Interim and Proposed Technical 

Support Document: 

Nonconformance Penalties for 

On-highway Heavy-Duty Diesel Engines 
Interim and Proposed Technical 


Support Document: 


Nonconformance Penalties for 


On-highway Heavy-Duty Diesel Engines
 

Assessment and Standards Division 

Office of Transportation and Air Quality 

U.S. Environmental Protection Agency 

NOTICE 

This technical report does not necessarily represent final EPA decisions or 

positions. It is intended to present technical analysis of issues using data 

that are currently available. The purpose in the release of such reports is to 

facilitate the exchange of technical information and to inform the public of 

technical developments. 

EPA-420-R-12-004 

January 2012 
Table of Contents 

CHAPTER 1: INTRODUCTION ...........................................................................3
 

1.1 Background on Nonconformance Penalties..................................................................3
 

1.2 Previous NCP Rulemakings and Regulations..............................................................4
 

1.3 Promulgation of 2007/2010 Emission Standards .........................................................6
 

1.4 The Onboard Diagnostic (OBD) System Requirements for 2010 and Later HeavyDuty On-highway Engines.......................................................................................................7
 

1.5 The Heavy-Duty Vehicle and Engine Greenhouse Gas Emissions Standards..........7
 

1.6 Characterization of the Heavy-Duty Engine and Vehicle Industries.........................8
 

1.6.1 Vehicle Applications and Classes........................................................................8
 

1.6.2 Engine and Vehicle Manufacturers....................................................................8
 

CHAPTER 2: TECHNOLOGIES TO MEET THE 2010 NOX STANDARD 

STANDARDS 13
 

2.1 Engine Service Classes..................................................................................................13
 

2.2 Emission Control Technologies for Diesel Engines....................................................13
 

2.2.1 Air Handling System and Turbocharging Technology...................................13
 

2.2.2 Advanced Fuel Injection Systems .....................................................................14
 

2.2.3 Diesel Particulate Filters and Oxidation Catalysts..........................................14
 

2.2.4 Selective Catalytic Reduction ............................................................................14
 

2.3 Optimization Strategies................................................................................................16
 

2.3.1 Engine-Out NOx Emission Reduction Strategies............................................17
 

2.3.2 Integrated Aftertreatment System....................................................................17
 

2.3.3 Integrated Engine and Aftertreatment Strategies...........................................18
 

2.3.4 Integrated Engine and Vehicle Strategies........................................................21
 

2.4 Summary of Strategies Used by Engine Manufacturers for 2010............................21
 

CHAPTER 3: COMPLIANCE COSTS ...............................................................22
 

3.1 Methodology ..................................................................................................................22
 

3.1.1 General Methodology .........................................................................................22
 

3.1.2 Net Present Value of Costs.................................................................................23
 

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3.1.3 Costs Analysis .....................................................................................................23
 

3.1.4 Upper Limit Engine............................................................................................25
 

3.2 Manufacturer Cost Data ..............................................................................................25
 

3.3 EPA Analysis of Costs ..................................................................................................27
 

3.3.1 Consideration of Manufacturer Costs Estimates ............................................27
 

3.3.2 Basis of EPA Cost Estimates .............................................................................28
 

3.3.3 NCP Compliance Costs......................................................................................29
 

3.3.4 MC50 and F.........................................................................................................34
 

CHAPTER 4: REGULATORY PARAMETERS FOR NCPS...........................36
 

4.1 NCP Equations and Parameters..................................................................................36
 

4.1.1 Refund for Engineering and Development Costs............................................38
 

4.2 Statutory Evaluation of NCPs......................................................................................39
 

4.2.1 Market Prices......................................................................................................40
 

4.2.2 Market Share ......................................................................................................40
 

APPENDIX A: CALCULATIONS........................................................................42
 

Calculation of DEF Consumption Costs...............................................................................42
 

Fuel Prices...............................................................................................................................43
 

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CL 

List of Acronyms 

AEO		 Annual Energy Outlook 

CH4		 methane 

compliance level 

CO		 carbon monoxide 

CO2		 carbon dioxide 

COC50		 estimate of the average total incremental cost to comply with standard relative 

to complying with the upper limit 

COC90		 estimate of the 90th percentile total incremental cost to comply with standard 

relative to complying with the upper limit 

CPI		 Consumer Price Index 

DEF		 diesel exhaust fluid 

DOC		 diesel oxidation catalyst 

DPF		 diesel particulate filter 

EGR		 exhaust gas recirculation 

EIA		 U.S. Energy Information Administration 

EPA		 U.S. Environmental Protection Agency 

F		 factor used to estimate the 90th percentile marginal cost based on the average 

marginal cost 

FE&D		 engineering and development factor 

FEL		 family emission limit 

g/hp-hr		 gram per horsepower-hour 

GHG		 greenhouse gas 

GVWR		 gross vehicle weight rating 

HC		 hydrocarbon 

HD		 heavy-duty 

HDDE		 heavy-duty diesel engine 

HDE		 heavy-duty engine 

HDGE		 gasoline-fueled heavy-duty engine 

HDOBD		 heavy-duty onboard diagnostics 

HDV		 heavy-duty vehicle 

HLDT		 heavy light-duty truck 

ICM		 indirect cost multiplier 

LDT2		 Light-Duty Truck 2 

LHDGE		 gasoline-fueled light heavy-duty engine 

MC50 estimate of the average marginal cost of compliance with the standard 

MC90 estimate of the 90th percentile marginal cost of compliance with the standard 

MOVES		 Motor Vehicle Emissions Simulator 

mpg miles per gallon 

N2		 nitrogen 

N2O		 nitrous oxide 

NCP		 nonconformance penalty 

NHTSA		 National Highway Traffic Safety Administration 

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NOx oxides of nitrogen 

NPV net present value 

OBD onboard diagnostics 

PM particulate matter 

S emission standard 

SCR selective catalytic reduction 

TSD Technical Support Document 

UL upper limit 

VMT vehicle miles travelled 

X compliance level above the standard at which NCP equals COC50 

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Chapter 1: Introduction 

The Technical Support Document (TSD) for this rulemaking presents analyses and 

supporting data for the provisions EPA used for establishing nonconformance penalties 

(NCPs) for model year 2012 and later on-highway heavy-duty diesel engines. Note that this 

TSD serves as a supporting document for both an Interim Final Rule establishing interim 

NCPs for heavy heavy-duty diesel engines and the Notice of Proposed Rulemaking seeking 

comments on establishing NCPs for other engines.A 

1.1 Background on Nonconformance Penalties 

Section 206(g) of the Clean Air Act (the Act), 42 U.S.C. 7525(g), allows EPA to 

promulgate regulations permitting manufacturers of heavy-duty engines (HDEs) or heavyduty vehicles (HDVs) to receive a certificate of conformity for HDEs or HDVs that exceed 

the applicable emissions standard, provided that they pay a nonconformance penalty (NCP) 

and that their emissions do not exceed an appropriate upper limit. Congress adopted section 

206(g) in the Clean Air Act Amendments of 1977 as a response to perceived potential for 

problems with technology-forcing heavy-duty emissions standards. If strict technologyforcing standards were promulgated, then some manufacturers, "technological laggards," 

might be unable to comply initially and would be forced out of the marketplace. NCPs were 

intended to remedy this potential problem. The laggards would have a temporary alternative 

that would permit them to sell their engines or vehicles by payment of a penalty. At the same 

time, conforming manufacturers would not suffer an economic disadvantage compared to 

nonconforming manufacturers, because the NCP would be based, in part, on money saved by 

the technological laggard. The resulting provisions of the Act require that NCPs account for 

the degree of emission nonconformity; increase periodically to provide incentive for 

nonconforming manufacturers to achieve the emission standards; and, most importantly, 

remove any competitive disadvantage to conforming manufacturers. 

Under section 206(g)(1), NCPs may be offered for HDVs or HDEs. The penalty may 

vary by pollutant and by class or category of vehicle or engine. HDVs are defined by section 

202(b)(3)(C) as vehicles in excess of 6,000 pounds gross vehicle weight rating (GVWR). 

Section 206(g) authorizes EPA to require testing of production vehicles or engines in 

order to determine the emission level on which the penalty is based. If the emission level of a 

vehicle or engine exceeds an upper limit of nonconformity established by EPA through 

regulation, the vehicle or engine would not qualify for an NCP under section 206(g) and no 

certificate of conformity could be issued to the manufacturer. If the emission level is below 

A Note that the NPRM proposes to establish NCPs for medium heavy-duty diesel engines, but not light 

heavy-duty diesel engines or gasoline engines. 

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the upper limit but above the standard, that emission level becomes the "compliance level," 

which is also the benchmark for warranty and recall liability; the manufacturer who elects to 

pay the NCP is liable for vehicles or engines that exceed the compliance level in-use, unless, 

for the case of HLDTs, the compliance level is below the in-use standard. The manufacturer 

does not have in-use warranty or recall liability for emissions levels above the standard but 

below the compliance level. 

1.2 Previous NCP Rulemakings and Regulations 

The generic NCP rule (Phase I) was promulgated August 30, 1985 (50 FR 35374). It 

established regulations for calculating NCPs in 40 CFR Part 86 Subpart L. It also established 

three basic criteria for determining the eligibility of emission standards for nonconformance 

penalties in any given model year. First, the emission standard in question must become more 

difficult to meet. This can occur in two ways, either by the emission standard itself becoming 

more stringent, or due to its interaction with another emission standard that has become more 

stringent. Second, substantial work must be required in order to meet the emission standard. 

EPA considers "substantial work" to mean the application of technology not previously used 

in that vehicle or engine class/subclass, or a significant modification of existing technology, in 

order to bring that vehicle/engine into compliance. EPA does not consider minor 

modifications or calibration changes to be classified as substantial work. Third, a 

technological laggard must be likely to develop. A technological laggard is defined as a 

manufacturer who cannot meet a particular emission standard due to technological (not 

economic) difficulties and who, in the absence of NCPs, might be forced from the 

marketplace. EPA will make the determination that a technological laggard is likely to 

develop, based in large part on the above two criteria. However, these criteria are not always 

sufficient to determine the likelihood of the development of a technological laggard. An 

emission standard may become more difficult to meet and substantial work may be required 

for compliance, but if that work merely involves transfer of well-developed technology from 

another vehicle class, it is unlikely that a technological laggard would develop. 

The above criteria were used to determine eligibility for NCPs during Phase II of the 

NCP rulemaking process (50 FR 53454, December 31, 1985). NCPs were offered for the 

following 1987 and 1988 model year standards: the particulate matter (PM) standard for 1987 

diesel-fueled light-duty trucks with loaded vehicle weight in excess of 3,750 pounds 

(LDDT2s), the 1987 gasoline-fueled light HDE (LHDGE) HC and CO emission standards, 

the 1988 diesel-fueled HDE (HDDE) PM standard, and the 1988 HDDE NOx standard. As 

discussed in the Phase II rule, NCPs were considered, but not offered, for the 1987 HLDT 

NOx standard and the 1988 (later, the 1990) gasoline-fueled HDE (HDGE) NOx standard. 

The availability of NCPs for 1991 model year HDE standards was addressed during 

Phase III of the NCP rulemaking (55 FR 46622, November 5, 1990). NCPs were offered for 

the following: the 1991 HDDE PM standard for petroleum-fueled urban buses, the 1991 

HDDE PM standard for petroleum-fueled vehicles other than urban buses, the 1991 

petroleum-fueled HDDE NOx standard, and the PM emission standard for 1991 and later 

model year petroleum-fueled light-duty diesel trucks greater than 3,750 lbs loaded vehicle 

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weight (LDDT2s). As discussed in the Phase III rule, NCPs were also considered, but not 

offered for the methanol-fueled heavy-duty diesel engine and heavy-duty gasoline engine 

standards as it was concluded that those standards did not meet the eligibility criteria 

established in the generic rule. In addition, Phase III of the NCP rulemaking described how 

NCPs would be integrated into the HDE NOx and PM averaging program. 

The availability of NCPs for HDVs and HDEs subject to the 1994 and later model 

year emission standards for particulate matter (PM) was addressed by Phase IV of the NCP 

rulemaking (58 FR 68532, December 28, 1993). NCPs were offered for the following: the 

1994 and later model year PM standard for heavy-duty diesel engines (HDDEs) used in urban 

buses and the 1994 and later model year PM standard for HDDEs used in vehicles other than 

urban buses. NCPs were also considered, but not offered, for the 1994 and later model year 

methanol-fueled HDE PM standard and the 1994 and later model year cold carbon monoxide 

(CO) standard for heavy light-duty gasoline fueled trucks. 

The availability of NCPs for HDVs and HDEs subject to the 1998 and later model 

year emission standards for NOx was addressed by Phase V of the NCP rulemaking (61 FR 

6949, February 23, 1996). NCPs were offered for the following: the 1998 and later model 

year NOx standard for heavy-duty diesel engines (HDDEs), the 1996 and later model year for 

Light-Duty Truck 3 (LDT3) NOx standard, and the 1996 and later urban bus PM standard. A 

concurrent but separate final rule (61 FR 6944, February 23, 1996) established NCPs for the 

1996 LDT3 PM standard and discussed other standards for which NCPs were considered. 

The availability of NCPs for 2004 model year HDE standards was addressed during 

Phase VI of the NCP rulemaking (67 FR 51464, August 8, 2002). NCPs were offered only 

for the NOx+NMHC standards. One notable aspect of that rule was that the upper limit for 

heavy heavy-duty diesel engines was set at a level above the previous standard. This was 

done because a legal settlement of compliance violations (i.e. a consent decree) allowed 

certain manufacturers to exceed the otherwise applicable 4.0 g/hp-hr NOx standard for a brief 

period.B

 The upper limit for these engines was set at 6.0 g/hp-hr to allow manufacturers to 

continue producing engines allowed by the consent decree. 

B On October 22, 1998, the Department of Justice and the Environmental Protection Agency 

announced settlements with seven major manufacturers of diesel engines. The settlements resolved claims that 

they installed illegal computer software on heavy-duty diesel engines that turned off the engine emission control 

system during highway driving. The settlements were entered by the Court on July 1, 1999. The Consent 

Decrees allowed heavy-heavy service class diesel engines to continue to use emission control strategies which 

could result in NOx emission levels as high as 6 or even 7 g/hp-hr NOx. 

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1.3 Promulgation of 2007/2010 Emission Standards 

The 0.20 g/hp-hr NOx standard currently applicable to heavy-duty engines was 

adopted January 18, 2001 (66 FR 5001) and first applied in the 2007 model year. However, 

because of phase-in provisions adopted in that rule and use of emission credits generated by 

manufacturers for early compliance, manufacturers were able to continue to produce engines 

with NOx emissions over 0.20 g/hp-hr until (and in some cases after) 2010 model year. The 

phase-in provisions ended after model year 2009 so that the standards were fully phased-in for 

model year 2010. Equally important, the cap applicable to Family Emission Limits for creditusing engine families was lowered to 0.50 g/hp-hr beginning in model year 2010. Because of 

these changes that occurred in model year 2010, the 0.20 g/hp-hr NOx emission standard is 

often referred to as the 2010 NOx emission standard, even though it applied to engines as 

early as model year 2007. For this rulemaking, the fully phased-in NOx requirements are 

referred to as the 2010 NOx standards. 

While some manufacturers still retain NOx emission credits that currently allow them 

to produce engines with NOx emissions as high as 0.50 g/hp-hr, we expect that one or more of 

these manufacturers could exhaust their supplies of credits as early as model year 2012. As 

seen in Figure 1-1, all manufacturers certified their model year 2011 medium and heavyheavy duty engine families at NOx levels below 0.50 g/hp-hr. NOx Emissions (g/hp-hr) 

2011 Model Year Heavy-Duty Engine NOx Certification Levels 

0.60 

Medium 

Heavy Heavy-Duty Engines Heavy-Duty Engines 

0.50 

0.40 

0.30 

0.20 

0.10 

0.00 

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 

Engine Family 

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Figure 1-1: 2011 Model Year Heavy-Duty Engine NOx Emissions Certification Levels 

1.4 The Onboard Diagnostics (OBD) System Requirements for 2010 and 

Later Heavy- Duty On-highway Engines 

For 2010 and later model year heavy-duty diesel and gasoline engines used in highway 

applications over 14,000 pounds gross vehicle weight rating, EPA requires that all major 

emissions control systems be monitored and malfunctions be detected prior to emissions 

exceeding a set of emissions thresholds. Most notably, we require that the aftertreatment 

devices—e.g., the diesel particulate filters and NOx reducing catalysts—that will be used on 

highway diesel engines to comply with the 2010 emissions standards will be monitored and 

their failure will be detected and noted to the driver. We also require that all emission-related 

electronic sensors and actuators be monitored for proper operation. 

For these highway applications over 14,000 pounds, we require that one engine family 

per manufacturer be certified to the OBD requirements in the 2010 through 2012 model 

years. Beginning in 2013, all highway engines for all manufacturers will have to be certified 

to the OBD requirements. This phase-in is designed to spread over a number of years the 

development effort required of industry and to provide industry with a learning period prior to 

implementing the complex OBD requirements on 100 percent of their highway product line. 

These OBD requirements are potentially relevant to this NCP rulemaking because 

lower emission standards can make the OBD requirements more difficult. 

1.5 The Heavy-Duty Vehicle and Engine Greenhouse Gas Emissions 

Standards
 

EPA and the Department of Transportation’s National Highway Traffic Safety 

Administration (NHTSA) issued the first-ever program to reduce greenhouse gas (GHG) 

emissions and improve fuel efficiency of heavy-duty trucks and buses in 2011.1 The agencies 

adopted complementary standards under their respective authorities covering model years 

2014-2018 and beyond, which together form a comprehensive national program, referred to in 

this document as the Heavy-Duty GHG rule. While improvements in the whole vehicle will 

be required, these regulations will specifically require reductions in the engine’s brakespecific fuel consumption (BSFC). The program regulates combination tractors and 

vocational vehicles separately from the engines installed in these vehicles. This approach 

ensures existing technologies readily available to improve fuel efficiency are applied to both 

engines and trucks resulting in the maximum improvement in overall vehicle efficiency 

possible. 

The Heavy-Duty GHG rule begins in model year 2014 and controls the CO2, N2O, and 

CH4 emissions and fuel consumption from HD engines. The program drives approximately 3 

to 5 percent improvements in CO2 emissions from engines in model year 2014 and an 

additional 2 to 4 percent improvement in model year 2017. The program also allows 

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manufacturers to generate greenhouse gas emission credits by meeting these greenhouse gas 

emission standards prior to model year 2014. 

The greenhouse gas requirements are potentially relevant to this NCP rulemaking 

because they affect the types of emission controls manufactures would pursue. As noted later, 

we believe that it is appropriate to assume that even if the NOx standard was higher, 

manufacturers would not have chosen emission controls that would have increased fuel 

consumption rates because they must also meet the greenhouse gas emission standards. 

1.6 Characterization of the Heavy-Duty Engine and Vehicle Industries 

1.6.1 Vehicle Applications and Classes 

Heavy-duty engines are used in a wide variety of vehicle applications. Smaller 

engines are used in heavy-duty pickup trucks, vans and other vehicles using those same 

chassis. At the other extreme, the largest engines are used in cement mixers, garbage trucks, 

and line-haul tractors. In matching the engines to the vehicles, the minimum requirement is 

that the engine would be large enough to power a fully-loaded truck up a hill. More typically, 

especially for the larger trucks, the engine is selected to provide the best fuel consumption. In 

other cases, especially for light heavy-duty, larger engines are used to provide additional 

performance. 

In applying heavy-duty emission standards, EPA categorizes heavy-duty vehicles into 

three service classes: light heavy-duty; medium heavy-duty; and heavy heavy-duty. Light 

heavy-duty includes pickup trucks and vans. Medium heavy-duty includes delivery trucks 

and recreational vehicles. Heavy heavy-duty includes buses and line-haul tractors. Table 1-1 

lists the gross vehicle weight rating of the vehicles by service class. Engines are classified by 

the primary service class for which the engine is intended. 

Table 1-1: Gross Vehicle Weight Rating of Light, Medium, and Heavy Heavy-Duty Engines and Vehicles 

Service Class DOT Weight Classes GVWR (lbs.) 

Light Heavy 2b-5 8,500 - 19,500 

Medium Heavy 6-7 19,501 - 33,000 

Heavy Heavy 8 33,001 + 

1.6.2 Engine and Vehicle Manufacturers 

Table 1-2 shows the major heavy-duty engine and vehicle manufacturers for the U.S. 

What is not shown in the table is the degree to which vehicle manufacturers buy engines from 

different engine manufacturers. The industry operates such that the vehicle manufacturer 

decides during the design stage which engines it will make available in its vehicles, and the 

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ultimate customer chooses its engine from among the available options. The result is that 

most of the vehicle manufacturers use engines from two or more engine suppliers for at least 

some of their vehicle models. This practice makes the industry a very competitive 

marketplace. This is particularly true for the medium heavy-duty and heavy heavy-duty 

marketplace, where the Navistar International Corporation is currently the only engine and 

vehicle manufacturer that is not offering engines from another manufacturer in its U.S. 

vehicle models. The light heavy-duty market is a mix of integrated manufacturers and 

exclusive relationships between vehicle manufacturers and diesel engine manufacturers. 

Specifically, General Motors and Ford currently supply their own diesel engines in the light 

heavy-duty pick-up trucks for their respective companies. Chrysler exclusively uses 

Cummins supplied diesel engines in their Dodge light heavy-duty pickup trucks. However, in 

the medium heavy-duty and heavy heavy-duty vehicle market, there is a wider range of 

engines available to choose from for the same vehicle. For example, an end-user can 

purchase a Western Star vehicle with either a Cummins or a Detroit Diesel engine in it. 

Engines produced by Cummins tend to be offered by all of the major heavy duty truck 

manufacturers in at least some of their truck models. In this sense, it has been common 

practice in the medium and heavy heavy-duty marketplace to treat the engine almost as a 

commodity. 

Table 1-2 Heavy-Duty Engine and Vehicle Manufacturers 

Heavy-Duty Diesel Engine Manufacturers 

(Brands) 

Cummins 

Daimler (Detroit Diesel, Mercedes Benz) 

Ford 

General Motors 

Hino 

Navistar 

PACCAR 

Volvo Truck (Volvo, Mack) 

Heavy-Duty Vehicle Manufacturers (Brands) Chrysler (Dodge) 

Daimler Trucks (Freightliner, Western Star) 

Ford (Ford) 

General Motors (Chevrolet, GMC) 

Hino (Hino) 

Navistar (International) 

PACCAR (Kenworth, Peterbilt) 

Volvo Truck (Volvo, Mack) 

Figure 1-2 contains an estimate of the 2010 market share by sales volume of diesel 

engine manufacturers in the heavy-duty market for the major engine manufacturers in the U.S. 

This table indicates that Ford dominates the sales of diesel engines with just above 60 percent, 

while General Motors follows at approximately 13 percent. The remaining quarter of the 

diesel engine sales are made up of Cummins, Navistar, Mack, Detroit Diesel, Volvo, 

PACCAR, Hino, and Mercedes Benz. It is important to note that when all service classes are 

considered together, the distribution is dominated by light heavy-duty pickups and vans, 

9 
 

 

 

 

which are sold in much higher numbers than medium heavy-duty and heavy heavy-duty 

trucks. 

2010 Diesel Engine Manufacturer Market Share 

Ford 

General Motors 

Cummins 

Navistar 

Mack 

Detroit Diesel 

Volvo Truck 

PACCAR 

Hino 

Mercedes-Benz 

Figure 1-2: 2010 Diesel Engine Manufacturer Market Share. Source: Ward’s Automotive Group 

Figure 1-3 illustrates by sales volume that in a similar manner to the HD engine 

market, the HD truck market is a competitive marketplace with a number of players. 

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2010 Diesel Truck Manufacturer Market Share 
 

Ford 

General Motors 

Navistar 

Paccar 

Volvo 

Daimler 

Hino 

Figure 1-3: 2010 Diesel Truck Manufacturer Market Share. Source: Ward’s Automotive Group 

We also separately evaluated the market share by sales volume of each of the largest 

Class 8 heavy-duty truck manufacturers in 2008 through October 2011 (shown in Figure 1-4). 

These are the trucks for which the interim NCPs may be used. Although the market share of 

each varies from year to year, each manufacturer generally has about 20 to 30 percent of the 

Class 8 market. These annual variations occur for a variety of reasons, such as introduction of 

a new model by one manufacturer or new purchases by large fleets (which represent a large 

fraction of new Class 8 purchases). When considering these data, it is important to note that 

economic conditions in 2009 and 2010 led to significantly reduced sales in the heavy-duty 

market relative to 2008, and market shares in these years may be especially variable. 

However, sales in 2011 have returned to 2008 levels or better. The 2011 year-to-date market 

share of each manufacturer closely resembles the 2008 breakdown. 

Since producing engines that comply with a 0.20 g/hp-hr NOx emission standard is 

more difficult than producing those with NOx emissions at 0.50 g/hp-hr, it can be presumed 

that allowing a manufacturer to produce engines with NOx emissions at 0.50 g/hp-hr without 

paying an NCP would bestow some competitive advantage. However, such advantage does 

not appear to have affected market share. Only Navistar is using non-SCR engines in its 

2011 Class 8 trucks, and it is using them in all of its trucks.C So the small decrease in 

C Note that while some other manufacturers have certified engines using emission credits, only Navistar 

is selling non-SCR engines for the U.S. market. So the market share for Navistar trucks is exactly the same as 

the market share for Navistar engines and the market share for non-SCR engines. 

11 
 

 

 

Navistar’s market share between 2008 and 2011 indicates that, while selling non-SCR engines 

in its trucks may provide some competitive advantage, it has not allowed Navistar to increase 

in market share. 

0 

5 

10 

15 

20 

25 

30 

35 

2008 2009 2010 2011 (Jan.-Oct.) 

Percent Market Share 

Calendar Year 

Class 8 Truck Market Share 

Navistar 

Paccar 

Volvo 

Daimler 

Figure 1-4: Class 8 Truck Market Share. Source: Ward’s Automotive Group 

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Chapter 2: Technologies to Meet the 2010 NOx Standard 

All engines that currently meet the 2010 0.20 g/hp-hr NOx emission standard without 

using credits rely on selective catalytic reduction (SCR) aftertreatment systems that use diesel 

exhaust fluid (DEF) to reduce NOx emissions. They also include traditional emission control 

technologies such as cooled EGR and injection timing optimization to reduce engine-out NOx 

emissions. The one non-SCR manufacturer also uses these traditional emission controls, but 

to a greater degree. All of the manufacturers use integrated diesel oxidation catalysts (DOC) 

and diesel particulate filters (DPFs) to control particulate matter (PM). This chapter 

summarizes these technologies and explains the effect on costs for different strategies for 

optimizing them. 

2.1 Engine Service Classes 

Manufacturers design light heavy-duty, medium heavy-duty, and heavy heavy-duty 

engine differently. The lighter duty engines tend to have smaller displacements, operate at 

higher engine speeds, and are not as likely to be rebuilt. This impacts mixing, heat rejection, 

and engine life. These differences affect which emission controls are most appropriate for 

each service class. In general, it is more difficult to reduce engine-out NOx emissions from 

the light and medium heavy-duty engines than it is from heavy heavy-duty engines. 

2.2 Emission Control Technologies for Diesel Engines 

This section describes the emission control technologies that were used to meet the 

2007 NOx and PM standards and are being used to meet the 2010 NOx standard. See Section 

2.4 for a discussion of how the different engine manufacturers are using these technologies. 

2.2.1 Air Handling System and Turbocharging Technology 

Cooled exhaust gas recirculation (EGR) lowers NOx emissions principally by 

replacing a portion of the fresh intake air oxygen with exhaust by-products and other inert 

gases, such as CO2, water vapor, and N2. The amount of exhaust that is recirculated varies 

with engine conditions. Thus, a cooled EGR system must be capable of routing different 

amounts of exhaust gas from the exhaust system to the intake system, as well as cooling the 

exhaust during that process. These inert gases dilute the in-cylinder mixture and reduce the 

peak cylinder temperatures during the combustion process and thus reduce NOx formation. 

The downside of EGR is that it tends to increase PM emissions and fuel consumption and can 

degrade engine oil. Manufacturers are continuing to make improvements to EGR systems, 

such as reducing pumping loss in the EGR piping system, which allows more EGR to flow 

without sacrificing engine performance. All engines that currently meet the 2010 0.20 g/hp-hr 

NOx emission standard use EGR as part of their emissions solution. 

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Advancements in turbocharger technology can improve engine performance while 

meeting emissions standards. Variable geometry turbines with better control and higher 

efficiency, allow optimal EGR control, thus better emission control. While turbo-compound 

is mainly used to improve engine thermal efficiency, its integration with the engine air 

handling system provides the engine manufacturer more flexibility for combustion 

optimization, thus delivering optimal overall engine system performance. The DD15 and 

DD16 engines developed by Detroit Diesel are an example of this strategy. 

2.2.2 Advanced Fuel Injection Systems 

Modern fuel injection systems for HD diesel engines, such as the common-rail system 

or advanced electronically controlled injectors, provide engineers with the ability to perform 

pilot injection, ramped injections, and post injections (in some cases multiple pilot and/or post 

injections). They can also provide engineers with complete control over injection timing, 

pressure and duration. These systems provide important flexibilities for engineers, including 

the ability for improved engine-out NOx and PM emissions performance. They are especially 

significant with respect to minimizing a trade-off between NOx emissions and fuel 

consumption. 

2.2.3 Diesel Particulate Filters and Oxidation Catalysts 

A diesel particulate filter (DPF) is a ceramic device that collects PM in the exhaust 

stream. The high temperature of the exhaust heats the ceramic structure and allows the 

particles inside to break down (or oxidize) into less harmful components. All on-highway 

heavy-duty diesel engine manufacturers use DPFs to reduce PM. Periodic regeneration to 

oxidize and remove loaded soot is required for all DPFs. One method of regeneration, called 

active regeneration, directly injects the fuel into exhaust stream and a diesel oxidation 

catalyst (DOC) or other device then oxidizes the fuel in the exhaust stream, providing the heat 

required for DPF regeneration. Active regeneration increases the fuel consumption of the 

vehicle, in some cases by more than one percent. The other regeneration method , called 

passive regeneration, uses NO2 to directly react with soot in the exhaust at much lower 

exhaust temperature than active regeneration. This requires increasing the NO2 fraction of the 

NOx, which is usually low coming out of the engine. Advanced thermal management can be 

used in production engines to eliminate active regeneration, thus significantly improving fuel 

efficiency. Volvo’s 2010 DPF+SCR system has eliminated active regeneration for onhighway vehicles.2

 All other manufacturers using SCR are working in the same direction, 

minimizing or eliminating active regeneration, thus improving fuel economy, providing 

efficiency improvements in the real world, although they are not directly reflected in the HD 

engine test procedure. 

2.2.4 Selective Catalytic Reduction 

Selective Catalytic Reduction (SCR) is an exhaust aftertreatment system used to 

control NOx emissions from heavy-duty engines by converting NOx into nitrogen (N2) and 

water (H2O). The technology depends on the use of a catalytic converter and a chemical 

14 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

reducing agent, which generally is in an aqueous urea solution, and is often referred to as 

diesel exhaust fluid (DEF). DEF injected into the exhaust upstream of the catalyst where it 

forms ammonia and carbon dioxide according to the following equation: 

CO(NH2)2+H2O → 2NH3 + CO2 

The ammonia then reacts with NO and NO2 molecules according to the following equations: 

4NO + 4NH3 + O2 → 4N2 + 6H2O 

2NO2 + 4NH3 + O2 → 3N2 + 6H2O 

Thus, one molecule of urea can reduce two molecules of NO or one molecule of NO2. 

However, not all urea molecules will find NOx molecules with which to react. Manufacturers 

design their system to inject slightly more urea than this stoichiometric amount. This is called 

overdosing the system. The excess ammonia reacts with oxygen to form N2 and water. DEF 

dosing rates vary among engines and are roughly proportional to the amount of NOx being 

reduced. For 2010 model year engines, DEF rates typically range between one and three 

percent of fuel consumption. In other words, DEF consumption is approximately one to three 

gallons for every 100 gallons of fuel consumed. 

The catalyst in the SCR systems used today in the HD engine industry generally 

contains either copper/zeolite or iron/zeolite formulations. Both formulations can achieve 

NOx conversion rates of over 90 percent. In general, iron/zeolite substrates have a greater 

acceptable maximum temperature for durability; whereas the copper/zeolite substrates have 

higher NOx efficiency rates at lower exhaust temperatures.3 

A robust SCR system can achieve about 90 percent reduction in cycle-weighted NOx 

emissions. Improvements have been made over the last several years to improve the NOx 

conversion rate and reduce the impact of temperature on the conversion rate. Figure 2-1 

shows the improvement over a three year period in both NOx conversion efficiency and 

maximizing conversion efficiency over a wider gas temperature range.4 

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Figure 2-1: SCR Efficiency Rate Improvement over Time. W. Tang, et. al., BASF. DOE DEER 

Conference, October 4, 2011. Page 3. 

2.3 Optimization Strategies 

Manufacturers can design and calibrate the EGR, fuel injection, and aftertreatment 

systems in different ways to optimize engines with respect to hardware costs, performance, 

emissions, operating costs, and reliability. In the context of this rulemaking, one of the 

central trade-offs to be optimized is the one between engine-out NOx emissions and DEF 

consumption rates. 

There are two typical paths to reduce NOx emissions at the tailpipe – improving the 

NOx conversion efficiency of the aftertreatment or reducing the NOx emissions coming out of 

the engine. However, the most effective way to meet 2010 emissions standards is the use of 

integrated engine and aftertreatment approach while continuously improving engine fuel 

economy. The next few sections will discuss each approach in more detail. 

All on-highway heavy-duty diesel engine manufacturers except one rely on SCR to 

reduce NOx emissions. SCR NOX conversion efficiency allows higher engine-out NOX 

emissions (while still meeting the tailpipe NOX standard due to the aftertreatment), and 

therefore, gives more room for engine system optimization. 

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2.3.1 Engine-Out NOx Emission Reduction Strategies 

Tailpipe NOx emissions reductions (i.e., downstream of any aftertreatment) can be 

achieved by reducing the NOx emissions from the engine (i.e., engine-out emissions) by 

different methods. First, engine-out NOx emissions can be reduced by optimization of 

combustion. This includes retarding injection timing and combustion chamber optimization in 

matching different fuel injection strategies depending on applications. Retarding injection 

timing tends to reduce the peak pressure and temperature inside the engine cylinder and 

therefore reduce the amount of NOx created in the cylinder. However, this type of injection 

timing change can increase fuel consumption of the engine. By appropriately optimizing 

piston bowl geometry and matching it with the injection angle and pressure, NOx emissions 

can be reduced in certain operating modes, but benefits would be limited over a wide range of 

operating conditions. 

An increased EGR rate can also reduce the amount of NOx produced in the engine. 

EGR replaces a portion of the fresh intake air oxygen with exhaust by-products and other inert 

gases, such as CO2, water vapor, and N2. It leads to lower cylinder pressure and therefore less 

NOx emissions. EGR rates have a linear impact on NOx emissions. However, an increase in 

EGR rates may lead to a reduction in power and increase PM emissions. Although this 

approach is one of the ways to reduce overall NOx emissions, the challenges in balancing the 

benefits of emissions reduction and thermal efficiency are significant. 

2.3.2 Integrated Aftertreatment System 

An advanced integrated aftertreatment system can allow individual components to be 

optimized, such as DOC, DPF, and SCR, on a system level. In general, catalyst efficiency is 

dependent on catalyst volume, surface area, chemical composition of the substrate, and 

packaging configurations. An increase in catalyst volume can increase the amount of 

emissions that are converted. However, a larger catalyst would typically have a higher 

hardware cost. An increase in surface area of the catalyst increases the amount of exhaust gas 

which can be catalyzed. Surface area increases can be achieved through smaller pore sizes, 

however, this can lead to higher system backpressure which can reduce engine power and 

increase fuel consumption of the engine. Optimization of DOC and DPF precious metal 

loading can have profound impacts on NOx reduction of a downstream SCR catalyst, while 

reducing system cost. 

Depending on technologies as well as applications, different manufacturers use 

different system configurations to achieve optimal NOx reduction. An example of this 

approach is the one-box system that packages the DOC, DPF, and SCR together, such as the 

one being used by Detroit Diesel in its 2010 production engine.5 This integrated system 

makes the vehicle packaging more compact and the engine more efficient in performance due 

to lower back pressure. Cummins’ 2010 SCR system utilizes a decomposition reactor that is 

integrated with the total aftertreatment system, which is different from other manufacturers’ 

aftertreatment systems.6 This decomposition reactor component converts DEF into ammonia 

17 
 

 

 

 

 

 

 

 

 

 

through hydrolysis. A long pipe between DPF and SCR ensures DEF to be well mixed with 

exhaust gas, thus achieving optimal NOx conversion efficiency. 

2.3.3 Integrated Engine and Aftertreatment Strategies 

An increase in aftertreatment efficiency allows an engine to maintain constant or even 

increasing engine-out NOx emissions while reducing tailpipe NOx emissions. Aftertreatment 

efficiency is impacted by DEF rates. An increase in DEF rate can increase the efficiency of 

the NOx conversion in the SCR system with proper engine control strategies. The ammonia 

produced from the DEF along with the catalyst converts NOx into nitrogen and water. As 

shown in Figure 2-2, DEF consumption rates have a linear impact on NOx emissions over a 

broad range. However, the benefits of increasing DEF rates will decline at some point and the 

conversion efficiency will be limited more by the residence time and other catalyst 

characteristics. 

Figure 2-2: Fluid Consumption Impact on Engine NOx Emissions Rates. Source: T. Johnson, 

Corning. DOE DEER Conference, October 4, 2011. Page 20. 

There are some negative impacts of increased DEF dosing rates. First, the operating 

cost of the vehicle increases with dosing rates. As discussed in more detail in Chapter 3 

below, DEF costs approximately $3 per gallon. As an example, an increase in DEF of 0.5 

gallon of DEF consumption for every 100 gallons of fuel consumed (which would generally 

be described as a one-half percent increase in DEF) may lead to an increase annual operating 

costs ranging between a few dollars and $220 per year depending on the number of miles 

travelled. Second, an increase in DEF consumption will require either an increase in DEF 

18 
 

 

 

 

 

 

 

 

capacity on the vehicle or an increase in the frequency of DEF refills. Optimal points with 

balance of the fuel and DEF consumptions can be found as indicated in Figure 2-2. 

More advanced and higher efficiency aftertreatment systems provide engine 

manufacturers more opportunities to improve engine fuel economy while meeting emissions 

standards. Figure 2-4 shows NOx trade-off on fuel economy and PM emissions with different 

engine technology road maps. Although some of the technologies noted in this figure may be 

beyond current production feasibilities and more in the area of research today, the figure does 

show the relation between SCR efficiency and engine technology requirements in order to 

meet 2010 emissions standards. This figure also qualitatively highlights the penalty of fuel 

economy for an engine that solely relies on non-SCR solution in order to meet 2010 emissions 

standards. 

As indicated in Figure 2-3, the typical technologies to improve both engine emissions 

and fuel economy include, but not limited to, better air handling system, lower friction loss of 

EGR piping, optimal fuel injection strategies, optimized combustion system, and advanced 

engine and aftertreatment system control.7 

19 
 

BSNOx (g/hp-hr) 

Figure 2-3: Fuel economy, NOx, and PM emissions with different engine technology road maps 

20 
 

 

 

 

 

 

 

 

 

 

 

2.3.4 Integrated Engine and Vehicle Strategies 

Engine manufacturers develop engines to achieve the optimum balance of emissions, 

fuel consumption, horsepower, costs, among other aspects. Vehicle manufacturers conduct 

similar optimizations of the vehicle and have an impact on the overall fuel consumption. The 

recent Heavy-Duty GHG rule noted the opportunities to reduce GHG emissions and fuel 

consumption through both engine technologies and vehicle improvements. Aerodynamics, 

rolling resistance, weight, and other systems in the vehicle will impact the power required to 

move the vehicle down the road. For example, an improvement to a vehicle’s aerodynamics 

will reduce the amount of power required from the engine and thus reduce the fuel consumed. 

When considered together, improvement to the vehicle efficiency can be well over 10 percent, 

which would be enough to offset any increase in fuel consumption due to specific emission 

reduction strategies used to reduce NOx to meet the 2007 and 2010 NOx emission standards 

(such as EGR). This can make it difficult for purchasers to discern whether changes in fuel 

consumption are due to changes in the engine or vehicle. 

2.4 Summary of Strategies Used by Engine Manufacturers for 2010 

Most engine manufacturers chose to comply with the 2010 NOx emission standard by 

adding SCR to the engine models they produced in 2007-2009. They also recalibrated the 

engines to reduce fuel consumption rates to levels lower than the 2007-2009 engines. In 

general, the approach with an SCR system appears to be a sound and cost effective pathway to 

achieve 2010 emissions standards while improving fuel economy and it is the primary path 

being used around the world. The reduction in operating costs due to improved fuel 

consumption was more than enough to offset the cost of supplying the SCR system with DEF. 

So the incremental savings to the operator is the net effect of an upfront increase in hardware 

costs that is offset significantly by reduced operating costs. 

One engine manufacturer chose instead to comply with the 2010 NOx emission 

standard by using in-cylinder EGR solution in combination with NOx emission credits earned 

prior to the 2010 model year. In this solution, a higher EGR rate is required in order to meet 

desired emission target, compared to typical engine system with the SCR solution. Therefore, 

requirements on air handling, EGR and charged air cooling are much higher than the 2007-

2009 engines. Consequently, a two-stage turbocharger system with a relatively large 

intercooling system is used. In addition, the 2010 model year engines contained many other 

improvements in the fuel injection and combustion systems, as well as better integration 

between engine and aftertreatment system relative to the engines they produced in 2007-2009. 

Electronic control on the total engine and aftertreatment system is also considerably 

enhanced. Many of these changes were made to partially offset the tendency of the increased 

EGR to increase fuel consumption. 

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Chapter 3: Compliance Costs 

This chapter describes our analysis of the costs of compliance. The analysis is based 

on our projections of costs to engine and vehicle manufacturers and operating costs for 

vehicle owners. This chapter generally does not include analysis of engine pricing or vehicle 

purchaser perceptions that could affect purchase decisions. 

3.1 Methodology 

3.1.1 General Methodology 

The costs of compliance for model year 2012 are the primary inputs for determining 

NCPs. In each of our six previous NCP rulemakings, we estimated costs using a 

methodology appropriate for the specific circumstances that applied at the time. None were 

approached in exactly the same way. In each case we considered key factors such as 

differences in calibration, hardware, and operating costs, but there have been some NCP 

calculations where other potential individual cost or cost saving elements have been included 

or excluded for various reasons. 

We requested cost of compliance information from several engine manufacturers and 

used that information to inform our own analysis of compliance costs. In past rules, EPA has 

based the NCPs directly on the average of actual compliance costs for all manufacturers. This 

was possible because each of the manufacturers had actually produced engines at the upper 

limit (which was almost always the previous emission standard). It was relatively simple for 

them to provide us with a confidential engineering analysis of the costs they actually incurred, 

the cost of the additional hardware, and differences in performance characteristics. It was 

also reasonable for EPA to assume a high degree of accuracy in these costs. In the case of 

this NCP rule, most manufacturers generally have never had production engines at 0.50 g/hphr (the upper limit). So averaging the manufacturers’ estimates of expected compliance costs 

does not necessarily lead to the average actual compliance costs. 

The NCP penalty formulas are based primarily on the cost difference between an 

engine emitting at the upper limit (the baseline engine) and one emitting at the standard (the 

compliant engine). Thus, the assumption of what technologies are on the baseline engine is 

central to the calculation of the penalties. As described in Section 3.3.2, we are assuming the 

baseline engine is already equipped with SCR. Specifically, EPA is assuming that the 

baseline engine (or upper limit engine) is an optimized, SCR-equipped engine that complies 

with all other emission standards and requirements. We estimated incremental costs both in 

terms of dollars per engine and dollars per g/hp-hr for the theoretical average and worst case 

manufacturers. 

It is worth noting that each of the five engine manufacturers contacted assumed a 

different technology package on its baseline engine. Manufacturers that produced engines 

below 0.20 g/hp-hr based their compliance costs on the following baseline engines: engines 

equipped with similar (but not identical) SCR and EGR hardware, SCR-equipped engines 

22 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

without EGR, an EGR version of its own engine, or the non-SCR engines produced by a 

competitor. Some of these manufacturers estimated costs relative to more than one baseline 

engine, while others provided costs relative to a single baseline engine. Four of the 

manufacturers compared the costs for their assumed baseline engine to the costs for their 

actual compliant engines. The one non-SCR manufacturer we contacted provided its 

projections of what it will spend to bring its current 2011 engine below 0.20 g/hp-hr. 

3.1.2 Net Present Value of Costs 

All costs are presented in 2011 dollars. Because the NCP is paid by the manufacturer 

in the model year that the engine is produced, we need to account for cost differences at the 

point of sale. All costs were calculated or converted to net present value (NPV) for calendar 

year 2012. Costs that occur after production (e.g., DEF costs) are discounted by 7.0 percent 

per year. It is also important to remember that since all costs are presented in terms of 

constant 2011 dollars, the discount rate does not include an adjustment with respect to the rate 

of inflation. 

Costs expressed in terms of 2010 or earlier dollars were adjusted upwards based on the 

Consumer Price Index (CPI) to be equivalent to 2011 dollars. For example, the difference 

between a 2009 dollar and a 2011 dollar would be approximately five percent. We recognize 

that concerns have been raised about using the CPI to adjust costs for inflation. However, we 

are not aware of a better method for adjusting general costs for inflation. Also, given the 

relatively small number of years involved in the inflation adjustments (generally three years 

or less), we believe that any errors introduced into the analysis by using the CPI would not be 

significant. 

3.1.3 Costs Analysis 

This section describes the cost categories that we considered in our analysis. These 

costs include engine manufacturing costs, vehicle manufacturing costs, and operating costs. 

Engine manufacturer costs of emissions control include variable costs (for incremental 

hardware, assembly, and associated markups), fixed costs (for tooling, research and 

development, etc.), and warranty costs. We also evaluated whether vehicle manufacturers are 

expected to incur some variable hardware costs or some fixed costs. Owner costs can include 

fuel costs, diesel exhaust fluid costs, maintenance and repair costs, and costs associated with 

any time that the vehicle is down for repair. 

To produce a unit of output, engine and truck manufacturers incur direct and indirect 

costs. Direct costs include cost of materials and labor costs. Indirect costs are all the costs 

associated with producing the unit of output that are not direct costs – for example, they may 

be related to production (such as research and development), corporate operations (such as 

salaries, pensions, and health care costs for corporate staff), or selling (such as transportation, 

dealer support, and marketing). Indirect costs are generally recovered by allocating a share of 

the costs to each engine or vehicle sold. 

23 
 

 

 

 

 

 

 

 

 

 

 

For this cost analysis, EPA considered both the direct or “piece” costs and indirect 

costs of individual components of technologies. For the direct costs, we followed a bill of 

materials approach utilized in the Heavy-Duty GHG rule.

8 A bill of materials, in a general 

sense, is a list of components or sub-systems that make up a system— in this case, an item of 

technology which reduces NOx emissions. 

Indirect costs were accounted for using the Indirect Cost Multiplier (ICM) approach. 

The heavy-duty engine cost projections in this analysis used this same approach in the HeavyDuty GHG rule. For the GHG rule, EPA contracted with RTI International to update EPA’s 

methodology for accounting for indirect costs associated with changes in direct manufacturing 

costs for heavy-duty engine and truck manufacturers.9 These indirect cost multipliers are 

intended to be used, along with calculations of direct manufacturing costs, to provide 

improved estimates of the full additional costs associated with new technologies. As shown 

in Table 3-1 below, the ICM varies with the complexity of the technology and the maturity of 

the technology. 

Table 3-1: Indirect Cost Multipliers Used in this Analysisa 

CLASS COMPLEXITY NEAR 

TERM 

LONG 

TERM 

HD diesel engines Low 1.15 1.12 

Medium 1.24 1.18 

High1 1.28 1.19 

High2 1.43 1.29 

Note: 

a Rogozhin, A., et. al., “Using indirect cost multipliers to estimate the total cost of adding new technology in the automobile 

industry,” International Journal of Production Economics (2009); “Documentation of the Development of Indirect Cost 

Multipliers for Three Automotive Technologies,” Helfand, G., and Sherwood, T., Memorandum dated August 2009; “Heavy 

Duty Truck Retail Price Equivalent and Indirect Cost Multipliers,” Draft Report prepared by RTI International and 

Transportation Research Institute, University of Michigan, July 2010. 

The NCP regulations contain provisions to refund manufacturers for their research and 

development costs. Thus, EPA notes that the near term, low complexity ICM value of 1.15 

includes an ICM for research and development of 0.02.10 

Any DEF or fuel cost impacts on the operator are dependent on the number of miles 

projected to be driven by the vehicle, along with assumptions for a price for fuel and DEF. 

For this analysis, we used the projected mileage accumulation rates generated by the Motor 

Vehicle Emissions Simulator, more commonly called MOVES, EPA’s official mobile source 

emission inventory model.11 The MOVES2010a version was used along with some postprocessing of the MOVES output to develop separate projections of vehicle miles travelled 

(VMT) for the medium and heavy heavy-duty engine classes. These annual VMT projections 

are shown in Appendix A and include a projection of vehicle survival fractions that are based 

on scrappage rates. (Note that the mileage estimates in this rule are slightly different from the 

estimates used in the final rulemaking that established the 2010 heavy-duty engine criteria 

pollutant standards). We used the Energy Information Administration’s (EIA) Annual Energy 

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Outlook 2011(AEO2011) to project fuel prices through 2035.12 The annual price values 

(dollars per gallon) used in this analysis were adjusted from 2009 dollars (as supplied in 

AEO2011) to 2011 dollars. The annual fuel price projections are included in Appendix A. 

We also used a DEF cost of $2.99 per gallon based on the national retail pump average in 

November 2011.13 We are using a constant value for the DEF price because we are not aware 

of any reliable projections that the price will change significantly in the coming years. 

3.1.4 Upper Limit Engine 

The upper limit (UL) used in the NCP derivation is the emission level established by 

regulation above which NCPs are not available and a heavy-duty engine cannot be certified or 

introduced into commerce. CAA section 206(g)(2) refers to the upper limit as a level above 

the emission standard, set by regulation, that corresponds to an emission level EPA 

determines to be “practicable.” The upper limit is an important aspect of the NCP regulations 

not only because it establishes an emission level above which no engine can be certified, but it 

is also a critical component of the cost analysis used to develop the NCP factors. The 

regulations specify that the relevant NCP costs for determining the COC50 and the COC90 

factors are the cost difference between an engine emitting at the upper limit and one that 

meets the new standards (see 40 CFR 86.1113-87). 

The regulatory approach adopted under the prior NCP rules sets the default upper limit 

at the prior emission standard when a prior emission standard exists and that standard is 

changed and becomes more stringent. EPA concluded that the UL should be reasonably 

achievable by all manufacturers with vehicles in the relevant class. It should be within reach 

of all manufacturers of HDEs or HDVs that are currently allowed so that they can, if they 

choose, pay NCPs and continue to sell their engines and vehicles while finishing their 

development of complying engines. A manufacturer of a previously certified engine or 

vehicle should not be forced to immediately remove an HDE or HDV from the market when 

an emission standard becomes more stringent. The prior emissions standard generally meets 

these goals, because manufactures have already certified their vehicles to that standard. 

In the past, EPA has rejected suggestions that the upper limit should be more stringent 

than the prior emission standard because it would be very difficult to identify a limit that 

could be met by all manufacturers. For this rule, however, all manufacturers are currently 

certifying all of their engines at or below the 0.50 g/hp-hr FEL cap. Thus, since NCPs were 

not intended to allow manufacturers to increase emissions, we are setting the upper limit at 

0.50 g/hp-hr. This will conform to the purpose of NCPs, which is to allow manufacturers to 

continue selling engines they are producing, but not to allow backsliding. 

3.2 Manufacturer Cost Data 

Prior to this IFR/NPRM, we requested from several of the engine manufacturers cost 

estimates to identify the incremental costs they would expect to take a model year 2012 

engine from 0.50 g/hp-hr NOx to 0.20 g/hp-hr. The incremental costs could include variable 

costs such as the hardware component cost, fixed costs such as R&D costs, and operating 

25 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

costs such as fuel costs. These costs were supposed to include costs for vehicle manufacturers 

and operators as well as engine manufacturers. We requested that all costs be presented in 

2011 dollars. We also requested that manufacturers include only emission-related costs. 

We received responses from all of the manufacturers that we contacted, representing 

virtually all of the current U.S. heavy heavy-duty diesel engine market. However, all of the 

data that we received were identified as confidential business information (CBI). Therefore, 

we are not including details of the information in this document. Instead we are presenting 

only a broad description of the information provided. 

As discussed above in Chapter 2, there are a variety of means to reduce NOx. Each of 

the manufacturers who currently produce heavy heavy-duty diesel engines which emit less 

than 0.20 g/hp-hr NOx provided information about at least one pathway to reduce NOx from 

0.50 to 0.20 g/hp-hr. Each provided a combination of changes to hardware (and other 

associated costs such as warranty costs), DEF consumption rate, engine-out NOx emissions, 

and/or fuel consumption. However, none of the manufacturers selected the same combination 

of changes. In general, there were three distinct options presented to the Agency for baseline 

engine technology as shown in Table 3-2. 

Table 3-2 Manufacturer Baseline Engine Scenarios 

SCR? EGR? 

Baseline Engine Option #1 Yes Yes 

Baseline Engine Option #2 No Yes 

Baseline Engine Option #3 Yes No 

More than one manufacturer chose Option #1 and assumed the baseline 0.50 g/hp-hr 

engine would contain both SCR and EGR. One of these manufacturers stated that relatively 

small changes would have been needed to hardware, such as changes to the loading in the 

SCR catalyst and the addition of a sensor to control DEF dosing, along with a re-optimization 

of engine-out NOx emissions, fuel consumption, and DEF dosing to achieve 0.20 g/hp-hr 

NOx. Similarly, another manufacturer stated hardware changes may be required to the DOC 

and DPF system, along with possible changes to the turbocharger and EGR configuration. 

Based on these manufacturers’ projections that fuel will be much more expensive than DEF, 

they assumed that 0.50 g/hp-hr engines would have been recalibrated to have much higher 

engine-out NOx emissions. This would reduce fuel costs but increase DEF costs. It should 

26 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

be noted that in some cases, when these costs were recalculated using EPA’s projections of 

fuel and DEF prices, the compliance costs for these recalibrated engines were less than EPA’s 

estimated COC90. 

Another SCR manufacturer suggested that the Option #2 pathway, which assumed a 

non-SCR baseline engine with high performance EGR system, could have achieved a the 0.50 

g/hp-hr level and that they would have added an SCR system to achieve the 0.20 g/hp-hr NOx 

emissions. In its estimate for this scenario, the improvement to the fuel consumption due to 

the SCR system would be offset by the DEF consumption required for the SCR, and thus 

produce a neutral fluid economy impact. The manufacturer estimated costs based on its 

approximation of the costs and performance of engines produced by a competitor with NOx 

levels above 0.20 g/hp-hr and their own engine which emits at less than 0.20 g/hp-hr. 

The fourth SCR manufacturer suggested an approach which assumed the 0.50 g/hp-hr 

NOx engine would contain SCR, but not require EGR. This strategy would lead to an 

increase in engine-out NOx emissions which would require a change in DEF and fuel 

consumption. 

The non-SCR manufacturer also projected the costs it will ultimately incur to achieve 

0.20 g/hp-hr. Its methodology is not summarized here because we cannot do so without 

disclosing its product plans. We merely note that it projected costs lower than EPA’s 

estimated COC50 and COC90 costs. 

In summary, all of the SCR manufacturers stated that the compliance costs should 

include some cost for additional hardware (several hundred to a few thousand). Although not 

all of them estimated total incremental compliance costs to reduce NOx emissions from 0.50 

g/hp-hr to 0.20 g/hp-hr, those that did generally estimated the incremental costs to be in the 

$3,000 to $5,000 range. They recommended that EPA set the maximum penalty at a level at 

least as high as these cost estimates. 

3.3 EPA Analysis of Costs 

The NCP regulations are structured to calculate the penalty amounts based on certain 

cost parameters, primarily on the total incremental and marginal costs for the average and 

highest cost manufacturer. EPA has independently estimated these costs. 

3.3.1 Consideration of Manufacturer Costs Estimates 

In past rules, EPA has based the NCPs directly on the average of actual compliance 

costs for all manufacturers. This was possible because each of the manufacturers had actually 

produced engines at the upper limit (which was almost always the previous emission 

standard). It was relatively simple for them to provide us with a confidential engineering 

analysis of the costs they actually incurred, the cost of the additional hardware, and 

differences in performance characteristics. There was little opportunity for strategic estimates 

27 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

since manufacturers needed to reflect actual costs that EPA could confirm. Thus, it was 

reasonable for EPA to assume a high degree of accuracy in these costs. 

The same cannot be said for this NCP rule. Those manufacturers that have reached 

0.20 g/hp-hr generally have never had production engines at 0.50 g/hp-hr (the upper limit). In 

some cases they had development engines, but this does not fully address the costs that would 

have been incurred for production engines. While manufacturers have a great deal of 

experience projecting production costs based on development engines, there is no way for us 

to verify the actual hardware, fuel, and DEF costs that would have occurred. Thus, we must 

consider the costs to be at least somewhat speculative. 

It also must be considered that each of the manufacturers was aware that their 

estimated costs could be used to determine the amount of the NCP paid by a competitor. We 

are concerned about this because we cannot independently verify the validity of the 

manufacturers’ costs. Thus, while we have used the technical and cost inputs from all of the 

manufacturers to inform our estimate, we believe under these circumstances it would be 

inappropriate to simply average these inputs. 

3.3.2 Basis of EPA Cost Estimates 

Each manufacturer identified a different technology that it would have taken to reduce 

NOx emissions from 0.50 to 0.20 g/hp-hr. Each provided a combination of changes to 

hardware (and other associated costs such as warranty costs), DEF consumption rate, engineout NOx emissions, and fuel consumption. Based on our technical judgment and discussions 

with engine manufacturers, EPA is assuming the baseline engine used to meet the 0.50 g/hphr NOx level is equipped with SCR (as well as a cooled EGR system) to control the tailpipe 

NOx emissions. We believe estimating costs from this scenario is the least speculative 

method to estimate compliance costs. As noted later in Chapter 4 of this document, we also 

believe this method leads to penalty parameters that will remove the competitive disadvantage 

for complying manufacturers. 

Specifically, we developed a pathway to reduce tailpipe NOx emissions by 

maintaining constant engine-out NOx emissions (and thus having no impact on fuel 

consumption), but include some hardware modifications and a higher DEF consumption rate 

to reduce tailpipe NOx emissions. Based on our analysis and discussions with manufacturers, 

we estimate an average increase of 0.004 gallons of DEF per gallon of fuel consumption 

would have been needed to reduce the NOx emissions from 0.50 to 0.20 g/hp-hr. In addition 

to the DEF rate change, we project that some hardware costs would be incurred to achieve the 

NOx reduction to the standard level. 

We did consider the other technology paths suggested by manufacturers (which 

assumed baseline engines with EGR but not SCR, or baseline engines with SCR but not 

EGR). However, we believe it is likely that these baseline engines would have had high 

operating costs. In general, relying on EGR to reduce NOx emissions significantly increases 

fuel consumption. Technology paths that involve significant changes in fuel consumption 

28 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

possess high degrees of uncertainty in their COC90 estimates due to the uncertainty 

associated with the price of fuel in the future. Similarly, relying on SCR to reduce NOx 

emissions without EGR requires large amount of DEF. We are not aware of an authoritative 

estimate of future DEF prices. For the more modest change in the amount of DEF in EPA’s 

approach, we assumed a constant DEF price. In either case, it is possible that over the life of 

a truck, the increased operating costs could be greater than the original hardware cost. We do 

not have the information required to calculate these operating costs with the accuracy needed 

to use these scenarios as the basis of our NCPs. In addition, since there is only one 

manufacturer producing low-NOx engines without SCR, we believe that we could not have 

developed an accurate estimate of the actual compliance costs for non-SCR engines without 

revealing confidential business information from that manufacturer. 

3.3.3 NCP Compliance Costs 

This section provides details on the total compliance costs to reduce the tailpipe NOx 

emissions of a baseline engine at 0.50 g/hp-hr to 0.20 g/hp-hr. As mentioned above, our 

assumed baseline engine with 0.50 g/hp-hr NOx emissions contains an SCR aftertreatment 

system. As discussed in Chapter 2 above, there are many pathways that can be used to reduce 

tailpipe emissions, including changing the engine-out emissions, increasing the efficiency of 

the aftertreatment system, and hardware changes. We selected a pathway to determine the 

total compliance cost which assumes that the engine-out emissions remain constant and the 

NOx emissions are reduced primarily with an increase in DEF consumption, along with small 

hardware modifications. Without a change to engine-out NOx emissions levels, the agency 

assumes that there will be no impact on the fuel economy of these vehicles (see discussion 

below). 

We calculated two parallel estimates of compliance costs. The first was COC50, 

which represents the total life-cycle costs to reduce a typical baseline engine’s emissions to 

the level of the standard. The second was COC90, which represents the total life-cycle costs 

for reducing the emissions to the standard level for an engine produced by the manufacturer 

with the highest production costs. Our estimated average compliance costs (COC50) and 90th 

percentile costs (COC90) are shown in Table 3-3 and Table 3-4. The derivation of these 

estimates is described in detail below. 

Table 3-3: Medium Heavy-Duty COC50 and COC90 Estimates (Net Present Value to 2012 in 2011$) 

COC50 COC90 

NPV of Hardware and Lifetime DEF 

Consumption Costs 

$462 $682 

Table 3-4 Heavy Heavy-Duty COC50 and COC90 Estimates (Net Present Value to 2012 in 2011$) 

COC50 COC90 

NPV of Hardware and Lifetime DEF 

Consumption Costs 

$1,561 $1,919 

29 
30

3.3.3.1 Operating Costs: DEF Consumption

The rate of DEF consumption can be calculated from the chemical reaction necessary

to convert urea to ammonia and the reactions to reduce NOx. These reactions proceed

according to the following chemical equations:

CO(NH2)2+H2O → 2NH3 + CO2

4NO + 4NH3 + O2 → 4N2 + 6H2O

2NO2 + 4NH3 + O2 → 3N2 + 6H2O

As these equations show, one molecule of urea can reduce two molecules of NO or

one molecule of NO2. So the minimum molar ratio of urea needed to NOx reduced is equal to

the NO2 fraction plus one-half the NO fraction. This stoichiometric rate can be thought of as

the ideal rate. This ideal rate can be calculated relative to fuel consumption rates for a given

brake-specific NOx reduction from the following equation:

ௌிேை௫஻ቀ ൌ ݋݅ݐ݈ܴ݁ܽݑܨ݋ݐܨܧܦ݈݀݁ܽܫ

஻ௌி஼ ቁቀ ଵ

ெ ௐ ಿ ೀೣ

ቁቀெ ௢௟௘௦௎௥௘௔

ெ ௢௟௘௦ேை௫ቁቀ ଵ௎௥௘௔ெ ௢௟௔௥஽௘௡௦௜௧௬ቁ

For the purpose of this rule, we calculated the ideal DEF rate needed to achieve a 0.30

g/hp-hr NOx emission reduction based on the assumptions shown below in Table 3-5.

Table 3-5: DEF Calculation Assumptions

Assumptions for DEF Calculations

Brake-Specific Fuel Consumption 0.2173 liter/hp-hr14

Molar Percent of Total NOx that is NO at SCR Inlet 50%

Urea Concentration in DEF 32.5% by mass (5.904 mol/liter)

೒ ଴Ǥଷ ଴ቆ ൌ ݋݅ݐ݈ܴ݁ܽݑܨ݋ݐܨܧܦ݈݀݁ܽܫ

೓೛ష೓ೝ

଴Ǥଶଵ଻ଷ೗೔೟೐ೝೞ

೓೛ష೓ೝ

ቇቀ ଵ

ସ଺Ǥ଴଴଺௚Ȁ௠ ௢௟ቁቀ଴Ǥ଻ହଵ

ቁቀ ଵ

ହǤଽ଴ସቁൌ ͲǤͲͲ͵  ͅͳʹ

This means that under these conditions, the DEF rate would need to be increased by

0.38 gallons for every 100 gallons of fuel consumed.

We recognize that in many cases manufacturers use dosing strategies that overdose by

five percent or more of the total DEF rate to account for maldistribution of the ammonia in the

catalyst. For this rule, we believe that a five percent DEF overdose rate is appropriate for the

marginal increase in DEF consumption. Thus, we calculated the incremental DEF rate
 

 

 

 

increase as 1.05 times the ideal DEF rate of 0.38 percent, for a total DEF rate increase of 0.40 

percent, to reduce NOx emissions by 0.30 g/hp-hr. 

Next we calculated the NPV of this impact using a DEF price of $2.99 per gallon for 

calendar years 2012 and beyond. The DEF price represents today’s national average retail 

pump price of on-highway DEF.15 Appendix A contains the baseline fuel economy and the 

baseline DEF consumption rate, and projected vehicle miles travelled (VMT) for both 

medium and heavy heavy-duty engines. The baseline fuel economy of a typical medium and 

heavy heavy-duty vehicle were based on the baseline fuel consumption rates generated for the 

Heavy-Duty GHG rule.16 The baseline fuel economy used in the analysis was 9.71 mpg for 

medium heavy-duty vehicles and 4.93 mpg for heavy heavy-duty vehicles. Table 3-6 contains 

the projected annual incremental cost due to the 0.40 percent increase in DEF consumption. 

Table 3-6: Incremental DEF Cost due to 0.40% Increase in DEF Consumption (2011$) 

Calendar Year Medium HD Vehicle Heavy HD Vehicle 

2012 $45 $208 

2013 $43 $205 

2014 $39 $191 

2015 $36 $176 

2016 $33 $162 

2017 $30 $149 

2018 $27 $137 

2019 $24 $125 

2020 $22 $115 

2021 $20 $104 

2022 $18 $94 

2023 $16 $85 

2024 $14 $77 

2025 $13 $70 

2026 $12 $64 

2027 $11 $58 

2028 $10 $52 

2029 $ 9 $47 

2030 $ 8 $43 

2031 $ 7 $38 

2032 $ 6 $35 

2033 $ 6 $31 

2034 $ 5 $28 

2035 $ 5 $26 

2036 $ 4 $23 

2037 $ 4 $21 

2038 $ 3 $19 

2039 $ 3 $17 

2040 $ 3 $16 

2041 $ 3 $14 

The NPV of the lifetime costs of the incremental increase in DEF consumption, using 

a seven percent discount rate, is $275 for medium heavy-duty engines and $1,374 for heavy 

31 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

heavy-duty engines (in 2011 dollars). The heavy heavy-duty engine cost is greater due to the 

higher average vehicle miles travelled and lower miles per gallon for these vehicles over their 

lifetimes, as compared to medium heavy-duty engines. 

3.3.3.2 Operating Costs: Fuel Consumption 

As noted earlier, we are estimating that the 0.50 g/hp-hr baseline engine and the fully 

compliant engine will have the same fuel consumption rates. The two primary reasons for 

this are the relative importance operators place on keeping fuel consumption rates low for the 

customer and the upcoming GHG emission standards. The Heavy-Duty GHG rule requires 

that manufacturers reduce their CO2 emissions/fuel consumption starting in 2014 model year 

by an average of three to five percent from a baseline 2010 model year engine. Thus, a 

pathway to reduce NOx that leads to an increase in fuel consumption in 2012 model year 

would require the manufacturer to apply technologies to recover the increase by 2014 model 

year. 

As a sensitivity analysis, we estimated the lifetime costs of a 0.25 percent increase in 

fuel consumption using VMT (vehicle-miles traveled) patterns listed in Appendix A. We 

calculated the NPV of these impacts using projected diesel fuel prices, also included in 

Appendix A. 

The NPV of the lifetime costs of a 0.25 percent incremental increase in fuel 

consumption, using a seven percent discount rate, would be $196 for medium heavy-duty 

engines and $986 for heavy heavy-duty engines (in 2011 dollars). The heavy heavy-duty 

engine cost is greater due to the higher average vehicle miles travelled and lower miles per 

gallon for these vehicles over their lifetimes, as compared to medium heavy-duty engines. 

3.3.3.3 Hardware, Warranty, and Research & Development Costs 

An SCR aftertreatment system may require hardware modifications to achieve tailpipe 

emissions levels of 0.20 g/hp-hr. Based on conversations with manufacturers, we believe that 

the lower NOx emissions levels would require the addition of a sensor for better control over 

the urea injection. This cost would apply for both the typical and worst case engines. In 

addition, for the worst case manufacturer, we believe a larger SCR catalyst would be required 

to increase the NOx conversion efficiency, and a separate ammonia sensor would be needed 

for better control. We estimate that the size and loading of the catalyst would need to increase 

by about 20 percent. Note that this would be proportional to the increase in NOx reductions 

for engines with engine-out emissions of 2.0 g/hp-hr (1.5 g/hp-hr reduction versus 1.8 g/hp-hr 

reduction). 

We estimate hardware costs to reduce NOx emissions from 0.50 to 0.20 g/hp-hr. The 

hardware costs fall into two categories – improved SCR catalyst to increase the NOx 

conversion efficiency and an additional sensor to improve the ammonia dosing control. 

The incremental catalyst costs were estimated from the retail cost of a SCR system 

available today on a 6.6L diesel engine used in a heavy-duty pickup truck, which is a light 

32 
 

 

 

 

 

 

 

 

 

 

heavy-duty engine.17 We scaled the retail cost of the SCR system based on the ratio of typical 

engine displacement in each engine class, as shown in Table 3-7 below. 

Table 3-7: SCR Retail Price 

LHD (6.6L) MHD (8L) HHD (13L) 

Complete SCR 

Catalyst Retail Price 

$1,076 $1,304 $2,119 

Next, the direct manufacturing costs were calculated based on the Retail Price 

Equivalent (RPE) as shown in Table 3-8. The RPE for heavy-duty engines is 1.36 as found in 

the study conducted by ICF International for the Heavy-Duty Greenhouse Gas Emissions 

rulemaking.18 

Table 3-8: Direct Manufacturing Cost of SCR Catalyst 

MHD HHD 

Complete SCR Catalyst Direct 

Manufacturing Cost 

$959 $1,558 

The incremental cost of the catalyst to improve the NOx conversion efficiency through 

increased SCR catalyst volume and/or improved loading is estimated to be 20 percent of the 

total catalyst cost, as shown below. The agency then applied a 1.15 indirect cost multiplier 

(ICM) to convert the direct manufacturing costs to marked up costs. The 1.15 multiplier 

consists of two percent for research and development and 13 percent for warranty and other 

costs.19 The marked up costs are shown below in Table 3-9. 

Table 3-9: SCR Catalyst Incremental Cost 

MHD HHD 

Incremental Direct Manufacturing Cost $192 $312 

Research and Development Cost (2%) $4 $6 

Warranty and Other Cost (13%) $25 $41 

Total Incremental SCR Catalyst Cost $221 $358 

The cost for an ammonia sensor was developed by converting a sensor’s retail price to 

a direct manufacturing cost and then to a marked up cost, similar to the procedure used above 

for the SCR catalyst cost. The costs are shown in Table 3-10.20 The same sensor could be 

used for both the medium and heavy heavy-duty engines, thus we estimated that the sensor 

cost be the same for both engine classes. 

33 
 

 

 

 

 

 

 

 

 

 

 

 

Table 3-10: Incremental Sensor Cost 

MHD HHD 

Sensor Retail Price $221 $221 

Sensor Direct Manufacturing Cost $163 $163 

Sensor Research and Development Cost (2%) $3 $3 

Sensor Warranty and Other Cost (13%) $21 $21 

Total Incremental Sensor Cost $187 $187 

The total incremental hardware costs for the SCR catalyst and sensor are estimated to 

be $407 for MHD and $545 for HHD for COC90. The total incremental sensor cost is 

estimated to be $187 for both MHD and HHD engines for COC50. 

3.3.3.4 Total Costs 

The total estimated costs for COC50 and COC90 for MHD and HHD engines are 

included below in Table 3-11. 

Table 3-11: COC50 and COC90 Costs 

MHD HHD 

COC50 COC90 COC50 COC90 

DEF Operating Costs $275 $275 $1,374 $1,374 

Hardware Costs $163 $192 $163 $474 

Research and Development 

Cost 

$3 $4 $3 $9 

Warranty and Other Cost $21 $25 $21 $62 

Total Cost $462 $682 $1,561 $1,919 

3.3.4 MC50 and F 

MC50 and F are two parameters used in the existing regulations in the calculation of 

the value X (see 40 CFR 86.1113-87 (a)(4)). X is the compliance level (g/hp-hr) above the 

standard where the penalty equals COC50. This section describes the derivation of MC50 and 

F for medium and heavy heavy-duty engines. 

3.3.4.1 Estimated value of MC50 

MC50 is the marginal cost of compliance for the average vehicle, expressed in terms 

of dollars per g/hp-hr of NOx emission controlled. In concept, it would be based on the 

difference in total compliance costs for an engine that had emissions equal to the standard 

(i.e., 0.20 g/hp-hr) and an engine that had emissions slightly above the standard. For example, 

if we had an estimate of the total cost of compliance for a typical engine with emissions equal 

to 0.30 g/hp-hr, then we would calculate MC50 as the difference between that cost and the 

average divided by the difference in emissions (0.10 g/hp-hr). However, in the case of this 

rulemaking, we do not have such detailed information. Moreover, the range of NOx 

34 
 

 

 

 

 

 

 

 

 

 

 

emissions control is narrow, which means that marginal cost can reasonably be assumed to be 

constant over the range. Therefore, we have calculated MC50 as COC50 (the estimated costs 

of the average control strategies that we believe will be used by manufacturers to achieve 

NOx control in the 0.20 to 0.50 g/hp-hr range), divided by the difference between the upper 

limit and the standard (0.30 g/hp-hr). This would be $1,540 per g/hp-hr for medium heavyduty and $5,203 per g/hp-hr for heavy heavy-duty. 

3.3.4.2 Estimated value of F 

The parameter F is defined in the existing regulations as a value from 1.1 to 1.3 that 

describes the ratio of the 90th percentile marginal cost (MC90) to MC50. We calculated F by 

first calculating an MC90 in the same way that we calculated MC50. We then calculated the 

value of F that would give these values of MC90, and then set F equal to MC90 divided by 

MC50. Using this approach we calculated MC90 to be $2,273 per g/hp-hr for medium heavyduty and $6,397 per g/hp-hr for heavy heavy-duty. This led to F values of 1.48 for medium 

heavy-duty and 1.23 for heavy heavy-duty. However, since F is capped at 1.3 under the 

regulations, we set F equal to 1.3 for medium heavy-duty engines and adjusted MC90 to equal 

$2,002 per g/hp-hr. 

35 
 

 

 

 

 

 

Chapter 4: Regulatory Parameters for NCPs 

4.1 NCP Equations and Parameters 

EPA's existing regulations for calculating NCPs are contained in 40 CFR Part 86 

Subpart L. NCP schedules can be calculated from those same equations using the Upper 

Limit, COC50, COC90, MC50, and F values from the previous chapter, and a standard level 

(S) of 0.20 g/hp-hr NOx. The values for X are calculated using these values and the following 

equation from Subpart L: 

X = (COC50 / F / MC50) + S 

The purpose of this equation is to achieve a penalty curve in which the slope for 

engines with compliance levels near the standard is equal to the 90th percentile marginal cost 

of compliance (MC90 equals MC50 times F). 

Table 4-1: NCP Parameters 

NCP Parameter Medium Heavy-Duty Engines Heavy Heavy-Duty Engines 

COC50 $462 $1,561 

COC90 $682 $1,919 

MC50 ($ per g/hp-hr) $1,540 $5,203 

MC90 ($ per g/hp-hr) $2,002 $6,397 

F 1.3 1.23 

UL (g/hp-hr) 0.50 0.50 

S (g/hp-hr) 0.20 0.20 

X (g/hp-hr) 0.43 0.44 

When the factors listed in Table 4-1 are input into the existing NCP equations 

specified in 40 CFR 86.1113(a)(1) and (2), for year n=1 (that is, the first year the penalties are 

available, thus the annual adjustment factor is equal to 1), the resulting penalty versus 

compliance level for each service class are shown in Figure 4-1 and Figure 4-2. Note that the 

bend in the penalty curve medium heavy-duty engines in Figure 4-2 occurs because F is 

capped at 1.3. 

36 
$-

$200 

$400 

$600 

$800 

$1,000 

$1,200 

$1,400 

$1,600 

$1,800 

$2,000 

0.20 0.25 0.30 0.35 0.40 0.45 0.50 

NCP Value 

NOx Emissions Level (g/hp-hr) 

2012 Heavy Heavy-Duty Engine NCP 

Figure 4-1: Heavy Heavy-Duty Engine NCP 

37 
 

 

$-

$100 

$200 

$300 

$400 

$500 

$600 

$700 

$800 

0.20 0.25 0.30 0.35 0.40 0.45 0.50 

NCP Value 

NOx Emissions Level (g/hp-hr) 

2012 Medium Heavy-Duty Engine NCP 

Figure 4-2: Medium Heavy-Duty Engine NCP 

4.1.1 Refund for Engineering and Development Costs 

Section 1113-87(h) of the existing regulations specify provisions under which a 

manufacturer that pays NCPs can recover some of the amount it has paid, provided it certifies 

a conforming replacement for the engines which used the NCPs. The maximum amount that 

can be recovered is limited to 90 percent of the portion of the penalty which EPA determines 

to be related to engineering and development. Thus, it is necessary for EPA to establish in 

each NCP rule a factor for each service class (FE&D) which define the fractions of the NCP 

which is considered to be related to engineering and development. We are setting these 

factors equal to 90 percent of the value which is equal to 0.02 times the direct manufacturing 

costs of the incremental hardware costs. The factors are listed in Table 4-2. 

Table 4-2: Engineering and Development Refund Factors 

Service Class FE&D Factor 

Medium Heavy-Duty Engines 0.009 

Heavy Heavy-Duty Engines 0.004 

38 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.2 Statutory Evaluation of NCPs 

Section 206(g) of the Clean Air Act, which provides EPA authority to set NCPs, also 

sets some conditions. Specifically, section 206(g)(3) requires that NCPs meet three 

conditions: 

1) It must account for the degree of emission nonconformity. 

2) It must increase periodically to provide incentive for nonconforming 

manufacturers to achieve the emission standards. 

3) It must remove the competitive disadvantage to conforming manufacturers. 

The existing regulations are structured so that NCPs based on the default formulas will 

automatically conform to the first two conditions. This structure is also intended to result in 

NCPs that will also remove the competitive disadvantage to complying manufacturers. It 

does this by setting the maximum penalty based directly on the worst case (90th percentile) 

cost that a complying manufacturer had to pay to reduce emissions from the upper limit to the 

standard. 

However, subjective factors can possibly make the monetary value of the competitive 

advantage higher or lower than the compliance costs incurred by the complying 

manufacturers and users. Possible factors include: 

• Perceived inconvenience of using DEF 

• Public relations benefits for a company using the cleanest engines 

• Fears of new technology 

• Uncertainty about future fuel and DEF prices 

• Operator preference for a particular vehicle manufacturer limiting engine choice 

• Marketing claims and unknown performance characteristics 

For example, a purchaser unfamiliar with SCR technology may imagine that costs and 

convenience will be worse than they actually would be, and as a result may avoid purchasing 

an SCR-equipped truck unless the manufacturer discounts the price. This would exacerbate 

the disadvantage for SCR manufacturers beyond what would be calculated based on costs 

alone. On the other hand, a trucking company that promotes itself as being an 

environmentally responsible company may be willing to pay a premium to ensure that its 

trucks have low-emitting engines. Similarly, a purchaser with a strong preference for a 

particular truck brand may be relatively unaffected by the price of the compliant engines if 

they are the only engines it can get in a truck of that brand. These factors would tend to make 

the disadvantage for compliant manufacturers less than what would be calculated based on 

costs alone. 

EPA recognizes that insufficient information is available to conclusively prove that the 

NCP removes all competitive disadvantages to all complying manufacturers. However, it is 

still helpful to consider market data to put the amount of the NCPs into context. To do this, 

39 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPA considered the available information about market prices and market share. As 

described below, both market prices and market shares support our conclusion that the NCPs 

are large enough to remove the competitive disadvantage to complying manufacturers. The 

analyses are presented here for the comparison of engines equipped with SCR to those that are 

not equipped with SCR. 

4.2.1 Market Prices 

When heavy-duty truck manufacturers increase prices to recover costs associated with 

reducing emissions, they typically identify the cost as an emission surcharge. The surcharges 

are applied at the time the trucks are purchased and are intended to cover all additional costs 

to the engine and truck manufacturers, including R&D, tooling, hardware, warranty and other 

overhead. They are not intended to cover operating costs. In many cases, purchasers may 

negotiate a lower surcharge, especially when purchasing a large number of trucks at once. 

We considered the surcharges that manufacturers publicly released as the additional 

cost for the 2010 emission controls. The surcharges ranged from $9,000 to $9,600 for SCR 

equipped heavy heavy-duty engines, and was $8,000 for the one non-SCR manufacturer.21 

To the extent these surcharges are based on the actual costs, it suggests that the cost advantage 

for non-SCR engines is about $1,000 to $1,600 dollars. Of course, different manufacturers 

may be applying different discounts to their surcharges, or use different factors to markup 

their actual costs. 

Note that these costs are relative to the manufacturers’ 2009 engines which generally 

had NOx emissions near 1.2 g/hp-hr, which is significantly above the upper limit for the 

NCPs. So these costs do not reflect the costs upon which the NCP are based. For complying 

manufacturers, the surcharges include the costs that would be associated with reducing NOx 

emissions to 0.50 g/hp-hr as well as the cost associated with further reducing NOx emissions 

to 0.20 g/hp-hr. 

These surcharges are not fundamentally inconsistent with our understanding of the 

differences in hardware costs between the two technology paths. SCR manufacturers need to 

recover the costs of the SCR catalyst itself, as well as the costs of the urea supply and delivery 

systems. The non-SCR manufacturer needs to recover the costs of the additional 

turbochargers and EGR coolers. We believe the hardware costs of SCR systems to be at least 

$1,000 more than the hardware costs of the non-SCR system. Of course, each manufacturer 

also needs to recover its R&D, warranty and other overhead costs. 

4.2.2 Market Share 

As noted in Chapter 1, we also evaluated the market share of each of the largest Class 

8 heavy-duty truck manufacturers in 2008 through October 2011 (shown in Figure 1-4). 

Although the market share of each manufacturer normally varies from year to year (for a 

variety of reasons, such as introduction of a new model by one manufacturer or new 

purchases by large fleets), observing longer term trends can be instructive. The most 

40 
 

significant trend observed is that the one non-SCR manufacturer has not gained market share 

since 2008, even though it appears to be offering its engines for a lower price. The market 

appears to consider the SCR engines to be worth about $1,000 to $1,600 more than the nonSCR alternative. 

41 
 

 

 

 

 

 

 

APPENDIX A: Calculations 

This appendix provides additional details for the calculations used to estimate the NCP 

costs. The appendix is split into two sections –DEF Consumption Rates and Fuel Prices and 

Costs. 

Calculation of DEF Consumption Costs 

This section of the appendix includes the values used in the DEF consumption cost 

calculations. The first table lists the inputs used for the analysis. The second table shows the 

fleet average annual vehicle miles travelled (VMT) of all 2012 model year vehicles within a 

given class (e.g., medium heavy-duty diesel vehicles) after considering the survival fraction of 

each vehicle class. 

Table: Inputs Used for DEF Consumption Analysis 

Parameter Input 

Medium HD Vehicle Typical Fuel Economy (mpg) 9.7 

Heavy HD Vehicle Typical Fuel Economy (mpg) 4.9 

Incremental DEF Consumption to Achieve 0.20 g/hp-hr NOx (gallon 

DEF/gallon fuel) 

0.0040 

DEF Price ($/gallon) $2.99 

Discount Rate 7% 

42 
 

 

 

Table: Annual Vehicle Miles Traveled by Calendar Year for a Typical 2012 Model Year Vehicle 

Calendar Year Medium HD Vehicle Heavy HD Vehicle 

2012 34,698 82,130 

2013 33,610 81,056 

2014 30,664 75,406 

2015 27,882 69,566 

2016 25,349 64,019 

2017 22,988 58,820 

2018 20,822 54,014 

2019 18,851 49,532 

2020 17,074 45,303 

2021 15,326 41,073 

2022 13,784 37,113 

2023 12,410 33,674 

2024 11,212 30,606 

2025 10,161 27,805 

2026 9,180 25,162 

2027 8,280 22,781 

2028 7,460 20,553 

2029 6,721 18,605 

2030 6,109 16,822 

2031 5,520 15,190 

2032 4,934 13,679 

2033 4,493 12,408 

2034 4,054 11,206 

2035 3,682 10,140 

2036 3,321 9,172 

2037 2,977 8,272 

2038 2,683 7,484 

2039 2,460 6,789 

2040 2,185 6,133 

2041 1,973 5,537 

Fuel Prices 

EPA did not include additional fuel operating costs as part of the NCP calculation. 

However, if we did project an impact on fuel consumption, then we would have used the 

Annual Energy Outlook (AEO) 2011 fuel price projections adjusted to 2011 dollars. Below is 

the Consumer Price Index used in the fuel price conversion and a table with the annual diesel 

fuel price projections. 

43 
 

The annual Consumer Price Index values used in this analysis are the following:22 

• 1982-1984 = 100 

• 2009 = 214.537 

• 2010 = 218.056 

• 2011 (average January through October) = 224.740 

The AEO 2011 fuel price forecasts are provided by EIA in terms of 2009 dollars. 

Thus, for this analysis, we adjusted EIA’s diesel fuel price projections upward by a factor 

equal to 224.740 divided by 214.537 to convert them into 2011 dollars. The diesel fuel prices 

used in the analysis are included in the table below. 

Table: Post-Tax Diesel Fuel Price Projections (2011$) 

Calendar Year Diesel Fuel Price per Gallon 

2012 $ 3.06 

2013 $ 3.11 

2014 $ 3.17 

2015 $ 3.23 

2016 $ 3.34 

2017 $ 3.45 

2018 $ 3.54 

2019 $ 3.63 

2020 $ 3.69 

2021 $ 3.71 

2022 $ 3.78 

2023 $ 3.80 

2024 $ 3.88 

2025 $ 3.90 

2026 $ 3.93 

2027 $ 3.98 

2028 $ 4.00 

2029 $ 4.05 

2030 $ 4.02 

2031 $ 4.02 

2032 $ 4.03 

2033 $ 4.03 

2034 $ 4.06 

2035 $ 4.07 

2036 $ 4.15 

2037 $ 4.22 

2038 $ 4.30 

2039 $ 4.38 

2040 $ 4.46 

2041 $ 4.54 

44 
Table: Operating Cost Increase Due to a 0.25% Increase in Fuel Consumption 

Calendar Year MHD Engine HHD Engine 

2012 $27 $128 

2013 $27 $128 

2014 $25 $122 

2015 $23 $114 

2016 $22 $109 

2017 $20 $103 

2018 $19 $97 

2019 $18 $92 

2020 $16 $85 

2021 $15 $77 

2022 $13 $71 

2023 $12 $65 

2024 $11 $60 

2025 $10 $55 

2026 $9 $50 

2027 $9 $46 

2028 $8 $42 

2029 $7 $38 

2030 $6 $34 

2031 $6 $31 

2032 $5 $28 

2033 $5 $25 

2034 $4 $23 

2035 $4 $21 

2036 $4 $19 

2037 $3 $18 

2038 $3 $16 

2039 $3 $15 

2040 $3 $14 

2041 $2 $13 

45 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References
 

1 Federal Register. Volume 76, September 15, 2011. Page 57106.
	

2 FleetOwner.com. “SCR Will Eliminate Need for Active DPF Regeneration for Volvo Trucks Next Year.” 

March 2009. Last accessed on June 27, 2011 at http://fleetowner.com/mid-america/volvo-trucks-scr-solution0320/index1.html
	

3 Cavataio, G., et.al. Performance Characterization of Cu/Zeolite and Fe/Zeolite Catalysts for the Selective 

Catalytic Reduction of NOx.
	

4 Cavataio, G., et.al. SAE 2008-01-1025. Enhanced Durability of Cu/Zeolite Based SCR Catalyst. 2008.
	

5 R. Aneja, K, Yury, and D. Kayes, DEER Conference, Aug 3 -6, 2009, Page 14.
	

6 Cummins. “Meeting 2010 Emissions – The Cummins Solution” Last viewed on November 25, 2011 at
	

http://cumminsengines.com/every/misc/Technology/Aftertreatment_System.page
	

7 D. Stanton, DEER Conference, August 3 -6, 2009, page 4.
	

8 76 FR at 57200 (September 15, 2011)
	

9 RTI International. Heavy-duty Truck Retail Price Equivalent and Indirect Cost Multipliers. July 2010.
	

10 RTI International. Heavy-duty Truck Retail Price Equivalent and Indirect Cost Multipliers. Table 4-8. July 

2010.
	

11 Information regarding the MOVES model can be found at http://www.epa.gov/otaq/models/moves/index.htm
	

12 U.S. Energy Information Administration. Annual Energy Outlook 2011. Last accessed on November 18,
	

2011 at http://38.96.246.204/forecasts/aeo/.
	

13 DieselExhuastFluid.com. Last accessed on November 14, 2011 at http://www.dieselexhaustfluid.com/.
	

14 The brake specific fuel consumption value in liters per hp-hour was converted from the baseline heavy heavyduty fuel consumption over the FTP cycle referenced in the Heavy-Duty GHG Rule (76 FR at 57236, September 

15, 2011). 

15 DieselExhuastFluid.com. Last accessed on November 14, 2011 at http://www.dieselexhaustfluid.com/. 

16 U.S.EPA. Final Rulemaking to Establish Greenhouse Gas Emissions Standards and Fuel Efficiency Standards 

for Medium- and Heavy-Duty Engines and Vehicles – Regulatory Impact Analysis. Page 6-2. The baseline fuel 

efficiency for HHD is 20.3 gal/100 mile and vocational diesel vehicles equal 10.3 gal/100 mile. 

17 NewGMParts.com. SCR system for 6.6L Diesel GM 3500 HD Pickup Truck retailed for $1,076. Last viewed 

on 12/5/2011 at 

46 
 

 

 

 

 

 

 

 

http://www.newgmparts.com/partlocator/index.cfm?action=getJointLocator&siteid=213815&chapter=§ioni 

ds=7,2489&groupid=60222&make=6&model=Silverado%203500HD&year=2011&catalogid=1&displayCatalo 

gid=0 

18 RTI International. Heavy-duty Truck Retail Price Equivalent and Indirect Cost Multipliers. July 2010. 

19 RTI International. Heavy-duty Truck Retail Price Equivalent and Indirect Cost Multipliers. Table 4-8. July 

2010. 

20 NewGMParts.com. NOx sensor for a 6.6L diesel engine for a GM 3500 HD Pickup truck retailed for $221. 

Last accessed on 12/5/2011 at 

http://www.newgmparts.com/partlocator/index.cfm?action=getJointLocator&siteid=213815&chapter=§ioni 

ds=2,2496&groupid=2497&subgroupid=104139&make=6&model=Silverado%203500HD&year=2011&catalog 

id=2&displayCatalogid=0 

21 FleetOwner.com, “Daimler releases 2010 emissions surcharges”, August 6, 2009, Jim Mele. 

22 U.S. Department of Labor, Bureau of Labor Statistics. Consumer Price Index. All Urban Consumers (CPI-U), 

U.S. City Average, all items. Last accessed on November 16, 2011. 

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