Motor Vehicle Exchange

NHTSA’s Light Duty Vehicle Fuel Economy Program

In 2009, NHTSA adopted new requirements for manufacturers wishing to transfer fuel economy credits between their fleets and for manufacturers and other persons wishing to trade fuel economy credits to achieve compliance with prescribed fuel economy standards. These new rules were effective with the 2011 model year which means that automakers will be able to start taking advantage of the new credit trading provisions in the spring of 2012 (i.e., after they have banked 2011MY credits with the agency). For the first time in history, automakers who have traditionally paid noncompliance penalties to the IRS will have the flexibility to instead acquire credits from manufacturers with excess credits. And given the more stringent light duty vehicle standards that have been established for the 2012-2016 model years, it is recognized by government and industry that compliance through credit acquisition may be necessary and prudent for certain light duty vehicle manufacturers.

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NHTSA’s Medium- and Heavy-Duty Vehicle Fuel Consumption Program

As of 2011, there are now for the first time fuel consumption standards established for medium- and heavy-duty vehicles that will go into effect beginning in the 2014 model year (with early compliance and credit generation possible for the 2013 model year).  Like with the light duty vehicle fuel consumption program, the new rules for medium- and heavy-duty vehicles include credit-trading provisions to provide truck and engine manufacturers with enhanced compliance flexibility. Contained in 49 CFR Part 535.7, the new averaging, banking and trading (ABT) program for fuel consumption credits makes credit trading possible for the following averaging sets:

  1. Heavy duty pickup trucks and vans
  2. Vocational light-heavy vehicles at or below 19,500 pounds GVWR
  3. Vocational and tractor medium-heavy vehicles above 19,500 pounds GVWR but at or below 33,000 pounds GVWR
  4. Vocational and tractor heavy-heavy vehicles above 33,000 pounds GVWR
  5. Compression-ignition light heavy-duty engines for Class 2b to 5 vehicles with a GVWR above 8,500 pounds but at or below 19,500 pounds
  6. Compression-ignition medium heavy-duty engines for Class 6 and 7 vehicles with a GVWR above 19,500 but at or below 33,000 pounds
  7. Compression-ignition heavy heavy-duty engines for Class 8 vehicles with a GVWR above 33,000 pounds
  8. Spark-ignition engines in Class 2b to 8 vehicles with a GVWR above 8,500 pounds

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EPA’s Light Duty Vehicle GHG Emissions Program

In 2010, for the first time in its history, the EPA established GHG emissions standards for light duty vehicles. Created in conjunction with the fuel consumption standards established by NHTSA, these stringent new GHG emissions standards are effective in the 2012-2016 model years. Under the new rules, manufacturers have the ability to generate early compliance credits. Therefore, manufacturers already have the opportunity buy and sell credits under this program. Unlike the NHTSA fuel consumption program, paying noncompliance penalties (because of their magnitude) is not an option for manufacturers and thus credit acquisition is anticipated to be the only practical alternative for manufacturers who are unable to bring their fleets into compliance with the new standards.

Embedded in the EPA’s light duty vehicle GHG emissions program are special standards known as the Temporary Leadtime Allowance Alternative Standards (TLAAS).  Per 40 CFR 86.1818-12(e)), qualifying manufacturers (i.e., those who sold fewer than 400,000 but more than zero 2009 MY combined passenger automobiles and light trucks),  can apply the TLAAS standards to as many as 100,000 2012-2015MY passenger automobiles and/or light trucks.  However, qualifying manufacturers with sales of 2009MY combined passenger automobiles and light trucks in the U.S. of greater than zero and less than 50,000 vehicles may apply the TLAAS standards to as many as 200,000 vehicles (over the 2012-2015 model years) and may additionally apply the TLAAS standards to as many as 50,000 2016 model year vehicles.  Qualifying manufacturers wishing to apply the TLAAS standard to more than 100,000 vehicles must, however, provide annual documentation of good-faith efforts made by the manufacturer to purchase credits from other manufacturers.  Via Mobilis Trading, automakers will be able to take appropriate measures to satisfy the requirements of 40 CFR 86.1818-12(3).

The light duty vehicle GHG program also includes special rules for small volume manufacturers. Per 40 CFR 86.1801-12(k), small volume manufacturers (i.e., manufacturers with either MY2008 or MY2009 U.S. sales of more than zero and less than 5,000) are eligible for an exemption from the CO2 standards. To be exempted, 40 CFR 86.1801-12(k)(3) requires the manufacturer to submit a declaration to EPA which among other things demonstrates due diligence in having attempted to first secure credits from other manufacturers. This declaration must be signed submitted at least 30 days prior to the introduction into commerce of any vehicles for each model year for which the small volume manufacturer status is requested, but not later than December of the calendar year prior to the model year for which deferral is requested. For example, if a manufacturer will be introducing model year 2012 vehicles in October of 2011, then the small volume manufacturer declaration would be due in September 2011. Via Mobilis Trading, small volume manufacturers will be able to take appropriate measures to satisfy the requirements of 40 CFR 86.1801-12(k)(3).

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EPA’s Medium- and Heavy-Duty Vehicle GHG Emissions Program

Established in conjunction with the new NHTSA fuel consumption standards that are applicable to 2014 model year and later medium- and heavy duty vehicles, there are now for the first time GHG emissions standards in place as well (with early compliance and credit generation possible for the 2013 model year). Like with the light duty vehicle fuel consumption program, the new rules for medium- and heavy-duty vehicles include credit trading provisions to provide truck and engine manufacturers with enhanced compliance flexibility. Contained in 49 CFR Part 535.7, the new averaging, banking and trading (ABT) program for fuel consumption credits makes credit trading possible for the following averaging sets:

  1. Spark-ignition engines
  2. Compression-ignition light heavy-duty engines
  3. Compression-ignition medium heavy-duty engines
  4. Compression-ignition heavy heavy-duty engines
  5. Heavy-duty vehicles at or below 14,000 pounds GVWR
  6. Vehicles at or below 19,500 pounds GVWR that are subject to the standards of § 1037.105.
  7. Vehicles above 19,500 pounds GVWR but at or below 33,000 pounds GVWR.
  8. Vehicles over 33,000 pounds GVWR.

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California and S.177 State Low Emission Vehicle Program

In addition to having to meeting the fleet average NMOG requirements, the LEV program also contains the zero-emission vehicle (ZEV) mandate. Under the LEV program rules, vehicle manufacturers must comply with a fleet average NMOG requirement. Although the fleet average NMOG standards have not posed much of a compliance challenge in recent years, proposed LEV III fleet average NMOG standards will be more stringent and some manufacturers may wish to have the flexibility to acquire credits to ensure compliance with the regulation. Via Mobilis Trading, manufacturers will have this opportunity to buy and sell NMOG credits.

In addition to having to meeting the fleet average NMOG requirements, the LEV program also the contains zero-emission vehicle (ZEV) mandate. Although the implementation of the ZEV mandate has been delayed and modified over the years, it is now in effect and manufacturers subject to the mandate must produce a certain percentage of zero emission vehicles or vehicles with near zero emissions to satisfy the law. Currently, manufacturers can comply with the ZEV mandate by producing certain quantities of zero emission vehicles (ZEVs), partial zero emission vehicles (PZEVs), advanced technology zero emission vehicles (AT PZEVs), or neighborhood electric vehicles (NEVs). Manufacturer unable to comply with the requirements have the option of acquiring credits from other manufacturers. To assist manufacturers with ZEV mandate compliance, Mobilis Trading offers the ability to acquire ZEV credits, PZEV credits, AT PZEV credits, and NEV credits.

In addition to California, several other states have adopted CA’s LEV program. These so-called S.177 states include: CT, MA, ME, MD, NJ, NY, RI, VT and WA. Mobilis Trading offer manufacturers the ability to acquire NMOG, ZEV, PZEV, AT PZEV and NEV credits to ensure compliance with each of these S.177 LEV/ZEV programs.

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Our easy-to-use online trading platform makes it possible for automakers, engine manufacturers, fuels producers, and fleet operators to buy and sell regulatory compliance credits via forward auctions and reverse auctions.
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In a Forward Auction, a company with excess credits initiates an auction to sell credits and companies needing credits bid to buy them. As the auction proceeds, bidding drives up the price of the credits. When the auction ends, the company that has offered to pay the most for the credits is the winner.

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In a Reverse Auction, a company needing credits initiates an auction to purchase credits and companies with excess credits bid to sell their credits to that company. As the auction proceeds, bidding drives the price of the credits down. When the auction ends, the company that has offered to sell their credits for the least amount of money is the winner.

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