United States Air and Radiation EPA420-F-02-025
Environmental Protection August 2002
Agency
Office of Transportation and Air Quality
Regulatory
Announcement
Non-Conformance Penalties for
Heavy-Duty Diesel Engines
The U.S. Environmental Protection Agency (EPA) is finalizing non-
conformance penalties that could be used by manufacturers of heavy-
duty diesel engines unable to meet the 2004 model year non-methane
hydrocarbon plus nitrogen oxides (NMHC+NOx) emission standard.
These penalties allow a manufacturer to produce and sell non-
conforming engines upon payment of a penalty. The penalty, which is
assessed on a per-engine basis, varies with the certified emission level
for the engine family involved.
What are Non-conformance Penalties?
Non-conformance penalties (NCPs) are monetary penalties that allow a
vehicle or engine manufacturer to sell engines that do not meet the
emission standards. Under a penalty structure previously established by
regulation, manufacturers may choose to pay a penalty on a per-engine
basis rather than comply with the applicable standard.
The Clean Air Act outlines the key requirements of an NCP program.
The Act requires that:
• The penalties increase with the degree of non-compliance with the
emission standard and that the penalties increase over time.
• Emissions under an NCP program may not go above an upper limit
established by regulation.
• The NCPs remove any competitive disadvantage that might other-
wise accrue to a manufacturer that is complying with the standards.
I Printed on Recycled Paper
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Which Engines and Vehicles would be Covered?
The non-conformance penalties will be available for 2004 and later
model year heavy-duty highway diesel engines, including engines used
in urban buses. EPA is establishing NCPs for the 2004 NMHC+NOx
standard for highway heavy-duty diesel engines. This standard is 2.5
grams per brake-horsepower-hour of NMHC+NOx.
Why is EPA Establishing these Penalties?
NCPs provide flexibility that fosters long-term improvement in emis-
sions without driving manufacturers out of the market. When EPA
established the 2004 NMHC+NOx standard in 1997, we committed to
establishing NCPs in time for the 2004 model year, if the need for such
NCPs became apparent. This final rule is the final step towards fulfilling
that commitment. As with past NCP rules, this rule relies primarily on
cost information provided by the manufacturers of heavy-duty diesel
engines in order to develop the penalty rates.
NCPs are authorized for heavy-duty engines under section 206(g) of the
Clean Air Act. A 1985 rulemaking established three basic criteria for
determining the eligibility of emission standards for NCPs in any given
model year. First, the emission standard in question must become more
difficult to meet. Second, substantial work must be required in order to
meet the emission standard. Third, a technological laggard must be
likely to develop. A technological laggard is considered to be a manu-
facturer who cannot meet a particular emission standard due to techno-
logical (not economic) difficulties and who, in the absence of NCPs,
might be forced from the marketplace.
These three criteria have been satisfied with respect to the NMHC+NOx
standard that applies to 2004 and later model year heavy-duty diesel
engines. Therefore, it is appropriate at this time to establish NCPs for
this emission standard.
What are the Requirements?
The actual penalties that a manufacturer would pay for each non-com-
plying engine are determined by formulas that already exist in the
federal regulations. The final rule specifies certain parameters that, when
plugged into the formulas along with the emissions of the engine and the
incorporation of other factors, will determine the amount a manufacturer
must pay. Key parameters that determine the NCP a manufacturer must
pay are the estimated average cost of compliance, the estimated cost of
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compliance for a near worst-case engine, and the degree to which the
engine exceeds the emission standard. Engine emissions may not exceed
an upper limit designated in the regulations. The table below provides
some examples of the calculated penalties at several emission rates
under this rule.
Penalty Rates at Several Example Emission Levels1
NHMC+NOx
Compliance Level
(g/bhp-hr)2
2.5
3.0
3.5
4.0
4.5
6.0
Heavy-Duty Service Class
Light
$0
$1,262
$1,745
$2,227
$2,710
N/A3
Medium
$0
$910
$1,820
$2,716
$4,930
N/A3
Heavy
$0
$3,640
$6,946
$7,999
$9,052
$12,210
Urban Bus
$0
$2,470
$4,393
$5,527
$6,660
N/A3
1 The penalties are for exceedance of the 2.5 gram per brake orsepower-hour
NMHC+NOx standard. They are expressed in 2001 dollars and are for the first
year of non-compliance (the penalties increase with subsequent years).
2 g/bhp-hr = grams per brake horsepower-hour.
3 For the light and medium heavy-duty service classes, and for urban buses, the
upper limit is established at 4.5 g/bhp-hr, therefore no NCPs are applicable to
emissions at 6.0 g/bhp-hr. For the heavy heavy-duty diesel engine service class,
the upper limit is set at 6.0 g/bhp-hr.
In 1998, the Department of Justice and the Environmental Protection
Agency announced a settlement with seven major manufacturers of
diesel engines to resolve claims that they installed illegal computer
software on heavy duty diesel engines that turned off the engine emis-
sion control system during highway driving. The settlements were
entered by the Court on July 1, 1999. These consent decrees with the
Federal Government contained a number of provisions applying to
heavy-duty on-road, and in some cases, nonroad, engines. The consent
decrees contain provisions for monetary penalties to be applied to
manufacturers unable to meet the specified October 2002 highway
emission limits. The decrees specify that such penalties are to be based
upon the NCPs for the 2004 standards; if such NCPs have not been
promulgated then the penalties revert to being based upon the existing
NCPs, which pertain to the 1998 heavy-duty diesel NOx standard.
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Health and Environmental Benefits
NCPs have a minimal environmental impact. They provide flexibility
that fosters long-term improvement in emissions without driving manu-
facturers out of the market. We can not predict how many manufacturers
would make use of the NCPs, therefore the emission impact cannot be
quantified. We expect relatively few engine families to be certified
under these provisions. Any impacts should be short-term in nature,
because the structure of the penalties, by increasing over time, discour-
ages long-term use, and because the penalty figures are high enough
such that long-term use is not a viable option for the manufacturers.
Costs
NCPs generally have minimal adverse economic impacts. Use of them
is optional; manufacturers have the flexibility and will likely choose
whether or not to use NCPs based on their ability to comply with emis-
sions standards. Manufacturers that choose to make use of the NCPs
will incur those costs, which are based, in part, on the cost of complying
with the emission standards. Without NCPs, a manufacturer that has
difficulty meeting the standards has only two alternatives: fix the non-
conforming engines, perhaps at a prohibitive cost, or do not produce/sell
them. The availability of NCPs provides manufacturers with a third
alternative, yet protecting the manufacturer that has chosen to incur the
costs of complying with the standards.
For More Information
You can access documents on this rulemaking electronically on the
Office of Transportation and Air Quality Web site at http://
www.epa.gov/otaq/hd-hwy.htm or by contacting us at:
U.S. Environmental Protection Agency
Office of Transportation and Air Quality
Assessment and Standards Division
2000 Traverwood Drive
Ann Arbor, MI 48105
E-mail: ASDInfo@epa.gov
Voicemail: (734)214-4636
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