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California’s Landmark Clean Car Mandate: How It Works and What It Means

The first quotas for green vehicles in the largest car market could have broad national impact, but will there be enough consumer demand?

Feb 8, 2012
(Page of )
Los Angeles, Calif.

If all goes as planned, more than a million ultra-clean cars will be zipping around California in the next decade, a 30-fold increase from today, thanks to tough new rules recently approved by state regulators.

It's not the first time the nation has set its sights on the million-mark for green vehicles. In 2009 President Obama pledged to put a million plug-in cars on U.S. roads by 2015.

But the president had no regulatory muscle to try to enforce his goal. And three years later there are fewer than 20,000 all-electric and plug-ins in the U.S., says Plug-In America, a San Francisco advocacy group.

Undaunted, California believes its clean car ambitions will be easily met because 12 of the world's leading carmakers helped craft its new rules and because the industry has six years to begin complying with them. The program is the first in the nation to regulate the kinds of vehicles to be sold in a state auto market.

"These regulations were done in very close conversation with the automakers and are based on what they're capable of," David Clegern, a spokesperson for the California Air Resources Board (CARB), the influential state air agency behind the rules, told InsideClimate News. "We, and they, don't really see any reason that they wouldn't work."

On Jan. 27, after nearly four years of arduous bargaining with the auto industry and environmental groups, CARB unanimously approved rules that require 15 percent of cars sold in California to be all-electric, plug-in hybrid electric or hydrogen vehicles. Compliance begins with model year 2018. Full compliance is expected by 2025.

The regulations would bring the number of zero-emissions vehicles up to about 1.5 million in California, the largest U.S. car market. CARB also strengthened an existing regulation to cut tailpipe greenhouse gas emissions in half for gasoline-powered cars by 2025.

Together they mark "the biggest improvement in global-warming emissions from vehicles that we've ever seen," said Don Anair, a senior engineer at the nonprofit Union of Concerned Scientists, which helped shape the rules,in an interview.

Here's a primer that explains how California's newest clean car program is expected to work and the challenges it faces.

How, exactly, will the rules work?

Beginning with the 2018 model year for cars and light trucks, a dozen of the world's largest carmakers will be required to meet the regulations or purchase credits if they can't.

Clegern, the CARB spokesperson, said the work has already begun. A few years ago the agency started reviewing automakers' preliminary production plans, delivery projections and initial sales goals for the 2018-2025 model years.Using those projections, CARB set a mandatory, annual target for each manufacturer to increase its share of zero-emissions vehicles, a mix of plug-in hybrids, battery-electric and hydrogen cars.

Combined the 12 automakers will have to supply some 78,000 clean cars in the first year, with incremental increases every year for eight years. Clegern said CARB might have to adjust yearly targets to reflect changing consumer demand and carmaker projections.

The goal is to have 500,000 all-electric and hydrogen cars and 900,000plug-in hybrids cruising California roads by 2025.

Half of the automakers have a head start on compliance. The six leading U.S. and Japanese automakers—General Motors, Ford, Chrysler, Toyota, Nissan Motor and Honda—are already required to meet California's 2008 clean car standard, which requires them to sell 60,000 green vehicles from 2012 through 2014.

By 2018, CARB's regulations will extend to Japan's Mazda Motor, South Korea's Hyundai Motor and Kia Motors, as well as leading German carmakers Daimler, Volkswagen and BMW.

Will the rules affect conventional cars?

Yes, a second rule passed last month requires all new conventional cars to slash tailpipe greenhouse gases by 50 percent from current levels by 2025. The policy strengthens an existing CARB regulation and is in line with what the U.S. Environmental Protection Agency and Department of Transportation proposed in November for new cars nationwide.

What happens if carmakers miss their targets?

CARB allows automakers to earn credits if they overshoot their clean car goals in a given year or beat their fleet-wide greenhouse gas targets. If they miss a target they can apply credits without penalty, similar to rollover minutes in a cell phone plan. Another option is buy credits from smaller E.V. makers, which aren't required to meet the CARB targets but can get credits for selling cars in California.

The big manufacturers can also trade credits among themselves. Clegern said that carmakers, not CARB, will set the prices.

If an automaker fails to meet CARB's requirements the agency would levy a $5,000 fine per vehicle. But CARB doesn't anticipate issuing fines. "Because the auto industry has to plan so far in advance ... it's pretty unlikely that you're not going to be able to deliver the cars that you promise," Clegern said.

Do the rules mandate fueling stations, too?

Yes, the new standards include requirements to boost the number of "clean fuel outlets" across California. The focus will be on building hydrogen filling stations, since most E.V. drivers charge their batteries at home or in office parking lots, Clegern said. But that could change if demand picks up for public E.V. chargers.

When the number of hydrogen fuel cell cars hits around 10,000 in a California neighborhood, oil companies and fuel providers will be required to install hydrogen fuel pumps.

The state now has nearly 1,500 public electric car chargers and just over 20 hydrogen facilities.

What do the rules mean for California consumers?

CARB expects the average price of every 2025 model year car—whether it's a conventional or zero-emissions model—to rise by up to $1,900 as a result of the new regulations. Over the life of the vehicles, however, CARB predicts owners will save $6,000 on fuel and maintenance costs.

The air agency estimates that in 2020 an all-electric vehicle will cost $12,900 more than the average gasoline-powered car, while hydrogen cars will cost $12,400 more.

What effect will the rules have on the U.S. car market?

Ten states have pledged to adopt California’s requirements for the 2018-2025 model years. They are:Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Rhode Island, and Vermont. That could double the impact of California's program and spur sales of more than 3.3 million zero-emissions vehicles across the country, said Simon Mui, a scientist at the Natural Resources Defense Council (NRDC), a national environmental group that played a major role in designing the rules.

Those states plus Arizona, New Hampshire, Nevada and Pennsylvania have already adopted California’s 2008 smog standards for conventional cars.

What about the problem of low consumer demand for E.V.'s?

Last year electric cars accounted for just 0.14 percent of new cars sold in 2011, due largely to limited production but also to low consumer demand. One of the main reasons is cost. The all-electric Nissan Leaf, for instance, sells for about $36,000, while the price of a 2012 fuel-efficient Honda Fit is just under $16,000.

Clegern of CARB said stoking demand is a top priority for CARB, though the agency doesn't have immediate plans to offer new incentives.

Since 2009 the state has given tax rebates, worth $2,500 each, to about 2,000 buyers of new zero-emissions vehicles. Last July, CARB allotted $15 million more to provide 5,600 additional rebates. That's on top of a $7,500 federal rebate, which expires when major automakers each sell 200,000 cars. California also allows drivers of clean cars access to carpool lanes.  

Clegern said he believes prices will drop as the cars become more popular.  "History tells us that ... the more these cars get out on the road, and the more common they become, the lower the cost of the technology will be," he said.

Cassandra Powers, the electric vehicles coordinator at the Georgetown University's Climate Center agreed.  "Flooding the market" with clean vehicles will boost consumer awareness and popularity, she said. "Supply is going to drive the demand in this case."

But the California New Car Dealers Association, a statewide trade group that opposes the clean car targets, told InsideClimate News it believes that's wishful thinking. "We love the new technologies ... but frankly, our customers aren't demanding zero-emissions vehicles," said Jonathan Morrison, the association's director of legal and regulatory affairs.

How and when did California emerge as the country's clean car leader, and what's different about this effort?

California has been cleaning up tailpipe pollution since the late 1950s, when it became the first state to limit smog emissions from cars. At that time it also required that new cars be fitted with fledgling pollution control technologies like the positive crankcase ventilation system, which filters harmful gases from internal combustion engines. The early regulations helped spur the auto industry to develop cleaner cars for the first time.

The state has continued tightening its auto pollution standards over the last half-century, with the federal government often following suit. In July, for instance, the EPA and Department of Transportation are expected to adopt California's rules on tailpipe greenhouse gas emissions. The two agencies and CARB will also adopt a fuel-efficiency mandate that requires cars and light trucks to get a combined average of 54.5 miles per gallon of gasoline by 2025, up from about 27.1 miles per gallon today.  

The 1967 Federal Air Quality Act, along with amendments to the Clean Air Act passed in the 1970s, cemented California's leadership on clean vehicles. So long as the state's standards are as stringent as federal ones and EPA approves, the laws say, the state can set its own targets for car emissions.

In 1990, CARB established the first standards for low- and zero-emissions vehicles, requiring 10 percent of sales from the state's top seven auto suppliers to come from electric and hydrogen cars by 2003. That mandate helped drive production of about 5,000 electric cars in the 1990s, including GM's infamous EV1, which was later recalled and destroyed after it failed to attract buyers. CARB eventually ratcheted down its sales target after it became apparent that no automaker could comply.

In 2001, CARB tried again. It required automakers to eventually produce up to 15,450 zero-emissions cars beginning in 2003. In 2008 the agency adopted new standards requiring the country's top six auto suppliers to meet the 60,000-car target by 2014, laying the groundwork for last month's regulations.

Things are different now.

"There's a lot more confidence that automakers can actually produce and sell these vehicles," Mui of NRDC said. In the past, many manufacturers fought "tooth and nail" against clean car mandates, he noted. "They still don't like having the requirements. But they support the goals of the zero-emissions vehicle program. And they're already commercializing these vehicles.”

Combined, the major automakers have launched, or are planning to offer, roughly 30 different plug-in hybrid and all-electric models within the next few years.

How do the rules fit within California’s broader effort to cut greenhouse gases?

The regulations are the latest changes to the state's three-year-old Advanced Clean Cars program, a package of existing requirements for manufacturers that seek to cut smog-forming emissions and greenhouse gases from tailpipes of conventional cars and create a new market for carbon-zero ones.

The program is a centerpiece of California's landmark global warming law, AB32, which orders a nearly 30 percent reduction in greenhouse gases over the next decade. Transportation accounts for 40 percent of the state’s climate-changing emissions.

Who opposes the new rules?

The Alliance of Automobile Manufacturers (AAM), a trade association, has been one of the most outspoken critics of California's gas-free car mandate. It argues that the rules force automakers to produce vehicles that consumers aren't forced to buy. The group represents 12 automakers. Seven of them—Ford, GM, Chrysler, Toyota, Mazda, Volkswagen and BMW—are regulated by CARB.

Morrison of the California New Car Dealers Association agreed. He said the green vehicle targets don't "take into account what consumers want, or what they're able to afford." But he's worried that if consumer demand fails to pick up, it will be car dealers—not automakers—that will be out of luck. "We're going to be saddled with all these expensive vehicles that nobody wants to buy," he said.

CARB could make the rules more palatable by lowering targets and by restoring an earlier provision that enabled car companies to earn partial credits for sales of conventional hybrids like the Prius, Morrison said.

What's this federal "loophole" that people are talking about?

Some clean car proponents worry there's a loophole in CARB's rules that could be abused and would cancel out the state's goal to put more clean cars on the road.

The new regulations state that if a carmaker's national fleet beats the upcoming federal standards for tailpipe greenhouse gases by one percent in a model year, then it would automatically get a huge exemption from its clean car quota in California—up to 50 percent for the 2018 model year and dropping after that.

The "over-compliance" provision, as CARB calls it, was the result of a compromise between agency and the automakers. It can be used for model years 2018 to 2021, and expires after that.

"If large manufacturers are able to use this provision, it could have a very big impact on the number zero-emission vehicles" that enter California, Anair of the Union of Concerned Scientists said. The provision could reduce the number of zero-emissions vehicles sold by 40 percent each year, according to Anair. That means 100,000 fewer clean cars would hit California's roads by 2021 than the rules mandate.

Clegern of CARB said the provision was a key driver of the compromise. "There are over-compliance credits available because we want everybody to be on board," he said.

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