Office of air quality management

ENVIRONMENTAL REGULATION

Proposed: August 1, 2005 as 37 N.J.R. 2762(a)

Adopted: November 28, 2005 by Bradley M. Campbell, Commissioner, Department of Environmental Protection.

Filed: December 19, 2005, as R.2006 d. 34 , with technical and substantive changes not requiring additional public notice and comment (See N.J.A.C. 1:30-6.3).

DEP Docket Number: 24-05-06/460

Effective Date: January 17, 2006

Operative Date: January 27, 2006

Expiration Date: Exempt.
The Department of Environmental Protection (Department) has adopted new rules and amendments regarding the sale, for registration in New Jersey, of passenger cars and light-duty trucks delivered for sale in New Jersey on and after January 1, 2009.

The Department is amending N.J.A.C. 7:27-26, National Low Emission Vehicle (NLEV) and Heavy-Duty Diesel New Engine Requirements Program, to repeal the NLEV program portion of the rules. In addition, the Department is adopting a new Subchapter 29 to implement the California Low Emission Vehicle (LEV) program in New Jersey, as directed by N.J.S.A. 26:2C-8.15 et seq., and adding related penalties at N.J.A.C. 7:27A-3.10, Air Administrative Procedures and Penalties.

The comments the Department received on the proposed rulemaking are summarized and responded to below.

Summary of Hearing Officer’s Recommendations and Agency Responses:

Chris Salmi, Assistant Director of the Department’s Division of Air Quality, served as the Hearing Officer at the September 15, 2005 public hearing on the proposed rules and the proposed State Implementation Plan (SIP) revisions that the rules represent, held at the Trenton War Memorial, Memorial Drive, Trenton, New Jersey. The comment period for the proposal and the proposed SIP revision closed on September 30, 2005. The Hearing Officer recommended that the Department adopt the amendments, new rules and recodification as proposed, with the changes described below. The Department has accepted the Hearing Officer's recommendations. A record of the public hearing is available for inspection in accordance with applicable law by contacting:

Department of Environmental Protection

Office of Legal Affairs

ATTN: Docket No. 29-04-11/455

401 East State Street

PO Box 402

Trenton, New Jersey 08625-0402

The Department received oral and/or written comments on its proposed amendments from the following persons:

1. 
   Thomas C. Austin, Sierra Research, Inc., at the request of the Alliance of Automobile Manufacturers
   
2. 
   C. Dianne Black-Nixon, Aston Martin
   
3. 
   Kelly Brown, Ford Motor Company
   
4. 
   Kelly Brown, Large Volume Manufacturers
   
5. 
   John Cabaniss, Jr., Association of International Automobile Manufacturers (AIAM)
   
6. 
   Coralie Cooper, Northeast States for Coordinated Air Use Management (NESCAUM)
   
7. 
   Gregory Dana, Alliance of Automobile Manufacturers
   
8. 
   James S. Ehlmann, Large Volume Automobile Manufacturers
   
9. 
   Christopher A. James, State of Connecticut, Dept. of Environmental Protection
   
10. 
    Suzanne Leta, NJPIRG (New Jersey Public Interest Research Group)
    
11. 
    S. Kingsley Macomber, Sierra Research, Inc
    
12. 
    Reginald Modlin, DaimlerChrysler
    
13. 
    Philip J. Morin III, Alliance of Automobile Manufacturers
    
14. 
    Dena Mottola, NJPIRG; David Pringle, New Jersey Environmental Federation, Eric Stiles, NJ Audobon Society and Jeff Tittel, Sierra Club of NJ
    
15. 
    Joseph S. Oswald, citizen
    
16. 
    Dr. Kim M. Pacanovsky, citizen
    
17. 
    Michael L. Pisauro, Jr., New Jersey Environmental Lobby (NJEL)
    
18. 
    Gerald Plante, Subaru
    
19. 
    David Pringle, himself and family, and New Jersey Environmental Federation (NJEF)
    
20. 
    Theodore Spencer, Natural Resources Defense Council
    
21. 
    Jeff Tittle, Sierra Club of New Jersey
    
22. 
    Alan R. Weverstad, General Motors
    

Comments are arranged by section. If a comment does not pertain to a specific section of the rules, it has been placed under the “General Comments” category. The “General Comments” category has been grouped by topic. At the end of each comment, the specific commenter(s) is referenced by placing the above numbers in parentheses.

The comments are as follows:

General Comments Organized by Topic:

Comments in Support of Proposal
1. COMMENT: The LEV program is important for New Jersey, as the State’s air pollution is at the top of the list nationwide. Most importantly, adoption of the clean car program will give the biggest automakers in this nation the push they need to apply innovative research and development that could once and for all put our nation on the path to a zero emissions clean air future. Given the expected growth in automobile miles traveled in New Jersey in the next few decades, coupled with the need to protect our health and quality of life, a clean cars future is the only acceptable future.

Clean cars are not just critical to cleaning up unhealthy air pollution and global warming emissions, they also offer New Jersey consumers, business and government agencies the promise of energy security and financial stability in the face of tumultuous gas prices and world events.

The Department and the Codey Administration are to be applauded for moving forward with the adoption of the LEV program. Adopt these rules without delay, so that the rules may be in place by the end of the year and the program can follow in January of 2009. New Jersey’s citizenry can ill afford to wait any longer than they already have for the cleaner air, energy independence and economic security these cleaner cars can bring to us. (10, 14)

2. COMMENT: New Jersey simply cannot restore our air quality without adopting the strongest possible car emission standards (in addition to taking other steps). In addition to strengthening the limits on pollutants that cause substantial health and environmental harm, the LEV program ensures that New Jersey is using its buying power to encourage carmakers to bring cleaner advanced technology cars to the consumer market.

The benefits of the LEV program are well documented by the Department in this rule proposal, as well as by NESCAUM, and the other states that have adopted the program. The Department’s analysis of the positive benefits of the rules as outlined in the Social Impact and Environmental Impact is correct. Also, the Department’s analysis is correct in the Economic Impact section, finding that consumers would benefit economically and that the cost of compliance with the rules is negligible and not a burden to the State budget. The commenter submitted several reports in support of the rules: “Cars and Global Warming: Policy Options to Reduce New Jersey’s Global Warming Pollution from Cars and Light Trucks” and “Clearing the Air: The Low-Emission Vehicle II Program and Its Impacts on New Jersey.” (14)

In terms of specific risks of climate change for the Northeast states, modeling suggests that average temperatures in New England could increase by 3.1 to 5.3 degrees centigrade by the year 2090, given increasing levels of greenhouse gases. Associated impacts on the region could include more frequent and intense storms, increased damage in coastal areas from flooding and erosion associated with sea level rises.

The Legislature has required the Department to adopt California’s vehicle emissions standards, but the Legislature, when it enacted the current version of N.J.S.A. 26:2C-8.17 in 2003, could not have contemplated that greenhouse gas emissions would become part of California’s enactment of the LEV rules. (13, 22)

The Department notes that it has adopted the rulemaking referred to by the commenter that reclassifies carbon dioxide as an air contaminant. (See 37 N.J.R. xxx(x), November xx, 2005.)

Furthermore, it is fair to assume that the Legislature in 2003 was sufficiently cognizant of the greenhouse gas problem to recognize the probability that greenhouse gas emission standards would become part of California’s LEV program. California legislative direction to CARB to include these standards in the LEV program occurred the previous year. As CARB relates in its ISOR (http://www.arb.ca.gov/cc/factsheets/cc_isor.pdf):
In 2002, recognizing that global warming would impose compelling and extraordinary impacts on California, the legislature adopted and the Governor signed AB 1493. That bill directs the California Air Resources Board (Board) to adopt regulations to achieve the maximum feasible and cost-effective reduction of greenhouse gas emissions from motor vehicles.
In addition, N.J.S.A. 26:2C-8.17b clearly contemplates “major substantive change[s] to the LEV program ....”
13. COMMENT: When the effect of the greenhouse gas element of the LEV rules is properly accounted for, the Federal Tier 2 program will likely provide greater control of ozone precursors. The proposed greenhouse gas rules will actually increase ozone precursors over the Tier 2 program for two reasons: the rebound effect of increased VMTs and lower fleet turnover rate due to higher vehicle prices. The rebound effect is the increase in travel that results from lower vehicle operating costs. Fleet turnover is the replacement of older, higher emitting vehicles in the vehicle population that results from the purchase of newly manufactured vehicles. These effects will not be counterbalanced by a reduction in ambient temperatures (and lower ozone) or a reduction in upstream emissions from less crude oil importation and refining operations. (1, 12)

 14. COMMENT: Adoption of the LEV rules with the greenhouse gas provisions in New Jersey will result in increased VOC and NO_x emissions in both 2020 and 2030 relative to a baseline where the Federal Tier 2 emission standards apply, rather than decreased emissions as claimed by the Department. These emissions increases are expected to increase ambient ozone and PM_2.5 concentrations. The small reductions in emissions due to reduced gasoline consumption (fuel cycle) are overwhelmed by the increase in emissions due to the rebound and fleet turnover effects.

The Department has estimated that adoption of the exhaust and evaporative emission standards that formed the basis of the LEV program prior to the adoption of the greenhouse gas rules will reduce VOC and NO_x emissions from motor vehicles by 6.8 tons per day Statewide in 2017. However, in arriving at this estimate, the Department did not analyze the impact of the California greenhouse gas rules on emissions of criteria and ozone-precursor pollutants. Instead, the Department refers to the CARB draft document of June 14, 2004, which does not contain a complete analysis of the rebound effect, and which was subsequently modified several times to correct errors and other methodological issues. The commenter performed an analysis that quantifies the changes in precursor pollutant emissions that would result in New Jersey from the proposed action. The results show increases in emissions of precursor and criteria pollutants, which will have to be accounted for in the State’s planning to reduce ambient concentrations of ozone and PM_2.5. Specifically, implementation of the LEV program with the greenhouse gas rules is projected to result in increased emissions of VOC and NO_x in New Jersey by 18.2 tons per day in 2020 and 9.5 tons per day in 2030. Based on this analysis, the Department should not proceed with adoption of the California rules because it will substantially increase smog-forming emissions. (11)

RESPONSE TO COMMENTS 13 AND 14: The Department modeled the ozone-precursor benefits of the LEV program using the United States Environmental Protection Agency’s (USEPA’s) most current methodology and computer models. The Department did not model the speculative effects of the proposed rules on consumer behavior and buying patterns to which the commenters refer, that is, the “rebound effect” and effects on fleet turnover.

The Department has reviewed the studies submitted by the commenter entitled “Evaluation of New Jersey’s Adoption of California’s Greenhouse Gas Regulations on Criteria Pollutants and Precursor Emissions,” dated September 30, 2005, and takes issue with several of the underlying assumptions used in the commenter’s analyses.

In regard to the analyses of fleet turnover, the commenter suggests that the costs of various technologies used to meet the greenhouse gas requirements will cause a significant increase in the cost of new vehicles, which they claim will result in depressed new vehicle sales (slowing the rate of fleet turnover). Both CARB and the commenter rely on projected costs of vehicle technologies developed by MARTEC Consulting. CARB generally cites cost estimates made in the NESCAF report which are derived from MARTEC and are generally on the lower end of cost projections. Sierra generally uses the higher end cost projections for the same technologies. The Department has reviewed both of the analyses and agrees with the cost projections made by CARB’s staff and in the NESCAF report and believes that the Sierra study overestimates the price impact of the greenhouse gas rules. In projecting the fleet turnover rate, the Department has relied on the expertise of the CARB and NESCAF analyses and the historic innovation of American industry to minimize cost. Additionally, the Sierra study overestimates the price impacts of the greenhouse gas rules due, in part, to its failure to recognize either the fact that manufacturers are allowed to buy and sell emission reduction credits or the compliance flexibilities that CARB has built into the greenhouse gas rules. These failures lead to an overestimate of the average price increases for vehicles produced by each manufacturer. For example, the study assumed vehicle-manufacturer-specific average price increases ranging from about $1,600 to $7,500 per vehicle, with relatively small operating cost reductions.

In regard to the study’s analyses of the VMT rebound effect, the Department believes that the conclusion of a 15.7 percent long-term rebound effect for New Jersey is without merit. The commenter has treated the VMT rebound effect as independent of other fiscal influences on the consumer, resulting in an overstatement of the rebound effect. For example, the recent gasoline price increases were not reflected in the commenter’s analysis of the costs of driving.

In response to similar consumer-behavior-related issues raised in a study of CARB’s proposed greenhouse gas rules conducted by Sierra Research, CARB contracted with the University of California (Davis and Irvine) to evaluate these econometric parameters and published the results in the document entitled "ARB Staff Responses to Comments Raising Significant Environmental Issues Regarding the Proposed Regulations to Control Greenhouse Gas Emissions from Motor Vehicles," dated August 04, 2005 (CARB’s Supplemental Analyses, available at CARB’s website at http://www.arb.ca.gov/regact/grnhsgas/att3.pdf). The Department has reviewed CARB’s analyses and agrees with its conclusions. The study conducted for CARB by the University of California is a more robust study relative to the study conducted by the commenter. The CARB study looked at 1,785 data points from a cross-section of states for the period 1966 to 2001 and used a more complex approach to estimate the rebound effect. The CARB study also looked at other factors that affect VMT, such as travel congestion and income level. The study conducted by the commenter treats the rebound effect as independent of other fiscal influences on consumers and does not take into account other factors that influence VMT, such as seasonal driving patterns and homeland security concerns, that can result in increased VMT.

The CARB Supplemental Analyses found a rebound effect much lower than found in the analyses referred to by the commenters and found no significant effect on fleet turnover. CARB staff also reviewed Sierra Research’s findings regarding the “rebound effect” and concluded that the purported emission increase due to higher estimates of the rebound effect cannot be supported.

Regarding the overall effects of the proposed greenhouse gas regulations on criteria pollutant emissions, CARB concluded in its Supplemental Analyses that even taking all such factors into account, the net effect of the regulation would still be a reduction in criteria pollutant emissions.

As such, after reviewing the evaluations submitted by the commenter and after reviewing CARB’s responses to a similar evaluation performed by the commenter on California’s rule proposal, the Department believes its projected emission reduction benefits for the new rules were soundly derived and finds no basis to modify those projections. The Department will continue to evaluate the issues relevant to the greenhouse gas standards and share these evaluations with the Low Emission Vehicle Review Commission.

The greenhouse gas emission reductions in New Jersey will contribute to regional and national efforts to reduce greenhouse gas emissions. See Response to Comments 29 through 32 for a discussion of the positive effect that these rules will have on climate in New Jersey by reducing greenhouse gas emissions.

In general, the steps that manufacturers will need to take to comply with the regulatory standards are expected to lead to price increases for new light duty passenger vehicles. Many of the technological options that manufacturers will choose to comply with the regulation are also expected to reduce operating costs.

“The rulemaking is not based an assumption that greenhouse gas technologies would migrate to vehicles nationwide. As noted in the ISOR (p. 81), staff expects that due to voluntary agreements and regulations already in force in Canada, Europe and Japan, as well as adoption of California’s greenhouse gas requirements by states in the northeast and elsewhere, there will be plenty of demand for high volume production of greenhouse gas reduction technologies anticipated in the ISOR.”

Regarding model availability and consumer choice, the greenhouse gas rules were specifically developed by CARB under statutory requirements not to limit consumer choice as to type, performance, or weight. Under the greenhouse gas emissions standard requirements, the manufacturer’s obligation is to have its overall fleet mix meet an annual greenhouse gas emissions average standard. This standard gradually declines and is set based on the manufacturer with the least-developed technology. There is no requirement to develop a specific type of vehicle. The Department has no reason to believe that model availability will be constrained under these rules.

The commenter is disproportionately penalized because of its model mix. Supporters of the California rules in New Jersey, along with the Department, in its Economic and Jobs Impact Statements, appear to assume that New Jersey dealers will be able to continue to sell the same number of vehicles to New Jersey residents and to residents of other states, regardless of whether the CARB rules apply in New Jersey. Such an assumption is unrealistic. The higher prices required for California-compliant vehicles will reduce demand for new vehicles within New Jersey. CARB has conceded this point for the California new-vehicle market; the only issue is how much vehicle sales in the regulated areas will decline.

Few if any consumers who are not required to purchase a California vehicle will choose to pay the price premium for a vehicle that meets the California standards. To the extent that residents of other states near New Jersey are not subject to the California rules, New Jersey dealers can expect to lose all or nearly all so-called “cross-border sales” once the California rules comes into effect. Those out-of-State consumers who want vehicles with higher fuel economy will be able to purchase them from dealers located outside New Jersey, who now and in the future will have an ample supply of higher-mileage vehicles for sale. (12)

28. COMMENT: The Department does not provide any estimated “pay-back period” over which it predicts that consumers will recover the costs of vehicles designed to meet the California standards. (13, 22)

RESPONSE to COMMENTS 27 and 28: The conclusions in the study submitted by the commenter are based on an overriding premise that passenger car and light-duty truck sales would be reduced by 75 percent as a result of the greenhouse gas rules. The study surmises that the effects of these lost vehicle sales would be felt throughout the automobile industry as lost jobs. The CARB, on the other hand, based on its staff analysis, concluded that there would be no significant adverse impact on California’s economy due to the greenhouse gas rules. (CARB, ISOR, August 6, 2004, available from CARB’s website at http://www.arb.ca.gov/regact/zev2001/isor.pdf). The CARB’s staff assessment found that the reduced operating costs resulting from the greenhouse gas rules would be sufficiently attractive to new car buyers to compensate for the vehicle price increase, so that vehicle sales volumes would not change from the levels expected without the rules. In direct disagreement with the results of the study submitted by the commenter, the CARB staff report concludes that the net results of increased new vehicle prices and lower operating costs is a tendency to increase sales in the near term, and to slightly decrease sales in the longer term as the more stringent second step of the rules is fully phased in.

Furthermore, CARB found that savings from reduced vehicle operating costs would end up as expenditures for other goods and services, thus having a positive impact on the economy. CARB concluded that these expenditures would flow through the economy, causing expansion or creation of new businesses in several sectors of the economy. The CARB staff analysis concluded that at a fuel price of $1.74 per gallon the greenhouse gas reduction technologies would more than pay for themselves over the life of the vehicle, and the rules as a whole would have small but overall positive effects on the California economy. At current fuel price levels, the net benefits increase both for individual consumers and for the New Jersey economy as a whole.

The Department does not share the commenter’s concern regarding the loss of cross-border sales. Many of New Jersey’s neighboring states have adopted the LEV program, which they are expected to implement by model year 2009 or sooner. In addition, dealers in New Jersey will not lose sales to non-LEV states as N.J.A.C. 7:27-29.3(a) prohibits the registration of non-compliant vehicles in the State. See also CARB’s Final Statement of Reasons, comment numbers 247 through 250, the responses to which are incorporated herein by reference. (See Appendix.) The Department has reviewed CARB’s responses to these comments and agrees with its conclusions.

As regards a payback period, CARB has estimated that projected operating cost savings of the greenhouse gas standards are estimated to yield payback periods well short of the assumed average vehicle lifetimes. CARB estimates that the near-term standard (for model year 2012) is estimated to result in a two-year payback period and the mid-term (model year 2016) will result in a five-year payback. (See CARB’s FSOR, page 165, incorporated herein by reference.) (See Appendix.)

In New Jersey, the largest collective source of greenhouse gas emissions is from the transportation sector. While the overall impact on climate may initially be small, the impacts will grow with the implementation of additional greenhouse gas emission-reduction strategies. The Regional Greenhouse Gas Initiative will provide policy for further greenhouse gas reductions on a regional basis. In the aggregate, with the anticipated reductions from the three West Coast states (California, Oregon and Washington) and the minimum of six states in the Northeast that have adopted or recently proposed the LEV program, including its greenhouse gas component, the aggregated reductions in greenhouse gas emissions will be significant.

In regard to GHEVs, the Department believes that the revisions that CARB made to its rules regarding credits for GHEVs will provide further incentive for manufacturers to employ this technology in their compliance plans. Also, please see CARB’s responses to this issue on pages 331 through 334 of its FSOR. (See Appendix.) The Department has reviewed CARB’s responses on the issue of credits for GHEVs and agrees with its conclusions, which it incorporates herein by reference.

No change to the definition of “test vehicle” is needed because the Department is following the process as outlined in CARB’s Manufacturer’s Advisory Correspondence in regard to test vehicle designation. As such, no change was made on adoption. There is also no need to change the definition of “vehicle equivalent credit.” Although the commenter is correct that the term is also used in regard to medium-duty vehicles, the Department believes the definition is clear in stating that the definition applies to ZEV credits.

The Department will work with manufacturers prior to model year 2009 to resolve any reporting issues that may arise in the 2009 model year.