## California Air Resources Board releases proposed Advanced Clean Car package: LEV III, GHG and ZEV rules to transform the California fleet; ZEVs and TZEVs to be 15+% of new vehicle sales by 2025

##### 08 December 2011
 Annual sales of Zero Emission Vehicles (ZEVs) and Transitionary ZEVs (TZEVs) under the new ACC proposal are projected to reach 15.4% by 2025, compared to 4% under the current ZEV regulation. Source: ARB ZEV ISOR. Click to enlarge.

The staff of the California Air Resources Board (ARB) has posted the proposed Advanced Clean Car (ACC) package of regulations in advance of the Board’s meeting on 26 January 2012 to consider adopting the new rules. ARB staff had posted a summary of the rules package in November. (Earlier post.)

The Advanced Clean Cars program combines the control of soot, smog-causing pollutants (LEV III) and greenhouse gas (GHG) emissions into a single coordinated package of requirements for model years 2017 through 2025. ACC also incorporates the Zero Emission Vehicle (ZEV) regulation as the “technology-forcing piece” of the package. The ZEV regulation—along with new LEV III criteria pollutant and GHG standards—can be the catalyst to the process of transforming the California light-duty fleet, ARB staff suggests. More specifically, the proposed Advanced Clean Cars package of regulations is designed to deliver:

• A 75% reduction in smog-forming emissions by 2025;

• A 34% cut in Greenhouse gas emissions from cars from 2016 levels, resulting in a reduction of 52 million tons of greenhouse gases by 2025 and a cumulative reduction of more than 870 million metric tons of greenhouse gases through 2050.

• Zero-emission or plug-in hybrid vehicles accounting for 1 in 7 new cars sold in California in 2025 (15.4%);

• A total of 1.4 million zero-emission and plug-in hybrid vehicles on the road in California by 2025; and

• A savings of $5 billion in operating costs in 2025 for California drivers. This will rise to$10 billion in 2030 when more advanced cars are on the road, according to ARB calculations.

The package also includes provisions that will ensure adequate fueling infrastructure is available for the increasing numbers of hydrogen fuel cell vehicles planned for deployment in California.

The proposed rules are designed to ensure the development of environmentally superior cars with a full range of models, from compacts to SUVs and pickups that will continue to deliver the performance, utility, and safety vehicle owners have come to expect with significant savings thanks to reduced operating costs. When fully implemented, annual fuel costs to operate a car will be reduced by an average of 25%, with an overall cumulative savings of $22 billion by 2025, according to ARB calculations. Many of the technologies that reduce climate change emissions also significantly reduce the operating costs of passenger vehicles on a month-to-month basis for consumers. ARB analysis indicates that the advanced technologies used to achieve the new smog and greenhouse gas standards will increase a new vehicle’s price in 2025 by about$1,900, a sum more than offset by $6,000 in fuel cost savings over the life of the car. This will reduce the monthly cost of a new car by$12, even when considering the higher cost of the loan or lease.

ARB economic analysis indicates that the overall savings generated by the proposed rules will result in an additional 21,000 jobs in California in 2025, rising to 37,000 in 2030.

LEV III and GHG

As noted earlier in the summary, very broadly, the LEV III standards will force the reduction of fleet average emissions of new passenger cars (PCs), light-duty trucks (LDTs) and medium-duty passenger vehicles (MDPVs) to super ultra-low-emission vehicle (SULEV) levels by 2025. (This corresponds to US EPA Tier 2 Bin 2.)

This will also include more stringent particulate mater standards for light- and medium-duty vehicles; the replacement of separate NMOG and oxides of nitrogen (NOx) standards with combined NMOG plus NOx standards; zero fuel evaporative emission standards for PCs and LDTs, and more stringent evaporative standards for medium-duty vehicles (MDVs).

The new rules will also require more stringent supplemental federal test procedure (SFTP) standards for PC and LDTs, which reflect more aggressive real world driving and, for the first time, require MDVs to meet SFTP standards.

Additional standards. Staff is also proposing three additional light-duty vehicle emission standards (ULEV70, ULEV50, and SULEV20) to which manufacturers may certify their vehicles when meeting the fleet average emission requirement. The numerical part of the standard category, such as 20 in SULEV20, refers to the emission standard, in thousandths of a gram per mile. Combined with an extended fleet average emission requirement phase-in period, providing these additional emission standards will allow manufacturers to phase-in additional emission componentry across their fleet in a cost-effective manner, according to ARB staff.

Certification fuels. For historical reasons, current California certification gasoline contains methyl tertiary butyl ether (MTBE) as an oxygenate, and as such does not represent gasoline currently sold in California, which does not contain MTBE. The current maximum ethanol content allowed in commercial gasoline is 10% by volume and is expected to remain at 10% for the foreseeable future, according to ARB.

Staff is proposing to change the certification fuel specifications to be more representative of current in-use fuel. Staff is also proposing that vehicles certify on a fuel that reflects the octane requirement that they are operated on in-use. Therefore, for vehicles that consumers must operate on premium fuel to maintain warranty coverage, manufacturers may certify on premium grade fuel, while all others must certify on regular grade fuel.

Greenhouse Gas Emission Standards. The proposed GHG emission standards would reduce new passenger vehicle carbon dioxide (CO2) emissions from their model year 2016 levels by approximately 34% by model year 2025, from about 251 to about 166 gCO2/mile, based on the projected mix of vehicles sold in California. The basic structure of the standards includes two categories—passenger cars and light-duty trucks—that are consistent with federal categories for light-duty vehicles.

The standard targets would reduce car CO2 emissions by about 36% and truck CO2 emissions by about 32% from model year 2016 through 2025.

 Projected targets for Light-Duty Vehicle gCO2/mile emission rates. Click to enlarge.
Harmonization. In the Initial Statement of Reasons (ISOR) for the LEV III and GHG rulemaking, ARB staff said that vehicle manufacturers have urged ARB to harmonize the requirements of LEV III with the federal Tier 3 program currently under development, which is expected to be finalized in mid-2012.

While staff has worked with USEPA in an effort to align many of the requirements of the two programs, some elements of the proposed LEV III program are expected to remain more stringent than the federal program in order to address California’s unique air pollution problems. Nonetheless, staff believes that manufacturers will be able to certify their vehicles to both California and federal requirements when both programs are in effect.

Similarly, in response to an invitation by President Obama, ARB worked closely with USEPA and NHTSA on the development of national GHG and fuel economy requirements for 2017-2025. The footprint-indexed CO2 standard target lines for 2017- 2025 were examined jointly by the three agencies in order to address the agencies’ regulatory requirements regarding technical feasibility and cost-effectiveness. While the proposed CO2e standards for 2017-2025 reflect the same level of technical stringency for conventional vehicles staff anticipates will be adopted by USEPA in their final rulemaking, the GHG element of California’s Advanced Clean Cars program remains distinctive from the federal program because of its focus on California’s long-term GHG goals. By including specific ZEV requirements, the Advanced Clean Cars program lays the foundation to transform California’s light-duty fleet by ensuring that ultra clean vehicles meeting consumer expectations will be commercially available in the timeframe needed to achieve critical GHG reductions by 2050.

—ISOR for LEV III and GHG

Zero Emission Vehicle Program

As noted in the summary, ARB staff is proposing two sets of changes to the ZEV rule, which has been in place in different forms since 1990:

• Amendments through MY 2017 to make minor mid-course corrections and clarifications, and enable manufacturers to successfully meet 2018 and subsequent model year requirements; and

• Regulations for MY 2018 and following. Staff’s goal for the proposed amendments for 2018 and subsequent model years is to achieve ZEV and transitional zero emission vehicle (TZEV; most commonly a PHEV) commercialization through simplifying the regulation and pushing technology to higher volume production in order to achieve cost reductions.

MY 2009 through 2017 amendments include:

• Provide Compliance Flexibility: Remove carry forward credit limitations for ZEVs, allowing manufacturers to bank ZEV credits indefinitely for use in later years. Slightly reduce the 2015 through 2017 credit requirement for intermediate volume manufacturers (IVM, less than 60,000 vehicles produced each year), to allow them to prepare for requirements in 2018. Extend the provision that allows ZEVs placed in any state that has adopted the California ZEV regulation to count towards the ZEV requirement through 2017 (i.e. extending the “travel provision” for BEVs through 2017).

• Adjust Credits and Allowances: Increase credits for Type V (300 mile FCV) ZEVs to appropriately incentivize this longer term technology.

• Add New Vehicle Category: Add Type I.5x and Type IIx vehicles as a compliance option for manufacturers to meet up to half of their minimum ZEV requirement. The proposed vehicle is closer to a BEV than to a PHEV: a vehicle with primarily zero-emission operation equipped with a small non-ZEV fuel auxiliary power unit (APU) for limited range extension.

MY 2018 and subsequent model year amendments include:

• Increase Requirement for 2018 and Subsequent Model Years. Increase requirements which push ZEVs and TZEVs to more than 15% of new sales by 2025. This is intended to ensure production volumes are at a level sufficient to battery and fuel cell technology down the cost curve and reduce incremental ZEV prices.

• Focus Regulation on ZEVs and Transitional Zero Emission Vehicles (TZEV): Remove partial zero emission allowance vehicle (PZEV, near-zero emitting conventional technologies) and advanced technology partial zero emission allowance vehicle (AT PZEV, typically non-plug-in HEVs) credits as compliance options for manufacturers because these technologies are now commercialized and their emissions are better reflected in the LEV III program.

Allow manufacturers to use banked PZEV and AT PZEV credits earned in 2017 and previous model years, but discount the credits, and place a cap on usage in 2018 and subsequent model years. Focus the 2018 and subsequent model year requirements on ZEVs and TZEVs

• Amend Manufacturer Size Definitions, Ownership Requirements, and Transitions. Amend IVM and large volume manufacturer (LVM) size definitions to bring all but the smallest manufacturers under the full ZEV requirements by model year 2018. Align LEV III and ZEV ownership requirements, so that manufacturers who own more than 33.4% of each other are considered as the same manufacturer for determination of size. Modify transition periods for manufacturers switching size categories. These changes result in applying the ZEV regulation to manufacturers that represent 97% of the light duty vehicle market.

• Modify Credit System. Base credits for ZEVs on range, with 50-mile BEVs earning 1 credit each and 350-mile FCVs earning 4 credits each. Allow extended range BEVs (BEVx) which have a limited combustion engine range extender to meet up to half of a manufacturer’s minimum ZEV requirement. The range of credits reflects the utility of the vehicle (i.e. the zero emitting miles it may travel) and its expected timing for commercialization. Simplify and streamline TZEV credit based on the vehicle’s zero-emission range capability, and ability to perform 10 miles on the more aggressive US06 drive schedule. In addition to simplifying the program, reducing the spread of credits makes the technologies more evenly treated and reduces the variation in compliance outcomes (numbers of vehicles produced to meet the regulation requirements).

• Modify Travel Provision: End the Travel Provision for BEVs after model year 2017. Extend the Travel Provision for FCVs until sufficient complementary polices are in place in states that have adopted the California ZEV regulation. This will allow FCV technology to continue to mature, and provide time for Section 177 States to build infrastructure and put in place incentives to foster FCVs.

• Add GHG-ZEV Over-Compliance Credits: Allow manufacturers who systematically over comply with the proposed LEV III GHG fleet standard to offset a portion of their ZEV requirement in 2018 through 2021 model years only.

ARB staff expects that as a result these proposals, more than 1.4 million ZEVs and TZEVs will be produced cumulatively in California by 2025, with 500,000 of those vehicles being pure ZEVs (BEVs and FCVs). During this time, the incremental price of a ZEV or TZEV is expected to rapidly decline, but remain higher than a conventional vehicle, by approximately \$10,000 (high-end estimate).

Clean Fuels Outlet

The Advanced Clean Cars program also includes amendments to the Clean Fuels Outlet (CFO) regulation that will assure ultra-clean fuels such as hydrogen are available to meet vehicle demands brought on by these amendments to the ZEV program.

The current CFO regulation requires the construction and operation of alternative fuel outlets for a particular fuel when there are 20,000 alternative fuel vehicles (AFVs) using that fuel. With the proposed changes, to the CFO regulation would:

• Apply only to zero emission vehicles (ZEVs) and ZEV fuels. Staff is proposing to change the types of AFVs subject to the regulation from all AFVs certified as low emission vehicles to only those certified as ZEVs when operating on the designated clean fuel.

• Add a regulatory review for plug-in electric vehicles. Electricity is currently excluded from the definition of a designated clean fuel in the regulation. Staff is proposing to add regulatory language that requires ARB to evaluate the development and usage of workplace and public charging infrastructure, and make recommendations for further actions two years following adoption of the regulation.

• Change the regulated party to be the major producer/importers of gasoline. California’s seven major petroleum companies supply 93% of the gasoline consumed in California, while owning only 13% of the retail gasoline outlets. Changing the regulated party from owner/lessors of retail gasoline outlets to “major refiner/importers of gasoline,” evenly spreads the requirement to build CFOs among the parties that continue to benefit financially from California’s use of gasoline.

• Modify calculations for determining the number of new CFOs and allocating responsibility among the regulated parties. Staff is proposing to modify how the number of required CFOs is calculated to account for the fuel requirements of hydrogen and FCVs. When determining how many CFOs each regulated party is responsible for, the proposed changes include allocating stations among each regulated party based on their share of the gasoline market, rather than the number of gasoline outlets each owns.

• Add a year to both fuel cell vehicle reporting requirements and the compliance timeframe. Staff is proposing to modify the AFV reporting requirements to make auto manufacturers report FCV production plans three model years into the future (the current requirement is two) and provide FCV placement numbers by air basin. This provides the regulated party with an additional year to locate, permit, and build CFOs.

• Add a lower regional activation trigger. Staff is proposing to add a 10,000 vehicle activation trigger that would apply to an air basin before the statewide trigger of 20,000 is reached. The lower trigger complements auto manufacturers’ early commercialization plans to market FCVs in regional clusters.

• Streamline the compliance requirements. The proposed amendments include modifying the compliance requirements to be less prescriptive and more like performance standards, giving the regulated party the flexibility to determine how best to meet the minimum requirements. Hydrogen infrastructure can be placed at an existing gasoline station or at a freestanding site.

• Add a penalty provision for auto manufacturers. Since the number of required CFOs is driven by auto manufacturer projections of sales and leases, staff is proposing to add a penalty that could be assessed to automakers that deliver less than 80 percent of their projected number of FCVs.

• Lower the regulation sunset provision. Under the current regulation, the requirement to build CFOs ceases when the total number outlets offering a particular clean fuel equals ten percent of the total number of retail gasoline outlets. Staff is proposing to reduce this provision to five percent based on findings that hydrogen fueling infrastructure can achieve commercial viability at five percent saturation and, therefore, a mandate would no longer be necessary.

The anticipated economic impacts of the regulation will mainly be felt during the onset, when hydrogen stations are not anticipated to be fully utilized. As station utilization improves due to increased consumer acceptance of FCV technology and confidence in fuel availability, the cost to dispense hydrogen will decrease. Staff projects that, with high station utilization, fuel providers will be able to sell hydrogen at an affordable price and realize a return on their investment within three to four years.

Offering hydrogen fuel in convenient commercial settings is critical to the successful launch of zero emission vehicles, which will contribute to achieving clean air and be the cornerstone of achieving climate change emission reduction goals.

—CFO ISOR

Beginning on Monday, 12 December, comments on the proposed regulations can be submitted at: http://www.arb.ca.gov/lispub/comm/bclist.php

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