EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION 
Brussels, 7.7.2010 
SEC(2010) 828 final 
  
COMMISSION STAFF WORKING DOCUMENT 
SUMMARY OF THE IMPACT ASSESSMENT 
  
Accompanying document to the 
  
Proposal for a 
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
amending Directive 97/68/EC as regards the pr ovisions for engines placed on the market 
under the flexibility scheme 
COM(2010)362 final 
SEC(2010)829 
 
 
 
EN 2   EN COMMISSION STAFF WORKING DOCUMENT 
SUMMARY OF THE IMPACT ASSESSMENT 
  
Accompanying document to the 
  
Proposal for a 
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
amending Directive 97/68/EC as regards the pr ovisions for engines placed on the market 
under the flexibility scheme 
 
EN 3   EN 1. P ROBLEM DEFINITION  
The Non-Road Mobile Machinery Directive 97/68/EC1 (NRMM) regulates the exhaust 
emissions (carbon oxide (CO), hydrocarbons (HC) , nitrogen oxides (NOx) and particulates 
(PM) from diesel engines installed in non road mobile machinery including construction, 
agricultural and forestry machinery, railcars & locomotives, inland waterway vessels, constant 
speed engines (mostly used in generator sets and pumps, etc) and small petrol engines used in 
different types of machinery (including handheld equipment like chainsaws etc). 
The current stage of emission limits applicable for type approval of the majority of diesel 
engines is referred to as Stage III A. It will be replaced by the stricter Stage III B limit for engines to be placed on the market from  2011 onwards depending on the engine power 
category. The necessary changes to the configur ation, size or weight of engines have an 
immediate knock-on effect for Original Eq uipment Manufacturers (OEMs). Technical 
solutions for complying III B engines are not in general yet finalised. Since the re-design of 
engines and machinery cannot be done in parallel  but only subsequently, further research and 
technological development is required by OEMs to ensure that complaint Stage III B machinery can be placed on the market. Apar t from the redesign of the body of the 
machinery, the production line of machinery (a dditional space, raw material handling and 
storage, costs etc) must also be adapted. The situation for machinery covered under the 
NRMM Directive is as follows: 
• For construction and agricultural machinery, technical solutions for OEMs are still 
to be found and consequently incr eased R&D efforts are necessary. 
• Railcar OEMs have fewer difficulties as they mostly use engines already 
developed for on-road uses but problems are encountered in the redesign of the 
vehicles to accommodate in a tight sp ace the engine and the after-treatment 
systems. 
• Locomotive OEMs have the biggest difficultie s to comply with the new limits and 
will definitely not be ready by 1.1.2012. The adaptation of vehicles compliant to 
Stage III B has not yet started. 
Compliance costs for OEMs to cope with the new emission limits are significant. From late 
2008 onwards most parts of the European i ndustry producing non road mobile machinery 
have unexpectedly and severely hit by the global financial and economic crisis. Particularly 
the sales of construction equipment and agricu ltural machinery dropped up to 60% depending 
on the market segment during 2009 and latest forecas ts do not expect a rec overy till the end of 
2010. For railcars difficulties occur, while the impact s of the crisis do not seem as severe as 
for construction equipment and agricultural m achinery. Due to the drop in sales OEMs are 
lacking the necessary financial means to produ ce in time machinery that respects the new 
emission limits. 
The Commission proposal to amend the Non-Road  Mobile Machinery Directive responds to 
the adverse market conditions as described above. 
                                                
 
1 OJ L 59, 27.2.1998, p.1.  
 
EN 4   EN 2. A NALYSIS OF SUBSIDIARITY  
The subsidiary principle is respected by the proposal, since the Direc tive already harmonises 
the type approval procedure for placing engines on  the market and Member States cannot take 
action individually. 
3. O BJECTIVES  
The general objective  of the amendment is to mitigate, at the best possible point, the impacts 
of the current economic crisis for engine a nd machinery manufacturers of some kind of non 
road mobile machinery to maintaining compe titiveness and employment while at the same 
time limiting as much as possible negative environmental impacts stemming from a later replacement of a defined number of existing engines that do not yet comply with the new 
more stricter emission limit. 
Specific objectives: 
To maintain the competitiveness of EU NRMM industry and alleviate the immediate 
pressures brought about by the economic crisis. 
To enable industry to continue financing R& D so that technology beco mes available for all 
product types in Stage III B.  
To limit the emissions of NRMM by enabling the re placing of older, more polluting and fuel 
consuming engines by cleaner ones.  
Operational Objectives: 
To introduce a cost effective and timely measure that allo ws EU engine and machinery 
producers to maintain their competitiveness and to continue selling products throughout Stage 
III B and therefore alleviate the immediate pressures brought about by the economic crisis. 
To maintain the incentive to invest in R&D an d develop cleaner engines that are compliant 
with future emission limit Stages. 
To allow industry to finance expenditure on R& D in the short term to develop Stage III B 
compliant machinery by allowing them to c ontinue to generate revenues from sales. 
4. P
OLICY OPTIONS  
The following options to tackle the iden tified problem have been identified: 
4.1. For the sectors already covered by the flexibility scheme  
4.1.1. No action = Base line option OEMs can use the flexibility scheme provided for in the Directive. By using the flexibility 
scheme an equipment manufacturer is allowe d to place on the mark et, during the period 
between two successive stages of limit valu es, a limited number of non-road mobile 
machinery which is fitted with engines that st ill comply with the previous stage of emission 
limit values. The flexibility scheme applies to  construction and forestry machinery using 
 
EN 5   EN compression ignition (diesel) engines, generator sets and pumps using constant speed engines 
but not to locomotives, railcars and inland waterway  vessels with diesel engines. An original 
equipment manufacturer has the options either to place on the market (1) for each engine 
power category a limited number of machines not exceeding 20% of the OEM's annual sales of machinery (calculated as the average of machinery sales in the EU of the latest 5 years) or 
(2) a fixed number of machines as  stipulated in the Directive. 
4.1.2. Provision of loans for purchasing stocked engines manufactured under the so called 
sell-off period 
The Directive provides the possibility that, whil e Stage III A is in force, industry may produce 
engines and machinery and stock them in the EU territory to keep indu stries running and to 
cover the needs of other countries  that do not have strict exha ust emissions limitations as EU. 
After the beginning of implementation of Stag e III B, these stocked engines and machinery 
may be placed on the market for a period of two years. This option suggests the use of government backed loans to be granted to OE Ms to purchase Stage III A engines for stock.  
4.1.3. Implementation of a scrappi ng scheme at national level 
The use of a scrapping scheme would be a subsi dy, given as an incentive, to the user to buy 
new machinery, with a Stage III B engine. U nder this option, the owner of older, more 
polluting machinery will deliver the machiner y for scrapping. A National Public authority 
would grant a lump sum to the owner of the scrapped machinery. The owner will receive the 
money via banking or the tax system when the purchase of new machinery is proven. 
4.1.4. Alternative types of provisi ons under the flexibility scheme 
4.1.4.1. Implementation of a scaled percentage of the flexibility scheme 
The option suggests the implementati on of a different percentage of flexibility to each of the 
various types of machinery, according to the particular transitional problems encountered 
from Stage III A to Stage III B plus a similar approach with regard to the fixed numbers. 
4.1.4.2. Increase of flexibility percentage to 50% This option suggests increasing flexibility fr om 20% to 50% for all machinery currently 
covered by the scheme. The fixed maximu m number of engines would be amended 
accordingly. 
4.1.4.3. Conditional use of the flexibility  scheme, with penalty mechanism 
In order to maintain the incen tives to develop III B machines, a system could be introduced 
where additional flexibility used in the transiti on from Stage III A to Stage III B will trigger a 
penalty after several years. This would maintain the incentive for the OEMs to develop 
machinery with III B engines and use only the minimum additional flexibility they need in 
order to temporarily overcome the economic crisis. 
4.1.5. Implementation of a trading system  
A system could be established whereby firms th at would not use the entire flexibility could 
sell their flexibility rights to firms that need additional flexibility. This  scheme would require 
 
EN 6   EN a mechanism to sell flexibility (permits) and a system in place to monitor the scheme. The 
price of each permit of fl exibility would be determined by the market.  
4.2. For the railcars sector currently excluded from the use of the flexibility scheme 
The same options as described under 4.1. have been considered plus the introduction of a 
flexibility percentage of 20%. 
5. A SSESSMENT OF IMPACTS  
5.1. For sectors already covered by the flexibility system 
The option of doing nothing  would not be effective in reach ing the objectives since industry 
would remain in a situation where producers co uld not sell any longer compliant machinery. 
Some firms would subsequently go out of  business resulting in unemployment. 
The option that OEMs buy stocked engines  from an engine manufactur er to continue to sell 
III A machinery is not feasible. Due to the economic crisis, cash flow is limited and private banking institutions are not provid ing sufficient credit. An incen tive to produce more Stage III 
A engines would result in a huge  number of Stage III A engine s, instead of developing more 
environmental friendly III B engines. 
The use of a scrapping scheme  will not assist OEMs in financing the R&D to make Stage III 
B machinery available. Whether the prospect of  a scrapping scheme would be sufficient to 
induce banks to hand out additional loans to OEMs for R&D remains doubtful. In addition if 
Member States implemented the scrapping scheme in different ways, this could lead to a fragmentation of the Internal Market  and to distortion of competition. 
A flexibility trading system  by which firms could buy additional flexibility from those firms 
that do not need it, would provide a strong ince ntive to comply as soon as possible with the 
new emission limits. However, setting up such a complex system in a short time scale would 
be disproportionate to th e expected achievements.  
The implementation of scaled percentages of  flexibility for the different types of 
machinery,  depending on the problems they encounter  for the transition from Stage III A to 
Stage III B is not feasible since there is no specific inventory of the machinery in each 
machinery type, nor a relevant system  to survey the number of sales. 
The use of the flexibility scheme with penalty mechanism  would limit concerns that 
competitive distortions may occur from enlarged flexibility. However, there is a lack of available information concerning compliance of non-road mobile machinery which would 
place a significant burden on competent National aut horities that render this option practically 
unfeasible and the preparation and implemen tation of such a mechanism would entail 
disproportionate costs (no tification and surveillan ce) with regard to the benefits triggered by 
its application. 
Assessing the impacts of the option to increase the flexibility mechanism to 50 %  for 
machinery already covered by flexibility has to take into account environmental, social and 
economic impacts. Environmental impacts have b een determined based on external costs of 
calculated emissions. Emissions have been cal culated taking into account machinery/engine 
stocks, average use and lifetime of machinery. Economic impacts have been determined in 
 
EN 7   EN terms of reduced compliance costs including research and development costs, variable 
production engine costs, equipmen t redesign costs, after treat ment devices costs and fuel 
costs. Socio-economic impacts have been derived form the compliance costs and the specific market situations. 
The environmental costs represent the cost ge nerated from the additional emissions of the 
engines under the amended 50% flexibility sche me compared to the current 20% flexibility 
scheme. According to the methodology followed based on the Net Present Value (NPV), per 
type of pollutant the environmental costs resu lting from a 50% flexibility compared to the 
current 20% flexibility are in the magnitude of: 
Environmental costs occurred during 2008 – 2030:
 
Pollutant 50% flexibility ( Million Euros)  
PM - 200 
NOx - 350 
Total - 550 
The economic impact  refers to compliance costs including mainly a reduction of peak efforts 
of R&D costs based on 2005 EUROSTAT figur es. The Net Present Value of saved 
compliance costs of the use of the amended flexibility is as follows: 
Economic Gains of 50% flexibility comp ared to 20% flexibility (million EUR)  
  Stage X   
Year % gain in R&D Moneti zed gain discounted gain 
2010 0.1 496 458 
2011 0.2 991 881 
2012 0.3 1 487 1 271 
2013 0.2 991 No gain due to overlap with next stage 
Total discounted period gain  2 610 
Total saved compliance cost 2 124 
5.2. For sectors not yet covered by th e flexibility system (railcars) 
Following the assessment of options under point 5.1, it is clear that some  of the options are 
not efficient in reaching the objectives, and are therefore unfeasible. The analysis therefore 
will focus on introducing flexibility of 20% and of 50%. 
The environmental impact  from the application of the flexibility scheme to railcars is 
calculated under the assumption that all engines under the 20% or 50% flexibility will be placed on the market in a three year period after the implementati on of stage IIIB, for the fleet 
of railcars.  
 
EN 8   EN  
Percentage of flexibility (%) E nvironmental costs (Euros) p.a 
20%  3.400.000  
50% 8.500.000  
As regards the economic impact  calculations related to the compliance costs of engines 
placed on the market under the proposed % of the flexibility scheme are as follows:  
Percentage of flexibility (%) NPV of saved compliance costs (Euros) 
p.a. 
20%  4.900.000  
50% 12.500.000  
6. COMPARISON OF OPTIONS  
A modification of the flexibility  scheme generates both, a nega tive environmental impact and 
an economic benefit in saved compliance costs including a decrease in peak R&D investment 
costs, since these costs are spread over a longer period. 
Comparison of options for sect ors already covered under the flexibility scheme (NPVs, all 
costs in Euros)  
 FLEXIBILITY PERCENTAGE 
 20% 50% 
Environmental cost 
  550.000.000 
Saved Compliance costs 
  2.124.000.000 
Comparison of options for railca rs (NPVs, all costs in Euros)  
 FLEXIBILITY PERCENTAGE  
 N.A. 20% 50% 
Environmental cost 
  10.200.000 25.500.000 
Saved Compliance 
costs  14.700.000 37.500.000 
 
EN 9   EN Although the use of 50% flexibility  for railcars results in higher savings of compliance costs 
the preferred policy option propose d is 20% for this sector sinc e producers of ra ilcars are for 
the first time proposed to become eligible to us e the provisions of the flexibility scheme. For 
railcars III B technology already exists and s hould be encouraged as much as possible. 
Railcars are mostly ‘borrowing’ engines from th e heavy duty vehicles (trucks, busses e.t.c.) 
and according to the industry, it is  required only to adapt at some  or more extend the engine to 
fit to the body of the railcar. Therefore the need to use Stag e III A engines is not that 
imperative since compliant to Stage III B technology already ex ists and should be 
encouraged. The 20% of proposed flexibility scheme  is expected to act as an upper limit to the 
placement of Stage III A engines to the market wher e a lot of railcar operators exist, but at the 
same time provide them the opportu nity to stay in business so they can  finance the completion 
of development of Stage III B engines. 
In conclusion the option to increase the flexib ility rate for those se ctors that are already 
subject to the flexibility scheme by 50% and adap t the total number of engines to be placed on 
the market under the scheme accordingly, has been chosen. 
In addition the option to include railcars in the flexibility scheme with a flexibility rate of 
20% has been considered as the best option. Th ese options reach an ad equate balance between 
the need to maintain the competitiveness of th e concerned industry during the crisis and to 
mitigate effects for the environment without requiring a change of the overall objectives 
pursued by the Directive to reducing the le vel of pollutant emissions from NRMM. 
7. MONITORING AND EVALUATION  
An assessment of the impacts of the enlarged pr ovisions of the flexibility scheme after its 
implementation and completion will be based on information provided by the industry and by 
Member States based on Article 4 and Annex XIII of the Directive.