EPA420-R-98-016
Final Regulatory Impact Analysis:
Control of Emissions from
Nonroad Diesel Engines
EPA
U.S. Environmental Protection Agency
Office of Air and Radiation
Office of Mobile Sources
Engine Programs and Compliance Division
August 1998
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Table of Contents
CHAPTER 1: INTRODUCTION 1
CHAPTER 2: INDUSTRY CHARACTERIZATION 3
I. Characterization of Engine Manufacturers 4
A. Engines Rated Under 37 kW 4
B. Engines Rated Between 37 and 75 kW 6
C. Engines Rated Between 75 and 130 kW 7
D. Engines Rated Between 130 and 450 kW 7
E. Engines Rated Over 450 kW 7
II. Characterization of Equipment Manufacturers 8
A. Equipment Using Engines Rated Under 37 kW 9
B. Equipment Using Engines Rated between 37 and 75 kW 10
C. Equipment Using 75 to 130 kW Engines 12
D. Equipment Using 130 to 560 kW Engines 14
E. Equipment Using Over 560 kW Engines 16
CHAPTER 3: TECHNOLOGICAL FEASIBILITY 20
I. Background on Diesel Technology and Emission Formation 20
II. General Description of Emission Control Strategies 21
A. Combustion Optimization 22
B. Advanced Fuel Injection Controls 23
C. Exhaust Gas Recirculation 25
D. Improving Charge Air Characteristics 25
E. Exhaust Aftertreatment Strategies 26
III. Specific Description of Emission Control Strategies by Power Category ... 27
A. Engines Rated over 75 kW 28
B. Engines Rated between 37 and 75 kW 28
C. Engines Rated under 37 kW 29
IV. Impact on Noise, Energy, and Safety 30
CHAPTER 4: ECONOMIC IMPACT 34
I. Cost of Engine Technologies 34
A. Methodology 34
B. Technologies for Meeting the New Standards 35
C. Cost of Engine Technologies 39
D. Projected Cost of Technology Packages 55
E. Summary of Engine Costs 57
II. Cost of Redesigning Equipment 60
A. Methodology 60
B. Equipment Changes 61
C. Cost of Equipment Changes 62
D. Summary of Total Projected Cost 68
III. Aggregate Costs to Society 71
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IV. Final Regulatory Flexibility Analysis 71
A. Requirements of SBREFA and RFA 72
B. Methodology 72
C. Characterization of Small Equipment Manufacturers 73
D. Estimated Impacts on Small Equipment Manufacturers 76
E. Summary of Projected Economic Impacts for Small Businesses 78
F. Regulatory Alternatives to Reduce Impacts 79
CHAPTER 5: ENVIRONMENTAL IMPACT 84
I. Health and Welfare Effects of Pollutants from Nonroad Engines 84
A. Ozone 84
B. Particulate Matter 85
C. Carbon Monoxide and Smoke 87
II. The NONROAD Model 88
A. Emission Factors 88
B. In-Use Operation Adjustments 91
C. Equipment Population Estimates 92
D. Growth Estimates 92
III. Emission Inventory Estimates 94
A. Equipment Manufacturer Allowance Impacts 94
B. Emission Model Results 95
IV. Emission Reductions Per Piece of Equipment 102
A. Per-Engine Emission Levels 102
B. Average Power 103
C. Average Load Factor 104
D. Average Annual Hours 104
E. Projected Annual Emissions Levels and Emission Reductions 105
F. Average Lifetime 107
G. Lifetime Emission Reductions 107
V. Conclusions 109
CHAPTER 6: COST-EFFECTIVENESS 111
I. Cost-Effectiveness of the New Emission Standards 112
A. NMHC + NOx 112
B. PM 120
II. Comparison with Cost-Effectiveness of Other Control Programs 120
Appendix to the Regulatory Impact Analysis A-1
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Chapter 1: Introduction
CHAPTER 1: INTRODUCTION
EPA is setting significantly more stringent standards for emissions of oxides of nitrogen,
hydrocarbons, and paniculate matter from diesel-cycle engines used in land-based nonroad
equipment and in some marine applications." This Final Regulatory Impact Analysis (Final RIA)
provides technical, economic, and environmental analyses of the new emission standards for the
affected engines. The anticipated emission reductions will translate into significant, long-term
improvements in air quality in many areas of the U. S. For engines in this large category of pollution
sources, NOx and PM standards are reduced by up to two-thirds compared with current standards.
Overall, these requirements provide much needed assistance to states and regions facing ozone and
particulate air quality problems that are causing a range of adverse health effects, especially in terms
of respiratory impairment and related illnesses.
Chapter 2 contains an overview of the manufacturers, including some description of their
engines and equipment, that may be affected by the new requirements. Chapter 3 provides a
description of the range of technologies being considered for improving emission controls from these
engines, including detailed projections of a possible set of compliance technologies. Chapter 4
applies cost estimates to the projected technologies for several different power categories and
contains the Final Regulatory Flexibility Analysis. Chapter 5 presents the calculated reduction in
emission levels resulting from the new standards; Chapter 6 compares the costs and the emission
reductions for an estimation of the cost-effectiveness of the rulemaking.
Table 1-1 lists the new standards and the affected model years. References in the text of the
document to the engine power ratings listed in Table 1-1 identify only the kilowatt rating. The reader
may refer to the table for horsepower equivalent ratings. Other values are listed with English units
in parentheses.
T)iesel-cycle engines, referred to simply as "diesel engines" in this analysis, may also be
referred to as compression-ignition (or CI) engines. These engines typically operate on diesel
fuel, but other fuels may be also be used. This contrasts with otto-cycle engines (also called
spark-ignition or SI engines), which typically operate on gasoline.
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Regulatory Impact Analysis
Table 1-1
Emission Standards in g/kW-hr (g/hp-hr)
Engine Power
kW<8
(hp560
(hp>750)
Tier
Tier 1
Tier 2
Tier 1
Tier 2
Tier 1
Tier 2
Tier 2
Tier 3
Tier 2
Tier 3
Tier 2
Tier 3
Tier 2
Tier 3
Tier 2
Tier 3
Tier 2
Model
Year
2000
2005
2000
2005
1999
2004
2004
2008
2003
2007
2003
2006
2001
2006
2002
2006
2006
NMHC+
NOx
10.5 (7.8)
7.5 (5.6)
9.5 (7.1)
7.5 (5.6)
9.5 (7.1)
7.5 (5.6)
7.5 (5.6)
4.7 (3.5)
6.6 (4.9)
4.0 (3.0)
6.6 (4.9)
4.0 (3.0)
6.4 (4.8)
4.0 (3.0)
6.4 (4.8)
4.0 (3.0)
6.4 (4.8)
CO
8.0 (6.0)
8.0 (6.0)
6.6 (4.9)
6.6 (4.9)
5.5 (4.1)
5.5 (4.1)
5.0 (3.7)
5.0 (3.7)
5.0 (3.7)
5.0 (3.7)
3.5 (2.6)
3.5 (2.6)
3.5 (2.6)
3.5 (2.6)
3.5 (2.6)
3.5 (2.6)
3.5 (2.6)
PM
1.0 (0.75)
0.80 (0.60)
0.80 (0.60)
0.80 (0.60)
0.80 (0.60)
0.60 (0.45)
0.40 (0.30)
0.30 (0.22)
0.20 (0.15)
0.20 (0.15)
0.20 (0.15)
0.20 (0.15)
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Chapter 2: Industry Characterization
CHAPTER 2: INDUSTRY CHARACTERIZATION
In understanding the impact of emissions standards on regulated industries, the nature of the
regulated and otherwise affected industries must be accurately assessed. This chapter characterizes
the nonroad engine and equipment industry based on the different manufacturers and their products,
the size and degree of vertical integration of the companies, and the diversity of the manufacturer
pool for the various types of equipment.
Nonroad engines are generally distinguished from highway engines in one of four ways: (1) the
engine is used in a piece of motive equipment that propels itself in addition to performing an
auxiliary function (such as a bulldozer grading a construction site); (2) the engine is used in a piece
of equipment that is intended to be propelled as it performs its function (such as a lawnmower); (3)
the engine is used in a piece of equipment that is stationary but portable, such as a generator or
compressor; or (4) the engine is used in a piece of motive equipment that propels itself, but is
primarily used for off-road functions.
This category is also different from other mobile source categories because: (1) it applies to a
wider range of engine sizes and power ratings; (2) the pieces of equipment in which the engines are
used are extremely diverse; and (3) the same engine can be used in widely varying equipment
applications (e.g., the same engine used in a backhoe can also be used in a drill rig or in an air
compressor).
Nonroad equipment can be grouped into several categories. This Final RIA considers the
following seven categories: agriculture and logging, construction, general industrial, lawn and
garden, utility, material handling, and small marine. Engines used in locomotives, large marine
applications (rated over 37 kW), aircraft, underground mining equipment, and all spark-ignition
engines within the above categories are not included in this rulemaking. Table 2-1 contains
examples of the types of nonroad equipment regulated by this rulemaking, arranged by category. A
more detailed list would include many more entries.
A major challenge in regulating nonroad engines is the lack of vertical integration in this field.
Although some nonroad engine manufacturers also produce equipment that rely on their own
engines, most engines are sold to various equipment manufacturers over which the original engine
manufacturer has no control. A characterization of the industry affected by this rulemaking must
therefore include equipment manufacturers as well as engine manufacturers.
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Regulatory Impact Analysis
Table 2-1
Sampling of Nonroad Equipment Applications
Segment
Agriculture
Construction
General Industrial
Lawn and Garden
Utility
Material Handling
Marine <37 kW
Applications
Ag Tractor
Baler
Combine
Backhoe
Bore/drill Rig
Cement Mixer
Crawler Tractor
Excavator
Grader
Concrete/Ind. Saw
Crushing Equipment
Garden Tractor
Air Compressor
Hydro Power Unit
Pressure Washer
Aerial Lift
Crane
Propulsion
Sprayer
Swather
Other Ag Equipment
Off -highway Truck
Paver
Paving Equipment
Plate Compactor
Roller
Rubber-Tired Dozer
Oil Field Equipment
Refrigeration/AC
Rear Engine Mower
Pump
Generator Set
Aircraft Support
Forklift
Terminal Tractor
Auxiliary
Skidder
Rubber-Tired Loader
Scraper
Signal Board
Skid-Steer Loader
Trencher
Feller/buncher
Scrubber/sweeper
Rail Maintenance
Chippers/Grinder
Irrigation Set
Welder
Rough-Terrain Forklift
I. Characterization of Engine Manufacturers
For purposes of discussion, the characterization of nonroad engine manufacturers is arranged
by the power categories used to define the new emission standards. The information detailed in this
section was derived from the Power Systems Research database and trade j ournals.l EPA recognizes
that the PSR database is not comprehensive, but EPA has not identified a better source to provide
consistent data for identifying additional companies.
A. Engines Rated Under 37 kW
In 1995, sales of engines in this category comprised approximately 3 5% (approximately 182,000
units) of the nonroad market. Emission standards for this category are further separated into three
power ranges to provide more appropriate phase-in and standard levels. These ranges are under 8
kW, between 8 and 19 kW, and between 19 and 37 kW.
The largest manufacturers of engines in this category are Yanmar and Kubota. Yanmar Diesel
America Corporation markets diesel engines with ratings ranging from 4 to 3700 kW (5 to 5000 hp).
Most of their engines are four-cycle, water-cooled direct injection models. Kubota makes diesel
engines with ratings ranging from 3 to 70 kW (4 to 90 hp.) Most of their engines are liquid-cooled
indirect injection models. Kubota also markets a 16 kW (21 hp) gaseous fueled engine which is
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Chapter 2: Industry Characterization
designed to meet the new standards.
1. Under 8 kW
In 1995, total sales were 21,000 engines, which is approximately 12% of the market for engines
rated under 37 kW. Of these engines, direct injection (DI) diesel engines comprise 90%
(approximately 18,900 units) of the market and indirect injection (IDI) diesel engines make up the
remaining 10% (approximately 2,000 units). Yanmar has the largest share of the DI market at
approximately 41%, followed by Robin America (22%), Lombardini (13%), Lister Fetter (10%) and
Hatz (7.5%). Other DI manufacturers are Acme, Onan, Farymann, Deutz, Honda, and Ruggerini.
The largest selling direct injection engines in this range are used in pumps, generator sets and
refrigeration units. Kubota has the largest share of the IDI market with 87%, the remaining 13%
being sold by Yanmar. Commercial turf mowers and general industrial engines are the largest selling
applications for IDI engines.
2. 8-19 kW
This is the largest category of engines rated under 37 kW, with approximately 101,000 units
sold in 1995. IDI engines dominate this category with 81% of the market (82,000 units). Yanmar
is the leading manufacturer with 55% of IDI sales and 51% of DI sales. Kubota is ranked second
with 36% of the IDI market. Other manufacturers in this category include Mitsubishi, IHI-Shibaura,
Perkins, Lombardini, Lister Fetter, Deutz, Onan, Acme, Hatz and Teledyne-Wisconsin. The largest
selling engines in this category are primarily used in refrigeration units, commercial turf mowers,
welders, and generator sets.
3. 19-37 kW
This category comprises the remaining 32% of engines rated under 37 kW, with approximately
58,600 units sold in 1995. There is a fairly even split between IDI and DI engines, with IDI
capturing 55% of the market with 32,000 units. Kubota dominates the IDI market with 84 percent
of sales, followed by Perkins (7%), Isuzu (3%) and Yanmar (2%). Deutz and Yanmar each have
approximately 32% of the DI market, followed by Perkins (10%), Lister-Fetter (8%), Hatz (8%),
Isuzu (3%) and Onan (3%). As with the smaller power ranges, commercial turf mowers and
refrigeration units are the largest selling engines, but skid-steer loader sales are also growing rapidly
in this power range.
B. Engines Rated Between 37 and 75 kW
In 1995, approximately 130,000 engines in this power range were sold. This represents the
second largest category of nonroad engines with 22% of the total market. Approximately 90% of
these engines are DI. Engines used in construction equipment comprise the largest segment in this
range. Of the construction segment, the largest selling piece of equipment is the skid-steer loader.
The single largest selling engine, however, is that used in refrigeration/air conditioning units.
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Regulatory Impact Analysis
There are three manufacturers which represent approximately two-thirds of total DI sales: John
Deere with 27% of the DI market, followed by Isuzu with 20% and Cummins with 17%. Kubota,
Deutz, and Perkins each have approximately 10% of the market. John Deere sells engines with
ratings ranging from 16 to 370 kW (21 to 500 hp). John Deere's Power Systems Group has
developed engines in Deere's Power Tech Series. Key features of the Power Tech Series engines
are a Lucas electronically controlled unit injection system, a cam-in-head engine design, high
pressure injection (1500 to 1800 bar (23,000 - 27,000 psi)) and a two-piece articulated steel piston.
An option on some engines is an electronic control unit that monitors engine functions through
remote-mounted engine sensors, resulting in added performance through improved low-end torque,
fuel efficiency and application flexibility due to programmable power curves.
Isuzu makes engines with ratings ranging from 8 to 230 kW (11 to 314 hp). Key features of
Isuzu's L series IDI engines are Bosch unit injection pumps, swirl-type combustion chambers, and
a single cam-driven overhead valve system to actuate the unit injection pumps and intake and
exhaust valves. Isuzu has also expended considerable effort to reduce the overall noise level of these
engines.
Cummins manufacturers diesel engines with ratings ranging from 54 to 4500 kW (72 to 6000
hp).b Most of Cummins' sales are in midrange engines, which were redesigned for the 1996 model
year to achieve greater power density as well as lower noise and exhaust emissions. The new design
features include a new Bosch "A" in-line fuel pump that provides injection pressures to 1100 bar
(16,000 psi), new three-ring pistons and anew Holsetturbocharger for improved performance. More
recently, Cummins completed additional design changes for its 6-liter engine to introduce full-
authority electronic controls with four valves per cylinder.2
In the IDI market, Wis-Con and Isuzu each have approximately a 20% share, followed by PSA
(15%), Mitsubishi (15%), and Mazda (10%). Wis-Con sells diesel engines with ratings ranging from
19to60kW(26to80hp).
C. Engines Rated Between 75 and 130 kW
Engines in this power range rank fourth in total nonroad diesel engines sales with approximately
68,000 units sold in 1995. Direct injection engines comprise 94% of this category. The top three
manufacturers are Cummins (36%), John Deere (25%), and Caterpillar (17%). Other manufacturers
include Perkins, Deutz, New Holland, Detroit Diesel, Hino, Mazda, Volvo, Komatsu, Hercules,
Isuzu, and Mitsubishi. The engines in this power range are used mostly in construction equipment
such as backhoes, rubber-tired loaders, and forest equipment. The second largest use for these
engines is in utility equipment such as air compressors and generator sets.
In this power range, it is expected that engine manufacturers will transfer the technological
bEngine sales by Consolidated Diesel, a subsidiary company that manufactures Cummins
engines, are included in the total engine sales for Cummins.
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Chapter 2: Industry Characterization
advancements from highway engines to their nonroad counterparts. In fact, Caterpillar, which
makes diesel engines with ratings ranging from 60 to 6000 kW (80 to 8000 hp), is already using the
Hydraulically actuated, Electronically controlled Unit Injection (HEUI) fuel system with Advanced
Diesel Engine Management on some nonroad Tier 1 engines.
D. Engines Rated Between 130 and 450 kW
This is the third largest nonroad category with 1995 sales approaching 107,000 units. Most of
the engines in this category are used in agricultural equipment, followed by construction and utility
equipment. There are two separate standards in this category: one for ratings between 130 and 225
kW and one for ratings between 225 and 450 kW. As with the previous category, it is expected that
manufacturers will utilize highway technology to meet the new standards.
1. 130-225 kW
This market includes about 8 percent IDI engines, but DI engines are dominant. The two largest
manufacturers are Cummins (38%) and John Deere (31%). Other major manufacturers include
Caterpillar (14%), Navistar (6%), New Holland (4%), and Detroit Diesel (4%). The engines used
in agricultural tractors comprise the largest category of equipment, followed by construction
equipment such as excavators, crawlers, and rubber-tired loaders.
2. 225-450 kW
The three largest manufacturers in this range are Caterpillar (34%), Cummins (33%), and
Detroit Diesel (25%). Other manufacturers include John Deere and Deutz. Engines used in
construction equipment (scrapers, crawlers, off-highway trucks) comprise the largest category in this
range.
E. Engines Rated Over 450 kW
This is the smallest nonroad category with approximately 3% of the total nonroad market.
There are two separate standards for engines rated above and below 560 kW. Caterpillar is the
largest manufacturer (46%), followed by Detroit Diesel (27%) and Cummins (26%). Generator sets
are the principal application in this range, followed by off-highway trucks and other types of
construction equipment.
II. Characterization of Equipment Manufacturers
For purposes of discussion, nonroad equipment is grouped into five power ranges similar to
those used for characterizing engine manufacturers. This section explores the characteristics of
nonroad equipment applications and the companies involved in manufacturing that equipment. This
analysis includes several numerical summaries of different categories. A more detailed treatment
is contained in a memorandum to the docket.3
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Regulatory Impact Analysis
In the range of ratings under 37 kW, engines and equipment are manufactured for all the major
market segments: agricultural, construction, general industrial, lawn and garden, material handling,
utility, and marine. The applications with the most manufacturers in this power range are pumps,
generator sets, commercial turf equipment, pressure washers, rollers, skid-steer loaders, and light
plants/signal boards. About 14% of the equipment in this power range is manufactured by a single
original equipment manufacturer (OEM). There are 58 total applications with engines rated under
37 kW. All market segments are also represented in the 37 to 75 kW range. There are 59 total
applications and about 12 % of these are made by a single OEM. The applications with the most
manufacturers, in descending order, are generator sets, pumps, rough terrain forklifts, standard
forklifts, other general industrial, rubber-tired loaders, drill rigs, rollers, and pavers. The major
market segments are also represented in the 75 to 130 kW range. With 54 total applications, less
than 8% are manufactured by a single OEM. The equipment pieces with the largest manufacturing
diversity (largest number of OEMs) are generator sets, pumps, other general industrial equipment,
forest equipment, other agricultural equipment, drill rigs, cranes, rough terrain forklifts, and rubber-
tired loaders. The 130 to 560 kW market has the largest number of OEMs producing generator sets,
forest equipment, cranes, chippers/grinders, pumps, and excavators. The applications with the
fewest number of OEMs (two-wheeled tractors, cement mixers, tillers, gas compressors, and
welders) include only a single manufacturer in the database. All of the major nonroad market
segments are represented in this power range. The largest engines, those rated over 560 kW, are only
produced for the nonroad market segments of construction, general industrial, material handling, and
utility equipment. Of the equipment in this power range, those pieces with the largest number of
OEMs are generator sets, chippers/grinders, off-highway trucks, and rubber-tired loaders. About
36% of the equipment in this power range is manufactured by a single OEM.
Most equipment manufacturers must buy engines from another company. For most power
categories, the PSR OELink database estimates that between 5 and 25 percent of equipment sales
are from equipment manufacturers that also produce engines.4 Equipment with engines rated
between 130 and 450 kW have the greatest degree of vertical integration, with over 40 percent of
sales coming from these companies. Since vertically integrated manufacturers are typically very
large companies, such as John Deere and Caterpillar, the companies that make up this fraction of the
market are in a distinct minority.
A. Equipment Using Engines Rated Under 37 kW
Engines rated under 37 kW are predominantly indirect injection (63% of the market) engines
that are water-cooled (77% of the market). About 20% and 4% of equipment in this power range
uses engines that are air-cooled and oil-cooled, respectively. The six leading manufacturers produce
45% of the equipment in this category. Their collective sales volume over five years (1991 to 1995)
was approximately 350,000 pieces of equipment in a market which has a five year total sales volume
of 770,000. These manufacturers are shown in Table 2-2.
Of these top six OEMs, their sales are typified by welders, generators, excavators, tractors,
commercial turf, and refrigeration/air conditioning units. The uses of the equipment are listed in
Table 2-3. These top six manufacturers have engines that are typical of the market. Sixty-three
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Chapter 2: Industry Characterization
OEMs produce 90% of the equipment in this horsepower range.
Table 2-2
Characterization of the Top 6 Manufacturers under 37 kW
Original Equipment
Manufacturer
Deere & Co.
ThermoKing
Corporation
Carrier Transicold
Melroe Company
Gillette Mfg., Inc.
Lincoln Electric
Major Equipment
Manufactured
Commercial Turf,
Lawn/Garden
Tractors
Refrigeration, A/C
Refrigeration, A/C
Skid-Steer Loaders
and Trenchers
Generator Sets
Welders
Percentage of
Market
21%
8%
7%
4%
3%
2%
1991 to 1995
Equipment Sales
165,062
65,099
50,138
30,405
19,884
19,081
Engine
Characterization*
W,NA, D/I
W,NA,I
W,NA,D/I
W,NA,I
W/A,NA,I/D
W,NA,D
Average
Annual Sales
33,012
13,020
10,028
6,081
3,977
3,816
* W=water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect inj ection, D = direct
injection.
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Regulatory Impact Analysis
Table 2-3
Equipment Sales Distribution under 37 kW
Application Description
Commercial Turf
Refrigeration / AC
Generator Sets
Skid-Steer Loaders
Pumps
Welders
Lawn and Garden Tractors
Agricultural Tractors
Light Plant/Signal Boards
Trenchers
Other General Industrial
Scrubber/Sweeper
Rollers
Air Compressors
Plate Compactors
Pressure Washers
Aerial Lifts
Excavators
Hydraulic Power Units
Paving Equipment
Listed Total
Grand Total
Five-Year Sales Volume
(1991-1995)
200,698
111,742
62,505
60,875
41,229
36,173
33,452
25,082
19,695
14,680
9,645
8,635
5,584
5,170
4,376
4,329
3,165
2,998
2,946
2,833
657,803
679,549
Average
Annual Sales
40,140
22,348
12,501
12,175
8,246
7,235
6,690
5,016
3,939
2,936
1,929
1,727
1,117
1,034
875
866
633
600
589
567
131,163
135,910
Percentage of Total
Sales
30%
16%
9%
9%
6%
5%
5%
4%
3%
2%
1.4%
1.3%
0.8%
0.8%
0.7%
0.6%
0.5%
0.4%
0.4%
0.4%
96.8%
100%
B. Equipment Using Engines Rated between 37 and 75 kW
For the 37 to 75 kW range, almost all equipment uses direct injection engines that are water-
cooled and naturally aspirated. The six leading manufacturers produce 55% of the equipment in this
category. These manufacturers are listed in Table 2-4.
10
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Chapter 2: Industry Characterization
Table 2-4
Characterization of the Top 6 Manufacturers between 37 and 75 kW
Original Equipment
Manufacturer
Thermo King
Corporation
Melroe Company
Deere & Co.
J.I. Case
Lincoln Electric
Ingersoll-Rand Co.
Major Equipment
Manufactured
Refrigeration, A/C
Skid-Steer Loader,
Sprayers
Ag Tractors, Crawlers,
Backhoe-loaders
Crawlers, Backhoe-
loaders
Welders
Air Compressors,
Rollers
Percentage of
Market
13%
11%
11%
10%
6%
4%
1991 to 1995
Equipment Sales
74,256
60,715
59,830
56,009
33,404
21,904
Engine
Characterization*
W,NA,D
W,NA/T,D
W,NA,D
W,NA,D
W/O,NA,D/I
W/A/O, NA,D
Average
Annual Sales
14,851
12,171
11,966
11,202
6,681
4,381
* W=water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect inj ection, D = direct
injection.
The 37 to 75 kW range of engines has the following typical applications: skid-steer loaders,
refrigeration/AC, tractors, loaders, backhoes, generator sets, welders, agricultural tractors, pumps,
and forklifts. These top selling applications represent about 66% of the market as seen in Table 2-5.
The top 90% of the market is supplied by 73 different companies.
11
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Regulatory Impact Analysis
Table 2-5
Equipment Sales Distribution Across Application between 37 and 75 kW
Application Description
Skid-Steer Loader
Refrigeration, A/C
Tractor/Loader/Backhoe
Generator Set
Welder
Ag Tractor
Pump
Forklift
Air Compressor
Commercial Turf
Crawlers
Roller
Rough Terrain Forklift
Trencher
Chippers/grinder
Unknown
Scrubber/sweeper
Irrigation Set
Swather
Other General Industrial
Listed Total
Grand Total
Five-Year Sales
Volume (1991-1995)
87,180
74,256
51,448
44,043
33,854
26,951
17,876
17,675
14,442
14,260
12,730
12,693
12,620
12,601
12,176
9,298
9,187
9,121
7,251
5,423
487,076
532,825
Average Annual
Sales
17,436
14,851
10,290
8,809
6,771
5,390
3,575
3,535
2,888
2,852
2,546
2,539
2,524
2,520
2,435
1,860
1,837
1,824
1,450
1,085
97,017
106,565
Percentage of
Total Sales
16%
14%
10%
8%
6%
5%
3%
3%
3%
3%
2%
2%
2%
2%
2%
2%
2%
2%
1.4%
1.0%
91%
100%
C. Equipment Using 75 to 130 kW Engines
For equipment using 75 to 130 kW engines, the OEMs use predominantly direct injection (82%),
water cooled (95%), turbocharged (58%) engines. The six leading manufacturers produce 48% of
the equipment in this category. These manufacturers are shown in Table 2-6. The market as a whole
has a very similar sales distribution as that of the top six manufacturers.
12
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Chapter 2: Industry Characterization
Table 2-6
Characterization of the Top 6 Manufacturers between 75 and 130 kW
Original Equipment
Manufacturer
LTV Aerospace &
Defense Company
Caterpillar, Inc.
Deere and Co.
J.I. Case
Ingersoll-Rand
Onan Corporation
Major Equipment
Manufactured
Military
R/T Loader
Tractor/Loader/
Backhoe, Swathers
Tractor/Loader/
Backhoe
Rubber-Tired Loader
Air Compressors,
Rollers
Gen Sets, Marine
Auxiliary
Percentage of
Market
17%
10%
8%
7%
3%
3%
1991 to 1995
Equipment Sales
56,303
33,703
27,303
23,156
10,440
9,997
Engine
Characterization*
W, NAT, I/D
W, T/NA, D
W,T/NA,D
W,T/NA,D
W/A,T/NA,D
W,T/NA,D
Average
Annual Sales
11,261
6,741
5,461
4,631
2,088
1,999
* W=water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect inj ection, D = direct
injection.
The applications listed in Table 2-7 represent about 70% of the market. The top 90% of this
market is supplied by 98 OEMs. The 75 to 130 kW range is characterized by a wide distribution of
applications as shown in Table 2-7.
13
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Regulatory Impact Analysis
Table 2-7
Equipment Sales Distribution Across Application between 75 and 130 kW
Application Description
Generator Set
Tractor/Loader/Backhoe
Rubber-Tired Loader
Ag Tractor
Grader
Forklift
Forest Equipment
Air Compressor
Irrigation Set
Pump
Roller
Cranes
Rough Terrain Forklift
Swather
Scrubber/Sweeper
Crawler
Sprayer
Excavator
Aircraft Support
Chipper/Grinder
Listed Total
Grand Total
Five-Year Sales
Volume (1991-1995)
26,353
25,569
16,966
9,878
9,399
8,332
8,053
7,637
7,603
7,265
6,825
6,627
6,429
5,342
5,059
4,882
4,844
3,821
3,677
3,316
177,877
208,801
Average Annual
Sales
5,271
5,114
3,393
1,976
1,880
1,666
1,611
1,527
1,521
1,453
1,365
1,325
1,286
1,068
1,012
976
969
764
735
663
35,575
41,760
Percentage of
Total Sales
13%
12%
8%
5%
5%
4%
4%
4%
4%
3%
3%
3%
3%
3%
2%
2%
2%
2%
2%
2%
68%
100%
D. Equipment Using 130 to 560 kW Engines
For 130 to 560 kW engines, the OEMs use almost exclusively direct injection, water-cooled,
turbocharged engines. The six leading manufacturers produce 55% of the equipment in this
category. These manufacturers are shown in Table 2-8. Typical applications include agricultural
tractors, combines, crawlers, graders, and generator sets. About 45 OEMs produce 90% of the
equipment in this power range. Table 2-9 lists the most common applications, led by farm tractors,
14
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Chapter 2: Industry Characterization
generator sets, and combines.
Table 2-8
Characterization of the Top 6 Manufacturers between 130 and 560 kW
Original Equipment
Manufacturer
Deere & Co.
Caterpillar, Inc.
Case IH
New Holland
Wayne Wheeled
Vehicles
Kohler Company
Major Equipment
Manufactured
Ag Tractors,
Combines
Generator Sets,
Graders
Ag Tractors,
Combines
Ag Tractors,
Combines
Tactical Military
Equipment
Generator Sets
Percentage of
Market
26%
12%
12%
4%
3%
3%
1991 to 1995
Equipment Sales
130,906
60,151
59,812
19,719
15,505
13,050
Engine
Characterization*
W, T,D
W,T,D
W,T,D
W,T,D
W,T,D
W,NA/T,D
Average
Annual Sales
26,181
12,030
11,962
3,944
3,101
2,610
* W=water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect inj ection, D = direct
injection.
15
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Regulatory Impact Analysis
Table 2-9
Equipment Sales Distribution Across Application between 130 and 560 kW
Application Description
Agricultural Tractor
Generator Sets
Combines
Rubber-Tired Loader
Graders
Crawlers
Air Compressors
Off -Highway Truck
Forest Equipment
Scrapers
Excavators
Cranes
Terminal Tractors
Special Vehicle/ Carts
Chippers/Grinders
Sprayers
Pumps
Other Agricultural Equipment
Off -highway Tractors
Surfacing Equipment
Listed Total
Grand Total
Five-Year Sales Volume
(1991-1995)
77,306
58,526
39,025
16,517
16,008
15,969
14,763
13,085
9,609
8,932
8,322
8,162
8,140
7,217
6,210
5,419
4,564
4,278
3,983
3,081
331,107
355,590
Average Annual
Sales
15,461
11,705
7,805
3,303
3,202
3,194
2,953
2,617
1,922
1,786
1,664
1,632
1,628
1,443
1,242
1,084
913
856
797
616
65,823
71,118
Percentage of
Total Sales
22%
16%
11%
5%
5%
4%
4%
4%
3%
3%
2%
2%
2%
2%
2%
2%
1.3%
1.2%
1.1%
0.9%
92.5%
100%
E. Equipment Using Over 560 kW Engines
As in the previous category, equipment rated over 560 kW uses turbocharged, direct injection
engines that are water-cooled. The leading six manufacturers produce 70% of the equipment in this
power range. These manufacturers are shown in Table 2-10. Generator sets make up the majority
of equipment in this range, while off-highway trucks and crawler tractors also have significant sales
(see Table 2-11).
16
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Chapter 2: Industry Characterization
Table 2-10
Characterization of the Top 6 Manufacturers over 560 kW
Original Equipment
Manufacturer
Caterpillar, Inc.
Onan Corporation
Kohler Company
Detroit Diesel
Distributors
Fermont Division
Komatsu-Dresser
Major Equipment
Manufactured
Crawlers,
Off Highway Truck
Generator Sets
Generator Sets
Generator Sets
Generator Sets
Off Highway Truck,
Rubber-Tired Loader
Percentage of
Market
41%
10%
8%
5%
3%
3%
1991 to 1995
Equipment Sales
6,816
1,677
1,249
824
572
494
Engine
Characterization*
W,T,D
W,T,D
W,T,D
W,T,D
W,T,D
W,T,D
Avg. Annual
Sales
1,363
335
250
165
114
99
* W=water-cooled, A= air cooled, O = oil cooled; NA = naturally aspirated, T=turbocharged; I = indirect inj ection, D = direct
injection.
Table 2-11
Equipment Sales Distribution Across Application over 560 kW
Application Description
Generator Sets
Off -highway Trucks
Crawlers
Off -highway Tractors
Oil Field Equipment
Chippers/Grinders
Bore/Drill Rigs
Rubber-Tired Loaders
Locomotives
Excavators
Cranes
Listed Total
Five-Year Sales Volume
(1991-1995)
7,116
1,257
837
218
148
118
91
68
37
28
9
11,918
Average
Annual Sales
1,423
251
167
44
30
24
18
14
7
6
2
1,986
Percentage of Total
Sales
72%
13%
8%
2%
1.5%
1.2%
0.9%
0.7%
0.4%
0.3%
0.1%
100%
17
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Regulatory Impact Analysis
Chapter 2 References
1. Information in the literature was taken principally from the July 1996 issue of Diesel
Progress.
2. "Big Changes for Cummins' B Series," Diesel Progress., May 1997, page 14.
3. "Industry Characterization Support Data," EPA memorandum from Cleophas Jackson to
Docket A-96-40, August 5, 1997.
4. Power Systems Research, OELink Database, 1996.
18
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Chapter 3: Technological Feasibility
CHAPTER 3: TECHNOLOGICAL FEASIBILITY
The nonroad emission source category encompasses a large and diverse population of engines
and equipment, as described in Chapter 2. Setting emission standards that apply to all the
participating manufacturers for all the applications is not straightforward. EPA has, however,
attempted to take into account the needs and constraints of the affected industries to develop a set
of emission standards that can be met in the specified time frame. The Agency believes there are
several factors that will enable manufacturers to successfully meet the new standards. First, and
perhaps most importantly, EPA believes that manufacturers will be able to draw from the experience
in the development of advanced highway engine technology when determining their strategies to
meet the new standards. Second, market demand is driving engine manufacturers to greater use of
advanced technologies that also provide improved capability for controlling emissions.
Manufacturers are expected to continue to improve engine performance by redesigning combustion
chambers, increasing the use of turbocharging and aftercooling, modifying fuel injection hardware,
and introducing electronic controls. Third, manufacturers have acknowledged that the majority of
their research and development efforts will be focused on meeting the most stringent standards (Tier
2 for engines rated under 37 kW and Tier 3 for larger engines). Even though these stringent
standards present significant challenges and will require a substantial effort on the part of industry,
EPA believes that the long lead time, coupled with the experience gained with highway engines, will
allow manufacturers to comply with the most stringent emission standards. Fourth, various
provisions are included to ease the burden of complying with the new standards, including a phase-in
schedule with considerable lead time, flexibility options for equipment manufacturers, and an
enhanced program of averaging, banking, and trading. EPA therefore believes that manufacturers
will be capable of achieving the new emission standards within the allotted lead time at a reasonable
cost.
This chapter first briefly reviews the principles of diesel engine combustion and emission
formation, then discusses in general terms the types of emission control strategies that may be
utilized by manufacturers to meet the standards. The application of these strategies to each of the
engine categories is considered next. The chapter concludes with an evaluation of the noise, energy,
and safety impacts associated with the rulemaking. A discussion of the effects of the suggested
engine modifications on equipment is discussed in the context of economic impacts in the next
chapter.
I. Background on Diesel Technology and Emission Formation
In a diesel engine, the liquid fuel is injected into the combustion chamber after the air has been
heated by compression. In the case of indirect injection engines, the fuel is injected into a
prechamber, where combustion initiates before spreading to the rest of the combustion chamber. The
fuel is injected in the form of a mist of fine droplets that mix with the air. Power output is controlled
19
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Regulatory Impact Analysis
by regulating the amount of fuel injected into the combustion chamber, without throttling (limiting)
the amount of air entering the engine. The compressed air heats the injected fuel droplets, causing
the fuel to evaporate and mix with the available oxygen. At several sites where the fuel mixes with
the oxygen, the fuel autoignites and the multiple flame fronts spread through the combustion
chamber.
NOx and PM are the emission components of most concern from diesel engines. Incomplete
evaporation and burning of the fine fuel droplets result in emissions of the very small particles of
PM. Small amounts of lubricating oil that escape into the combustion chamber can also contribute
to PM. The high temperatures and excess oxygen associated with diesel combustion can cause the
nitrogen in the air to combine with available oxygen to form NOx. Because of the presence of
excess oxygen, hydrocarbons evaporating in the combustion chamber tend to be completely burned
and HC and CO are not emitted at high levels. Evaporative emissions from diesel engines are
insignificant due to the low evaporation rate of diesel fuel.
Controlling both NOx andPM emissions requires different, sometimes opposing strategies. The
key to controlling NOx emissions is reducing peak combustion temperatures. In contrast, higher
temperatures in the combustion chamber or faster burning lower rates of PM emissions, either by
decreasing the formation of particulates or by oxidizing those particulates that have formed. To
control both NOx and PM, manufacturers need to combine approaches using the many different
variables to achieve optimum performance.
II. General Description of Emission Control Strategies
In general, nonroad engine manufacturers are expected to apply similar emission control
strategies to those utilized by the manufacturers of heavy-duty highway diesel engines, even though
the application of these strategies could differ because of some unique aspect of the operating
environment or performance needs of the nonroad engines. While both highway and nonroad
engines experience frequent changes in load and speed caused by work fluctuations, nonroad
operators typically do not change engine speeds as often as highway vehicles. Also, nonroad engines
often power both nonmotive and motive functions. Another factor affecting the choice of emission
control strategies is the fact that many nonroad engines are used in multiple equipment applications,
many of which have low sales volumes. Nonroad engine manufacturers are, however, currently in
the process of introducing models that have been certified to the Tier 1 standards and are
successfully demonstrating their ability to meet the first level of emission standards. Based on a
review of current emissions research, EPAbelieves that emission control improvements from engine
design changes have not yet leveled off and that further emission reductions are possible.
The remainder of this section discusses in more detail potential engine control strategies,
including combustion optimization, better fuel control, exhaust gas recirculation, improved charge
air characteristics, and aftertreatment devices. A more detailed analysis of the application of these
strategies to individual categories of nonroad engines is discussed in Section HI. The costs
associated with these systems are considered in the next chapter.
20
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Chapter 3: Technological Feasibility
A. Combustion Optimization
Several parameters in the combustion chamber of a heavy-duty diesel engine affect its efficiency
and emissions. These engine parameters include charge (or intake) air temperature and pressure,
peak cylinder temperature and pressure, turbulence, valve and injection timing, injection pressure,
fuel spray geometry and rate, combustion chamber geometry and compression ratio. Many
technologies that are designed to control the engine parameters listed above have been investigated.
As mentioned previously, however, a positive influence on one pollutant may have a negative
influence on another. For example, charge air cooling reduces NOx emissions, but increases PM.
Manufacturers will need to integrate all of these variables into optimized systems to meet the new
standards.
1. Timing retard
The effect of injection timing on emissions and performance is well established.1'2'3'4 Retarded
timing is the strategy most likely to be used by manufacturers of engines rated under 37 kW to meet
the new Tier 1 standards. NOx is reduced because the premixed burning phase is shortened and
because cylinder temperature and pressure are lowered. Timing retard increases HC, CO, PM, and
fuel consumption, however, because the end of inj ection comes later in the combustion stroke where
the time for extracting energy from fuel combustion is shortened and the cylinder temperature and
pressure are too low for more complete oxidation of PM. One technology that can offset this trend
is higher injection pressure, which is discussed further below.
2. Combustion chamber geometry
While manufacturers are already achieving emission reductions through modifications to the
combustion chamber, EPA believes there are additional changes that may provide further
improvements in emission control. The parameters being investigated include (1) the shape of the
chamber and the location of injection; (2) reduced crevice volumes; and (3) compression ratio.
These parameters have been thoroughly explored for highway engines and should be readily
adaptable to nonroad engines.
Efforts to redesign the shape of the combustion chamber and the location of the fuel injector for
highway and nonroad engines have been primarily focused on optimizing the relative motion of air
and injected fuel to simultaneously limit the formation of both NOx and PM. Piston crown design
must be carefully matched with injector spray pattern and pressure for optimal emission behavior.5
One strategy, reentrant piston bowl design, focuses on optimizing the radius of the combustion bowl,
the angle of the reentrant lip, and the ratio of the bowl diameter to bowl depth to optimize air motion.
An alternative is the use of higher pressure inj ection systems that decrease the need for turbulent in-
cylinder charge air motion. While higher pressure systems raise concerns of durability, there has
been a significant amount of progress in this area and it is expected that manufacturers will be able
to develop a durable system.6
The second parameter being investigated is reducing crevice volumes by moving the location
21
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Regulatory Impact Analysis
of the top piston ring relative to the top of the piston.7 A reduced crevice volume can result in
reduced HC emissions and, to a lesser extent, reduced PM emissions. Costs associated with the
relocation of the top ring can be substantial because raising the top of the piston ring requires
modified routing of the engine coolant through the engine block and lube oil routing under the piston
to prevent the raised ring from overheating. It is also important to design a system that retains the
durability and structural integrity of the piston and piston ring assembly, which requires very precise
tolerances to avoid compromising engine lubrication.
Compression ratio is another engine design parameter that impacts emission control. In general,
higher compression ratios cause a reduction of cold start PM and improved fuel economy, but can
also increase NOx. Several methods can be employed to increase the compression ratio in an
existing diesel engine. Redesign of the piston crown or increasing the length of the connecting rod
or piston pin-to-crown length will raise the compression ratio by reducing the clearance volume.8
There is a limit to the benefit of higher compression ratios because of increased engine weight (for
durability) and frictional losses, which could somewhat limit fuel economy improvements.
3. Swirl
Increasing the turbulence of the intake air entering the combustion chamber (i.e., inducing swirl)
can reduce PM by improving the mixing of air and fuel in the combustion chamber. Historically,
swirl was induced by routing the intake air to achieve a circular motion in the cylinder.
Manufacturers are, however, increasingly using "reentrant" piston designs in which the top surface
of the piston is cut out to allow fuel injection and air motion in a smaller cavity in the piston to
induce additional turbulence. Manufacturers are also changing to three or four valves per cylinder,
which reduces pumping losses and can also allow for intake air charge motion. The effect of swirl
is often engine-specific, but some general effects may be discussed.
At low loads, increased swirl reduces HC, PM, and smoke emissions and lowers fuel
consumption due to enhanced mixing of air and fuel. NOx emissions might increase slightly at low
loads as swirl increases. At high loads, swirl causes slight decreases in PM emissions and fuel
consumption, but NOx may increase because of the higher temperatures associated with enhanced
mixing and reduced wall impingement.9 A higher pressure fuel system can be used to offset some
of the negative effects of swirl, such as increased NOx, while enhancing the positive effects such as
a reduction in PM.10
B. Advanced Fuel Injection Controls
Control of the many variables involved in fuel injection is central to any strategy to reduce
diesel engine emissions. The principal variables being investigated are injection pressure, nozzle
geometry (e.g., number of holes, hole size and shape, and fuel spray angle), the timing of the start
of injection, and the rate of injection throughout the combustion process (e.g., rate shaping).
Manufacturers continue to investigate new injector configurations for nozzle geometry and
higher injection pressure (in excess of 2300 bar (34,000 psi)).11'12 Increasing injection pressure
22
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Chapter 3: Technological Feasibility
achieves better atomization of the fuel droplets and enhances mixing of the fuel with the intake air
to achieve more complete combustion. Though HC and PM are reduced, higher cylinder pressures
can lead to increased NOx formation.13 Retarding the start of fuel injection in conjunction with
higher fuel injection pressures can, however, lead to reduced NOx because of lower combustion
temperatures. HC, PM, or fuel economy penalties from this strategy can be avoided because the
termination of fuel inj ection need not be delayed. Nozzle geometry is used to optimize the fuel spray
pattern for a given combustion chamber design in order to improve mixing with the intake air and
to minimize fuel condensation on the combustion chamber surfaces.14 Minimizing the leakage of
fuel droplets is critical for reducing HC emissions. Valve-closed orifice (VCO) tips are more
effective than sac-type nozzles, because they eliminate any droplets remaining after inj ection, which
would increase HC emissions. Although VCO tips are subject to very high pressures, EPA believes
progress will continue in developing a durable injector tip prior to implementation of the Tier 2
standards.
The most recent advances in fuel injection technology are the systems that use rate shaping or
multiple injections to vary the delivery of fuel over the course of a single injection. Igniting a small
quantity of fuel initially limits the characteristic rapid increase in pressure and temperature that leads
to high levels of NOx formation. Injecting most of the fuel into an established flame then allows for
a steady burn that limits NOx emissions without increasing PM emissions. Rate shaping may be
done either mechanically or electronically. Rate shaping has been shown to reduce NOx emissions
by up to 20 percent.15
For electronically controlled engines, multiple injections may be used to shape the rate of fuel
injection into the combustion chamber. Recent advances in fuel system technology allow high-
pressure multiple injections to be used to reduce NOx by 50 percent with no significant penalty in
PM. Two or three bursts of fuel can come from a single injector during the injection event. The
most important variables for achieving maximum emission reductions with optimal fuel economy
using multiple injections are the delay preceding the final pulse and the duration of the final pulse.16
This strategy is most effective in conjunction with retarded timing, which leads to reduced NOx
emissions without the attendant increase in PM.
A promising fuel injection design is that developed by Caterpillar and Navistar, the
Hydraulically Actuated Electronically Controlled Unit Inj ection (HEUI) system.17 The HEUI system
utilizes a common rail of pressurized oil to provide high injection pressures throughout an engine's
operating range. The HEUI system provides full electronic control of injection timing and duration,
along with the possibility for rate shaping. The most attractive aspect of this system is that it
operates largely independent of engine speed. This could be an important strategy for nonroad
engine manufacturers because of the use of a single engine in a wide range of applications. Some
manufacturers are already utilizing this system on production engines. It is expected that
manufacturers will be able to develop and produce a full-authority electronic fuel injection system
for a reasonable cost in time for some engines meeting Tier 2 standards; many more models are
expected to incorporate electronic controls in engines designed for Tier 3 standards.
23
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Regulatory Impact Analysis
C. Exhaust Gas Recirculation
Exhaust gas recirculation (EGR) is the most recent development in diesel engine control
technology for obtaining significant NOx reductions. EGR reduces peak combustion chamber
temperatures by slowing reaction rates and absorbing some of the heat generated from combustion.
While NOx emissions are reduced, PM and fuel consumption can be increased, especially at high
loads, because of the reduced oxygen available during combustion.18'19 One method of minimizing
PM increases is to reduce the flow of recirculated gases during high load operation, which would
also prevent a loss in total power output from the engine. Recent experimental work showed NOx
reductions of about 50 percent, with little impact on PM emissions, using just 6 percent EGR in
conjunction with a strategy of multiple injections.20
Another challenge facing manufacturers is the potential negative effects of soot from the
recirculated exhaust being routed into the intake stream. Soot may form deposits in the intake
system, which could cause wear on the turbocharger or decrease the efficiency of the aftercooler.
As the amount of soot in the cylinder increases, so does the amount of soot that works its way past
the piston rings into the lubricating oil, which can lead to increased engine wear. One thing that has
been developed to reduce soot in the recirculated exhaust gas is a low-voltage soot removal device.21
Engine wear was shown to be greatly reduced as a result of this device. Another strategy is to
recirculate the exhaust gas after it has passed through a particulate trap or filter. Demonstrations
have shown that some prototype traps can remove more than 90 percent of particulate matter.22
D. Improving Charge Air Characteristics
Charge air compression (turbocharging) is primarily used to increase power output and reduce
fuel consumption from a given displacement engine. At rated power, a typical diesel engine loses
about 30 percent of its energy through the exhaust. A turbocharger uses the waste energy in the
exhaust gas to drive a turbine linked to a centrifugal compressor, which then boosts the intake air
pressure. By forcing more air into the cylinder, more fuel can also be added at the same air-fuel
ratio, resulting in higher power and better fuel consumption while controlling smoke and particulate
formation. To prevent increased NOx emissions, an aftercooler is typically installed to reduce the
temperature of the charge air after it has been heated during compression.
While aftercooling reduces NOx emissions, it was initially developed to improve the specific
power output of an engine by increasing the density of air entering the combustion chamber. There
are two kinds of aftercooling strategies—air-to-water or air-to-air. Air-to-water aftercoolers use
engine coolant to lower the intake air temperature. This method, however, can only reduce the
temperature of the compressed intake air to the operating temperature of the engine and significantly
adds to the heat load on the cooling system. The temperature of the intake air after compression by
the turbocharger is approximately 300°F. An air-to-water aftercooler can only cool the charge air
to approximately 200°F.
Air-to-air aftercoolers use a stream of outside air flowing through a separate heat exchanger to
cool the intake air. An air-to-air aftercooler can cool the compressed intake air to a temperature
24
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Chapter 3: Technological Feasibility
approaching that of the ambient. Air-to-air aftercoolers are widely used with highway engines, but
nonroad engines complying with Tier 1 standards generally have not incorporated air-to-air
aftercooling, due to limits on dust tolerance and space constraints. Ground-level dust is becoming
less of an issue because recent developments have improved dust resistance, primarily through
greater fin spacing on the heat exchanger. Over time, equipment manufacturers are expected to
modify their designs to make space for air-to-air aftercooling technology. While introducing air-to-
air aftercooling requires a greater degree of engine and equipment modification, the benefits for
improved fuel efficiency, greater engine durability, and better control of NOx emissions make a
compelling case for their widespread use in the long term.23
E. Exhaust Aftertreatment Strategies
Researchers in industry and academia have explored various technologies for treating engine-out
exhaust emissions. In general, EPA does not expect that manufacturers will need to utilize exhaust
aftertreatment to meet the new standards; however, further work on these technologies may lead to
development of an approach that provides effective control at a lower cost than today's anticipated
technologies. This may be especially true in certain niche markets. For example, some nonroad
applications that involve operation in confined areas are currently using some form of exhaust
aftertreatment. This analysis considers in detail only oxidation catalysts and particulate traps. Other
technologies being pursued include selective and nonselective catalytic reduction, various plasma
and electrochemical approaches, and fuel additives.
1. Oxidation catalysts
The flow-through oxidation catalyst provides relatively moderate PM reductions by oxidizing
both gaseous hydrocarbons and the portion of PM known as the soluble organic fraction (SOF). The
SOF consists of hydrocarbons adsorbed to the carbonaceous solid particles and may also include
hydrocarbons that have condensed into droplets of liquid.34 The carbon portion of the PM remains
largely unaffected by the catalyst. Although recent combustion chamber modifications have reduced
SOF emissions, the SOF still comprises between 30 and 60 percent of the total mass of PM.
Catalyst efficiency for SOF varies with exhaust temperature, ranging from about 50 percent at 150°C
to more than 90 percent above 350°C.24 Because exhaust gas temperatures typically fluctuate
between 100°C and 400°C during the Federal Test Procedure for highway diesel engines, the
reduction in tested total particulate mass provided by the oxidation catalyst is relatively modest.
Another challenge facing catalyst manufacturers is the formation of sulfates in the exhaust. At
higher exhaust temperatures, catalysts have a greater tendency to oxidize sulfur dioxide to form
sulfates, which contribute to total PM emissions. In addition to the introduction of low-sulfur fuel
by EPA, catalyst manufacturers have been successful in developing catalyst formulations that
minimize sulfate formation.25 Catalyst manufacturers have also adjusted the placement of the
catalyst to a position where the needed SOF reduction is achieved, but sulfate formation is
minimized.26 Nonroad fuel with sulfur concentrations higher than 0.05 weight percent may prevent
the use of more active oxidation catalysts with higher conversion efficiencies.
25
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Regulatory Impact Analysis
2. Particulate traps
Use of a particulate trap is a very effective way of reducing parti culate emissions, including the
carbon portion. Particulate traps have been extensively developed for highway applications, though
very few engines have been sold equipped with traps, primarily because of the complexity of the
systems needed to remove the collected particulate matter. Continued efforts in this area may lead
to simpler, more durable designs that control emissions cost-effectively. Research in this area is
focused on developing new filter materials and regeneration methods. Some designs rely on an
additive acting as a catalyst to promote spontaneous oxidation for regeneration, while other designs
aim to improve an active regeneration strategy with microwave or other burner technology.
III. Specific Description of Emission Control Strategies by Power
Category
In developing the various numerical standards and implementation dates, EPA depended heavily
on extending the analysis of technological feasibility for the earlier rulemaking to set emission
standards for highway heavy-duty engines. While the 2004 standards for highway engines apply
equally to all sizes of engines starting in the same year, the standards established in this rulemaking
are a complex combination of numerical values and applicable model years. Varying numerical
standards were considered necessary to account for the very wide range of engines represented in
nonroad applications. Also, because of the range of engines offered by individual manufacturers,
EPA believes that new standards can be implemented most expeditiously by phasing the standards
in at different times for different power ranges. EPA applied a similar phase-in for the first tier of
nonroad emission standards in 1994.
Because the new emission standards depend on the evaluation of technologies for complying
with the standards for highway engines, the discussion of technological feasibility in that rulemaking
is central to supporting the feasibility of complying with standards for nonroad engines. This
analysis of diesel engine technologies is contained in Chapter 4 of the Final RIA for the highway
rule.27
By setting multiple tiers of standards that extend well into the next decade, EPA is providing
engine manufacturers with substantial lead time for developing, testing, and implementing emission
control technologies. This lead time and the coordination of standards with those for highway
engines allows time for a comprehensive R&D program to integrate the most effective emission
control approaches into the manufacturers' overall design goals related to durability, reliability, and
fuel consumption. The following sections describe a set of projections related to the technologies
manufacturers may ultimately implement.
A. Engines Rated over 75 kW
Although this category of engines extends over a very large range, EPA expects manufacturers
to use similar emission control strategies previously identified for highway diesel engines. In fact,
some manufacturers currently use the same engine for both their highway and nonroad applications.
26
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Chapter 3: Technological Feasibility
The difference between models lies primarily with charge air compression and cooling, and
electronic control software where applicable. The expected increasing use of electronic controls
allows manufacturers to tailor the engine to specific applications with minimal modification to the
rest of the engine.
To meet Tier 2 standards, manufacturers will continue optimizing the combustion chamber and
modifying injection timing. Manufacturers are expected to increase their use of electronic controls
to improve both emission control and engine performance. Certification data for the 1996 model
year indicates that some manufacturers have already upgraded their systems to incorporate advanced
high-pressure electronic fuel inj ection systems.28 There are even a few engines certified in 1996 with
emission levels close to the Tier 2 standards.
The Tier 3 standards will likely lead to very widespread use of full authority electronic systems
with very high-pressure unit inj ector or common rail fuel systems. The technology for electronic fuel
injection is advancing at a rapid pace, driven by market demand for improved performance and
increasingly stringent emission standards. Manufacturers may also utilize EGR to further reduce
NOx emissions. EPA believes manufacturers can meet the Tier 3 standards for these engines by
transferring and adapting these technologies developed for highway engines.
B. Engines Rated between 37 and 75 kW
This category is somewhat transitional in nature, because some current engines are naturally
aspirated and resemble smaller engines, while others are turbocharged and resemble highway and
larger nonroad engines. In discussions that led to the proposed Tier 2 and Tier 3 emission standards,
manufacturers placed a high priority on being able to continue to produce naturally aspirated engines
in this size range. Since that time, however, increased use of turbochargers for light-duty highway
applications (in the U. S. and abroad), among other things, has advanced the technology and reduced
costs enough that turbocharging has become a viable near-term option for engines in this size range.
Most of these engines have certified Tier 1 emission levels that are near or below the new Tier
2 levels. Compliance with Tier 2 standards will therefore require incremental change in injection
or other combustion variables, though some bigger steps such as turbocharging and introducing a
low level of EGR may be adopted for some engines, primarily in anticipation of Tier 3 standards.
Meeting Tier 3 standards will involve more extensive changes. Manufacturers are expected
to make broad use of turbocharging (or supercharging) in conjunction with either aftercooling or
EGR for controlling both NOx and PM emissions. Further fuel injection upgrades, perhaps
including electronically controlled injection, will also be needed to meet emission standards. The
Tier 3 standards are comparable to, but less stringent than, the highway standards that will become
effective in model year 2004. EPA believes that implementation of the Tier 3 standards in 2008 for
these engines gives manufacturers sufficient time to adapt highway technologies as appropriate and
optimize the systems for controlling emissions at a relatively low cost.
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Regulatory Impact Analysis
C. Engines Rated under 37 kW
The design features of these small engines and their greater cost sensitivity constrain the
targeted level of emission control. These engines are therefore subject to less stringent emission
standards.
Engines using indirect injection (IDI) are already controlled to levels below the new Tier 1
standards and, in many cases, below even the Tier 2 standards. Certification data submitted to the
California ARB for diesel engines rated under 19 kW show most IDI engines controlling NMHC +
NOx emissions well below 7 g/kW-hr (5.2 g/hp-hr), with PM levels between 0.3 and 0.4 g/kW-hr
(0.2 and 0.4 g/hp-hr).29 Those engines that need additional control can use currently available, low-
cost upgrades to fuel inj ection systems to meet the new emission standards. An additional advantage
of IDI engine technology is the relatively quiet engine operation. Since fuel consumption in IDI
engines is 10 to 15 percent higher than in their direct-injection counterparts, shifting to IDI
technology to comply with emission standards is not an optimal solution.
For direct injection engines, EPA expects that manufacturers will be able to meet the Tier 1
standards by optimizing the combustion chamber and retarding the timing. These control
technologies are well established for diesel engines and should be readily adaptable to the small
engines. Additional certification data from the California ARB show emission rates for some DI
engines rated under 19 kW to be between the Tier 1 and Tier 2 standards.30 To meet the Tier 2
standards, some manufacturers could replace the existing rotary pump fuel injection systems with
a more sophisticated rotary pump, some designs of which have already been developed, or perhaps
an in-line pump system.31 Current trends, though, indicate that consumers are requesting more
sophisticated electronics on their machinery for improvements in performance.32 For this reason,
it is possible that by 2004 an electronically controlled engine will be available at a reasonable cost.
Electronic controls enable the engine designer to more carefully control the engine, especially the
fuel injection parameters, to optimize engine operation for the best combination of emission control,
power, and fuel economy. At any rate, limited electronics should be available for governing and for
some improvements in performance. Finally, some applications may employ EGR to ensure
sufficiently low NOx emission levels.
Many of the air-cooled diesel engines rated under 8 kW face unique design challenges. The
small size and low cost of these engines limit the flexibility of designing or adapting technologies
to control emissions. For example, increasing injection pressure in very small cylinders involves
tradeoffs resulting from the greater impingement of fuel spray on cylinder walls. Also, for some
approaches, such as reducing injector hole diameters, scaling a technology down to the smallest
engines may not be feasible due to machining or other production limitations. Tier 1 standards for
these engines are therefore set at less stringent levels than those for larger engines. To reach these
levels, manufacturers will need to rely on several of the strategies used for other engines. For
example, increasing swirl and redesigning piston head geometries can be an effective way of
improving fuel air mixing in small engines, with the additional benefit of allowing higher injection
pressures without increasing fuel wetting on the cylinder walls. The position and design of piston
28
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Chapter 3: Technological Feasibility
rings can be improved to reduce the contribution of engine oil to particulate emissions.
Incorporating fuel injectors that provide mechanically controlled rate shaping would allow
substantial control of NOx emissions at a low cost. Using inj ectors with valve-closed-orifice nozzles
would similarly control HC emissions. Engines that operate within a relatively narrow range of
engine speeds can achieve a degree of charge-air compression with intake manifold designs that rely
on pulse tuning. These types of strategies have been shown to reduce emission levels to that of the
new Tier 2 standards; EPA believes that despite the more difficult characteristics of these engines,
manufacturers will be able to incorporate such strategies to achieve compliance with Tier 2
standards.
IV. Impact on Noise, Energy, and Safety
The Clean Air Act requires EPA to consider potential impacts on noise, energy, and safety when
establishing the feasibility of emission standards for nonroad diesel engines. One important source
of noise in diesel combustion is the sound associated with the combustion event itself. When a
premixed charge of fuel and air ignites, the very rapid combustion leads to a sharp increase in
pressure, which is easily heard and recognized as the characteristic sound of a diesel engine. The
conditions that lead to high noise levels also cause high levels of NOx formation. Fuel injection
changes and other NOx control strategies therefore typically reduce engine noise.
Combustion-related noise reductions may be as great as 8 or 10 decibels, which is much greater than
that anticipated from increasing the size or speed of the cooling fan.1
Another principle source of noise is the cooling fan. Any engine changes that increase the heat
load to the heat exchangers would increase the need for fan cooling, either with larger fans or with
higher fan speeds, which quickly increases noise levels. Fans are typically positioned to provide
cooling air for three heat exchanger applications: engine coolant, hydraulic working fluid, and air
conditioning. Applying cooled EGR to an engine would likely require the engine coolant to absorb
the heat from the recirculating exhaust gases. Heat rej ection from the EGR system, however, would
generally occur during lower-power operation. During periods of high-power operation, and
therefore high heat rejection from combustion, there is little or no EGR flow. As a result, EGR
cooling is expected to have a small effect on total cooling capacity. EPA believes that any increase
in noise from a cooling fan resulting from increased heat rejection would be more than offset by a
reduction in combustion noise related to controlling NOx emissions. The need and ability of
manufacturers to maintain low noise levels from diesel engines is therefore not compromised by the
new standards.
The impact of new emission standards on energy is measured by the effect on fuel consumption
from complying engines. Manufacturers of engines rated under 37 kW are expected to retard
injection timing, which increases fuel consumption somewhat. Most of the technology changes
anticipated in response to the new standards, however, have the potential to reduce fuel consumption
as well as emissions. Redesigning combustion chambers, incorporating improved fuel injection
systems, and introducing electronic controls provide the engine designer with powerful tools for
improving fuel efficiency while simultaneously controlling emission formation. To the extent that
manufacturers shift from air-to-water aftercooling to air-to-air aftercooling, there will be a marked
29
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Regulatory Impact Analysis
improvement in fuel efficiency. A moderate degree of cooled EGR can be incorporated with little
or no increase in fuel consumption, especially with the anticipated use of EGR cooling.
Manufacturers of highway diesel engines have been able to steadily improve fuel efficiency even as
new emission standards required significantly reduced emissions.
There are no apparent safety issues associated with the new standards. Manufacturers will likely
use only proven technology that is currently used in other engines, especially in diesel trucks.
30
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Chapter 3: Technological Feasibility
Chapter 3 References
l.Herzog, P., Burgler, L., Winklhofer, E., Zelenda, P., and Carterllieri, W., "NOx Reduction
Strategies for DI Diesel Engines," SAE Paper 920470, 1992.
2.Uyehara, O., "Factors that Affect NOx and Particulates in Diesel Engine Exhaust," SAE Paper
920695, 1992.
S.Durnholz, M., Eifler, G., Endres, H., "Exhaust-Gas Recirculation - A Measure to Reduce
Exhaust Emission of DI Diesel Engines," SAE Paper 920715, 1992.
4.Bazari, Z., French, B., "Performance and Emissions Trade-Offs for a HSDI Diesel Engine - An
Optimization Study," SAE Paper 930592, 1993.
5."Estimated Economic Impact of New Emission Standards for Heavy-Duty On-Highway
Engines," Acurex Environmental Corporation Final Report (FR-97-103), March 31, 1997, page
4-11.
6.See reference 4-SAE 930592
7."Emission Control Technology for Diesel Trucks," U.S. EPA Report to Congress, October
1993.
8.See reference 5 - Acurex Environmental Final Report, page 4-10
9.See reference 4-SAE 930592
10.See reference 1--SAE 920470
1 l.See reference 4-SAE 930592
12.Pierpont, D., Reitz,R., "Effects of Injection Pressure and Nozzle Geometry on DI Diesel
Emissions and Performance," SAE Paper 950604, 1995.
13.See reference 1-SAE 920470
14. See reference 12-SAE 950604
IS.Ghaffarpour, M. and Baranescu, R., "NOx Reduction Using Injection Rate Shaping and
Intercooling in Diesel Engines," SAE Paper 960845, 1996
16.Piepont, D., Montgomery, D., Reitz, R., "Reducing Particulate and NOx Using Pilot
Injection," SAE Paper 950217, 1995.
17."CAT's HEUI System: A Look at the Future?," Diesel Progress, April 1995, page 30.
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Regulatory Impact Analysis
18.See reference 1--SAE 920470
19. See reference 17--SAE 950217
20.Montgomery, D. and Reitz, R., "Six-Mode Cycle Evaluation of the Effect of EGR and
Multiple Injections on Particulate and NOx Emissions from a D.I. Diesel Engine," SAE Paper
960316, 1996
21.Yoshikawa, H., Umehara, T., Kurkawa, M., Sakagami, Y., Ikeda, T., "The EGR System for
Diesel Engine Using a Low Voltage Soot Removal Device," SAE Paper 930369, 1993.
22.Khalil, N., Levendis, Y., Abrams, R., "Reducing Diesel Particulate and NOx Emissions via
Filtration and Particle-Free Exhaust Gas Recirculation," SAE Paper 950736, 1995.
23.See reference 4-SAE 930592
24.Meeting between EPA and Manufacturers of Emission Controls Association, April 1995.
25.Voss, K., Bulent, Y., Hirt, C., and Farrauto, R., "Performance Characteristics of a Novel
Diesel Oxidation Catalyst," SAE Paper 940239, 1994.
26.Johnson, J., Bagley, S., Gratz, L., Leddy, D., "A Review of Diesel Particulate Control
Technology and Emissions Effects - 1992 Horning Memorial Award Lecture," SAE Paper
940233, 1994.
27."Final Regulatory Impact Analysis: Control of Emissions of Air Pollution from Highway
Heavy-Duty Engines," U.S. EPA, September 16, 1997.
28."Certification Data for Nonroad Diesel Engines," EPA memorandum from Phil Carlson to
Docket A-96-40, August 8, 1997.
29.See reference 28
30.See reference 28
31."Pump Evolution Meets Emissions Standards," OEM Off-Highway., March 1996, Page 138.
32."Build It and They Will Come," OEM Off-Highway, November 1996, page 74.
32
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Chapter 4: Economic Impact
CHAPTER 4: ECONOMIC IMPACT
The new emission standards are set in a far-reaching schedule extending well into the next
decade. This will help manufacturers plan and conduct a comprehensive, efficient, and orderly R&D
program. For engine models that have heavy-duty highway counterparts, much of the R&D focus
will be on transferring emission control technology from highway engines to work in nonroad
applications. Even engines that are smaller or bigger than the highway engines are expected to
benefit from the technological development for highway engines, which face similar emission
standards two to five years earlier than comparable standards for nonroad engines. Manufacturers
that produce engines for both highway and nonroad markets will have an advantage in transferring
technology development, but dedicated nonroad engine manufacturers are also expected to learn
from highway technologies, either by accessing publicly available information, by working with
consultants or contractors that have been involved in developing the highway technologies, or by
inspection of manufactured engines. Basic research on highway engines will likely go a long way
toward narrowing the list of design options, so that designers of nonroad engines can work more
directly toward final solutions.
The time available for conducting R&D and the potential for transferring highway technology
play significantly in the analysis of costs for complying with the new emission standards. Learning
from this experience and applying additional R&D will enable manufacturers to optimize a
combination of control strategies and techniques that control emissions at the lowest cost, with
minimum effects on operating costs and engine durability. Also, the program review scheduled for
2001 provides manufacturers and EPA an opportunity to review the feasibility and cost of complying
with the Tier 3 standards for engines rated over 37 kW, and Tier 2 standards for smaller engines.
This chapter lays out EPA's estimates of the cost of complying with the new standards, first for
incremental engine prices, then incremental equipment prices. The estimated aggregate cost to
society is also considered, followed by an analysis of the impact on small businesses.
I. Cost of Engine Technologies
A. Methodology
Using the technical information in Chapter 3, EPA identified packages of technologies that
engine manufacturers could use to meet the new emission standards. To quantify the costs of these
technologies, EPA relied extensively on the contracted study of the cost of highway engine
technologies conducted by ICF, Incorporated and Arcadis Geraghty & Miller.1 In addition, Arcadis
developed cost estimates for utilizing electronic controls for nonroad engines.2
While the following analysis projects a relatively uniform emission control strategy for
33
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Regulatory Impact Analysis
designing the different categories of engines, this should not suggest that EPA expects a single
combination of technologies will be used by all manufacturers. In fact, depending on basic engine
emission characteristics, EPA expects that control technology packages will gradually be fine-tuned
to different applications. Furthermore, EPA expects manufacturers to use averaging, banking, and
trading programs as a means to deploy varying degrees of emission control technologies on different
engines. EPA nevertheless believes that the projections presented here provide a cost estimate
representative of the different approaches manufacturers may ultimately take.
Costs of control include variable costs (for incremental hardware costs, assembly costs, and
associated markups) and fixed costs (for tooling, R&D, and certification). Variable costs are
marked up at a rate of 29 percent to account for manufacturers' overhead and profit.3 For
technologies sold by a supplier to the engine manufacturers, an additional 29 percent markup is
included for the supplier's overhead and profit. The analysis also includes consideration of lifetime
operating costs where applicable.
B. Technologies for Meeting the New Standards
The following discussion provides a description and estimated costs for those technologies EPA
projects will be needed to comply with the new emission standards. For some technologies, it is
difficult to make a distinction between the benefits related to reduced emissions and the benefits for
improved fuel economy and engine performance. Modifications to fuel injection systems, for
example, have the potential to improve engine performance in addition to the expected reductions
in NOx, HC, and PM emissions.
The technology packages in the analysis include multiple sets of projections. EPA has
information about technologies for those engines already complying with the Tier 1 standards
finalized in 1994. For engines not yet subject to Tier 1 standards, some judgment is required to
project the technology packages for complying with finalized Tier 1 standards; these Tier 1
projections serve as the baseline scenario for estimating the impact of the new emission standards.
Specification of these technologies is based on an observation of the technologies used with certified
engines and a set of technical judgments about the most likely control steps manufacturers will use
to meet Tier 1 emission standards. Tier 1 standards do not apply to engines rated under 37 kW, so
current designs provide the technology baseline for those engines.
Cost estimates based on these projected technology packages apply to engines starting in the
first year of production under the new standards. Costs in subsequent years should be reduced as
manufacturers pursue innovations to streamline production and simplify designs. EPA has attempted
to quantify the cost savings associated with this ongoing development, which is well established in
the literature, as described in Section I.E. below.
A variety of technological improvements are anticipated for complying with the multiple tiers
of emission standards. The fact that manufacturers have nearly a full decade before implementation
of the most challenging of the new standards ensures that technologies will develop significantly
before reaching production. This ongoing development will lead to reduced costs in additional ways.
34
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Chapter 4: Economic Impact
First, research will lead to enhanced effectiveness for individual technologies, allowing
manufacturers to use simpler packages of emission control technologies than would be predicted
given the current state of development. Similarly, the continuing effort to develop different
technologies may ultimately provide a lower-cost alternative. Finally, manufacturers will focus
research efforts on any potential drawbacks, such as increased fuel consumption or maintenance
costs, attempting to minimize or overcome any negative effects. Because the analysis does not
explicitly factor in any cost savings for these efforts, actual costs for some technologies ten years
from now may be substantially lower than are estimated here.
A combination of technology upgrades are anticipated for complying with the new emission
standards. Achieving very low NOx emissions will require basic research on reducing in-cylinder
NOx, HC, and PM. Modifications to basic engine design features, such as piston bowl shape and
engine block and head geometry, can improve intake air characteristics and distribution during
combustion. For this analysis, EPA projects large R&D expenditures for these basic engine
modifications to be spread over the applicable tiers of new emission standards. Manufacturers are
expected to introduce electronic controls or exhaust gas recirculation on some engines. Advanced
fuel-injection techniques and hardware will allow designers to modify various fuel injection
parameters for higher pressure, further rate shaping, and some split injection. Most engines rated
over 75 kW are expected to also incorporate air-to-air aftercooling, either for Tier 2 or Tier 3
standards.
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Regulatory Impact Analysis
Similar developments in highway diesel engines have shown that most of these technologies
not only can reduce emissions, but also can greatly enhance engine performance. As a demonstration
of this, truck drivers and trucking companies currently enj oy the benefits of using sophisticated, new,
high-performance electronic engines that have much lower emissions than engines from fifteen years
ago. Similarly, EPA has observed a clear increase in the deployment of electronic controls in
nonroad engines independent of changes to emission standards, which results from a willingness for
engine and equipment consumers to pay a premium for these more capable engines. A difficulty in
assessing the impact of new emission standards then is establishing the appropriate technology
baseline from which to make projections. Ideally, the analysis would establish the mix of
technologies that manufacturers would have introduced absent the changes in emission standards,
then make a proj ection for any additional changes in hardware or calibration required to comply with
those standards. The costs of those projected technology and calibration changes would then most
accurately quantify the impact of setting new emission standards.
While it is difficult to take into account the effect of ongoing technology development, EPA
believes that assessing the full cost of the anticipated technologies as an impact of the new emission
standards would inappropriately exclude from consideration the observed benefits for engine
performance, fuel consumption, and durability. Short of having sufficient data to predict the future
with a reasonable degree of confidence, EPA faces the need to devise an alternate approach to
quantifying the true impact of the new emission standards. EPA believes the observed value of
performance improvements in the field justifies the use of a discount based on equal weighting of
emission and non-emission benefits of those technologies which clearly have substantial non-
emission benefits, namely electronic controls, fuel injection changes, turbocharging, and engine
modifications. For some or all of these technologies, a greater value for the non-emission benefits
could likely be justified. The following analysis describes current engine technologies as the
baseline scenario, from which are made technology projections and cost estimates. Appendix A
explores the sensitivity of discounting the estimated costs to account for non-emission benefits.
1. Baseline technology packages
An important technology distinction in the baseline packages is the difference between direct
and indirect injection, because of the inherently lower NOx emissions associated with indirect
injection. About 70 percent of engines rated under 37 kW use indirect injection technology,
according to the PSR OE Link database. Similarly, about 15 percent of engines rated between 37
and 75 kW employ indirect injection. Bigger engines use almost exclusively direct injection.
Fuel injection hardware is another important consideration, because these systems represent
such a big portion of the total engine cost. Engines rated under 75 kW typically use rotary fuel
pumps, which have a relatively lower cost, but have less potential for increasing injection pressure
or maintaining sophisticated control of injection variables. Bigger engines typically use in-line or
unit pumps, which cost more than rotary pumps, but offer the advantages of higher pressure and
greater control.
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Chapter 4: Economic Impact
Another engine parameter to consider relates to charge air compression and cooling. Almost
all engines rated under 37 kW are naturally aspirated (i.e., no turbocharging or aftercooling). For
engines rated over 37 kW, EPA's certification records for engines complying with Tier 1 emission
standards provide information on these engines' aspiration parameters. As shown in Table 4-1,
substantial numbers of engines rated under 130 kW are currently naturally aspirated. For
turbocharged engines, most have either no aftercooling or air-to-water aftercooling, though 10 to 20
percent of engines rated over 130 kW are equipped with air-to-air aftercooolers.
The certification data shows that almost all engines under 450 kW have mechanical controls,
even though bigger engines almost all have electronic controls. Apparently the additional cost of
developing electronic controls for these large engines is justified with the higher total cost of the
product.
Table 4-1
Distribution of Engine Technologies in 1998 EPA Certification Data*
Power Rating
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Regulatory Impact Analysis
3. Projected technologies for Tier 2
Compliance with the Tier 2 standards, which apply to all power categories, will require a
combination of engine technologies and design strategies. First, engine manufacturers are expected
as much as possible to make an extensive review of engine design to reduce emissions and to
incorporate a variety of changes for improved performance, fuel consumption, durability, or
serviceability. These modifications will result in engines designed for optimum air flow and fuel-air
mixing. With sufficient lead time, introducing a redesigned engine model gives the manufacturer
opportunity to integrate several changes not directly related to emission control.
Second, electronic controls will likely play a role in controlling emissions from some engines.
EPA expects that there will be an increasing demand for electronic controls in some sectors of the
nonroad market, especially for the larger engines. In addition, electronic controls provide the
designer with a very important tool for managing fuel inj ection and combustion processes to achieve
optimum performance while controlling emissions. To reflect this, EPA projects that all direct
injection engines rated over 37 kW will adopt electronic controls, either for Tier 2 or Tier 3
standards.
Improved fuel inj ection systems account for the third maj or change expected in response to Tier
2 standards. To account for the better emission control performance from indirect inj ection models,
EPA has projected neither a cost nor an emission benefit related to the Tier 2 standards. Direct
injection engines rated under 75 kW will likely continue to use rotary fuel pumps, which can be
upgraded to increase fuel injection pressures to about 1,000 bar (15,000 psi) and to incorporate rate
shaping of the fuel charge (either mechanically or electronically). Such fuel pumps are already
available. For engines rated between 75 and 560 kW, the analysis projects improved unit injection
systems that similarly provide the capability for higher injection pressures and injection strategies
such as rate shaping or split injection. Common rail fuel injection systems, with increased control
of fuel injection pressure, timing, and rate shaping, provide an attractive technology option for
engines rated over 560 kW.
All engines rated between 75 and 560 kW are projected to utilize air-to-air aftercooling to meet
either Tier 2 or Tier 3 emission standards. Whether engines currently have no aftercooling or air-to-
water aftercooling, deploying air-to-air aftercooling provides a very big advantage in limiting NOx
formation. In addition, the upgraded aftercooling system carries substantial benefits for improved
fuel consumption and improved engine durability.
Finally, manufacturers may take a different approach for engines rated between 37 and 75 kW
because of the greater cost sensitivity of these engines. Some manufacturers have indicated a
preference to rely on turbocharging for these engines, but to use uncooled EGR instead of
aftercooling to reduce NOx emissions. Relative to aftercooling, the fuel economy penalty associated
with uncooled EGR is thought to be outweighed by its lower initial cost.
The result of engine modifications, new electronic controls, improved fuel injection,
turbocharging, and aftercooling will be engines with better performance in addition to enhanced
38
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Chapter 4: Economic Impact
emission control. To estimate the impact of the new emission standards, EPA has therefore
discounted the cost of these technologies and design strategies by one-half Halving the projected
costs of technological changes is intended to provide a distinction between benefits related to
emission controls and benefits related to other aspects of engine performance. This approach is
described more completely in the Final RIA for the emission standards for 2004 model year heavy-
duty highway engines.5
4. Projected technologies for Tier 3
The engine changes for complying with Tier 3 standards will in many cases follow directly from
the developments needed to meet emission standards for 2004 model year highway engines.
Accordingly, these projections rely extensively on the analysis developed for highway engines,
adapting the information as needed to apply to nonroad models. The Tier 3 standards, scheduled to
take effect between 2006 and 2008 for engines rated between 37 and 560 kW, will also require
multiple technological improvements.
Engines rated between 75 and 560 kW are projected to complete the shift to electronic controls
and air-to-air aftercooling, while introducing cooled EGR and common rail fuel injection. Engines
rated between 37 and 75 kW are expected to use an increased degree of uncooled EGR with further
emission control resulting from new electronically controlled fuel injection systems.
C. Cost of Engine Technologies
The analysis includes cost estimates for the six power categories listed in Table 4-2, which are
based generally on the standards specified for various engine sizes. Grouping engines this way is
necessary to make distinctions in the cost of compliance based on engine size. Each power category
nevertheless encompasses a rather wide range of engines. The analysis develops a cost estimate for
a single engine near the middle of the range represented. Costs for engines on the high end of the
power range would generally be higher than the nominal value presented and vice versa. Costs for
engine sizes near the boundaries of the ranges can best be approximated by interpolation.
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Regulatory Impact Analysis
Table 4-2
Power Categories for
Estimating Incremental Costs
Power
Range
0-37 kW
(0-50 hp)
37-75 kW
(50-1 00 hp)
75-130 kW
(100-175 hp)
130-450 kW
(175-600 hp)
450- 560 kW
(600-750 hp)
560+ kW
(750+ hp)
Nominal
Engine Power
20 kW
(25 hp)
50 kW
(75 hp)
100 kW
(150hp)
250 kW
(300 hp)
500 kW
(650 hp)
750 kW
(1000 hp)
EPA believes it is appropriate to use cost estimates for highway engines as the starting point
for estimating nonroad engine costs for two main reasons. First, manufacturers have generally
confirmed EPA's understanding that emission controls from diesel engines will rely on similar
technology development, regardless of the application. The analysis therefore projects the use of
similar technologies for different sizes of engines, with some variations to reflect the different
characteristics of the smaller and bigger engines. The analysis also adjusts the variable costs
according to the size of the engine. Second, the timing to introduce the new standards is intended
to maximize the potential for transferring technology from highway to nonroad engines. An
additional important factor is EPA's belief that manufacturers will increasingly sell single engine
models into both highway and nonroad markets. Using an engine for both highway and nonroad
applications is a very appealing way to minimize costs by reducing technology development efforts.
Especially with the advent of electronic controls, the differences between highway and nonroad
engines can be limited to the software driving the electronic controls and perhaps the specifications
for bolt-on components such as turbochargers and aftercoolers.
R&D expenditures for emission-control development for engines with highway counterparts are
therefore typically estimated at 10 percent of the total previously estimated for highway engines. A
greater effort is anticipated to transfer and adapt technology development to smaller and bigger
engines. Retooling costs are somewhat harder to predict, but are generally projected to be 10 to 20
percent of the total R&D expenditure for the same engines. Since tooling costs are consistently
smaller than R&D, the retooling estimates are not a sensitive component of the total cost proj ections.
40
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Chapter 4: Economic Impact
To adapt the highway cost estimates to nonroad engines, the analysis anticipates light heavy-
duty vehicle technology to transfer most directly to 100 kW engines, while medium heavy-duty
vehicle technology will transfer most directly to 250 kW engines. With somewhat greater
adaptation, the heavy heavy-duty vehicle estimates can be applied to 500 kW engines. Cost
estimates for 20, 50, and 750 kW engines were in most cases developed by using engineering
judgment to extrapolate the previously developed cost estimates.
41
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Regulatory Impact Analysis
1. Engine modifications
All engines are projected to go through a significant upgrade over the course of the
implementation of the new emission standards. Manufacturers are expected in some cases to
conduct a major redesign either for the first or second tier of new standards, depending on the need
for near-term reductions and the opportunities for improvements unrelated to emission controls
(among other things). Furthermore, some manufacturers may make engine modifications to a
smaller degree for both tiers of new standards. To reflect this distribution of effort between the tiers
of standards, costs for engine modifications are divided between tiers.
Engine modifications, including retarded injection timing, involve substantial fixed costs for
R&D and retooling and may add to the operating cost through higher fuel consumption, but EPA
estimates no variable cost associated with these changes. Estimated costs for highway engines were
$5 million for R&D and $3 50,000 for retooling per engine family. Proj ected R&D costs for nonroad
engines range from $500,000 for engines rated between 75 and 450 kW to $3,300,000 for engines
rated over 560 kW. Additional R&D expenditures are allocated for individual technologies, as
described below.
Fixed costs are calculated on a unit basis by amortizing the total outlays over several years of
production. A five-year amortization was selected as representative for most engines.
Manufacturers are expected to amortize fixed costs for Tier 3 engines rated between 450 and 560
kW and for Tier 2 engines rated over 560 kW over 10 years to spread the costs over a greater number
of engines. Annual domestic sales volumes are derived from the PSR OE Link database by adding
up average annual sales over a five-year period for current engine models (Table 4-3). Under a
scenario of harmonized emission standards, manufacturers can mitigate the impact of incurred fixed
costs by distributing those costs over international sales volumes. Engine manufacturers provided
data showing that on average they sell about 20 percent of their product in the U.S., with the rest
going to foreign markets.6 Table 4-3 shows the effect of increasing average sales volumes per
model to reflect global markets.
Manufacturers would minimize the per-engine cost impact by distributing fixed costs over total
worldwide sales, even though globally harmonized emission standards are not expected in the
foreseeable future. This may nevertheless be appropriate if manufacturers choose to simplify
production by offering a single low-emitting engine even in countries that have either no emission
standards or less stringent emission standards. On the other hand, quantifying the fraction of engine
sales going to those countries anticipated to have harmonized emission standards (Canada, Japan,
and European Union members) would be very difficult. To test the sensitivity of different
amortization calculations, Appendix A shows the effect of distributing fixed costs over only half of
engine sales outside the U.S.
42
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Chapter 4: Economic Impact
Table 4-3
Analytical Assumptions for Domestic and Global
Average Sales Volumes per Engine Model
Power
Range
0-37 kW
37-75 kW
75-130 kW
130-450 kW
450- 560 kW
560+ kW
Domestic Sales
Volume
1286
2237
2409
1322
99
154
Global Sales
Volume
5787
10,067
10,841
5949
446
693
The widely varying cost estimates and sales volumes for different size engines cause very wide
disparities in the per-engine costs of making the expected engine modifications (see Table 4-4). The
low values of under $100 for a complete redesign for engines rated at or below 250 kW reflects the
effect of technology transfer and relatively high sales volume. The higher values for engines rated
over 450 kW show that high per-engine costs result from amortizing large fixed costs over very
small sales volumes. Table 4-4 shows that amortizing costs over a longer period allows
manufacturers to soften the sharp effect of low sales volumes.
The anticipated increase in operating costs for engines rated under 37 kW is focused on the
minority of engines that need design improvements, as described above, totaling about $130 in net
present value (npv) over the lifetime of those engines. The calculated sales-weighted composite
increase in operating costs for all engines rated under 37 kW is about $30 in the Tier 1 time frame,
with an additional $30 projected for the tier 2 time frame.
43
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Regulatory Impact Analysis
Table 4-4
Cost Calculation for Engine Modifications
R&D
tooling
Unit fixed cost (5-yr)
Unit fixed cost (10-yr)
Tier 1 percentage
Composite engine cost
Operating cost
Tier 2 percentage
Composite engine cost
Operating cost
Tier 3 percentage
Composite engine cost
20 kW
$2,000,000
$200,000
$93
—
33%
$31
$44
33%
$31
$44
—
—
50 kW
$2,000,000
$200,000
$53
—
—
—
—
15%
$8
—
85%
$45
100 kW
$500,000
$100,000
$13
—
—
—
—
50%
$7
—
50%
$7
250 kW
$500,000
$100,000
$25
—
—
—
—
50%
$12
—
50%
$12
500 kW
$2,000,000
$200,000
$1204
$703
—
—
—
50%
$602
—
50%
$352
750 kW
$3,300,000
$330,000
—
$746
—
—
—
100%
$746
—
—
—
2. Electronic controls
Electronic controls have revolutionized engine design for light-duty and, more recently, heavy-
duty highway engines. The experience with these engines has shown that electronic controls provide
the engine designer with a tool that greatly enhances the emission control, engine performance, and
fuel consumption characteristics of the engine. As electronic controls have seen increasing
application, the cost of introducing electronics has decreased dramatically. The growing base of
experience has reduced the development time to prepare the software to integrate the information
from multiple sensors in managing the combustion process for an additional application. Also, the
cost of designing and manufacturing the electronic control modules (ECMs), sensors, and other
pieces of hardware has decreased as the engineering and production developments transfer to
component development and manufacture for new applications. For example, for one recent engine
conversion to electronic controls, an estimated 80 to 85 percent of the software was copied from
other engine models.7
Arcadis has prepared a memorandum to characterize the variable and fixed costs of adopting
electronic controls for the various sizes of nonroad engines.8 Hardware costs include consideration
of several components. Sensors are anticipated for measuring fuel pressure, crank angle, ambient
temperature, intake air temperature (for turbocharged engines), and coolant temperature. Engines
rated between 37 and 75 kW are expected to incorporate solenoids directly into the existing rotary
fuel pumps, while bigger engines are expected to use electronically controlled fuel injectors.
Finally, wiring harnesses and ECMs are needed to tie everything together. Based on information
44
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Chapter 4: Economic Impact
received during the comment period, EPA has reduced the estimated cost of adopting electronic
controls for engines rated between 37 and 75 kW; the simpler design and operation of these engines
allows a greater than anticipated cost savings relative to the bigger engines.
All direct injection engines are projected to adopt electronic controls, though several engine
models with higher power ratings already utilize electronics (see Table 4-1). Engines rated between
37 and 75 kW are already certified at or below Tier 2 emission levels and would therefore be
expected to have electronic controls starting in the Tier 3 time frame. Larger engines are expected
to shift deployment of electronic controls more into the Tier 2 time frame, largely because of the
greater potential for transferring technology from similar engine models already equipped with
electronic controls.
Hardware costs for incorporating electronic controls depend on the number of cylinders or fuel
injectors. Engines rated between 37 and 75 kW typically have four cylinders. For 100 kW and 250
kW models, almost all engines have six cylinders, while bigger engines are highly varied. The PSR
OE Link database shows that engines rated between 450 and 560 kW have about 12 cylinders on
average. Hardware costs are increased by 10 percent to account for a potential increase in warranty
claims resulting from introduction of these substantially new systems.
Estimated R&D expenditures are based on development of multiple ratings for each engine
model to reflect the multiple applications served by nonroad engines. The number of ratings was
estimated by assigning one rating for each separate application for an engine model. EPA
understands that the number of ratings for an engine model varies greatly from one model to another
and from one manufacturer to another. The high costs contemplated for R&D reinforce EPA's belief
that manufacturers will make a great effort to streamline their engine offerings to reduce the number
of ratings offered for each engine. Reducing the number of ratings will lead to large savings in
development costs.
Combining variable and fixed costs results in cost estimates that again vary widely according
to engine size, as shown in Table 4-5. Total estimated costs for introducing electronic controls range
from $400 for 50 kW engines to $2,200 for 500 kW engines.
45
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Regulatory Impact Analysis
Table 4-5
Cost Calculation for Electronic Controls
ECM
modified fuel injectors
electronic fuel pump
sensors
wiring harness
assembly
markup @ 29%
warranty @ 10%
Total hardware RPE
R&D
tooling
Fixed cost (per engine)
Total engine cost
Percentage applied — Tier 2
Composite cost — Tier 2
Percentage applied — Tier 3
Composite cost — Tier 3
50 kW
$100
$115
$43
$5
$13
$80
$28
$383
$1,250,000
$220,000
$36
$419
—
—
85%
$356
100 kW
$150
$180
$104
$20
$16
$136
$47
$653
$2,400,000
$150,000
$57
$711
75%
$533
25%
$178
250 kW
$175
$180
$114
$20
$16
$146
$51
$702
$2,250,000
$155,000
$99
$801
75%
$600
20%
$160
500 kW
$250
$420
$120
$25
$20
$242
$84
$1,161
$1,800,000
$105,000
$1043
$2204
15%
$331
—
—
3. Improved fuel injection hardware
Fuel injection is central to any analysis of diesel engine emission control. Engines of different
sizes will experience very different improvements in fuel injection hardware. Three types of
improvements are considered below.
a. rotary fuel pumps
For direct inj ection engines rated under 75 kW, EPA expects manufacturers to use rotary pumps
designed with larger plungers or with modified cam profiles to achieve higher injection pressures.
Other parts and assemblies will need to be stronger to accommodate the higher pressures. A
multiple-spring assembly in the injector can be added to provide rate-shaping capability.
EPA estimated R&D costs for rotary pumps by allotting $3 million for a fuel pump supplier to
design each of two pumps, one for engines rated under 37 kW and the other for engines rated
between 37 and 75 kW. Fixed costs are amortized assuming that two companies supply injectors
to all these engines. Hardware costs are marked up for both the suppliers' and the manufacturers'
overhead and profit. Engine retail prices are estimated to increase by about $120 as a result of these
upgraded fuel pumps (see Table 4-6). For engines rated under 37 kW, improved fuel pump costs
46
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Chapter 4: Economic Impact
are applied to all direct injection models and half of indirect injection models. Incremental fuel
pump costs for engines rated between 37 and 75 kW are included as one of the cost elements for
incorporating electronic controls.
Table 4-6
Cost Calculation for Improved Rotary Fuel Pumps
incremental material
markup @29%
Supplier's variable cost
R&D
tooling
engines per year
Fixed cost (per engine)
Total cost from supplier
Mfr. markup @ 29%
Total engine cost
Percentage applied — Tier 2
Composite cost
20 kW
$60
$17
$77
$3,000,000
$500,000
95,000
$13
$91
$26
$117
67%
$78
50 kW
$60
$17
$77
$3,000,000
$500,000
75,000
$11
$89
$26
$115
—
—
b. unit injection
Engines rated between 75 and 450 kW are projected to need upgraded unit injection systems.
Previously developed costs were based on electronically controlled engines, but mechanically
controlled engines will likely need a comparable degree of modification; the same cost estimates
are therefore applied to both types of engines. The increased cost for stronger materials and
additional components adds about $20 per injector to the price of these engines. Total incremental
engine costs related to these improvements range from $100 to $630 (see Table 4-7).
47
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Regulatory Impact Analysis
Table 4-7
Cost Calculation for Improved Unit Injectors
incremental material
improved solenoid
markup @ 29%
Total hardware RPE
R&D
tooling
cylinders per engine
Fixed cost (per engine)
Total engine cost
100 kW
$18
$45
$21
$95
$150,000
$56,000
6
$5
$99
250 kW
$24
$51
$25
$113
$150,000
$35,000
6
$8
$120
500 kW
$40
$80
$39
$174
$600,000
$230,000
8
$454
$629
c. common rail
Several highway engines have clearly demonstrated the benefits and the feasibility of using
common rail injection systems. Common rail systems provide a constant supply of pressurized fuel
at the inj ectors, which greatly increases control of the inj ection process. Available inj ection pressure
does not decrease at low engine speeds, though the designer can in some cases vary the injection
pressure based on the particular characteristics of different engine operating modes.
Engines converting to common rail need a high-pressure pump to maintain a consistent pressure
of a fuel or oil reservoir. Injectors would have to be reconfigured to handle different actuation and
pressures and solenoid control valves would be needed to control the timing and degree of fuel
delivery to the combustion chamber. Cost estimates are developed for an engine that has been
equipped with electronic controls. Engines rated between 450 and 560 kW are projected to adopt
common rail technology on an earlier schedule, rather than continuing to modify unit injection
systems. Resulting engine cost increases range from $120 to $600 (see Table 4-8).
48
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Chapter 4: Economic Impact
Table 4-8
Cost Calculation for Improved Common Rail Fuel Systems
solenoid control valves
higher pressure oil pump
markup @ 29%
Total hardware RPE
R&D
tooling
cylinders per engine
Fixed cost (per engine)
Total cost
Percentage applied — Tier 2
Composite engine cost
Percentage applied — Tier 3
Composite engine cost
100 kW
$30
$60
$26
$116
$150,000
$64,000
6
$5
$121
—
—
100%
$121
250 kW
$36
$65
$29
$130
$150,000
$40,000
6
$8
$138
—
—
100%
$138
500 kW
$56
$75
$38
$169
$600,000
$160,000
8
$416
$585
50%
$293
50%
$293
750 kW
$108
$85
$56
$249
$1,000,000
$270,000
12
$261
$510
100%
$510
—
—
4. Exhaust gas recirculation
The biggest technology change anticipated in response to the new standards is adoption of
cooled EGR systems for engines in the Tier 3 time frame. Extensive R&D effort will be required
to develop EGR technologies that control emissions without compromising engine performance or
durability. The timing of the Tier 3 standards, however, is based on the expectation that
manufacturers will be able to adapt well-developed EGR systems from highway engines to work in
nonroad engines. The analysis therefore leaves out the costs of basic research, but includes
considerable R&D costs for tailoring these basic EGR system designs to nonroad engines. EGR
designs are expected to include a valve and sufficient tubing to route exhaust gases into the engine's
air intake. A heat exchanger will likely be installed to cool the recirculated exhaust with engine
coolant. Total EGR-related price increases, detailed in Table 4-9, range from $90 to $800.
As described earlier, engines rated between 37 and 75 kW are expected to take a somewhat
different approach to EGR, introducing the technology sooner, but omitting EGR cooling. This has
the effect of reducing the impact on initial purchase price, but will likely correspond with an increase
in fuel consumption. EPA expects manufacturers to use a relatively light degree of EGR to comply
with Tier 2 standards with direct-injection engines, then increase the extent of exhaust recirculation
to comply with Tier 3 standards. The analysis incorporates this effect by assessing a one-half percent
penalty in fuel consumption for Tier 2 and an additional one-half percent penalty for Tier 3. The
estimated effect of the combined tiers of standards is an increase of $120 in lifetime fuel costs (net
49
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Regulatory Impact Analysis
present value).
Table 4-9
Cost Calculation for Exhaust Gas Recirculation
electronic EGR valve
EGR tubing
EGR cooler
assembly
markup @ 29%
warranty @ 10%
Total hardware RPE
R&D
tooling
Fixed cost (per engine)
Total engine cost
rebuild cost impact
improved oil impact
fuel economy impact
Total Operating Cost (npv)
Percentage applied — Tier 2
Composite engine cost
Composite operating cost
Percentage applied — Tier 3
Composite engine cost
Composite operating cost
Tier 3
50 kW
$30
$7
$7
$13
$4
$60
$1,000,000
$40,000
$25
$86
$44
$4
$62
$110
45%
$39
$50
40%
$34
$44
100 kW
$35
$9
$48
$7
$29
$10
$137
$1,000,000
$40,000
$23
$160
$48
$6
—
$55
—
—
—
100%
$160
$55
250 kW
$35
$14
$53
$7
$31
$11
$151
$1,000,000
$40,000
$43
$193
$56
$9
—
$65
—
—
—
100%
$193
$65
500 kW
$50
$30
$75
$7
$47
$16
$224
$1,000,000
$40,000
$569
$794
$121
$15
—
$135
—
—
—
100%
$794
$135
The EGR cooler goes a long way toward resolving the potential deleterious effects of EGR on
fuel consumption and engine durability for the bigger engines. Recirculating particulate matter
through the engine remains an issue. As described in the highway analysis, EPA believes that the
great concern for these potential negative effects will drive manufacturers to make additional R&D
investments in the intervening years to overcome these concerns. EPA anticipates that the effort to
design acceptable EGR technology for highway engines will resolve these concerns for fuel
consumption and durability effects. As in the analysis for highway engines, an estimated 2 percent
increase in the cost of engine oil is included to reflect the outcome of the R&D effort. The increased
50
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Chapter 4: Economic Impact
cost of oil changes are calculated over the lifetime of the engines; the net present value of increased
operating costs range from $4 to $15 per engine.
Engines rated between 37 and 75 kW
EPA anticipates that EGR systems will be serviced at the point of rebuild, including
replacement of the EGR valve and solvent cleaning of the EGR tubing. The aftermarket cost of an
EGR valve is estimated at three times the manufacturer's long-term cost. Cleaning time for a
mechanic is estimated at 30 minutes. For this analysis, rebuilding for engines equipped with EGR
is expected to occur after 10 years of operation. Median lifetimes developed from PSR's PartsLink
database lead EPA to conclude that 40 percent of engines rated at or below 250 kW will be rebuilt,
while 60 percent of larger engines are expected to continue operation until the point of rebuild. The
resulting net present value of the increased rebuild burden is estimated as an average for all engines
between $40 and $120 per engine.
5. Turbocharging and Aftercooling
Manufacturers are expected to rely on new or improved turbochargers and aftercoolers to reduce
both NOx and PM emissions. Turbochargers increase the amount of air entering the cylinder by
compressing the charge air. To offset the heating of the charge air coming out of the turbocharger,
aftercoolers extract heat from the compressed charge air, further increasing its density. Air-to-water
aftercoolers use the engine's main cooling system to cool the air approximately to the engine
operating temperature. Air-to-air aftercoolers use fan-driven ambient air to more effectively cool
the charge air.
Used together, turbochargers and aftercoolers allow manufacturers to produce more power with
greater thermal efficiency, while suppressing NOx and PM emission formation. These performance
advantages have led to common use of these technologies in relatively large nonroad diesel engines.
Most of these engines, however, typically use turbocharging either with no aftercooling or with air-
to-water aftercooling. Almost all highway diesel engines, which are subject to more stringent
emission standards and have the added benefit of naturally high air speeds, have long relied on
turbocharging and air-to-air aftercooling to achieve the maximum benefit from these systems.
The added cost and complexity of charge air compression and cooling have so far prevented
most nonroad engines rated less than 100 or 150 kW from using turbocharging and aftercooling. The
growth in the market for light-duty automotive diesel engines has contributed to the development
of low-cost turbochargers sized for nonroad engines of comparable power ratings. Manufacturers
have expressed an interest or intent to adopt turbocharging for engines currently rated as low as 40
or 60 kW. EPA has therefore incorporated into the cost analysis a projection that all direct injection
engines rated over 37 kW will use turbochargers. For engines rated between 37 and 75 kW it may
be more appropriate to consider supercharging, which would provide better low-speed and transient
performance at the expense of some fuel economy improvement. The emission control potential and
cost impact would be somewhat different for turbocharging and supercharging, but such distinctions
are relatively minor and are not quantified in this analysis. Also, as described above, these engines
51
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Regulatory Impact Analysis
are expected to rely on EGR instead of aftercooling to control emissions
Engines rated over 75 kW are all projected to adopt air-to-air aftercooling. Considering the
reluctance of some equipment manufacturers to accept such a major change in engine system
configuration, some engine manufacturers may attempt to meet Tier 2 and Tier 3 standards with air-
to-water aftercooling systems. Aside from such redesign considerations, engine manufacturers are
expected to add or convert to air-to-air aftercooling as broadly as possible for the emission control
and performance benefits described above. Table 4-1 characterizes the deployment of turbocharging
and aftercooling variations for current engines and provides a basis for calculating the percentage
of engines in each power range that will make specific technology changes.
Table 4-10 lays out the cost components involved for adding a turbocharger to an engine,
including the turbocharger itself, a waste gate, additional material, R&D, and a markup. The
resulting incremental cost per engine is $300 and $550 for 50 and 100 kW engines, respectively.
The calculation of aftercooling is more complex, both because of the complexity of the systems
and because of the potential for conversion from one type of aftercooling to another. Table 4-11
details the cost of adding an air-to-air aftercooler to an engine that previously had no aftercooling.
The principal cost component is a new heat exchanger dedicated to the aftercooling system. The
dramatically higher price estimated for the largest engines reflects the effect on costs from producing
large units with very low sales volumes. Including the cost of other components, assembly, R&D,
and markup leads to total engine costs for adding air-to-air aftercooling that range from $350 for a
100 kW engine to $4,000 for a 500 kW engine.
To determine an estimated cost for converting from air-to-water to air-to-air aftercooling, the
analysis develops a cost for adding air-to-water aftercooling to an engine that previously had no
aftercooling. Those costs, when subtracted from the air-to-air aftercooling costs in Table 4-11, yield
a net cost to upgrade aftercooling systems. Estimated costs for upgraded aftercooling range from
$120 for a 100 kW engine to $1300 for a 500 kW engine. These much lower costs for upgrading
aftercooling systems result from the savings involved in decreasing the size of the main heat
exchanger, which can then be dedicated to engine cooling.
As described earlier, turbocharging and aftercooling offer compelling performance benefits
independent of the better control of emissions. EPA attempted to incorporate these benefits into the
analysis, though much differently for turbocharging and aftercooling. For turbocharging,
performance benefits are difficult to quantify in monetary terms; the analysis therefore discounts the
total cost of turbocharging by 50 percent, as for fuel injection improvements and general engine
modifications. EPA believes this discounted cost is the best way of isolating the effects of emission
controls for an estimate of the impact of the new standards.
For aftercooling, it is possible to estimate an improvement in fuel economy, which can be
calculated directly as a cost credit. The hardware costs for aftercooling are therefore included in the
analysis with no discount. Manufacturers have expressed an expectation that upgrading from air-to-
water aftercoolers to air-to-air aftercoolers at Tier 1 emission levels would allow them to improve
52
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Chapter 4: Economic Impact
fuel economy by 6 to 8 percent. That benefit would decrease at lower NOx emission levels. EPA's
best estimate of the fuel economy improvement is therefore 3 percent for upgraded aftercooling
systems and 6 percent for those engines that currently have no aftercooling. The resulting cost
savings is in all cases greater than the incremental cost of adopting the technology, which is
consistent with engine manufacturers' eagerness to move toward air-to-air aftercooling.
Table 4-
Cost Calculation for
10
Turbocharg:
;mg
turbocharger hardware
waste gate
additional materials
markup @ 29%
Total hardware RPE
Engine R&D
engines per year
Fixed cost (per engine)
Total engine cost
Percentage deployment — Tier 2
Composite cost
50 kW
$150
$55
$30
$68
$303
$250,000
$50,000
$1
$304
50%
$152
100 kW
$300
$75
$50
$123
$548
$250,000
$30,000
$2
$550
50%
$138
53
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Regulatory Impact Analysis
Table 4-11
Cost Calculation for Air-to-Air Aftercooling
heat exchanger
plumbing
hardware
assembly
markup @29 %
warranty @ 10 %
Total hardware RPE
R&D
tooling
Fixed cost (per engine)
Total engine cost (AA)
Total operating cost (npv)
Percentage applied — Tier 3
Composite cost — Tier 3
100 kW
$210
$18
$5
$10
$70
$24
$338
$300,000
$30,000
$7
$345
($1177)
45%
$155
250 kW
$700
$23
$6
$10
$214
$74
$1027
$300,000
$30,000
$14
$1041
($2097)
30%
$312
500 kW
$2800
$29
$7
$10
$825
$285
$3956
$300,000
$30,000
$181
$4137
($5988)
—
—
54
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Chapter 4: Economic Impact
Table 4-12
Cost Calculation for Converting from
Air-to-Water to Air-to-Air Aftercooling
Air-to-Water Aftercooling:
incremental radiator
supplier's markup @ 29 %
plumbing
hardware
assembly
markup @29 %
Total hardware RPE
R&D
tooling
Fixed cost (per engine)
Total engine cost (AW)
Total engine cost (AA)
Net engine cost
Net operating cost (npv)
Percentage applied — Tier 2
Composite cost — Tier 2
Percentage applied — Tier 3
Composite cost — Tier 3
100 kW
$120
$35
$9
$2
$3
$49
$218
$200,000
$30,000
$5
$223
$345
$122
($588)
25%
$31
30%
$37
250 kW
$400
$116
$12
$3
$3
$155
$688
$200,000
$30,000
$9
$698
$1041
$343
($1048)
25%
$86
25%
$86
500 kW
$1600
$464
$15
$4
$3
$605
$2690
$200,000
$30,000
$126
$2816
$4137
$1320
($2994)
40%
$594
45%
$594
6. Closed crankcase
Naturally aspirated engines will be required to have closed crankcases. The necessary hardware,
a simple tube with a PCV valve to route the crankcase vapors into the engine's air intake, can be
readily adapted from highway engine models. The estimated cost for these components is $ 10, with
no additional amount allocated for R&D (see Table 4-13). Due to the small number of naturally
aspirated engines with high power ratings, costs are estimated only for 20 and 50 kW engines. As
described above, several of these engines will be turbocharged in the future, thereby eliminating the
need for a closed crankcase.
55
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Regulatory Impact Analysis
Table 4-13
Cost Calculation for Closed Crankcases
PCV valve
tubing
assembly
markup @29%
Total hardware RPE
Total engine cost
20 kW
$5
$2
$1
$2
$10
$10
50 kW
$5
$2
$1
$2
$10
$10
D. Projected Cost of Technology Packages
Added to the cost of incorporating the new engine technologies is the cost of certifying engine
families. To factor in certification costs, the analysis uses a figure of $60,000 per engine family,
allowing for two emission tests, two months of engineering time, and miscellaneous fees and
expenses. Distributing those costs across the different engine categories, amortizing the costs over
five years, and dividing by the number of projected sales results in per-engine costs of less than $15
for engines rated below 450 kW. Dividing the same costs over the larger engines with lower sales
volumes leads to calculated costs of up to $150 per engine, as shown in Table 4-14.
The cost of combining the above technology elements to comply with the new standards is
shown in Table 4-14. Where costs are discounted to reflect benefits unrelated to emission control
requirements, this is factored into the individual technology costs shown. Tier 1 standards for
engines rated under 37 kW have estimated incremental costs below $50 per engine for both retail
price and increased operating expenses.
Tier 2 standards involve generally higher cost impacts than are expected from Tier 1 standards.
The incremental cost to engines rated 250 kW or less is expected to be $70 to $460, while bigger
engines may face incremental costs of $700 to $1400. The cost of complying with Tier 3 standards
is similar to that for Tier 2, though the Tier 3 standards apply only to engines rated between 37 and
560 kW. The effect of improved fuel economy resulting from air-to-air aftercooling is shown by the
projected reduction in operating costs, which for several engines completely offsets the projected
incremental cost of incorporating new technologies.
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Chapter 4: Economic Impact
Table 4-14
Incremental Unit Cost of Complying
with New Emission Standards—Engines
Em.
Std.
Tier 1
Tier 2
Tier 3
Engine
Technology
Engine modifications
operating cost (NPV)
Certification
Total first-year costs
operating cost (NPV)
Engine modifications
operating cost (NPV)
Electronic controls
Improved injection
EGR
operating cost (NPV)
Turbocharger
AA Aftercooler upgrade
operating cost (NPV)
Closed crankcase
Certification
Total first-year costs
operating cost (NPV)
Engine modifications
operating cost (NPV)
Electronic controls
Common rail systems
EGR
operating cost (NPV)
AA Aftercooler upgrade
operating cost (NPV)
New AA Aftercooler
operating cost (NPV)
Certification
Total first-year costs
purchase price
operating cost (NPV)
Percent
Attributed to Em.
Standards
75%
100%
—
50%
50%
50%
100%
50%
100%
100%
100%
—
50%
50%
50%
100%
100%
100%
100%
—
Weighted Unit Cost
20 kW
$23
$44
$11
$34
$44
$15
$44
—
$39
—
—
—
$10
$8
$72
$44
—
—
—
—
—
—
—
—
50 kW
—
—
—
$4
$9
—
—
$39
$50
$76
—
—
$6
$124
$59
$23
$53
$178
—
$34
$44
—
—
$6
$240
$97
100 kW
—
—
—
$3
$0
$267
$50
—
$69
$31
($147)
—
$6
$425
($147)
$3
$0
$89
$60
$160
$55
$37
($177)
$155
($530)
$6
$511
($652)
250 kW
—
—
—
$6
$0
$300
$60
—
—
$86
($262)
—
$12
$463
($262)
$6
$0
$80
$69
$193
$65
$86
($262)
$312
($629)
$12
$758
($826)
500 kW
—
—
—
$301
$0
$165
$146
—
—
$594
($1347)
—
$148
$1355
($1347)
$176
$0
—
$146
$794
$135
$594
($1347)
—
$148
$1858
($1212)
750 kW
—
—
—
$373
$0
—
$255
—
—
—
—
$55
$683
$0
—
—
—
—
—
—
—
—
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Regulatory Impact Analysis
Characterizing these estimated costs in the context of their fraction of the total purchase price
is helpful in gauging the economic impact of the new standards. ICF conducted a study to
characterize the range of current prices for nonroad engines by collecting quoted list prices on a
variety of engines.9 Taking a straight average of these prices, and allowing a 40 percent discount off
of list price results in a best estimate of actual prices for the various sizes of nonroad diesel engines,
as shown in Table 4-15. The incremental costs estimated in this analysis for engines over 450 kW
seem particularly high, but in fact represent a comparable price change relative to the total price of
the engine. The estimated cost increases for all engines are between 1 and 13 percent of actual sales
prices. Moreover, the cost savings described below further reduce the anticipated impact of the
emission standards; long-term cost increases are expected to be less than 8 percent of total engine
price.
Table 4-15
Estimated Prices for New Nonroad Diesel Engines
Power Range
0-37 kW
(0-50 hp)
37-75 kW
(50-100 hp)
75-130 kW
(100-175 hp)
130-450 kW
(175-600 hp)
560+ kW
(750+ hp)
List Price
$4,000
$5,900
$6,700
$12,600
$79,800
Estimated
Sale Price
$2,400
$3,500
$4,000
$7,500
$47,900
E. Summary of Engine Costs
The per-engine cost figures presented above are used in Chapter 6 to calculate the cost-
effectiveness of the program by comparing the costs to lifetime emission reductions. Included in that
calculation are the costs developed for first-year engines above, with the following modifications for
later model year production.
First, the analysis anticipates that manufacturers recover their initial fixed costs for tooling,
R&D, and certification over a five-year period. Fixed costs are therefore applied only to the first five
model years of production.
The second modification is related to the effects of the manufacturing learning curve. This is
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Chapter 4: Economic Impact
a well documented and accepted phenomenon dating back to the 1930s. The general concept is that
unit costs decrease as cumulative production increases. Learning curves are often characterized in
terms of a progress ratio, where each doubling in cumulative production leads to a reduction in unit
cost to a percentage "p" of its former value (referred to as a "p cycle"). The organizational learning
which brings about a reduction in total cost is caused by improvements in several areas. Areas
involving direct labor and material are usually the source of the greatest savings. These include, but
are not limited to, a reduction in the number or complexity of component parts, improved component
production, improved assembly speed and processes, reduced error rates, and improved
manufacturing process. These all result in higher overall production, less scrappage of materials and
products, and better overall quality.
Companies and industry sectors learn differently. In a 1984 publication, Button and Thomas
reviewed the progress ratios for 108 manufactured items from 22 separate field studies representing
a variety of products and services.10'11 As shown in Figure 4-1, of the 108 progress ratios observed,
8 were less than 70 percent, 39 were in the range of 71 to 80 percent, 54 were in the range of 81 to
90 percent, and 7 were above 90 percent. The average progress ratio for the whole data set falls
between 81 and 82 percent. The lowest progress ratio of 55 percent shows the biggest improvement,
representing a remarkable 45 percent reduction in costs with every doubling of production volume.
At the other extreme, except for one company that saw increasing costs as production continued,
every study showed cost savings of at least 5 percent for every doubling of production volume. This
data supports the commonly used p value of 80 percent, i.e., each doubling of cumulative production
reduces the former cost level by 20 percent. As each successive p cycle takes longer to complete,
production proficiency generally reaches a relatively stable level, beyond which increased production
does not necessarily lead to markedly decreased costs.
EPA applied a p value of 20 percent in this analysis. That is, the variable costs were reduced
by 20 percent for each doubling of cumulative production. To avoid overly optimistic projections,
however, EPA included several additional constraints. Using one year as the base unit of production,
the first doubling occurs at the start of the third model year and the second doubling at the start of
the fifth model year. To be conservative, EPA incorporated the second doubling at the start of the
sixth model year. Recognizing that the learning curve effect may not continue indefinitely with
ongoing production, EPA used only two p cycles.
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Regulatory Impact Analysis
o
c
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Chapter 4: Economic Impact
EPA believes the use of the learning curve is appropriate to consider in assessing the cost impact
of diesel engine emission controls. The learning curve applies to new technology, new
manufacturing operations, new parts, and new assembly operations. While all the technologies
projected in this analysis specify either upgraded existing designs or transferred highway
developments, the changes envisioned nevertheless require manufacture of new components and
assemblies, involving new manufacturing operations. As manufacturers gain experience with these
new systems, comparable learning is expected to occur with respect to unit labor and material costs.
Table 4-16 lists the projected schedule of costs over time for each power category. The
estimated long-term cost savings are most pronounced for those engines whose costs are attributed
mostly to R&D and other fixed costs. In particular, the initial estimated costs of $800 to $1900 for
the biggest engines are reduced to levels $500 or less by the sixth year of production. The estimated
impact on operating costs does not change over time and is therefore not shown in Table 4-16.
Table 4-16
Projected Long-Term Increase in Prices
Due to Tier 3 Standards—Engines
Years of
Production*
1-2
3-5
6+
Power (kW)
50
$240
$203
$120
100
$511
$418
$297
250
$758
$623
$435
500
$1858
$1691
$535
* Year 3 costs are adjusted by reducing variable costs by 20 percent (fixed costs remain unchanged). Year
6 costs are adjusted by reducing variable costs an additional 20 percent and eliminating fixed costs.
II. Cost of Redesigning Equipment
As discussed earlier in this chapter for engine costs, the final rule sets a long-term schedule of
emission standards extending well into the next decade, helping both engine and equipment
manufacturers to plan and execute a comprehensive R&D program. The following section presents
EPA's analysis of the costs that equipment manufacturers will incur as a result of the new emission
standards.
A. Methodology
Using the engine technology and cost information provided in the preceding section, EPA was
able to develop estimates for the costs expected for equipment manufacturers to accommodate the
newly redesigned engines. According to the PSR OE Link database and discussions with equipment
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Regulatory Impact Analysis
and engine manufacturers, there are about 1,000 nonroad equipment manufacturers using diesel
engines in many thousands of different applications. EPA realizes that the time needed for
equipment manufacturers to make these changes will vary significantly from manufacturer to
manufacturer and from application to application. As with the analysis of engine costs, EPA
assessed the cost of equipment changes by evaluating a relatively uniform emission control strategy.
Actual strategies may differ from those presented here, but EPA believes that the estimated costs in
this analysis are representative of a wide range of equipment redesign scenarios. The provisions
granting compliance flexibility to equipment manufacturers are intended to reduce the potential for
anomalously high costs for individual equipment models.
As described earlier in this chapter, costs of control to equipment manufacturers include fixed
costs (for R&D and tooling) and variable costs (for incremental hardware costs, assembly costs, and
associated markups). Also, as for the engine costs, variable costs for equipment are marked up at
a rate of 29 percent to account for equipment manufacturers' overhead and profit. Cost estimates for
redesigning equipment are presented as the first-year production costs for the new emission
standards. Costs in subsequent years will decrease based on an expected learning curve for
equipment manufacturers and the eventual recovery of fixed costs.
B. Equipment Changes
The modifications to equipment due to the new standards relate to packaging (installing engines
in equipment engine compartments), power train (torque curve), and heat rejection effects of the
newly complying engines. The anticipated changes to nonroad equipment are drawn from the
preceding analysis of projected changes to engine technology. EPA's emphasis on ongoing
technological development is doubly important in the context of equipment impacts. Absent new
emission standards, both engine and equipment manufacturers would be expected to pursue
technological developments for improving product lines. To the extent that manufacturers have time
to coordinate changes, the burden of redesigning equipment for emission standards can be minimized
by including those changes as part of a comprehensive effort to develop and produce an improved
product.
All engines rated under 560 kW face two tiers of new emission standards. Equipment
manufacturers are expected to redesign their equipment models for the first tier of standards to
minimize further changes for the next tier of engines to the greatest extent possible. To analyze costs
for equipment, EPA proj ected one comprehensive redesign for each model. To reflect the possibility
of splitting costs between the tiers or deferring significant redesign until the second tier of new
engines, EPA divided costs between the two tiers of new emission standards. To divide costs, EPA
allocated three-fourths of total costs (fixed plus variable costs) to Tier 2 standards and one-fourth
of total costs to Tier 3 standards. In making this assumption for the analysis, EPA is not in any way
stating an expectation that the standards will, in fact, produce this particular redesign schedule.
The projections of effort needed to make equipment changes were generally developed by
considering the manufacturer's past experience in accommodating redesigned engines, applying
engineering judgment as needed to quantify the projected changes. The following section details
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Chapter 4: Economic Impact
EPA's assessment of costs to equipment manufacturers.
C. Cost of Equipment Changes
The analysis includes cost projections for nonroad equipment in the six power categories
described in Table 4-2. The equipment is grouped this way to make distinctions in compliance cost
based on the size of the equipment and their engines. Even with these groupings by power category,
each category includes a wide array of equipment and engine combinations for the various
applications. The analysis presents costs at several points to represent, as much as possible, the
whole range of equipment.
The R&D and tooling costs are estimated for modifying equipment based on those changes
needed to accommodate the anticipated engine technology modifications for each power category.
The principal cost to equipment manufacturers resulting from the new standards will be related to
a general redesign of engine compartments and engine-related auxiliary devices. In some cases, the
overall function of an equipment model will have to be reviewed to ensure satisfactory performance.
Equipment design challenges will be greatest if engines are adopting air-to-air aftercooling. The
effort to make space for the additional hardware and to account for the changes in heat rejection and
other engine parameters will require a broad effort to maintain an effective product.
Variable costs are also considered. Many nonroad equipment models are expected to require
some additional steel for new or reinforced brackets, modified location and shape of sheet metal, and
other similar changes. An additional cost is assessed for various other materials required to
accommodate new engines.
1. Fixed costs
a. methodology for estimating level of effort for fixed costs
For all the power categories, EPA generally matched the estimated fixed cost of compliance (a
measure of the R&D and tooling effort required to accommodate new engines) with the equipment
application. Thus, certain applications of equipment were considered to be more difficult than others
for the purpose of accommodating complying engines. This estimation of difficulty was based a
combination of engine packaging constraints and anticipated technology changes. The space
available for engine changes and the degree of air-to-air aftercooling were thus used as indicators
of the difficulty in redesigning an equipment model.
To calculate fixed costs for equipment applications, the following steps were taken. First, the
applications were generally separated into the following two categories within the parameters of
EPA's definition of nonroad engine (see 40 CFR 89.2): motive (e.g., agricultural tractors, excavators,
forklifts, etc.) andportable (e.g., pumps, generators, air compressors, etc.). Second, within these
two categories the applications were generally differentiated into "extensive" and "moderate"
categories to indicate the level of effort needed to accommodate complying engines. EPA's
assessment of the level of effort for the different groups is developed in a separate memorandum and
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Regulatory Impact Analysis
summarized in Table 4-17.12 For example, some equipment without challenging constraints for
engine packaging may need little or no modification to accommodate a new engine. Third, a fixed
cost per equipment product line (model) was determined for each of these two distinctions within
motive and portable categories for a total of four separate fixed costs per product line. Fourth, these
fixed costs per product line were amortized over ten years at a 7 percent discount rate. The longer
period for amortization reflects the smaller sales volumes and the longer product development cycles
for nonroad equipment. Fifth, using the annual sales per equipment product line, the fixed cost in
the first year was determined for both motive and portable applications for a total of four separate
fixed costs per unit. Finally, these four fixed costs per unit were weighted based on the number of
units in each of the four different categories for a weighted average fixed cost per unit for that power
category.
Motive equipment is generally expected to require more effort in accommodating complying
engines compared with portable equipment, because motive equipment on the whole has more
engine compartment packaging constraints and is therefore more sensitive to changed engine
specifications. Motive equipment also has more operator view and serviceability constraints for the
equipment manufacturer to accommodate than portable equipment. In addition, for both motive and
portable categories, smaller equipment was more often considered to be difficult for manufacturers
(see Table 4-12). Because a compact design is often most important for smaller equipment, these
designs generally have disproportionately smaller engine compartments. In addition, all equipment
models undergoing a change to air-to-air aftercooling were considered to need extensive redesign.
Table 4-17
Breakdown for Level of Effort
Estimating Fixed Costs
in
HP Range
0-37 kW
(0-50 hp)
37-75 kW
(50-100 hp)
75-130 kW
(100-175 hp)
1 30-450 kW
(175-600 hp)
450- 560 kW
(600-750 hp)
560+ kW
(750+ hp)
Motive
extensive= 80%
moderate= 20%
extensive= 70%
moderate= 30%
extensive= 100%
moderate= 0%
extensive= 80%
moderate= 20%
extensive= 90%
moderate= 10%
extensive= 10%
moderate= 90%
Portable
extensive= 50%
moderate= 50%
extensive= 50%
moderate= 50%
extensive= 100%
moderate= 0%
extensive= 80%
moderate= 20%
extensive= 90%
moderate= 10%
extensive= 10%
moderate= 90%
The number of sales per equipment product line was an important parameter in determining the
amortized unit fixed costs from the fixed cost per product line. These sales volume estimates were
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Chapter 4: Economic Impact
extracted from the PSR database by adding up average annual sales over a five-year period for those
equipment models that had sales in 1995, with adjustments for stationary applications and global
sales volumes.13 The PSR sales database excludes imported equipment data, and thus, the equipment
sales numbers are based on domestic (U. S.) sales only. It is estimated that imported equipment could
account for as much as 20 percent of the total sales. Incorporating this missing data may change the
calculations somewhat, but it is not clear whether the average sales volumes would increase or
decrease. On the other hand, as for engine costs, equipment manufacturers will be able to amortize
fixed costs over global sales volumes to reduce the cost impact of redesigning equipment. On
average, approximately half of manufacturers' equipment sales go to other countries.14 As described
for engine costs, to test the sensitivity of different amortization calculations, Appendix A shows the
effect of distributing fixed costs over only half of equipment sales outside the U.S.
b. effort needed for re-engineering equipment
As described above, the fixed cost was determined only for the effort needed by equipment
manufacturers to accommodate the emissions control of complying engines. First, for each product
line of motive applications needing extensive redesign, EPA estimated that the combined R&D and
tooling level of effort needed by equipment manufacturers, which includes the effort needed for
testing, would be approximately 4,600 hours of effort. This includes 1,600 hours of junior engineers'
time and 450 hours of senior engineers' time. In addition, 2,500 hours of technicians' time is
included for testing, operating, repairing, and maintaining equipment, machines, and tools. This
level of effort is equivalent to about $315,000. Second, for each product line of motive applications
needing moderate redesign, EPA estimated that the combined R&D and tooling level of effort
needed by equipment manufacturers would be approximately 2,400 hours of effort distributed
similarly, including the effort needed for testing, which is equivalent to about $150,000.
Third, for each product line of portable applications needing extensive redesign, EPA estimated
that the combined R&D and tooling level of effort needed by equipment manufacturers, which does
not include testing, would be approximately 750 hours of effort. This includes 450 hours of junior
engineers' time, 120 hours of senior engineers' time, and 230 hours for technicians' time, which is
equivalent to about $60,000. Lastly, for each product line of portable applications needing moderate
redesign, EPA estimated that the combined R&D and tooling level of effort needed by equipment
manufacturers, which does not include testing, would be approximately 270 hours of effort
distributed similarly, which is equivalent to about $21,000.
c. effort needed for changing product support literature
In addition, EPA added to the R&D cost (and thus the fixed cost) the effort for equipment
manufacturers to modify product support literature (dealer training manuals, operator manuals,
service manuals, etc.) due to the product changes resulting from the new emission standards. For
each product line of motive applications, EPA estimated that the level of effort needed by equipment
manufacturers to modify the manuals for retraining their dealers to be about 100 hours, with the
needed clerical and printing support (about 80 hours of junior engineering time, 20 hours of senior
engineering time, and 4 hours of clerical time ), which is equivalent to about $10,000. For each
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Regulatory Impact Analysis
product line of portable applications, EPA estimated two separate costs of literature changes for
extensive and moderate redesigns. EPA projected that the level of effort needed by equipment
manufacturers to modify manuals for each product line of portable equipment needing extensive
redesign to be about 50 hours (distributed similarly), which is equivalent to about $5,000. For each
product line of portable equipment needing moderate redesign the effort needed by equipment
manufacturers would be about 30 hours, which is equivalent to about $2,500.
d. total fixed costs
In summary, the total fixed costs for each product line of motive equipment were estimated to
be about $330,000 and $165,000 for the extensive and moderately redesigned product lines,
respectively, and the total fixed costs for each product line of portable equipment were estimated to
be about $70,000 and $23,000 for the extensive and moderately redesigned product lines,
respectively. Using these figures, EPA calculated an amortized fixed cost per unit, as shown in
Table 4-18.
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Chapter 4: Economic Impact
Table 4-18
Total Fixed Costs per Equipment Piece for Both Tiers of Standards Combined
Power
<37kW
(<50 hp)
37-75 kW
(50-1 00 hp)
75-1 30 kW
(100-175 hp)
1 30-450 kW
(175-600 hp)
450-560 kW
(600-750 hp)
560+ kW
(750+ hp)
Type
Motive
Portable
Motive
Portable
Motive
Portable
Motive
Portable
Motive
Portable
Motive
Portable
No. of
Product
Lines
401
535
625
342
503
255
926
523
70
75
68
19
Annual
Sales per
Product
Line
363
210
188
183
75
34
104
13
24
7
70
81
Effort
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Extensive
Moderate
Distribution
of Effort
80%
20%
50%
50%
70%
30%
50%
50%
100%
0%
100%
0%
80%
20%
80%
20%
90%
10%
90%
10%
10%
90%
10%
90%
First Year
Unit Cost
$53
$27
$19
$6
$250
$125
$53
$18
$630
$315
$284
$95
$452
$226
$753
$251
$1921
$961
$1408
$469
$675
$337
$468
$156
Weighted
First Year Unit
Cost
$48
$13
$213
$35
$630
$284
$406
$652
$1825
$1314
$371
$187
$33
$151
$565
$422
$1707
$357
For < 37 kW equipment, the cost per product line is first discounted by 2/3 since most indirect engines in this power category already meet the
standards, and second this discounted cost per model is increased by 25 percent since the standards are the first and the lead time is short for this
power category.
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Regulatory Impact Analysis
Similar to costs described above in the engine cost section of this chapter, the widely varying
fixed cost estimates and sales volumes for different size equipment create broad diversities in the
estimated unit costs. The low cost of about $30 for equipment utilizing engines rated under 37 kW
is due primarily to the expectation that many of the engines already meet Tier 1 or even Tier 2
standards. In addition, the low costs for equipment with engines rated between 37 and 75 kW reflect
the relatively high sales volume of this range even though the equipment is expected to need a
greater level of effort to accommodate complying engines than bigger equipment. The highest cost
of $ 1,707 for equipment utilizing engines rated between 450 and 560 kW demonstrates that high unit
costs are due to amortizing large fixed costs over small sales volumes, even though product lines of
large equipment are expected to need relatively less redesign effort.
3. Variable costs
EPA expects that the significant effort to redesign nonroad equipment to accommodate new
engines will be reflected primarily in the fixed costs for R&D and retooling. While variable costs
resulting from the new emission standards will likely be much smaller, the analysis next considers
hardware costs for additional or more expensive materials that may be required as a result of changes
to engine size or performance.
For the engine compartment modifications, EPA projects that about 50 percent of the affected
equipment will require slightly more steel. This increase in steel would be done for miscellaneous
steel changes that may include increasing the amount of material in side panels, hoods, brackets,
mounts, etc. More specifically, for this portion of the equipment, EPA estimates a 10 percent
increase in the amount of steel used, at a cost of approximately 30 cents per pound. Including
markup for overhead and profits, the total incremental retail price equivalent (RPE) hardware costs
related to these steel modifications range from $3 to $6 per unit for those units that need more steel
(see Table 4-19).
In addition, the analysis accounts for additional expenses for other materials, such as weldments,
plastics, castings, gaskets, seals, and hoses. As with the projection for additional steel, not all
equipment is expected to require changes to the amount or type of these materials. Considering the
complexity of designs and the potential for any or all of these materials to involve additional costs,
the analysis factors in an estimated cost five times greater than that for the steel alone.
Table 4-19
Estimated Incremental Variable Costs
steel
miscellaneous hardware
markup
Total hardware RPE
0-37 kW
$2
$10
$3
$15
37-75 kW
$2
$10
$3
$15
75-130 kW
$3
$15
$5
$23
1 30-450 kW
$4
$20
$7
$31
450-560 kW
$6
$30
$10
$46
560+ kW
$6
$30
$10
$46
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Chapter 4: Economic Impact
D. Summary of Total Projected Cost
1. First-year costs
Fixed and variable costs are combined in Table 4-20 to show the total unit cost for equipment
modified to accommodate engines designed to new tiers of emission standards. As described above
in Section n.B of this chapter, EPA then allocated three-fourths of these total costs to the first tier
of standards and one-fourth of these total costs to the second tier of standards. For engines rated
over 560 kW, the analysis attributes all costs to Tier 2, which is the only set of new standards for
these engines. The costs shown in Table 4-20 reflect this breakdown between the two tiers. For
example, for the equipment between 130 and 450 kW, three-fourths of the $453 total cost ($340)
would be the Tier 2 cost per unit, and one-fourth ($113) would be the Tier 3 cost per unit.
In summary, for the new Tier 1 standards that only apply to equipment with engines rated under
37 kW, EPA projected the incremental cost on this equipment to be about $25. For the Tier 2
standards, equipment with engines rated between 37 and 75 kW are expected to have incremental
costs up to $125, and the equipment with larger engines may incur incremental costs up to $400 or
even $1300. The incremental costs of the Tier 3 standards are expected to range from $40 to $400.
Table 4-20 shows these costs for the various power ranges and adds the projected engine costs for
a total cost impact for purchasers of new equipment.
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Regulatory Impact Analysis
Table 4-20
Incremental Unit Cost of Complying
with New Emission Standards—Equipment
Equipment
Modification
Weighted Unit Cost
0-37 kW
37-75 kW
75-130
kW
130-450
kW
450-560
kW
560+
kW
Tier 1
Total hardware
Total fixed costs
Total first-year costs
equipment changes
engine changes
total
$8
$16
$24
$34
$56
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Tier 2
Total hardware
Total fixed costs
Total first-year costs
equipment changes
engine changes
total
$3
$5
$8
$72
$80
$12
$113
$125
$124
$249
$17
$424
$441
$425
$866
$23
$317
$340
$464
$804
$35
$1281
$1315
$1354
$2670
$46
$357
$404
$683
$1087
Tier 3
Total hardware
Total fixed costs
Total first-year costs
equipment changes
engine changes
total
—
—
—
$4
$38
$42
$241
$282
$6
$141
$147
$511
$658
$8
$106
$113
$758
$872
$12
$427
$439
$1858
$2296
—
—
—
To better understand the economic impact of the new standards on equipment manufacturers,
the incremental costs are viewed in the context of their fraction of the total purchase price of
equipment. Equipment prices vary widely, but comparing total costs with a sampling of the
equipment list prices is illustrative. EPA collected quoted list prices on a several types of equipment
with high sales volume representing the low and high end of prices for different engine ratings. Two
ranges of engine power ratings were chosen: under 37 kW and between 185 and 335 kW (250 to 450
hp), the latter is in the middle of the 37 to 450 kW range. Using a range of these prices and
accounting for an estimated 20 percent discount from list prices, EPA determined a best estimate of
actual prices for nonroad diesel equipment (see Table 4-21).15 Comparing the estimated unit costs
for engines and equipment with the current purchase prices shows cost increases are almost all under
2 percent of purchase price, while most are well below 1 percent.
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Chapter 4: Economic Impact
Table 4-21
Estimated Prices for New Nonroad Diesel Equipment
Power Range
0-37 kW
(0-50 hp)
185-335 kW
(250-450 hp)
Portable Equipment
Estimated Sale Price
$1,600-12,000
$24,000-40,000
Motive Equipment
Estimated Sale Price
$16,000-20,000
$130,000
2. Long-term costs
The long-term cost savings described above for engine costs also apply to equipment cost
estimates. Fixed costs only apply until those costs are fully recovered. Also, EPA believes it is
appropriate to use the manufacturing learning curve when assessing the economic impact to
equipment manufacturers of accommodating complying engine technologies. EPA believes that the
modifications expected for equipment manufacturers due to the new standards will require
manufacture of new components and assemblies, which will lead to new manufacturing processes.
Furthermore, as manufacturers learn more about these new manufacturing processes, they are
expected to reduce their unit labor and material costs. These cost savings are calculated the same
as for engine costs (i.e., a 20 percent reduction in year 3 and a further 20 percent reduction in year 6).
The estimated long-term costs for each equipment-power category for Tier 3 standards are
shown in Table 4-22. The projected cost savings is small for the medium term due to the
predominance of fixed costs. After those fixed costs are fully recovered though, the analysis proj ects
a great reduction in the impact of the new standards.
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Regulatory Impact Analysis
Table 4-22
Projected Long-Term Increase in
Prices Due to Tier 3 Standards
Scenario
Equipment
Engine and
Equipment
Years of
Production*
1-2
3-5
6-10
11+
1-2
3-5
6-10
11+
Power (kW)
37-75
$42
$41
$40
$3
$282
$244
$160
$122
75-130
$147
$146
$145
$4
$658
$564
$442
$301
130-450
$113
$112
$111
$5
$872
$734
$545
$440
450-560
$439
$436
$434
$7
$2296
$2127
$1991
$543
*For equipment, year 3 costs are adjusted by reducing variable costs by 20 percent (fixed costs remain unchanged).
Year 6 costs are adjusted by reducing variable costs an additional 20 percent and eliminating fixed costs for
engines (fixed costs for equipment remain unchanged). Year 11 costs are adjusted by eliminating fixed costs for
equipment changes.
III. Aggregate Costs to Society
The above analysis develops per-unit estimates of engine and equipment costs for each
power category. With current data for engine sales for each category and projections for the
future, these costs can be translated into a total cost to the nation for the emission standards in
any year.16 Accounting for the projected favorable impact of the new standards on operating
costs, primarily from fuel savings in larger engines, would produce negative aggregate costs (net
economic gains) in future years. However, because it is difficult to accurately assess the fuel
economy impacts of hardware changes and the degree to which these savings would have
developed in the absence of new emission standards, EPA has conservatively chosen to present
aggregate costs to society without factoring in the expected changes in operating costs presented
earlier in this chapter. Using only the increased purchase prices presented in this chapter leads to
aggregate costs of about $5 million in the first year the new standards apply, increasing to a peak
of about $550 million in 2010 as increasing numbers of engines become subject to the new
standards. The following years show declining aggregate costs as the per-unit cost of compliance
decreases, as described earlier in the chapter, resulting in a minimum aggregate cost of about
$390 million in 2017. After 2017, stable engine costs applied to a slowly growing market lead to
slowly increasing aggregate costs.
IV. Final Regulatory Flexibility Analysis
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Chapter 4: Economic Impact
This section presents the results of the EPA's Final Regulatory Flexibility Analysis (Final
RFA), which evaluates the impacts on small businesses expected from new nonroad diesel
emission standards. As described below, the Final RFA largely confirms the conclusions of the
Initial RFA performed as a part of the proposed rule. This analysis has the following objectives:
(1) to specify an appropriate definition for "small business" for entities subject to the final rule,
(2) to characterize small participants in the nonroad diesel equipment manufacturing industry
(the industry evaluated in this analysis, as described below), (3) to assess the impact of the final
rule standards on small equipment manufacturers, and (4) to evaluate the relief provided by
regulatory alternatives.
A. Requirements of SBREFA and RFA
When proposing and promulgating rules subject to notice and comment under the Clean Air
Act, EPA is generally required under the Regulatory Flexibility Act (RFA) to conduct a
regulatory flexibility analysis unless EPA certifies that the requirements of a regulation will not
cause a significant impact on a substantial number of small entities. The Regulatory Flexibility
Act was amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA),
which was signed into law on March 29, 1996, to strengthen its analytical and procedural
requirements.
In developing the NPRM, EPA concluded that a significant impact on a substantial number
of small entities was likely and completed the initial analysis on which this Final RFA is based.
In responding to the provisions of SBREFA, EPA may use a variety of economic measures to
assess economic impacts on small entities. The analyses in the Initial and Final RFAs use a
measure known as the "sales test" to evaluate the impacts on small entities. The sales test
involves calculation of the annualized compliance costs as a function of sales revenue.
B. Methodology
1. Data sources
The Power Systems Research (PSR) database OE Link is the primary data source for this
analysis for product information about small and large equipment manufacturers. It includes the
number of equipment models produced, the types of engines used, and annual sales for each
equipment model. EPA believes that the PSR database is the most comprehensive source
available on the nonroad equipment manufacturing industry. Dun and Bradstreet (D& B) was the
main source of financial information, specifically for numbers of employees and the dollar value
of annual sales. Financial information on 334 of the 581 equipment manufacturers listed in the
PSR database was located (approximately 60 percent). These 334 equipment manufacturers
produced 63 percent of the total 1995 diesel equipment from the PSR database. Because the
ratio of total companies and ratio of total production represented by the 334 equipment
manufacturers are nearly equal, this sample likely contains a proportionate number of large and
small equipment manufacturers. This sample should therefore reflect the financial and
production characteristics of the equipment manufacturers that may be affected by the final rule.
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Regulatory Impact Analysis
2. Definition of small equipment manufacturer
SB A defines a small business differently for different lines of business. In order to simplify
the analysis, EPA looked at the effect of assuming, for the sake of the analysis, that a single
definition using the threshold of 500 or fewer employees could be used to characterize all small
nonroad diesel equipment manufacturers. This is the most commonly occurring among the SBA
definitions that apply to these companies. Of the 334 nonroad diesel equipment manufacturers
considered in the analysis, there were a total of 286 small manufacturers identified based on the
specific line-of-business definitions of small business from SBA, and there were a total of 283
small manufacturers found according to the general 500-employee threshold. The 286 small
equipment manufacturers identified based on the specific line-of-business definitions produced
25 percent of the total 1995 equipment, and the 283 small equipment manufacturers found using
the general 500 employee threshold produced 24 percent of the total 1995 equipment. Because
the differences in total number of small equipment manufacturers and the differences in percent
of total production that these small manufacturers produce are so small, the more general
definition of small business (500 or fewer employees) as defined by SBA for manufacturing
companies was considered acceptable. Thus, the analysis focuses on the impacts of the final rule
for 283 small businesses.
C. Characterization of Small Equipment Manufacturers
1. Generating model companies
EPA's analysis was based on a contract study performed by ICF, Incorporated.17 The
EPA/ICF study characterized the equipment industry by classifying industry segments in a
manner that would be useful for the subsequent evaluation of potential impacts of compliance
costs using the model company approach. To generate model small companies, nonroad diesel
equipment manufacturers (from market data described above) were segmented by size, measured
by sales (dollar value of annual sales) and total power. Total power is the product of individual
engine power and the number of units sold. Total power for a nonroad equipment manufacturing
company would be the sum of the products of the number of units of equipment produced and the
power rating of the engine used in each piece of equipment. This measure helps provide insight
into the amount of revenue generated from sales of equipment using diesel engines, and it
highlights equipment manufacturers that are probably generating revenue from other lines of
business and those companies that likely add minimal value to diesel engines when producing
equipment. The segmentation produced six groups of small companies, each group represented
by one model company. Small equipment manufacturers outside of these groups were not further
evaluated in the model company analysis, which left 238 small companies remaining within the
groups making up model companies.
2. Characterizing model companies
Table 4-23 provides summary data for characteristics of each group of small companies (or
each model company), such as number of equipment types, number of models, number of engine
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Chapter 4: Economic Impact
types, total power, number of employees, number of units sold, and sales revenue. Each model
company is developed from the median values of characteristics for each group of small
companies; mean values were not chosen to avoid skewing the data. Although each group
contains companies that manufacture multiple equipment types (applications), typical companies
in all groups of small companies produce one type of equipment. In addition, each group
contains at least one company that manufactures only one equipment model. Typical companies
in all groups have fewer engine models than equipment models, indicating that engine models are
shared by different equipment models within the companies.
Many applications are spread across multiple company groupings. For example, generator
sets contribute to the top two thirds of sales (measured by total power sold) in Groups 1, 2, and 3.
The high volume of these typically low-power units leads to companies in Groups 1, 2 and 3
producing an order of magnitude greater total power compared to companies in Groups 4, 5 and
6 (comparing 1 with 4, 2 with 5, and 3 with 6). Also, companies in Groups 1, 2 and 3 have
greater total power-to-dollar sales ratios compared to companies in Groups 4, 5 and 6. Cranes
account for the greatest portion of Group 6 sales (13 percent, measured by total power). These
low-volume units have high value added (for example, a complex piece of equipment with
several functions run by one engine), explaining why companies in Group 6 have similar dollar
sales to those in Group 3, even though median unit sales for Group 6 are only 15 percent those of
Group 3. These high value added companies require a similar number of employees to produce a
much lower volume of units compared to the companies with less value added products.
Comparing mean and median number of employees of Groups 1, 2, and 3 to Groups 4, 5 and 6,
respectively, the values are very similar. Median sales for the same groups are also very similar.
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Regulatory Impact Analysis
Table 4-23
Characteristics of Model Company Groups
Characteristic
Median Equipment Types
Averase Equipment
Max Equipment Tvpes
Min Equipment Tvpes
Median No. of Models
Averase No. of Models
Max No. of Models
Min No. of Models
Median Ensine Models
Averase Ensine Models
Max Ensine Models
Min Ensine Models
Median Total hp
Averase Total hp
Max Total hp
Min Total hp
Median Units Sold
Averase Units Sold
Max Units Sold
Min Units Sold
Med. Units Sold <50hp
Avs. Units Sold <50hp
Max Units Sold <50hp
Min Units Sold <50hp
Median Equipment hp
Averase Equipment hp
Min Equipment hp
Max Equipment hp
Median Emplovees
Averase Emplovees
Max Emplovees
Min Emplovees
Median Sales
Averase Sales
Max Sales
IV'Ti n S ^ 1 P c
Model Company Number
1
1
1
3
1
2
4
13
1
2
4
11
1
4,985
9,318
64,785
430
55
154
1,241
5
-
79
1,241
-
78
61
4
900
6
8
30
2
$ 550,966
$ 724,816
$ 1,900,000
$ 1 20 000
2 3 4l 5
1
1
3
1
5
6
22
1
5
6
22
1
20,579
33,291
150,794
5,550
222
462
2,259
33
-
227
1,932
-
100
72
15
578
45
43
140
3
$ 4,550,000
$ 4,759,557
$ 10,000,000
$ 2000000
1
1
3
1
7
9
29
2
7
9
29
1
121,744
136,150
321,192
32,138
1,022
1,424
4,793
174
2
615
2,994
-
122
96
20
540
150
194
500
30
$ 20,000,000
$ 26,946,453
$ 85,555,429
3! 1 2 000 000
1
1
2
1
2
3
12
1
2
2
5
1
926
896
2,719
105
15
40
438
2
10
35
438
-
38
23
4
250
8
11
28
1
$ 927,260
$ 901,328
$1,900,000
$ 130000
1
1
3
1
3
3
9
1
3
3
9
1
2,695
3,801
13,237
294
41
66
258
3
10
39
258
-
74
57
7
444
35
43
130
7
$ 4,163,873
$ 5,128,141
$ 10,000,000
$ 2000000
6
1
1
4
1
4
6
17
1
4
6
17
1
15,915
29,461
231,361
1,540
155
390
3,377
10
-
164
3,377
-
104
76
8
794
135
185
500
25
$ 24,000,000
$ 37,531,852
$ 350,604,000
$ 1 0 200 000
The EPA/ICF study found that the unit production and sales revenue data shows that some
small companies in Groups 1 and 2 are currently facing financial hardship without the effects of
new nonroad diesel regulations. This present financial condition of some companies provides an
indication of the current effects on small companies from competition in the market.
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Chapter 4: Economic Impact
D. Estimated Impacts on Small Equipment Manufacturers
1. Projected costs of the final standards
The original EPA/ICF study evaluated the impacts on small manufacturers of nonroad
equipment by examining the effect of projected fixed costs resulting from the rule. (In the
analysis, it was assumed that variable costs could generally be passed along as price increases
without significant economic consequences.) On the basis of comments and further analysis,
EPA has adjusted its estimates of fixed costs (see Section 6 of the Summary and Analysis of
Comments document associated with this rule for a discussion of EPA's decision to revise the
projected costs). As a result of these changes, EPA has reanalyzed the economic impacts of the
rule on small equipment manufacturers, incorporating the revised fixed cost values.18 Table 4-24
presents the revised fixed costs per product line. The presented cost figures are the total fixed
costs that would be amortized in the first year of a five-year amortization.
As in the case of variable costs, manufacturers may also be successful in passing on fixed
costs to the final consumer. To the extent that manufacturers are able to recover their fixed costs,
the impacts estimated here would be mitigated. However, the costs presented in the table assume
that manufacturers are not able to pass on any of the fixed costs to their customers.
Table 4-24
Compliance Cost by Engine Power Range
Power Range
0-37 kW
37-75 kW
75-130 kW
130-450 kW
450- 560 kW
560+ kW
Fixed Cost per
Product Line
$9,000
$28,000
$34,000
$30,000
$26,000
$21,000
As in the original analysis, this analysis evaluates the economic impacts under two
scenarios, the "base case" and "flexibility case." The base case provides a measure of the
effectiveness of these provisions by analyzing the impacts of the final rule if the regulatory
flexibilities which are a part of this rule are ignored. The flexibility case is based on the
availability and use of provisions that provide flexibility to equipment manufacturers in meeting
the new standards by allowing them to exempt from the new emission standards certain
percentages of the equipment pieces they sell for the first seven years after the standards are
77
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Regulatory Impact Analysis
implemented. The flexibility case also incorporates the availability and use of an additional
provision which will allow equipment manufacturers with lower-volume production lines to
exempt a specific number of pieces of equipment for each power category.
It should be noted that the two flexibility provisions considered in this analysis have been
revised in the final rule to be more advantageous to equipment manufacturers; in addition, there
are additional flexibility provisions in the final rule that for simplicity were not considered in this
analysis. As a result, the complete package of flexibility provisions established by this final rule
can be expected to ease the economic burdens on small businesses to a greater extent than the
two provisions considered in this analysis.
2. Sales test
As with the original analysis in the Initial RFA, the "sales test" was conducted for each of
the 334 companies (small and large). The number (and percent) of large and small manufacturers
are shown in Table 4-25 for the ratio ranges of less than one percent, one to three percent, and
more than three percent. These show that the impact of the final rule without flexibility
provisions would be that more than 30 percent of small businesses would be economically
impacted by greater than or equal to 1 percent.
Table 4-25
Compliance Cost Impacts as a Percentage of Sales Revenue by Company Size
Company Type
Small
Large
Total
Number of
Companies
283
51
334
<1%
177
63%
51
100%
288
1-3%
57
20%
0
0%
57
>3%
49
17%
0
0%
49
As demonstrated in Table 4-26, the flexibility provisions are projected to mitigate the
impact of the final rule such that only 13 percent of small businesses are estimated to have an
economic impact greater than 1 percent. Furthermore, the flexibility provisions reduced the
number of small equipment manufacturers impacted by 1 percent or more from 106 to 32,
approximately a 60 percent decrease. Thus, the analysis indicates that these flexibility provisions
will dramatically reduce the impacts of the emission standards.
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Chapter 4: Economic Impact
Table 4-26
Compliance Cost Impacts with Flexibility Provisions
as a Percentage of Sales Revenue by Company Size
Company Type
Small
Large
Total
Total
283
51
334
< 1%
251
89%
51
100%
302
1-3%
11
4%
0
0%
11
>3%
21
7%
0
0%
21
Some of the small companies that are projected to experience an impact of 3 percent or
greater with the flexibility provisions were Group 1 and 2 companies. Based on the finding that
some of these companies are already likely experiencing financial difficulty, it is not surprising
that a small number of companies are estimated to experience a greater impact from the
standards. ICF's study further describes the circumstances surrounding the likely current
financial instability of small companies in Groups 1 and 2.
E. Summary of Projected Economic Impacts for Small Businesses
The flexibility provisions dramatically reduce the estimated economic impacts of the
regulations on small equipment manufacturers, decreasing the percentage of small equipment
manufacturers that would experience a 1 percent or greater impact from 37 to 11 percent of small
companies. EPA considers the flexibility provisions to be a significant regulatory alternative
because they enable the Agency to accomplish the objectives of the final rule while minimizing
significant economic impacts on small equipment manufacturers.
In addition, the impact on small equipment manufacturers in comparison to large
manufacturers is not substantially greater. Generally, small companies with low sales revenue
that produce a large number of units (measured as the sum of power times units) would have the
greatest relative impact. For those small companies that did appear to experience the greatest
relative impact by the final rule (i.e., from Group 1 and 2 companies), it is important to note that
this analysis did not focus on the present financial health of equipment manufacturers, which
would provide an element of uncertainty in the evaluation of estimated impacts. Based on
production and sales information, some companies in Groups 1 and 2 seem to be currently in
poor financial health, because they have a low revenue based on total power production. The
rule would therefore be expected to have a small effect on the financial health of small
equipment manufacturers compared with the current effects of competition in the market.
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Regulatory Impact Analysis
F. Regulatory Alternatives to Reduce Impacts
Under section 609(b) of the Regulatory Flexibility Act as added by SBREFA, EPA
convened a Small Business Advocacy Review Panel on March 25, 1997. The purpose of the
Panel was to collect the advice and recommendations of representatives of small entities that will
be affected by the rule and to report on those comments and the Panel's findings as to issues
related to the key elements of an initial regulatory flexibility analysis under section 603 of the
Regulatory Flexibility Act. Those elements of an initial regulatory flexibility analysis are:
The number of small entities to which the proposed rule will apply.
Projected reporting, record keeping, and other compliance requirements of the proposed
rule, including the classes of small entities which will be subject to the requirements and the
type of professional skills necessary for preparation of the report or record.
Other relevant federal rules which may duplicate, overlap, or conflict with the proposed rule.
Any significant alternatives to the proposed rule which accomplish the stated objectives of
applicable statutes and which minimize any significant economic impact of the proposed
rule on small entities.
Once completed, the Panel report was provided to the Agency and included in the rulemaking
record. The Panel, consisting of representatives of the Small Business Administration, the Office
of Management and Budget, and EPA, issued a report on May 23, 1997 entitled, Final Report of
the SBREFA Small Business Advocacy Review Panel for Control of Emissions of Air Pollution
from NonroadDiesel Engines, which may be found in the docket for this rulemaking.19 The
Panel findings and recommendations on these issues and EPA's response to these findings are
described below in summary.
Accordingly, during the development of the proposal, EPA and the SBREFA Panel were in
contact with representatives of four separate but related industries that will be subject to this rule
and that contain small businesses as defined by regulations of the Small Business Administration
(SBA): nonroad diesel engine manufacturing, manufacturing of nonroad diesel equipment, the
rebuilding or remanufacturing of diesel nonroad engines, and post-manufacturer marinizing of
diesel engines. (Post-manufacture marinizers generally purchase complete or partially complete
engines and add parts to adapt them for propulsion or auxiliary marine use.) According to SBA's
regulations (13 CFR 121), businesses with no more than the following numbers of employees or
dollars of annual receipts are considered "small entities" for purposes of a regulatory flexibility
analysis (the definition of small manufacturer of nonroad diesel equipment is discussed further in
Section IV.B.2. above):
Manufacturers of engines (including marinizers) 1000 employees
Equipment manufacturers
Manufacturers of construction equipment 750 employees
Manufacturers of industrial trucks (forklifts) 750 employees
Manufacturers of other nonroad equipment 500 employees
Rebuilders/Remanufacturers of engines $5 million
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Chapter 4: Economic Impact
There are several hundred small nonroad equipment manufacturers, one small nonroad
engine manufacturer, many small nonroad engine rebuilders/remanufacturers, and an estimated
ten small post-manufacture engine marinizers subject the rule.
Regarding the proposed reporting and record keeping requirements, only equipment
manufacturers commented. Equipment manufacturers commented that under the flexibility
provisions, they should only be required to maintain accurate records of the engine types installed
in equipment. These records would not be routinely submitted to EPA, but would be available
upon request. The commenters believe this approach would minimize the administrative burden
on equipment manufacturers while providing for market-driven "self-policing" among competing
companies (due to the likelihood that competitors would alert EPA to abuses of the flexibility
provisions). It should be noted that no record keeping requirements would be imposed on
equipment manufacturers that choose not to take advantage of the voluntary flexibility
provisions. The panel encouraged EPA to minimize the need for reporting and record keeping.
As described in the final rule, EPA will require that equipment manufacturers maintain accurate
records of the production of equipment, installed engines, and calculations used to determine the
percent-of-production allowances. Manufacturers are required to make these records available to
EPA upon request. EPA intends to conduct only limited audits of these records; the Agency
anticipates that scrutiny by equipment manufacturers of their competitors' products will help
identify potential candidates for audits.
Again, only equipment manufacturers commented about the proposed rule's overlap with
other federal rules. A representative of the diesel forklift industry stated that Occupational Safety
and Health Administration (OSHA) ambient carbon monoxide (CO) limits, especially as applied
in the state of Minnesota, need to be evaluated for any overlap with the engine-based standards.
No other potential overlaps with other federal rules were noted. The panel encouraged EPA to
consider this potential overlap with OSHA CO limits. EPA has considered the potential overlap
with OSHA requirements and has concluded that no changes to this final rule are appropriate
because OSHA CO limits (and state requirements for CO monitoring such as those in place in
Minnesota), focus on indoor ambient air concentrations, expressed in parts per million.
Coordination of these requirements with EPA CO standards, which are focused on per-engine
emission reductions to achieve National Ambient Air Quality Standards, would have to account
for highly variable activities that greatly influence indoor CO concentrations, such as room
ventilation rates and machine operating hours. These activities are beyond the scope of the final
rule. Comments received on the NPRM provided no additional information or suggestions for
coordinating federal regulations.
Small manufacturers of nonroad equipment and their representatives suggested alternative
ways in which the provisions of the draft proposal might be improved. The Panel believed that a
set of five alternatives, considered as an integrated package, would provide significant flexibility
and burden reduction for small entities subject to the draft proposed rule. The Panel believed
that EPA should consider conducting further analysis on these five alternatives and proposing or
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Regulatory Impact Analysis
soliciting comment on them in the proposal. The five alternatives were: (1) flexibility for
equipment manufacturers to aggregate and use exemption allowances on a schedule that best
suited their needs, (2) equivalent flexibility for manufacturers of equipment using small engines
as for those using larger engines, (3) provision for equipment manufacturers to purchase credits
in the averaging, banking, and trading program and to use those credits to exempt more
equipment, (4) dropping of the requirement that the small volume allowance be restricted to a
single equipment model, and (5) adoption of a hardship relief provision. EPA proposed all 5
recommended provisions.
After evaluating the comments received on the proposed regulatory alternatives, EPA is
adopting some of the provisions put forward by the Panel, as well as several alternative
provisions that, as a whole provide small businesses with equivalent or better flexibility
compared to the program embodied in the Panel recommendations. These final flexibility
provisions, and EPA's rationale for adopting them, are discussed in detail in the final rule
preamble and in the Summary and Analysis of Comments. EPA believes that the set of
provisions established in the final rule will provide adequate compliance flexibility for
equipment manufacturers, including those that are small, while meeting the Agency's air quality
goals. The Agency believes that these provisions represent a very significant mitigation of the
economic impacts on small equipment manufacturers compared to the impacts that might
otherwise have occurred.
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Chapter 4 References
1."Estimated Economic Impact of New Emission Standards for Heavy-Duty On-Highway
Engines," Acurex Environmental Corporation Final Report (FR 97-103), March 31, 1997. The
Acurex Environmental Corporation has since changed its name to Arcadis Geraghty & Miller.
2."Incremental Costs for Nonroad Engines: Mechanical to Electronic," Memorandum from Lou
Browning, Acurex Environmental, to Alan Stout, EPA, April 1, 1997.
3."Update of EPA's Motor Vehicle Emission Control Equipment Retail Price Equivalent (RPE)
Calculation Formula," Jack Faucett Associates, Report No. JACKFAU-85-322-3, September
1985.
4."Certification Data from Nonroad Diesel Engines," EPA memorandum from Phil Carlson to
Docket A-96-40, August 8, 1997.
5."Final Regulatory Impact Analysis: Control of Emissions of Air Pollution from Highway
Heavy-Duty Engines," September 16, 1997.
6. "Economic Evaluation of Regulations on Exhaust Emissions from Large Nonroad,
Compression Ignition Engines," David Harrison, et al, National Economic Research Associates,
October 29, 1997.
7."Big Changes for Cummins' B Series," Diesel Progress., May 1997, page 14.
8."Incremental Costs for Nonroad Engines: Mechanical to Electronic," Memorandum from Lou
Browning, Acurex Environmental, to Alan Stout, EPA, April 1, 1997.
9."Engine Price, On-Highway and Nonroad," Memorandum from Thomas Uden, ICF, Inc., to
Alan Stout, EPA, August 7, 1997.
10."Treating Progress functions as a Managerial Opportunity," J. Dutton and A. Thomas,
Academy of Management Review, Vol. 9, No. 2, page 235, 1984.
11."Learning Curves in Manufacturing," L. Argote and D. Epple, Science, February 1990, Vol.
247, page 920.
12."Methodology to Develop the Categories for the Effort Needed by Nonroad Equipment
Manufacturers in Accommodating Complying Diesel Engines," EPA memorandum from Bryan
J. Manning to Public Docket A-96-40.
13. "Methodology to Determine Number of Product Lines and their Sales Volume for Nonroad
Diesel Equipment Cost Analysis," EPA memorandum from Alan Stout to Public Docket
A-96-40.
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14. "Economic Evaluation of Regulations on Exhaust Emissions from Large Nonroad,
Compression Ignition Engines," David Harrison, et al, National Economic Research Associates,
October 29, 1997.
15."Methodology to Develop Nonroad Diesel Equipment Sales Prices," EPA memorandum from
Bryan J. Manning to Public Docket A-96-40.
16.Engine sales data is from the PSR OE Link database.
17."Small Business Impact Assessment: Nonroad Compression-Ignition Equipment
Manufacturers," Draft Final Report from ICF Incorporated, prepared for U.S. EPA under
Contract Number 68-C5-0010, Work Assignment Number 211, June 1997.
18."Revised Results for the Small Business Impact Assessment: Nonroad Compression Ignition
Equipment Manufacturers;" Memorandum from Thomas Uden, ICF Kaiser, to Tad Wysor, EPA,
July, 1998.
19."Final Report of the SBREFA Small Business Advocacy Review Panel for Control of
Emissions of Air Pollution from Nonroad Diesel Engines," May 23, 1997.
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CHAPTER 5: ENVIRONMENTAL IMPACT
Nonroad diesel equipment performs a large portion of our nation's work, and also has been
shown to contribute to decreased air quality in our nation's cities. To more fully understand both
the contributions that nonroad equipment makes toward various atmospheric pollutants and the
benefits that can be derived from more stringent emission standards, EPA developed a new
computer model for projecting nonroad emissions inventories called NONROAD. This chapter
has several purposes. First, the chapter reviews the latest scientific information relating to
adverse health and environmental effects of the regulated pollutants. Then, it analyzes the results
of the new NONROAD model to understand the impact the new emission standards are projected
to have on the emissions of oxides of nitrogen (NOx), primary and secondary particulate matter
(PM), and volatile organic compounds (VOCs), both on a nationwide basis and a per-machine
basis.
I. Health and Welfare Effects of Pollutants from Nonroad Engines
As part of the periodic review of the ozone and PM air quality standards required under the
Clean Air Act, EPA has recently assessed the impacts of ozone and PM on human health and
welfare, taking into account the most relevant, peer-reviewed scientific information available.
The paragraphs below review some of EPA's key concerns at this time, as compiled in the
Agency's Criteria Documents and Staff Papers for ozone and PM. The Criteria Documents
prepared by the Office of Research and Development consist of EPA's latest summaries of
scientific and technical information on each pollutant. The Staff Papers on ozone and PM are
prepared by the Office of Air Quality Planning and Standards, and summarize the policy-relevant
key findings regarding health and welfare effects.
A. Ozone
Over the past few decades, many researchers have investigated the health effects associated
with both short-term (one- to three-hour) and prolonged acute (six- to eight-hour) exposures to
ozone. In particular, in the past decade, numerous controlled-exposure studies of moderately
exercising human subjects have been conducted which collectively allow a quantification of the
relationships between prolonged acute ozone exposure and the response of people's respiratory
systems under a variety of environmental conditions. To this experimental work has been added
field and epidemiological studies which provide further evidence of associations between short-
term and prolonged acute ozone exposures and health effects ranging from respiratory symptoms
and lung function decrements to increased hospital admissions for respiratory causes. In addition
to these health effects, daily mortality studies have suggested a possible association between
ambient ozone levels and an increased risk of premature death.
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Most of the recent controlled-exposure ozone studies have shown that respiratory effects
similar to those found in the short-term exposure studies occur when human subjects are exposed
to ozone concentrations as low as 0.08 ppm while engaging in intermittent, moderate exercise for
six to eight hours. These effects occur even though ozone concentrations and levels of exertion
are lower than in the earlier short-term exposure studies and appear to build up over time,
peaking in the six- to eight-hour time frame. Other effects, such as the presence of biochemical
indicators of pulmonary inflammation and increased susceptibility to infection, have also been
reported for prolonged exposures and, in some cases, for short-term exposures. Although the
biological effects reported in laboratory animal studies can be extrapolated to human health
effects only with great uncertainty, a large body of toxicological evidence exists which suggests
that repeated exposures to ozone causes pulmonary inflammation similar to that found in humans
and over periods of months to years can accelerate aging of the lungs and cause structural
damage to the lungs.
In addition to the effects on human health, ozone is known to adversely affect the
environment in many ways. These effects include reduced yield for commodity crops, for fruits
and vegetables, and commercial forests; ecosystem and vegetation effects in such areas as
National Parks (Class I areas); damage to urban grass, flowers, shrubs, and trees; reduced yield in
tree seedlings and noncommercial forests; increased susceptibility of plants to pests; materials
damage; and visibility. Nitrogen oxides (NOx), key precursors to ozone, also result in nitrogen
deposition into sensitive nitrogen-saturated coastal estuaries and ecosystems, causing increased
growth of algae and other plants.
B. Particulate Matter
Paniculate matter (PM) represents a broad class of chemically and physically diverse
substances that exist as discrete particles (liquid droplets or solids) over a wide range of sizes.
Human-generated sources of particles include a variety of stationary and mobile sources.
Particles may be emitted directly to the atmosphere or may be formed by transformations of
gaseous emissions such as sulfur dioxide or nitrogen oxides. The major chemical and physical
properties of PM vary greatly with time, region, meteorology, and source category, thus
complicating the assessment of health and welfare effects as related to various indicators of
particulate pollution. At elevated concentrations, particulate matter can adversely affect human
health, visibility, and materials. Components of particulate matter (e.g., sulfuric or nitric acid)
contribute to acid deposition.
Key EPA findings can be summarized as follows:
1. Health risks posed by inhaled particles are affected both by the penetration and deposition of
particles in the various regions of the respiratory tract, and by the biological responses to
these deposited materials.
2. The risks of adverse effects associated with deposition of ambient particles in the thorax
(tracheobronchial and alveolar regions of the respiratory tract) are markedly greater than for
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deposition in the extrathoracic (head) region. Maximum particle penetration to the thoracic
regions occurs during oronasal or mouth breathing.
3. The key health effects categories associated with PM include premature death; aggravation
of respiratory and cardiovascular disease, as indicated by increased hospital admissions and
emergency room visits, school absences, work loss days, and restricted activity days;
changes in lung function and increased respiratory symptoms; changes to lung tissues and
structure; and altered respiratory defense mechanisms. Most of these effects have been
consistently associated with ambient PM concentrations, which have been used as a measure
of population exposure, in a large number of community epidemiological studies.
Additional information and insights on these effects are provided by studies of animal
toxicology and controlled human exposures to various constituents of PM conducted at
higher than ambient concentrations. Although mechanisms by which particles cause effects
are not well known, there is general agreement that the cardio-respiratory system is the
major target of PM effects.
4. Based on a qualitative assessment of the epidemiological evidence of effects associated with
PM for populations that appear to be at greatest risk with respect to particular health
endpoints, the EPA has concluded the following with respect to sensitive populations:
a. Individuals with respiratory disease (e.g., chronic obstructive pulmonary disease, acute
bronchitis) and cardiovascular disease (e.g., ischemic heart disease) are at greater risk of
premature mortality and hospitalization due to exposure to ambient PM.
b. Individuals with infectious respiratory disease (e.g., pneumonia) are at greater risk of
premature mortality and morbidity (e.g., hospitalization, aggravation of respiratory
symptoms) due to exposure to ambient PM. Also, exposure to PM may increase
individuals' susceptibility to respiratory infections.
c. Elderly individuals are also at greater risk of premature mortality and hospitalization for
cardiopulmonary problems due to exposure to ambient PM.
d. Children are at greater risk of increased respiratory symptoms and decreased lung
function due to exposure to ambient PM.
e. Asthmatic individuals are at risk of exacerbation of symptoms associated with asthma,
and increased need for medical attention, due to exposure to PM.
5. There are fundamental physical and chemical differences between fine and coarse fraction
particles and it is reasonable to expect that differences may exist between the two subclasses
of PM-10 in both the nature of potential effects and the relative concentrations required to
produce such effects. The specific components of PM that could be of concern to health
include components typically within the fine fraction (e.g., acid aerosols, sulfates, nitrates,
transition metals, diesel particles, and ultra fine particles), and other components typically
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within the coarse fraction (e.g., silica and resuspended dust). While components of both
fractions can produce health effects, in general, the fine fraction appears to contain more of
the reactive substances potentially linked to the kinds of effects observed in the
epidemiological studies. The fine fraction also contains the largest number of particles and a
much larger aggregate surface area than the coarse fraction which enables the fine fraction to
have a substantially greater potential for absorption and deposition in the thoracic region, as
well as for dissolution or absorption of pollutant gases.
With respect to welfare or secondary effects, fine particles have been clearly associated with
the impairment of visibility over urban areas and large multi-state regions. Fine particles, or
major constituents thereof, also are implicated in materials damage, soiling and acid deposition.
Coarse fraction particles contribute to soiling and materials damage.
Paniculate pollution is a problem affecting localities, both urban and nonurban, in all
regions of the United States. Manmade emissions that contribute to airborne particulate matter
result principally from stationary point sources (fuel combustion and industrial processes),
industrial process fugitive particulate emission sources, nonindustrial fugitive sources (roadway
dust from paved and unpaved roads, wind erosion from cropland, etc.) and transportation
sources. In addition to manmade emissions, consideration must also be given to natural
emissions including dust, sea spray, volcanic emissions, biogenic emanation (e.g., pollen from
plants), and emissions from wild fires when assessing particulate pollution and devising control
strategies.
C. Carbon Monoxide and Smoke
Though carbon monoxide (CO) and smoke are not the primary focus of this rule, EPA is
establishing new standards for both CO (for all engine categories subject to this regulation) and
smoke (for engines rated from 0 to 37 kW) in this rule. CO has long been known to have
substantial adverse effects on human health and welfare, including toxic effects on blood and
tissues, and effects on organ functions, and has been linked to fetal brain damage, increased risk
for people with heart disease, and reduced visual perception, cognitive functions and aerobic
capacity. As shown in EPA's Nonroad Engine and Vehicle Emissions Study (NEVES), nonroad
diesel engines contribute to emissions of carbon monoxide in nonattainment areas.
Smoke from compression-ignition engines, including those below 37 kW, has long been
associated with adverse effects on human welfare, including considerable economic, visibility
and aesthetic damage. The carbon particles that make up diesel smoke cause reduced visibility,
soiling of urban buildings, homes, personal property, clothes, and skin, and are associated with
increased odor, coughing, and eye irritation. In addition, the particles causing visible smoke are
the same as those associated with the significant threats to human health described above for
particulate matter.
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II. The NONROAD Model
In order to quantify the level of emission inventories from nonroad equipment and to
estimate the impact of future standards on those inventories, EPA has developed a new computer
model called the NONROAD Model. EPA has replaced the model used in the NPRM analysis
with this new NONROAD model in order to predict the emissions impact of the new standards
being finalized. Much of the information used in the new NONROAD model is the same as the
information used in the model to analyze the environmental impact of the proposal. The
following section highlights the areas where significant changes in the modeling performed for
the proposal and the modeling for this final rule analysis exist.
For a complete description of EPA's new NONROAD model, the reader is referred to the
technical reports and program documentation prepared by EPA in support of the NONROAD
model development. These reports and documentation describe the operation of the model and
provide detailed information on the inputs that go into the model and how they were developed.
Copies of the technical reports and model documentation have been placed in the public docket
for this rulemaking.
A. Emission Factors
EPA has updated the emission factors for engines manufactured prior to the existing Tier 1
standards (which apply to engines at or above 37 kW). In the emissions model used in the
proposal, EPA based all of the pre-control emission factors on those found in the NEVES report.
The emission factors contained in the NEVES report were based on 1970s-era engines. Recent
testing on newer pre-control engines above 37 kW shows that the emission levels of engines have
dropped compared to the levels presented in the NEVES report. Table 5-1 presents the pre-
control emission levels assumed in the NONROAD model for 1988 and later model year engines
at or above 37 kW. (These levels are assumed to apply until the effective model year of the
existing Tier 1 standards.) The reader is directed to EPA's technical report, "Exhaust Emission
Factors for Nonroad Engine Modeling — Compression Ignition" for a more detailed explanation
of the updated pre-control emission factors.
Table 5-1
Emission Factors for 1988 and later Model Year
Pre-control Nonroad Engines at or above 37 kW, g/kW-hr (g/bhp-hr)
Engine Category
>37to75kW
>75kW
HC
1.32(0.99)
0.91 (0.68)
CO
4.65 (3.49)
3.60(2.70)
NOx
11.07(8.30)
11.17(8.38)
PM
0.96 (0.72)
0.54 (0.40)
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Regulatory Impact Analysis
For engines below 37 kW, where very little information on the emission levels of pre-
control engines exists, the NONROAD model uses information from the California ARB's
model for nonroad emissions (known as "OFF-ROAD"). The direct injection levels and indirect
injection levels were combined based on the technology weightings presented in the RIA for the
proposal. Table 5-2 contains the resulting emission factors assumed in the NONROAD model
for engines below 37 kW.
Table 5-2
Emission Factors for Pre-control
Nonroad Engines less than 37 kW, g/kW-hr (g/bhp-hr)
Engine Category
0 to 12 kW
>12to37kW
HC
2.0(1.5)
2.4(1.8)
CO
6.7 (5.0)
6.7 (5.0)
NOx
13.3(10.0)
9.2 (6.9)
PM
1.33 (1.0)
1.07(0.8)
EPA's NONROAD model assumes the same NMHC and NOx emission factors for
engines covered under the new standards as the emissions model used in the proposal. Tables 5-
3 and 5-4 present the NMHC and NOx emission levels assumed in the NONROAD model for
engines meeting the new standards, respectively.
Table 5-3
Estimated Certification NMHC Levels, g/kW-hr (g/hp-hr)
Power Range (kW)
Oto8
>8to 19
>19to37
>37 to 75
>75to 130
>130to225
>225 to 450
>450 to 560
>560
Tierl
2.1 (1.6)
0.9 (0.7)
1.1 (0.8)
0.9 (0.7)
0.5 (0.4)
0.4 (0.3)
Tier 2
0.8 (0.6)
0.5 (0.4)
0.4 (0.3)
Tier 3
Not applicable
0.3 (0.2)
Not applicable
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Table 5-4
Estimated Certification NOx Levels, g/kW-hr (g/hp-hr)
Power Range (kW)
Oto8
>8to 19
>19to37
>37 to 75
>75to 130
>130to225
>225 to 450
>450 to 560
>560
Tierl
7.9 (5.9)
7.0 (5.2)
7.4 (5.5)
9.2 (6.9)
Tier 2
6.7 (5.0)
7.0 (5.2)
6.0 (4.5)
Tier 3
Not applicable
4.4 (3.3)
3.7 (2.8)
Not applicable
Although the Tier 1 rule established new standards for PM, no PM benefits were claimed
in that rule. This was due to the fact that, although a lower PM standard was established for a
steady-state test cycle, there was a great deal of uncertainty over the levels of in-use PM
emissions that might result from the transient operation of these engines. For this analysis, EPA
has continued to assume no benefit for PM from the existing Tier 1 standards. Therefore, the PM
emission factors assumed for engines covered under the existing Tier 1 standards are the pre-
control levels listed in Table 5-1. In order to estimate the PM benefit of the new standards, EPA
assumed that engines covered by the new standards would emit at the level of the new standards,
and then applied EPA's best current estimates of in-use operation adjustment factors for PM
emission levels, as described in section n.B below. These factors and other assumptions in the
model are still under review, and will continue to be improved in the future as new information
becomes available.
Because of the continued uncertainties about the degree to which the steady-state test
procedure will control PM emissions in use, especially from the many nonroad engines that
frequently operate in transient modes, EPA cannot be certain that any assessment made at this
time of the expected PM emission reductions due to the new standards will be completely
accurate. Nevertheless, EPA has attempted to make a reasonable estimate of these reductions.
EPA believes this approach provides a reasonable estimate of PM benefits from the new
standards but actual benefits could vary significantly from these levels.
B. In-Use Operation Adjustments
Nonroad engines often operate under conditions unlike that of the steady-state ISO-C1
testing procedure typically used in emissions testing. This alternate operation can cause a change
in the emission characteristics of nonroad CI engines. The emissions model used in the NPRM
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analysis contained no adjustment to the post-control emission factors for different types of in-use
operation. (The pre-control emission factors taken from the NEVES report already included a
"transient" operation adjustment. However, the emission levels from Tier 1 and later engines
were not adjusted for in-use operation.)
In order to estimate the impact of in-use operating conditions on nonroad emissions, the
NONROAD model uses in-use adjustment factors that were derived from emission testing
designed to represent typical operational behavior of nonroad equipment. The adjustment factors
were based on testing performed under a joint EPA and EMA project that was designed to
develop more realistic test cycles for nonroad engine emissions characterization. The project
developed cycles to represent typical operation of an agricultural tractor, a crawler dozer, and a
backhoeMoader. The cycles were developed from data acquired from instrumenting one piece of
each type of equipment. This data was used to construct appropriate test cycles from statistical
criteria developed by EPA and EMA. Southwest Research Institute then tested nine late-model
nonroad engines using the steady-state ISO-C1 certification procedure and the three nonroad test
cycles. Table 5-5 contains the average adjustment factors based on testing of the nine engines.
Table 5-5
In-use Adjustment Factor used in the NONROAD Model
(Ratio of Application Test Cycle to Steady-State ISO-C1 Emissions)
Test Cycle
Agricultural Tractor
BackhoeVLoader
Crawler Dozer
HC
0.89
2.19
0.93
CO
0.42
2.31
1.27
NOx
0.99
1.03
0.99
PM
0.64
2.04
1.21
To apply the in-use adjustment factors listed in Table 5-5 to the entire CI equipment, EPA
matched the individual nonroad applications contained in the NONROAD model with the test
cycle that is thought to most closely represent the in-use activity for each application. For those
applications where steady-state operation is typical, no adjustment to the emission factors is
made. To determine the estimated in-use emission level for each application, the emission
factors described in Tables 5-1 through 5-4 were multiplied by the appropriate in-use adjustment
factor to create the emission factor inputs used in the NONROAD model. It should be noted that
EPA plans to continue investigating the effects in-use behavior on emissions and improve these
adjustment factors in the future as new information becomes available. EPA's technical report,
"Exhaust Emission Factors for Nonroad Engine Modeling — Compression-Ignition," contains a
more thorough description of how the in-use operation adjustments were derived.
C. Equipment Population Estimates
The NONROAD model has population estimates of nonroad equipment covered by the
new standards. The modeling performed in support of the NPRM used 1995 population
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estimates from the Power Systems Research (PSR) PartsLink database. The NONROAD model
uses the 1996 population estimates from the same database as the basis for the base populations.
D.
Growth Estimates
Essential to the determination of future emissions is the ability to accurately estimate the
growth in nonroad equipment activity. For this final rule analysis, EPA looked at growth factors
developed from two different sources: economic projections from the BEA and historical trends
in growth in nonroad engine population from the PSR PartsLink Database.
Historically, EPA has used economic indicators such as the those provided by the
Department of Commerce's Bureau of Economic Analysis (BEA). The BEA growth estimates
are prospective and are developed for various sectors of the economy. BEA growth indicators
have been widely used by states in preparing emission inventories for their State Implementation
Plans (SIP) and most recently for the Ozone Transport Assessment Group (OTAG), a consortium
of states and EPA to determine effective control strategies for ozone attainment. BEA growth
indicators have also been the basis for EPA's Trends Report. BEA provides economic indicators
by state or as a national average for numbers of employees, inflation adjusted national dollars of
earnings, and inflation adjusted aggregate gross state products (GSP) dollars of earnings. The
sector specific BEA-based growth estimates used in this analysis are shown in Table 5-6. These
growth projections are from the most recent BEA estimates (July 1995) and are related to a 1995
base year.
Table 5-6
Growth Factors for Nonroad Sectors
based on BEA Economic Indicators
Sector
Airport Service
Construction
Farm
Industrial
Lawn and Garden
Light Commercial
Logging
Railway
Recreational
Average Annual BEA-based
Predicted Growth (%)
5.5
1.0
2.4
1.9
1.0
1.9
7.4
-0.9
1.0
BEA projections are for economic growth in broad sectors of the economy and may not
correlate completely with the growth in nonroad diesel equipment used by those sectors. For the
equipment categories covered by this rule, there is some indication that past rates of growth in
sales of equipment and fuel may be higher than BEA projections for future growth. An
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examination of the past growth of the United States nonroad diesel annual populations from
PSR's PartsLink Database for the years 1989 to 1996 indicates that overall historical population
growth (and hence, sales growth) may be higher than BEA projections of future growth.1 Using
the PSR PartsLink database, EPA has developed sector specific growth factors for nonroad diesel
equipment based on a retrospective analysis of 1989 to 1996 equipment populations. The sector
specific PSR-based growth estimates used in this analysis are shown in Table 5-7. EPA's
technical report, "Nonroad Engine Growth Estimates," provides a more detailed description of
the development of the growth rates based on the BEA and PSR information.
Table 5-7
Growth Factors for Nonroad Diesel Equipment Sectors
based on PSR Population Estimates
Sector
Airport Service
Construction
Farm
Industrial
Lawn and Garden
Light Commercial
Logging
Railway
Recreational
Average Annual PSR-based
Predicted Growth (%)
8.3
3.3
3.1
3.6
9.1
5.3
-1.2
4.5
3.8
Due to the significant differences in the two sets of growth rates, EPA has used both sets
of growth information to evaluate the impacts of the new standards. It should be noted that the
draft version of the NONROAD model contains only the growth rates based on the PSR
population estimates.
III. Emission Inventory Estimates
Because this rule is concerned primarily with three major pollutants (NOx, HC, and PM),
eight different market segments (and even more numerous individual applications), and different
tiers of standards depending upon the power range, there are countless ways to present the results
of the modeling performed in support of this rulemaking. The following section presents the
inventories for each of the three pollutants and the total reductions expected under the new
standards. A memo containing a more detailed presentation of the modeling results has been
placed in the public docket for the rulemaking.2
A. Equipment Manufacturer Allowance Impacts
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Along with the new engine standards, EPA is adopting flexibility allowances for
equipment manufacturers. There are two flexibility provisions in the rule with the potential to
have significant impacts on emissions projections. They are the "Percentage Phase-in
Allowance" provision and the "Small Volume Allowance" provision. Equipment manufacturers
are allowed to take advantage of one, but not both, of these provisions. During the first seven
years of implementation of the Tier 1 standards for engines rated below 37 kW, or the Tier 2
standards for larger engines, not all pieces of equipment are required to meet the new standard.
Under the Percentage Phase-in Allowance provisions, a manufacturer may exempt up to a
cumulative total of eighty percent of the production over the first seven years a new standard
applies. (This applies separately to each regulatory power category). The engines used in such
exempted equipment will only have to meet the previous standard which is either the Tier 1
standard in the case of equipment at or above 37 kW, or unregulated in the case of equipment
under 37 kW. For these categories of engines where there is an overlap in standards whereby the
exemption allowance extends into the Tier 3 set of standards (this only occurs in equipment at or
above 37 kW), the standard for the exempted equipment continues to be the Tier 1 standard.
Under the Small Volume Allowance provisions, a manufacturer may exempt up to a
cumulative total of 700 units over the first seven years a new standard applies. (This applies
separately to each regulatory power category.) Again, the engines used in such exempted
equipment will only have to meet the previous standard which is either the Tier 1 standard in the
case of equipment at or above 37 kW, or unregulated in the case of equipment under 37 kW.
Realistically, each manufacturer will choose the exemption provision that best meets its
needs. Some will opt into one of the options described above, while others may not opt into
either of these programs. For the purposes of emissions modeling, and thus to determine the
expected benefits from this rule, EPA assumed that manufacturers took full advantage of the
Percentage Phase-in Allowance provisions. EPA believes this results in a conservative estimate
(i.e., yields lower benefits) of the environmental impact of the new standards.
B. Emission Model Results
1. Projected emission inventories and reductions
Table 5-8 presents the NOx inventory under the current Tier 1 standards and the emission
reductions expected from the new standards for future years in five year increments using both
the PSR and the BEA growth assumptions. It is evident from Table 5-8 that the PSR figures
yield higher reduction estimates than the BEA growth assumptions, as would be expected. It is
reasonable to assume that the actual emission reductions are located somewhere between these
two sets of numbers.
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Table 5-8
NOx Inventories and Reductions (Short tons/Year)
Calendar
Year
1995
2000
2005
2010
2015
2020
NOx Emission Inventories
Under the Current Standards
Assuming
BEA Growth
2,867,000
2,740,000
2,715,000
2,827,000
2,946,000
3,005,000
Assuming
PSR Growth
2,867,000
2,932,000
3,240,000
3,787,000
4,530,000
5,445,000
NOx Reductions
Due to the New Standards
Assuming
BEA Growth
(% Reduction)
0
13,300
(0.5%)
264,000
(9.7%)
873,000
(30.9%)
1,347,000
(45.7%)
1,541,000
(51.3%)
Assuming
PSR Growth
(% Reduction)
0
16,000
(0.6%)
340,000
(10.5%)
1,211,000
(32.0%)
2,086,000
(46.0%)
2,756,000
(50.6%)
Based on the information in Table 5-8, the new standards should decrease overall NOx
emissions from nonroad sources by over 30% beyond the levels expected under the current Tier 1
standards in the year 2010 and by over 50% by the year 2020. Figures 5-1 and 5-2 illustrate the
relationship between NOx inventories under the existing Tier 1 standards and the new standards
for the PSR and BEA growth assumptions, respectively. Note that with the PSR growth
assumptions, under the Tier 1 rule there is a net increase in emissions from 1995 to 2010,
whereas with the BEA growth assumptions, there is a net decrease in emissions during the same
time period. Under both growth scenarios, the new standards yield a net decrease in the NOx
emissions inventory out to the year 2020.
Hydrocarbons, though not as significant as NOx on a total tonnage basis, will still see
some reductions because of the new standards. Table 5-9 presents the HC inventory under the
existing Tier 1 standards and the emission expected from the new standards for future years in
five year increments using both the BEA and the PSR growth assumptions.
96
-------
Figure 5-1
NOx Emissions with PSR Growth
CO
CD
"w
c
a
c
O
X
O
existing Tier 1
1995
2000
2005 2010
2015 2020
6
CO 5
$,
c
O 3
X
O
Figure 5-2
NOx Emissions with BEA Growth
existing Tier 1
1995
2000
2005
2010
2015 2020
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Regulatory Impact Analysis
Table 5-9
Hydrocarbon Inventories and Reductions (Short tons/year)
Calendar
Year
1995
2000
2005
2010
2015
2020
HC Emission Inventories
Under the Current Standards
Assuming
BEA Growth
397,000
337,000
300,000
301,000
311,000
317,000
Assuming
PSR Growth
397,000
361,000
364,000
419,000
506,000
619,000
HC Reductions
Due to the New Standards
Assuming
BEA Growth
(% Reduction)
0
9,000
(2.7%)
40,000
(13.3%)
108,000
(35.9%)
159,000
(51.3%)
179,000
(56.4%)
Assuming
PSR Growth
(% Reduction)
0
11,000
(3.0%)
55,000
(15.0%)
162,000
(38.7%)
271,000
(53.6%)
361,000
(58.3%)
By the year 2010, a decrease of more than 30% in hydrocarbons is projected under this
rule regardless of the growth scenario. By the year 2020, more than a 50% reduction in
hydrocarbons can be expected. Figures 5-3 and 5-4 illustrate the relationship between the
existing Tier 1 HC inventories and the HC inventories under the new standards for the PSR and
BEA growth assumptions, respectively.
Table 5-10 presents the PM inventory under the current Tier 1 standards and the emission
reductions expected from the new standards for future years in five year increments using both
the PSR and BEA growth assumptions.
98
-------
Figure 5-3
HC Emissions with PSR Growth
700
i-" 600
CO
50°
** 400
T3
c
(/) 300
D
O
20°
O
existing Tier 1
100
1995
2000
2005
2010
2015
2020
700
Figure 5-4
HC Emissions with BEA Growth
CD
CD
C
c
CD
O
600
500
400
300
200
100
existing Tier 1
1995
2000
2005
2010
2015
2020
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Regulatory Impact Analysis
Table 5-10
PM Inventories and Reductions (Short tons/year)
Calendar
Year
1995
2000
2005
2010
2015
2020
PM Emission Inventories
Under the Current Standards
Assuming
BEA Growth
283,000
271,000
279,000
295,000
308,000
315,000
Assuming
PSR Growth
283,000
294,000
341,000
410,000
497,000
604,000
PM Reductions
Due to the New Standards
Assuming
BEA Growth
(% Reduction)
0
2,000
(0.7%)
40,000
(14.3%)
100,000
(33.8%)
133,000
(43.2%)
145,000
(46.0%)
Assuming
PSR Growth
(% Reduction)
0
2,000
(0.7%)
52,000
(15.1%)
140,000
(34.1%)
210,000
(42.3%)
266,000
(44.0%)
Figures 5-5 and 5-6 illustrate the relationship between the PM inventories under the
current standards and the projected PM inventories under the final rule for the PSR and BEA
growth assumptions, respectively. In each case there is a net decrease in PM emissions from the
baseline of about 30% in the year 2010 and over 40% in 2020. As noted earlier, because of the
continued uncertainties about the degree to which the steady-state test procedure will control PM
emissions in use, especially from the many nonroad engines that frequently operate in transient
modes, EPA cannot be certain that any assessment made at this time of the expected PM
emission reductions due to the new standards will be completely accurate. The PM reductions
indicated here result from EPA's best current estimates of adjustment factors for in-use PM
emissions levels, as reflected in the NONROAD model. These factors and other assumptions in
the model are still under review, and will continue to be improved in the future as new
information becomes available.
2. Secondary nitrate particulates
The NOx reductions resulting from this rule are expected to reduce the concentrations of
secondary nitrate particulates. This is because NOx can react with ammonia in the atmosphere to
form ammonium nitrate particulates, especially when ambient sulfur levels are relatively low.
EPA contracted with Systems Applications International (SAI) to investigate the formation of
secondary nitrate particulates in the United States.3 SAI used a combination of ambient
concentration data and computer modeling that simulates atmospheric conditions to estimate the
100
-------
Figure 5-5
Direct PM Emissions with PSR Growth
CO
CD
>>
~to
c
o
CO
CO
i
b
700
600
500
400
300
200
100
existing Tier 1
FRM standards
1995
2020
2000 2005 2010 2015
Figure 5-6
Direct PM Emissions with BEA Growth
700
8 600
C 500
CO
CO
400
300
200
100
existing Tier 1
FRM standards
1995
2000 2005 2010 2015 2020
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Regulatory Impact Analysis
conversion of NOx to PM nitrate. For the purpose of modeling, the continental 48 states were
divided into nine regions, and rural areas were distinguished from urban areas. The model was
designed to perform the equilibrium calculation to estimate particulate nitrate formation for
different regions, seasons, and times of day and then was calibrated using ambient data.
Ambient data were collected from 72 ozone, 64 NOx, and 14 non-methane organic
compound (NMOC) monitoring sites for use in the oxidation calculations. Data were also
collected from 45 nitrate/NOx monitoring sites for use in the equilibrium calculations. SAI
admitted that the available data from monitoring sites in some regions were limited and stated
that more data would improve confidence in the results from these regions. In addition, the
distribution of monitoring sites between rural and urban areas does not necessarily reflect the
distribution of nonroad equipment operation. EPA has, however, reviewed the SAI report and its
associated uncertainty analysis and believes that is the best estimate of atmospheric NOx to PM
nitrate conversion rates available today.
The results from the SAI report state that the fraction of NOx converted to nitrates (g/g)
ranges from 0.01 in the northeast to 0.07 in southern California. Based on population and usage
figures for the various regions, the average fraction of NOx converted to nitrates is
approximately 0.04 based on information derived from work on EPA's highway heavy-duty
engine NPRM4. This value changes slightly from year-to-year due to the effects of ozone and
oxides of sulfur (SOx) projections on the calculations for future years. The effects of the
conversion fraction on future PM reductions is shown in Table 5-11.
Table 5-11
Estimated Secondary PM Reductions (Short tons/year)
Calendar
Year
2005
2010
2015
2020
Total NOx Emission
Reductions
BEA Growth
264,000
873,000
1,346,000
1,541,000
PSR Growth
340,000
1,211,000
2,086,000
2,756,000
Equivalent Secondary PM
Emission Reductions
BEA Growth
10,600
34,900
53,800
61,600
PSR Growth
13,600
48,400
83,400
110,200
IV. Emission Reductions Per Piece of Equipment
The following section describes the development of the NMHC + NOx emissions and PM
emission estimates on a per-machine basis. The emission reduction estimates were developed to
estimate the cost-effectiveness of the new standards on a per-machine basis, as presented in
Chapter 6. The per-machine reductions have been estimated for the six power categories for
which cost estimates were developed in Chapter 4. The estimates are made for an average piece
102
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Chapter 5: Environmental Impact
of machinery in each of the power ranges. Although the emissions vary from one nonroad
application to another, EPA is presenting the average numbers to show reductions achieved from
a typical piece of nonroad equipment. In order to estimate the emissions from a piece of nonroad
equipment, information on the emission level of the engine, the power of the engine, the load
factor of the engine, the annual hours of use of the engine, and the lifetime of the engine are
needed. The values used to predict per-machine emissions in this analysis and the methodology
for determining the values are presented below.
A. Per-Engine Emission Levels
To project the impact of the new standards, EPA must estimate the emission levels of
engines prior to the time the new standards take effect and the emission levels once the new
standards go into effect. Tables 5-12 and 5-13 contain the estimated NMHC + NOx emission
levels and PM emission levels assumed by EPA in projecting the impact of the new standards,
respectively. For the 0 to 37 kW category and the 130 to 450 kW category, where more than one
power subcategory was combined, EPA weighted the appropriate subcategory emissions levels
(contained in Tables 5-1 through 5-4) by population to determine the emission level for the
overall power category.
Table 5-12
Estimated NMHC + NOx Emission Levels, g/kW-hr (g/hp-hr)
Control Level
Pre-control
Tier 1
Tier 2
Tier 3
Power Range (kW)
0-37
12.4(9.3)
8.3 (6.2)
7.5 (5.6)
—
37-75
—
10.2 (7.6)
7.5 (5.6)
4.7(3.5)
75-130
—
9.8 (7.3)
6.6 (4.9)
4.0 (3.0)
130-450
—
9.8 (7.3)
6.6 (4.9)
4.0 (3.0)
450-560
—
9.7 (7.2)
6.4 (4.8)
4.0 (3.0)
>560
—
9.7 (7.2)
6.4 (4.8)
—
Table 5-13
Estimated PM Emission Levels, g/kW-hr (g/hp-hr)
Control Level
Pre-control
Tierl
Tier 2
TierS
Power Range (kW)
0-37
1.13(0.85)
0.81 (0.61)
0.70 (0.52)
—
37-75
—
0.96 (0.72)
0.40 (0.30)
—
75-130
—
0.54 (0.40)
0.29 (0.22)
—
130-450
—
0.54 (0.40)
0.20(0.15)
—
450-560
—
0.54 (0.40)
0.20(0.15)
—
>560
—
0.54 (0.40)
0.20(0.15)
—
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Regulatory Impact Analysis
As discussed in Chapter 4, some technology upgrades associated with this program may
have been introduced absent the changes in emission standards. Any emission reductions that
would normally have occurred with improvements in technology should not be considered in
determining the benefits and cost effectiveness of new emission standards. However, EPA
believes that as manufacturers modernize and improve the technologies used on nonroad engines,
they are faced with many choices on how to employ the new technologies to the greatest
advantage for their customers. Many times, in the absence of requirements to meet tighter
emission standards, the manufacturer will design the parameters of a new technology, or
similarly, redesign the existing engine, to minimize fuel consumption or some other desirable
trait, while not taking advantage of the emissions control capability of the new technology.
Because none of these technologies leads to inherently lower emissions, EPA has not made any
adjustments to the emission reduction or cost-effectiveness calculations to account for emission
benefits that would have occurred independent of the new standards.
B. Average Power
To estimate the average power for equipment in each power category, EPA used the
PartsLink database from Power Systems Research to estimate the population and power ratings
of nonroad diesel applications within each of the six different power categories that are expected
to be covered by the new standards. To simplify the calculations, EPA used the most common
applications within each power category that represent 90% of the category's population. For
each of the most common applications, EPA used the information on all the individual engines
within the application and determined a population-weighted average power for each power
category. For those equipment applications where a certain fraction of the equipment is not
expected to be categorized as a mobile source nonroad application (and therefore not subject to
the nonroad engine standards), such as generator sets or pumps, EPA excluded the estimated
fraction of engines from the average power calculations. Table 5-14 presents the resulting
population-weighted average power for the different power categories.
Table 5-14
Average Power
Power
Range (kW)
0-37
37-75
75-130
130-450
450-560
>560
Average Power,
kW (hp)
20.5 (27.5)
51.2(68.7)
96.0 (128.8)
172.0 (230.6)
476.7 (639.3)
596.8 (800.3)
104
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Chapter 5: Environmental Impact
C. Average Load Factor
To estimate the average load factor for a typical piece of equipment, EPA again used the
PartsLink database from Power Systems Research to estimate the population and load factor of
nonroad diesel applications within each of the six different power ranges that are expected to be
covered by the new standards. As noted earlier, to simplify the calculations, EPA used the most
common applications within each power range that represent 90% of the category's population.
For each of the most common applications, EPA used the application-specific load factor and
determined a population-weighted average load factor for each power range. As noted above, for
those equipment applications where a certain fraction of the equipment is not expected to be
categorized as a mobile source nonroad application (and therefore not subject to the nonroad
engine standards), such as certain generator sets or pumps that are not moved for more than a
year, EPA excluded the estimated fraction of engines from the average load factor calculations.
Table 5-15 presents the resulting population-weighted average load factors for the different
power ranges.
Table 5-15
Average Load Factor
Power
Range (kW)
0-37
37-75
75-130
130-450
450-560
>560
Average Load
Factor
0.57
0.55
0.63
0.65
0.67
0.63
D. Average Annual Hours
To estimate the average annual hours for a typical piece of equipment, EPA again used
the PartsLink database from Power Systems Research to estimate the population and annual
hours of usage for nonroad diesel applications within each of the six different power ranges that
are expected to be covered by the new standards. As noted earlier, to simplify the calculations,
EPA used the most common applications within each power range that represented 90% of the
categories population. For each of the most common applications, EPA used the application-
specific annual hours of operation and determined a population-weighted average annual hours of
operation for each power range. Again, for those equipment applications where a certain fraction
of the equipment is not expected to be categorized as a mobile source nonroad application (and
therefore not subject to the nonroad engine standards), such as generator sets or pumps, EPA
excluded the estimated fraction of engines from the average annual hours calculations. Table 5-
105
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Regulatory Impact Analysis
16 presents the resulting population-weighted average annual hours of operation for the different
power ranges.
Table 5-16
Average Annual Hours of Operation
Power
Range (kW)
0-37
37-75
75-130
130-450
450-560
>560
Average
Annual Hours
695
815
622
576
1073
1056
E. Projected Annual Emissions Levels and Emission Reductions
Using the information presented in Tables 5-12 through 5-16 and the equation used for
calculating emissions from nonroad equipment, EPA calculated the annual NMHC + NOx
emissions and annual PM emissions expected from typical nonroad diesel equipment from
current engines certified at the existing Tier 1 standards (or pre-control levels for engines <37
kW) and engines designed to meet the new standards. Tables 5-17 and 5-18 contain the annual
NMHC + NOx emissions estimates and annual PM emissions estimates, respectively.
Table 5-17
Annual NMHC + NOx Emissions, short tons
Control
Level
Pre-control
Tier 1
Tier 2
Tier3
Power Range (kW)
0-37
0.11
0.08
0.07
—
37-75
—
0.26
0.19
0.12
75-130
—
0.41
0.28
0.17
130-450
—
0.70
0.47
0.29
450-560
—
3.71
2.50
1.56
>560
—
4.38
2.97
—
106
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Chapter 5: Environmental Impact
Table 5-18
Annual PM Emissions, short tons
Control
Level
Pre-control
Tier 1
Tier 2
Power Range (kW)
0-37
0.01
0.01
0.01
37-75
—
0.03
0.01
75-130
—
0.02
0.01
130-450
—
0.04
0.01
450-560
—
0.32
0.12
>560
—
0.43
0.16
Table 5-19 and Table 5-20 contain the annual NMHC + NOx emission reductions and
annual PM emission reductions resulting from the new standards, respectively.
Table 5-19
Annual NMHC + NOx Emission Reductions, short tons
Control
Increment
Pre-control
to Tier 1
Tier 1 to
Tier 2
Tier 2 to
Tier3
Power Range (kW)
0-37
0.038
0.007
—
37-75
—
0.070
0.073
75-130
—
0.133
0.108
130-450
—
0.228
0.183
450-560
—
1.214
0.934
>560
—
1.411
—
Table 5-20
Annual PM Emission Reductions, short tons
Control
Increment
Pre-control
to Tier 1
Tier 1 to
Tier 2
Power Range (kW)
0-37
0.003
0.001
37-75
—
0.017
75-130
—
0.010
130-450
—
0.023
450-560
—
0.197
>560
—
0.267
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Regulatory Impact Analysis
F. Average Lifetime
To calculate the emission reductions that will occur over the lifetime of nonroad
equipment due to the new standards, it is necessary to know the lifetime of nonroad equipment.
The equation that is used to calculate average lifetime of nonroad equipment relies on the annual
hours of use, the load factor of the equipment, and the estimated engine life at full load for
nonroad equipment. Using average load factor and average annual hours of use information
contained in Tables 5-15 and 5-16, respectively, and information on the engine life at full load
information5, the average lifetime of nonroad equipment was calculated by power range and is
presented in Table 5-21. The average lifetime for the different types of lawn and garden
equipment is not calculated in the same manner. Each lawn and garden application has an
average lifetime associated with it. For nonroad equipment under 37 kW, where diesel lawn and
garden applications exist, the average lifetime results presented in Table 5-21 are a population-
weighted value of the lawn and garden application results and the results of the remaining
applications (other than lawn and garden equipment).
Table 5-21
Average Lifetime (years)
Power
Range (kW)
0-37
37-75
75-130
130-450
450-560
>560
Average
Lifetime
6.2
9.0
10.2
10.7
8.4
9.0
G. Lifetime Emission Reductions
The lifetime emission reductions due to the new standards were calculated based on the
annual emission reductions contained in Table 5-19 and Table 5-20 and the average lifetimes
contained in Table 5-21. Table 5-22 and Table 5-23 contain the lifetime NMHC + NOx emission
reductions and PM emission reductions, respectively, on a nondiscounted basis. Table 5-24 and
Table 5-25 contain the lifetime NMHC + NOx emission reductions and PM emission reductions,
respectively on a discounted basis, assuming a 7% discount rate.
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Chapter 5: Environmental Impact
Table 5-22
Nondiscounted Lifetime NMHC + NOx Emission Reductions, short tons
Control
Increment
Pre-control
to Tier 1
Tier 1 to
Tier 2
Tier 2 to
Tier3
Power Range (kW)
0-37
0.23
0.05
—
37-75
—
0.63
0.65
75-130
—
1.36
1.10
130-450
—
2.44
1.95
450-560
—
10.14
7.80
>560
—
12.69
—
Table 5-23
Nondiscounted Lifetime PM Emission Reductions, short tons
Control
Increment
Pre-control
to Tier 1
Tier 1 to
Tier 2
Power Range (kW)
0-37
0.017
0.006
37-75
—
0.150
75-130
—
0.105
130-450
—
0.246
450-560
—
1.648
>560
—
2.406
Table 5-24
Discounted Lifetime NMHC + NOx Emission Reductions, short tons
Control
Increment
Pre-control
to Tier 1
Tier 1 to
Tier 2
Tier 2 to
Tier3
Power Range (kW
0-37
0.20
0.04
37-75
0.49
0.51
75-130
1.02
0.82
130-450
1.82
1.46
450-560
7.68
5.91
>560
9.83
109
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Regulatory Impact Analysis
Table 5-25
Discounted Lifetime PM Emission Reductions, short tons
Control
Increment
Pre-control
to Tier 1
Tier 1 to
Tier 2
Power Range (kW)
0-37
0.014
0.005
37-75
—
0.116
75-130
—
0.079
130-450
—
0.184
450-560
—
1.248
>560
—
1.865
V. Conclusions
The amount of emission reductions that will be achieved with the implementation of the
new standards is quite substantial. The chief pollutant, NOx, is expected to see emission
reductions beyond 30% below the levels expected under the current Tier 1 standards (that are just
now being implemented) by the year 2010. The NOx reductions due to the new standards will
increase to over 50% in the year 2020. Under the new standards, HC and PM are expected to
show reductions of about 55% and 45%, respectively, by the year 2020. Additional reductions in
PM can be expected, due to the effect of NOx reductions on the formation of secondary nitrate
particulates, amounting to approximately 110,000 tons/year nationwide by the year 2020
(assuming PSR growth rates).
A review of the emission levels in Figures 5-1 to 5-6 show that while the Tier 1 program
achieves some initial reductions in NOx, the rate of growth of the industry soon leads to net
increases in the inventories of all pollutants. With the new standards, however, the projected
levels of inventories continue to decrease well into the 21st century.
110
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Chapter 5: Environmental Impact
Chapter 5 References
1. Power Systems Research, PartsLink Database, 1996.
2. "Results of the Emissions Modeling in Support of the Nonroad Diesel Engine FRM," EPA
memorandum from Phil Carlson to Public Docket A-96-40, August 20, 1998.
3. "Benefits of Mobile Source NOx Related Particulate Matter Reductions," Systems
Applications International, EPA Contract No. 68-C5-0010, WAN 1-8, October 1996.
4. 61 FR 33421 "Control of Emissions of Air Pollution from Highway Heavy-duty Engines",
June 27, 1996.
5. Table 4 of "Nonroad CI Modeling Methodology and Request for Comment", EPA
memorandum from Peter Caffrey to Public Docket A-96-40, July 1997.
Ill
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Regulatory Impact Analysis
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Chapter 6: Cost-Effectiveness
CHAPTER 6: COST-EFFECTIVENESS
This chapter assesses the cost-effectiveness of the new NMHC + NOx emission standards
for nonroad diesel engines. This analysis relies in part on cost information from Chapter 4 and
emissions information from Chapter 5 to estimate the cost-effectiveness of the standards in terms
of dollars per ton of total NMHC + NOx emission reductions. This chapter also examines the
cost-effectiveness of the PM standards. Finally, the chapter compares the cost-effectiveness of
the new provisions with the cost-effectiveness of other NOx and PM control strategies from
previous EPA rules.
The analysis presented in this chapter is performed for nonroad diesel equipment broken
down into the same power categories as presented in Chapter 4. The analysis is performed on a
per-machine basis and examines total costs and total NMHC + NOx emission reductions over the
typical lifetime of an average piece of nonroad equipment in each power category, discounted at
a rate of seven percent to the beginning of the equipment's life. An estimate of the fleet-wide
cost-effectiveness of the new standards, combining all of the power categories, is also presented.
EPA has analyzed the cost-effectiveness of each new standard incremental to the previously
applicable standard (i.e., Tier 2 standards incremental to Tier 1, Tier 3 standards incremental to
Tier 2, and for engines rated under 37 kW, Tier 1 standards incremental to uncontrolled emission
levels).
The cost-effectiveness is analyzed on a nationwide basis. In the recent rulemaking for
highway heavy-duty diesel engines, EPA also presented a regional ozone control cost-
effectiveness analysis in which the total life-cycle cost was divided by the discounted lifetime
NMHC + NOx emission benefits adjusted for the fraction of emissions that occur in the regions
expected to impact ozone levels in ozone nonattainment areas. (Air quality modeling indicates
that these regions include all of the states that border on the Mississippi River, all of the states
east of the Mississippi River, Texas, California, and any remaining ozone nonattainment areas
west of the Mississippi River not already included.) The results of that analysis show that the
regional cost-effectiveness values were 13 percent higher than the nationwide cost-effectiveness
values. Because of the small difference between the two results, EPA is presenting only
nationwide cost-effectiveness results for this analysis.
In addition to the primary benefit of reducing ozone within and transported into urban
ozone nonattainment areas, the NOx reductions expected from the new nonroad diesel engine
standards will have secondary benefits as well. These secondary benefits include impacts with
respect to human mortality, human morbidity, agricultural yields, visibility, soiling (due to
secondary paniculate), and ecosystems (e.g., through the reduced effects of acid deposition and
eutrophication). To estimate the monetary value of these secondary benefits to society, ICF
Incorporated prepared a study in support of the recent highway heavy-duty engine rulemaking
summarizing the results of a variety of studies that examined the value of ozone control on the
secondary benefits highlighted above.1 Table 6-1 contains a summary of the results of the ICF
113
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Regulatory Impact Analysis
report. The total value of all the secondary benefits was estimated to be $878 per ton of NOx
reduction. The cost-effectiveness analysis presented in this chapter does not assign any value to
these secondary benefits. They are presented in this chapter for informational purposes only.
Table 6-1
Summary of Estimated Monetized Benefits per Ton
Benefit Category
Human Mortality
Human Morbidity
Agricultural Yields
Soiling
Ecosystems
Visibility
Point Estimate of Benefits
per Ton of NOx Reduction
$312
$10
$287
$17
$16
$236
I.
Cost-Effectiveness of the New Emission Standards
A. NMHC + NOx
The following section describes the cost-effectiveness of the new NMHC + NOx
standards for the various power categories of nonroad equipment. As discussed in Chapter 4, the
estimated cost of complying with the standards varies depending on the model year under
consideration. The following section presents the per-machine cost-effectiveness results for the
different model years during which the costs are expected to change. In calculating the cost-
effectiveness numbers, the full lifecycle costs (both with and without the expected changes in
operating costs included) were divided by the combined NOx and NMHC lifetime emission
reductions as presented in Chapter 5.
The following section also presents the fleet-wide cost-effectiveness for the new engine
standards. These fleet-wide cost-effectiveness numbers are calculated by weighting the various
power category costs and emission reductions by the population estimates for nonroad equipment
affected by the new standards in each power category. The populations for the different power
categories of nonroad equipment were determined from the PSR PartsLink database. Table 6-2
contains the 1995 nonroad diesel equipment populations used in the fleet-wide analysis. (The
populations listed in Table 6-2 exclude those nonroad applications which are expected to not
meet EPA's definition of a mobile source nonroad engine such as generator sets that are not
moved from a specific location in a given year.)
114
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Chapter 6: Cost-Effectiveness
Table 6-2
1995 Nonroad Diesel Equipment
Populations by Power Category
Power Category
0-37 kW
37-75 kW
75-130 kW
130-450 kW
450-560 kW
>560 kW
1995 Population
2,555,000
2,080,000
1,410,000
1,124,000
11,000
19,000
A copy of the spreadsheets prepared for this cost-effectiveness analysis has been placed in
the public docket for the final rulemaking.2 The reader is directed to the spreadsheets for a
complete version of the cost-effectiveness calculations.
Tables 6-3 through 6-8 contain the discounted cost-effectiveness values for the individual
power categories of nonroad equipment based on the total net present value costs (excluding
operating costs) as presented in Chapter 4 and the lifetime NMHC + NOx emission reductions as
presented in Chapter 5. Table 6-9 contains the fleet-wide, discounted cost-effectiveness of the
Tier 2 NMHC + NOx emission standards and the Tier 3 NMHC + NOx emission standards
(without factoring in the effects of operating costs).
115
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Regulatory Impact Analysis
Table 6-3
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 0-37 kW Engines (Excluding operating costs)
Level of
Standard
Tier 1
Tier 2
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Engine and
Equipment
Costs
$59
$57
$80
$71
$35
$29
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
0.20
0.04
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$300
$290
$2,090
$1,850
$910
$770
Table 6-4
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 37-75 kW Engines (Excluding operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Engine and
Equipment
Costs
$249
$226
$282
$244
$160
$122
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
0.49
0.51
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$510
$460
$560
$480
$320
$240
116
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Chapter 6: Cost-Effectiveness
Table 6-5
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 75-130 kW Engines (Excluding o
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Engine and
Equipment
Costs
$867
$784
$658
$564
$442
$301
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
1.02
0.82
)erating costs)
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$850
$770
$800
$690
$540
$370
Table 6-6
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 130-450 kW Engines (Excluding operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Engine and
Equipment
Costs
$804
$719
$872
$734
$545
$440
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
1.82
1.46
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$440
$400
$600
$510
$380
$300
117
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Regulatory Impact Analysis
Table 6-7
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 450-560 kW Engines (Excluding operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Engine and
Equipment
Costs
$2,670
$2,523
$2,296
$2,127
$1,991
$543
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
7.68
5.91
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$350
$330
$390
$360
$340
$90
Table 6-8
Discounted Cost-effectiveness of the
NMHC + NOx Standards for Greater than 560 kW Engines (Excluding operating costs)
Level of
Standard
Tier 2
Model Year
Grouping
I to 2
3 to 5
6 to 10
11+
Discounted,
Engine and
Equipment
Costs
$1,087
$1,053
$1,025
$109
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
9.83
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$110
$110
$100
$10
118
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Chapter 6: Cost-Effectiveness
Table 6-9
Discounted Fleet-wide Cost-effectiveness of the NMHC + NOx Standards
(Excluding operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
Ito2
3 to 5
Ito2
3 to 5
6 to 10
11+
Discounted
Cost-effectiveness
($/ton)
$600
$540
$650
$550
$410
$300
Tables 6-10 through 6-15 contain the discounted cost-effectiveness values for the
individual power categories of nonroad equipment based on the total net present value costs
(including operating costs) as presented in Chapter 4 and the lifetime NMHC + NOx emission
reductions as presented in Chapter 5. For those categories of engines where the operating cost is
expected to offset the increased engine and equipment costs (due to improved fuel economy), the
overall cost and cost-effectiveness is shown as zero in the tables. Table 6-16 contains the fleet-
wide, discounted cost-effectiveness of the Tier 2 NMHC + NOx emission standards and the Tier
3 NMHC + NOx emission standards (factoring in the effects of operating costs).
119
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Regulatory Impact Analysis
Table 6-10
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 0-37 kW Engines (Including operating costs)
Level of
Standard
Tier 1
Tier 2
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Lifetime Costs
$103
$101
$125
$115
$79
$74
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
0.20
0.04
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$520
$510
$3,240
$3,000
$2,060
$1,920
Table 6-11
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 37-75 kW Engines (Including operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Lifetime Costs
$308
$285
$379
$340
$256
$219
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
0.49
0.51
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$630
$580
$750
$670
$510
$430
120
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Chapter 6: Cost-Effectiveness
Table 6-12
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 75-130 kW Engines (Including operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Lifetime Costs
$719
$638
$7
$0
$0
$0
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
1.02
0.82
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$710
$630
$10
$0
$0
$0
Table 6-13
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 130-450 kW Engines (Including operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Lifetime Costs
$542
$456
$46
$0
$0
$0
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
1.82
1.46
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$300
$250
$30
$0
$0
$0
121
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Regulatory Impact Analysis
Table 6-14
Discounted Cost-effectiveness of the
NMHC + NOx Standards for 450-560 kW Engines (Including operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
I to 2
3 to 5
I to 2
3 to 5
6 to 10
11+
Discounted,
Lifetime Costs
$1,323
$1,176
$1,085
$915
$779
$0
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
7.68
5.91
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$170
$150
$180
$160
$130
$0
Table 6-15
Discounted Cost-effectiveness of the
NMHC + NOx Standards for Greater than 560 kW Engines (Including operating costs)
Level of
Standard
Tier 2
Model Year
Grouping
I to 2
3 to 5
6 to 10
11+
Discounted,
Lifetime Costs
$1,087
$1,053
$1,025
$109
Discounted,
Lifetime
NMHC + NOx
Reductions (tons)
9.83
Discounted,
Per-machine
Cost-effectiveness
($/ton)
$110
$110
$100
$10
122
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Chapter 6: Cost-Effectiveness
Table 6-16
Discounted Fleet-wide Cost-effectiveness of the NMHC + NOx Standards
(Including operating costs)
Level of
Standard
Tier 2
Tier3
Model Year
Grouping
Ito2
3 to 5
Ito2
3 to 5
6 to 10
11+
Discounted
Cost-effectiveness
($/ton)
$540
$480
$220
$130
$0
$0
B. PM
EPA has also estimated the cost-effectiveness of the PM emission standards for nonroad
diesel engines. The per-machine PM emission reduction estimates were developed in Chapter 5.
For costs, EPA assumed half of the increased engine and equipment costs projected in Chapter 4
were allocated for PM control, and excluded operating costs. EPA believes this is a conservative
assumption given the stringency of the NMHC + NOx standards and results in an upper end
estimate of the cost-effectiveness for PM control. Table 6-17 contains the resulting fleet-wide
cost-effectiveness of the PM standards. For this estimate, the Tier 1 standards for engines rated
under 37 kW were combined with the Tier 2 standards for all power categories.
Table 6-17
Discounted Fleet-wide Cost-effectiveness of the PM Standards
Level of
Standard
Tier 1 and
Tier 2
combined
Model Year
Grouping
1 to 2
3 to 5
6 to 10
11+
Discounted
Cost-effectiveness
($/ton)
$2,320
$2,100
$1,680
$700
123
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Regulatory Impact Analysis
II. Comparison with Cost-Effectiveness of Other Control Programs
In an effort to evaluate the cost-effectiveness of the new standards, EPA has summarized
the cost-effectiveness results for three other recent EPA mobile source rulemakings that required
reductions in NOx emissions, the primary focus of the new standards. Table 6-18 summarizes
the cost-effectiveness results from the heavy-duty vehicle portion of the Clean Fuel Fleet Vehicle
Program, Phase n of the Reformulated Gasoline Program and the most recent NMHC + NOx
engine standards for highway heavy-duty diesel engines.
Table 6-18
Summary of Cost-Effectiveness Results for Recent EPA NOx Control Programs
EPA Rule
Clean Fuel Fleet Vehicle Program
(Heavy-duty)
Reformulated Gasoline - Phase II
2.5 g/hp-hr NMHC + NOx
Standard for Highway Heavy-Duty
Engines
Locomotive Engine Standards
Pollutants Considered
in Calculations
NOx
NOx
NMHC + NOx
NOx
Cost-Effectiveness
($/ton)
$1,300 -$1,500
$5,000
$100-$600
$160 - $250
A comparison of the cost-effectiveness numbers in Table 6-18 with the cost-effectiveness
results presented throughout this chapter for nonroad diesel engines shows that the cost-
effectiveness of the new NMHC + NOx standards are more favorable than the cost-effectiveness
of both the clean fuel fleet vehicle program and reformulated gasoline. The cost-effectiveness
results of the new NMHC + NOx standards for nonroad diesel engines are comparable to the
cost-effectiveness of the most recent highway heavy-duty NMHC + NOx standards and slightly
less favorable than the locomotive engine NOx standards.
For comparison purposes, EPA has also summarized the cost-effectiveness results for two
other recent EPA mobile source rulemakings that required reductions in PM emissions.
Table 6-19 summarizes the cost-effectiveness results for the most recent urban bus engine PM
standard and the urban bus retrofit/rebuild program. The PM cost-effectiveness results presented
earlier in Table 6-17 are more favorable than either of the urban bus programs.
124
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Chapter 6: Cost-Effectiveness
Table 6-19
Summary of Cost-Effectiveness Results
for Recent EPA Diesel PM Control Programs
EPA Rule
0.05 g/hp-hr Urban Bus
PM Standard
Urban Bus Retrofit/Rebuild
Program
Cost-Effectiveness
($/ton)
$10,000 -$16,000
$25,500
125
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Regulatory Impact Analysis
Chapter 6 References
1."Benefits of Reducing Mobile Source NOx Emissions," prepared by ICF Incorporated for
Office of Mobile Sources, U.S. EPA, Draft Final, September 30, 1996.
2. "Cost Effectiveness and 20-Year Cost/Benefit Analysis of the New Nonroad Diesel Engine
Standards," EPA memorandum from Phil Carlson to Docket A-96-40, July 22, 1998.
126
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Chapter 6: Cost-Effectiveness
127
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Appendix
Appendix to the Regulatory Impact Analysis
Table A-l contains the year-by-year fleetwide costs and emission benefits associated with
the new diesel nonroad engine standards for the 20-year period from 1999 to 2018. The
fleetwide costs presented in Table A-l do not include the impact of the new standards on
operating costs, which in many cases are projected to lead to decreased costs. (The numbers
presented in Table A-l are not discounted.)
Table A-l
Costs and Emission Benefits of the New Diesel Nonroad Engine Standards
Calendar Year
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Fleetwide Costs
$4,800,000
$13,100,000
$46,200,000
$54,600,000
$172,100,000
$247,300,000
$257,100,000
$393,400,000
$469,800,000
$524,400,000
$519,000,000
$548,400,000
$522,700,000
$527,200,000
$422,000,000
$398,000,000
$413,100,000
$392,800,000
$387,700,000
$388,000,000
Fleetwide Reductions (short tons)
NOx
5,300
16,300
36,600
60,300
140,100
240,000
339,600
514,000
688,300
862,700
1,037,100
1,211,400
1,386,300
1,561,300
1,736,200
1,911,100
2,086,000
2,220,000
2,353,900
2,487,800
HC
4,400
10,900
17,700
24,500
31,300
38,100
54,800
76,300
97,700
119,200
140,700
162,100
183,900
205,700
227,500
249,300
271,100
289,000
306,900
324,800
PM
800
2,100
5,000
8,500
18,400
34,900
51,500
69,200
86,900
104,600
122,300
140,000
154,100
168,100
182,200
196,200
210,300
221,400
232,400
243,500
A-l
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Regulatory Impact Analysis
Table A-2 contains the discounted year-by-year fleetwide costs and emission benefits
associated with the new diesel nonroad engine standards for the 20-year period from 1999 to
2018. The year-by-year results were discounted to 1999 and a discount rate of seven percent was
assumed for the analysis. Again, the discounted fleetwide costs presented in Table A-2 do not
include the impact of the new standards on operating costs, which in many cases are expected to
decrease.
Table A-2
Discounted Costs and Emission Benefits of the New Diesel Nonroad Engine Standards
Calendar Year
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Discounted
Fleetwide Costs
$4,800,000
$12,200,000
$40,400,000
$44,500,000
$131,300,000
$176,300,000
$171,300,000
$245,000,000
$273,400,000
$285,200,000
$263,900,000
$260,600,000
$232,100,000
$218,800,000
$163,700,000
$144,200,000
$139,900,000
$124,300,000
$114,700,000
$107,300,000
Discounted Fleetwide Reductions
(short tons)
NOx
5,300
15,200
32,000
49,200
106,900
171,100
226,300
320,100
400,600
469,300
527,200
575,500
615,500
647,900
673,300
692,700
706,600
702,800
696,400
687,900
HC
4,400
10,200
15,500
20,000
23,900
27,200
36,500
47,500
56,900
64,800
71,500
77,000
81,700
85,400
88,200
90,400
91,800
91,500
90,800
89,800
PM
800
2,000
4,400
6,900
14,000
24,900
34,300
43,100
50,600
56,900
62,200
66,500
68,400
69,800
70,600
71,100
71,200
70,100
68,800
67,300
Summing the discounted annual costs and discounted emission reductions over the
twenty-year period yields a 20-year fleetwide cost of $3.2 billion and 20-year emission reductions
of 8.3 million tons of NOx, 1.2 million tons of HC, and 0.9 million tons of PM. The resulting
A-2
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Appendix
20-year annualized fleetwide costs and emission reductions are $298 million per year and
786,000 tons per year of NOx, 110,000 tons per year of HC, and 87,000 tons per year of PM. A
copy of the spreadsheet prepared for this 20-year cost and benefit analysis has been placed in the
public docket for the final rulemaking. The reader is directed to the spreadsheets for a complete
version of the analysis.
Sensitivity Analysis #1: Impact of Non-Emissions Cost Assumptions
As described in Chapter 4, EPA's cost and cost-effectiveness analyses are based on the
assumption that half of the cost of certain technologies expected to be used to meet the new
standards can be attributed to benefits unrelated to emissions control. In other words, EPA
believes that manufacturers may have used those technologies on nonroad engines regardless of
whether EPA set new standards. In order to analyze the sensitivity of the cost analysis to this
assumption, EPA estimated the per-equipment costs by attributing the full cost of these
technologies to the new emission standards.1 EPA then estimated the effect of these increased
costs on the 20-year costs to society. Table A-3 contains the year-by-year fleetwide costs
associated with these increased cost estimates for the 20-year period from 1999 to 2018. By
assuming all of the cost of technology is attributed to emissions, the 20-year fleetwide discounted
cost is estimated to be $4.4 billion, approximately $1.2 billion higher than the base case results
presented earlier in this appendix. The resulting 20-year annualized fleetwide costs are $411
million per year, approximately $115 million higher than the base case results presented earlier in
this appendix. Table A-4 presents the cost-effectiveness of the standards using the costs
developed for this sensitivity analysis.
A-3
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Regulatory Impact Analysis
Table A-3
Fleetwide Costs Assuming Full Cost is Attributed to Emissions Control
(Sensitivity Analysis #1)
Calendar Year
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Undiscounted
Fleetwide Costs
$5,500,000
$14,800,000
$62,600,000
$74,100,000
$243,300,000
$349,100,000
$361,500,000
$519,600,000
$614,700,000
$705,600,000
$696,700,000
$726,600,000
$706,600,000
$714,400,000
$595,500,000
$578,700,000
$601,400,000
$583,900,000
$586,800,000
$595,500,000
Discounted
Fleetwide Costs
$5,500,000
$13,800,000
$54,700,000
$60,500,000
$185,600,000
$248,900,000
$240,900,000
$323,600,000
$357,700,000
$383,800,000
$354,200,000
$345,200,000
$313,800,000
$296,500,000
$230,900,000
$209,800,000
$203,700,000
$184,900,000
$173,600,000
$164,700,000
A-4
-------
Appendix
Table A-4
Cost-effectiveness of the NMHC + NOx Standards
Assuming Full Cost is Attributed to Emissions Control
(Sensitivity Analysis #1)
Standard
Tier 1
Tier 2
Tier 3
Power
(kW)
0-37
0-37
37-75
75-130
130-450
450-560
>560
37-75
75-130
130-450
450-560
Year of
Production
1
1
6
1
1
1
1
1
6
1
6
1
6
1
6
1
6
Discounted
Engine and
Equipment
Cost
$66
$135
$56
$329
$1,255
$1,171
$3,283
$1,715
$1,608
$483
$264
$811
$532
$1,027
$632
$2,618
$2,298
Discounted
Lifetime
NMHC+NOx
Reductions
0.20 tons
0.04 tons
0.49 tons
1.02 tons
1.82 tons
7.68 tons
9.83 tons
0.51 tons
0.82 tons
1.46 tons
5.91 tons
Discounted
Lifetime Cost-
effectiveness
$560/ton
$3,510/ton
$l,470/ton
$670/ton
$l,230/ton
$640/ton
$430/ton
$170/ton
$160/ton
$950/ton
$520/ton
$990/ton
$650/ton
$710/ton
$430/ton
$440/ton
$390/ton
Sensitivity Analysis #2: Impact of Global Sales Cost Distribution Assumption
As described in Chapter 4, EPA's cost and cost-effectiveness analyses are based on the
assumption that manufacturers would spread their fixed costs over their world production of
nonroad engines, based on a scenario of manufacturers offering a single low-emitting engine into
a market with harmonized emission standards. Because there are regions of the world that are
not likely to adopt the EPA standards, EPA has estimated the per-equipment costs based on the
assumption that fixed costs could be distributed over only half of engines sold into other
countries.1 EPA then estimated the effect of these revised costs on the 20-year costs to society.
By distributing costs over fewer engines, year by year cost estimates increase compared to the
base case results presented earlier in this appendix. The 20-year fleetwide discounted cost is
A-5
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Regulatory Impact Analysis
estimated to be $3.6 billion, approximately $0.4 billion higher than the base case results. The
resulting 20-year annualized fleetwide costs are $339 million per year, approximately $40 million
higher than the base case results presented earlier in this appendix.
A-6
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Appendix
Appendix References
1. "Sensitivity Tests of Nonroad Diesel Cost Estimates," EPA memo from Alan Stout to Docket
A-96-40, August 27, 1998.
A-7
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