STAFF REPORT 

INITIAL STATEMENT OF REASONS FOR PROPOSED RULEMAKING 

PUBLIC HEARING TO CONSIDER AMENDMENTS TO THE CURRENT 

REGULATIONS FOR SMALL OFF-ROAD ENGINES 

Date of Release: October 3, 2008 

Scheduled for Consideration: November 20, 2008 

Location: 

Byron Sher Auditorium 

Air Resources Board, Cal/EPA Headquarters 

1001 I Street 

Sacramento, CA 95812 

Air Resources Board 

P.O. Box 2815 

Sacramento, CA 95812 

This report has been reviewed by the staff of the California Air Resources Board and 

approved for publication. Approval does not signify that the contents necessarily reflect 

the views and policies of the Air Resources Board, nor does mention of trade names or 

commercial products constitute endorsement or recommendation for use. 
1 

TABLE OF CONTENTS 

EXECUTIVE SUMMARY .........................................................................................................................................2

1. INTRODUCTION ................................................................................................................................................3

2. BACKGROUND...................................................................................................................................................4

2.1 LEGAL AUTHORITY ......................................................................................................................................4

2.2 REGULATORY HISTORY................................................................................................................................4

2.3 EMISSIONS INVENTORY ................................................................................................................................6

2.4 RELATED FEDERAL REGULATIONS ...............................................................................................................7

2.5 PUBLIC PROCESS ..........................................................................................................................................7

3. DISCUSSION........................................................................................................................................................8

3.1 CERTIFICATION EMISSIONS CREDITS ............................................................................................................8

3.2 PRODUCTION EMISSION CREDITS ...............................................................................................................10

3.3 ZERO EMISSION EQUIPMENT CREDITS........................................................................................................12

3.4 WARRANTY CONTACT................................................................................................................................13

3.5 DURABILITY PERIOD ..................................................................................................................................13

3.6 ETHANOL BLEND CERTIFICATION FUEL OPTION ........................................................................................13

4. ENVIRONMENTAL AND ECONOMIC IMPACTS .....................................................................................14

4.1 ENVIRONMENTAL IMPACT ..........................................................................................................................14

4.1.1 Emission Reductions............................................................................................................................14

4.1.2 Environmental Justice..........................................................................................................................14

4.2 COST AND COST-EFFECTIVENESS ...............................................................................................................15

4.3 ECONOMIC IMPACT ON THE ECONOMY OF THE STATE ................................................................................15

4.3.1 Legal Requirement...............................................................................................................................15

4.3.2 Businesses Affected ..............................................................................................................................15

4.3.3 Engine Manufacturers .........................................................................................................................16

4.3.4 Impact on Small Businesses.................................................................................................................17

4.3.5 Potential Impact on Distributors and Dealers.....................................................................................17

4.3.6 Potential Impact on Business Competitiveness....................................................................................17

4.3.7 Potential Impact on Employment.........................................................................................................17

5. ALTERNATIVES CONSIDERED ...................................................................................................................17

5.1 NO ACTION.................................................................................................................................................18

5.2 MORE STRINGENT EMISSION STANDARDS TO COMPENSATE FOR THE BANKED EMISSION CREDITS ...........18

5.3 HARMONIZATION WITH THE U.S. EPA’S CREDIT PROGRAM.......................................................................18

5.4 ISSUES OF CONTROVERSY...........................................................................................................................19

5.5 SUMMARY OF ALTERNATIVES EVALUATED................................................................................................19

6. CONCLUSIONS AND RECOMMENDATIONS............................................................................................19

7. REFERENCES ...................................................................................................................................................20

APPENDIX A: Proposed Amendments to the Small Off-Road Equipment and Engines Exhaust 

Emission Regulation 

APPENDIX B Proposed Amendments to the California Exhaust Emission Standards and Test 

Procedures for 2005 and Later Small Off-Road Engines 
2 

EXECUTIVE SUMMARY 

The amendments proposed herein to the California emissions regulations and test 

procedures for new small off-road engines (SORE) and equipment are intended to 

address issues that have developed since the Air Resources Board (Board or ARB) last 

considered the regulations (September 2003) and to enhance alignment with other ARB 

and United States Environmental Protection Agency (U.S. EPA) regulations. 

In addition to the changes discussed below, staff is proposing that the Board modify the 

SORE regulations to address the excessive accumulation of emission credits. 

Specifically, staff proposes the removal of the mechanisms which allow for generation of 

new production emission credits. Staff also proposes limiting the lifetime of existing 

production emission credits and new certification emission credits. These proposed 

changes would result in a more balanced emission credit program which should 

encourage introduction of new cleaner technology, yet keep in check excessive 

emission credit balances. If the proposed changes are not adopted, emissions related 

to the more than 10,265 tons of combined certification and production emission credits 

could represent an increase of 5.4 tons per day over a 5-year period, if all the current 

certification and production emission credits were spent. Without the limitations 

proposed by staff, the large bank of HC+NOx credits could jeopardize the State’s 

Implementation Plan. 

To encourage the increased use of zero emission equipment (ZEE) such as electrics, 

staff proposes to allow certification emission credit generation for advanced technology 

ZEE capable of performing at the same level as professional-grade equipment. 

Staff is also proposing to streamline the regulations and harmonize with U.S. EPA to the 

extent feasible. 

Staff is proposing other minor amendments including: 

• Durability period to include a “years” definition 

• Clarification of warranty contact requirement 

• Permitting the use of fuel with up to ten percent ethanol in certification testing 

A more in depth description of staff’s proposal is included in Chapter 3 of this report.

Staff recommends that the Board adopt this proposal. 
3 

1. INTRODUCTION 

Small off-road engines (SORE) are spark-ignition engines rated at or below 19 kilowatts 

(25 horsepower). The vast majority of these engines use gasoline, but some use an 

alternative fuel such as liquefied petroleum gas (LPG) or compressed natural gas 

(CNG). SORE are used to power a broad range of lawn and garden equipment 

including lawn mowers, leaf blowers, and lawn tractors, as well as generators and small 

industrial equipment. Exhaust and evaporative emissions from off-road equipment are 

a significant source of hydrocarbon (HC) and oxides of nitrogen (NOx) emissions in 

California. Both NOx and HC emissions contribute to the State’s ozone problem. 

This report presents proposed changes to the current SORE regulations. These 

proposed changes include the elimination of “production emission” credit generation 

and limitations on the lifetime and usage of “certification emission” credits, as well as 

other minor changes. These terms, and the overall credit generation provisions, are 

discussed in greater detail later in this report. The changes to the credit program would 

help ensure advancement of cleaner engine technology, while preserving manufacturer 

flexibility. 

This report addresses the need for the proposed regulatory changes, provides a 

summary of the proposed amendments, presents the environmental and economic 

impacts of the proposal, and discusses alternatives to staff’s proposal. Appendix A 

contains the Proposed Amendments to the Small Off-Road Engine Exhaust Emission 

Control Regulations. Appendix B contains the Proposed Amendments to the California 

Exhaust Emission Standards and Test Procedures for 2005 and Later Small Off-Road 

Engines. 
4 

2. BACKGROUND 

2.1 Legal Authority 

In 1988, the Legislature enacted the California Clean Air Act (CCAA), which declared 

that attainment of state ambient air quality standards is necessary to promote and 

protect public health, particularly the health of children, older people, and those with 

respiratory diseases. The Legislature also directed that these standards be attained by 

the earliest practicable date. Specifically, Health and Safety Code (HSC) sections 

43013 and 43018 direct ARB to achieve the maximum feasible and cost-effective 

emission reductions from all off-road mobile source categories, which includes the 

SORE category addressed in this proposal. 

2.2 Regulatory History 

In December 1990, the Board approved exhaust emission control regulations for new 

SORE. These engines are equal to or less than 19 kilowatts and include both handheld 

equipment (such as string trimmers and chain saws) and nonhandheld equipment (such 

as lawn mowers and generators, as well as industrial equipment). 

The SORE regulations include exhaust emission standards, emissions test procedures, 

and provisions for warranty and production compliance programs (See Title 13, 

California Code of Regulations, sections 2400-2409 and the documents incorporated 

therein). The SORE category was the first off-road category subject to emission control 

regulations. The adopted regulations consisted of two tiers. The first tier began in 

1995, while the Tier 2 standards were to become effective with the 1999 model year. 

In March 1998, the Board revised the Tier 2 standards and delayed their implementation 

from 1999 to 2000, but required manufacturers to meet the emission standards for the 

life of the engine instead of just when the engines are new. In addition, the Board 

approved an emissions credit program. The program involved two types of credits: 

certification emission credits and production emission credits. 

Certification emission credits are similar to those used in other ARB emission programs 

(e.g., the heavy-duty diesel program) to provide flexibility to manufacturers. Certification 

emission credits are generated when a manufacturer certifies an engine to a family 

emission limit (FEL) below the applicable emission standard. Thus, they represent real 

and enforceable emissions reductions beyond those required by regulation. The value 

of the credits is determined by the following formula: 

Certification Emission Credits 

 = (Standard – FEL) x Sales x Power x Emission Durability Period x Load Factor
5 

Production emission credits are generated based on the amount the production line test 

result, or Compliance Level (CL), is below the FEL, using a similar formula: 

 

Production Emission Credits 

 = (FEL – CL) × Sales × Power × Emissions Durability Period × Load Factor

Production emission credits were originally intended for a manufacturer to use to offset 

compliance problems, but no manufacturer has had to use production emission credits 

for that purpose to date. The manufacturer also is allowed to convert production 

emission credits to certification emission credits at a rate of 1.1 production emission 

credits to 1.0 certification emission credit. When a manufacturer accumulates a large 

amount of production emission credits, it tends to convert them to certification emission 

credits, which in turn allows the continued production of engines which emit above the 

standard. Because they are based on the manufacturer’s compliance level, production 

emission credits do not necessarily represent emission reductions beyond those 

required by regulation. Manufacturers traditionally target a compliance level below the 

actual standard to ensure compliance in production, even without the possibility of 

obtaining production emission credits; any air quality benefit from the compliance level 

is achieved regardless. (This is addressed further in Section 3.2.) In short, the 

production emission credits have been more of a detriment to air quality than a benefit. 

The adoption of production emission credits was unique, in that no other existing mobile 

source category was allowed to generate and use production line credits for compliance 

purposes. At the time the 1998 proposal was drafted, the United States Environmental 

Protection Agency (U.S. EPA) was also considering the use of production emission 

credits and staff’s proposal was intended to harmonize with the anticipated, future 

U.S. EPA rulemaking. Ultimately, however, U.S. EPA decided against offering 

production emissions credits as an option for these engines and equipment in its final 

rule. 

In 2003, the Board adopted more stringent exhaust emissions standards. These new 

standards applied to engines above 80 cc (generally used in nonhandheld equipment 

such as lawn mowers and generators), and were based on reductions achievable with 

the use of a catalyst. The new catalyst-based standards were to be implemented with 

the 2007 model year for engines with displacements between 80 and 225 cc, and with 

the 2008 model year for engines 225 cc and above. Overall, these catalyst-based 

standards represented an additional 35 percent reduction in exhaust emissions from the 

previous HC+NOx emission standards. 

The current exhaust emission standards for spark-ignition SORE are shown in 

Table 2.1. 
6 

Table 2.1. Tier 3 Exhaust Emission Standards for Spark-Ignition Engines 

(grams per kilowatt-hour) 

Model Year Displacement Category Durability Periods 

(hours) 

Hydrocarbon 

plus Oxides of 

Nitrogen(1)(3)

Carbon 

Monoxide 

Particulate 

2005 and <50 cc 50/125/300 50 536 2.0(2)

subsequent 50-80 cc, inclusive 50/125/300 72 536 2.0

(2)

2007 and 

subsequent 

>80 cc - <225 cc 125/250/500 10.0 549 

2008 and 

subsequent 

≥ 225 cc 125/250/500/1000 8.0 549 

 (1) The Executive Officer may allow gaseous-fueled (i.e., propane, natural gas) engine families, that satisfy the requirements of the 

regulations, to certify to either the hydrocarbon plus oxides of nitrogen or hydrocarbon emission standard, as applicable, on the basis of the 

non-methane hydrocarbon (NMHC) portion of the total hydrocarbon emissions. 

 (2) Applicable to all two-stroke engines. 

 (3) Engines used exclusively to power products which are used exclusively in wintertime, such as snowthrowers and ice augers, at 

the option of the engine manufacturer, need not certify to or comply with standards regulating emissions of HC+NOx or NMHC+NOx, as 

applicable. If the manufacturer exercises the option to certify to standards regulating such emissions, such engines must meet such 

standards. If the engine is to be used in any equipment or vehicle other than an exclusively wintertime product such as a snowthrower or ice 

auger, it must be certified to the applicable standard regulating emissions of HC+NOx or NMHC+NOx as applicable. 

During the extensive public process before the Board meeting in 2003, many of the 

engine and equipment manufacturers strongly opposed the use of catalysts on the small 

off-road equipment, claiming the use of catalysts created safety issues. Since safety 

issues dominated the discussions, potential emission credit issues were overshadowed. 

Staff did not foresee that the potential for accumulation of credits would become so 

overwhelming that engine manufacturers would not need to make modifications to their 

engines for years past the introduction of the more stringent emission standards. In 

fact, as of the end of the 2007 model year, manufacturers have banked over 10,265 

tons of combined certification and production HC+NOx emission credits, and are 

expending the credits to avoid using catalysts and avoid producing engines that meet 

the Tier 3 emission standards. This means that even though the new Tier 3 emission 

standards are in effect, California is not fully achieving the cleaner air these standards 

were intended to deliver. If the combined credits were expended over a five-year period 

typical of equipment life, emissions would be 5.4 tons per day higher than if the engines 

met the standards. These credit issues, the focus of staff’s proposal, are discussed in 

greater detail in Section 3 of this report. 

2.3 Emissions Inventory 

Figure 2.1 illustrates the contribution of SORE to statewide HC+NOx emission levels for 

calendar years 2000, 2010, and 2020. Since the implementation of exhaust emission 

standards for small engines, the emissions contribution has declined and was projected 

to decline further over the next decade as a result of the emission standards adopted in 

2003. However, due to the large amount of banked certification and production 

emission credits, the exhaust emission levels may not decline for years. 
7 

Figure 2.1. SORE Evaporative and Exhaust Emissions Inventory 

Statewide ROG(1) + NOx Emissions 

0

50

100

150

200

Tons Per Day

2000 2010 2020

Model Year

(1) ROG, or reactive organic gases, is the reactive part of hydrocarbon 

 emissions which contribute to the formation of ozone in the presence 

 of sunlight and other gases. 

2.4 Related Federal Regulations 

Federally, SORE are regulated under title 40, Code of Federal Regulations, part 90. 

The federal “phase 2” standards currently in effect are equivalent in stringency to the 

California Tier 2 standards. Although the federal program allows generation and use of 

certification emission credits, it does not include any provision for production emission 

credits. 

In September 2008, the U.S. EPA adopted changes to several equipment categories 

including regulations for SORE which would reduce hydrocarbon emissions by about 35 

percent compared to their current levels. These “phase 3” standards will bring the 

national emission standards down to the same levels as California Tier 3 standards. 

The new exhaust emission standards are to begin in 2011 or 2012, depending on the 

size of the engine. U.S. EPA also included new requirements to reduce evaporative 

emissions from these fuel systems. The U.S. EPA’s evaporative emission standards, 

which will also go into effect in 2011 and 2012, are comparable in stringency to ARB’s 

program, which was adopted in 2003 and went into effect in 2007. 

2.5 Public Process 

Staff conducted public workshops on November 14, 2007 and April 21, 2008 to aid in 

developing the proposed regulations. Workshop notices were sent out via email on the 

msprog listserve list and orspark listserve list to all stakeholders, including 

environmental organizations, engine manufacturers, equipment manufacturers, and 

trade associations, as well as other interested parties. At the workshops and 

subsequently, staff has shared draft proposed regulatory language with all stakeholders. 

Public information concerning the development of this proposal was also made 

available on ARB's website at www.arb.ca.gov/msprog/sore/sore.htm. 
8 

During development of this proposal, staff also met with many of the engine and 

equipment manufacturers individually to discuss their concerns. A list of meetings held 

with a number of stakeholders is summarized in Table 2.2 below. 

Table 2.2 

List of Meetings and Telephone Calls

Stakeholder Date(s) 

American Honda Co. 2/8/08, 8/12/08 

Andreas Stihl AG & Co. 10/4/07, 2/8/08, 3/27/08, 8/12/08, 8/22/08 

Briggs & Stratton Corp. 2/8/08, 4/3/08, 8/12/08 

ECHO Incorporated 2/8/08, 3/10/08, 4/24/08, 8/12/08, 8/22/08 

Engine Manufacturers Association 2/8/08, 4/24/08, 6/24/08, 8/12/08 

John Deere 8/12/08 

Kawasaki Motors Corp. 2/8/08, 8/12/08 

Kohler Co. 2/7/08, 2/8/08, 4/21/08, 4/24/08, 8/12/08, 8/22/08 

Lion Cells 7/14/08 

MECA 11/29/07 

Outdoor Power Equipment Institute 2/8/08, 4/24/08, 8/12/08, 8/22/08 

RedMax/Zenoah America, Inc. 2/8/08, 8/12/08 

Robin America (Fuji Heavy) 8/12/08 

Shindaiwa Inc. 2/8/08, 3/27/08, 8/12/08, 8/22/08 

Tecumseh 8/12/08 

The Toro Company 2/8/08, 4/24/08, 8/12/08, 8/22/08 

TTI/Techtronic Industries 2/8/08, 8/12/08 

As a result of the oral and written comments received, staff made significant changes to 

the proposed regulations, which are reflected in the staff's proposal. 

3. DISCUSSION 

3.1 Certification Emissions Credits 

Certification emission credits were intended to provide flexibility to manufacturers. In 

concept, manufacturers would earn certification emission credits by introducing some 

engine families with cleaner technologies (e.g., catalysts) earlier than necessary, then 

have more time to improve other engine families that were smaller in volume or were 

otherwise more challenging to bring into compliance. Staff’s expectation was that 

averaging, banking and trading of certification emission credits would provide 

manufacturers with another tool to manage compliance, while also encouraging early 

introduction of clean engines. 

While the certification emission credit program did provide flexibility, it has had mixed 

results with regards to advancing technology. Instead of using catalysts, which are a 

technically feasible and cost-effective means to comply with the Tier 3 standards, 
9 

manufacturers have been able to use banked credits (which could include production 

emission credits that have been converted to certification emission credits), allowing 

them to certify “dirtier” engines. Most importantly, this is not a situation involving just 

one or two manufacturers. As shown in Table 3.1, for 2008 model year engines with a 

displacement between 80 and 225 cc, over 90 percent exceeded the HC+NOx standard 

through the use of credits. Overall, seven out of ten new 2008 model year SORE 

exceed the certification emission standard. 

Table 3.1. 2008 Model Year SORE Engines which Exceed the 

SORE Tier 3 HC+NOx Standard 

Engine 

Displacement 

Total Estimated 

Sales 

Number of engines 

exceeding the 

standard 

Percentage of 

engines exceeding 

the standard 

Less than or equal 

to 80 cc 894,707 164,227 18.4%

From 80 to 225 cc 3,295,601 3,005,791 91.2%

Greater than or 

equal to 225 cc 399,147 149,756 37.5%

Total 4,589,455 3,319,774 72.3%

Note: Excluding cold-weather only equipment which do not need to meet HC+NOx standard. 

Manufacturers that do certify with catalyst-equipped engines tend to be smaller 

companies which are new or are not able to obtain many certification or production 

emission credits. Other manufacturers who may not have intended to use the credit 

program found it necessary to participate in the credit program to remain competitive 

with manufacturers who used emission credits. Overall, the effect has been to delay 

implementation of cleaner technology. Furthermore, the large bank tends to indicate 

that the emission standards themselves are not as stringent as they could be, in that 

many more credits were generated than were needed. 

There are other reasons that can further explain how this situation has occurred. Some 

manufacturers made incrementally cleaner engines and banked many certification 

emission credits over a long period of time. Specifically, manufacturers have been able 

to bank certification emission credits since 1999, when the emission standards were 

much more lenient (i.e., 16.1 g/kW-hr for lawn mower engines). Relatively minor 

modifications made at that time enabled manufacturers to come in well below the 

emission standard, and thus generate and bank credits for years. Although the current 

standards are now more stringent (i.e., 10 g/kW-hr for lawn mower engines), some of 

the same engine families which were used to accumulate certification emission credits 

before the emission standard change were able to use emission credits to meet the 

current emission standard without improvements. 

To further exacerbate the situation, the certification emission credits remain available for 

use indefinitely, even though the engines from which the emission credits were 

generated deteriorate, fall out of warranty, and are taken out of service. Thus, since 

certification emission credits are intended to represent air quality benefits which are 
10 

time sensitive, allowing the credits to be banked for an indefinite time period has led to 

large credit banks which slow progress towards cleaner engines and results in dirtier air. 

To remedy this issue, staff proposes that the certification credit lifetime be limited to five 

years. This limit coincides with the useful lifetime of SORE equipment. Although many 

lawn mowers or other engines remain in service much longer than five years, staff is 

unaware of any supporting evidence that would suggest that these mowers remain in 

emissions compliance beyond that time period, nor is there any mechanism to enforce 

emissions compliance beyond the emissions durability period. Staff believes limiting the 

credit life to five years strikes a balance between not allowing for credits at all and 

keeping credits from accumulating indefinitely. 

3.2 Production Emission Credits 

Production emission credits also contribute to the problem of excessive credit banks. 

As mentioned previously, manufacturers design their engines such that during 

production line testing, the engines will perform “comfortably” below the emission 

standard, or FEL. Thus, in general, any emissions margin observed during production 

testing is used by manufacturers as an emissions “cushion” to ensure compliance. 

However, only in the SORE program1

 are manufacturers permitted to use the emissions 

margin to generate production emission credits. It was envisioned that these 

generated/banked credits could be used at a later date if emissions compliance 

problems were encountered. However, no such problems have been encountered 

since the adoption of the SORE credit program in 1998. Thus, the production emission 

credit balances continue to grow. 

In a sense, manufacturers are getting a double benefit from their compliance margins. 

Credits are recognition that an engine is cleaner than the required emission standard. 

In contrast, the primary purpose of any production compliance margin is to ensure that 

the chance of exceeding the emission standards in actual production is minimized. 

Thus, it is essentially part of the design strategy to meet the emission standards, not an 

additional effort to go beyond the requirements. As noted, no other ARB program 

allows generation and use of credits based on production line emission results that fall 

below the emission standard or FEL. 

In addition to allowing a manufacturer to benefit from its compliance margin, production 

emission credits are intrinsically inflated beyond the actual value of the compliance 

margin. This inflation occurs because of the differences between certification testing 

and production line testing. Whereas certification testing is conducted on the worstcase engine model within an engine family, production line testing can be on any engine 

 

(1) Although the U.S. EPA had considered using production emission credits at one time for small sparkignition engines, it ultimately rejected the idea. When the U.S. EPA emission standards went into effect, 

the manufacturers of small engines were able to make the transition to the phase 2 emission standards 

without the use of production emission credits. The U.S. EPA has not introduced production emission 

credits for their phase 3 emission standards. Thus, termination of the production emission credit program 

would harmonize with U.S. EPA. 
11 

model. There is no guarantee that the engines used for production line testing are 

representative of the worst-case engine model. Thus, the amount of production 

emission credits generated can exceed the value of the nominal compliance margin. 

This leads to yet another concern in that the existing program allows production 

emission credits to be converted to certification emission credits. As the production 

emission credits, which provide no real emission benefits, are converted to certification 

emission credits, the overall credit banks grow even larger. Although only a small 

amount of production emission credits are currently banked as production emission 

credits, over 4,500 tons have already been converted to certification emission credits. 

Overall, production emission credits represent more than half of the total banked 

credits, as shown in Table 3.2. 

Table 3.2. Comparison of Production Emission Credits to Total Banked Emission 

Credits 

Tons HC+NOx Percentage of 

Total Banked 

Credits 

Total Banked Credits 10,265

Production Credits Banked 782 7.6 %

Production Credits Converted to 

Certification Credits 

4,526 44.1 %

Total Contribution of Production Credits 5,308 51.7 %

Note: Credit values, incorporating 2007 model year reports received as of August 22, 2008 

Finally, it must be recognized that production emission credits are not necessary to 

meet current SORE requirements. Production emission credits are being used to delay 

compliance with the current Tier 3 standards, even though cost-effective technology is 

available to sufficiently reduce emissions. If the production credit program is removed, 

manufacturers would still have an incentive to produce cleaner engines because the 

manufacturer would still be able to claim certification credits for the cleaner-thanrequired engines. 

For these reasons, staff has concluded that the production emissions credit program 

has not functioned as envisaged; it has resulted in higher emissions and needs to be 

eliminated. Staff therefore proposes to end generation of new production emission 

credits in 2009, but to allow manufacturers an additional year, until 2010, to use or 

convert production credits to certification credits. This period would ensure that those 

manufacturers who have already converted their production emission credits to 

certification credits do not have an unfair advantage over those who have not yet 

converted them. 
12 

3.3 Zero Emission Equipment Credits 

The Board has long been interested in ways to expand the use of electric equipment in 

the SORE category. In 2004, staff reported to the Board specifically on potential 

electrification programs, concluding at that time that the residential market has 

significant penetration of electric equipment, but that current electric equipment cannot 

meet the demands of the commercial user. However, advances in similar equipment 

such as power tools, and advances in battery development have led staff to propose 

modifications to the SORE program to encourage manufacturers to develop 

professional grade zero-emission equipment (ZEE). In addition to providing reductions 

in criteria pollutants, increased use of ZEE would provide greenhouse gas reductions. 

Although electric equipment can be classified and labeled as “Blue Sky” equipment 

under the current regulations, such equipment are not eligible to participate in the 

emission credit program. Staff proposes to modify the program, to allow certification 

emission credit generation for advanced technology ZEE capable of performing at the 

same level as commercial gasoline-powered equipment. To insure that real air quality 

benefits are achieved, staff proposes that this equipment meet the following 

requirements. 

• The equipment must be able to perform at a level equivalent to that of currently 

available, professional level SORE equipment (i.e., equipment used by 

professional gardeners). 

• The equipment must not be powered by an electric cord. Corded equipment 

already exists and is generally not conducive to professional usage, and so 

awarding emission credits for it would not advance technology beyond its current 

state. 

• Each recharge or refueling should allow the equipment to perform at a 

professional performance level for the same duration as typical professional 

equipment of the same type. Furthermore, the time to repower (e.g., time to 

replace battery pack) the ZEE should be equivalent to the time of refueling typical 

spark-ignition equipment. 

• The equipment must be as durable as the equivalent professional SORE 

equipment. Thus, it should be able to be operated over the appropriate SORE 

test cycle repeatedly for the maximum durability period for that equipment. 

To obtain certification, a manufacturer would need to provide a description of the 

equipment (including performance data showing that it meets the ZEE criteria), a 

description of the power source, and an energy density or specific energy test. 

All other standard certification requirements such as providing the warranty, labels, etc. 

would also need to be met. Upon certification of advanced technology ZEE, the 

manufacturer would receive credits determined by the following equation: 

ZEE Certification Emission Credits 

 = Equivalent HC+NOx Emissions Standard x Sales x Power x EDP x Load Factor
13 

In general, ZEE credits could be averaged, banked, and traded as normal certification 

emission credits, and would be subject to the same five-year credit life. However, 

because ZEE emission credits could be generated by manufacturers not currently in the 

SORE category (e.g., those who produce electric equipment, but not engines), staff 

proposes some additional limitations on ZEE usage to ensure that any potential influx of 

emissions credits does not result in the delay of improvements to engine-powered 

equipment that has been seen under the current credit program. Specifically, staff 

proposes that ZEE credits can be used only up to 40 percent above the standard. If an 

engine family’s emissions are higher than 40 percent above the standard, they would 

need to use other certification credits to cover the difference. Staff believes that the 

addition of ZEE credits will promote advanced technology and allow manufacturers 

additional flexibility. Staff intends to follow the implementation of the ZEE credit 

program closely to ensure it accomplishes its goal of encouraging advanced technology. 

3.4 Warranty Contact 

Currently, warranty guidelines require that manufacturers provide an American toll free 

number with the assumption that the receiver of the call would speak English. Although 

this guideline has been in place for several years, some newer manufacturers are not 

complying with this requirement or its intent. Staff therefore proposes to place this 

requirement in regulatory language to clarify what is needed to protect the consumers 

who purchase such equipment in the State of California. Manufacturers are generally in 

support of this proposed provision. 

3.5 Durability Period 

Most ARB and U.S. EPA engine programs include a useful life definition in terms of 

years of use, extent of engine operation in hours, or vehicle usage in miles. Currently, 

the SORE and equipment durability period is only defined in terms of hours. These 

engines do not typically have hour meters on them, so there is no way of determining 

how long an engine has been operated and whether or not it meets the time 

requirements. Staff proposes to amend the durability period to add five years of use as 

an alternative to hours. For example, for engines which currently have a durability 

period of 125 hours, the durability period would become either five years or 125 hours, 

whichever comes first. The five-year period is equivalent to a typical median life of 

SORE equipment; U.S. EPA also uses this time period in their new rule. 

3.6 Ethanol Blend Certification Fuel Option 

Staff proposes to allow manufacturers the option to use a certification fuel with up to ten 

percent ethanol content, provided that they use the same fuel for certification with the 

U.S. EPA. This option would enhance harmonization with U. S. EPA, and could reduce 

testing costs for some manufacturers. 
14 

4. ENVIRONMENTAL AND ECONOMIC IMPACTS 

4.1 Environmental Impact 

4.1.1 Emission Reductions 

The intent of the proposed regulations is to obtain the emission reductions from small 

engines and equipment which was expected from the previously adopted Tier 3 

standards. By 2010, on an annual average basis, the Tier 3 emission standards would 

result in statewide emission reductions of 3.2 tons per day of NOx and 18.5 tons per 

day of HC. In 2020, the estimated reductions increase to 7.5 and 42.0 tons per day for 

NOx and HC, respectively. Although there are no new incremental benefits from this 

proposal, the proposal will assure these benefits are realized. If the proposed changes 

are not adopted, emissions related to the more than 10,265 tons of combined 

certification and production emission credits could result in an increase of 5.4 tons per 

day for 5 years, if all the current certification and production emission credits were 

spent. 

The emission reductions from fully meeting the Tier 3 standards are part of the 

reductions needed to attain health-based air quality standards in California. As such, 

these reductions are included in the State Implementation Plan (SIP). Extensive usage 

of banked credits that allow engines to emit above the standards would interfere with 

attainment and exceed the emission limits in the SIP. Specifically, without the 

limitations proposed by staff, the large bank of HC+NOx credits could jeopardize the 

SIP. 

4.1.2 Environmental Justice 

State law defines environmental justice as the fair treatment of people of all races, 

cultures, and incomes with respect to the development, adoption, implementation, and 

enforcement of environmental laws, regulations, and policies (Senate Bill 115, Solis; 

Stats 1999, Ch. 690; Government Code § 65040.12(c)). The Board has established a 

framework for incorporating environmental justice into the ARB's programs consistent 

with the directives of State law. The policies developed apply to all communities in 

California, but recognize that environmental justice issues have been raised more in the 

context of low income and minority communities, which sometimes experience higher 

exposures to some pollutants as a result of the cumulative impacts of air pollution from 

multiple mobile, commercial, industrial, area wide, and other sources. Over the past 

twenty-five years, the ARB, local air districts, and federal air pollution control programs 

have made substantial progress towards improving the air quality in California. 

However, some communities continue to experience higher exposures than others as a 

result of the cumulative impacts of air pollution from multiple mobile and stationary 

sources and thus may suffer a disproportionate level of adverse health effects. Since 

the same ambient air quality standards apply to all regions of the State, all communities, 

including environmental justice communities, will benefit from the air quality benefits 

associated with the proposal. Alternatives to the proposed recommendations, such as 
15 

recommending no change to the current program could adversely affect all 

communities. As additional relevant scientific evidence becomes available, the small 

off-road engine standards will be reviewed again to make certain that the health of the 

public is protected with an adequate margin of safety. 

To ensure that everyone has an opportunity to stay informed and participate fully in the 

development of the proposal, staff has held workshops in El Monte and has distributed 

information through the internet, as described in section 2.5 of this report. 

4.2 Cost and Cost-Effectiveness 

The proposed changes to the SORE program should not change the cost of complying 

with the Tier 3 standards as estimated in 2003, because the estimates at the time did 

not assume extensive use of credits to comply. No additional expenses are expected 

for the engine manufacturers other than those already assumed previously. 

4.3 Economic Impact on the Economy of the State 

The proposed regulations are not expected to impose a significant cost burden, if any, 

to engine or equipment manufacturers. As noted in Section 4.2, the proposed 

regulations should not increase costs beyond those accounted for in the 2003 

rulemaking. Based on the above assumptions, staff expects the proposed regulations 

to impose no adverse impact on California competitiveness and employment. The 

following sections are intended to fulfill ARB’s legal requirements related to economic 

analysis and economic impact for stakeholders affected by these proposed regulations. 

4.3.1 Legal Requirement 

Section 11346.3 of the Government Code requires State agencies to assess the 

potential for adverse economic impacts on California business enterprises and 

individuals when proposing to adopt or amend any administrative regulations. The 

assessment shall include a consideration of the impact of the proposed regulations on 

California jobs, business expansion, elimination or creation, and the ability of California 

business to compete. 

Also, section 11346.5 of the Government Code requires State agencies to estimate the 

cost or savings to any state, local agency and school district in accordance with 

instructions adopted by the Department of Finance. The estimate shall include any nondiscretionary cost or savings to local agencies and the cost or savings in federal funding 

to the state. 

4.3.2 Businesses Affected 

Any business involved in the manufacturing of SORE and equipment will potentially be 

affected by the proposed regulations. Also, potentially affected are businesses that 
16 

supply engines and parts to these manufacturers, and those businesses that buy and 

sell equipment in California. 

4.3.3 Engine Manufacturers 

There are currently 60 SORE manufacturers that market certified engines in California, 

as shown in Table 4.2. Sixteen of these manufacture only engines less than or equal to 

80 cc for use in such applications as chainsaws, trimmers, and other handheld 

products. Twenty-nine exclusively manufacture engines greater than 80 cc for use in 

such applications as walk-behind and riding mowers, portable generators, and other 

nonhandheld products. Fifteen manufacturers produce engines for both handheld and 

nonhandheld applications. None of the manufacturers is located in California although 

some have small repair and distribution operations in California. Some manufacturers 

of the evaporative emission components are located in California, but they would not be 

affected by these proposed modifications. 

Table 4.2 

Manufacturers with Small Engines Certified in California (Model Year 2008) 

Produce < 80 cc Produce > 80 cc Produce Both 

Andreas Stihl Alto U.S. Champion Power 

China Xingyue Group Briggs & Stratton Honda Motor 

Homelite Consumer Chongqing AM-Pride Kawasaki Heavy Industries 

Husqvarna AB Chongqing Dajiang Power Mitsubishi Heavy Industries 

Husqvarna Outdoor Chongqing Huawei Lianlong Ningde Cue 

Husqvarna Zenoah Chongqing Hybest Shandong Huasheng Zhongtian 

Kioritz Chongqing Lifan Shanghai Alton 

Makita Numazu Chongqing Maifeng Shindaiwa 

Maruyama Chongqing Sanding Suzhou Erma Machinery 

McCulloch Chongqing Weima United Power Equipment 

MTD Southwest Chongqing Zongshen Wenling Zhengjiang Vehicle 

Nikko Tanaka Engineering Cummins Power Generation Wuxi Kipor Power 

Suzhou Honbase Eagle Solutions Yamaha 

Suzhou Tiger Fuji Heavy Industries Yancheng Jiangdong 

Yongkang Apollo Generac Power Systems Zhejiang Robot 

Zhejiang Zomax Jiangsu Changfa Group 

 Jiangsu Sumec-Linhai 

 Kohler 

 Kohler Power Systems 

 Kubota 

 Liquid Combustion 

 Loncin 

 Onyx Environmental 

 Power Solutions 

 Shanghai Grow Development 

Tecumseh Power 

Tecumseh Products 

Tornado 

Westerbeke 
17 

4.3.4 Impact on Small Businesses 

The proposed regulations have only a minor impact on small businesses that buy and 

sell off-road equipment. Any impacts that the small businesses might experience due to 

the Tier 3 standards were already considered at the 2003 Board Hearing. 

4.3.5 Potential Impact on Distributors and Dealers 

Most engine and equipment manufacturers sell their products through distributors and 

dealers, some of which are owned by manufacturers and some are independent. Most 

independently owned dealers are small businesses. Some low-volume manufacturers 

also deal directly with their customers. The distributors and dealers sell about 

1,700,000 units of small engine equipment per year in California. Although they are not 

directly affected by the proposed amendments, the amendments may affect them 

indirectly. If an increase in the price of engines and equipment reduces sales volume, 

dealers’ revenue would be affected adversely. But again, no significant price increase, 

if any, is expected. 

4.3.6 Potential Impact on Business Competitiveness 

The proposed amendments would have no significant impact on the ability of California 

engine and equipment manufacturers to compete with manufacturers of similar products 

in other states. This is because all manufacturers that produce these engines and 

equipment for sale in California are subject to the proposed amendments regardless of 

their location. Furthermore, all of the engine manufacturers, and most of the equipment 

manufacturers, are located outside of California. 

4.3.7 Potential Impact on Employment 

The proposed regulations are not expected to cause a reduction in California 

employment because, as previously noted, the economic impact of the proposal should 

be minimal. Also, California accounts only for a small share of manufacturing 

employment in off-road engine, equipment, and component production. 

5. ALTERNATIVES CONSIDERED 

Staff evaluated three additional alternatives to the currently proposed regulations. 

These included: 

• Take no action. 

• Set more stringent emission standards to compensate for the banked 

emission credits. 

• Harmonize with the U.S. EPA’s credit program. 

These alternatives are discussed in detail below. 
18 

5.1 No Action 

The first alternative evaluated was to take no action. Under this alternative, many of the 

engine and equipment manufacturers would be able to continue to delay 

implementation of the new SORE emission standards across their entire product line for 

years. If the Board adopted yet more stringent standards later, the same situation 

would likely occur; the manufacturers would have so many credits banked that cleaner 

engines would not be offered until years after the nominal implementation of the new 

standards. In particular, the production emission credits which are obtained from the 

compliance margin would continue to reduce emission benefits that were intended to 

provide improved air quality. Additionally, with the adoption of U.S. EPA’s new emission 

standards, it is possible that manufacturers could produce SORE for California that 

have higher emissions than those in the rest of the country. Thus, staff believes that 

keeping the production emission credits and allowing an unlimited lifetime for the 

certification emission credits would be a detriment to California’s air quality in the near 

future. As noted in Section 4.1.1, if the proposed changes are not made, the usage of 

banked credits could jeopardize SIP attainment. 

5.2 More Stringent Emission Standards to Compensate for the Banked 

Emission Credits 

Another alternative would be to require that SORE standards be set at a level that 

would force the banked credits to be redeemed more quickly. The more stringent 

standard would likely need to be based on either alternative fueled engines or electric 

powered equipment to be stringent enough to ensure that the existing credit banks are 

reduced to zero within five years. There are advantages to this scenario in that as the 

credit banks disappear the engines would have to be much cleaner. However, those 

manufacturers who did not obtain any emission credits previously would need to meet 

the emission standards immediately, putting them at a great competitive disadvantage. 

Also, as different manufacturers exhausted their credit accounts, they might not be able 

to meet the more stringent standards and thus could be forced out of the California 

market. This option was considered in the previous rulemaking for this category and 

was shown to be cost-ineffective. 

5.3 Harmonization with the U.S. EPA’s Credit Program 

Another alternative would be to adopt the U.S. EPA’s SORE credit program. At first 

glance, this may seem to work toward harmonization between the California and federal 

program. It would eliminate the production emission credit problem. However, because 

the time frames for implementing the emission standards for the California and federal 

programs are different, this could cause major confusion for the engine manufacturers 

in tracking the emission credits. There are benefits to the U.S. EPA’s program in that 

the phase 2 emission credits will expire within two years of a change in emissions 

standards. The concern however is that the new phase 3 emission credits would not 
19 

expire until after the next standard change is made and thus could be in place and 

result in higher emissions for a long period of time. 

5.4 Issues of Controversy 

There are several issues related to this proposal on which staff and industry continue to 

disagree. These include the termination of the production emission credits program, 

credit lifetime, and incentives for advanced technology. 

With regards to the production emissions credits program, staff’s rationale is described 

in section 3.1.1. With regards to credit lifetime, staff had presented some alternatives 

during the workshop process that allowed longer lifetimes, either with discounting of 

credits, or with extended warranty coverage to ensure that engines remained in service 

for the full life of the credits. Industry rejected these options, and did not provide 

sufficient evidence that the equipment life was greater than the proposed credit life. 

Manufacturers also claimed that the limitation on the lifetime of the emission credits 

would hinder development of new technology. However, a review of the number of 

engines which exceed the standards (shown in Table 3.1) shows that the current 

unlimited credit life has not encouraged early introduction of new emission control 

technologies. Regardless, staff intends to continue to investigate how the program may 

be modified to encourage advanced technologies in applications for which they are 

currently not in widespread use. 

5.5 Summary of Alternatives Evaluated 

After carefully considering the remaining issues and the suggested alternatives, staff 

believes its proposal is the best option. 

6. CONCLUSIONS AND RECOMMENDATIONS 

In developing the proposed regulations, staff’s goal has been to achieve the greatest 

possible emissions reductions in a technologically feasible and cost-effective manner. 

Meeting the requirements of the proposed modifications is achievable using existing 

technologies and manufacturing processes and would add no costs that have not 

already been considered by the Board. The proposed regulations are necessary to 

meet air quality emissions reduction goals and to achieve health based ambient air 

quality standards. 

No alternatives considered by the Board would be more effective in achieving the 

purpose for which the regulations are proposed or would be as effective as or less 

burdensome to affected private persons than the proposed regulations. 

The staff recommends that the Board approve its proposal. 
20 

7. REFERENCES 

ARB 1998: California Air Resources Board, Public Hearing to Consider Amendments to 

the 1999 Small Off-Road Engine Regulations, February 1998 (Staff Report). 

ARB 2001: California Air Resources Board, Policies and Actions for Environmental 

Justice, December 2001. 

ARB 2003: California Air Resources Board, Public Hearing To Consider The Adoption 

Of Exhaust And Evaporative Emission Control Requirements For Small Off-Road 

Equipment And Engines Less Than Or Equal To 19 Kilowatts, August 8, 2003 (Staff 

Report). 

ARB 2004: California Air Resources Board, Report to the Board on the Potential 

Electrification Programs for Small Off-Road Engines, April 2, 2004 (Staff Report). 

ARB 2007: California Air Resources Board, Public Hearing to Consider Amendments to 

the California Reformulated Gasoline Regulations and Other Changes, April 27, 2007 

(Staff Report). 

U.S. EPA 2007: United States Environmental Protection Agency, Control of Emissions 

from Nonroad Spark-Ignition Engines and Equipment; Proposed Rule, 72 Federal 

Register 28097-28393, May 18, 2007.