(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. Participation in this program is voluntary.

(b) Section 1039.740 restricts the use of emission credits to certain averaging sets.

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

(1) Actual emission credits means emission credits you have generated that we have verified by reviewing your final report.

(2) Averaging set means a set of engines in which emission credits may be exchanged only with other engines in the same averaging set.

(3) Broker means any entity that facilitates a trade of emission credits between a buyer and seller.

(4) Buyer means the entity that receives emission credits as a result of a trade.

(5) Reserved emission credits means emission credits you have generated that we have not yet verified by reviewing your final report.

(6) Seller means the entity that provides emission credits during a trade.

(7) Standard means the emission standard that applies under subpart B of this part for engines not participating in the ABT program of this subpart.

(8) Trade means to exchange emission credits, either as a buyer or seller.

(d) You may not use emission credits generated under this subpart to offset any emissions that exceed an FEL or standard. This applies for all testing, including certification testing, in-use testing, selective enforcement audits, and other production-line testing. However, if emissions from an engine exceed an FEL or standard (for example, during a selective enforcement audit), you may use emission credits to recertify the engine family with a higher FEL that applies only to future production.

(e) Engine families that use emission credits for one or more pollutants may not generate positive emission credits for another pollutant.

(f) Emission credits may be used in the model year they are generated or in future model years. Emission credits may not be used for past model years.

(g) You may increase or decrease an FEL during the model year by amending your application for certification under § 1039.225. The new FEL may apply only to engines you have not already introduced into commerce. Each engine's emission control information label must include the applicable FELs.

(h) You may use either of the following approaches to retire or forego emission credits:

(1) You may retire emission credits generated from any number of your engines. This may be considered donating emission credits to the environment. Identify any such credits in the reports described in § 1039.730. Engines must comply with the applicable FELs even if you donate or sell the corresponding emission credits under this paragraph (h). Those credits may no longer be used by anyone to demonstrate compliance with any EPA emission standards.

(2) You may certify a family using an FEL below the emission standard as described in this part and choose not to generate emission credits for that family. If you do this, you do not need to calculate emission credits for those families and you do not need to submit or keep the associated records described in this subpart for that family.

[69 FR 39213, June 29, 2004, as amended at 81 FR 74139, Oct. 25, 2016]

Link to an amendment published at 89 FR 29794, Apr. 22, 2024.

The provisions of this section apply separately for calculating emission credits for NOX, NOX + NMHC, or PM.

(a) [Reserved]

(b) 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) ← (AvgPR) ← (UL) ← (10−3) Where: Std = the emission standard, in grams per kilowatt-hour, that applies under subpart B of this part for engines not participating in the ABT program of this subpart (the “otherwise applicable standard”). FEL = the family emission limit for the engine family, in grams per kilowatt-hour. Volume = the number of engines eligible to participate in the averaging, banking, and trading program within the given engine family during the model year, as described in paragraph (c) of this section. AvgPR = the average value of maximum engine power values for the engine configurations within an engine family, calculated on a sales-weighted basis, in kilowatts. UL = the useful life for the given engine family, in hours.

(c) As described in § 1039.730, compliance with the requirements of this subpart is determined at the end of the model year based on actual U.S.-directed production volumes. Do not include any of the following engines to calculate emission credits:

(1) Engines with a permanent exemption under subpart G of this part or under 40 CFR part 1068.

(2) Exported engines.

(3) Engines not subject to the requirements of this part, such as those excluded under § 1039.5.

(4) Engines in families that include only stationary engines, except for engines in families certified to standards that are identical to standards applicable under this part 1039 to nonroad engines of the same type for the same model year.

(5) Any other engines, where we indicate elsewhere in this part 1039 that they are not to be included in the calculations of this subpart.

[69 FR 39213, June 29, 2004, as amended at 71 FR 39185, July 11, 2006; 72 FR 53133, Sept. 18, 2007; 75 FR 22992, Apr. 30, 2010; 81 FR 74139, Oct. 25, 2016]

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

(b) You may certify one or more engine families to an FEL above the applicable 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 an engine family to an FEL that exceeds the otherwise applicable standard, you must obtain enough emission credits to offset the engine family's deficit by the due date for the final report required in § 1039.730. The emission credits used to address the deficit may come from your other engine 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.

[69 FR 39213, June 29, 2004, as amended at 81 FR 74140, Oct. 25, 2016]

(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.

(b) You may designate any emission credits you plan to bank in the reports you submit under § 1039.730 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.

[75 FR 22992, Apr. 30, 2010]

(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.

(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 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 § 1039.255(e) for cases involving fraud. We may void the certificates of all engine families participating in a trade that results in a manufacturer having a negative balance of emission credits. See § 1039.745.

[69 FR 39213, June 29, 2004, as amended at 75 FR 22992, Apr. 30, 2010]

(a) You must declare in your application for certification your intent to use the provisions of this subpart for each engine family that will be certified using the ABT program. You must also declare the FELs you select for the engine 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 applicable standards.

(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.

[69 FR 39213, June 29, 2004, as amended at 75 FR 22992, Apr. 30, 2010; 81 FR 74140, Oct. 25, 2016]

(a) If any of your engine 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 engine family participating in the ABT program:

(1) Engine-family designation and averaging set.

(2) The emission standards that would otherwise apply to the engine 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 § 1039.225.

(4) The projected and actual U.S.-directed production volumes for the model year. If you changed an FEL during the model year, identify the actual U.S.-directed production volume associated with each FEL.

(5) Maximum engine power for each engine configuration, and the average engine power weighted by U.S.-directed production volumes for the engine family.

(6) Useful life.

(7) Calculated positive or negative emission credits for the whole engine 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 engine families in each averaging set in the applicable model year is not negative.

(2) State whether you will retain any emission credits for banking. If you choose to retire emission credits that would otherwise be eligible for banking, identify the engine families that generated the emission credits, including the number of emission credits from each family.

(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 engine 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.

[69 FR 39213, June 29, 2004, as amended at 72 FR 53133, Sept. 18, 2007; 75 FR 22992, Apr. 30, 2010; 81 FR 74140, Oct. 25, 2016]

(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 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 § 1039.725 and § 1039.730.

(d) Keep records of the engine identification number for each engine 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. You must also identify the purchaser and destination for each engine you produce to the extent this information is available.

(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.

[69 FR 39213, June 29, 2004, as amended at 72 FR 53133, Sept. 18, 2007; 75 FR 22993, Apr. 30, 2010; 81 FR 74140, Oct. 25, 2016]

The following restrictions apply for using emission credits:

(a) Averaging sets. Emission credits may be exchanged only within an averaging set. For emission credits generated by Tier 4 engines, there are two averaging sets—one for engines at or below 560 kW and another for engines above 560 kW.

(b) Emission credits from earlier tiers of standards. (1) For purposes of ABT under this subpart, you may not use emission credits generated from engines subject to emission standards identified in appendix I of this part, except as specified in § 1039.102(d)(1) or as follows:

(2) Emission credits generated from marine engines certified to the standards identified in appendix I of this part for land-based engines may not be used under this part.

(c) NOX and NOX + NMHC emission credits. You may use NOX emission credits without adjustment to show compliance with NOX + NMHC standards. You may use NOX + NMHC emission credits to show compliance with NOX standards, but you must adjust the NOX + NMHC emission credits downward by twenty percent when you use them, as shown in the following equation:

NOX emission credits = (0.8) × (NOX + NMHC emission credits).

(d) Other restrictions. Other sections of this part specify additional restrictions for using emission credits under certain special provisions.

[69 FR 39213, June 29, 2004, as amended at 70 FR 40464, July 13, 2005; 81 FR 74140, Oct. 25, 2016; 86 FR 34506, June 29, 2021]

(a) For each engine 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 an engine family if you fail to comply with any provisions of this subpart.

(b) You may certify your engine family to an FEL above an applicable standard based on a projection that you will have enough emission credits to offset the deficit for the engine 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 an engine family.

(c) We may void the certificate of conformity for an engine 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 § 1039.820).