Policy update

CARB: Proposed Modifications to CA’s Zero Emission Vehicle Program

On December 7, 2011 the California Air Resources Board (ARB) staff released a staff report outlining proposed modifications to the Zero Emission Vehicle (ZEV) program as part of the Advanced Clean Cars rulemaking. This rulemaking also includes LEV III criteria pollutant and greenhouse gas (GHG) emission standards, and the Clean Fuels Outlet program. The ZEV proposal requires increasing rates of deployment of zero tailpipe emission vehicles to help California meet its 2050 goals of reducing GHG emissions by 80%. The package will be considered for adoption by the Board at the January 26-27, 2012 Board meeting.

Key Elements

The staff proposal makes minor changes to existing ZEV requirements for model year 2009-2017 and imposes new requirements for model years 2018 to 2025 that substantially increase the number of vehicles that must be produced. Under an ARB staff “likely compliance scenario” the revised program will require about 15 percent of the vehicles sold in California in 2025 to be ZEVs (battery electric or fuel cell vehicles) or TZEVs (transitional ZEVs, i.e. plug-in hybrid electric vehicles). The current program would require about 4 percent. 

Regulatory Structure

The staff proposal imposes steadily increasing percentage requirements for the 2018-2025 model years, on average reduces the amount of credits per vehicle, and also reduces the applicability threshold in terms of a manufacturer’s sales. Taken together these changes are expected to result in roughly 1.5 times more vehicles in 2018 and 4 times more vehicles in 2025 compared to the existing regulation. This increase is somewhat offset by staff’s proposal for a new “GHG overcompliance” provision, under which overcompliance with the proposed federal GHG standards for passenger vehicles may be used to reduce a manufacturer’s ZEV obligation.

The staff proposal would give enhanced credits for a potential new type of battery electric vehicle equipped with a small non-ZEV fuel auxiliary power unit (APU) for limited range extension, while phasing out credits for non plug-in hybrids and other very clean conventional vehicles. It would also modify the “travel” provision, which allows a vehicle placed in any of the 12 ZEV program states to count towards compliance in all such states. The staff proposal extends BEV travel from the 2014 to the 2017 model year, and extends FCEV travel from 2017 indefinitely (until such time as there are clear plans for sufficient hydrogen infrastructure in Section 177 ZEV states). 

Projected Cost

The staff report estimates that on a per-vehicle basis the incremental cost for ZEVs and TZEVs will range from about $11,000 to $13,000 in 2020 and $9,000 to $9,500 in 2025 (2009$), for a total cost of about $10.5 billion over the 2018 through 2025 model years. The staff report notes that introducing zero emission vehicles into the fleet will allow manufacturers to forego adding technology to the conventional portion of the fleet to meet fleet average emission standards. Taking into account this cost offset, staff estimates that the net compliance cost to manufacturers for the ZEV program from 2018-2025 is about $4.6 billion. Use of the “overcompliance” option and interaction with incentives provided under the proposed federal passenger vehicle GHG standards may yield a lower net cost.

Projected Emission Benefits

Staff calculates a 2030 statewide criteria pollutant reduction of about 6 tons per day of reactive organic gases, 3.5 tons per day of nitrogen oxides, and 0.2 tons per day of particulates, primarily from reductions in conventional fuel production, refining, and distribution. For GHGs, the staff report states that the ZEV amendments do not provide any benefit because ZEV upstream emissions are included in determining compliance with the GHG standard. Again, as noted below this estimate does not take into account the effect of federal ZEV incentives, nor does it include the impact of likely GHG overcompliance.

Interaction with Federal Passenger Vehicle Greenhouse Gas ZEV Incentives

The California GHG tailpipe regulation differs from the federal Notice of Proposed Rulemaking (NPRM) in its treatment of ZEVs. The NPRM includes two “temporary regulatory incentives” to promote commercialization: (1) a GHG compliance value of 0 g/mi for BEVs, FCEVs, and the electric operation fraction for PHEVs, up to a certain cap; and (2) multipliers that allow such vehicles to count as more than one vehicle in a manufacturer’s compliance calculation for model years 2017 to 2021. Although the California passenger vehicle GHG standards do not contain this flexibility, manufacturers can choose to comply using the federal regulations in lieu of meeting the California regulations. To the extent that they do so, ZEV deployments will provide a larger cost offset than estimated by ARB staff, due to avoided technology improvements for other vehicles.

The ARB staff estimate of emission benefits is also based upon compliance using the California rules. Because the federal rules provide greater GHG credits for ZEV deployments, the GHG emissions impact of the proposed ZEV amendments is likely less favorable through 2025 than noted in the staff report. These environmental impacts must of course be balanced against the possible incentive provided to manufacturers to increase their deployment of emerging electric drive technologies critical to meeting long term GHG emission reduction goals.