Mail-Out #96-23 July 15, 1996 To: ALL INTERESTED PARTIES Re: Notice of Workshop Concerning Development of Voluntary Light-Duty Vehicle Accelerated Retirement Program Regulations This letter is notification of a public workshop, to be held by the staff of the California Air Resources Board (ARB), concerning the development of regulations for light-duty vehicle scrapping programs. This will be the second of several workshops to be held at various locations throughout the state. Each workshop is intended to address a different issue important to the development of regulations governing voluntary light-duty vehicle scrapping programs. The legislation that mandates these regulations specifically directs that the regulations be sensitive to the concerns of car collector interests. This workshop will focus on the issues of concern to car collectors by providing information on the staff's current progress and preliminary plans and by soliciting public comments. The workshop will be held at the following time and location: Thursday, August 15, 1996 9:30 a.m. to noon California Air Resources Board Annex 4 9530 Telstar Ave. El Monte, California In November 1994, ARB approved the State Implementation Plan (SIP), which outlines the approach to be taken in bringing the state's air quality into attainment with federal ozone standards. One of the measures contained in the SIP is measure M1, which calls for annual retirement of older, higher-emitting vehicles in the South Coast Air Basin. Full implementation of this measure is intended to begin in 1999 and will achieve emission reductions of reactive organic gases (ROG) and oxides of nitrogen (NOx), eventually resulting in a reduction of 25 tons per day ROG + NOx in 2010. The SIP also provides for such programs in other areas of the state, on an as-needed basis. In October 1995, the Governor signed Senate Bill 501 (SB 501), which directs ARB to develop regulations concerning programs to encourage the voluntary retirement of older, light-duty vehicles in the state. These regulations will define the method by which SIP measure M1 and similar programs will be implemented. A vehicle owner, whose car meets criteria to be contained in the regulations, will be given the opportunity to sell the vehicle to a program operator. The program operator would then dispose of the vehicle in such a manner as to ensure it does not return to service. Participating vehicle owners would be compensated financially with an amount to be determined by the market. Upon vehicle disposal, the program operator would be granted mobile source emission reduction credits of appropriate value, which may in turn be sold on the open market. The legislation that prescribes the regulations contains several conditions on how the regulations are to be implemented. Of interest to this workshop: "- the program design should be sensitive to the concerns of car collectors...." The staff will present a draft proposal addressing this requirement at the workshop. A description of the staff's proposal is included as an attachment to this letter. Because the regulations are in the early stages of development, the staff is interested in public input on this subject and would like to receive constructive comments and suggestions related to this draft proposal. Of course, the staff is always interested in obtaining feedback on all areas of public interest to this project. More than one workshop will be necessary to fully address the complete regulatory effort. Succeeding workshops will focus on such areas as interaction with the Inspection and Maintenance Program (Smog Check) and local district vehicle retirement programs, and credit calculation procedures and usage. In addition, ARB has assembled a Technical Advisory Group (TAG) to help address the details of the credit calculation procedure. The status of the TAG's progress will be presented in future public workshops. ARB encourages all interested parties to present comments and information on the subject of vehicle retirement for emission reductions at the appropriate workshop. Those who are unable to participate in person at the workshops or who wish to supply additional information are encouraged to submit written comments. Workshop participants who wish to discuss unresolved technical issues or confidential data may schedule individual meetings with the staff. The public board hearing for this regulatory item has been tentatively scheduled for April 1997. If you have any questions or comments regarding this subject, please contact Ms. Krista Fregoso, Air Pollution Specialist, Regulatory Strategy Section, at (916) 445-5035, or Mr. Steve Church, Associate Air Resources Engineer, Regulatory Strategy Section, at (916) 323-5189. Sincerely, /s/ Robert H. Cross, Assistant Chief Mobile Source Division ATTACHMENT Development of SB 501 Voluntary Light-Duty Vehicle Accelerated Retirement Program Regulations: Proposal for Dealing with the Concerns of the Collector Car Interests Background In October 1995, Governor Wilson signed Senate Bill 501 (SB 501) directing the Air Resources Board (ARB) to develop statewide regulations to encourage the voluntary retirement of older, higher-emitting, light-duty vehicles. These regulations, to be adopted by June 30, 1997, will define the method by which measure M1 of the State Implementation Plan (SIP) and other similar vehicle retirement programs will be implemented. The SIP, which outlines ARB's plans for achieving the federal ozone standards in California's six non-attainment areas, includes measure M1 as one method of obtaining a fraction of the necessary emission reductions in the South Coast Air Basin (SCAB). Measure M1 calls for the accelerated retirement, on a strictly voluntary basis, of a large number of older, higher- emitting vehicles per year in the SCAB, beginning in 1999. The early retirement of these vehicles is estimated to achieve a reduction of 25 tons per day of reactive organic gases (ROG) + oxides of nitrogen (NOx) in 2010. Vehicles retired following the requirements of the regulations under development will earn mobile source emission reduction credits applicable towards meeting the emission reduction goals of SIP measure M1. The SIP also allows this measure to be implemented in other non- attainment areas of the state on an as-needed basis. Because several different voluntary scrapping programs are under development or are already in place, a brief explanation of how these interconnect is worthwhile. An important element of all scrapping programs is that they are voluntary and exist only to provide options that are mutually beneficial to both vehicle owners and to industry. For example, private citizens benefit by potentially receiving more money for their cars than they might be worth on the open market. Industry benefits by having an alternative compliance option for achieving necessary emission reductions at a cost lower than that of traditional control strategies. Currently, several air quality districts have adopted rules governing local, voluntary scrapping programs. These district rules, which follow guidelines previously adopted by ARB, are subject to change if a more stringent protocol is adopted through this regulatory process. Generally, the goal of these local programs is to provide an alternative for local industries seeking a less costly compliance option to other district rules. The Bureau of Automotive Repair (BAR) is also developing criteria for participation in a voluntary scrapping program in conjunction with their Enhanced Inspection and Maintenance Program (Smog check II). This scrapping program, when implemented, could only be used by owners of "gross-polluters", which are vehicles that have the highest emissions. Although gross-polluters only comprise about 15 percent of all vehicles, they are responsible for approximately half of the state's vehicular pollution. The purpose of BAR's scrapping program is to provide a positive option to vehicle owners who do not wish to spend the money to repair their gross-polluting vehicles to achieve acceptable emission levels. Finally, it is the SB 501, or M1, scrapping program that is being developed through this workshop and regulatory process. The goal of the M1 program is to provide cost-effective air quality benefits to assist in achieving state and federally mandated clean air standards. As with all scrapping programs, the M1 program is voluntary. Of particular concern in this regulatory effort is the need to be sensitive to the issues important to those people and groups interested in collecting and preserving certain vehicles. The draft proposal presented in this document pertains only to this aspect of this regulatory effort and is based on specific provisions of SB 501. These provisions are: 1) Health and Safety Code Section 44100(e)(3), which states that "Participation by the vehicle owner shall be entirely voluntary and the program design should be sensitive to the concerns of car collectors and to consumers for whom older vehicles provide affordable transportation"; and 2) Health and Safety Code Section 44120(b), which states that the early vehicle retirement program implemented through these regulations shall "Set aside and resell to the public any vehicles with special collector interest. No emission reduction credit shall be generated for vehicles that are resold to the public..." The following proposal provides a process by which vehicles are made available to the public for purchase prior to being scrapped. As stated above, Health and Safety Code Section 44100(e)(3) requires ARB to consider affordable transportation concerns as well as the concerns of car collectors. When implemented, the "set aside" provisions contained in this proposal would help ensure the availability of vehicles and spare parts to consumers for whom these issues are important. Throughout the course of regulatory development, and particularly at the August workshop, ARB staff is interested in receiving constructive input and additional information for consideration in developing a final proposal dealing with these issues. Granting Emission Reduction Credits SB 501 authorizes the issuance of emission reduction credits to private entities (i.e., licensed scrappers or auto dismantlers) that purchase and retire vehicles in accordance with the regulations that are under development. SB 501 then authorizes the resale of those credits, to public or private entities, to be retired towards meeting the emission reduction requirements of measure M1 in the SIP (referred to as the M1 program) or for other purposes currently authorized by ARB. However, there are specific circumstances in which emission reduction credits will not be granted for vehicles purchased in accordance with the regulations under development. Eligibility for Generating Emission Reduction Credits In this proposal, emission reduction credit can only be generated by scrapping a vehicle that contains its engine block (disassembled engine components will be discussed in a later section of this proposal). For any vehicle purchased by a licensed scrapper or licensed auto dismantler, emission reduction credit will not be granted if the vehicle is resold to the public or if its engine is removed and resold to the public. Either of these two actions essentially removes the vehicle from the M1 program since it is now ineligible for generating credit. -- Regarding resale of a vehicle, the case for not granting credit is clear. SB 501 states that credit will not be granted for any vehicle that is resold to the public. Because a vehicle that is resold to the public has the potential for further use and may be driven again, there are no verifiable surplus emission reductions available for use as emission reduction credits. -- Regarding resale of an engine, SB 501 provides no specific requirements. However, the engine, which is the primary polluting unit of a vehicle, can be thought of as analogous to the vehicle itself. Therefore, unless the engine is permanently disabled, there is no assurance that there are verifiable emission reductions. It is possible that an engine could be used, as is, to prolong the useful life of a vehicle that otherwise would have been retired naturally. By extending the life of another older vehicle, there would be no net difference in the population of older vehicles. It is also possible that the availability of engines from scrapped vehicles could provide an indirect incentive for people to retain their older vehicles longer. In the case where an engine is rebuilt before continuing operation, it is not practical from a cost standpoint to rebuild an older engine to specifications that reduce its emission levels to that of a recent model year engine utilizing newer emission control technology. Instead, it is more likely that an engine would be rebuilt to its original configuration and its emission levels may be no less than they were just prior to scrapping the vehicle from which the engine was removed. As such, there are too many uncertainties associated with what will happen to an engine after it is purchased to ensure emission reductions will still be achieved. Vehicle Parts Recycling In order to generate real and quantifiable emission reduction credits, certain procedures must be performed to ensure that the vehicles for which credit is granted are never driven again. For all vehicles for which emission reduction credit is sought, the engine block must be permanently destroyed along with the Vehicle Identification Number, the license plates, and the body and frame. However, the removal of reusable components such as doors, fenders, bumpers, and disassembled engine components, with the exception of the emission control equipment and the engine block, will be allowed, within a reasonable timeframe, subsequent to possession of the vehicle by the licensed scrapper or the licensed auto dismantler. Defining and Identifying "Collector" Vehicles SB 501 states that the regulations should define the term "collector interest vehicle" and provide for the setting aside and reselling of any vehicles with special collector interest. For purposes of this regulation, ARB staff proposes to define a collector car as any vehicle for which a member of the public expresses an interest and purchases within a reasonable timeframe, i.e., any vehicle could potentially be a collector car. Therefore, all vehicles purchased by a licensed scrapper or licensed auto dismantler should be made available for inspection to the public prior to being scrapped. Under current operating procedures, auto dismantlers are unable to remove any vehicle components or permanently dispose of a vehicle until specific requirements have been fulfilled with the California Department of Motor Vehicles and the California Department of Justice. This process creates a natural window of opportunity of approximately 5 to 15 days between the time vehicles are purchased and are actually scrapped. During this time, car enthusiasts and others could view vehicles and select specific ones for purchase. To facilitate this process, licensed scrappers and auto dismantlers should be responsible for publishing notices identifying locations where vehicles are available for inspection and what kinds of vehicles are available for inspection. Suggestions to ARB staff regarding how to implement this process in an efficient and cost-effective manner are encouraged. Because this "lag" time between the time of vehicle purchase and vehicle scrapping already occurs, the "viewing" process should not create any undue burden on the scrapper or auto dismantler. Purchasing "Collector" Vehicles Once a car collector or any member of the public has expressed an interest in purchasing a specific vehicle and agrees to the requested purchase price, the vehicle should be purchased within a reasonable timeframe or the purchaser will risk losing the opportunity to buy that vehicle. The auto dismantler's natural lag time between the time of vehicle purchase and vehicle scrapping is anywhere from 5 to 15 days on average, and this is a reasonable timeframe in which to allow members of the public to view and purchase vehicles. Potential collector vehicles will be set aside for public viewing during this timeframe that normally occurs (not less than five days), but will not be set aside for viewing or purchase for any additional period of time.