This subpart describes how you may use emission credits to demonstrate that Category 1 and Category 2 engines comply with emission standards under this part. The provisions of this subpart do not apply for Category 3 engines.

(a) You may average, bank, and trade (ABT) emission credits for purposes of certification as described in this subpart to show compliance with the standards of this part. Participation in this program is voluntary.

(b) The definitions of subpart J of this part apply to this subpart. The following definitions also apply:

(1) Actual emission credits means emission credits you have generated that we have verified by reviewing your final report.

(2) Applicable emission standard means an emission standard that is specified in subpart B of this part. Note that for other subparts, “applicable emission standard” is defined to also include FELs.

(3) Averaging set means a set of engines in which emission credits may be exchanged only with other engines in the same averaging set.

(4) Broker means any entity that facilitates a trade of emission credits between a buyer and seller.

(5) Buyer means the entity that receives emission credits as a result of a trade.

(6) Reserved emission credits means emission credits you have generated that we have not yet verified by reviewing your final report.

(7) Seller means the entity that provides emission credits during a trade.

(8) Standard means the emission standard that applies under subpart B of this part for engines not participating in the ABT program of this subpart.

(9) Trade means to exchange emission credits, either as a buyer or seller.

(c) Emission credits may be exchanged only within an averaging set. Except as specified in paragraph (d) of this section, the following criteria define the applicable averaging sets:

(1) Recreational engines.

(2) Commercial Category 1 engines.

(3) Category 2 engines.

(d) Emission credits generated by commercial Category 1 engine families may be used for compliance by Category 2 engine families. Such credits must be discounted by 25 percent.

(e) You may not use emission credits generated under this subpart to offset any emissions that exceed an FEL or standard. This applies for all testing, including certification testing, in-use testing, selective enforcement audits, and other production-line testing. However, if emissions from an engine exceed an FEL or standard (for example, during a selective enforcement audit), you may use emission credits to recertify the engine family with a higher FEL that applies only to future production.

(f) Engine families that use emission credits for one or more pollutants may not generate positive emission credits for another pollutant.

(g) Emission credits may be used in the model year they are generated or in future model years. Emission credits may not be used for past model years.

(h) You may increase or decrease an FEL during the model year by amending your application for certification under § 1042.225.

(i) You may use NOX + HC credits to show compliance with a NOX emission standard or use NOX credits to show compliance with a NOX + HC emission standard.

(j) [Reserved]

(k) You may use either of the following approaches to retire or forego emission credits:

(1) You may retire emission credits generated from any number of your engines. This may be considered donating emission credits to the environment. Identify any such credits in the reports described in § 1042.730. Engines must comply with the applicable FELs even if you donate or sell the corresponding emission credits under this paragraph (k). Those credits may no longer be used by anyone to demonstrate compliance with any EPA emission standards.

(2) You may certify a family using an FEL below the emission standard as described in this part and choose not to generate emission credits for that family. If you do this, you do not need to calculate emission credits for those families and you do not need to submit or keep the associated records described in this subpart for that family.