documents and Staff Papers for ozone and PM. The Criteria Documents

prepared by the Office of Research and Development consist of EPA’s latest summaries of

scientific and technical information on each pollutant. The Staff Papers on ozone and PM are

prepared by the Office of Air Quality Planning and Standards, and summarize the policy-relevant

key findings regarding health and welfare effects. 

A. Ozone

Over the past few decades, many researchers have investigated the health effects associated

with both short-term (one- to three-hour) and prolonged acute (six- to eight-hour) exposures to

ozone. In particular, in the past decade, numerous controlled-exposure studies of moderately

exercising human subjects have been conducted which collectively allow a quantification of the

relationships between prolonged acute ozone exposure and the response of people’s respiratory

systems under a variety of environmental conditions. To this experimental work has been added

field and epidemiological studies which provide further evidence of associations between shortterm and prolonged acute ozone exposures and health effects ranging from respiratory symptoms

and lung function decrements to increased hospital admissions for respiratory causes. In addition

to these health effects, daily mortality studies have suggested a possible association between

ambient ozone levels and an increased risk of premature death. 
Regulatory Impact Analysis



Most of the recent controlled-exposure ozone studies have shown that respiratory effects

similar to those found in the short-term exposure studies occur when human subjects are exposed

to ozone concentrations as low as 0.08 ppm while engaging in intermittent, moderate exercise for

six to eight hours. These effects occur even though ozone concentrations and levels of exertion

are lower than in the earlier short-term exposure studies and appear to build up over time,

peaking in the six- to eight-hour time frame. Other effects, such as the presence of biochemical

indicators of pulmonary inflammation and increased susceptibility to infection, have also been

reported for prolonged exposures and, in some cases, for short-term exposures. Although the

biological effects reported in laboratory animal studies can be extrapolated to human health

effects only with great uncertainty, a large body of toxicological evidence exists which suggests

that repeated exposures to ozone causes pulmonary inflammation similar to that found in humans

and over periods of months to years can accelerate aging of the lungs and cause structural

damage to the lungs.

In addition to the effects on human health, ozone is known to adversely affect the

environment in many ways. These effects include reduced yield for commodity crops, for fruits

and vegetables, and commercial forests; ecosystem and vegetation effects in such areas as

National Parks (Class I areas); damage to urban grass, flowers, shrubs, and trees; reduced yield in

tree seedlings and noncommercial forests; increased susceptibility of plants to pests; materials

damage; and visibility. Nitrogen oxides (NOx), key precursors to ozone, also result in nitrogen

deposition into sensitive nitrogen-saturated coastal estuaries and ecosystems, causing increased

growth of algae and other plants.

B. Particulate Matter

Particulate matter (PM) represents a broad class of chemically and physically diverse

substances that exist as discrete particles (liquid droplets or solids) over a wide range of sizes. 

Human-generated sources of particles include a variety of stationary and mobile sources. 

Particles may be emitted directly to the atmosphere or may be formed by transformations of

gaseous emissions such as sulfur dioxide or nitrogen oxides. The major chemical and physical

properties of PM vary greatly with time, region, meteorology, and source category, thus

complicating the assessment of health and welfare effects as related to various indicators of

particulate pollution. At elevated concentrations, particulate matter can adversely affect human

health, visibility, and materials. Components of particulate matter (e.g., sulfuric or nitric acid)

contribute to acid deposition.

Key EPA findings can be summarized as follows:

1. Health risks posed by inhaled particles are affected both by the penetration and deposition of

particles in the various regions of the respiratory tract, and by the biological responses to

these deposited materials.

2. The risks of adverse effects associated with deposition of ambient particles in the thorax

(tracheobronchial and alveolar regions of the respiratory tract) are markedly greater than for
Chapter 5: Environmental Impact



deposition in the extrathoracic (head) region. Maximum particle penetration to the thoracic

regions occurs during oronasal or mouth breathing.

3. The key health effects categories associated with PM include premature death; aggravation

of respiratory and cardiovascular disease, as indicated by increased hospital admissions and

emergency room visits, school absences, work loss days, and restricted activity days;

changes in lung function and increased respiratory symptoms; changes to lung tissues and

structure; and altered respiratory defense mechanisms. Most of these effects have been

consistently associated with ambient PM concentrations, which have been used as a measure

of population exposure, in a large number of community epidemiological studies. 

Additional information and insights on these effects are provided by studies of animal

toxicology and controlled human exposures to various constituents of PM conducted at

higher than ambient concentrations. Although mechanisms by which particles cause effects

are not well known, there is general agreement that the cardio-respiratory system is the

major target of PM effects.

4. Based on a qualitative assessment of the epidemiological evidence of effects associated with

PM for populations that appear to be at greatest risk with respect to particular health

endpoints, the EPA has concluded the following with respect to sensitive populations:

a. Individuals with respiratory disease (e.g., chronic obstructive pulmonary disease, acute

bronchitis) and cardiovascular disease (e.g., ischemic heart disease) are at greater risk of

premature mortality and hospitalization due to exposure to ambient PM.

b. Individuals with infectious respiratory disease (e.g., pneumonia) are at greater risk of

premature mortality and morbidity (e.g., hospitalization, aggravation of respiratory

symptoms) due to exposure to ambient PM. Also, exposure to PM may increase

individuals’ susceptibility to respiratory infections.

c. Elderly individuals are also at greater risk of premature mortality and hospitalization for

cardiopulmonary problems due to exposure to ambient PM.

d. Children are at greater risk of increased respiratory symptoms and decreased lung

function due to exposure to ambient PM.

e. Asthmatic individuals are at risk of exacerbation of symptoms associated with asthma,

and increased need for medical attention, due to exposure to PM.

5. There are fundamental physical and chemical differences between fine and coarse fraction

particles and it is reasonable to expect that differences may exist between the two subclasses

of PM-10 in both the nature of potential effects and the relative concentrations required to

produce such effects. The specific components of PM that could be of concern to health

include components typically within the fine fraction (e.g., acid aerosols, sulfates, nitrates,

transition metals, diesel particles, and ultra fine particles), and other components typically
Regulatory Impact Analysis



within the coarse fraction (e.g., silica and resuspended dust). While components of both

fractions can produce health effects, in general, the fine fraction appears to contain more of

the reactive substances potentially linked to the kinds of effects observed in the

epidemiological studies. The fine fraction also contains the largest number of particles and a

much larger aggregate surface area than the coarse fraction which enables the fine fraction to

have a substantially greater potential for absorption and deposition in the thoracic region, as

well as for dissolution or absorption of pollutant gases.

With respect to welfare or secondary effects, fine particles have been clearly associated with

the impairment of visibility over urban areas and large multi-state regions. Fine particles, or

major constituents thereof, also are implicated in materials damage, soiling and acid deposition. 

Coarse fraction particles contribute to soiling and materials damage.

Particulate pollution is a problem affecting localities, both urban and nonurban, in all

regions of the United States. Manmade emissions that contribute to airborne particulate matter

result principally from stationary point sources (fuel combustion and industrial processes),

industrial process fugitive particulate emission sources, nonindustrial fugitive sources (roadway

dust from paved and unpaved roads, wind erosion from cropland, etc.) and transportation

sources. In addition to manmade emissions, consideration must also be given to natural

emissions including dust, sea spray, volcanic emissions, biogenic emanation (e.g., pollen from

plants), and emissions from wild fires when assessing particulate pollution and devising control

strategies.

C. Carbon Monoxide and Smoke

Though carbon monoxide (CO) and smoke are not the primary focus of this rule, EPA is

establishing new standards for both CO (for all engine categories subject to this regulation) and

smoke (for engines rated from 0 to 37 kW) in this rule. CO has long been known to have

substantial adverse effects on human health and welfare, including toxic effects on blood and

tissues, and effects on organ functions, and has been linked to fetal brain damage, increased risk

for people with heart disease, and reduced visual perception, cognitive functions and aerobic

capacity. As shown in EPA’s Nonroad Engine and Vehicle Emissions Study (NEVES), nonroad

diesel engines contribute to emissions of carbon monoxide in nonattainment areas.

Smoke from compression-ignition engines, including those below 37 kW, has long been

associated with adverse effects on human welfare, including considerable economic, visibility

and aesthetic damage. The carbon particles that make up diesel smoke cause reduced visibility,

soiling of urban buildings, homes, personal property, clothes, and skin, and are associated with

increased odor, coughing, and eye irritation. In addition, the particles causing visible smoke are

the same as those associated with the significant threats to human health described above for

particulate matter.
Chapter 5: Environmental Impact



II. The NONROAD Model

In order to quantify the level of emission inventories from nonroad equipment and to

estimate the impact of future standards on those inventories, EPA has developed a new computer

model called the NONROAD Model. EPA has replaced the model used in the NPRM analysis

with this new NONROAD model in order to predict the emissions impact of the new standards

being finalized. Much of the information used in the new NONROAD model is the same as the

information used in the model to analyze the environmental impact of the proposal. The

following section highlights the areas where significant changes in the modeling performed for

the proposal and the modeling for this final rule analysis exist.

For a complete description of EPA’s new NONROAD model, the reader is referred to the

technical reports and program documentation prepared by EPA in support of the NONROAD

model development. These reports and documentation describe the operation of the model and

provide detailed information on the inputs that go into the model and how they were developed. 

Copies of the technical reports and model documentation have been placed in the public docket

for this rulemaking.

A. Emission Factors

EPA has updated the emission factors for engines manufactured prior to the existing Tier 1

standards (which apply to engines at or above 37 kW). In the emissions model used in the

proposal, EPA based all of the pre-control emission factors on those found in the NEVES report. 

The emission factors contained in the NEVES report were based on 1970s-era engines. Recent

testing on newer pre-control engines above 37 kW shows that the emission levels of engines have

dropped compared to the levels presented in the NEVES report. Table 5-1 presents the precontrol emission levels assumed in the NONROAD model for 1988 and later model year engines

at or above 37 kW. (These levels are assumed to apply until the effective model year of the

existing Tier 1 standards.) The reader is directed to EPA’s technical report, “Exhaust Emission

Factors for Nonroad Engine Modeling -- Compression Ignition” for a more detailed explanation

of the updated pre-control emission factors. 

Table 5-1

Emission Factors for 1988 and later Model Year 

Pre-control Nonroad Engines at or above 37 kW, g/kW-hr (g/bhp-hr)

Engine Category HC CO NOx PM 

37 to 75 kW 1.32 (0.99) 4.65 (3.49) 11.07 (8.30) 0.96 (0.72)

75 kW 0.91 (0.68) 3.60 (2.70) 11.17 (8.38) 0.54 (0.40)
Regulatory Impact Analysis



For engines below 37 kW, where very little information on the emission levels of precontrol engines exists, the NONROAD model uses information from the California ARB’s

model for nonroad emissions (known as “OFF-ROAD”). The direct injection levels and indirect

injection levels were combined based on the technology weightings presented in the RIA for the

proposal. Table 5-2 contains the resulting emission factors assumed in the NONROAD model

for engines below 37 kW.

Table 5-2

Emission Factors for Pre-control 

Nonroad Engines less than 37 kW, g/kW-hr (g/bhp-hr)

Engine Category HC CO NOx PM 

0 to 12 kW 2.0 (1.5) 6.7 (5.0) 13.3 (10.0) 1.33 (1.0)

12 to 37 kW 2.4 (1.8) 6.7 (5.0) 9.2 (6.9) 1.07 (0.8)

EPA’s NONROAD model assumes the same NMHC and NOx emission factors for

engines covered under the new standards as the emissions model used in the proposal. Tables 5-

3 and 5-4 present the NMHC and NOx emission levels assumed in the NONROAD model for

engines meeting the new standards, respectively.

Table 5-3

Estimated Certification NMHC Levels, g/kW-hr (g/hp-hr)

Power Range (kW) Tier 1 Tier 2 Tier 3

0 to 8 2.1 (1.6)

0.8 (0.6) Not applicable >8 to 19 0.9 (0.7)

>19 to 37 1.1 (0.8)

>37 to 75 0.9 (0.7)

0.5 (0.4)

0.3 (0.2)

>75 to 130

0.5 (0.4) >130 to 225

>225 to 450

0.4 (0.3) 0.4 (0.3) >450 to 560

>560 Not applicable
Chapter 5: Environmental Impact



Table 5-4

Estimated Certification NOx Levels, g/kW-hr (g/hp-hr)

Power Range (kW) Tier 1 Tier 2 Tier 3

0 to 8 7.9 (5.9)

6.7 (5.0) Not applicable >8 to 19 7.0 (5.2)

>19 to 37 7.4 (5.5)

>37 to 75

9.2 (6.9)

7.0 (5.2) 4.4 (3.3)

>75 to 130

6.0 (4.5) 3.7 (2.8) >130 to 225

>225 to 450

>450 to 560

>560 Not applicable

 

Although the Tier 1 rule established new standards for PM, no PM benefits were claimed

in that rule. This was due to the fact that, although a lower PM standard was established for a

steady-state test cycle, there was a great deal of uncertainty over the levels of in-use PM

emissions that might result from the transient operation of these engines. For this analysis, EPA

has continued to assume no benefit for PM from the existing Tier 1 standards. Therefore, the PM

emission factors assumed for engines covered under the existing Tier 1 standards are the precontrol levels listed in Table 5-1. In order to estimate the PM benefit of the new standards, EPA

assumed that engines covered by the new standards would emit at the level of the new standards,

and then applied EPA’s best current estimates of in-use operation adjustment factors for PM

emission levels, as described in section II.B below. These factors and other assumptions in the

model are still under review, and will continue to be improved in the future as new information

becomes available.

Because of the continued uncertainties about the degree to which the steady-state test

procedure will control PM emissions in use, especially from the many nonroad engines that

frequently operate in transient modes, EPA cannot be certain that any assessment made at this

time of the expected PM emission reductions due to the new standards will be completely

accurate. Nevertheless, EPA has attempted to make a reasonable estimate of these reductions. 

EPA believes this approach provides a reasonable estimate of PM benefits from the new

standards but actual benefits could vary significantly from these levels.

B. In-Use Operation Adjustments

Nonroad engines often operate under conditions unlike that of the steady-state ISO-C1

testing procedure typically used in emissions testing. This alternate operation can cause a change

in the emission characteristics of nonroad CI engines. The emissions model used in the NPRM
Regulatory Impact Analysis



analysis contained no adjustment to the post-control emission factors for different types of in-use

operation. (The pre-control emission factors taken from the NEVES report already included a

“transient” operation adjustment. However, the emission levels from Tier 1 and later engines

were not adjusted for in-use operation.)

In order to estimate the impact of in-use operating conditions on nonroad emissions, the

NONROAD model uses in-use adjustment factors that were derived from emission testing

designed to represent typical operational behavior of nonroad equipment. The adjustment factors

were based on testing performed under a joint EPA and EMA project that was designed to

develop more realistic test cycles for nonroad engine emissions characterization. The project

developed cycles to represent typical operation of an agricultural tractor, a crawler dozer, and a

backhoe\loader. The cycles were developed from data acquired from instrumenting one piece of

each type of equipment. This data was used to construct appropriate test cycles from statistical

criteria developed by EPA and EMA. Southwest Research Institute then tested nine late-model

nonroad engines using the steady-state ISO-C1 certification procedure and the three nonroad test

cycles. Table 5-5 contains the average adjustment factors based on testing of the nine engines.

Table 5-5

In-use Adjustment Factor used in the NONROAD Model

(Ratio of Application Test Cycle to Steady-State ISO-C1 Emissions)

Test Cycle HC CO NOx PM

Agricultural Tractor 0.89 0.42 0.99 0.64

Backhoe\Loader 2.19 2.31 1.03 2.04

Crawler Dozer 0.93 1.27 0.99 1.21

To apply the in-use adjustment factors listed in Table 5-5 to the entire CI equipment, EPA

matched the individual nonroad applications contained in the NONROAD model with the test

cycle that is thought to most closely represent the in-use activity for each application. For those

applications where steady-state operation is typical, no adjustment to the emission factors is

made. To determine the estimated in-use emission level for each application, the emission

factors described in Tables 5-1 through 5-4 were multiplied by the appropriate in-use adjustment

factor to create the emission factor inputs used in the NONROAD model. It should be noted that

EPA plans to continue investigating the effects in-use behavior on emissions and improve these

adjustment factors in the future as new information becomes available. EPA’s technical report,

“Exhaust Emission Factors for Nonroad Engine Modeling -- Compression-Ignition,” contains a

more thorough description of how the in-use operation adjustments were derived.

C. Equipment Population Estimates

The NONROAD model has population estimates of nonroad equipment covered by the

new standards. The modeling performed in support of the NPRM used 1995 population
Chapter 5: Environmental Impact



estimates from the Power Systems Research (PSR) PartsLink database. The NONROAD model

uses the 1996 population estimates from the same database as the basis for the base populations.

D. Growth Estimates

Essential to the determination of future emissions is the ability to accurately estimate the

growth in nonroad equipment activity. For this final rule analysis, EPA looked at growth factors

developed from two different sources: economic projections from the BEA and historical trends

in growth in nonroad engine population from the PSR PartsLink Database.

Historically, EPA has used economic indicators such as the those provided by the

Department of Commerce’s Bureau of Economic Analysis (BEA). The BEA growth estimates 

are prospective and are developed for various sectors of the economy. BEA growth indicators

have been widely used by states in preparing emission inventories for their State Implementation

Plans (SIP) and most recently for the Ozone Transport Assessment Group (OTAG), a consortium

of states and EPA to determine effective control strategies for ozone attainment. BEA growth

indicators have also been the basis for EPA’s Trends Report. BEA provides economic indicators

by state or as a national average for numbers of employees, inflation adjusted national dollars of

earnings, and inflation adjusted aggregate gross state products (GSP) dollars of earnings. The

sector specific BEA-based growth estimates used in this analysis are shown in Table 5-6. These

growth projections are from the most recent BEA estimates (July 1995) and are related to a 1995

base year.

Table 5-6

Growth Factors for Nonroad Sectors

based on BEA Economic Indicators

Sector Average Annual BEA-based

Predicted Growth (%)

Airport Service 5.5

Construction 1.0

Farm 2.4

Industrial 1.9

Lawn and Garden 1.0

Light Commercial 1.9

Logging 7.4

Railway -0.9

Recreational 1.0

BEA projections are for economic growth in broad sectors of the economy and may not

correlate completely with the growth in nonroad diesel equipment used by those sectors. For the

equipment categories covered by this rule, there is some indication that past rates of growth in

sales of equipment and fuel may be higher than BEA projections for future growth. An
Regulatory Impact Analysis



examination of the past growth of the United States nonroad diesel annual populations from

PSR's PartsLink Database for the years 1989 to 1996 indicates that overall historical population

growth (and hence, sales growth) may be higher than BEA projections of future growth.1 Using

the PSR PartsLink database, EPA has developed sector specific growth factors for nonroad diesel

equipment based on a retrospective analysis of 1989 to 1996 equipment populations. The sector

specific PSR-based growth estimates used in this analysis are shown in Table 5-7. EPA’s

technical report, “Nonroad Engine Growth Estimates,” provides a more detailed description of

the development of the growth rates based on the BEA and PSR information.

Table 5-7

Growth Factors for Nonroad Diesel Equipment Sectors

based on PSR Population Estimates

Sector Average Annual PSR-based 

Predicted Growth (%)

Airport Service 8.3

Construction 3.3

Farm 3.1

Industrial 3.6

Lawn and Garden 9.1

Light Commercial 5.3

Logging -1.2

Railway 4.5

Recreational 3.8

Due to the significant differences in the two sets of growth rates, EPA has used both sets

of growth information to evaluate the impacts of the new standards. It should be noted that the

draft version of the NONROAD model contains only the growth rates based on the PSR

population estimates.

III. Emission Inventory Estimates

Because this rule is concerned primarily with three major pollutants (NOx, HC, and PM),

eight different market segments (and even more numerous individual applications), and different

tiers of standards depending upon the power range, there are countless ways to present the results

of the modeling performed in support of this rulemaking. The following section presents the

inventories for each of the three pollutants and the total reductions expected under the new

standards. A memo containing a more detailed presentation of the modeling results has been

placed in the public docket for the rulemaking.2

A. Equipment Manufacturer Allowance Impacts
Chapter 5: Environmental Impact



Along with the new engine standards, EPA is adopting flexibility allowances for

equipment manufacturers. There are two flexibility provisions in the rule with the potential to

have significant impacts on emissions projections. They are the “Percentage Phase-in

Allowance” provision and the “Small Volume Allowance” provision. Equipment manufacturers

are allowed to take advantage of one, but not both, of these provisions. During the first seven

years of implementation of the Tier 1 standards for engines rated below 37 kW, or the Tier 2

standards for larger engines, not all pieces of equipment are required to meet the new standard.

Under the Percentage Phase-in Allowance provisions, a manufacturer may exempt up to a

cumulative total of eighty percent of the production over the first seven years a new standard

applies. (This applies separately to each regulatory power category). The engines used in such

exempted equipment will only have to meet the previous standard which is either the Tier 1

standard in the case of equipment at or above 37 kW, or unregulated in the case of equipment

under 37 kW. For these categories of engines where there is an overlap in standards whereby the

exemption allowance extends into the Tier 3 set of standards (this only occurs in equipment at or

above 37 kW), the standard for the exempted equipment continues to be the Tier 1 standard.

Under the Small Volume Allowance provisions, a manufacturer may exempt up to a

cumulative total of 700 units over the first seven years a new standard applies. (This applies

separately to each regulatory power category.) Again, the engines used in such exempted

equipment will only have to meet the previous standard which is either the Tier 1 standard in the

case of equipment at or above 37 kW, or unregulated in the case of equipment under 37 kW.

Realistically, each manufacturer will choose the exemption provision that best meets its

needs. Some will opt into one of the options described above, while others may not opt into

either of these programs. For the purposes of emissions modeling, and thus to determine the

expected benefits from this rule, EPA assumed that manufacturers took full advantage of the

Percentage Phase-in Allowance provisions. EPA believes this results in a conservative estimate

(i.e., yields lower benefits) of the environmental impact of the new standards.

B. Emission Model Results

1. Projected emission inventories and reductions 

Table 5-8 presents the NOx inventory under the current Tier 1 standards and the emission

reductions expected from the new standards for future years in five year increments using both

the PSR and the BEA growth assumptions. It is evident from Table 5-8 that the PSR figures

yield higher reduction estimates than the BEA growth assumptions, as would be expected. It is

reasonable to assume that the actual emission reductions are located somewhere between these

two sets of numbers.
Regulatory Impact Analysis



Table 5-8

NOx Inventories and Reductions (Short tons/Year)

Calendar

Year

NOx Emission Inventories

Under the Current Standards

NOx Reductions

Due to the New Standards

Assuming

BEA Growth

Assuming

PSR Growth

Assuming

BEA Growth

(% Reduction)

Assuming

PSR Growth

(% Reduction)

1995 2,867,000 2,867,000 0 0

2000 2,740,000 2,932,000 13,300

(0.5%)

16,000

(0.6%)

2005 2,715,000 3,240,000 264,000

(9.7%)

340,000

(10.5%)

2010 2,827,000 3,787,000 873,000

(30.9%)

1,211,000

(32.0%)

2015 2,946,000 4,530,000 1,347,000

(45.7%)

2,086,000

(46.0%)

2020 3,005,000 5,445,000 1,541,000

(51.3%)

2,756,000

(50.6%)

Based on the information in Table 5-8, the new standards should decrease overall NOx

emissions from nonroad sources by over 30% beyond the levels expected under the current Tier 1

standards in the year 2010 and by over 50% by the year 2020. Figures 5-1 and 5-2 illustrate the

relationship between NOx inventories under the existing Tier 1 standards and the new standards

for the PSR and BEA growth assumptions, respectively. Note that with the PSR growth

assumptions, under the Tier 1 rule there is a net increase in emissions from 1995 to 2010,

whereas with the BEA growth assumptions, there is a net decrease in emissions during the same

time period. Under both growth scenarios, the new standards yield a net decrease in the NOx

emissions inventory out to the year 2020.

Hydrocarbons, though not as significant as NOx on a total tonnage basis, will still see

some reductions because of the new standards. Table 5-9 presents the HC inventory under the

existing Tier 1 standards and the emission expected from the new standards for future years in

five year increments using both the BEA and the PSR growth assumptions.
Figure 5-1 

NOx Emissions with PSR Growth

1995 2000 2005 2010 2015 2020

existing Tier 1

FRM standards

Figure 5-2 

NOx Emissions with BEA Growth

1995 2000 2005 2010 2015 2020

existing Tier 1

FRM standards
Regulatory Impact Analysis



Table 5-9

Hydrocarbon Inventories and Reductions (Short tons/year)

Calendar

Year

HC Emission Inventories

Under the Current Standards 

HC Reductions

Due to the New Standards 

Assuming

BEA Growth

Assuming

PSR Growth

Assuming

BEA Growth

(% Reduction)

Assuming

PSR Growth

(% Reduction)

1995 397,000 397,000 0 0

2000 337,000 361,000 9,000

(2.7%)

11,000

(3.0%)

2005 300,000 364,000 40,000

(13.3%)

55,000

(15.0%)

2010 301,000 419,000 108,000

(35.9%)

162,000

(38.7%)

2015 311,000 506,000 159,000

(51.3%)

271,000

(53.6%)

2020 317,000 619,000 179,000

(56.4%)

361,000

(58.3%)

By the year 2010, a decrease of more than 30% in hydrocarbons is projected under this

rule regardless of the growth scenario. By the year 2020, more than a 50% reduction in

hydrocarbons can be expected. Figures 5-3 and 5-4 illustrate the relationship between the

existing Tier 1 HC inventories and the HC inventories under the new standards for the PSR and

BEA growth assumptions, respectively.

Table 5-10 presents the PM inventory under the current Tier 1 standards and the emission

reductions expected from the new standards for future years in five year increments using both

the PSR and BEA growth assumptions.
Figure 5-3 

HC Emissions with PSR Growth

1995 2000 2005 2010 2015 2020

existing Tier 1

FRM standards

Figure 5-4 

HC Emissions with BEA Growth

1995 2000 2005 2010 2015 2020

existing Tier 1

FRM standards
Regulatory Impact Analysis



Table 5-10

PM Inventories and Reductions (Short tons/year)

Calendar 

Year

PM Emission Inventories

Under the Current Standards

PM Reductions 

Due to the New Standards

Assuming

BEA Growth

Assuming

PSR Growth

Assuming

BEA Growth

(% Reduction)

Assuming

PSR Growth

(% Reduction)

1995 283,000 283,000 0 0

2000 271,000 294,000 2,000

(0.7%)

2,000

(0.7%)

2005 279,000 341,000 40,000

(14.3%)

52,000

(15.1%)

2010 295,000 410,000 100,000

(33.8%)

140,000

(34.1%)

2015 308,000 497,000 133,000

(43.2%)

210,000

(42.3%)

2020 315,000 604,000 145,000

(46.0%)

266,000

(44.0%)

Figures 5-5 and 5-6 illustrate the relationship between the PM inventories under the

current standards and the projected PM inventories under the final rule for the PSR and BEA

growth assumptions, respectively. In each case there is a net decrease in PM emissions from the

baseline of about 30% in the year 2010 and over 40% in 2020. As noted earlier, because of the

continued uncertainties about the degree to which the steady-state test procedure will control PM

emissions in use, especially from the many nonroad engines that frequently operate in transient

modes, EPA cannot be certain that any assessment made at this time of the expected PM

emission reductions due to the new standards will be completely accurate. The PM reductions

indicated here result from EPA’s best current estimates of adjustment factors for in-use PM

emissions levels, as reflected in the NONROAD model. These factors and other assumptions in

the model are still under review, and will continue to be improved in the future as new

information becomes available.

2. Secondary nitrate particulates

The NOx reductions resulting from this rule are expected to reduce the concentrations of

secondary nitrate particulates. This is because NOx can react with ammonia in the atmosphere to

form ammonium nitrate particulates, especially when ambient sulfur levels are relatively low. 

EPA contracted with Systems Applications International (SAI) to investigate the formation of

secondary nitrate particulates in the United States.3

 SAI used a combination of ambient

concentration data and computer modeling that simulates atmospheric conditions to estimate the 
Figure 5-5 

Direct PM Emissions with PSR Growth

1995 2000 2005 2010 2015 2020

Figure 5-6 

Direct PM Emissions with BEA Growth

1995 2000 2005 2010 2015 2020

existing Tier 1

FRM standards
Regulatory Impact Analysis



conversion of NOx to PM nitrate. For the purpose of modeling, the continental 48 states were

divided into nine regions, and rural areas were distinguished from urban areas. The model was

designed to perform the equilibrium calculation to estimate particulate nitrate formation for

different regions, seasons, and times of day and then was calibrated using ambient data.

Ambient data were collected from 72 ozone, 64 NOx, and 14 non-methane organic

compound (NMOC) monitoring sites for use in the oxidation calculations. Data were also

collected from 45 nitrate/NOx monitoring sites for use in the equilibrium calculations. SAI

admitted that the available data from monitoring sites in some regions were limited and stated

that more data would improve confidence in the results from these regions. In addition, the

distribution of monitoring sites between rural and urban areas does not necessarily reflect the

distribution of nonroad equipment operation. EPA has, however, reviewed the SAI report and its

associated uncertainty analysis and believes that is the best estimate of atmospheric NOx to PM

nitrate conversion rates available today.

The results from the SAI report state that the fraction of NOx converted to nitrates (g/g)

ranges from 0.01 in the northeast to 0.07 in southern California. Based on population and usage

figures for the various regions, the average fraction of NOx converted to nitrates is

approximately 0.04 based on information derived from work on EPA’s highway heavy-duty

engine NPRM4

. This value changes slightly from year-to-year due to the effects of ozone and

oxides of sulfur (SOx) projections on the calculations for future years. The effects of the

conversion fraction on future PM reductions is shown in Table 5-11.

Table 5-11

Estimated Secondary PM Reductions (Short tons/year)

Calendar

Year

Total NOx Emission

Reductions 

Equivalent Secondary PM

Emission Reductions

BEA Growth PSR Growth BEA Growth PSR Growth

2005 264,000 340,000 10,600 13,600

2010 873,000 1,211,000 34,900 48,400

2015 1,346,000 2,086,000 53,800 83,400

2020 1,541,000 2,756,000 61,600 110,200

IV. Emission Reductions Per Piece of Equipment 

The following section describes the development of the NMHC + NOx emissions and PM

emission estimates on a per-machine basis. The emission reduction estimates were developed to

estimate the cost-effectiveness of the new standards on a per-machine basis, as presented in

Chapter 6. The per-machine reductions have been estimated for the six power categories for

which cost estimates were developed in Chapter 4. The estimates are made for an average piece
Chapter 5: Environmental Impact



of machinery in each of the power ranges. Although the emissions vary from one nonroad

application to another, EPA is presenting the average numbers to show reductions achieved from

a typical piece of nonroad equipment. In order to estimate the emissions from a piece of nonroad

equipment, information on the emission level of the engine, the power of the engine, the load

factor of the engine, the annual hours of use of the engine, and the lifetime of the engine are

needed. The values used to predict per-machine emissions in this analysis and the methodology

for determining the values are presented below.

A. Per-Engine Emission Levels

To project the impact of the new standards, EPA must estimate the emission levels of

engines prior to the time the new standards take effect and the emission levels once the new

standards go into effect. Tables 5-12 and 5-13 contain the estimated NMHC + NOx emission

levels and PM emission levels assumed by EPA in projecting the impact of the new standards,

respectively. For the 0 to 37 kW category and the 130 to 450 kW category, where more than one

power subcategory was combined, EPA weighted the appropriate subcategory emissions levels

(contained in Tables 5-1 through 5-4) by population to determine the emission level for the

overall power category.

Table 5-12

Estimated NMHC + NOx Emission Levels, g/kW-hr (g/hp-hr)

Control Level Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control 12.4 (9.3) —————

Tier 1 8.3 (6.2) 10.2 (7.6) 9.8 (7.3) 9.8 (7.3) 9.7 (7.2) 9.7 (7.2)

Tier 2 7.5 (5.6) 7.5 (5.6) 6.6 (4.9) 6.6 (4.9) 6.4 (4.8) 6.4 (4.8)

Tier 3 — 4.7 (3.5) 4.0 (3.0) 4.0 (3.0) 4.0 (3.0) —

Table 5-13

Estimated PM Emission Levels, g/kW-hr (g/hp-hr)

Control Level Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control 1.13 (0.85)— — — — —

Tier 1 0.81 (0.61) 0.96 (0.72) 0.54 (0.40) 0.54 (0.40) 0.54 (0.40) 0.54 (0.40)

Tier 2 0.70 (0.52) 0.40 (0.30) 0.29 (0.22) 0.20 (0.15) 0.20 (0.15) 0.20 (0.15)

Tier 3— — — — — —
Regulatory Impact Analysis



As discussed in Chapter 4, some technology upgrades associated with this program may

have been introduced absent the changes in emission standards. Any emission reductions that

would normally have occurred with improvements in technology should not be considered in

determining the benefits and cost effectiveness of new emission standards. However, EPA

believes that as manufacturers modernize and improve the technologies used on nonroad engines,

they are faced with many choices on how to employ the new technologies to the greatest

advantage for their customers. Many times, in the absence of requirements to meet tighter

emission standards, the manufacturer will design the parameters of a new technology, or

similarly, redesign the existing engine, to minimize fuel consumption or some other desirable

trait, while not taking advantage of the emissions control capability of the new technology. 

Because none of these technologies leads to inherently lower emissions, EPA has not made any

adjustments to the emission reduction or cost-effectiveness calculations to account for emission

benefits that would have occurred independent of the new standards.

B. Average Power

To estimate the average power for equipment in each power category, EPA used the

PartsLink database from Power Systems Research to estimate the population and power ratings

of nonroad diesel applications within each of the six different power categories that are expected

to be covered by the new standards. To simplify the calculations, EPA used the most common

applications within each power category that represent 90% of the category’s population. For

each of the most common applications, EPA used the information on all the individual engines

within the application and determined a population-weighted average power for each power

category. For those equipment applications where a certain fraction of the equipment is not

expected to be categorized as a mobile source nonroad application (and therefore not subject to

the nonroad engine standards), such as generator sets or pumps, EPA excluded the estimated

fraction of engines from the average power calculations. Table 5-14 presents the resulting

population-weighted average power for the different power categories.

Table 5-14

Average Power 

Power 

Range (kW)

Average Power,

 kW (hp)

0-37 20.5 (27.5)

37-75 51.2 (68.7)

75-130 96.0 (128.8)

130-450 172.0 (230.6)

450-560 476.7 (639.3)

>560 596.8 (800.3)
Chapter 5: Environmental Impact



C. Average Load Factor

To estimate the average load factor for a typical piece of equipment, EPA again used the

PartsLink database from Power Systems Research to estimate the population and load factor of

nonroad diesel applications within each of the six different power ranges that are expected to be

covered by the new standards. As noted earlier, to simplify the calculations, EPA used the most

common applications within each power range that represent 90% of the category’s population. 

For each of the most common applications, EPA used the application-specific load factor and

determined a population-weighted average load factor for each power range. As noted above, for

those equipment applications where a certain fraction of the equipment is not expected to be

categorized as a mobile source nonroad application (and therefore not subject to the nonroad

engine standards), such as certain generator sets or pumps that are not moved for more than a

year, EPA excluded the estimated fraction of engines from the average load factor calculations.

Table 5-15 presents the resulting population-weighted average load factors for the different

power ranges.

Table 5-15

Average Load Factor

Power 

Range (kW)

Average Load 

Factor

0-37 0.57

37-75 0.55

75-130 0.63

130-450 0.65

450-560 0.67

>560 0.63

D. Average Annual Hours

To estimate the average annual hours for a typical piece of equipment, EPA again used

the PartsLink database from Power Systems Research to estimate the population and annual

hours of usage for nonroad diesel applications within each of the six different power ranges that

are expected to be covered by the new standards. As noted earlier, to simplify the calculations,

EPA used the most common applications within each power range that represented 90% of the

categories population. For each of the most common applications, EPA used the applicationspecific annual hours of operation and determined a population-weighted average annual hours of

operation for each power range. Again, for those equipment applications where a certain fraction

of the equipment is not expected to be categorized as a mobile source nonroad application (and

therefore not subject to the nonroad engine standards), such as generator sets or pumps, EPA

excluded the estimated fraction of engines from the average annual hours calculations. Table 5-
Regulatory Impact Analysis



16 presents the resulting population-weighted average annual hours of operation for the different

power ranges.

Table 5-16

Average Annual Hours of Operation

Power 

Range (kW)

Average 

Annual Hours

0-37 695

37-75 815

75-130 622

130-450 576

450-560 1073

>560 1056

E. Projected Annual Emissions Levels and Emission Reductions

Using the information presented in Tables 5-12 through 5-16 and the equation used for

calculating emissions from nonroad equipment, EPA calculated the annual NMHC + NOx

emissions and annual PM emissions expected from typical nonroad diesel equipment from

current engines certified at the existing Tier 1 standards (or pre-control levels for engines <37

kW) and engines designed to meet the new standards. Tables 5-17 and 5-18 contain the annual

NMHC + NOx emissions estimates and annual PM emissions estimates, respectively.

Table 5-17

Annual NMHC + NOx Emissions, short tons

Control

Level

Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control 0.11 —————

Tier 1 0.08 0.26 0.41 0.70 3.71 4.38

Tier 2 0.07 0.19 0.28 0.47 2.50 2.97

Tier 3 — 0.12 0.17 0.29 1.56 —
Chapter 5: Environmental Impact



Table 5-18

Annual PM Emissions, short tons

Control

Level

Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control 0.01 —————

Tier 1 0.01 0.03 0.02 0.04 0.32 0.43

Tier 2 0.01 0.01 0.01 0.01 0.12 0.16

Table 5-19 and Table 5-20 contain the annual NMHC + NOx emission reductions and

annual PM emission reductions resulting from the new standards, respectively.

Table 5-19

Annual NMHC + NOx Emission Reductions, short tons

Control

Increment

Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control

to Tier 1

0.038 —————

Tier 1 to

Tier 2

0.007 0.070 0.133 0.228 1.214 1.411

Tier 2 to

Tier 3

— 0.073 0.108 0.183 0.934 —

Table 5-20

Annual PM Emission Reductions, short tons

Control

Increment

Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control

to Tier 1

0.003 —————

Tier 1 to

Tier 2

0.001 0.017 0.010 0.023 0.197 0.267
Regulatory Impact Analysis



F. Average Lifetime

To calculate the emission reductions that will occur over the lifetime of nonroad

equipment due to the new standards, it is necessary to know the lifetime of nonroad equipment. 

The equation that is used to calculate average lifetime of nonroad equipment relies on the annual

hours of use, the load factor of the equipment, and the estimated engine life at full load for

nonroad equipment. Using average load factor and average annual hours of use information

contained in Tables 5-15 and 5-16, respectively, and information on the engine life at full load

information5, the average lifetime of nonroad equipment was calculated by power range and is

presented in Table 5-21. The average lifetime for the different types of lawn and garden

equipment is not calculated in the same manner. Each lawn and garden application has an

average lifetime associated with it. For nonroad equipment under 37 kW, where diesel lawn and

garden applications exist, the average lifetime results presented in Table 5-21 are a populationweighted value of the lawn and garden application results and the results of the remaining

applications (other than lawn and garden equipment).

Table 5-21

Average Lifetime (years)

Power 

Range (kW)

Average 

Lifetime

0-37 6.2

37-75 9.0

75-130 10.2

130-450 10.7

450-560 8.4

>560 9.0

G. Lifetime Emission Reductions

The lifetime emission reductions due to the new standards were calculated based on the

annual emission reductions contained in Table 5-19 and Table 5-20 and the average lifetimes

contained in Table 5-21. Table 5-22 and Table 5-23 contain the lifetime NMHC + NOx emission

reductions and PM emission reductions, respectively, on a nondiscounted basis. Table 5-24 and

Table 5-25 contain the lifetime NMHC + NOx emission reductions and PM emission reductions,

respectively on a discounted basis, assuming a 7% discount rate.
Chapter 5: Environmental Impact



Table 5-22

Nondiscounted Lifetime NMHC + NOx Emission Reductions, short tons

Control

Increment

Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control

to Tier 1

0.23 —————

Tier 1 to 

Tier 2

0.05 0.63 1.36 2.44 10.14 12.69

Tier 2 to 

Tier 3

— 0.65 1.10 1.95 7.80 —

Table 5-23

Nondiscounted Lifetime PM Emission Reductions, short tons

Control

Increment

Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control

to Tier 1

0.017 —————

Tier 1 to 

Tier 2

0.006 0.150 0.105 0.246 1.648 2.406

Table 5-24

Discounted Lifetime NMHC + NOx Emission Reductions, short tons

Control

Increment

Power Range (kW

0-37 37-75 75-130 130-450 450-560 >560

Pre-control

to Tier 1

0.20 —————

Tier 1 to 

Tier 2

0.04 0.49 1.02 1.82 7.68 9.83

Tier 2 to 

Tier 3

— 0.51 0.82 1.46 5.91 —
Regulatory Impact Analysis



Table 5-25

Discounted Lifetime PM Emission Reductions, short tons

Control

Increment

Power Range (kW)

0-37 37-75 75-130 130-450 450-560 >560

Pre-control

to Tier 1

0.014 —————

Tier 1 to 

Tier 2

0.005 0.116 0.079 0.184 1.248 1.865

V. Conclusions

The amount of emission reductions that will be achieved with the implementation of the

new standards is quite substantial. The chief pollutant, NOx, is expected to see emission

reductions beyond 30% below the levels expected under the current Tier 1 standards (that are just

now being implemented) by the year 2010. The NOx reductions due to the new standards will

increase to over 50% in the year 2020. Under the new standards, HC and PM are expected to

show reductions of about 55% and 45%, respectively, by the year 2020. Additional reductions in

PM can be expected, due to the effect of NOx reductions on the formation of secondary nitrate

particulates, amounting to approximately 110,000 tons/year nationwide by the year 2020

(assuming PSR growth rates).

A review of the emission levels in Figures 5-1 to 5-6 show that while the Tier 1 program

achieves some initial reductions in NOx, the rate of growth of the industry soon leads to net

increases in the inventories of all pollutants. With the new standards, however, the projected

levels of inventories continue to decrease well into the 21st century.
Chapter 5: Environmental Impact



1. Power Systems Research, PartsLink Database, 1996.

2. “Results of the Emissions Modeling in Support of the Nonroad Diesel Engine FRM,” EPA

memorandum from Phil Carlson to Public Docket A-96-40, August 20, 1998. 

3. “Benefits of Mobile Source NOx Related Particulate Matter Reductions,” Systems

Applications International, EPA Contract No. 68-C5-0010, WAN 1-8, October 1996. 

4. 61 FR 33421 ”Control of Emissions of Air Pollution from Highway Heavy-duty Engines”,

June 27, 1996.

5. Table 4 of “Nonroad CI Modeling Methodology and Request for Comment”, EPA

memorandum from Peter Caffrey to Public Docket A-96-40, July 1997. 

Chapter 5 References
Regulatory Impact Analysis


Chapter 6: Cost-Effectiveness



CHAPTER 6: COST-EFFECTIVENESS

This chapter assesses the cost-effectiveness of the new NMHC + NOx emission standards

for nonroad diesel engines. This analysis relies in part on cost information from Chapter 4 and

emissions information from Chapter 5 to estimate the cost-effectiveness of the standards in terms

of dollars per ton of total NMHC + NOx emission reductions. This chapter also examines the

cost-effectiveness of the PM standards. Finally, the chapter compares the cost-effectiveness of

the new provisions with the cost-effectiveness of other NOx and PM control strategies from

previous EPA rules.

The analysis presented in this chapter is performed for nonroad diesel equipment broken

down into the same power categories as presented in Chapter 4. The analysis is performed on a

per-machine basis and examines total costs and total NMHC + NOx emission reductions over the

typical lifetime of an average piece of nonroad equipment in each power category, discounted at

a rate of seven percent to the beginning of the equipment's life. An estimate of the fleet-wide

cost-effectiveness of the new standards, combining all of the power categories, is also presented. 

EPA has analyzed the cost-effectiveness of each new standard incremental to the previously

applicable standard (i.e., Tier 2 standards incremental to Tier 1, Tier 3 standards incremental to

Tier 2, and for engines rated under 37 kW, Tier 1 standards incremental to uncontrolled emission

levels).

The cost-effectiveness is analyzed on a nationwide basis. In the recent rulemaking for

highway heavy-duty diesel engines, EPA also presented a regional ozone control costeffectiveness analysis in which the total life-cycle cost was divided by the discounted lifetime

NMHC + NOx emission benefits adjusted for the fraction of emissions that occur in the regions

expected to impact ozone levels in ozone nonattainment areas. (Air quality modeling indicates

that these regions include all of the states that border on the Mississippi River, all of the states

east of the Mississippi River, Texas, California, and any remaining ozone nonattainment areas

west of the Mississippi River not already included.) The results of that analysis show that the

regional cost-effectiveness values were 13 percent higher than the nationwide cost-effectiveness

values. Because of the small difference between the two results, EPA is presenting only

nationwide cost-effectiveness results for this analysis. 

In addition to the primary benefit of reducing ozone within and transported into urban

ozone nonattainment areas, the NOx reductions expected from the new nonroad diesel engine

standards will have secondary benefits as well. These secondary benefits include impacts with

respect to human mortality, human morbidity, agricultural yields, visibility, soiling (due to

secondary particulate), and ecosystems (e.g., through the reduced effects of acid deposition and

eutrophication). To estimate the monetary value of these secondary benefits to society, ICF

Incorporated prepared a study in support of the recent highway heavy-duty engine rulemaking

summarizing the results of a variety of studies that examined the value of ozone control on the

secondary benefits highlighted above.1

 Table 6-1 contains a summary of the results of the ICF
Regulatory Impact Analysis



report. The total value of all the secondary benefits was estimated to be $878 per ton of NOx

reduction. The cost-effectiveness analysis presented in this chapter does not assign any value to

these secondary benefits. They are presented in this chapter for informational purposes only.

Table 6-1

Summary of Estimated Monetized Benefits per Ton

Benefit Category Point Estimate of Benefits

per Ton of NOx Reduction

Human Mortality $312

Human Morbidity $10

Agricultural Yields $287

Soiling $17

Ecosystems $16

Visibility $236

I. Cost-Effectiveness of the New Emission Standards

A. NMHC + NOx

The following section describes the cost-effectiveness of the new NMHC + NOx

standards for the various power categories of nonroad equipment. As discussed in Chapter 4, the

estimated cost of complying with the standards varies depending on the model year under

consideration. The following section presents the per-machine cost-effectiveness results for the

different model years during which the costs are expected to change. In calculating the costeffectiveness numbers, the full lifecycle costs (both with and without the expected changes in

operating costs included) were divided by the combined NOx and NMHC lifetime emission

reductions as presented in Chapter 5.

The following section also presents the fleet-wide cost-effectiveness for the new engine

standards. These fleet-wide cost-effectiveness numbers are calculated by weighting the various

power category costs and emission reductions by the population estimates for nonroad equipment

affected by the new standards in each power category. The populations for the different power

categories of nonroad equipment were determined from the PSR PartsLink database. Table 6-2

contains the 1995 nonroad diesel equipment populations used in the fleet-wide analysis. (The

populations listed in Table 6-2 exclude those nonroad applications which are expected to not

meet EPA’s definition of a mobile source nonroad engine such as generator sets that are not

moved from a specific location in a given year.)
Chapter 6: Cost-Effectiveness



Table 6-2

1995 Nonroad Diesel Equipment 

Populations by Power Category

Power Category 1995 Population

0-37 kW 2,555,000

37-75 kW 2,080,000

75-130 kW 1,410,000

130-450 kW 1,124,000

450-560 kW 11,000

>560 kW 19,000

A copy of the spreadsheets prepared for this cost-effectiveness analysis has been placed in

the public docket for the final rulemaking.2

 The reader is directed to the spreadsheets for a

complete version of the cost-effectiveness calculations.

Tables 6-3 through 6-8 contain the discounted cost-effectiveness values for the individual

power categories of nonroad equipment based on the total net present value costs (excluding

operating costs) as presented in Chapter 4 and the lifetime NMHC + NOx emission reductions as

presented in Chapter 5. Table 6-9 contains the fleet-wide, discounted cost-effectiveness of the

Tier 2 NMHC + NOx emission standards and the Tier 3 NMHC + NOx emission standards

(without factoring in the effects of operating costs).
Regulatory Impact Analysis



Table 6-3

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 0-37 kW Engines (Excluding operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Engine and

Equipment

Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 1 1 to 2 $59 0.20 $300

3 to 5 $57 $290

Tier 2 1 to 2 $80 0.04 $2,090

3 to 5 $71 $1,850

6 to 10 $35 $910

11+ $29 $770

Table 6-4

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 37-75 kW Engines (Excluding operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Engine and

Equipment

Costs

Discounted,

Lifetime

 NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $249 0.49 $510

3 to 5 $226 $460

Tier 3 1 to 2 $282 0.51 $560

3 to 5 $244 $480

6 to 10 $160 $320

11+ $122 $240
Chapter 6: Cost-Effectiveness



Table 6-5

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 75-130 kW Engines (Excluding operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Engine and

Equipment

Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $867 1.02 $850

3 to 5 $784 $770

Tier 3 1 to 2 $658 0.82 $800

3 to 5 $564 $690

6 to 10 $442 $540

11+ $301 $370

Table 6-6

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 130-450 kW Engines (Excluding operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Engine and

Equipment 

Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $804 1.82 $440

3 to 5 $719 $400

Tier 3 1 to 2 $872 1.46 $600

3 to 5 $734 $510

6 to 10 $545 $380

11+ $440 $300
Regulatory Impact Analysis



Table 6-7

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 450-560 kW Engines (Excluding operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Engine and

Equipment

Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $2,670 7.68 $350

3 to 5 $2,523 $330

Tier 3 1 to 2 $2,296 5.91 $390

3 to 5 $2,127 $360

6 to 10 $1,991 $340

11+ $543 $90

Table 6-8

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for Greater than 560 kW Engines (Excluding operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Engine and

Equipment 

Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $1,087 9.83 $110

3 to 5 $1,053 $110

6 to 10 $1,025 $100

11+ $109 $10
Chapter 6: Cost-Effectiveness



Table 6-9

Discounted Fleet-wide Cost-effectiveness of the NMHC + NOx Standards

(Excluding operating costs)

Level of

Standard

Model Year

Grouping

Discounted

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $600

3 to 5 $540

Tier 3 1 to 2 $650

3 to 5 $550

6 to 10 $410

11+ $300

Tables 6-10 through 6-15 contain the discounted cost-effectiveness values for the

individual power categories of nonroad equipment based on the total net present value costs

(including operating costs) as presented in Chapter 4 and the lifetime NMHC + NOx emission

reductions as presented in Chapter 5. For those categories of engines where the operating cost is

expected to offset the increased engine and equipment costs (due to improved fuel economy), the

overall cost and cost-effectiveness is shown as zero in the tables. Table 6-16 contains the fleetwide, discounted cost-effectiveness of the Tier 2 NMHC + NOx emission standards and the Tier

3 NMHC + NOx emission standards (factoring in the effects of operating costs).
Regulatory Impact Analysis



Table 6-10

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 0-37 kW Engines (Including operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Lifetime Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 1 1 to 2 $103 0.20 $520

3 to 5 $101 $510

Tier 2 1 to 2 $125 0.04 $3,240

3 to 5 $115 $3,000

6 to 10 $79 $2,060

11+ $74 $1,920

Table 6-11

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 37-75 kW Engines (Including operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Lifetime Costs

Discounted,

Lifetime

 NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $308 0.49 $630

3 to 5 $285 $580

Tier 3 1 to 2 $379 0.51 $750

3 to 5 $340 $670

6 to 10 $256 $510

11+ $219 $430
Chapter 6: Cost-Effectiveness



Table 6-12

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 75-130 kW Engines (Including operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Lifetime Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $719 1.02 $710

3 to 5 $638 $630

Tier 3 1 to 2 $7 0.82 $10

3 to 5 $0 $0

6 to 10 $0 $0

11+ $0 $0

Table 6-13

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 130-450 kW Engines (Including operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Lifetime Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $542 1.82 $300

3 to 5 $456 $250

Tier 3 1 to 2 $46 1.46 $30

3 to 5 $0 $0

6 to 10 $0 $0

11+ $0 $0
Regulatory Impact Analysis



Table 6-14

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for 450-560 kW Engines (Including operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Lifetime Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $1,323 7.68 $170

3 to 5 $1,176 $150

Tier 3 1 to 2 $1,085 5.91 $180

3 to 5 $915 $160

6 to 10 $779 $130

11+ $0 $0

Table 6-15

Discounted Cost-effectiveness of the 

NMHC + NOx Standards for Greater than 560 kW Engines (Including operating costs)

Level of

Standard

Model Year

Grouping

Discounted,

Lifetime Costs

Discounted,

Lifetime

NMHC + NOx

Reductions (tons)

Discounted,

Per-machine

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $1,087 9.83 $110

3 to 5 $1,053 $110

6 to 10 $1,025 $100

11+ $109 $10
Chapter 6: Cost-Effectiveness



Table 6-16

Discounted Fleet-wide Cost-effectiveness of the NMHC + NOx Standards

(Including operating costs)

Level of

Standard

Model Year

Grouping

Discounted

Cost-effectiveness

($/ton)

Tier 2 1 to 2 $540

3 to 5 $480

Tier 3 1 to 2 $220

3 to 5 $130

6 to 10 $0

11+ $0

B. PM

EPA has also estimated the cost-effectiveness of the PM emission standards for nonroad

diesel engines. The per-machine PM emission reduction estimates were developed in Chapter 5. 

For costs, EPA assumed half of the increased engine and equipment costs projected in Chapter 4

were allocated for PM control, and excluded operating costs. EPA believes this is a conservative

assumption given the stringency of the NMHC + NOx standards and results in an upper end

estimate of the cost-effectiveness for PM control. Table 6-17 contains the resulting fleet-wide

cost-effectiveness of the PM standards. For this estimate, the Tier 1 standards for engines rated

under 37 kW were combined with the Tier 2 standards for all power categories.

Table 6-17

Discounted Fleet-wide Cost-effectiveness of the PM Standards

Level of

Standard

Model Year

Grouping

Discounted

Cost-effectiveness

($/ton)

Tier 1 and

Tier 2

combined

1 to 2 $2,320

3 to 5 $2,100

6 to 10 $1,680

11+ $700
Regulatory Impact Analysis



II. Comparison with Cost-Effectiveness of Other Control Programs

In an effort to evaluate the cost-effectiveness of the new standards, EPA has summarized

the cost-effectiveness results for three other recent EPA mobile source rulemakings that required

reductions in NOx emissions, the primary focus of the new standards. Table 6-18 summarizes

the cost-effectiveness results from the heavy-duty vehicle portion of the Clean Fuel Fleet Vehicle

Program, Phase II of the Reformulated Gasoline Program and the most recent NMHC + NOx

engine standards for highway heavy-duty diesel engines.

Table 6-18

Summary of Cost-Effectiveness Results for Recent EPA NOx Control Programs

EPA Rule

Pollutants Considered

in Calculations

Cost-Effectiveness

($/ton)

Clean Fuel Fleet Vehicle Program

(Heavy-duty)

NOx $1,300 - $1,500

Reformulated Gasoline -- Phase II NOx $5,000

2.5 g/hp-hr NMHC + NOx

Standard for Highway Heavy-Duty

Engines

NMHC + NOx $100-$600

Locomotive Engine Standards NOx $160 - $250

A comparison of the cost-effectiveness numbers in Table 6-18 with the cost-effectiveness

results presented throughout this chapter for nonroad diesel engines shows that the costeffectiveness of the new NMHC + NOx standards are more favorable than the cost-effectiveness

of both the clean fuel fleet vehicle program and reformulated gasoline. The cost-effectiveness

results of the new NMHC + NOx standards for nonroad diesel engines are comparable to the

cost-effectiveness of the most recent highway heavy-duty NMHC + NOx standards and slightly

less favorable than the locomotive engine NOx standards.

For comparison purposes, EPA has also summarized the cost-effectiveness results for two

other recent EPA mobile source rulemakings that required reductions in PM emissions. 

Table 6-19 summarizes the cost-effectiveness results for the most recent urban bus engine PM

standard and the urban bus retrofit/rebuild program. The PM cost-effectiveness results presented

earlier in Table 6-17 are more favorable than either of the urban bus programs.
Chapter 6: Cost-Effectiveness



Table 6-19

Summary of Cost-Effectiveness Results 

for Recent EPA Diesel PM Control Programs

EPA Rule

Cost-Effectiveness

($/ton)

0.05 g/hp-hr Urban Bus

PM Standard

$10,000 - $16,000

Urban Bus Retrofit/Rebuild

Program

$25,500
Regulatory Impact Analysis



1.“Benefits of Reducing Mobile Source NOx Emissions,” prepared by ICF Incorporated for

Office of Mobile Sources, U.S. EPA, Draft Final, September 30, 1996.

2. “Cost Effectiveness and 20-Year Cost/Benefit Analysis of the New Nonroad Diesel Engine

Standards,” EPA memorandum from Phil Carlson to Docket A-96-40, July 22, 1998.

Chapter 6 References
Chapter 6: Cost-Effectiveness


Appendix

$

Appendix to the Regulatory Impact Analysis

Table A-1 contains the year-by-year fleetwide costs and emission benefits associated with

the new diesel nonroad engine standards for the 20-year period from 1999 to 2018. The

fleetwide costs presented in Table A-1 do not include the impact of the new standards on

operating costs, which in many cases are projected to lead to decreased costs. (The numbers

presented in Table A-1 are not discounted.) 

Table A-1

Costs and Emission Benefits of the New Diesel Nonroad Engine Standards

Calendar Year Fleetwide Costs Fleetwide Reductions (short tons)

NOx HC PM

1999 $4,800,000 5,300 4,400 800

2000 $13,100,000 16,300 10,900 2,100

2001 $46,200,000 36,600 17,700 5,000

2002 $54,600,000 60,300 24,500 8,500

2003 $172,100,000 140,100 31,300 18,400

2004 $247,300,000 240,000 38,100 34,900

2005 $257,100,000 339,600 54,800 51,500

2006 $393,400,000 514,000 76,300 69,200

2007 $469,800,000 688,300 97,700 86,900

2008 $524,400,000 862,700 119,200 104,600

2009 $519,000,000 1,037,100 140,700 122,300

2010 $548,400,000 1,211,400 162,100 140,000

2011 $522,700,000 1,386,300 183,900 154,100

2012 $527,200,000 1,561,300 205,700 168,100

2013 $422,000,000 1,736,200 227,500 182,200

2014 $398,000,000 1,911,100 249,300 196,200

2015 $413,100,000 2,086,000 271,100 210,300

2016 $392,800,000 2,220,000 289,000 221,400

2017 $387,700,000 2,353,900 306,900 232,400

2018 $388,000,000 2,487,800 324,800 243,500
Regulatory Impact Analysis

$

Table A-2 contains the discounted year-by-year fleetwide costs and emission benefits

associated with the new diesel nonroad engine standards for the 20-year period from 1999 to

2018. The year-by-year results were discounted to 1999 and a discount rate of seven percent was

assumed for the analysis. Again, the discounted fleetwide costs presented in Table A-2 do not

include the impact of the new standards on operating costs, which in many cases are expected to

decrease.

Table A-2

Discounted Costs and Emission Benefits of the New Diesel Nonroad Engine Standards

Calendar Year Discounted

Fleetwide Costs

Discounted Fleetwide Reductions

(short tons)

NOx HC PM

1999 $4,800,000 5,300 4,400 800

2000 $12,200,000 15,200 10,200 2,000

2001 $40,400,000 32,000 15,500 4,400

2002 $44,500,000 49,200 20,000 6,900

2003 $131,300,000 106,900 23,900 14,000

2004 $176,300,000 171,100 27,200 24,900

2005 $171,300,000 226,300 36,500 34,300

2006 $245,000,000 320,100 47,500 43,100

2007 $273,400,000 400,600 56,900 50,600

2008 $285,200,000 469,300 64,800 56,900

2009 $263,900,000 527,200 71,500 62,200

2010 $260,600,000 575,500 77,000 66,500

2011 $232,100,000 615,500 81,700 68,400

2012 $218,800,000 647,900 85,400 69,800

2013 $163,700,000 673,300 88,200 70,600

2014 $144,200,000 692,700 90,400 71,100

2015 $139,900,000 706,600 91,800 71,200

2016 $124,300,000 702,800 91,500 70,100

2017 $114,700,000 696,400 90,800 68,800

2018 $107,300,000 687,900 89,800 67,300

Summing the discounted annual costs and discounted emission reductions over the

twenty-year period yields a 20-year fleetwide cost of $3.2 billion and 20-year emission reductions

of 8.3 million tons of NOx, 1.2 million tons of HC, and 0.9 million tons of PM. The resulting
Appendix

$

20-year annualized fleetwide costs and emission reductions are $298 million per year and

786,000 tons per year of NOx, 110,000 tons per year of HC, and 87,000 tons per year of PM. A

copy of the spreadsheet prepared for this 20-year cost and benefit analysis has been placed in the

public docket for the final rulemaking. The reader is directed to the spreadsheets for a complete

version of the analysis.

Sensitivity Analysis #1: Impact of Non-Emissions Cost Assumptions

As described in Chapter 4, EPA’s cost and cost-effectiveness analyses are based on the

assumption that half of the cost of certain technologies expected to be used to meet the new

standards can be attributed to benefits unrelated to emissions control. In other words, EPA

believes that manufacturers may have used those technologies on nonroad engines regardless of

whether EPA set new standards. In order to analyze the sensitivity of the cost analysis to this

assumption, EPA estimated the per-equipment costs by attributing the full cost of these

technologies to the new emission standards.1

 EPA then estimated the effect of these increased

costs on the 20-year costs to society. Table A-3 contains the year-by-year fleetwide costs

associated with these increased cost estimates for the 20-year period from 1999 to 2018. By

assuming all of the cost of technology is attributed to emissions, the 20-year fleetwide discounted

cost is estimated to be $4.4 billion, approximately $1.2 billion higher than the base case results

presented earlier in this appendix. The resulting 20-year annualized fleetwide costs are $411

million per year, approximately $115 million higher than the base case results presented earlier in

this appendix. Table A-4 presents the cost-effectiveness of the standards using the costs

developed for this sensitivity analysis.
Regulatory Impact Analysis

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Table A-3

Fleetwide Costs Assuming Full Cost is Attributed to Emissions Control

(Sensitivity Analysis #1)

Calendar Year Undiscounted

Fleetwide Costs

Discounted

Fleetwide Costs

1999 $5,500,000 $5,500,000

2000 $14,800,000 $13,800,000

2001 $62,600,000 $54,700,000

2002 $74,100,000 $60,500,000

2003 $243,300,000 $185,600,000

2004 $349,100,000 $248,900,000

2005 $361,500,000 $240,900,000

2006 $519,600,000 $323,600,000

2007 $614,700,000 $357,700,000

2008 $705,600,000 $383,800,000

2009 $696,700,000 $354,200,000

2010 $726,600,000 $345,200,000

2011 $706,600,000 $313,800,000

2012 $714,400,000 $296,500,000

2013 $595,500,000 $230,900,000

2014 $578,700,000 $209,800,000

2015 $601,400,000 $203,700,000

2016 $583,900,000 $184,900,000

2017 $586,800,000 $173,600,000

2018 $595,500,000 $164,700,000
Appendix

$

Table A-4

Cost-effectiveness of the NMHC + NOx Standards

Assuming Full Cost is Attributed to Emissions Control

(Sensitivity Analysis #1)

Standard

Power

(kW)

Year of

Production

Discounted

Engine and

Equipment

Cost

Discounted

Lifetime

NMHC+NOx

Reductions

Discounted

Lifetime Costeffectiveness

Tier 1 0-37 1 $66 0.20 tons $560/ton

Tier 2 0-37 1 $135 0.04 tons $3,510/ton

6 $56 $1,470/ton

37-75 1 $329 0.49 tons $670/ton

75-130 1 $1,255 1.02 tons $1,230/ton

130-450 1 $1,171 1.82 tons $640/ton

450-560 1 $3,283 7.68 tons $430/ton

>560 1 $1,715 9.83 tons $170/ton

6 $1,608 $160/ton

Tier 3 37-75 1 $483 0.51 tons $950/ton

6 $264 $520/ton

75-130 1 $811 0.82 tons $990/ton

6 $532 $650/ton

130-450 1 $1,027 1.46 tons $710/ton

6 $632 $430/ton

450-560 1 $2,618 5.91 tons $440/ton

6 $2,298 $390/ton

Sensitivity Analysis #2: Impact of Global Sales Cost Distribution Assumption

As described in Chapter 4, EPA’s cost and cost-effectiveness analyses are based on the

assumption that manufacturers would spread their fixed costs over their world production of

nonroad engines, based on a scenario of manufacturers offering a single low-emitting engine into

a market with harmonized emission standards. Because there are regions of the world that are

not likely to adopt the EPA standards, EPA has estimated the per-equipment costs based on the

assumption that fixed costs could be distributed over only half of engines sold into other

countries.1

 EPA then estimated the effect of these revised costs on the 20-year costs to society. 

By distributing costs over fewer engines, year by year cost estimates increase compared to the

base case results presented earlier in this appendix. The 20-year fleetwide discounted cost is
Regulatory Impact Analysis

$

estimated to be $3.6 billion, approximately $0.4 billion higher than the base case results. The

resulting 20-year annualized fleetwide costs are $339 million per year, approximately $40 million

higher than the base case results presented earlier in this appendix.
Appendix

$

1. “Sensitivity Tests of Nonroad Diesel Cost Estimates,” EPA memo from Alan Stout to Docket

A-96-40, August 27, 1998.

Appendix References