A report commissioned by the Natural Resources Defense Council (NRDC) and prepared by Chuck Shulock finds that the California Zero-Emission Vehicles (ZEV) regulations—also adopted by nine other states—requires a ‘tune-up’ to ensure the market expands well beyond current sale levels.
The findings of the report suggest that the number of vehicles required through 2025 will be smaller than originally projected in 2012 when ARB adopted the last major revisions to the ZEV program. While some of these vehicles will be higher performing in terms of electric range than the vehicles originally assumed in 2012, the net result is that the total number of ZEVs is likely to fall short of the original 2025 goals.
Absent a strengthening of the program or a tightening of the ZEV credit structure, the report suggests that the ZEV program will deliver approximately 2.1 million electric-drive vehicles across the ten ZEV states compared to the original 3.3 million goal. In 2025, this would translate to a market share of 6% of passenger vehicle sales in 2025 in California versus the 15.4% originally estimated, and 5.6% of passenger vehicle sales in 2025 in the other ZEV states.
The ZEV regulation requires OEMs to deliver a certain number of “ZEV credits” annually; i.e., it does not actually specify ZEV sales share targets. ZEV credits are awarded to manufacturers based primarily on various performance characteristics of the vehicles. Vehicles with longer zero tailpipe emission range earn more credit; in turn, fewer such vehicles are needed to meet a manufacturer’s credit obligation. Too, historic extra credits can be “banked”, and the same vehicle can earn credits in multiple states under the so-called “travel” provision.
One of the key issues identified in the report is that many OEMS are developing ever-more-capable vehicles and new types of vehicles that increasingly can meet the needs of mainstream customers. However, going forward automakers such as Tesla—even if only partly successful with its Model 3 launch—could generate enough ZEV credits that could be cover the entire auto industry’s ZEV portion of the requirements in California.
Even under a conservative growth scenario for Tesla, OEMS as a whole would not be required to produce ZEVs directly until 2022 or 2024.
The results indicate that the ZEV program may likely become “non-binding” as a regulation, and give rise to questions as to whether the program in its current form still provides the appropriate degree of technology-forcing pressure and will enable California to be on course to meet longer-term criteria pollutant and GHG reduction climate goals, as outlined in ARB’s 2016 Mobile Source Reduction Strategy.—Chuck Shulock
Prior to forming his consultancy, Shulock was Assistant Executive Officer and Director of Climate Programs at the California Air Resources Board, where he led the Board’s initial implementation of the California Global Warming Solutions Act (AB 32). He also served as project leader for the adoption of regulations pursuant to AB 1493, the California legislation that directed the Board to reduce greenhouse gas emissions from passenger vehicles, and led the staff teams that prepared the 2001 and 2003 amendments to the Zero Emission Vehicle regulation.
Background. Originally adopted in California in 1990, the ZEV regulation has evolved over the years, with the stringency of the requirement being adjusted to reflect the pace of technology development and customer response to newly developed vehicle platforms.
In 2013, the Governors of eight of the ZEV states (including California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, and Vermont) signed a Memorandum of Understanding to place 3.3 million zero-emission vehicles on the road by 2025, equivalent to about 15% of passenger car and light duty truck sales by 2025 being plug-in hybrid, full battery electric, or fuel cell vehicles. (Earlier post.)
This year, ARB will determine if the ZEV regulation is on track out to 2025. The evaluation will address banked ZEV credits, market trends in California and other ZEV states, and if warranted, will propose regulatory modifications in 2017.
NRDC commissioned the report to examine the likely number of vehicles that auto manufacturers will need to deliver through 2025 in order to comply with the current ZEV regulation, and to identify possible possible modifications to ensure that the program remains on track.
Suggestions. With the 2030 and 2050 trajectory in mind, the report identifies some possible regulatory options that make it far more likely that the program will result in vehicle deliveries hitting a minimum of 3.3 million across the ZEV states and reaching 15% sales by 2025.
NRDC asked Shulock Consulting to evaluate different mechanisms by which the California Air Resources Board can increase the number of vehicles, ensure product diversity of long-range ZEVs and high-performance plug-in hybrids, and improve the likelihood of meeting the ZEV state governors’ goals.
Possible changes include:
Minimum Floor, Stricter Crediting, Minimum TZEV Performance. The first set of options would restrict the use of banked credits and require at least 25% of credits used to comply to come from vehicles produced in that model year. Further, per-vehicle credits would be reduced to better ensure that the credit structure is aligned with the goals. This policy option would also increase TZEV (plug-in hybrid) performance requirements to a minimum 20 miles real world range.
Minimum Floor, Stricter Crediting, Minimum TZEV Performance, Allow High Performance TZEVs to Satisfy Larger Portion of ZEV Requirement. The second package likewise restricts the use of banked credits and modifies the credit formula. It also creates a new category called High Performance TZEVs with 52-mile real-world all-electric range as a minimum.
As this report has attempted to make clear, there are many variables that affect the number of vehicles that will be produced to comply with the ZEV regulation, and any such predictions are uncertain. Moreover, the raw number of vehicles produced is not the only measure of success—the desired environmental outcomes are also driven by the types and diversity of ZEV and TZEV vehicles produced, their performance characteristics, and ultimately their marketability and attractiveness of vehicles offered to customers. … This report demonstrates a need to consider changes to the ZEV regulation.—Chuck Shulock