Non-Conformance Penalties for
Heavy-Duty Diesel Engines Subject
to the 2010 NOx Emission Standard
The U.S. Environmental Protection Agency (EPA) is adopting an
Interim Final Rulemaking on nonconformance penalties (NCP)
for heavy heavy-duty diesel engines while also issuing a Notice of
Proposed Rulemaking (NPRM) on nonconformance penalties for both
medium and heavy heavy-duty diesel engines that could be used by
manufacturers of heavy-duty diesel engines unable to meet the 2010
model year oxides of nitrogen (NOx) emission standard. These penalties
allow a manufacturer to produce and sell nonconforming engines upon
payment of a penalty. The penalty, which is assessed on a per-engine
basis, varies with the certified emission level for the engine family
involved.
What are Non-conformance Penalties?
Non'Conformance penalties (NCPs) are monetary penalties that allow a vehicle or
engine manufacturer to sell engines that do not meet the emission standards. Under
a penalty structure previously established by regulation, manufacturers unable to
comply with the applicable standard may choose to pay a penalty, which is assessed
on a per-engine basis.
The Clean Air Act outlines the key requirements of an NCP program. The Act
requires that:
• The penalties increase with the degree of non-compliance with the emission
standard and that the penalties increase over time,
• Emissions under an NCP program may not go above an upper limit established
by regulation,
• The NCPs remove any competitive disadvantage that might otherwise accrue
to a manufacturer that is complying with the standards.
SEPA
United States
Environmental Protection
Agency
Office of Transportation and Air Quality
EPA-420-F-12-001
January 2012
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Which Engines and Vehicles Would be Covered?
EPA is establishing NCPs for the 2010 NOx standard for highway heavy-duty diesel engines.
This standard is 0.20 grams per brake-horsepower-hour (g/hp-hr) of NOx. The non-conformance
penalties will be available immediately for 2012 and 2013 model year heavy heavy-duty highway
diesel engines on an interim basis. We are also taking comment on making them available more
permanently and on making them available for 2012 and later medium heavy-duty highway
diesel engines.
Why is EPA Establishing these Penalties?
NCPs provide flexibility that fosters long-term improvement in emissions without driving
manufacturers out of the market. As with past NCP rules, this interim final rule and proposed
rule were developed with the assistance of cost information provided by the manufacturers of
heavy-duty diesel engines in order to develop the penalty rates,
NCPs are authorized for heavy-duty engines under section 206(g) of the Clean Air Act. A 1985
rulemaking established three basic criteria for determining the eligibility of emission standards
for NCPs in any given model year. First, the emission standard in question must become more
difficult to meet. Second, substantial work must be required in order to meet the emission
standard. Third, a technological laggard must be likely to develop. A technological laggard is
considered to be a manufacturer who cannot meet a particular emission standard due to techno-
logical (not economic) difficulties and who, in the absence of NCPs, might be forced from the
marketplace. One manufacturer is currently using NOx credits to certify all of its heavy heavy-
duty diesel engines near 0.50 g/hp-hr. Based on its current credit balance and projected sales for
this service class, we do not expect this manufacturer to have sufficient credits to cover its entire
model year 2012 production. These three criteria have been satisfied with respect to the NOx
standard that applies to 2010 and later model year heavy-duty diesel engines. Therefore, it is
appropriate at this time to establish NCPs for this emission standard.
What are the Penalty Levels?
The actual penalties that a manufacturer would pay for each non-complying engine are determined
by formulas that already exist in the federal regulations. Both the Interim Final Rule and the
NPRM specify certain parameters that, when plugged into the formulas along with the emissions
of the engine and the incorporation of other factors, would determine the amount a manufacturer
must pay. Key parameters that determine the NCP a manufacturer must pay are EPA's estimated
average cost of compliance, EPA's estimated cost of compliance for a near worst-case engine, and
the degree to which the engine exceeds the emission standard (as measured from production
engines). Engine emissions may not exceed an upper limit designated in the regulations. The
upper limit in both the Interim Final and Notice of Proposed Rulemaking is 0.50 g/hp-hr. The
figure below provides the calculated penalties for emission rates between 0.20 and 0.50 g/hp-hr
NOx for 2012 model year heavy heavy-duty engines under the interim final rule and proposed in
the NPRM.
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2012 Heavy Heavy-Duty Engine NCR
$2,000
$1,
5
a.
o
<500
$-
0,20 0,25 0,30 0.35 0.40 0,45 0,50
N Ox Emissions Level (g/hp-hr)
In addition, the figure below provides proposed level of the penalties at NOx emission rates
between 0.20 and 0.50 g/hp-hr for 2012 model year medium heavy-duty engines under the
proposed rule.
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2012 Medium Heavy-Duty Engine NCR
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0,20 0,25 0.30 0.35 0,40 0,45 0.50
NOx Emissions Level (g/hp-hr)
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Why is EPA adopting an interim final rule and proposing a rule in
parallel?
EPA is taking action as an interim final rule without prior proposal and public comment because
EPA finds for good cause to do so for heavy heavy-duty diesel engines under section 553(b)(B)
of the Administrative Procedure Act (APA), 5 U.S.C. 551 et seq. This section allows EPA to
issue a final rule without notice-and-comment where it would be impracticable, unnecessary or
contrary to the public interest. EPA has determined that there is good cause for making today's
rule final without prior proposal and opportunity for comment, but only for heavy heavy-duty
diesel engines. In reaching this determination, EPA considered several factors: (1) Taking interim
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final action avoids the possibility of an engine manufacturer being unable to certify a complete
product line of engines for model year 2012 and/or 2013; (2) the Agency is only amending limited
provisions in existing NCP regulations in 40 CFR part 86; (3) the rule's duration is limited; and
(4) there is no risk to the public interest in allowing manufacturers to certify using NCPs before
the point at which EPA could make them available through a full notice-and-comment rule-
making,
EPA is also publishing a Notice of Proposed Rulemaking (NPRM) addressing NCPs for heavy-
duty engines. Among other things, the NPRM seeks comment on NCPs for model year 2012
and later heavy heavy-duty diesel engines, as well as medium heavy-duty diesel engines. The
NCPs in the Final Rule that will follow this NPRM will likely supersede the NCPs being pro-
mulgated in the Interim Final Rule, especially for model year 2013 and later.
What are the Health and Environmental Benefits?
NCPs have a minimal environmental impact. They provide flexibility that fosters long-term
improvement in emissions without driving manufacturers out of the market. We cannot predict
how many manufacturers would make use of the NCPs, therefore the emission impact cannot be
quantified. We expect relatively few engine families to be certified under these provisions. Any
impacts should be short-term in nature, because the structure of the penalties, by increasing over
time, discourages long-term use, and because the penalty figures are high enough such that long-
term use is not a viable option for the manufacturers.
What are the Costs?
NCPs generally have minimal adverse economic impacts. Use of them is optional, and
manufacturers will likely choose whether or not to use NCPs based on their ability to comply
with emissions standards. Manufacturers that choose to make use of the NCPs will incur those
costs, which are based, in part, on the cost of complying with the emission standards. Without
NCPs, a manufacturer that has difficulty meeting the standards has only two alternatives: fix the
nonconforming engines, perhaps at a prohibitive cost, or not produce/sell them. The availability
of NCPs provides manufacturers with a third alternative, yet protecting the manufacturer that
has chosen to incur the costs of complying with the standards.
For More Information
You can access the interim final and the proposed rules and related documents on EPA's Office
of Transportation and Air Quality (OTAQ) Web site at:
www.epa.gov/otaq/hd-hwy.htm
For more information on these and related rules, please contact EPA through EPA OTAQ
Public Inquiries at:
www.epa.gov/otaq/oms-cmt.htm
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