Subpart H - Averaging, Banking, and Trading for Certification

§1054.701 General provisions.

(a) You may average, bank, and trade (ABT) emission credits for purposes of certification as described in this subpart to show compliance with the standards of this part. This applies for engines with respect to exhaust emissions and for equipment with respect to evaporative emissions. Participation in this program is voluntary.

(b) The definitions of subpart I of this part apply to this subpart. The following definitions also apply:

§1054.705 How do I generate and calculate exhaust emission credits?

The provisions of this section apply for calculating exhaust emission credits. You may generate exhaust emission credits only if you are a certifying engine manufacturer.

(a) For each participating family, calculate positive or negative emission credits relative to the otherwise applicable emission standard. Calculate positive emission credits for a family that has an FEL below the standard. Calculate negative emission credits for a family that has an FEL above the standard. Sum your positive and negative credits for the model year before rounding. Round the sum of emission credits to the nearest kilogram (kg) using consistent units throughout the following equation:

Emission credits (kg) = (STD ? FEL) × (Volume) × (Power) × (UL) × (LF) × (10^?3)

Where:

STD = the emission standard, in g/kW-hr.

FEL = the family emission limit for the family, in g/kW-hr.

Volume = the number of engines eligible to participate in the averaging, banking, and trading program within the given family during the model year, as described in § 1054.701(i).

Power = the maximum modal power of the emission-data engine as calculated from the applicable test procedure described in subpart F of this part, in kilowatts.

UL = the useful life for the given family, in hours.

LF = load factor. Use 0.47 for nonhandheld engines and 0.85 for handheld engines. We may specify a different load factor if we approve the use of special test procedures for a family under 40 CFR 1065.10(c)(2), consistent with good engineering judgment.

(b) [Reserved]

§1054.706 How do I generate and calculate evaporative emission credits?

The provisions of this section apply for calculating evaporative emission credits related to fuel tank permeation. You may generate credits only if you are a certifying equipment manufacturer. This may include engine manufacturers that make engines with complete fuel systems as described in §1054.2.

(a) For each participating family, calculate positive or negative emission credits relative to the otherwise applicable emission standard. Calculate positive emission credits for a family that has an FEL below the standard. Calculate negative emission credits for a family that has an FEL above the standard. Sum your positive and negative credits for the model year before rounding. Round the sum of emission credits to the nearest kilogram (kg) using consistent units throughout the following equation:

Emission credits (kg) = (STD?FEL) × (Total Area) × (UL) × (AF) × (365) × (10^?3)

Where:

STD = the emission standard, in g/m ²/day.

FEL = the family emission limit for the family, in g/m ²/day, as described in paragraph (b) of this section.

Total Area = The combined internal surface area of all fuel tanks in the family, taking production volume into account, in m ².

UL = 5 years, which represents the useful life for the given family.

AF= adjustment factor. Use 1.0 for testing at 28°C; use 0.60 for testing at 40°C.

(b) For calculating credits under paragraph (a) of this section, the emission standard and FEL must both be based on test measurements at the same temperature (28° or 40°C). Determine the FEL for calculating emission credits relative to testing at 28°C as described in paragraphs (b)(1) and (2) of this section. Determine the FEL for calculating emission credits relative to testing at 40°C as described in paragraph (b)(3) of this section.

(1) To use an FEL below 5.0 g/m ²/day, it must be based on emission measurements.

(2) The provisions of this paragraph (b)(2) apply for all emission families with FELs at or above 5.0 g/m ²/day. To calculate emission credits for such emission families, you must choose from one of the following options and apply it to all your emission families with FELs at or above 5.0 g/m ²/day:

(i) Option 1: Establish all your FELs based on emission measurements. This may include measurements from a certifying fuel tank manufacturer.

(ii) Option 2: Use an assigned FEL of 10.4 g/m ²/day. This would apply without regard to whether any of these emission families have measured emission levels below 10.4 g/m ²/day. If any of your fuel tanks were otherwise certified (by you or the fuel tank manufacturer) with an FEL at or above 5.0 g/m ²/day, the assigned FEL of 10.4 g/m ²/day applies only for emission credit calculations.

(3) Determine the FEL for calculating emission credits relative to testing at 40°C as described in paragraph (b)(1) and (2) of this section, but use 8.3 g/m ²/day instead of 5.0 g/m ²/day and use 17.3 g/m ²/day instead of 10.4 g/m ²/day.

§1054.710 How do I average emission credits?

(a) Averaging is the exchange of emission credits among your families. You may average emission credits only within the same averaging set.

(b) You may certify one or more families to an FEL above the emission standard, subject to the FEL caps and other provisions in subpart B of this part, if you show in your application for certification that your projected balance of all emission-credit transactions in that model year is greater than or equal to zero.

(c) If you certify a family to an FEL that exceeds the otherwise applicable standard, you must obtain enough emission credits to offset the family's deficit by the due date for the final report required in §1054.730. The emission credits used to address the deficit may come from your other families that generate emission credits in the same model year, from emission credits you have banked from previous model years, or from emission credits generated in the same or previous model years that you obtained through trading.

[86 FR 34523, Jun. 29, 2021]

§1054.715 How do I bank emission credits?

(a) Banking is the retention of emission credits by the manufacturer generating the emission credits for use in future model years for averaging or trading. You may use banked emission credits only within the averaging set in which they were generated, except as described in this subpart.

(b) You may designate any emission credits you plan to bank in the reports you submit under §1054.730 as reserved credits. During the model year and before the due date for the final report, you may designate your reserved emission credits for averaging or trading.

(c) Reserved credits become actual emission credits when you submit your final report. However, we may revoke these emission credits if we are unable to verify them after reviewing your reports or auditing your records.

[86 FR 34523, Jun. 29, 2021]

§1054.720 How do I trade emission credits?

(a) Trading is the exchange of emission credits between manufacturers. You may use traded emission credits for averaging, banking, or further trading transactions. Traded emission credits may be used only within the averaging set in which they were generated, except as described in this subpart.

(b) You may trade actual emission credits as described in this subpart. You may also trade reserved emission credits, but we may revoke these emission credits based on our review of your records or reports or those of the company with which you traded emission credits. You may trade banked credits within an averaging set to any certifying engine or equipment manufacturer.

(c) If a negative emission credit balance results from a transaction, both the buyer and seller are liable, except in cases we deem to involve fraud. See §1054.255(e) for cases involving fraud. We may void the certificates of all families participating in a trade that results in a manufacturer having a negative balance of emission credits. See §1054.745.

§1054.725 What must I include in my application for certification?

(a) You must declare in your application for certification your intent to use the provisions of this subpart for each family that will be certified using the ABT program. You must also declare the FELs you select for the family for each pollutant for which you are using the ABT program. Your FELs must comply with the specifications of subpart B of this part, including the FEL caps. FELs must be expressed to the same number of decimal places as the emission standard.

(b) Include the following in your application for certification:

(1) A statement that, to the best of your belief, you will not have a negative balance of emission credits for any averaging set when all emission credits are calculated at the end of the year.

(2) Detailed calculations of projected emission credits (positive or negative) based on projected production volumes. We may require you to include similar calculations from your other engine families to demonstrate that you will be able to avoid negative credit balances for the model year. If you project negative emission credits for a family, state the source of positive emission credits you expect to use to offset the negative emission credits.

[86 FR 34523, Jun. 29, 2021]

§1054.730 What ABT reports must I send to EPA?

(a) If any of your families are certified using the ABT provisions of this subpart, you must send an end-of-year report within 90 days after the end of the model year and a final report within 270 days after the end of the model year. We may waive the requirement to send the end-of-year report as long as you send the final report on time.

(b) Your end-of-year and final reports must include the following information for each family participating in the ABT program:

(1) Family designation and averaging set.

(2) The emission standards that would otherwise apply to the family.

(3) The FEL for each pollutant. If you change the FEL after the start of production, identify the date that you started using the new FEL and/or give the engine identification number for the first engine covered by the new FEL. In this case, identify each applicable FEL and calculate the positive or negative emission credits as specified in §1054.225.

(4) The projected and actual U.S.-directed production volumes for the model year as described in §1054.701(i). For fuel tanks, state the production volume in terms of surface area and production volume for each fuel tank configuration and state the total surface area for the emission family. If you changed an FEL during the model year, identify the actual U.S.-directed production volume associated with each FEL.

(5) The maximum modal power of the emission-data engine or the appropriate internal surface area of the fuel tank.

(6) Useful life.

(7) Calculated positive or negative emission credits for the whole family. Identify any emission credits that you traded, as described in paragraph (d)(1) of this section.

(c) Your end-of-year and final reports must include the following additional information:

(1) Show that your net balance of emission credits from all your participating families in each averaging set in the applicable model year is not negative.

(2) State whether you will retain any emission credits for banking.

(3) State that the report's contents are accurate.

(d) If you trade emission credits, you must send us a report within 90 days after the transaction, as follows:

(1) As the seller, you must include the following information in your report:

(i) The corporate names of the buyer and any brokers.

(ii) A copy of any contracts related to the trade.

(iii) The averaging set corresponding to the families that generated emission credits for the trade, including the number of emission credits from each averaging set.

(2) As the buyer, you must include the following information in your report:

(i) The corporate names of the seller and any brokers.

(ii) A copy of any contracts related to the trade.

(iii) How you intend to use the emission credits, including the number of emission credits you intend to apply for each averaging set.

(e) Send your reports electronically to the Designated Compliance Officer using an approved information format. If you want to use a different format, send us a written request with justification for a waiver.

(f) Correct errors in your end-of-year report or final report as follows:

(1) You may correct any errors in your end-of-year report when you prepare the final report as long as you send us the final report by the time it is due.

(2) If you or we determine within 270 days after the end of the model year that errors mistakenly decreased your balance of emission credits, you may correct the errors and recalculate the balance of emission credits. You may not make these corrections for errors that are determined more than 270 days after the end of the model year. If you report a negative balance of emission credits, we may disallow corrections under this paragraph (f)(2).

(3) If you or we determine anytime that errors mistakenly increased your balance of emission credits, you must correct the errors and recalculate the balance of emission credits.

[73 FR 59259, Oct. 8, 2008, as amended at 75 FR 23026, Apr. 30, 2010; 86 FR 34523, Jun. 29, 2021]

§1054.735 What records must I keep?

(a) You must organize and maintain your records as described in this section.

(b) Keep the records required by this section for at least eight years after the due date for the end-of-year report. You may not use emission credits for any engines or equipment if you do not keep all the records required under this section. You must therefore keep these records to continue to bank valid credits.

(c) Keep a copy of the reports we require in §1054.730.

(d) Keep records of the engine identification number for each engine or piece of equipment you produce that generates or uses emission credits under the ABT program. You may identify these numbers as a range. If you change the FEL after the start of production, identify the date you started using each FEL and the range of engine identification numbers associated with each FEL.

(e) We may require you to keep additional records or to send us relevant information not required by this section in accordance with the Clean Air Act.

[86 FR 34523, Jun. 29, 2021]

§1054.740 What special provisions apply for generating and using emission credits?

(a) You may generate Phase 3 emission credits from 2008 through 2011 model year Class I engines if you voluntarily meet the Phase 3 exhaust emission standards specified in §1054.105. Divide these into transitional and enduring emission credits as follows:

(1) Transitional credits are based on reducing emissions from Phase 2 levels down to Phase 3 levels. Calculate the value of transitional emission credits as described in §1054.705, based on setting STD equal to 15.0 g/kW-hr and FEL equal to 10.0 g/kW-hr. You may use these transitional credits only for Class I engines in 2012 through 2014 model years. You may not use these transitional credits for Class II engines.

(2) Enduring credits are based on reducing emissions below Phase 3 levels. Calculate the value of enduring credits as described in §1054.705, based on setting STD equal to 10.0 g/kW-hr and FEL to the value of the family emission limit you select for the family. You may use these enduring credits for any nonhandheld engines certified to the Phase 3 standards under this part, except as specified in paragraph (d) of this section.

(b) You may generate Phase 3 emission credits from 2008 through 2010 model year Class II engines if you voluntarily meet the Phase 3 exhaust emission standards specified in §1054.105. Divide these into transitional and enduring emission credits as follows:

(1) Transitional credits are based on reducing emissions from Phase 2 levels down to Phase 3 levels. Calculate the value of transitional emission credits as described in §1054.705, based on setting STD equal to 11.0 g/kW-hr and FEL equal to 8.0 g/kW-hr. You may use these transitional credits only for Class II engines in 2011 through 2013 model years. You may not use these transitional credits for Class I engines.

(2) Enduring credits are based on reducing emissions below Phase 3 levels. Calculate the value of enduring credits as described in §1054.705, based on setting STD equal to 8.0 g/kW-hr and FEL to the value of the family emission limit you select for the family. You may use these enduring credits for any nonhandheld engines certified to the Phase 3 standards under this part, except as specified in paragraph (d) of this section.

(c) You may not use emission credits generated by nonhandheld engines certified to Phase 2 emission standards to demonstrate compliance with the Phase 3 exhaust emission standards in 2014 and later model years.

(d) [Reserved]

(e) You may use Phase 2 or Phase 3 emission credits from nonhandheld engines to demonstrate compliance with the Phase 3 standards for handheld engines subject to the following restrictions:

(1) The handheld family must be certified in 2008 and all later model years using carryover of emission data from an engine family that was most recently certified with new emission data in 2007 or an earlier model year.

(2) The handheld family's FEL may not increase above the level selected for the 2007 model year in later years unless such an increase is based on emission data from production engines.

(3) Your total production of handheld engines certified under this paragraph (e) may not exceed 30,000 in any model year.

[86 FR 34523, Jun. 29, 2021]

§1054.745 What can happen if I do not comply with the provisions of this subpart?

(a) For each family participating in the ABT program, the certificate of conformity is conditional upon full compliance with the provisions of this subpart during and after the model year. You are responsible to establish to our satisfaction that you fully comply with applicable requirements. We may void the certificate of conformity for a family if you fail to comply with any provisions of this subpart.

(b) You may certify your family to an FEL above an emission standard based on a projection that you will have enough emission credits to offset the deficit for the family. However, we may void the certificate of conformity if you cannot show in your final report that you have enough actual emission credits to offset a deficit for any pollutant in a family.

(c) We may void the certificate of conformity for a family if you fail to keep records, send reports, or give us information we request.

(d) You may ask for a hearing if we void your certificate under this section (see §1054.820).