Making Sense of California’s Zero Emissions Vehicle Program

For the past two years, electric vehicles (EVs) have been prominent subjects of automotive news pages, with OEMs introducing new models almost monthly. The latest announcement is the Toyota Rav4 EV, which is scheduled to hit California dealers late this summer. The Rav4 really exemplifies most of the EV announcements because it, like many of the EVs, will first be available in California and it will be sold in limited numbers.

This type of vehicle has been called the “compliance” EV; its main purpose is not to capitalize on the demand for EVs but rather to comply with California’s Zero Emissions Vehicle (ZEV) program, in which 10 other states participate. Other compliance EVs are the Chevrolet Spark EV, the Honda Fit EV, and the Ford Focus Electric. Vehicles designed specifically for compliance should not be that surprising since the first major OEM-produced ZEV, the GM EV1, was a “compliance” vehicle for the 1996 version of the California ZEV program. Since the ZEV program has proven a major influence on the EV industry, we should examine it in greater detail to better understand and anticipate the strategy behind the way OEMs are introducing their plug-ins.

The ZEV program, which is run under the greater Advanced Clean Cars (ACC) program adopted by the California Air Resource Board (CARB), is a mandate requiring OEMs to deliver a minimum percentage of Partial ZEVs and full ZEVs to California annually. Partial ZEVs (PZEVs) are Plug-in Hybrids, Hybrids, and low emissions conventional vehicles. The program specifically targets large (60,000+ CA sales/annually) and intermediate (4,500-60,000 CA sales/annually) volume OEMs. Any OEM with less than 4,500 is not regulated, but can still participate in trading credits; Tesla, Phoenix, and Zip Car do this. (Although Zip Car is not an OEM, it participates through various allowances and exceptions within the program rules.)

Large volume OEMs like GM, Nissan, Ford, and Toyota must follow the most stringent ZEV requirements, supplying at a minimum 7.6 percent of their 2012 requirement (12 percent ZEVs) through actual ZEV credits. That works out to just under 1 percent of actual fleet sales. Intermediate volume OEMs like BMW, Kia, Volkswagen, and Volvo can fulfill their entire requirement through PZEVs. For 2012 through 2014, ZEVs must make up 12 percent of OEMs deliveries; from 2015 through 2017 they must make-up 14 percent; and after 2018, they must comprise 16 percent.

The program is administered using credits to determine the total value of OEM efforts that comply with the program. So, pure ZEV deliveries accrue more credits for their makers than the more basic PZEVs do. In this system one credit is equal to the base level ZEV. A delivery of the most basic PZEV to California earns its manufacturer 0.2 credits, no further credits are bestowed on the manufacturer once the vehicle has been placed into production. Neighborhood electric vehicles (NEV), and Compressed Natural Gas (CNG) vehicles also receive credits.

Credit values for each model vary as there are many additions, multipliers, and classifications awarded vehicles for a wide range of characteristics, including the use of advanced components, use in a public transportation system, and an all-electric range. For example, a ZEV with an all-electric range of 300+ miles and fast refueling capabilities (hydrogen) can earn over 7 credits. If an OEM accrues extra credits it can save or trade the credits with other OEMs. The financial penalty for not meeting the requirement is $5,000 per ZEV (or credit); there is no defined price for the credit, so we can assume the traded value for a credit does not exceed $5,000. In 2011 there were four total trades, the biggest being a trade of just under 23 credits from Tesla to Honda.

Basic ZEV Credit Ratings

2012-2014 All electric Range

– Type 0 1 Default Case

– Type 1 2 50-75 mi range

– Type 1.5 2.5 75-100 mi range

– Type 2 3 100+ mi range

– Type 3 4 100+ FR/200+ mi range

– Type 4 5 200+ mi range FR

– Type 5 7 300+ mi range FR

FR = Fast Refueling

Determining the credit amount for each specific technical advancement in emissions reductions technologies is one of the most important pieces of this program. It is especially important for smaller OEMs like Tesla, Phoenix, and Zip Car, which are not regulated under the scheme, but can still profit from it by trading credits they accrue with OEMs that cannot comply on their own. So, specific credit ratings bestowed on specific fuels or technologies can influence the direction of technological development within the industry.

An example of this influence is the new set of standards adopted in January 2012 for the years 2015 through 2025. The new standards introduce the BEVx credit, which is used for full electric vehicles with small back up engines to extend the EV ranges in low charge situations. Also within the new standards are requirements placed on fuel suppliers (BP, Chevron, Tesoro, etc.) to deliver cleaner fuels as part of ARB’s Clean Fuels Outlet (CFO) program. These regulations focus particularly on hydrogen; CARB forecasts having 50 commercial stations in operation by 2025.

Many of the OEM-announced EV introductions are “compliance” vehicles and may never enter markets outside of California, but that fact should not discount the tremendous impact the ZEV program has had on the greater auto industry. As of January 2012, 2.16 million PZEVs and ZEVs have been produced for California. Based on the increased standards CARB introduced in January, CARB forecasts that by 2025, just under 250,000 ZEVs and PHEVs will be produced for the California market annually, or 15.4 percent of California’s new vehicles. While credit for the EV revolution cannot rest entirely on the ZEV program, it deserves recognition for advancing fuel efficient technologies and helping reduce the prohibitive cost of EVs so that someday, people in other states can own a similar vehicle.

Article by Scott Shepard, appearing courtesy the Matter Network.

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