Since 1984, EPA has progressively  implemented more and more stringent diesel emissions standards, for  example, reducing the level of allowable nitrogen oxide emissions from  diesel engines from 10.7 grams per unit of work in 1988 to 2.5 grams in 2004  (see fig. This adversely affected their operations, at least in the short term,  according to company officials. To meet the increased demand for trucks with older  engines, the major engine manufacturers increased production of new  trucks with older engines before October, but had to decrease production  when demand subsequently dropped until about early 2003, with  detrimental effects, according to representatives of the engine  manufacturers we contacted. These manufacturers also said that they lost  market share to others that were not subject to the consent decrees or that  decided to pay penalties rather than make a new engine on time. EPA roughly estimated that two provisions of the consent decrees would  reduce nitrogen oxide emissions by roughly 4 million tons. However, as  discussed, trucking companies bought more trucks with the older engine  technology than planned, and truck owners are now operating trucks  longer than expected, thereby reducing the number of trucks with cleaner  engines on the road below anticipated levels. Therefore, by mid-2003, the U.S. heavy-duty  diesel engine market was dominated by (1) the four manufacturers subject  to the decrees that were selling engines that met the new emissions  standards—Cummins, Detroit Diesel, Mack Trucks, and Volvo; (2) two  manufacturers subject to the decrees that were selling engines that did not  meet the standards—Navistar International and Caterpillar; and (3)  Mercedes, that entered the U.S. market in 1999 but that did not have to  meet the standards until 2004. Engine manufacturers we contacted expect to have new  engines ready for 2007 and to be able to meet the trucking companies’ time  frames for delivering trucks with prototype engines for testing. But, they believe they can resolve these issues before 2007. However, even at these lower levels, the nine fuel industry  representatives said that the likelihood of contamination during the  delivery of the fuel through the distribution system is extremely high. All of the representatives said that they are highly supportive of the 2007  standards. In  addition, representatives of some of these companies questioned whether  the availability of a relatively small number of test vehicles in a limited  number of fleets could provide sufficient information to allay the concerns  of the trucking industry as a whole. Some Stakeholders Commended EPA’s Efforts to Ensure Technology Is Ready by 2007, but Others Would Like the Agency to Provide More Certainty

EPA has taken a number of steps to help with and monitor the engine and  fuel technology development. However, some of the engine manufacturers and the trucking  companies we contacted would like more help and reassurance that the  technology will be ready when needed, including economic incentives to  manufacturers to produce engines on time and trucking companies to buy  them as scheduled. Some Stakeholders Believe EPA Has Done Enough to Promote the Technology, While Others Would Like More Help and Outreach

In general, a number of stakeholders we contacted—the association of  emissions control equipment manufacturers, a number of the fuel industry  representatives, the environmental and public health groups, and two of  the engine manufacturers—either commended EPA for its efforts to ensure  the needed technology is ready on time, or believe the agency is already  doing enough to provide such assurances. As to convening an independent review panel, we do not believe that  this would unduly delay the schedule for implementing the standards. Scope and Methodology

Our objectives in this review were to determine (1) the effects, if any, of  EPA’s 1998 consent decrees with diesel engine manufacturers on trucking  companies, engine manufacturers, and expected emissions reductions;   (2) stakeholders’ views on industries’ ability to comply with the 2007  standards and EPA’s actions to ensure that the new engine technologies and  low-sulfur fuel will be ready in time; and (3) if not, EPA’s options and plans  for mitigating any potential negative effects on key industry sectors. Because ATA  could not identify which of its member companies had purchased engines  in the months before and immediately after October 2002, GAO and ATA  agreed that the largest trucking companies, as determined by the total  number of trucks in their fleets, were more likely than smaller companies  to have purchased trucks during that period and, therefore, would be in the  best position to recount their experience with both the new engines and the  impacts of the accelerated schedule. For example, we  used the information showing that: (1) the industry pre-bought older  engines prior to October 2002 because companies did not have engines in  time to test their reliability and possible costs; (2) companies that had  bought the new engines determined both the purchase price, and  operations and maintenance costs, were higher than estimated and  anticipated; and (3) EPA developed its estimate of what it would cost to  buy and operate new engines for 2007 in 2000, before technology designs  were completed and selected to assess the trucking representatives’  concerns about meeting the 2007 standards. This increase in truck production may be  associated with the decrees. Addressing concerns about whether fuel will be available in sufficient  quantities and locations and the new engines will be ready in time to test  should not be overly burdensome and will help to prevent a significant pre- buy of older engines before 2007 that would delay emissions and health  benefits as occurred in 2002.
Why GAO Did This Study

Diesel engine emissions pose health risks, but one major source--heavy-duty diesel vehicles--is critical for our economy. To reduce risks, the Environmental Protection Agency (EPA) has set stringent emissions standards for diesel engines. In 1998, EPA found that some engine makers were violating standards, so they agreed to build engines that meet 2004 standards early, by October 2002. EPA has set even more stringent standards for 2007. GAO was asked to (1) assess the October 2002 deadline's effects on industry and emissions, and (2) obtain stakeholders' views on the readiness of technology for the 2007 standards and EPA's efforts to ensure this. GAO analyzed information from EPA, 10 large trucking companies, the engine makers subject to the early deadline, and other stakeholders.

What GAO Found

Implementing the 2004 diesel emissions standards 15 months early disrupted some industries' operations but also helped reduce pollution earlier. More specifically, because some manufacturers had to build new engines sooner than planned, most could not provide trucking companies with prototype engines early enough to test. Concerned that the new engines would be costly and unreliable, some of the companies said they bought more trucks with old engines than planned before October 2002. Our analysis of truck production and financial data also shows this surge. This adversely affected some companies' operations and profits. To meet the increased demand for trucks with old engines, some manufacturers reported that they ramped up production of such engines before October. But when demand subsequently dropped, they had to decrease production and release workers, reducing profits and disrupting operations, at least until demand increased later in 2003. Manufacturers of the new engines also continued to lose market share to manufacturers that either did not have to meet the early date, or that did but chose not to, paying penalties instead. While accelerating the schedule for new engines affected some industries, it accelerated emissions benefits, although not to the extent or in the time frames anticipated. For example, EPA roughly estimated that its agreements with engine manufacturers that violated standards would reduce nitrogen oxide emissions by about 4 million tons over the life of the engines. But because companies initially bought more trucks with old engines and owners are now operating trucks longer, some of the expected emissions reductions will be delayed. As for the 2007 standards, EPA has taken a number of steps to aid the transition to the new diesel engines and fuel, but some stakeholders would like more help. Most engine, emissions control, and fuel industry representatives said the needed technologies will be ready on time; but other engine, trucking, and fuel representatives have concerns and would like more help to ensure that the technology will be available. For example, manufacturers plan to have limited numbers of prototype engines ready for a few fleets to test by mid- to late-2005-- trucking companies say they need new engines 18 to 24 months before the 2007 deadline to test the engines in all weather conditions and to develop their longterm purchasing plans. Some companies, however, are concerned that providing test engines to only a few fleets may not provide the industry as a whole with sufficient information to judge the engines' performance. In addition, they are still concerned that the new engines may be too costly and much less fuelefficient. As a result, they expect companies will again buy more trucks with old engines before the deadline, disrupting industry operations and emissions benefits. The fuel industry representatives said they can produce the low-sulfur fuel the new engines require on time and see no reason to delay the standards. Nevertheless, they worry the fuel initially may not be available nationwide and it may be difficult not to contaminate it with other fuels in the distribution system. Environmental and health groups do not want to delay the standards or the expected emissions benefits. Some stakeholders would like more information on technological progress. In addition, they would like more reassurance--such as from an independent review panel--that the technology will be ready on time and additional assistance--such as economic incentives--to encourage timely purchases of trucks with the new technologies.