The California Air Resources Board (CARB) has informed Navistar that its pollution credits allowing it to sell heavy-duty engines that don’t comply with 2010 environmental standards will expire in February.

“This Executive Order is conditional upon completion of manufacturer’s compliance with the averaging, banking, and trading provisions of 40 CFR Part 86,” reads CARB’s Executive Order issued Jan. 13. “That based on the manufacturer’s statement of credit balance and projected production, the model year for purposes of production under this Executive Order expires on Feb. 29, 2012. This Executive Order only covers engines produced on or before Feb. 29, 2012.

Furthermore, the manufacturer may not introduce into commerce any engine under this Executive Order unless the manufacturer has sufficient credits to cover the introduction into commerce of the engine. Failure to comply with these provisions shall be cause for the Executive Officer to rescind this certification, in which case all engines covered under this certification would be deemed uncertified and subject to civil penalties.”

Navistar Spokeswoman Karen Denning said the company remains confident in its exhaust gas recirculation strategy and soon will be unveiling a compliant engine for certification. Navistar will provide more details at its Analyst and Investor Day on Feb. 2, Denning said.

The CARB Executive Order isn’t the only bad news Navistar has received recently. Last week, Navistar lost its legal bid to force the U.S. Environmental Protection Agency to recall 2010 model year engines using selective catalytic reduction to cut truck emissions. Navistar is using in-cylinder EGR-only technology to meet the current standards in conjunction with banked EPA credits for meeting and beating pre-existing emissions regulations in effect prior to the 2010 regulations.

Navistar alleged in the suit filed July 5 with the U.S. District Court for the District of Columbia that the truck maker, a contractor it hired, and the California Air Resources Board all say nitrogen oxide emissions skyrocket when drivers don’t keep diesel exhaust fluid topped off, rendering EPA’s SCR rule “irrelevant” altogether.

Furthermore, Navistar accused EPA Director Lisa Jackson of not doing her duty to uphold the Clean Air Act and her agency of not doing its part to protect public health. U.S. District Judge Colleen Kollar-Kotelly dismissed Navistar’s claims.

Navistar Public Relations Manager Stephen Schrier said in July the lawsuit was about ensuring a level playing field in the heavy-duty truck market, noting that testing done by Navistar showed that operators can “defeat” SCR systems by adding water or other substances to the system instead of DEF, allowing the trucks to operate indefinitely in violation of 2010 emissions regulations. SCR engine manufacturers, however, said the lawsuit was nothing new.