EO 12866 Interagency comments on Final Rule: Standards of Performance for New Residential Wood Heaters, New Residential Hydronic Heaters and Forced-Air Furnaces (RIN 2060-AU00)

We support sell-throughs for all product categories. Although EPA does discuss some of the reasons that it has declined to adopt sell-throughs, the justifications should be more closely considered. EPA may be approaching this rulemaking as a stand-alone issue, but the interagency commenter believes EPA should be considering the unintended consequences of the 2015 rule and seeking to resolve them.

 Industry has provided anecdotal evidence of stranded inventory and the need for the relief of a sell-through  HPBA and EPA discussed this issue in two-way communications over the last year, including after the comment period. Information provided was anecdotal, based on voluntary responses from individual businesses. It appears that EPA has declined to accept anecdotal evidence. For example, EPA asks about how far in advance manufacturers need to submit their applications in order to avoid disruption.  This question was asked and answered multiple times by EPA staff at the industry trade fair. In fact, it was a bone of contention because manufacturers with compliant stoves were prevented from showcasing them because of delays in the certification process. The trade fair is the primary source of orders from smaller retailers for the coming winter, but larger retailers establish their catalog even earlier. To have product in a catalog for sale in May 2020, certifications needed to be in hand in 2018. 
 Industry asserts that EPA's basis for a lack of sell-through in 2015 was wrong, based on an assumption that Step 1 stoves would continue to move through the streams of commerce right up until the last date of manufacture. Industry cites significantly lower revenues than were projected as evidence. The retort that businesses had since 2015 to manage their inventory is an implicit recognition that small businesses did not in fact have five years of sales with which to finance development of step 2 stoves. (EPA notes in the RFC that stranded inventory is not uncommon in the wood heaters industry.  EPA did not acknowledge this fact in the 2015 rule or its RIA.)
 Simple availability of step 2 appliances should not be the touchstone for whether the industry is capable of compliance. First, availability should not be a proxy for reasonable substitute. As EPA notes, step 2 stoves are outnumbered by the number of step 1 stoves. If the range of available step 2 stoves does not match the consumer preferences, then consumers will delay replacement of step 0 or step 1 stoves and the projected health benefits will not accrue.  Second, availability is not the same as market capacity. EPA does not have information sufficient to assume that all prior demand for step 1 appliances can be met with step 2 appliances, again delaying assumed health benefits. Third, availability is a statement about the industry as a whole, not the viability of individual small businesses. As the interagency commenter said in its comments submitted on the proposed rule, small businesses finance development out of current sales, so lower current sales delay development. Overall, that some step 2 appliances are available should not be a justification for ignoring the hardships identified by manufacturers and retailers in the public comments.
 The absence of data on failed Step 2 appliances should not be dispositive. Manufacturers do not submit for testing appliances that will fail just so they can demonstrate that they have failed. 
 EPA should update the RIA from the proposed rule to clearly delineate the impacts of this decision.  It should respond to concerns raised in the public comment that reduction in the supply of stoves overall, due to exit from the market, reduced consumer choice, due to fewer step 2 options being available than step 1 stoves, and the higher cost of step 2 stoves will reduce the replacement of step 0 and unregulated stoves.


