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Regulatory

Announcement

 Printed on Recycled Paper

United States

Environmental Protection

Agency

Air and Radiation EPA420-F-02-025

August 2002

Office of Transportation and Air Quality

Non-Conformance Penalties for

Heavy-Duty Diesel Engines

The U.S. Environmental Protection Agency (EPA) is finalizing nonconformance penalties that could be used by manufacturers of heavyduty diesel engines unable to meet the 2004 model year non-methane

hydrocarbon plus nitrogen oxides (NMHC+NOx) emission standard.

These penalties allow a manufacturer to produce and sell nonconforming engines upon payment of a penalty. The penalty, which is

assessed on a per-engine basis, varies with the certified emission level

for the engine family involved.

What are Non-conformance Penalties?

Non-conformance penalties (NCPs) are monetary penalties that allow a

vehicle or engine manufacturer to sell engines that do not meet the

emission standards. Under a penalty structure previously established by

regulation, manufacturers may choose to pay a penalty on a per-engine

basis rather than comply with the applicable standard.

The Clean Air Act outlines the key requirements of an NCP program.

The Act requires that:

• The penalties increase with the degree of non-compliance with the

emission standard and that the penalties increase over time.

• Emissions under an NCP program may not go above an upper limit

established by regulation.

• The NCPs remove any competitive disadvantage that might otherwise accrue to a manufacturer that is complying with the standards.
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Which Engines and Vehicles would be Covered?

The non-conformance penalties will be available for 2004 and later

model year heavy-duty highway diesel engines, including engines used

in urban buses. EPA is establishing NCPs for the 2004 NMHC+NOx

standard for highway heavy-duty diesel engines. This standard is 2.5

grams per brake-horsepower-hour of NMHC+NOx.

Why is EPA Establishing these Penalties?

NCPs provide flexibility that fosters long-term improvement in emissions without driving manufacturers out of the market. When EPA

established the 2004 NMHC+NOx standard in 1997, we committed to

establishing NCPs in time for the 2004 model year, if the need for such

NCPs became apparent. This final rule is the final step towards fulfilling

that commitment. As with past NCP rules, this rule relies primarily on

cost information provided by the manufacturers of heavy-duty diesel

engines in order to develop the penalty rates.

NCPs are authorized for heavy-duty engines under section 206(g) of the

Clean Air Act. A 1985 rulemaking established three basic criteria for

determining the eligibility of emission standards for NCPs in any given

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

difficult to meet. Second, substantial work must be required in order to

meet the emission standard. Third, a technological laggard must be

likely to develop. A technological laggard is considered to be 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.

These three criteria have been satisfied with respect to the NMHC+NOx

standard that applies to 2004 and later model year heavy-duty diesel

engines. Therefore, it is appropriate at this time to establish NCPs for

this emission standard.

What are the Requirements?

The actual penalties that a manufacturer would pay for each non-complying engine are determined by formulas that already exist in the

federal regulations. The final rule specifies certain parameters that, when

plugged into the formulas along with the emissions of the engine and the

incorporation of other factors, will determine the amount a manufacturer

must pay. Key parameters that determine the NCP a manufacturer must

pay are the estimated average cost of compliance, the estimated cost of
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compliance for a near worst-case engine, and the degree to which the

engine exceeds the emission standard. Engine emissions may not exceed

an upper limit designated in the regulations. The table below provides

some examples of the calculated penalties at several emission rates

under this rule.

Penalty Rates at Several Example Emission Levels1

1 The penalties are for exceedance of the 2.5 gram per brake orsepower-hour

NMHC+NOx standard. They are expressed in 2001 dollars and are for the first

year of non-compliance (the penalties increase with subsequent years).

2 g/bhp-hr = grams per brake horsepower-hour.

3 For the light and medium heavy-duty service classes, and for urban buses, the

upper limit is established at 4.5 g/bhp-hr, therefore no NCPs are applicable to

emissions at 6.0 g/bhp-hr. For the heavy heavy-duty diesel engine service class,

the upper limit is set at 6.0 g/bhp-hr.

In 1998, the Department of Justice and the Environmental Protection

Agency announced a settlement with seven major manufacturers of

diesel engines to resolve 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. These consent decrees with the

Federal Government contained a number of provisions applying to

heavy-duty on-road, and in some cases, nonroad, engines. The consent

decrees contain provisions for monetary penalties to be applied to

manufacturers unable to meet the specified October 2002 highway

emission limits. The decrees specify that such penalties are to be based

upon the NCPs for the 2004 standards; if such NCPs have not been

promulgated then the penalties revert to being based upon the existing

NCPs, which pertain to the 1998 heavy-duty diesel NOx standard.

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Health and Environmental Benefits

NCPs have a minimal environmental impact. They provide flexibility

that fosters long-term improvement in emissions without driving manufacturers out of the market. We can not predict how many manufacturers

would make use of the NCPs, therefore the emission impact cannot be

quantified. We expect relatively few engine families to be certified

under these provisions. Any impacts should be short-term in nature,

because the structure of the penalties, by increasing over time, discourages long-term use, and because the penalty figures are high enough

such that long-term use is not a viable option for the manufacturers.

Costs

NCPs generally have minimal adverse economic impacts. Use of them

is optional; manufacturers have the flexibility and will likely choose

whether or not to use NCPs based on their ability to comply with emissions standards. Manufacturers that choose to make use of the NCPs

will incur those costs, which are based, in part, on the cost of complying

with the emission standards. Without NCPs, a manufacturer that has

difficulty meeting the standards has only two alternatives: fix the nonconforming engines, perhaps at a prohibitive cost, or do not produce/sell

them. The availability of NCPs provides manufacturers with a third

alternative, yet protecting the manufacturer that has chosen to incur the

costs of complying with the standards.

For More Information

You can access documents on this rulemaking electronically on the

Office of Transportation and Air Quality Web site at http://

www.epa.gov/otaq/hd-hwy.htm or by contacting us at:

U.S. Environmental Protection Agency

Office of Transportation and Air Quality

Assessment and Standards Division

2000 Traverwood Drive

Ann Arbor, MI 48105

E-mail: ASDInfo@epa.gov

Voicemail: (734) 214-4636