What price nonconformance?

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The Environmental Protection Agency has proposed that diesel engine manufacturers that can’t meet the October 2002 deadline be allowed to sell current-technology engines after October, if they pay a nonconformance penalty (NCP) per noncompliant engine sold. The agency is accepting comments on the proposal until March 18 and will hold a public hearing on the issue on Feb. 15 near Washington, D.C.

EPA has given diesel engine manufacturers until October of this year to cut oxides of nitrogen (NOx) emissions to one half of current levels. Most engine manufacturers say they will comply and will use cooled exhaust gas recirculation to achieve the required reduction. (See “What to expect from EGR,” page 26.)

The exception is Caterpillar Engine Division, Mossville, Ill., which says it will meet emissions standards, at least until 2007, and likely beyond, without EGR. But Cat’s Advanced Combustion Emissions Reduction Technology (ACERT) – which Cat says has better long-term emissions-reducing potential than EGR – won’t be ready for sale until the October of 2003. (For a brief explanation of ACERT, see page 32.)

It appears that if NCPs are allowed, Caterpillar will have no choice but to pay them if it wants to sell engines during the year following the deadline. But, “it’s far too early in the process to say,” according to Caterpillar spokesman Carl Volz. He added that the company “is studying NCPs,” but would not comment further on the subject.

If Caterpillar pays NCPs, it would likely not want to pay them for very long. The stiff penalties – starting at $4,680 per heavy-duty engine – increase with the degree of non-compliance and increase over time. Even at that initial rate, if a manufacturer were to sell 16,000 such engines (half of what Cat sold in 2001), NCPs would amount to $74 million.
Other engine manufacturers had little to add, except that they intend to meet this October’s deadline and are not concerned with NCPs.