EPA proposes strictest standards yet for 2007 emissions
The Environmental Protection Agency (EPA) unveiled plans last month to reduce diesel emissions in a two-step process: 2004 and 2007. While the changes for 2004 were expected, and industry officials and engine makers have been planning for it, the changes proposed for 2007 may throw the trucking world a curve.
At issue is lowering the sulfur content of fuel by 2007, which will translate into higher diesel prices. How much higher is uncertain. "It could be pennies a gallon or more," said Allen Schaeffer, vp-environmental and highway policy for the American Trucking Assns. "It could be significant. Fuel changes are up for grabs in 2007."
By 2004, all diesel engines weighing over 8,500 lb. must meet combined emissions standards of hydrocarbons (particulate matter) and nitrogen oxides of less than 2.4 gm/ brake-hp./hr. Current standards are 1.3 gm for hydrocarbons (1.1 gm for gasoline engines) and 4 gm for nitrogen oxides. The standards would require diesel trucks to be 50% cleaner than today's models. Gasoline trucks would be 78% cleaner. EPA expects that the standard would reduce particulate matter in the air by about 55,000 tons per year.
The increase in engine costs would be about $700 per Class 8 engine, EPA estimates. A medium-duty engine will cost an additional $600. Operating costs for diesels will be an additional $100 over the life of the engine, which is estimated at about 10 years. EPA estimates total cost to the industry for medium- and heavy-duty engines will reach $383 million in 2004. By 2007, the cost could drop to $43 million because of technological innovations. For example, part of EPA's proposal calls for on-board diagnostics systems to help identify any failures of the emissions control system components.
Even though pollution standards are set for 2004, questions remain about engine performance. There's a concern about the possibility of exhaust gas recirculation increasing back-pressure, which could reduce fuel economy, according to Schaeffer. "There are also issues of maintenance, because there's not a lot of experience (with the less polluting engines)."
The second phase of the emissions standards, targeted for 2007, will again reduce pollution for heavy-duty trucks. In proposals expected late this year or early next year, EPA hopes to reduce nitrogen oxide emissions by 75-90% compared to 2004 levels. Hydrocarbons could be reduced by 80-90%. To do this, EPA will propose reduction in sulfur content from its current level of 500 ppm.
EPA's health arguments are persuasive. "Together, smog and particulate matter in the United States account for 15,000 premature deaths, 1-million respiratory problems, 400,000 asthma attacks, and thousands of cases of aggravated asthma, especially in children. Motor vehicles generate about 30% of all emissions of nitrogen oxides and volatile organic compounds - the pollution that causes smog," the proposal noted. Truck fleets are not the only ones affected by the proposals. The EPA is taking aim at heavy passenger vehicles such as SUVs. The pollution reduction plan was written to include these vehicles, which produce more pollution than passenger cars.
The big question for the trucking industry is how much of a reduction in sulfur content the EPA will demand; the lower the content, the higher the cost. The proposal calls for a 90% reduction from the current 500 ppm, bringing the sulfur level to 50 ppm.
This is nowhere near levels common in today's diesel fuel, which is usually about 300 ppm. The EPA will be accepting public comments on the proposal until December 2 1999.
At this point we don't know how much a change to very-low-sulfur content will affect fuel costs and engine performance. As we've seen in the past, since fuel costs are the next-highest operating expense after labor, a few pennies can make a big difference in profits. Indeed, Wall Street analysts often cite higher fuel costs as a reason to lower earnings expectations. In addition to profits taking a hit, trucking-company stock prices will be affected in anticipation of higher fuel prices.