EPA Tier 4 and EU Stage IV Environmental Regulations (Important Issues for OEMs and Distributors)

EPA “Tier 4” regulations (40 C.F.R., Part 1039, et seq.) and EU “Stage IV” regulations (Directive 2004/26/EC of the European Parliament) apply to four major types of pollutant emissions: hydrocarbons (“HC”), carbon monoxide (“CO”), particulate matter (“PM”) and oxides of nitrogen (“NOx”), and require that manufacturers substantially reduce pollution emissions. After January 1, 2015, these requirements will apply to virtually every type of diesel engine typically found in the equipment fleets of distributors, rental operators, contractors and other owners throughout the United States and Europe.

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European and American standards have largely been conformed, but the rest of the world remains well behind in terms of pollution regulations and the technologies necessary to achieve compliance with mandated thresholds. China, India, Japan and South Korea, for example, have adopted similar standards in some (albeit, more limited) cases.

The following summary table compares the new standards to the prior standards for the U.S., the EU and China:

Competitive Issues: Obviously, this creates some competitive issues for owners and operators in developed countries. Market participants in the more heavily regulated U.S. and EU continue to argue (with considerable merit) that, among other things, the increased cost of the newer, cleaner machines, places them at a disadvantage when competing with businesses in lightly regulated or unregulated countries. Clean diesel technologies are, however, improving quickly, and some of the benefits have reportedly begun to manifest themselves (e.g., increased productivity, decreased fuel consumption, reduced employee health issues and reduced absenteeism; though the evidence is thus far mostly anecdotal, and remains the subject of considerable debate).
In addition, some of the heaviest polluters, including China (which has now surpassed the U.S. in total CO2 emissions and emits almost 30% of the world’s greenhouse gases) are starting to catch up. According to The Economist (August 10, 2013), China has issued 20 significant anti-pollution laws in the past several years, has created a Ministry for Environmental Protection, and is moving toward broader adoption of Tier 4 / Stage IV-type emission standards. But progress is still slow, and enforcement remains spotty, meaning OEMs and their customers in developed countries will continue to suffer at least some degree of competitive disadvantage in the near-term.
bejin_vs_Los_angeles
Technologies: Tier 4 / Stage IV technologies fall into two broad categories: (1) advanced engine design (using new combustion technologies, intake filtration systems, variable geometry turbochargers, crankcase filters, and exhaust gas recirculation systems, for example), and (2) exhaust gas after-treatment systems (for example, particulate matter filters and selective catalytic reduction systems). OEMs are generally free to use any combination of technologies they deem appropriate, as long as they meet the applicable emissions standards.
Costs / Benefits: Among the chief concerns for most distributors and their customers is, of course, the cost of these new technologies. Manufacturers are currently estimating the cost increase at between 2% and 7% of the total purchase price of a given machine (though many claim these estimates are optimistic). According to most manufacturers, however, fuel consumption should decrease by as much as 5%, and maintenance costs should decline by roughly 1% (though only limited data on either metric has been available thus far). Anticipated longer-term benefits, such as increased employee productivity, enhanced engine reliability and reductions in absenteeism and employee health costs will be more difficult to assess. The reductions in maintenance, repair and replacement costs should, however, help mitigate a portion of the purchase price increase over time.
Timing: Implementation is ongoing. New diesel engines in the U.S. and EU are, with some exceptions, subject to at least Tier 4i (“interim”) / Stage IIIA requirements. In the U.S., Tier 4f (“Final”) regulations become applicable to the 174-751 hp nonroad diesel engine market on January 1, 2014, and to the last segment (75-173 hp) on January 1, 2015, when similar Stage IV regulations also become effective in the EU for engines over 56 kW (75 hp).
Continued Use of Older, Non-Tier 4 / Stage IV Technology: The regulations generally do not require equipment owners and operators to dispose of their current fleets of older-technology diesel engines (Note: California has adopted its own standards). Local worksites in a growing number of areas have, however, begun to require Tier 4 / Stage IV technology with respect to at least a portion of the equipment used on-site, meaning operators will likely have little choice but to move quickly toward replacement (or retrofitting, where possible) fleets in those areas.

Legal Issues:
What are the Legal Issues, and How Should Distributors Deal with Them?

Knowledge is Key: A lack of customer knowledge can spell disaster, particularly with respect to expensive new and unfamiliar equipment and technologies. After the damage has been done is not the time to try to determine who is responsible. It is, therefore, imperative that the customer acknowledge in writing all Tier 4 / Stage IV monitoring and maintenance protocols, especially with respect to rentals (and in the case of rentals, that the owner or distributor be entitled to inspect and maintain the equipment as and when necessary, and recover damages for customers’ non-compliance).

Legal Liabilities: A great deal of Tier 4 / Stage IV technology is new and/or still being developed. Consequently, you can expect a number of legal issues (and lawsuits) to arise over the next several years, dealing with, for example, damage resulting from maintenance failures, warranty claims, fines and penalties, updated guidelines, worksite restrictions, and other issues. air distance calculator Who will be responsible (and pay) for them?

Fines: Critically, the EPA can also assess Fines of up to $37,500.00 per violation against OEMs and dealers, and up to $3,750.00 per violation against individuals (e.g., for tampering with Tier 4 emission devices). Never attempt to disconnect or circumvent Tier 4 / Stage IV equipment, and if you rent equipment, be sure to advise your customers of the need to refrain from doing so.

Contracts: Few sale or rental contracts in use today adequately deal with these issues; the technology is simply too new, meaning the potential cost/liability issues have yet to be fully assessed. If you don’t have the time to revise your current contracts, I would encourage you to do that before the inevitable lawsuits arise. When you do, among other things, you will want to make certain your sales and rental contracts accomplish at least the following:

  • Advise your customers of applicable Tier 4 / Stage IV requirements;
  • Obtain written confirmations from customers that you have provided, and they have received, read and       understood the necessary instructions and warnings;
  • Obtain their agreements to comply with the new regulations; and
  • Obtain indemnities (agreements to reimburse you for your expenses if you are sued or fined for compliance       failures by customers and third parties).

Doing so may be the difference between recovering a large emission controls-related loss, and suffering a hefty and unreimbursible expense.

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