(a) Applicability. Cold temperature fleet average standards apply for NMHC or NMOG+NOX emissions as described in § 86.1811. Certification testing provisions described in this subpart apply equally for meeting cold temperature exhaust emission standards except as specified.

(b) Calculating the cold temperature fleet average standard. Manufacturers must compute separate sales-weighted cold temperature fleet average emissions at the end of the model year using actual sales and certifying test groups to FELs, as defined in § 86.1803-01. The FEL becomes the standard for each test group, and every test group can have a different FEL. The certification resolution for the FEL is 0.1 grams/mile for NMHC and 0.010 grams/mile for NMOG+NOX. Determine fleet average emissions separately for each set of vehicles subject to different fleet average emission standards. Do not include electric vehicles or fuel cell vehicles when calculating fleet average emissions. Starting with Tier 4 vehicles, determine fleet average emissions based on separate averaging sets for light-duty program vehicles and medium-duty vehicles. Convert units between mg/mile and g/mile as needed for performing calculations. Calculate the sales-weighted cold temperature fleet averages using the following equation, rounded to the nearest 0.1 grams/mile for NMHC and to the nearest 0.001 grams/mile for NMOG+NOX:

(c) Certification compliance and enforcement requirements for cold temperature fleet average standards. Each manufacturer must comply on an annual basis with fleet average standards as follows:

(1) Manufacturers must report in their annual reports to the Agency that they met the relevant fleet average standard by showing that their sales-weighted cold temperature fleet average emissions are at or below the applicable fleet average standard for each averaging set.

(2) If the sales-weighted average is above the applicable fleet average standard, manufacturers must obtain and apply sufficient credits as permitted under paragraph (d)(8) of this section. A manufacturer must show via the use of credits that they have offset any exceedance of the cold temperature fleet average standard. Manufacturers must also include their credit balances or deficits.

(3) If a manufacturer fails to meet the cold temperature fleet average standard for two consecutive years, the vehicles causing the exceedance will be considered not covered by the certificate of conformity (see paragraph (d)(8) of this section). A manufacturer will be subject to penalties on an individual-vehicle basis for sale of vehicles not covered by a certificate.

(4) EPA will review each manufacturer's sales to designate the vehicles that caused the exceedance of the fleet average standard. EPA will designate as nonconforming those vehicles in test groups with the highest certification emission values first, continuing until reaching a number of vehicles equal to the calculated number of noncomplying vehicles as determined above. In a group where only a portion of vehicles would be deemed nonconforming, EPA will determine the actual nonconforming vehicles by counting backwards from the last vehicle produced in that test group. Manufacturers will be liable for penalties for each vehicle sold that is not covered by a certificate.

(d) Requirements for the cold temperature averaging, banking, and trading (ABT) program. (1) Manufacturers must average the cold temperature fleet average emissions of their vehicles and comply with the cold temperature fleet average standard. A manufacturer whose cold temperature fleet average emissions exceed the applicable standard must complete the calculation in paragraph (d)(4) of this section to determine the size of its credit deficit. A manufacturer whose cold temperature fleet average emissions are less than the applicable standard must complete the calculation in paragraph (d)(4) of this section to generate credits.

(2) There are no property rights associated with cold temperature credits generated under this subpart. Credits are a limited authorization to emit the designated amount of emissions. Nothing in this part or any other provision of law should be construed to limit EPA's authority to terminate or limit this authorization through rulemaking.

(3) The following transition provisions apply:

(i) Cold temperature NMHC credits may be used to demonstrate compliance with the cold temperature NMOG+NOX emission standards for Tier 4 vehicles. The value of a cold temperature NMHC credit is deemed to be equal to the value of a cold temperature NMOG+NOX credit.

(ii) Credits earned from any light-duty vehicles, light-duty trucks, and medium-duty passenger vehicles may be used for any light-duty program vehicles, even if they were originally generated for a narrower averaging set.

(4) Credits are earned on the last day of the model year. Manufacturers must calculate, for a given model year, the number of credits or debits it has generated according to the following equation, rounded to the nearest 0.1 vehicle-grams/mile:

(5) NMHC and NMOG+NOX credits are not subject to any discount or expiration date except as required under the deficit carryforward provisions of paragraph (d)(8) of this section. There is no discounting of unused credits. NMHC and NMOG+NOX credits have unlimited lives, subject to the limitations of paragraph (d)(2) of this section.

(6) Credits may be used as follows:

(i) Credits generated and calculated according to the method in paragraph (d)(4) of this section may be used only to offset deficits accrued with respect to the standard in § 86.1811-10(g)(2). Credits may be banked and used in a future model year in which a manufacturer's average cold temperature fleet average level exceeds the applicable standard. Credits may be exchanged only within averaging sets. Credits may also be traded to another manufacturer according to the provisions in paragraph (d)(9) of this section. Before trading or carrying over credits to the next model year, a manufacturer must apply available credits to offset any credit deficit, where the deadline to offset that credit deficit has not yet passed.

(ii) The use of credits shall not be permitted to address Selective Enforcement Auditing or in-use testing failures. The enforcement of the averaging standard occurs through the vehicle's certificate of conformity. A manufacturer's certificate of conformity is conditioned upon compliance with the averaging provisions. The certificate will be void ab initio if a manufacturer fails to meet the corporate average standard and does not obtain appropriate credits to cover its shortfalls in that model year or in the subsequent model year (see deficit carryforward provision in paragraph (d)(8) of this section). Manufacturers must track their certification levels and sales unless they produce only vehicles certified with FELs at or below the applicable to cold temperature fleet average levels below the standard and have chosen to forgo credit banking.

(7) The following provisions apply if debits are accrued:

(i) If a manufacturer calculates that it has negative credits (also called “debits” or a “credit deficit”) for a given model year, it may carry that deficit forward into the next model year. Such a carry-forward may only occur after the manufacturer exhausts any supply of banked credits. At the end of that next model year, the deficit must be covered with an appropriate number of credits that the manufacturer generates or purchases. Any remaining deficit is subject to an enforcement action, as described in this paragraph (d)(8). Manufacturers are not permitted to have a credit deficit for two consecutive years.

(ii) If debits are not offset within the specified time period, the number of vehicles not meeting the cold temperature fleet average standards (and therefore not covered by the certificate) must be calculated by dividing the total amount of debits for the model year by the cold temperature fleet average standard applicable for the model year in which the debits were first incurred.

(iii) EPA will determine the number of vehicles for which the condition on the certificate was not satisfied by designating vehicles in those test groups with the highest certification cold temperature NMHC or NMOG+NOX emission values first and continuing until reaching a number of vehicles equal to the calculated number of noncomplying vehicles as determined above. If this calculation determines that only a portion of vehicles in a test group contribute to the debit, EPA will designate actual vehicles in that test group as not covered by the certificate, starting with the last vehicle produced and counting backwards.

(iv)(A) If a manufacturer ceases production of vehicles affected by a debit balance, the manufacturer continues to be responsible for offsetting any debits outstanding within the required time period. Any failure to offset the debits will be considered a violation of paragraph (d)(8)(i) of this section and may subject the manufacturer to an enforcement action for sale of vehicles not covered by a certificate, pursuant to paragraphs (d)(8)(ii) and (iii) of this section.

(B) If a manufacturer is purchased by, merges with, or otherwise combines with another manufacturer, the controlling entity is responsible for offsetting any debits outstanding within the required time period. Any failure to offset the debits will be considered a violation of paragraph (d)(8)(i) of this section and may subject the manufacturer to an enforcement action for sale of vehicles not covered by a certificate, pursuant to paragraphs (d)(8)(ii) and (iii) of this section.

(v) For purposes of calculating the statute of limitations, a violation of the requirements of paragraph (d)(8)(i) of this section, a failure to satisfy the conditions upon which a certificate(s) was issued and hence a sale of vehicles not covered by the certificate, all occur upon the expiration of the deadline for offsetting debits specified in paragraph (d)(8)(i) of this section.

(8) The following provisions apply for trading cold temperature credits:

(i) EPA may reject credit trades if the involved manufacturers fail to submit the credit trade notification in the annual report. A manufacturer may not sell credits that are not available for sale pursuant to the provisions in paragraphs (d)(7)(i) of this section.

(ii) In the event of a negative credit balance resulting from a transaction that a manufacturer could not cover by the reporting deadline for the model year in which the trade occurred, both the buyer and seller are liable, except in cases involving fraud by either the buyer or seller. EPA may void ab initio the certificates of conformity of all engine families participating in such a trade.

(iii) A manufacturer may only trade credits that it has generated pursuant to paragraph (d)(4) of this section or acquired from another party.