The Obama administration is letting trucking companies buy their way out of new climate rules, by simply paying a fine if they can't comply.
The Environmental Protection Agency and the Department of Transportation finalized the new joint greenhouse gas and fuel efficiency rules for big semi-truck haulers, vans and school buses on Tuesday.
Buried deep in the rules are changes to a complicated fining mechanism that the agency uses to continue progress when companies, for economic reasons, cannot comply.
The EPA finalized the rules as the last part of the administration's climate change agenda, while admitting that the cost has jumped from what it was when proposed.
"There will be some escalation in cost, but it is with a long lead time and gradual and very short payback period," said EPA Administrator Gina McCarthy in issuing the regulations Tuesday.
McCarthy's hope is that by the time the rules are fully implemented in a decade, truck operators would have recouped the cost through the fuel savings from the highly efficient vehicles. The costs vary based on the type of truck and its size. But the price for a big-rig tractor trailer truck could climb by as much as $15,100 by the time the rules are fully implemented in 2027. That's a jump of about $1,000 per truck from the original proposal that EPA issued last year.
Many large manufacturers and trucks fleet operators, such as engine maker Cummins and heavy-duty truck owners Waste Management and Pepsi Co., say they support the rules.
But there still is concern among truck retailers, who fear smaller companies could be hurt by the rules.
A spokesman for the American Truck Dealers, representing about 2,000 heavy-duty truck dealerships, told the Wall Street Journal that the group was still reading the rule but was "concerned with the possibility that compliance will prove too complex or expensive for the market [dealer customers] to accept without disruption."
That's OK, according to the final regulation. The EPA says manufacturers and truckmakers will just pay fines in lieu of compliance. Companies to which the fine applies are referred to as "laggards."
The hope is that the penalties are temporary and the companies step up to comply.
"Such 'technology-forcing' standards create the risk that one or more manufacturers may lag behind in the development of their technology to meet the standard and, thus, be forced out of the marketplace," the EPA said in the final rule.
Recognizing that risk, Congress enacted a change that requires the EPA to establish the special penalties "to protect these technological laggards by allowing them to pay a penalty for engines that temporarily are unable to meet the applicable emission standard, while removing any competitive advantage those technological laggards may have," the EPA said.
The penalty was initiated by the agency as a way for businesses to meet the EPA's increasingly stringent pollution controls for nitrogen oxide emissions in 2012. But federal judges had other ideas about the proposed fines.
The D.C. Circuit Court of Appeals said the EPA didn't provide enough notice to businesses before finalizing the penalties, in addition to other problems and therefore directed the EPA to vacate it.
But now the agency says it has met the court's test for keeping the penalty in place, and it's back. But since the nitrogen oxide standards have been met, that leaves the EPA to find another home for its fines.
In Tuesday's Phase 2 proposed rule, the EPA said it re-proposed the fines with more notice and additional opportunity for public comment. And "although EPA received one comment opposing these amendments [to the penalties], they are being finalized as proposed," it said.
The penalties aren't the more common penalties EPA uses to enforce its regulations. These are a new class of fines called "nonconformance penalties."
They "are monetary penalties established by regulation that allow a vehicle or engine manufacturer to sell engines that do not meet the emission standards," the EPA said in the final rule.
So, basically, a company pays the fine, instead of meeting the standard.