By on July 7, 2016

Car exhaust (Image: JT/Flickr)

Halfway through its mandate to have 15.4 percent of the state’s vehicles generate zero emissions by 2025, the California Air Resources Board (CARB) is now considering changing its requirements.

The problem is too many credits handed out to green car manufacturers, who then sell them to dirtier automakers to bolster their standing with CARB, Bloomberg reports.

Since California created the mandate, makers of electric vehicles, Tesla especially, have skewed the equation. Under CARB requirements, automakers must build a certain amount of non-polluting vehicles in proportion to their market share. If they can’t, they can buy credits from another manufacturer that produces more non-polluting than required.

An all-electric automaker like Tesla has a big cache of credits ready for the taking. As a result, conventional automakers can get by with just six percent of their fleet carrying a “green” label.

Automakers are already annoyed with the U.S. government’s 2025 fuel economy targets, which are about to undergo a midterm review, but they’re really annoyed with California, especially if the state’s emissions regulator changes course in mid-stream.

CARB chairman Mary Nichols said she hasn’t figured out what to do about the overabundance of credits. Still, a chorus of voices is growing, calling on the regulator to make the mandate stricter — either by putting a cap on the number of credits available or boosting the required percentage of green vehicles.

Robert Bienenfeld, Honda’s assistant vice president for U.S. environmental strategy, told Bloomberg, “It’s bizarre to say we need to make the regulation more stringent because it’s working.”

Tesla’s vice-president for business development, Diarmuid O’Connell, called the possibility of capping credits “an extremely stupid idea.”

“You’d be punishing people who are doing the most to put EVs on the road,” he stated.

[Image: JT/Flickr]

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55 Comments on “California is Thinking of Changing its Zero-Emission Vehicle Rules, and Automakers Aren’t Happy About It...”


  • avatar
    28-Cars-Later

    ““You’d be punishing people who are doing the most to put EVs on the road,” he stated.”

    Which provide much needed profit to the loss making automaker.

    http://jalopnik.com/tesla-raked-in-another-51m-from-selling-zero-emissions-1702673346

    • 0 avatar
      JimZ

      I think you mean revenue.

      • 0 avatar
        28-Cars-Later

        Yes it provides revenue, but this revenue activity is near 100% profitable whereas revenue from most Tesla activity is not. The company would be in a much worse position if that $51 million dollars in revenue netted them only $1 million in profit (or worse, generated a loss).

        • 0 avatar
          JimZ

          It’s not “profit” if the company’s operations consume all of it. JFC, some of you need to open a dictionary and take a look at what “profit” means.

          • 0 avatar
            Vulpine

            “It’s not “profit” if the company’s operations consume all of it.”

            You’re assuming that the company’s ‘operations’ are consuming it without even considering that the company’s capital investments (i.e. new builds such as Superchargers, service centers, Gigafactory, etc.) are consuming it.

          • 0 avatar
            28-Cars-Later

            If my division’s product revenue is 99% margin, but my company loses money, this doesn’t mean my division’s product is not a profit center offsetting overall losses.

            Tesla may consume all of the profit it receives from selling credits, but without this fraudulent scheme it would be in even more dire financial straits. This is sort of the point I was making.

          • 0 avatar
            JimZ

            shareholders don’t invest in “divisions.”

            back in the old days, nobody was interested in hearing how GMAC or Ford Motor Credit were turning profits while losses from automotive operations canceled that out.

          • 0 avatar
            28-Cars-Later

            Shareholder investments were not the original point. Thanks for playing.

    • 0 avatar
      orenwolf

      Very much this. Given what Tesla makes in credits, I’d expect them to fight tooth and nail to not get capped.

      That being said, why don’t they have gas guzzler taxes, so that the purchase price (or credit) is intrinsic to the vehicle? I guess because then people would just buy their car one state over?

      • 0 avatar
        Quentin

        How would one state over help? The taxes are paid to the state of residence at the time of registration… not the state of purchase.

      • 0 avatar
        Vulpine

        I think the capping would be how much the other OEMs can buy more than how many total credits are generated.

        On the other hand, increasing the percentage of ‘green cars’ before credits can be counted would have a more direct effect on those stubborn OEMs avoiding the ZEV mandate.

  • avatar
    runs_on_h8raide

    Soon, by legal mandates from govt….all cars will suffer the fate of dirty deezle Vee-dubs.

    “Mr. Jones, your 2019 Buick is ‘non-compliant.’ Please turn it in to your nearest Police Department for destruction. You’ll be able to receive a voucher for a bicycle or tricycle once you complete the paperwork. Have a nice day.” — Your Government

  • avatar
    PrincipalDan

    I’d rather see the automakers stop getting extra CAFE credit for selling E85 compatible vehicles.

    • 0 avatar
      Scoutdude

      That is in process, to get credit the mfg has to somehow “prove” the ratio of E85 vs gas that is actually used.

      Personally I’d like to see it stay if for no other reason than the fact that there are people who keep pushing for E15 to be the minimum, and they may get there and beyond sooner or later. That did factor into my decision when purchasing a work van recently. I spent a little more and got something just new enough to be flex fuel. I figure I’ll probably keep it another 10 years and that way I’m ready for those mandates.

    • 0 avatar
      Vulpine

      It’s not CAFE credit they’re talking about, it’s CARB, requiring a certain percentage of vehicles be Zero Emissions Vehicles (ZEVs). Currently only BEVs, FCEVs and some PHEVs qualify.

      • 0 avatar
        Scoutdude

        Yes I was just pointing out that the E85 CAFE credit was going away.

        Lots of standard ICE powered cars do count as PZEVs and those do give ZEV credits, it is how Subaru is currently surviving. Standard Hybrids are generate PZEV credits which again do count.

  • avatar
    HotPotato

    Exactly! Unfortunately I think that’s fed, not state.

  • avatar
    Kendahl

    As new cars get more and more expensive, the fleet gets older and older. If CARB keeps going, Los Angeles streets will look like Havana.

    • 0 avatar
      VoGo

      Car price inflation has been low to nonexistent. There are more older cars on the road today because cars are better built and last longer.

      No need to blame the government for everything.

      • 0 avatar
        28-Cars-Later

        “Car price inflation has been low to nonexistent.”

        Please read something on a subject before typing, some of the things you say are completely ridiculous.

        “WHOLESALE PRICING REMAINS STRONG

        Wholesale prices (mix-, mileage-, and seasonally adjusted) increased in both 2014 and 2015 on an average annual basis, and they have been in an elevated range for six years. Clearly, 2015’s upward price movement defied market expectations (as analysts expected higher wholesale volumes would push prices
        lower), but the price rise did not defy market realities. Indeed, the increase in wholesale pricing reflected the record retail profit opportunities available to dealers in 2015. These record profits and near-record wholesale
        prices were the result of strong new vehicle pricing, exceptional credit conditions, higher employment levels, record job stability, and the often overlooked factor of increased dealership operating efficiencies.

        Statistically speaking, the last four years have shown the least volatility in wholesale vehicle pricing since the Manheim Index’s inception in 1995. A lot of macroeconomic and industry factors contributed to that stability; but also give credit to better and more efficient remarketing practices, which enabled commercial consignors to anticipate, respond to, and thus minimize impending swings in wholesale pricing.”

        http://www.manheim.com/content_pdfs/products/UCMR-2016.pdf?WT.svl=m_prod_consulting_latestupdates_graphic_2016

      • 0 avatar
        ajla

        “has been low to nonexistent.”

        Just like inflation-adjusted wage increases!

        In all seriousness, I’d be interested to see if anyone has tracked vehicle purchase prices as a percentage of take home pay from the 50s to today.

        • 0 avatar
          VoGo

          Comerica tracks the price of a new car in terms of the number of weeks of pay for median family income. It’s been pretty flat for the last decade. If you want the details, look here:

          http://blog.comerica.com/2013/03/20/auto-affordability-slipped-in-fourth-quarter/

    • 0 avatar
      bikegoesbaa

      “As new cars get more and more expensive”*

      *Citation needed

      In terms of absolute inflation-adjusted dollars cars appear to be basically the same price they have always been.

      In terms of content or anticipated operable miles per dollar they are of course dramatically cheaper than in the past.

      • 0 avatar
        stuki

        That is completely dependent on what value one chooses to arbitrarily (or self servingly) plug in as a value for inflation.

        Considering the question begging illumination regards LA vs Havana wrt car age, I’d suggest the most appropriate value would be to compare the take home wages of the income quintile(s) most likely to be driving cars approaching Havana age, vs prices of new cars.

  • avatar
    PentastarPride

    I highly doubt that the guidelines will “stay the same” between now and 2025. With environmentalists, it is never good enough and the rules always change.

    It’s a game of limbo. Look at washing machines. The ones out today barely wash clothes, but they see more of an opportunity to cut down on water usage even more.

    If the California government continues on the path they are on, automakers should simply refuse to ship new cars to CA until they renegotiate with more reasonable terms.

    Very quickly, consumers, dealers and any person or company a part of the supply chain will place excruciating pressure on California’s legislature to simply give up. Billions of dollars will be at stake.

    • 0 avatar
      VoGo

      There is a stunning correlation between FCA fans and revulsion at government regulation of fuel economy and air pollution. I just don’t see why you are so supportive of an import car company’s desire to degrade America’s environment and economy.

      In the past there have been standoffs between CARB and automakers, and the automakers have caved every time because the market (California plus several other states that support its rules) is too big for the automakers to boycott for any length of time and survive.

      • 0 avatar
        PentastarPride

        It has nothing to do with being an “FCA fan”. The rules are not justifiable and take no consideration of the engineering complexities and expense that are a direct result of these rules.

        I can think of one only person on here that may fit your description: BTSR. Sure, he happens to be a fan of a few FCA products (and I can’t say that I disagree with his views), but that has nothing to do with automaker preference and opinions of environmental policy. I’m sure that there’s someone out there driving a brand-new Volvo (or Prius, even) that share similar beliefs, even though both cars are typically owned by individuals solidly on the left.

        Don’t forget that not everyone wants or can use a hybrid or EV, or an undersized and turbocharged ICE (and so on). This is a market issue, people should decide what they want, not a group of out-of-touch individuals.

        Hypothetically speaking, if Toyota stood up against CAFE/CARB, I would fully support them. Personally, I don’t care for their cars, but nonetheless I would support them as much as I would support FCA or any other automaker.

        • 0 avatar
          VoGo

          PentaPride,
          You are trotting out the usual argument that the auto industry can’t possibly meet regulations to improve safety, the environment or fuel economy. And yet, every single time there has been a regulation, the industry magically met the target.

          I think what worries you – and should really worry the brass in London – is that FCA is not going to meet CAFE in 2025, because rather than invest in their core business, they’ve been throwing all their investment at Alfa Romeo, with no return.

      • 0 avatar
        Vulpine

        “In the past there have been standoffs between CARB and automakers, and the automakers have caved every time because the market (California plus several other states that support its rules) is too big for the automakers to boycott for any length of time and survive.”

        Those CARB states represent more than 20% of US states combined and all of them relatively high-population states where even today many of those ZEVs are not available. Increasing the percentage of ‘green’ cars will force those OEMs to start selling in the 9 states that joined CARB a couple years ago. It also means they’ll have to abandon the ‘compliance car’ mindset because they won’t be able to afford taking a loss on 10% of their product or more.

        For instance, I live in one of those CARB-compliant states and the nearest Fiat 500e to me is over 2,291 miles away. http://www.fiatusa.com/hostc/sni/IUX201601/results.do?radius=50&zipcode=21921

        • 0 avatar
          FreedMike

          I think translates to what – 100 recharges to get it delivered to you?

        • 0 avatar
          Scoutdude

          States didn’t join CARB, they adopted the California emissions standards and varying other parts of CARB regulations. For example my state has been in a state of Californication since 2009 yet ti wasn’t until the 2015 model year that they required the longer California emissions warranty coverage too. We also do not have a ZEV mandate.

    • 0 avatar
      ToddAtlasF1

      The washing machine reference rings true. I recently moved into a house that came with an older Whirlpool top-loader washing machine. It could wash clothes CLEAN in about 25 minutes. Sadly, it died almost two weeks ago. The most promising new machine I could find arrived yesterday. I’m not sure how it is saving energy by taking an hour and two minutes to do what the last machine did in less than half the time, but it seems to have done a reasonably job. Incidentally, my last place had a high end front loader. I never used the steam function, but it combined long wash times with instant mildew whenever someone left the door shut after unloading. I should have had the Whirlpool repaired.

      • 0 avatar
        PentastarPride

        Regarding washing machines: If you get the opportunity, buy a Speed Queen. They are priced higher than what’s at Lowes, Sears, etc. but clean very well and are truly durable. These are the last of the traditional style top loaders.

        My parents had one when I was growing up…25 years later, they still have it. When I bought my first home three years ago I passed on the glitzy machines with all the buttons and dials and bought one with the matching dryer.

        Front load machines are a lot better at cleaning than an HE top load machine but they seem to fail way too early.

        • 0 avatar
          Vulpine

          “Front load machines are a lot better at cleaning than an HE top load machine but they seem to fail way too early.”

          Probably because they’re driving a great, big drum instead of a relatively-tiny agitator for all the action. However, I prefer the front loaders over the top loaders for their effectiveness, even though I’m currently using a top loader.

    • 0 avatar
      FreedMike

      I don’t know, Pentastar, I did my wash at my girlfriend’s house with her front loader while my old top loader was broken, and they worked fine.

  • avatar
    ydnas7

    the core problem is that CARB supports H2, and the Chevy Bolt, Nissan LEAF 2, and Tesla 3 all destroy the economics of H2.

    CARB view was of 100 city mile EVs and 300 mile H2 fuel cells.

    but thats out of date versus Chevy Bolt, Nissan LEAF 2, and Tesla 3 which will all get 300 CITY miles.

    because 3 manufactures will sell credits, the price will plummet, and become so cheap, that only the bold and rich will try to sell H2 vehicles vs 200mile EVS at $150/kWh.

    so less H2 vehicles means death for H2 stations, which means death for H2 vehicles

    • 0 avatar
      Dr. Doctor

      The major problem with hydrogen as a fuel source is that the bulk of it is produced by the electrolysis of natural gas. Splitting hydrogen from water is a pretty energy-intensive process that doesn’t yield as much hydrogen as the natural gas process.

      Yes, water is the only byproduct but the energy, infrastructure, and R&D costs vs. lithium ion batteries and cleaner power generation make it the lesser of the two options.

      • 0 avatar
        RHD

        Someone needs to create a solar-powered water splitting machine for home fuel generation. Put in ten gallons of water at sunrise, fill up with pure hydrogen at sunset.

      • 0 avatar
        Felix Hoenikker

        Correction,
        Most hydrogen is produced by reforming a mixture of steam and methane (natural gas). Electrolysis of water is not a significant H2 supply in the US.
        One of the main goals of a “hydrogen economy” is to break the carbon cycle. Reforming natural gas produces CO2 as a by product so it is not a viable long term source of H2 for transportation fuels.
        The idea is to generate H2 from solar or nuclear power via electrolysis of water or another technology that does not generate CO2 as a by product. The biggest problem with H2 vehicles is storing H2 in high pressure tanks. Once a low pressure, on board storage system is developed, fuel cell vehicles will be a thing.

        • 0 avatar
          Vulpine

          That’s the point he was making, Felix, though he might have worded it differently. The problem is that even cracking hydrogen from natural gas creates emissions that we’re trying to eliminate while the process at an on-site station seems to be slower and problematical, considering how few of those H2 stations are functional when an HFCV rolls in to refuel at any given time.

  • avatar
    JustPassinThru

    What this does is illustrate the FOLLY of expensive re-engineering, re-tooling of an entire industry to meet, not a changing economic circumstance but POLITICAL mandates – based on nothing but the whim of the hour, and as easily retracted or even reversed.

    • 0 avatar
      Vulpine

      “What this does is illustrate the FOLLY of expensive re-engineering, re-tooling of an entire industry to meet, not a changing economic circumstance but POLITICAL mandates – based on nothing but the whim of the hour, and as easily retracted or even reversed.”

      This isn’t a political or economic situation, JPT, it’s an environmental one. Because politics and economics simply ignored the environmental issue for so long, we’re now having to force the issue rather than letting the market adapt at its own rate.

      • 0 avatar
        JustPassinThru

        Yeah, I know. Some people are just in love with government – they feel lost without masters to tell them what to do, how, when, how much.

        And when all this market-diktat-by-imperial-fiat leads to situations like this, they tie themselves into pretzels defending it.

        Duly noted. I have to wonder, though: Why do people who love government and hate corporations and the cars corporations make, come to sites like this one?

        And where were these people when the government-built Zastiva Yugo so-badly needed buyers? You’d think they’d put their money where their mouths are.

    • 0 avatar
      FreedMike

      “What this does is illustrate the FOLLY of expensive re-engineering, re-tooling of an entire industry to meet, not a changing economic circumstance but POLITICAL mandates – based on nothing but the whim of the hour, and as easily retracted or even reversed.”

      -Direct quote from whoever was sticking with mainframe computers in 1981, when IBM introduced the PC and the government gave out tax incentives to businesses that bought them. That whole PC thing was just a passing fancy, after all. No one ever got rich off that.

      • 0 avatar
        JustPassinThru

        The PC caught on, obviously, because a small, transportable desktop computer was more practical than something that took a whole office suite of space to work.

        The PC would have succeeded over mainframe computers without any government aid – in fact it did. And all the government subsidies to preserve mainframes wouldn’t have helped.

        The electric car is not practical now; may never be practical in our lifetimes; and all the tax benefits or punishment on manufacturers who do not offer this folly, won’t change that. It will just screw up the marketplace and cause wild reversals as it comes out that dull-normal lawmakers really are not Nostradaumses.

        Remember the Synthetic Fuels Corporation? SIX BILLION 1980 dollars of taxpayer money poured into that sinkhole, and NOTHING to show for it. EVER.

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