California May Increase ZEV Numbers, Stirring Uproar by Automakers

California is contemplating new ZEV requirements, making Tesla and a few competitors quite angry.

The state’s zero emission vehicle rules require automakers to sell all-electric or hydrogen fuel cell vehicles in proportion to their market share in the state. Automakers earn credits to reach those goals. Companies that exceed the standards, like Tesla Motors, can sell their extra credits to Honda and other carmakers that don’t. The rapid sales growth by Tesla and the increasing range of other EVs have the state contemplating new requirements.

California’s Air Resources Board has projected 15.4 percent market share for ZEVs by 2025. ZEV credits have been flooding the system and automakers may now be able to fulfill their requirements with as little as 6 percent of their fleets consisting of all-electric or fuel-cell vehicles, said Dan Sperling, a professor of civil engineering and environmental science at the University of California at Davis. To bring those figures back in line, the state may increase its ZEV requirement, said Sperling, who serves on the ARB board.

The prospect of such a move is angering automakers, whether they sold credits to other companies or used them for their own zero-emission compliance.

“It’s a feature of the regulation that you’re required to produce fewer cars if you invest more in technology,” said Robert Bienenfeld, assistant vice president for U.S. environmental strategy at Honda. “It’s bizarre to say we need to make the regulation more stringent because it’s working.”

Tesla sold $168.7 million in ZEV and other regulatory credits last year, and has seen its electric car sales increase significantly. Diarmuid O’Connell, Tesla’s vice president for business development, said he supports higher emission targets. But he rejects the idea of capping credit trades, which he calls “an extremely stupid idea: You’d be punishing people who are doing the most to put EVs on the road.”

The potential oversupply comes as federal and California regulators begin a midterm review of their plan to boost U.S. fuel economy to a projected 54.5 miles per gallon by 2025, and cut tailpipe carbon dioxide emissions 35 percent.

“The industry asked for the midterm so we can lower the standard if necessary,’’ said ARB Chairman Mary Nichols. “We said ‘Fine, as long as there is also the possibility it can go higher.”’

Nichols said she hasn’t decided how to respond to the oversupply of credits. Some analysts say changing the rules now might spark a backlash.

“If automakers are hitting the targets and complying with the law, it’s politically untenable for the ARB to change the measuring stick,” said Eric Noble, president of CarLab, an automotive-consulting firm.

SEE ALSO: Tesla Battles Carmakers Over California’s ZEV Sales Requirements

Since 1990, when the zero-emission mandate started, California has been alone among world regulators in requiring specific technologies instead of just setting pollution limits. That’s having a big impact, said Alan Baum, an independent auto analyst based in West Bloomfield, Mich.

By 2018, the number of hybrid, plug-in hybrid and all-electric models sold in the U.S. will jump to 92 from 58 this year, Baum said. Cheap gasoline drove the sale of such models and fuel-cell cars down 11.3 percent last year to 509,000. By 2018, they should rebound to 854,000, Baum said.

Volkswagen AG will play a part in the building up California’s infrastructure and clean-air mandates. The automaker agreed last week to spend more than $1 billion in the state as part of a settlement with regulators on its diesel emissions scandal. The state will use the cash to build electric and hydrogen fueling stations as well as other clean-air projects.

Automotive News