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 provisions for engines placed on the market under the flexibility scheme COM(2010)362 FINAL SEC(2010)829
Date: 2010-07-07
Institutions: European Commission
Subjects: agricultural vehicle, approximation of laws, atmospheric pollutant, motor vehicle, pollution control measures, technical regulations

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 provisions for engines placed on the market 
under the flexibility scheme 

COM(2010)362 final 
SEC(2010)829 

EN 

   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 provisions for engines placed on the market 
under the flexibility scheme 

EN 

2 

   EN 

 
 
 
 
 
1. 

PROBLEM 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  configuration,  size  or  weight  of  engines  have  an 
immediate  knock-on  effect  for  Original  Equipment  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.  Apart  from  the  redesign  of  the  body  of  the 
machinery,  the  production  line  of  machinery  (additional  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 increased 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  space  the  engine  and  the  after-treatment 
systems. 

•  Locomotive OEMs have the biggest difficulties 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  industry  producing  non  road  mobile  machinery 
have unexpectedly and severely  hit by the global financial and economic crisis. Particularly 
the sales of construction equipment and agricultural machinery dropped up to 60% depending 
on the market segment during 2009 and latest forecasts do not expect a recovery till the end of 
2010. For railcars difficulties occur, while the impacts of the crisis do not seem as severe as 
for  construction  equipment  and  agricultural  machinery.  Due  to  the  drop  in  sales  OEMs  are 
lacking  the  necessary  financial  means  to  produce  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 

3 

   EN 

 
                                                 
2. 

ANALYSIS OF SUBSIDIARITY 

The subsidiary principle is respected by the proposal, since the Directive already harmonises 
the type approval procedure for placing engines on the market and Member States cannot take 
action individually. 

3. 

OBJECTIVES 

The general objective of the amendment is to mitigate, at the best possible point, the impacts 
of the current economic crisis for engine and machinery manufacturers of some kind of non 
road  mobile  machinery  to  maintaining  competitiveness  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 becomes available for all 
product types in Stage III B.  

To limit the emissions of NRMM by enabling the replacing of older, more polluting and fuel 
consuming engines by cleaner ones.  

Operational Objectives: 

To  introduce  a  cost  effective  and  timely  measure  that  allows  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  and  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 continue to generate revenues from sales. 

4. 

POLICY OPTIONS 

The following options to tackle the identified 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  allowed  to  place  on  the  market,  during  the  period 
between  two  successive  stages  of  limit  values,  a  limited  number  of  non-road  mobile 
machinery which is fitted with engines that still comply with the previous stage of emission 
limit  values.  The  flexibility  scheme  applies  to  construction  and  forestry  machinery  using 

EN 

4 

   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, while Stage III A is in force, industry may produce 
engines and machinery and stock them in the EU territory to keep industries running and to 
cover the needs of other countries that do not have strict exhaust emissions limitations as EU. 
After the beginning of  implementation of Stage 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 OEMs to purchase Stage III A engines for stock.  

4.1.3. 

Implementation of a scrapping scheme at national level 

The use of a scrapping scheme would be a subsidy, given as an incentive, to the user to buy 
new  machinery,  with  a  Stage  III  B  engine.  Under  this  option,  the  owner  of  older,  more 
polluting  machinery  will  deliver  the  machinery  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 provisions under the flexibility scheme 

4.1.4.1.  Implementation of a scaled percentage of the flexibility scheme 

The option suggests the implementation 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  from  20%  to  50%  for  all  machinery  currently 
covered  by  the  scheme.  The  fixed  maximum  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 incentives to develop III B machines, a system could be introduced 
where additional flexibility used in the transition 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  that would not use the entire flexibility could 
sell their flexibility rights to firms that need additional flexibility. This scheme would require 

EN 

5 

   EN 

 
a  mechanism  to  sell  flexibility  (permits)  and  a  system  in  place  to  monitor  the  scheme.  The 
price of each permit of flexibility 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. 

ASSESSMENT OF IMPACTS 

5.1. 

For sectors already covered by the flexibility system 

The option of doing nothing would not be effective in reaching the objectives since industry 
would remain in a situation where producers could 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 manufacturer 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 providing sufficient credit. An incentive to produce more Stage III 
A engines would result in a huge number of Stage III A engines, 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 incentive 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 the 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 authorities that render this option practically 
unfeasible  and  the  preparation  and  implementation  of  such  a  mechanism  would  entail 
disproportionate costs (notification and surveillance) 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  been  determined  based  on  external  costs  of 
calculated  emissions.  Emissions  have  been  calculated  taking  into  account  machinery/engine 
stocks,  average  use  and  lifetime  of  machinery.  Economic  impacts  have  been  determined  in 

EN 

6 

   EN 

 
terms  of  reduced  compliance  costs  including  research  and  development  costs,  variable 
production  engine  costs,  equipment  redesign  costs,  after  treatment  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  generated  from  the  additional  emissions  of  the 
engines  under  the  amended  50%  flexibility  scheme  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  resulting  from  a  50%  flexibility  compared  to  the 
current 20% flexibility are in the magnitude of: 

Environmental costs occurred during 2008 – 2030: 

Pollutant 

PM 

NOx 

Total

50% flexibility (Million Euros) 

- 200 

- 350 

- 550 

The economic impact refers to compliance costs including mainly a reduction of peak efforts 
of  R&D  costs  based  on  2005  EUROSTAT  figures.  The  Net  Present  Value  of  saved 
compliance costs of the use of the amended flexibility is as follows: 

Economic Gains of 50% flexibility compared to 20% flexibility (million EUR) 

Stage X 

Year 

% gain in R&D 

Monetized gain 

discounted gain 

2010 

2011 

2012 

2013 

0.1 

0.2 

0.3 

0.2 

Total discounted period gain  

Total saved compliance cost 

496 

991 

1 487 

458 

881 

1 271 

991 

No gain due to overlap with next stage 

2 610 

2 124 

5.2. 

For sectors not yet covered by the 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 implementation of stage IIIB, for the fleet 
of railcars.  

EN 

7 

   EN 

 
  
  
Percentage of flexibility (%) 

Environmental costs (Euros) p.a 

20%  

50% 

3.400.000  

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%  

50% 

4.900.000  

12.500.000 

6. 

COMPARISON OF OPTIONS 

A modification of the flexibility scheme generates both, a negative 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  sectors  already  covered  under  the  flexibility  scheme  (NPVs,  all 
costs in Euros) 

Environmental cost 

FLEXIBILITY PERCENTAGE 

20% 

50% 

550.000.000 

Saved Compliance costs 

2.124.000.000 

Comparison of options for railcars (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 

8 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Although the use of 50% flexibility for railcars results in higher savings of compliance costs 
the preferred policy option proposed is 20% for this sector since producers of railcars are for 
the first time proposed to become eligible to use the provisions of the flexibility scheme. For 
railcars  III  B  technology  already  exists  and  should  be  encouraged  as  much  as  possible. 
Railcars  are  mostly  ‘borrowing’  engines  from  the  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  Stage  III  A  engines  is  not  that 
imperative  since  compliant  to  Stage  III  B  technology  already  exists  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 where a lot of railcar operators exist, but at the 
same time provide them the opportunity to stay in business so they can finance the completion 
of development of Stage III B engines. 

In  conclusion  the  option  to  increase  the  flexibility  rate  for  those  sectors  that  are  already 
subject to the flexibility scheme by 50% and adapt 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. These options reach an adequate balance between 
the  need  to  maintain  the  competitiveness  of  the  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 level of pollutant emissions from NRMM. 

7. 

MONITORING AND EVALUATION 

An  assessment  of  the  impacts  of  the  enlarged  provisions  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. 

EN 

9 

   EN