Tier 3 Motor Vehicle Emission and Fuel Standards

Congressional research reportApr 28, 2014

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Tier 3 Motor Vehicle Emission and Fuel

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Tier 3 Motor Vehicle Emission and Fuel Standards

Summary

On March 3, 2014, the Environmental Protection Agency finalized new (“Tier 3”) emission

standards for light duty (and some larger) motor vehicles. Light duty vehicles include cars, SUVs,

vans, and most pickup trucks. Phase-in of the standards will begin with Model Year 2017. By the

time Tier 3 is fully implemented in Model Year 2025, the standards for light duty vehicles will

require reductions of about 80% in tailpipe emissions of non-methane organic gases and nitrogen

oxides (both of which contribute to the formation of ground-level ozone) and of about 70% in

tailpipe emissions of particulates. Ozone and particulates are the most widespread air pollutants in

the United States. Both contribute to respiratory illness and premature mortality. EPA estimates

that implementation of the standards will reduce premature mortality by 770 to 2,000 persons

annually, as well as providing reductions in hospital admissions, lost work days, school absences,

and restricted activity days for persons with respiratory illness. Assigning monetary values to

these benefits, EPA estimates the annual benefits at between $6.7 billion and $19 billion in 2030.

Like the current “Tier 2” standards, which were promulgated in 2000 and phased in between

Model Years 2004 and 2009, the Tier 3 standards treat vehicles and fuels as a system: reductions

in vehicle emissions are easier to achieve if the fuel used contains less sulfur. The Tier 3 standards

will require that gasoline contain no more than 10 parts per million (ppm) sulfur on an annual

average basis beginning January 1, 2017, down from 30 ppm under the Tier 2 program. The fuel

standards will match limits already attained in California and in much of the world, including the

European Union, Japan, and Korea, and proposed for adoption in China. Further, the rule extends

the required useful life of emission control equipment from 120,000 miles to 150,000 miles, and

sets standards for heavier duty gasoline-powered vehicles. The standards will also require about a

50% reduction in evaporative emissions (some of which also contribute to ozone formation

and/or cause health problems directly).

EPA estimates the cost of the rules at $1.1 billion annually in 2017 to $1.5 billion annually in

2030. The agency estimates that the rule will add $33 to $88 to the cost of a new vehicle, and less

than one cent to the price of a gallon of gasoline. The effect on gasoline prices has been the most

controversial issue: the American Petroleum Institute contends that the tighter sulfur controls will

impose almost $10 billion in refinery capital expenditures and increase gasoline manufacturing

costs by 6 to 9 cents per gallon. But, in addition to EPA, at least two studies by third-party

consultants conclude that the costs will be far less than API’s estimate. To address refining

industry concerns, the final rule will allow a three-year delay in compliance for small refiners. It

also includes averaging, banking, and trading programs that will give the refining industry some

flexibility in meeting the standards.

The auto industry is generally supportive of the rule—five auto companies, five trade groups, and

the United Auto Workers union have issued statements of support, and a GM executive joined the

EPA Administrator as she announced the standards. The standards facilitate the adoption of new

technologies necessary to meet greenhouse gas standards already promulgated by EPA. In

addition, California and 12 other states have already adopted tailpipe standards similar to Tier 3.

Proponents contend that the harmonization of national standards eliminates the threat of a

patchwork of state requirements and decreases compliance costs by preserving a unified national

market. Many in Congress have expressed concern about the potential impacts of the rule. As a

result, Congress can be expected to continue oversight as the rule is implemented.

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Tier 3 Motor Vehicle Emission and Fuel Standards

Contents

Introduction...................................................................................................................................... 1

Current Standards ............................................................................................................................ 1

Tier 2 Standards ......................................................................................................................... 1

Greenhouse Gas Standards ........................................................................................................ 2

Tier 3 Standards ............................................................................................................................... 3

Tailpipe Emissions Standards .................................................................................................... 3

Evaporative Emission and Other Vehicle Standards.................................................................. 4

Fuel Standards ........................................................................................................................... 4

Benefits of the Rule ................................................................................................................... 5

Costs of the Rule ....................................................................................................................... 8

Tables

Table A-1. Tier 3 Fleet-Average Non-Methane Organic Gases and Nitrogen Oxides

Standards by Model Year ............................................................................................................ 10

Table A-2. Tier 3 Particulate Matter Standards by Model Year ..................................................... 10

Table A-3. Tier 3 Evaporative Emission and Other Vehicle Standards .......................................... 11

Appendixes

Appendix. Tier 3 Vehicle Emissions Standards ............................................................................. 10

Contacts

Author Contact Information........................................................................................................... 11

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Introduction

Since the 1960s, emission standards for motor vehicles, coupled with standards for the fuels they

burn, have reduced emissions from new cars and trucks by at least 95%. Nevertheless, because

there are more vehicles on the road, because they are being driven more miles, and because the

average useful life of a car exceeds the statutorily defined “useful life” over which emission

standards must be met, emissions from motor vehicles continue to be a major component of the

nation’s air pollution problems. For these reasons, Congress, through the Clean Air Act (CAA)1

has required emission standards for new automobiles since 1965, and has amended these

requirements on several occasions.2

Further, over the last five decades, the scientific understanding of the effects of air pollutants has

led to a tightening of air quality standards. The CAA, as amended, requires the U.S.

Environmental Protection Agency (EPA) to set National Ambient Air Quality Standards

(NAAQS)3 for common pollutants from numerous and diverse sources, which may reasonably be

anticipated to endanger public health and welfare. EPA has set standards for six principal

pollutants: ozone, particulate matter, nitrogen oxides, sulfur dioxide, carbon monoxide, and lead.4

The agency reports that in 2013 on-road vehicles accounted for about 34% of carbon monoxide

emissions in the United States, 38% of nitrogen oxides, 12% of volatile organic compounds,5 and

3% of particulate matter.6 Despite nationwide reductions in each of these major air pollutants by

over 50% since 1970, air quality still fails to meet ambient standards in areas where about onethird of the nation’s population lives.

Current Standards

Tier 2 Standards

Emission requirements for new motor vehicles have been strengthened numerous times since the

first federal rulemaking took effect in 1968. The most recent revision, referred to as the “Tier 2”

standards, was promulgated in February 2000.7 Tier 2 required vehicle manufacturers to reduce

Clean Air Act, 42 U.S.C. 7401 et seq. For a review of the Act, see CRS Report RL30853, Clean Air Act: A Summary

of the Act and Its Major Requirements, by (name redacted) and (name redacted).

Congress first required vehicle emissions to be regulated when it amended the CAA under the Motor Vehicle Air

Pollution Control Act of 1965 (P.L. 89-272). Other major amendments to the CAA took place in 1970, 1977, and 1990.

The CAA Amendments of 1990 authorize the U.S. Environmental Protection Agency to establish emissions standards

for motor vehicles to address air pollution that may reasonably be anticipated to endanger public health or welfare

(Section 202). EPA also has authority to establish fuel controls to address such air pollution (Section 211). These

requirements were referred to as the “Tier 1” standards at the time.

CAA, Sections 108 and 109.

For current National Ambient Air Quality Standards, see U.S. EPA, http://www.epa.gov/air/criteria.html.

Vehicles do not directly emit ozone (commonly referred to as smog). Rather, nitrogen oxides and volatile organic

compounds produce ground-level ozone when they chemically react in the presence of sunlight. Vehicles emit volatile

organic compounds primarily in the form of non-methane organic gases.

U.S. Environmental Protection Agency, National Emissions Inventory (NEI), http://www.epa.gov/ttnchie1/trends/.

The Tier 2 revisions are found in U.S. Environmental Protection Agency, "Control of Air Pollution from New Motor

Vehicles: Tier 2 Motor Vehicle Emissions Standards and Gasoline Sulfur Control Requirements," 65 Federal Register

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tailpipe emissions of several common pollutants, including carbon monoxide (CO), formaldehyde

(HCHO), nitrogen oxides (NOx), non-methane organic gases (NMOG, a class of volatile organic

compounds (VOCs)), and particulate matter (PM). The standards significantly targeted emissions

of NMOG and NOx to help control the formation of ground-level ozone pollution. Relative to the

prior Tier 1 standards, the fleet-average standard for NOx required vehicle manufacturers to

reduce overall tailpipe emissions by 88% to 95% (based upon the vehicle type). However,

manufacturers had the flexibility to average the NOx emissions of their vehicle fleets to

demonstrate compliance with the standards instead of certifying each vehicle according to the

same stringency. The Tier 2 standards also required at least an 80% reduction in PM emissions

and a less stringent reduction in CO emissions.

Tier 2 was phased in beginning in model year (MY) 2004 and required all new passenger cars and

light trucks up to 8,500 pounds, and all new heavier passenger vehicles up to 10,000 pounds

(including large sport-utility vehicles), to demonstrate full compliance by MY2009. To further the

vehicle emissions requirements, standards were also set on the level of pollutants (or compounds

that may lead to pollution) in the vehicles’ fuels. Most prominently, oil refiners were required to

limit sulfur levels in gasoline to an average of 30 parts per million (ppm) nationwide beginning in

2005, roughly 90% less than the previous national average of 340 ppm. Reducing sulfur in

gasoline prevents the fouling of catalytic converters, restoring or preserving their effectiveness in

reducing NMOG, NOx, and CO emissions.

Greenhouse Gas Standards

Vehicle fuel economy has been regulated by the National Highway Traffic Safety Administration

(NHTSA) since 1975.8 Under the Obama Administration, EPA has begun regulating emissions of

greenhouse gases (GHGs) from motor vehicles. Because fuel consumption and GHG emissions

are closely linked, EPA has coordinated with NHTSA since 2010 to issue a series of joint

rulemakings. Most recently, on August 28, 2012, NHTSA and EPA issued final rules to tighten

passenger corporate average fuel economy (CAFE) and GHG standards for MY2017-2025.9 The

agencies expect that combined new passenger car and light truck fuel economy standards will be

nearly 41.0 miles per gallon (mpg) in MY2021 and 49.7 mpg in MY2025, up from 34.1 mpg in

MY2016.10 GHG emissions from new vehicles will decline by about 50% as a result of the

standards. While the joint CAFE/GHG standards are not directly associated with the Tier 2/Tier 3

standards, requirements in the latter would assist vehicle manufacturers in advancing technology

that would help meet the requirements of the former. This relationship is discussed further in the

next sections.

(...continued)

6698-6870, February 10, 2000.

The Energy Policy and Conservation Act of 1975 (EPCA), P.L. 94-163.

U.S. Environmental Protection Agency and National Highway Traffic Safety Administration, "Light-Duty Vehicle

Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule," 75 Federal

For further discussion, see CRS Report R42721, Automobile and Truck Fuel Economy (CAFE) and Greenhouse Gas

Standards, by (name redacted), (name redacted), and (name redacted).

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Tier 3 Standards

In February 2011, EPA began scoping new emissions standards for conventional pollutants from

cars and light trucks as mandated by a May 2010 memorandum from the White House.11 The

memorandum directed EPA to “review for adequacy the current non-greenhouse gas emissions

regulations for new motor vehicles, new motor vehicle engines, and motor vehicle fuels,

including tailpipe emissions standards for nitrogen oxides and air toxics, and sulfur standards for

gasoline,” and to promulgate regulations as required.

Through its investigation, EPA found that

Over 149 million Americans are currently experiencing unhealthy levels of air pollution,

which are linked with respiratory and cardiovascular problems and other adverse health

impacts that lead to increased medication use, hospital admissions, emergency department

visits, and premature mortality. Motor vehicles are a particularly important source of

exposure to air pollution, especially in urban areas. By 2018, we project that in many areas

that are not attaining health-based ambient air quality standards (i.e., “nonattainment areas”),

passenger cars and light trucks will contribute 10-25 percent of total nitrogen oxides (NOx)

emissions, 15-30 percent of total volatile organic compound (VOC) emissions, and 5-10

percent of total direct particulate matter (PM2.5) emissions.12

As a result of these findings, EPA proposed Tier 3 standards on May 21, 2013, released the final

version on March 3, 2014, and published it in the Federal Register on April 28, 2014.13 The final

rule is effective on June 27, 2014. As with Tier 2, the Tier 3 standards consider the vehicle and its

fuel as an integrated system and include changes to both vehicle emission limits and fuel

formulation rules, lowering the allowable sulfur content of gasoline.

The Tier 3 standards have been controversial since at least a year prior to their proposal, with

dueling studies from auto manufacturers, EPA, and the petroleum refining industry having been

prepared in advance of their release. The proposed standards were reported to be nearly ready in

the spring of 2012, but the controversy over their presumed content delayed the proposal for a

year. Numerous Members of Congress weighed in on the standards during their development,

with many expressing their concern over the potential cost, and urging delay to permit further

study.

Tailpipe Emissions Standards

As finalized, the Tier 3 standards set requirements on tailpipe emissions for the sum of nonmethane organic gases (NMOG) and nitrogen oxides (NOx), presented as NMOG+NOx, and for

particulate matter (PM). They apply to all light-duty passenger cars and trucks as well as some

The White House, Office of the Press Secretary, “Presidential Memorandum Regarding Fuel Efficiency Standards,”

May 21, 2010, see Section 3(a), http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuelefficiency-standards.

U.S. Environmental Protection Agency, “Control of Air Pollution From Motor Vehicles: Tier 3 Motor Vehicle

Emission and Fuel Standards; Final Rule,” 79 Federal Register 23413-23886, April 28, 2014,

https://federalregister.gov/a/2014-06954.

Links to the proposed and final standards and related materials are on EPA’s website at

http://www.epa.gov/otaq/tier3.htm.

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medium and heavy-duty vehicles. Compared to current standards, the NMOG and NOx tailpipe

standards for light-duty vehicles represent approximately an 80% reduction from Tier 2’s fleet

average and a 70% reduction in per-vehicle PM standards. Heavy-duty vehicle tailpipe standards

represent about a 60% reduction in both fleet-average NMOG+NOx and per-vehicle PM

standards. Consistent with the Tier 2 principle of vehicle and fuel neutrality, the Tier 3 standards

apply to all light-duty vehicles and trucks, regardless of the fuel they use. That is, vehicles

certified to operate on any fuel (e.g., gasoline, diesel fuel, ethanol blends, compressed natural gas,

liquefied natural gas, hydrogen, and methanol) are all subject to the same standards. EPA is also

extending the regulatory useful life period during which the standards apply from 120,000 miles

to 150,000 miles.

The tailpipe standards include different phase-in schedules that vary by vehicle class, but

generally become effective between MY2017 and MY2025. In addition to the gradual phase-in

schedules, several other provisions are designed to further ease manufacturers’ paths to

compliance. These flexibilities include credits for early compliance and the ability to offset some

higher-emitting vehicles with extra-clean models. EPA is also finalizing more lead time for small

businesses and small volume manufacturers as well as a hardship provision that allows for

additional time to comply if a manufacturer cannot meet requirements after a good faith effort.

The standards for NMOG+NOx are fleet-average standards, meaning that a manufacturer

calculates the weighted average emissions of the vehicles it produces in each model year and

compares that average to the applicable standard for that model year. The standards differ by

vehicle class and test procedures (see Table A-1 for more detail). The PM standards are expressed

on a per-vehicle basis, meaning the standards apply to each vehicle separately (i.e., not as a fleet

average). PM standards also differ by vehicle class and test cycle (see Table A-2 for more detail).

Evaporative Emission and Other Vehicle Standards

Tier 3 also sets standards designed to eliminate fuel vapor-related evaporative emissions from the

vehicle’s fuel system. The evaporative emissions program represents about a 50% reduction from

current standards and applies to all light-duty and on-road gasoline-powered heavy-duty vehicles.

As with the tailpipe standards, the evaporative emissions standards include phase-in flexibilities,

credit and allowance programs, and more lead time and a hardship provision for small businesses

and small volume manufacturers. EPA is also extending the regulatory useful life period during

which the standards apply from 120,000 miles to 150,000 miles. See Table A-3 for more detail.

Fuel Standards

As with Tier 2, the Tier 3 standards treat vehicles and fuels as a system to reduce both vehicle

emissions and fuel pollutants. Under the Tier 3 fuel program, gasoline is required to contain no

more than 10 parts per million (ppm) sulfur on an annual average basis beginning January 1,

2017, down from 30 ppm under the Tier 2 program (similar reductions have already been phased

in for highway diesel fuels beginning in 2006).14 The new gasoline sulfur standards aim to make

emission control systems more effective for both existing and new vehicles, and thus enable more

A 15 ppm sulfur specification, known as Ultra Low Sulfur Diesel (ULSD), was phased in for highway diesel fuel

from 2006-2010. Diesel engines equipped with advanced emission control devices (generally, 2007 and later model

year engines) are to use highway ULSD fuel. The diesel program regulations are located in 40 CFR Part 80 subpart I.

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stringent vehicle emissions and fuel economy standards (i.e., since removing sulfur allows the

vehicle’s catalytic converter to work more efficiently and facilitates the development of lower

cost technologies to improve fuel economy and reduce GHG emissions). There is an averaging,

banking, and trading (ABT) program that allows refiners and importers to spread out their

investments through an early credit program and rely on ongoing nationwide averaging to meet

the standard. Further, there is a three-year delay for small refiners and “small volume refineries”

(refiners processing less than or equal to 75,000 barrels per calendar day).

Tier 3 also updates the federal emissions test fuel specifications to better match current in-use

gasoline and look forward to future ethanol and sulfur content. The new fuel specifications apply

to new vehicle certification, assembly line, and in-use testing. Key changes include moving to a

test fuel containing 10% ethanol by volume, lowering octane, and lowering the existing sulfur

specification to be consistent with Tier 3 requirements.15

Benefits of the Rule

EPA anticipates that the implementation of the Tier 3 vehicle and fuel standards will reduce

emissions of NOx, VOC, PM2.5, and air toxics. The fuel standards alone, which would take effect

in 2017, are projected to provide an immediate 56% reduction in sulfur dioxide (SO2) emissions

as the ultra-low sulfur gasoline is deployed in existing vehicles and engines. Further, EPA projects

that NOx emissions will be reduced by about 260,000 tons by 2018 (about 10% of the current

emissions from on-highway vehicles), and by about 330,000 tons by 2030 (about 25% of the

current emissions from on-highway vehicles) as covered vehicles become a larger percentage of

the fleet. VOC and CO emissions are projected to be reduced by about 170,000 tons and 3.5

million tons respectively by 2030 (16% and 24% of the current emissions from on-highway

vehicles). Emissions of many air toxics, including benzene, 1,3-butadiene, acetaldehyde,

formaldehyde, acrolein, and ethanol, are projected to be reduced in the range of 10% to 30%.

These projected reductions would immediately reduce ozone levels in 2017 when the sulfur

controls take effect, and would lead to significant decreases in ambient concentrations of ozone,

PM2.5 and air toxics by 2030 as the vehicle fleets become updated.

EPA has reported that exposure to ambient concentrations of ozone, PM2.5, and air toxics is linked

to adverse human health impacts such as premature deaths and other public health and

environmental effects. EPA expects the final Tier 3 standards to reduce these adverse impacts and

yield significant benefits, including the annual prevention of between 660 and 1,500 PM-related

premature deaths, between 110 and 500 ozone-related premature deaths, about 2,200 asthmarelated hospital admissions, 81,000 work days lost, 210,000 school absence days, and

approximately 1.1 million minor restricted-activity days. The agency estimates that the annual

monetized health benefits of the Tier 3 standards in 2030 (2011$) would be between $7.4 billion

and $19 billion, assuming a 3% discount rate (or between $6.7 billion and $18 billion assuming a

7% discount rate).16

Further, EPA anticipates the Tier 3 tailpipe emission and gasoline sulfur standards would improve

the performance of existing emission controls and facilitate the use of new technology. Auto

The requirements for federal emissions test fuels were revised between the proposed and final rule due to public

comment. EPA had proposed moving to a test fuel containing 15% ethanol by volume.

EPA, “Final Rule,” Section VIII.

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manufacturers have been generally supportive of the standards,17 which they view as allowing the

adoption of new technology necessary to meet the separate GHG standards already promulgated,

and which would harmonize the U.S. fuel requirements with those of foreign fuels.18 The Tier 3

gasoline sulfur standards are similar to levels already achieved in Europe, Japan, and South

Korea,19 as well as those proposed in China20 and some other countries. For companies that

operate in world markets—as the major auto manufacturers do—harmonizing fuel and emission

standards is a major concern. In the U.S. context, auto manufacturers already face more stringent

requirements for both tailpipe emissions21 and fuel requirements22 in California and the Section

177 states,23 and many individual vehicle manufacturers and their trade organizations have

emphasized the importance of a nationwide program to enable streamlined production and

decreased compliance costs.

For these reasons, the EPA proposal has been supported by various Members of Congress,24 many

industry, environmental25 and public health groups,26 and by a number of governors and other

For example, see Alliance of Automobile Manufacturers and Association of Global Automakers, “Comments on the

Proposed Rulemaking to Control of Air Pollution from Motor Vehicles: Tier 3 Motor Vehicle Emission and Fuel

Standards,” July 1, 2013,

http://www.globalautomakers.org/sites/default/files/document/attachments/Alliance%20and%20Global%20Comments

%20on%20Tier%203%20NPRM.pdf; and the Manufacturers of Emissions Controls Technology, “MECA Applauds

EPA Adoption of Tier 3 Rulemaking for Light-Duty Vehicles,” March 3, 2014,

http://www.meca.org/attachments/2354/MECA_press_release_-_EPA_Tier_3_final_rule_030314.pdf.

For views of the Auto Alliance, see their testimony at the EPA Tier 3 hearing, at http://www.autoalliance.org/

index.cfm?objectid=631E0230-AC48-11E2-9CE9000C296BA163.

European Council, “Directive 2009/30/EC of the European Parliament and of the Council of 23 April 2009 amending

Directive 98/70/EC as regards the specification of petrol, diesel and gas-oil,” http://eur-lex.europa.eu/legalcontent/EN/ALL/?uri=CELEX:32009L0030. Japan, Ministry of Economy, Trade and Industry, “Law on the Quality

Control of Gasoline and Other Fuels (Fuel Quality Control Law),” http://law.egov.go.jp/htmldata/S51/S51HO088.html. Republic of Korea, Ministry of the Environment, “The Clean Air

Conservation Act Enforcement Rules.” http://www.me.go.kr/home/web/main.do.

China has proposed a gasoline sulfur content of 10 ppm to be implemented in 2017. See “China V, GB 19147-2013”

for diesel standards and “China V GB 17930-2013” for gasoline standards, as reported by the International Council for

Clean Transportation, http://transportpolicy.net/index.php?title=China:_Fuels:_Diesel_and_Gasoline.

The Tier 3 standards are closely coordinated with California’s Low Emission Vehicle (LEV) III program

(http://www.arb.ca.gov/regact/2012/leviiighg2012/leviiighg2012.htm) to create a vehicle emissions program that will

allow automakers to sell the same vehicles in all 50 states. In December 2012 EPA approved a waiver of Clean Air Act

preemption for the California Air Resources Board’s (CARB’s) LEV III program with compliance beginning in 2015.

California Air Resources Board, “California Reformulated Gasoline Regulations,” Section 2262,

http://www.arb.ca.gov/fuels/gasoline/100912CaRFG_regs.pdf.

Twelve states have adopted California’s LEV III program under Section 177 of the Clean Air Act (Connecticut,

Delaware, Maryland, Maine, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Rhode Island,

Washington, and Vermont).

See letter to EPA Administrator Gina McCarthy from Rep. Jan Schakowsky, et al., January 31, 2014, at

http://schakowsky.house.gov/uploads/Tier3Letter.pdf and Sen. Kirsten Gillibrand, et al., “Implementing Tier 3

Standards Would Generate More Than 24,000 Jobs Over Three Years While Protecting the Public from Hazardous

Pollutants,” November 29, 2012, http://www.gillibrand.senate.gov/newsroom/press/release/gillibrand-calls-for-newtier-of-emission-reduction-standards.

For example, see National Association of Clean Air Agencies,

http://www.4cleanair.org/Documents/NACAATier3VehandFuelReportFINALOct2011.pdf; as well as a 21-member

advocacy group coalition that includes coalition includes Corning Inc., Donaldson Co., Tenneco Inc., NGK Automotive

Ceramics USA Inc., Hug Filtersystems AG, United Auto Workers, Clean Air Watch, the Environmental Defense Fund,

the Sierra Club, and the Union of Concerned Scientists,

http://www.eenews.net/assets/2013/01/10/document_gw_02.pdf.

For example, see American Lung Association, “A Penny for Prevention: The Case for Cleaner Gasoline and Vehicle

(continued...)

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state and local officials.27 Many state and local stakeholders have also noted that without the

tighter standards set on vehicles and gasoline, nonattainment areas in about half the states would

need to impose more controls on stationary sources of ozone precursors and particulates (e.g.,

power plants and factories).

Some trade organizations, however, contend that the Tier 3 standards would have negligible

effects on air quality in comparison to reductions that have been realized by previous rulemaking.

Two separate studies prepared by the Environ International Corporation for the American

Petroleum Institute (API) present findings which show significant improvements in both

summertime ambient ground-level ozone and ground-level PM2.5 concentrations as a result of the

switch from Tier 1 to Tier 2 standards. However, the studies project relatively small additional

reductions in 2022 levels of these pollutants as a result of the proposed Tier 3, even when

considering emissions reductions due to a lower gasoline sulfur content.28 As a result, API has

argued that the Tier 3 proposal ignores the results of earlier sulfur standards that had led to

“significant reduction in ambient ozone levels and will lead to further ozone reductions for the

next decade,” adding that Tier 3 rules would add no substantial benefit while imposing

“significant costs on making gasoline.” Further, API notes that any benefit-cost analysis of the

rule would need to be considered along with EPA’s other mandates for the refinery sector,

including the prospects for strengthening fuel volatility requirements for gasoline, greenhouse gas

rules for the sector, and forthcoming stricter ozone ambient air standards.29

As a point of comparison, EPA’s Final Regulatory Impact Analysis for the Tier 3 standards

returns estimates similar to the Environ studies for reductions in ozone and fine particulate levels

in the near term (2018).30 Further, EPA estimates that by 2030—when it is projected that many of

the vehicles on the road would be covered under the Tier 3 standards—ozone and fine particulate

levels would decrease an additional 50% on average. EPA bases its health impact estimates on the

2030 modeling.

(...continued)

Standards,” April 4, 2013, http://www.lung.org/healthy-air/outdoor/resources/clean-gasoline-and-vehicles/.

For example, see Attorneys General of New York, Connecticut, Delaware, Maryland, Massachusetts, Maine, New

Hampshire, North Carolina, Oregon, Rhode Island, Vermont, Washington and the District of Columbia and

Corporation Counsels of the Cities of New York & Chicago, “Comments on Proposed Tier 3 Motor Vehicle Emissions

Standards,” July 1, 2013, http://www.ag.ny.gov/press-release/ag-schneiderman-and-city-and-state-coalition-urgeadoption-national-air-pollution.

Environ International Corporation estimates that if the current Tier 2 standards were to remain in place until 2022,

they would have been responsible for lowering the monthly average ambient ozone concentrations by as much as 12

parts per billion. By enacting the Tier 3 rule, ozone concentrations would fall by only an additional 0.5 part per billion

by 2022, according to this analysis. Similarly, Tier 2 would have been responsible for lowering summertime monthly

average 24-hour PM2.5 concentrations by up to 2.7 µg/m3; whereas enacting the Tier 3 rule would return only a 0.1

µg/m3 reduction. Environ International Corporation, “Effects of Light-Duty Vehicle Emissions Standards and Gasoline

Sulfur Level on Ambient Ozone,” Prepared for the American Petroleum Institute, September 2012,

http://www.api.org/~/media/Files/News/2013/13-April/ENVIRON-Sep2012-Effects-of-LDV-Emiss-Stds-GasolineSulfur-level-on-Ozone.pdf; and Environ International Corporation, “Effects of Light-Duty Vehicle Emissions

Standards and Gasoline Sulfur Level on Ambient Fine Particulate Matter,” Prepared for the American Petroleum

Institute, June 2013, http://www.api.org/news-and-media/news/newsitems/2013/june2013/~/media/Files/Policy/Alternatives/Environ-API-report-vehicle-emissions.pdf.

American Petroleum Institute, “Study: Tier 3 sulfur rule would do little to improve air quality,” June 20, 2013,

http://www.api.org/news-and-media/news/newsitems/2013/june-2013/study-tier-3-sulfur-rule-would-do-little-toimprove-air-quality.

EPA estimates decreases in ozone design levels of between 0.5 and 1.0 ppb in 2018 and decreases in 24-hour PM2.5

design values in over 200 counties of between 0.05 and 0.15 μg/m3. EPA, “Final Rule,” Section III: C.

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Costs of the Rule

The economic cost imposed by the Tier 3 standards will affect two sectors directly: vehicle

manufacturing and petroleum refining. For the former, changes in vehicle design are expected to

increase manufacturers’ costs of production. EPA estimates that these costs differ across years and

range from $46 to $65 for cars, $73 to $88 for trucks, and $33 to $75 for medium- and heavyduty vehicles covered by the rule.31 This increase in price is expected to lower the quantity of

vehicles sold, although given that vehicle prices likely would not change by more than the cost

increase, the decrease in vehicle sales is projected to be negligible.

More controversial has been the potential impact on the cost of gasoline. In letters to the

President before the standards’ proposal, several Senators of both parties asked that the

Administration delay the EPA rulemaking over concerns that the new fuel standards would raise

the price of gasoline;32 similar concerns have been expressed in the wake of the final rule.33

Refiners argue that it will be difficult and costly overall to meet the standards and that some

independent and/or smaller refineries will find it more difficult than others to comply.34 The

American Petroleum Institute contends that the tighter sulfur controls would impose almost $10

billion in refinery capital expenditures, create an annual compliance cost of $2.4 billion, increase

gasoline manufacturing costs from 6 to 9 cents per gallon, and increase refinery GHG emissions

by 1%.35

EPA has asserted that the rule as proposed would add less than a penny to the price of a gallon of

gasoline (0.65 cents according to the final rule’s Regulatory Impact Analysis).36 EPA contends

that many variables determine the retail price of gasoline, including the price of crude oil on the

global market, taxes, transportation costs, and distribution and marketing costs, as well as refinery

costs. According to analysis by the U.S. Energy Information Administration, refinery costs

averaged 10.6% of the retail cost of gasoline in 2013;37 and thus, the gasoline sulfur control for

Tier 3 would add just 0.2 percentage points to this refining component. EPA’s evaluation of

gasoline sulfur control costs is corroborated by several studies, including one prepared for the

International Council for Clean Transportation and another for the Emissions Control Technology

Association.38 (See text box for further discussion of the cost estimates).

Calculations at EPA, “Final Rule,” Section VII.A.

For example, see Senator Heidi Heitkamp, et al., “Letter,” March 19, 2013,

http://www.heitkamp.senate.gov/record.cfm?id=341129, and Senator David Vitter, et al., “Letter,” February 4, 2013,

http://www.epw.senate.gov/public/index.cfm?FuseAction=Minority.PressReleases&ContentRecord_id=a70c480cce1b-5ee7-430b-ae4f2e5230d9.

For example, see comments by Rep. Lamar Smith, Chairman of the House Science, Space, and Technology

Committee, “EPA Fuel Standards Based on Secret Science," March 3, 2014, http://science.house.gov/pressrelease/smith-epa-fuel-standards-based-secret-science.

For further detail on the market forces affecting the U.S. refinery industry, see CRS Report R41478, The U.S. Oil

Refining Industry: Background in Changing Markets and Fuel Policies, by (name redacted) et al.

Baker and O’Brien, “Addendum to Potential Supply and Cost Impacts of Lower Sulfur, Lower RVP Gasoline,”

Prepared for the American Petroleum Institute, March 2012,

http://www.api.org/Newsroom/upload/110715_LowerSulfur_LowerRVP_Final.pdf.

See calculations at EPA, “Final Rule,” Section VII.B.

U.S. Energy Information Administration, “Gasoline Pump Components History,”

http://www.eia.gov/petroleum/gasdiesel/gaspump_hist.cfm.

See MathPro Inc., “Refining Economics of a National Low Sulfur, Low RVP Gasoline Standard,” Prepared for the

International Council for Clean Transportation, October 25, 2011,

(continued...)

Congressional Research Service

Tier 3 Motor Vehicle Emission and Fuel Standards

In sum, EPA estimates the annual compliance cost of the overall program in 2030 would be

approximately $1.5 billion ($760 million for the vehicle program and $700 million for the fuel

program), and the 2030 benefits would be between $6.7 billion and $19 billion, or 4.5 to 13 times

greater than the costs of the program. To address industry concerns, the final rule would allow a

three-year delay in compliance for small refiners. It also includes averaging, banking, and trading

programs that would give the refining industry flexibility in meeting the standards.

Comparisons of Fuel Cost Estimates for the Tier 3 Program

The Tier 3 fuel program is expected to result in many refiners investing in additional sulfur control hardware and/or

changing their operations to reduce gasoline sulfur levels. The costs that would be incurred by the refiners—and, by

extension, the costs incurred by the average consumer of gasoline—have been under intense debate since even

before the Tier 3 standards were proposed. EPA and several third parties have produced cost estimates for the fuel

program. A short summary of the estimates and the methodology used to produce them is presented below.

EPA. Estimate: “0.65 cents per gallon, averaged over all gasoline.” Methodology: EPA used a refinery-by-refinery cost

model, projecting the sulfur control technology expected to be used by each existing refinery and its cost. EPA

aggregated the individual refinery costs to develop a national average and assumed that refiners would take full

advantage of the industry- and nation-wide averaging, banking, and trading (ABT) provisions. (The ABT provisions

allow refiners who reduce their gasoline sulfur levels below the 10 ppm target to earn credits and trade them to

other refiners who find abatement more expensive.) Further, EPA focused on the circumstances that refineries would

face in the longer term, specifically after 2020. This approach meant that the ABT program modeling did not consider

the impact on gasoline sulfur levels of delayed compliance for small refiners and small volume refineries, nor did it

consider the generation and use of any early sulfur credits. EPA estimated capital expenditures of $2.025 billion,

amortized at a 7% return on investment before taxes and expressed in 2011 dollars.

MathPro Inc. “Refining Economics of a National Low Sulfur, Low RVP Gasoline Standard,” Prepared for the

International Council for Clean Transportation, October 25, 2011. Estimate: “0.8 cents per gallon.” Methodology:

ICCT used a regional refinery model (aggregating operations in PADDs 1-4). ICCT estimated the total capital

investment, annual refining cost, and per-gallon refining cost of meeting the 10 ppm sulfur standard as $3.9 billion,

$1.5 billion, and 1.4 cents per gallon, respectively, amortized at a 10% return on investment after taxes. Further, their

analysis indicated that (1) reducing the average CapEx by 30% (through revamps and operational changes rather than

installing new units [as EPA had considered in its CapEx estimate]), and (2) reducing the return on investment to 7%

before tax, returned an estimate of 0.8 cents per gallon.

Baker and O’Brien. “Addendum to Potential Supply and Cost Impacts of Lower Sulfur, Lower RVP Gasoline,”

Prepared for the American Petroleum Institute, March 2012: Estimate: “a marginal cost of 6 cents to 9 cents per

gallon in most markets.” Methodology: API used a refinery-by-refinery cost model, but employed higher capital costs

for targeted technologies (specifically the cost of the fluid catalytic cracking post-treaters) than the other studies and

assumed that no refinery would shut down as a result of the standard. The API study reported “marginal costs”—not

average costs—projecting that the refineries with the highest compliance costs would set the price of gasoline for the

entire market. API employed a 20 ppm sulfur cap on individual refineries (the final rule allows an 80 ppm cap) which

effectively precludes the utilization of the fuel program’s ABT flexibilities. API estimated $10 billion in refinery capital

expenditures and $2.4 billion in annual compliance costs, amortized at a 10% return on investment after taxes. (As a

comparison, EPA estimated a value for the “average cost” of gasoline using API’s CapEx data and production volumes

and found it would be equivalent to 2.12 cents per gallon. Similarly, Navigant Economics (see footnote 38) estimated a

value for the “average cost” of gasoline using API’s data and found it would be equivalent to 1.9 cents per gallon.)

(...continued)

http://www.theicct.org/sites/default/files/publications/ICCT04_Tier3_Report_Final_v4_All.pdf; and Navigant

Economics, “Economic Analysis of the Implications of Implementing EPA’s Tier 3 Rules,” Prepared for the Emissions

Control Technology Association, June 14, 2012, http://www.ectausa.com/061212-Economic-Analysis-of-theImplications-of-Tier-3-Sulfur-Reduction-Final_embargoed.pdf.

Congressional Research Service

Tier 3 Motor Vehicle Emission and Fuel Standards

Appendix. Tier 3 Vehicle Emissions Standards

Table A-1. Tier 3 Fleet-Average Non-Methane Organic Gases and Nitrogen Oxides

Standards by Model Year

NMOG+NOx emissions in milligrams per mile (mg/mi)

Standards

Tier 2

2017

2018

2019

2020

2021

2022

2023

2024

2025

Federal Test Procedure

LDV, LDT1

160

LDT2, 3, 4,

MDPV

160

101

HDV Class 2b

395

310

278

253

228

203

178

HDV Class 3

630

508

451

400

349

298

247

Supplemental Federal Test Procedure

All L and M

200

103

Source: Prepared by the CRS based on data from the U.S. Environmental Protection Agency.

Notes: Tier 2 standards apply for a 120,000 mile full useful life for Bin 5 vehicles. Tier 3 standards apply for a

150,000 mile useful life for the fleet-average vehicles. Tier 3 standards apply to both test procedures: FTP,

Federal Test Procedure (simulating typical driving), and SFTP, Supplemental Federal Test Procedure (a composite

test simulating higher temperatures, higher speeds, and quicker accelerations). For vehicle classes as defined by

40 CFR 86.1803-01: LDV, Light-Duty Vehicle, a passenger car or passenger car derivative capable of seating 12

passengers or less; LDT1, Light-Duty Truck 1, any light light-duty truck up through 3,750 lbs loaded vehicle

weight; LDT2, Light-Duty Truck 2, any light light-duty truck greater than 3,750 lbs loaded vehicle weight; LDT3,

Light-Duty Truck 3, any heavy light-duty truck up through 5,750 lbs loaded vehicle weight; LDT4, Light-Duty

Truck 4, any heavy light-duty truck greater than 5,750 lbs loaded vehicle weight; MDPV, Medium Duty Passenger

Vehicle (8,501-10,000 lbs) designed to carry passengers as opposed to cargo; and HDV, Heavy Duty Vehicles,

Class 2b (8,501-10,000 lbs) and Class 3 (10,001-14,000 lbs). For the light-duty fleet over 6000 lbs gross vehicle

weight, and MDPVs, the Tier 3 standards apply beginning in MY 2018. For the heavy-duty fleet, voluntary

standards are made available in 2016 and 2017, matching those of California’s LEV III program. HDV Tier 3

standards for SFTP are consistent with those adopted by the California LEV III program. HDV Tier 3 standards

also have requirements for carbon monoxide and formaldehyde.

Table A-2. Tier 3 Particulate Matter Standards by Model Year

PM emissions as measured by the Federal Test Procedure in milligrams per mile (mg/mi)

Standards

Tier 2

MY2017

MY2018

MY2019

MY2020

MY2021

MY2022

LDV, LDT, MDPV

HDV, Class 2b

HDV, Class 3

Phase-in (percent of

U.S. sales)

100

Source: Prepared by the CRS based on data from the U.S. Environmental Protection Agency.

Notes: Tier 2 standards apply for a 120,000 mile full useful life for Bin 5 vehicles. Tier 3 standards apply for a

150,000 mile useful life. For vehicles above 6000 lbs gross vehicle weight, the FTP PM standards will apply

beginning in MY 2018 (see note in Table A-1). EPA is also setting PM standards for emissions measured over

the SFTP with standards levels and duty cycles varying by vehicle class and power-to-weight ratio.

Congressional Research Service

Tier 3 Motor Vehicle Emission and Fuel Standards

Table A-3. Tier 3 Evaporative Emission and Other Vehicle Standards

Standards

Requirements

Evaporative Emissions Standards (i.e., evaporative

emissions from the entire fuel system)

The standard over 2-day and 3-day evaporative emission

tests vary by vehicle categories and range from 0.300 to

0.500 grams (g)/test for light-duty vehicles and medium

duty passenger vehicles, with 0.600 g/test for on-road

gasoline-powered heavy-duty vehicles.

Bleed Test Requirements (i.e., evaporative emissions

from just the fuel tank and the evaporative emission

canister)

The standard for light-duty and medium-duty passenger

vehicles is 0.020 g/test without averaging. The standard

for on-road gasoline-powered heavy-duty vehicles is

0.030 g/test without averaging.

Leak Test and Emission Standard

The standard requires that the cumulative equivalent

diameter of any orifices or “leaks” not exceed 0.02

inches anywhere in the fuel/evaporative system for lightduty vehicles, medium-duty passenger vehicles, and some

gasoline-powered heavy-duty vehicles.

Onboard Diagnostic System (OBD) Requirements

The standard adopts and incorporates by reference the

California Air Resources Board’s current OBD

regulations, effective for MY 2017, with only minor

differences. These requirements cover all vehicles except

those in the heavier fraction of the heavy-duty vehicle

class.

Source: Prepared by the CRS based on data from the U.S. Environmental Protection Agency.

Author Contact Information

(name redacted)

Analyst in Environmental Policy

/redacted/@crs.loc.gov, 7-....

Congressional Research Service

(name redacted)

Specialist in Environmental Policy

/redacted/@crs.loc.gov, 7-....

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