1. Tier 3 Vehicle and Fuel Standards: Final Rule National Tribal Forum on Air Quality May 21, 2015 1

2. Overview Background on OTAQ What is Tier 3? Why Tier 3? Overview of the Program Benefits and Costs 2

3. OTAQ: Addressing Transportation Air Quality and Climate 3 Light-duty Heavy- duty Locomotives Recreational and Commercial Marine Fuel Quality And Renewables Non-road Diesel Ships Nonroad Gasoline Aircraft

4. Reconciling Transportation with the Environment Through sector specific rules – Passenger vehicles – Cargo/vocational trucks – Ag and construction equip – Lawn and Garden – Locomotive/Marine – Recreational boats – Etc. Typically with emission reductions exceeding 90% and often >99% from uncontrolled levels Through Partnerships 4

5. 40 years ago… 5

6. Source: http://www.epa.gov/airtrends/aqtrends.html#comparison Comparison of Growth Areas and Emissions 1980-2012 6

7. What is Tier 3? 7 A passenger vehicle and gasoline regulation A systems approach to reducing passenger vehicle pollution: more stringent vehicle standards enabled by gasoline sulfur control Creates a harmonized vehicle program – Coordinated with California Low Emission Vehicle (LEV) III standards – Enables auto industry to produce and sell one vehicle nationwide Part of comprehensive approach to create cleaner, more efficient vehicles – Begins phasing in with model year (MY) 2017 – Allows coordinated compliance with both LEV III and light-duty GHG/fuel economy standards for MY 2017-2025

8. Why Tier 3: Air Quality and Public Health Tier 3 standards will have immediate health and air quality benefits – Reduce ozone, particulate matter (PM), and toxics Help States and local areas attain and maintain ozone and PM NAAQS – Tier 3 provides cost-effective national reductions that avoid more expensive local controls Reduce pollution near roads – More than 50 million people live, work, or go to school near major roads 8

9. Why Lower Sulfur Gasoline? Both Tier 3 and LEV III vehicle standards depend upon lower sulfur gasoline – Sulfur at current levels degrades the performance of vehicle catalytic converters, the primary emission control system on vehicles Tier 3 vehicle standards are not achievable without lower sulfur Lower sulfur also provides immediate emission reductions from the existing fleet – Catalytic converters on existing cars will perform more effectively California already has lower sulfur gasoline (as do Europe, Japan, S. Korea, and several other countries) – Other states prohibited from controlling gasoline sulfur on their own Enables some lower-cost technologies for complying with vehicle greenhouse gas standards 9

10. Public Involvement Finalized February, 2014 after a March 2013 that received extensive comment Auto industry was broadly supportive – Stressed the importance of harmonizing with California LEV III States, environmentalists, health groups also supportive – No other measure provides reductions as large or as quickly Oil industry opposed to the lower-sulfur fuel standard 10

11. Tier 3 Vehicle Standards Phase in between 2017 and 2025 Tighter VOC and NOx tailpipe standards – 80% reduction from today’s fleet average Tighter PM tailpipe standard – 70% reduction in per-vehicle standard Evaporative emissions standards – Reduced fuel vapor emissions and improved system durability Revised certification test fuel to be E10 – Better reflects in-use gasoline – Current certification test fuel has no ethanol 11

12. Tier 3 Fuel Standards Lower the annual average sulfur standard from 30 to 10 ppm – Starting January 1, 2017 – In reality phased down from 2014 thru 1/1/2020 Maintain the current per-gallon sulfur caps – 80 ppm at refinery gate, 95 ppm at retail – We had sought comment on lower caps 12

13. Fuel Flexibilities A broad set of flexibilities that have proven successful in past EPA fuel programs Annual average standard with a sufficiently high per-gallon cap Flexible early credit program and nationwide averaging, banking and trading provide nearly to 6 years of lead time – Including carrying over “banked” credits from Tier 2 Delay for small refiners and refineries <75,000 barrels per day until 1/1/2020 Economic and technical hardship provisions available to all refiners 13

14. Tier 3 Emission Impacts Reductions in National On-Road Inventory 14 20182030 Reduction (US Tons) % Reduction Reduction (US Tons) % Reduction NOx 260,00010%330,00025% VOC 48,0003%170,00016% PM2.5 1000.1%8,00016% Benzene 2,0006%5,00026% Lower NOx, VOC, and PM2.5 emissions lead to Moderate to large ozone decreases across the country Small to moderate PM decreases across the country

15. Benefits of Tier 3 15 Total Ozone and PM-related Premature Mortality Avoided: 770-2,000 in 2030 (based on range of ozone and PM mortality studies) Other PM- and ozone-related health impacts avoided in 2030: Hospital admissions and asthma-related ER visits: 2,200 Asthma exacerbations: 19,000 Upper and lower respiratory symptoms in children: 30,000 Lost school days, work days, and minor restricted activity days: 1.4 million Total Monetized Benefits in 2030 (2011$): $6.7 to $19 Billion

16. Summary of Costs and Benefits Fuel Sulfur Standard – 0.65 ¢/gal Vehicle Standards in 2025 – $72 per vehicle Annual Cost in 2030 – Total Program: $1.5 billion Vehicle Program: $0.76 billion Fuel Program: $0.70 billion Benefits outweigh costs by a factor of 4.5 to 13 16

17. 17 AQ Impacts in 2030 - Ozone

18. 18 AQ Impacts in 2030 – Annual PM 2.5

19. Beijing The Day Tier 3 Was Signed 19

20. Thank You