CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY

AIR RESOURCES BOARD

STAFF REPORT:

INITIAL STATEMENT OF REASONS FOR PROPOSED RULEMAKING,

PUBLIC HEARING TO CONSIDER ADOPTION OF REGULATIONS TO

CONTROL GREENHOUSE GAS EMISSIONS FROM MOTOR VEHICLES

This report has been reviewed by the staff of the California Air Resources Board

and approved for publication. Approval does not signify that the contents

necessarily reflect the views and policies of the Air Resources Board, nor does

the mention of trade names or commercial products constitute endorsement or

recommendation for use.

Date of Release: August 6, 2004

Scheduled for Consideration: September 23, 2004
Initial Statement of Reasons

August 6, 2004
Initial Statement of Reasons

August 6, 2004

i

EXECUTIVE SUMMARY

California has a long history of environmental leadership. This tradition of

environmental leadership continues to this day. In 2002, recognizing that global

warming would impose compelling and extraordinary impacts on California, the

legislature adopted and the Governor signed AB 1493 (Pavley). That bill directs

the California Air Resources Board (Board) to adopt regulations to achieve the

maximum feasible and cost-effective reduction of greenhouse gas emissions

from motor vehicles. This Initial Statement of Reasons presents the staff

proposal that will be considered by the Board at its September 2004 public

hearing.

Climate Change Overview

The Earth’s climate has always changed; the paleo-record of the last million

years shows large changes with the growth and retreat of the great ice sheets

over the continents. Nevertheless, over the past century the northern

hemisphere has warmed at a rate faster than at any other time over the last

millennium, and that change is because human activities are altering the

chemical composition of the atmosphere through the buildup of greenhouse

gases (GHGs), primarily carbon dioxide (CO2), methane (CH4), nitrous oxide

(N2O), and hydrofluorocarbons. The initial focus of climate change scientists was

on so-called GHGs; however, research over the last two decades has

demonstrated that airborne particles also have the potential to significantly alter

climate, and that anthropogenic emissions may have a substantial effect on the

present day abundance of particles in the atmosphere.

Climate change can also be considerably intensified by the increase of ozone

levels in the troposphere. Ozone is produced by photochemical reactions. Its

precursor components are primarily the result of road traffic. Unlike many of the

other GHGs, ozone is a short-lived gas that is found in regionally varying

concentrations. Nevertheless, it is the third most important anthropogenic GHG

behind CO2 and CH4, and its concentration has increased by 35 percent since

pre-industrial times.

The heat-trapping property of GHGs is undisputed. Although there is uncertainty

about exactly how and when the earth’s climate will respond to increasing

concentrations of GHGs, observations in conjunction with climate models

indicate that detectable changes are under way. These observed changes go

beyond a global mean rise in temperature, including also changes in regional

temperature extremes, precipitation, soil moisture, and sea level, all of which

could have significant adverse effects on water resources, many ecological

systems, as well as on human health and the economy.

There is no scientific uncertainty about the fact that human activities have

increased the atmospheric abundance of GHGs. The uncertainties start when
Initial Statement of Reasons

August 6, 2004

ii

we try to predict exactly what the climate changes will be in various local areas of

the Earth, and what the effects of clouds will be in determining the rate at which

the mean temperature will increase. There are also uncertainties associated with

the magnitude and timing of other consequences of a warmer planet: sea level

rise, spread of certain diseases out of their usual geographic range, the effect on

agricultural production, water supply, sustainability of ecosystems, increased

strength and frequency of storms, extreme heat events, air pollution episodes,

and the consequence of these effects on the economy. Already, some of these

effects have been seen in California. Over the last hundred years, average

temperatures have increased 0.7o F, sea levels have risen by three to eight

inches, and spring run-off has decreased 12 percent.

California's transportation sector is the single largest contributor of GHGs in the

State, producing close to 60 percent of all such emissions. If current trends

continue, the State’s inventory of GHGs could mirror the growth in population.

Transportation and land-use trends in California will likely continue to increase

GHG emissions. This proposal will reduce GHG emissions from motor vehicles.

The international community recognizes that such GHG emission reduction

actions would lessen the pressures on natural and human systems from climate

change. Slower rates of increase in global mean temperature and sea level

would allow more time for adaptation. Consequently, mitigation actions are

expected to delay and reduce damages caused by climate change and thereby

generate environmental and socio-economic benefits.

California Actions to Address Climate Change

The State of California has traditionally been a pioneer in efforts to reduce air

pollution, dating back to 1963 when the California New Motor Vehicle Pollution

Control Board adopted the nation’s first motor vehicle emission standards.

California likewise has a long history of actions undertaken in response to the

threat posed by climate change. Beginning with 1988 legislation that directed the

California Energy Commission, in consultation with the Air Resources Board and

other agencies, to study the implications of global warming on California’s

environment, economy, and water supply, and continuing on over the years

through Governor Schwarzenegger’s April 2004 Executive Order outlining his

vision for the California Hydrogen Highway Network, California state government

has consistently recognized the necessity for state action on climate change to

protect California’s interests. At the Air Resources Board, attention to the

mechanisms and effects of climate change dates back to 1989, when staff first

updated the Board on the emerging science.

Maximum Feasible and Cost-Effective Technologies

A key part of the staff’s technical work is an assessment of technologies and

fuels that can contribute to a reduction of climate change emissions in passenger

vehicles from the 2009 model-year and beyond. The staff technology
Initial Statement of Reasons

August 6, 2004

iii

assessment reviews baseline vehicle attributes and their contribution to

atmospheric climate change emissions, and evaluates technologies that have the

potential to decrease these emissions. The technologies explored are currently

available on vehicles in various forms, or have been demonstrated by auto

companies and/or vehicle component suppliers in at least prototype form. The

report then examines the lifetime cost of these technologies to vehicle owneroperators. This approach is consistent with the AB 1493 directive to require

climate change reduction technologies that are economical to an owner or

operator of a vehicle, taking into account the full life-cycle costs of a vehicle.

There is a near-term, or off-the-shelf, technology package in each of the vehicle

classes evaluated (small and large car, minivan, small and large truck) that

resulted in a reduction of CO2 emissions of at least 15 to 20 percent from

baseline 2009 values. In addition, there is generally a near-term technology

package in each of the vehicle classes that results in about a 25 percent CO2

emission reduction.

Several technologies stood out as providing significant reductions in emissions at

favorable costs. These include discrete variable valve lift, dual cam phasing,

turbocharging with engine downsizing, automated manual transmissions, and

camless valve actuation. Potential improvements in the air conditioning system

include an improved variable displacement compressor with revised controls,

reduced leakage systems, and the use of an alternative refrigerant (e.g. HFC152a). Packages containing these and other technologies provided substantial

emission reductions at prices that ranged from a saving to several hundreds of

dollars. Nearly all technology combinations modeled provide reductions in

lifetime operating costs that exceed the retail price of the technology.

Climate Change Emission Standards

Vehicle climate change emissions comprise four main elements: (1) CO2, CH4

and N2O emissions resulting directly from operation of the vehicle; (2) CO2

emissions resulting from operating the air conditioning (AC) system (indirect AC

emissions); (3) refrigerant emissions from the air conditioning system due to

either leakage, losses during recharging, or release from scrappage of the

vehicle at end of life (direct AC emissions); and (4) upstream emissions

associated with the production of the fuel used by the vehicle. The climate

change emission standard incorporates all of these elements.

Staff elected to incorporate the CO2 equivalent emission standards into the

current Low-Emission Vehicle (LEV) program along with the other light and

medium-duty automotive emission standards. Accordingly, there would be a CO2

equivalent fleet average emission requirement for the passenger car/light-duty

truck 1 (PC/LDT1) category and another for the light-duty truck 2 (LDT2)

category, just as there are fleet average emission requirements for criteria

pollutants for both categories of vehicles in the LEV program.
Initial Statement of Reasons

August 6, 2004

iv

Determination of the specific climate change emission standards for each

category involved several steps. First, the maximum feasible emission

reductions were modeled for five vehicle types (small and large car, minivan,

small and large truck) with various technology packages. These technology

packages were then categorized with respect to their technology readiness (i.e.

near-, mid-, or long-term). Secondly, manufacturer specific data were collected

for the California fleet in order to evaluate individual manufacturer product mix.

The emission standards for each category were then determined based on the

manufacturer with the highest average weight vehicles (as opposed to the

average of all the manufacturers) to ensure that all manufacturers can comply

with the standards.

Staff proposes setting near-term standards, phased in from 2009 through 2012,

and mid-term standards, phased in from 2013 through 2016. The proposed

standards, expressed in terms of CO2 equivalent grams per mile, are as follows:

Table ES-1. CO2 Equivalent Emission Standards for Model Years 2009 through

2016

CO2-equivalent emission

standard by vehicle category

(g/mi) Tier Year

PC/LDT1 LDT2

2009 323 439

2010 301 420

2011 267 390 Near-term

2012 233 361

2013 227 355

2014 222 350

2015 213 341 Mid-term

2016 205 332

Staff estimates that the average fleetwide incremental cost of control to meet

these standards, taking into account the phase-in of the standard and the specific

starting point of the six largest individual manufacturers, will be as follows:
Initial Statement of Reasons

August 6, 2004

v

Table ES-2. Average Cost of Control by Model Year for the Major Six Automakers

Year All major 6

PC/LDT1 16

2009 LDT2 36

PC/LDT1 52

2010 LDT2 93

PC/LDT1 194

2011 LDT2 199

PC/LDT1 292

2012

Near-term

phase-in

LDT2 308

PC/LDT1 330

2013 LDT2 382

PC/LDT1 383

2014 LDT2 491

PC/LDT1 483

2015 LDT2 723

PC/LDT1 626

2016

Mid-term

phase-in

LDT2 955

Thus when fully phased in the near term standards will result in an estimated

average cost increase of $292 for PC/LDT1, and $308 for LDT2 as compared to

the 2009 baseline vehicle. The fully phased in mid term standards will result in

an estimated average cost increase of $626 for PC/LDT1 and $955 for LDT2.

The staff analysis concludes, however, that these increased costs will be more

than offset by operating cost savings over the lifetime of the vehicle.

Looking at the cost of the technology on a per vehicle basis, staff estimates that

the estimated cost to apply the near term technology to an individual vehicle

would be an average of $382 for the PC/LDT1 category and $358 for the LDT2

category, compared to the 2009 baseline vehicle. The estimated average cost to

apply the maximum feasible mid term technology is $1,204 for PC/LDT1 and

$1,356 for LDT2. These costs are higher than the fleet averages shown above

because not all vehicles will need to be controlled to the maximum level. Rather,

the proposed standard is set at a level that is feasible for the manufacturer in the

worst starting position. Therefore the average cost across the fleet will be less

than the maximum cost of the technology on a per vehicle basis.

To provide perspective on the potential impact of the proposed regulations on the

monthly cash flow for typical purchasers of vehicles affected by the regulation,

staff considered a vehicle-financing period of five years at an interest rate of 5

percent. Using the average increase in vehicle prices associated with the fully

phased-in regulation (2016), staff calculated the potential increases in monthly

loan payments and decreases in operating cost. This methodology thus provides

an estimate of the effect on individual consumers. The analysis concluded that

on monthly basis, the increased vehicle payment minus the reduction in

operating cost would result in a net savings to vehicle owners ranging from $6.54

to $11.73.
Initial Statement of Reasons

August 6, 2004

vi

The staff analysis concludes that these standards, when applied to the fleet of

the “major six” automakers (GM, Ford, DaimlerChrysler, Toyota, Honda, Nissan),

would result in the following emission reductions by year. The reductions needed

by individual automakers will vary depending on their initial starting position.

Table ES-3. Average Percent CO2 Emission Change by Vehicle Model Year

Year All major 6

PC/LDT1 -1.3%

2009 LDT2 -2.1%

PC/LDT1 -4.4%

2010 LDT2 -5.5%

PC/LDT1 -14.0%

2011 LDT2 -11.8%

PC/LDT1 -24.9%

2012

Near-term

phase-in

LDT2 -18.3%

PC/LDT1 -26.7%

2013 LDT2 -19.6%

PC/LDT1 -28.5%

2014 LDT2 -20.9%

PC/LDT1 -31.2%

2015 LDT2 -22.9%

PC/LDT1 -33.9%

2016

Mid-term

phase-in

LDT2 -24.8%

The proposed standards also address upstream emissions (emissions due to the

production and transportation of the fuel used by the vehicle). Staff proposes to

use the upstream emission levels for conventional fuel vehicles as a yardstick

against which to compare the relative emissions of alternative fuel vehicles. This

approach simplifies the regulatory treatment of gasoline vehicles, while at the

same time allowing for appropriate consideration of differences in upstream

emissions from alternative fuel vehicles.

AB 1493 directs that emission reduction credits be granted for any reductions in

GHG emissions achieved prior to the operative date of the regulations. ARB staff

proposes that (1) credit for early emission reductions should be available for

model years 2000 through 2008, with manufacturers allowed to opt in to the

program during any model year during this timeframe, and (2) the baseline

against which manufacturer emissions are measured should be the fully phased

in near term standard. Thus under the staff early credit proposal a

manufacturer’s fleet average emissions, for model years beginning with their first

year of participation through 2008, would be compared to the 2012 standards. If

a manufacturer has fleet average emissions below the standard for a specific

model year, the manufacturer would earn credit.

AB 1493 also requires that the regulations “provide flexibility, to the maximum

extent feasible consistent with this section, in the means by which a person

subject to the regulations ... may comply with the regulations. That flexibility shall

include, but is not limited to, authorization for a person to use alternative methods
Initial Statement of Reasons

August 6, 2004

vii

of compliance with the regulations.” Thus the use of alternative compliance

strategies must not undercut the primary purpose of the regulation, which is to

achieve GHG reductions from motor vehicles. Accordingly, the ARB's alternative

compliance program will be limited to the vehicles that are regulated through AB

1493, and their fuels. This is to ensure that the program does not dilute the

technology-forcing nature of the regulation, since the goal is to reduce emissions

from the vehicles themselves. The major features of the staff proposal are:

• Projects must be located in California to be eligible as alternative methods

of compliance.

• Only companies regulated by AB 1493 (automakers) will be permitted to

apply for alternative compliance credits.

• Only those vehicles regulated under AB 1493 are eligible for alternative

compliance credits. This includes model year 2009 and later passenger

vehicles and light-duty trucks and other vehicles used for noncommercial

personal transportation in California.

• Eligible projects are limited to those that achieve GHG reductions through

documented increased use of alternative fuels in eligible vehicles.

Environmental Impacts

Taking into account the penetration of 2009 and later vehicles meeting the new

standard into the fleet, staff estimates that the proposed regulation will reduce

climate change emissions by an estimated 87,400 CO2 equivalent tons per day

statewide in 2020 and by 154,500 CO2 equivalent tons per day in 2030. This

translates into a 18 percent overall reduction in climate changes emissions from

the light duty fleet in 2020 and a 27 percent overall reduction in 2030.

Staff estimates that baseline emissions today (2004) are 386,600 CO2 equivalent

tons per day, and in 2010 will be 430,200 CO2 equivalent tons per day. Thus

with the regulation emissions will continue to grow from today’s level through

2009 when the regulation takes effect, but emissions in 2020 and in 2030 will be

slightly lower than in 2010. Figure XS-1 illustrates this trend in graphic form.
Initial Statement of Reasons

August 6, 2004

viii

Figure ES-1. Motor Vehicle Greenhouse Gas Emissions (Excluding Upstream

Emissions)

Greenhouse gas emissions from California light duty vehicles are a small fraction

of the global total. Based on inventory data from various sources, GHG

emissions from California light duty vehicles are about 30 percent of California

CO2 equivalent GHG emissions from all sources and about 2 percent of total

United States GHG emissions. Although estimates of global GHG emissions

vary greatly, emissions from California light duty vehicles appear to amount to

less than 1 percent of the total. Thus the proposed California regulation, viewed

in isolation, will not wholly mitigate the potential consequences of climate change

in California.

It does not necessarily follow, however, that California should do nothing.

Rather, there are several compelling reasons to move forward with the proposed

regulation, even while recognizing that by itself it will not solve the climate

change problem. First of all, the proposed regulation is a “no regrets” policy that

addresses climate change emissions but at the same time provides economic

benefit to the state. Second, California would not be acting in isolation. Other

states in the United States, and other countries internationally, have already

taken or are contemplating steps to reduce GHG emissions from a variety of

sectors and sources. Moreover, California action specifically to control GHGs is

strongly supported by the public. The July 2004 Special Survey on Californians

and the Environment, conducted by the Public Policy Institute of California, found

0

100000

200000

300000

400000

500000

600000

700000

2000 2005 2010 2015 2020 2025 2030 2035

Calendar Year

Tons Per DAy

Without Regulation

With Regulation

-18% -27%
Initial Statement of Reasons

August 6, 2004

ix

that eight in ten Californians support a state law that requires automakers to

further reduce the emission of GHGs from new cars in California by 2009.

Finally, the longstanding technology-forcing role of California regulation should

not be understated. There have been many instances where other jurisdictions

have adopted motor vehicle controls that were pioneered in California. Thus

there is potential for the proposed regulation to spread to other jurisdictions and

thereby add momentum to the already existing set of measures that are

underway around the globe.

Cost Effectiveness

Typically, emission control regulations impose a cost. Cost effectiveness is a

measure of the cost imposed per ton of reduction achieved, and thus is a useful

tool to compare various possible approaches. In this instance, however,

AB 1493 requires that the regulations be economical to the consumer over the

life cycle of the vehicle. Consistent with this direction, the technology packages

that provide the basis for the standard result in operating cost savings that

exceed the initial capital cost, resulting in a net savings to the consumer over the

lifecycle of the vehicle. This translates to a “negative” cost effectiveness value

(there is a cost savings per ton reduced). Thus staff estimates that the cost

effectiveness of the staff proposal, in terms of dollars per ton of CO2 equivalent

emissions reduced, is -$138 in 2020 and -$135 in 2020.

Economic Impacts

The climate change regulation may impact several sectors of the economy. The

steps that manufacturers will need to take to comply with the regulatory

standards are expected to lead to price increases for new vehicles. Many of the

technological options that manufacturers choose to comply with the regulation

are also expected to reduce operating costs. These two responses to the

regulation have combined positive and negative impacts on California

businesses and consumers. The vehicle price increase will be borne by

purchasers and may negatively affect businesses. However, the operating cost

savings from the use of vehicles that comply with the regulation will positively

impact consumers and most businesses. Based on the staff analysis, the net

effect of the regulation on the economy is expected to be small but positive. The

proposed climate change regulation is not expected to cause any significant

adverse impact on the State's economy. It is very likely that savings from

reduced vehicle operating costs would end up as expenditures for other goods

and services. These expenditures would flow through the economy, causing

expansion or creation of new businesses in several sectors. Staff's economic

analysis shows that as the expenditures occur, jobs and personal income

increase. There will not be any impacts on the ability of California business to

compete with businesses in other states. State and local agencies will not be

adversely impacted and are likely to realize a net reduction in their cost of fleet

operations.
Initial Statement of Reasons

August 6, 2004

x

Impacts on Low Income and Minority Communities

The ARB has made the achievement of environmental justice an integral part of

its activities. The Board approved Environmental Justice Policies and Actions

(Policies) on December 13, 2001. These Policies establish a framework for

incorporating environmental justice into the ARB's programs consistent with the

directives of State law.

As the ARB developed the climate change regulations, staff worked closely with

community leaders involved with environmental justice as well as with

environmental and public health organizations to maintain an ongoing dialogue

and thus successfully implement the ARB's environmental justice policies.

Staff has undertaken an evaluation to investigate if low-income and minority

communities (communities) may be impacted disproportionately by the climate

change regulation. The primary direct mechanism identified was the potential

effect on used car prices. Because the vehicle price increases caused by the

proposed regulation may, over time, increase the price of used vehicles that lowincome households tend to purchase, the staff focused on analyzing the potential

impacts of the vehicle price increase on low-income purchasers of used vehicles.

The analysis showed that the expected impacts of any price increase are minor,

and would be more than outweighed by a reduction in operating cost. Thus the

proposed regulation should not have a significant impact on low-income

purchasers of used vehicles.

Other Considerations

Staff also has investigated several approaches that supplement the standard

economic analysis. The methods used rely on recent tools and studies that

provide additional insight into the potential impacts of the regulation. Using those

tools and studies to investigate possible secondary impacts of the regulation, this

report presents additional perspectives on the potential impact of the proposed

regulation on fleet mix, emissions, the State’s economy, small businesses, and

low-income households. The methods discussed are in the early stages of

development relative to the standard economic analysis that has been developed

over many years. As such, it is expected that these new methods will be further

refined over time.

The economic impact analysis is based on the staff assessment that the reduced

vehicle operating cost resulting from the regulation will be sufficiently attractive to

new car buyers to compensate for the vehicle price increase, which results in

vehicle sales that are unchanged from the levels that would have been the case

without the regulation. Staff also, however, assessed what the consequences

would be if one assumes that the changes in vehicle price and other attributes do

affect sales. Staff analyzed the potential effect of price and operating cost
Initial Statement of Reasons

August 6, 2004

xi

changes on sales, fleet size, and fleet age using a consumer choice model

developed by researchers at the University of California, Davis. The results

show that the net result of increased new vehicle prices and lower operating

costs is a tendency to increase sales in the near term, and slightly decrease

sales in the longer term as the more stringent second step of the regulation is

fully phased in.

Staff also evaluated potential adverse environmental impacts associated with

increased vehicle miles traveled (VMT) due to lower operating costs. Part of this

effort utilized the findings from a study conducted by researchers at the

University of California, Irvine. Our analysis indicates that the benefits of

reduced climate change emission from the regulation will not be affected

significantly by any increase in driving attributable to lower operating cost.

The staff assessment concludes that communities with low income and minority

households are expected to have increased jobs as a result of the regulation.

Future employment growth in some sectors may be reduced, but an increase in

overall economic activity because of increased purchasing power due to lowered

operating costs of vehicles would be expected to create a sufficient number of

jobs to more than offset any losses.

Many of the measures that manufacturers will employ to achieve climate change

emission reductions will result in reduced vehicle operating costs, due to the fact

that the vehicles will be more efficient. These operating cost savings in turn feed

into the staff analysis of the economic impact of the regulation and its costeffectiveness. The dollar value to consumers of a given motor vehicle GHG

reduction and any associated increase in vehicle efficiency will vary depending

on the price of fuel. Throughout the analysis staff assumed a fuel price of $1.74

per gallon for gasoline. Several commenters have noted that these assumed fuel

prices do not correspond to current conditions, and have suggested that staff

assess the extent to which its findings and conclusions would change given

higher fuel prices. In response to these comments staff has replicated relevant

portions of the analysis using an assumed fuel price of $2.30 per gallon, which is

intended to be more representative of recent prices.

Almost all of the technology packages evaluated by staff paid for themselves

over the lifecycle of the vehicle at the assumed fuel price of $1.74 per gallon.

The choice of the technology packages to use for setting the near term and mid

term standards was driven more by technical lead time and developmental

constraints rather than by payback concerns. Thus although using a fuel price of

$2.30 per gallon reduces the payback period and increases the net present value

for all technology packages, this change by itself would not allow staff to set a

more stringent standard. Rather, the limiting factor on the standard is the

availability of technology packages for widespread deployment.
Initial Statement of Reasons

August 6, 2004

xii

The primary staff analysis concluded that at a fuel price of $1.74 per gallon the

GHG reduction technologies would more than pay for themselves over the life of

the vehicle, and the regulation as a whole would have small but overall positive

effects on the California economy. As would be expected, if fuel prices are $2.30

per gallon rather than $1.74 per gallon, the net benefits increase both for

individual consumers and for the state as a whole.

Staff Recommendation

The ARB staff recommends that the Board adopt the regulation as proposed in

this Initial Statement of Reasons. The proposed regulation is intended to achieve

the maximum feasible and cost effective of GHG emissions from new motor

vehicles.
Initial Statement of Reasons

August 6, 2004

TABLE OF CONTENTS

1 INTRODUCTION......................................................................................................1

1.1 Organization of the Report..................................................................................1

1.2 Modifications to the June 14 Draft .....................................................................1

2 CLIMATE CHANGE OVERVIEW...........................................................................3

2.1 Climate Change Causes and Projections.........................................................4

2.2 Climate Change Pollutants .................................................................................8

2.3 Global Warming Potentials ...............................................................................14

2.4 Pollutants Included in the Proposed Regulation............................................16

2.5 Indicators of Climate Forcing and Climate Change In California................16

2.6 Potential Impacts on California ........................................................................19

2.7 Abrupt Climate Change.....................................................................................24

2.8 Summary..............................................................................................................25

3 CALIFORNIA ACTIONS TO ADDRESS CLIMATE CHANGE ........................27

3.1 Summary of California Activities ......................................................................27

3.2 Legislation............................................................................................................29

3.3 Administrative Initiatives....................................................................................31

4 SUMMARY OF PROPOSED REGULATION.....................................................39

4.1 Climate Change Emission Reduction Standard ............................................39

4.2 Early Credits........................................................................................................40

4.3 Alternative Compliance......................................................................................40

5 MAXIMUM FEASIBLE AND COST-EFFECTIVE TECHNOLOGIES.............42

5.1 Background .........................................................................................................42

5.2 Technology Assessment ...................................................................................46

5.3 Incremental Costs Of Technologies................................................................80

5.4 Lifetime Cost Of Technologies To Vehicle Owner-Operator.......................99

5.5 Conclusions .......................................................................................................101

6 CLIMATE CHANGE EMISSION STANDARDS...............................................103

6.1 Determination of Maximum Feasible Emission Reduction Standard.......104

6.2 Determination of Effect of Standard on the Fleet........................................115

6.3 Compliance with the Emission Standards ....................................................121

6.4 Treatment of Upstream Emissions ................................................................124

6.5 Early Reduction Credits...................................................................................126

6.6 Alternative Compliance Strategies ................................................................129

7 REGULATORY ALTERNATIVES......................................................................137

7.1 Less Stringent or No New Vehicle Standards..............................................137

7.2 More Stringent New Vehicle Standards........................................................137

7.3 Standards for Mobile Air Conditioner Refrigerant Emissions ....................137

7.4 Summary............................................................................................................138
Initial Statement of Reasons

August 6, 2004

8 ENVIRONMENTAL IMPACTS ...........................................................................139

8.1 Baseline Inventory Development ...................................................................139

8.2 Emissions Benefits of Proposed Regulation................................................142

8.3 Emission Impact of the Staff Proposal in a Broader Context ....................144

8.4 Fuel Cycle Emissions.......................................................................................146

8.5 Energy Cost and Demand...............................................................................147

8.6 Other Environmental Media............................................................................147

8.7 Other Considerations .......................................................................................147

9 COST EFFECTIVENESS ...................................................................................148

9.1 Cost Data and Emission Reductions.............................................................148

9.2 Cost Effectiveness............................................................................................149

10 ECONOMIC IMPACTS........................................................................................150

10.1 Legal Requirements.....................................................................................150

10.2 Potential Impacts on Business Creation, Elimination, or Expansion....151

10.3 Potential Impact on California Business Competitiveness.....................159

10.4 Potential Costs to Local and State Agencies...........................................160

10.5 Potential Impact on Individual Consumers...............................................160

10.6 Conclusion.....................................................................................................161

11 IMPACTS ON MINORITY AND LOW INCOME COMMUNITIES.................162

11.1 ARB Environmental Justice Policy.............................................................162

11.2 AB 1493 Requirements ...............................................................................162

11.3 Potential Environmental Impacts ...............................................................166

11.4 Potential Economic Impacts .......................................................................166

12 OTHER CONSIDERATIONS..............................................................................171

12.1 Consumer Response Effects on Emissions and State Economy.........171

12.2 Alternative Approach to Assessing Consumer Response.....................181

12.3 Effects of Regulation on Vehicle Miles Traveled.....................................182

12.4 Combined Effect on Criteria Pollutant Emissions....................................188

12.5 Manufacturer Response..............................................................................190

12.6 Impact on Businesses in Low Income and Minority Communities .......191

12.7 Effect of Increased Fuel Price....................................................................196

12.8 Summary and Conclusions .........................................................................199

13 SUMMARY AND STAFF RECOMMENDATION.............................................201

13.1 Summary of Staff Proposal.........................................................................201

13.2 Staff Recommendation................................................................................202

LIST OF ACRONYMS AND ABBREVIATIONS.......................................................205

REFERENCES.............................................................................................................207

APPENDIX A: PROPOSED AMENDMENTS .........................................................215
Initial Statement of Reasons

August 6, 2004

1

1 INTRODUCTION

California has a long history of environmental leadership. Motivated by the stunning

natural beauty of our coastline, inland valleys, forests and mountains, as well as by the

public health and environmental challenges brought about increasing levels of pollution,

California’s citizens have repeatedly called for and supported measures to protect

California’s environmental heritage. Our political leadership and governmental

institutions have responded with a variety of initiatives that restore, protect and enhance

the environment, to ensure public health, environmental quality and economic vitality.

Often these California initiatives have provided a benchmark and template for further

action both nationally and internationally.

This tradition of environmental leadership continues to this day. In 2002, recognizing

that global warming will impose compelling and extraordinary impacts on California, the

legislature adopted and the Governor signed Assembly Bill (AB) 1493 (Pavley). That

bill directs the California Air Resources Board (Board) to adopt regulations to achieve

the maximum feasible and cost-effective reduction of greenhouse gas emissions from

motor vehicles. This Initial Statement of Reasons presents the staff proposal for

consideration by the Board.

1.1 Organization of the Report

The report begins (Section 2) with an overview of the scientific evidence regarding

climate change and its potential effects in California. Section 3 outlines the long history

of previous actions that California has taken to understand and address the threat of

climate change. Section 4 briefly summarizes the proposed regulation. Section 5

presents the results of staff’s detailed technology assessment, which identifies the

technologies available to achieve the maximum feasible and cost-effective reduction.

Section 6 describes how the vehicle-level reductions outlined in the technology

assessment were translated into a standard that can be applied at the manufacturer

fleet level. This section also discusses staff’s proposed approach towards alternative

compliance and credits for early action. Section 8 summarizes the environmental

impact of the proposed regulation, and Section 9 provides staff’s estimate of its costeffectiveness. Section 10 presents staff’s evaluation of the impact of the regulation on

California’s businesses and economy. Section 11 looks more specifically at potential

impacts on minority and low-income communities. Section 12 discusses the status of

staff work to evaluate several other considerations, such as the possible effect of

changes in vehicle attributes on vehicle purchase or vehicle miles traveled.

1.2 Modifications to the June 14 Draft

Staff released a draft version of this Initial Statement of Reasons on June 14, 2004.

Four workshops were held in early July to receive public comment. Since that time staff

has been reviewing issues raised by public comment and updating the staff

methodology and analysis. Changes of note in this final version include:

• The introductory climate change overview has been revised;
Initial Statement of Reasons

August 6, 2004

2

• The estimated incremental cost and greenhouse gas emission reductions for several

of the technology packages have been revised;

• The phase-in period for both the near term and mid term standards has been

extended to four years;

• The standards themselves have been adjusted slightly due to updated staff analysis,

and the use of General Motors rather than DaimlerChrysler as the initial reference

point;

• The above modifications to the estimated incremental cost, the standards, and the

phase in period have been incorporated into the economic and environmental

impacts analyses, and the analysis of other considerations;

• The treatment of small, independent small, and intermediate manufacturers under

the regulation has been clarified;

• The discussion of the environmental impacts of alternative fuels and alternative fuel

vehicles has been updated;

• The upstream correction factor for hydrogen has been adjusted to differentiate

between fuel cell and internal combustion engine vehicles;

• The staff proposal for early credits has been modified to allow manufacturers to take

advantage of early action beginning in any year from 2000 through 2008, and to

provide that the value of early credits is phased out;

• The discount factor applied to alternative compliance credits has been deleted, and

other aspects of the alternative compliance staff proposal have been clarified;

• The discussion of environmental impacts considers the reductions achieved under

this regulation in the broader context of global climate change emissions;

• The report summarizes issues noted during a series of environmental justice

focused workshops; and

• The discussion of other considerations has been broadened to consider the

environmental and economic impacts of a scenario that assumes higher fuel prices,

consistent with recent experience.

The final text also contains a number of other minor updates and clarifying changes.

Staff has prepared Technical Support Documents that provide additional information

and explanation regarding the staff methodology. These documents, which are listed at

the end of this Staff Report as References, are included as part of the rulemaking file

and are available on the ARB website.
Initial Statement of Reasons

August 6, 2004

3

2 CLIMATE CHANGE OVERVIEW

The earth’s climate has always evolved - the extremes of the 100,000-year ice-age

cycles in both climate and greenhouse gases (GHGs) over the last half million years are

well documented. The last 10,000 years has been a warm and stable period, and the

last millennium, over which current societies have developed, has been one of the most

stable climates observed. Yet, over the 20th century, we have observed a rapid change

in the climate and GHGs that is attributable to human activities. These recent changes

in GHGs far exceed the extremes of the ice ages, and the global mean temperature is

warming at a rate that cannot be explained by natural causes alone. Human activities

are directly altering the chemical composition of the atmosphere through the buildup of

GHGs, primarily carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O).

Climate research has identified other greenhouse agents that can drive climate change,

particularly tropospheric ozone (O3), hydrofluorocarbons (HFCs), and atmospheric

aerosols (particles containing sulfate, black carbon or other carbonaceous compounds).

Thus, it appears that an effective response to the threat of climate change ultimately will

need to address CO2, GHGs, and aerosols.

It is true that levels of natural GHGs have fluctuated in the past. However, there are

several reasons for attributing the rise in GHGs to anthropogenic, rather than natural

emissions. The first indicator comes from comparing the current increase with changes

that have occurred in the past. At the end of the last ice age, the concentration of CO2

increased by around 100 ppm (parts per million) over about 8,000 years, or

approximately 1.25 ppm per century. Since the start of the industrial revolution, the rate

of increase has accelerated markedly. Since 1860, the concentration of CO2 has

increased by around 80 ppm, just over 50 ppm per century. The rate of CO2

accumulation has continued to increase, and it currently stands at around 150

ppm/century – over 200 times faster than the background rate for the past 15,000 years.

The heat-trapping property of GHGs is undisputed. Although there is uncertainty about

exactly how and when the earth’s climate will respond to increasing concentrations of

GHGs, combining observations with climate models indicates that detectable changes

are under way. There most likely are and will continue to be changes beyond just a

global mean warming, such as changes in regional temperature extremes, precipitation,

soil moisture, and sea level, all of which could have significant adverse effects on many

ecological systems, as well as on human health and the economy.

This chapter first presents the causes and projections for climate change (Section 2.1).

The chapter then discusses climate change pollutants (Section 2.2), the definition of

global warming potentials used in the proposed regulation (Section 2.3), pollutants

addressed under the proposed regulation (Section 2.4), indicators of climate change in

California (Section 2.5), and potential impacts of climate change on California (Section

2.6). The chapter concludes with a brief discussion of abrupt climate change (Section

2.7).
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4

2.1 Climate Change Causes and Projections

Climate change is a shift in the "average weather" that a given region experiences. This

is measured by changes in the features that we associate with weather, such as

temperature, wind patterns, precipitation, and storms. Global climate change means

change in the climate of the Earth as a whole. Global climate change can occur

naturally; an ice age is an example of naturally occurring climate change. The Earth's

natural climate has always been, and still is, constantly changing. The climate change

we are seeing today, however, differs from previous climate change in both its rate and

its magnitude.

The temperature on Earth is regulated by a system commonly known as the

"greenhouse effect". Naturally occurring GHGs, primarily water vapor, CO2, CH4, and

N2O, absorb heat radiated from the Earth's surface. As the atmosphere warms, it in turn

radiates heat back to the surface, to create what is commonly called the "greenhouse

effect". The Earth's surface temperature would be about 34°C (61°F) colder than it is

now if it were not for the natural heat trapping effect of greenhouse gases like CO2, CH4,

N2O, and water vapor. Indeed, water vapor is the most abundant and important of

these naturally occurring greenhouse gases. In addition to its direct effect as a

greenhouse gas, clouds formed from atmospheric water vapor also affect the heat

balance of the Earth by reflecting sunlight (a cooling effect), and trapping infrared

radiation (a heating effect).

Human activities are exerting a major and growing influence on some of the key factors

that govern climate by changing the composition of the atmosphere and by modifying

the land surface. The human impact on these factors is clear. The concentration of

CO2 in the atmosphere has risen about 30 percent since the late 1800s (NAST, 2001).

This increase has resulted from the burning of coal, oil, and natural gas, and the

destruction of forests around the world to provide space for agriculture and other human

activities. Rising concentrations of CO2 and other GHGs are intensifying the Earth’s

natural greenhouse effect. Global projections of population growth and assumptions

about energy use indicate that the CO2 concentration will continue to rise, likely

reaching between two and three times its late-19th-century level by 2100. Figure 2-1

(Source: IPCC 2001 Synthesis report) shows the atmospheric CO2 concentration from

year 1000 to year 2000 from ice core data and from direct atmospheric measurements

over the past few decades. Projections of CO2 concentrations for the period 2000 to

2100 are based on model predictions.
Initial Statement of Reasons

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Figure 2-1: Past and future CO2 atmospheric concentrations. (Source: IPCC 2001

Synthesis report ).

Figure 2-2 (Source: IPCC 2001 Synthesis report) shows variations of the Earth's surface

temperature for years 1000 to 2100. From year 1000 to year 1860 variations in average

surface temperature of the Northern Hemisphere are reconstructed from proxy data

(tree rings, corals, ice cores, and historical records). The line shows the 50-year

average, the gray region the 95 percent confidence limit in the annual data. For the

period 1860 to 2000 the figure shows variations in observations of globally and annually

averaged surface temperature from the instrumental record; the line shows the decadal

average. For 2000 to 2100 projections of globally averaged surface temperature are

shown for several model scenarios using a global climate model.
Initial Statement of Reasons

August 6, 2004

6

Figure 2-2. Variations of the Earth's surface temperature: years 1000 to 2100 (Source:

IPCC 2001 Synthesis report)

The Third Assessment Report of the International Panel on Climate Change (IPCC,

Synthesis report , 2001) and the National Research Council of the National Academies

(NRC, 2001) conclude that the global climate is changing at a rate unmatched in the

past one thousand years. The IPCC Assessment cites new and stronger evidence that

most of the global warming observed over the last fifty years is attributable to human

activities and that anthropogenic climate change will persist for many centuries. Also,

the IPCC concludes that the observed changes over the last fifty years and those

projected for the future include higher maximum air temperatures, more hot days, fewer

cold days, greater extremes of drying and heavy rainfall, and sea level rise (IPCC

Synthesis report, 2001). However, while the NRC Report generally agrees with the

IPCC Assessment, it does not rule out that some significant part of these changes is

also a reflection of natural variability.

Many sources of data indicate that the Earth is warming faster than at any time in the

previous 1,000 years. The global mean surface temperature has increased by 1.1o F
Initial Statement of Reasons

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7

since the 19th century (IPCC Synthesis report, 2001). The 10 warmest years of the last

century all occurred within the last 15 years. For example, 2002 and 2003 are tied as

the second warmest years on record, according to a year-end review of climate data by

the National Oceanic and Atmospheric Administration. Both the IPCC (2001) and the

NAST (2001) reports project that warming in the 21st century will be significantly larger

than in the 20th century. Scenarios examined in these assessments, which assume no

major interventions to reduce continued growth of world GHG emissions, indicate that

temperatures in the US will rise by about 5-9°F (3-5°C) on average in the next 100

years, which is more than the projected global average increase. In general the

continental regions of the Northern Hemisphere are expected to warm more than the

global average. This rise is very likely to be associated with more extreme precipitation

and faster evaporation of water, leading to greater frequency of both very wet and very

dry conditions. Climate change, whether warming or cooling, will impact public health,

air quality, water resources, agriculture, ecological resources, and California’s economy.

As a result, global climate change issues are receiving increasing national and

international attention from governments, business and industry, the research

community, environmental interests, and the public (IPCC, 2001).

The relationship between CO2 concentration, temperature increase, and the risks of

adverse impacts from climate change are depicted in Figure 2-3 (IPCC 2001 Synthesis

report). In the upper right of the figure are bars for different atmospheric concentrations

of CO2 (450 ppm to 1000 ppm) showing the range of mean global temperature range

predicted from these concentrations using climate models. In the upper left of the figure

are five vertical bars, each representing a type of negative impact caused by climate

change (e.g., threatened ecosystems, extreme climate events, etc.). In each bar the

white area represents neutral or small impacts; yellow indicates low negative impacts,

and red means more widespread or greater magnitude of negative impacts. It is

possible the high risk, serious impacts represented by the red areas, which is

associated with warming above 3.5oC, would be avoided by stabilizing the CO2

concentrations at or below 1000 ppm. Stabilization of atmospheric CO2 concentrations

at 1,000 ppm or below would require global anthropogenic CO2 emissions to drop below

year 1990 levels, within a few decades or about a century, and continue to decrease

steadily thereafter to a small fraction of current emissions.

Figure 2-3 provides a schematic view of the IPCC’s assessment of potential climate

impacts at varying levels of temperature increase. It reflects the very broad range of

impacts—from the local to the global, the environmental to the economic, and the

gradual to the sudden. Across this full range, as the IPCC readily acknowledges, there

are significant limitations on our ability to project the timing and magnitude of impacts.

Even if we were able to accurately forecast future temperature rises, our understanding

of the climate responses remains limited, particularly at local and regional scales.

Some impacts, particularly those on ecosystems, are quite sensitive not only to the

magnitude of local climatic shifts but also to the rate of change. A slow change may

allow for adaptation or shifts in the spatial distribution of species, while a quick one may

accelerate the rate of extinction or disrupt ecological functions in an irreversible way.

However, Figure 2-3 presents general trends in the relationships between increases in
Initial Statement of Reasons

August 6, 2004

8

temperature and the risks of negative impacts, and the trends are not affected by the

uncertainties in specific future impacts.

Figure 2-3. Risks of adverse impacts from climate change (source: IPCC 2001 Synthesis

report).

2.2 Climate Change Pollutants

Naturally occurring GHGs include water vapor, CO2, CH4, N2O, and O3. Several

classes of halogenated substances that contain fluorine, chlorine, or bromine are also

GHGs, but they are, for the most part, solely a product of industrial activities.

Chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs) are halocarbons

that contain chlorine, while halocarbons that contain bromine are referred to as

bromofluorocarbons (i.e., halons). Because CFCs, HCFCs, and halons are substances

which deplete stratospheric ozone, they are regulated by the Montreal Protocol on

Substances that Deplete the Ozone Layer. The United Nations Framework Convention
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9

on Climate Change (UNFCCC) defers to this earlier international treaty; consequently

these gases are not included in national GHG inventories. Other fluorine-containing

gases—hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride

(SF6)—do not deplete stratospheric ozone but are potent GHGs. These latter

substances are addressed by the UNFCCC and accounted for in State and national

GHG inventories. In addition, there are a number of other pollutants such as carbon

monoxide, nitrogen oxides, and aerosols that have direct or indirect effects on terrestrial

or solar radiation absorption. They are discussed later in this section.

In September 2000, the California Legislature passed Senate Bill 1771 (SB1771, 2000),

requiring the California Energy Commission (CEC), in consultation with other state

agencies, to update California’s inventory of GHG emissions in January 2002 and every

five years thereafter. The CEC (2002) report includes emissions of the four GHGs (

CO2, CH4, N2O, and SF6) and two classes of GHGs (HFCs and PFCs) that are listed in

Annex A of the Kyoto Protocol. Although the first three gases are also emitted from

natural sources, the CEC report focuses on emissions due to human activities

(anthropogenic emissions). The report concluded that there were major uncertainties

associated with the inventory of GHG emissions, and recommended that future GHG

inventories could be improved by: (1) incorporating improved data; (2) updating

emissions estimates; and, (3) presenting a discussion of the uncertainty in emissions

estimates from key sources.

Figure 2-4 shows the distribution of California's anthropogenic emissions by GHG.

HFCs, 

PFCs, SF6 

2%

CO2

84%

N2O

6%

CH4

8%

Figure 2-4: Distribution of California GHG emissions by gas in 1999, expressed in terms

of CO2 equivalent (adapted from CEC, 2002).

Individual climate change species are briefly discussed in the following sections.

Detailed discussions of GHG emissions are given in the CEC (2002) report.
Initial Statement of Reasons

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10

2.2.A Carbon Dioxide (CO2)

In the atmosphere, carbon generally exists in its oxidized form, as CO2. Increased CO2

concentrations in the atmosphere have been primarily linked to increased combustion of

fossil fuels.

Fossil fuel combustion accounted for 98 percent of gross California CO2 emissions.

California's total CO2 emissions from fossil fuel combustion in 1999 were 356 million

metric tons of CO2 equivalent (MMTCO2 Eq), which accounts for approximately 7

percent of the U.S. emissions from this source. The transportation sector accounted for

the largest portion of emissions, averaging 59 percent of the total CO2 emissions from

fossil fuel combustion in California for the period 1990-1999. Within the transportation

sector, gasoline consumption accounted for the greatest portion of emissions. Figure

2-5 presents the contribution of each sector to CO2 emissions from fossil fuel

combustion in 1999.

Figure 2-5. CO2 Emissions from the Combustion of Fossil Fuels by Sector for 1999

(adapted from CEC, 2002).

The CEC (2002) report indicates that CO2 emissions from fossil fuel combustion tracked

economic and population growth in the early 1970s. Emissions remained flat through

1986, and then started to grow through the end of the decade. Economic and

population growth both outpaced the growth in emissions during this period.

2.2.B Methane (CH4)

Methane accounted for approximately 8 percent of gross 1999 GHG emissions in

California, in terms of equivalent CO2 emissions. Methane is produced during anaerobic

decomposition of organic matter in biological systems. Decomposition occurring in

landfills accounts for the majority of anthropogenic CH4 emissions in California and in

the United States as a whole. Agricultural processes such as enteric fermentation,

Industrial

12%

Electric Power

16%

Transportation

59%

Residential

9%

Commercial

4%
Initial Statement of Reasons

August 6, 2004

11

manure management, and rice cultivation are also significant sources of CH4 in

California.

While it is well established that exhaust from vehicles using hydrocarbon fuels contains

CH4, there are few published data concerning the magnitude of CH4 emissions from the

modern, and likely future, vehicle fleet. Metz (2001) concluded that the anthropogenic

contribution of road transport to the global CH4 budget is less than 0.5 percent. Threeway catalyst emission control systems installed on all modern vehicles are effective in

removing CH4 from vehicle exhaust (Nam et al., 2004). It seems highly likely that the

future will bring increasingly stringent regulations concerning the effectiveness and

durability of vehicle emission control systems. Hence, it is likely that emissions of CH4

from gasoline- and diesel-powered vehicles will be reduced from their already low

values. A possible exception to this trend would be the increased use of compressed

natural gas (CNG) powered vehicles. However, based on the emission measurements

reported in Nam et al. (2004) even assuming a substantial fraction of CNG-powered

vehicles, the tailpipe CH4 emissions from CNG vehicles can be controlled such that they

are likely to have negligible environmental impact. However, refueling losses would be

another source of CH4 emissions from CNG vehicles, and leakage may be significant as

well.

2.2.C Nitrous Oxide (N2O)

Nitrous oxide emissions accounted for nearly 6 percent of GHG emissions (CO2

equivalent) in California in 1999. The primary sources of anthropogenic N2O emissions

in California are agricultural soil management and fossil fuel combustion in mobile

sources. Nitrous oxide is a product of the reaction that occurs between nitrogen and

oxygen during fuel combustion. Both mobile and stationary combustion emit N2O, and

the quantity emitted varies according to the type of fuel, technology, and pollution

control device used, as well as maintenance and operating practices. For example,

some types of catalytic converters installed to reduce motor vehicle pollution can

promote the formation of N2O. EPA (2003) estimates suggest that, in 2001, N2O

emissions from mobile combustion were 13 percent of U.S. N2O emissions, while

stationary combustion accounted for 3 percent. From 1990 to 2001, combined N2O

emissions from stationary and mobile combustion increased by 9 percent, primarily due

to increased rates of N2O generation from on-road vehicles.

Behrentz et al. (2004) conducted a pilot study to measure exhaust emissions of N2O.

Their results indicate that the average N2O emissions factor for the 37 vehicles tested

was 20 ± 4 mg/km, significantly lower than previous reports of average values of ~35

mg/km (Dasch, 1992; Ballantyne et al., 1994; Barton and Simpson, 1994; Michaels et

al., 1998). The difference between the previously reported emission factors and those

presented in the pilot study could be related to the introduction of new technologies on

some of the vehicles tested since they play a significant role in the amount of N2O

emitted by the vehicles. The differences could also be related to difference in the

vehicle fleets studied. This issue will be resolved with ARB's future analysis of a much

larger database of N2O emissions. However, it is generally expected that N2O
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August 6, 2004

12

emissions from light-duty vehicles will continue this pattern of decreasing emissions due

to increasingly stringent control technologies for nitrogen oxides (NOX).

2.2.D Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), and Sulfur

Hexafluoride (SF6)

HFCs, PFCs and SF6 accounted for the remaining 2 percent of gross 1999 GHG

emissions in California. HFCs are primarily used as substitutes for ozone-depleting

substances (ODS) regulated under the Montreal Protocol. PFCs and SF6 are generally

emitted from various industrial processes including aluminum smelting, semiconductor

manufacturing, electric power transmission and distribution, and magnesium casting.

There is no aluminum or magnesium production in California; however, the rapid growth

in the semiconductor industry leads to greater use of PFCs.

For vehicular HFC emissions (particularly HFC-134a), four emission sources, all related

to air conditioning, should be considered: emissions leaking from the hoses, seals, and

system components of vehicle air conditioning system, and emissions that are released

when the air conditioning system is opened for servicing. HFC emissions can also

occur when the vehicle is scrapped at the end of its useful life or due to sudden

releases (e.g., traffic accident refrigerant releases). HFC-134a, commercially known as

R-134a, is presently the vehicle refrigerant of choice among vehicle manufacturers. The

assessment of mobile air conditioning system technology and associated cost analysis

are included in later chapters.

2.2.E Water Vapor

It should be noted that just because water vapor is the most important contributor to the

natural greenhouse effect does not mean that human-made GHGs are unimportant.

Over the past ten thousand years, the amounts of the various GHGs in the Earth's

atmosphere remained relatively stable until a few centuries ago, when the

concentrations of many of these gases began to increase due to industrialization,

increasing demand for energy, rising population, and changing land use. A simple

comparison of the relative greenhouse efficiencies of water vapor and CO2 quickly

becomes problematic because water vapor enters the climate system mostly as a

"feedback" gas. The overall impact of water vapor with respect to global climate change

is not well understood as it can lead to both warming (absorption of long-wave radiation

from Earth) and cooling (cloud formation/reflection of solar radiation).

As the temperature of the atmosphere rises, more water is evaporated from ground

storage (oceans, rivers, reservoirs, and soil). Because the air is warmer, the relative

humidity can be higher, leading to more water vapor in the atmosphere. As a

greenhouse gas, the higher concentration of water vapor is then able to absorb more

long-wave radiation radiated from the Earth, thus further warming the atmosphere. This

is referred to as a "positive or warming feedback loop.” However, as water vapor

increases in the atmosphere, more of it will eventually also condense into clouds, which

are more able to reflect incoming solar radiation, thus allowing less energy to reach the
Initial Statement of Reasons

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13

Earth's surface and heat it up. This is referred to as a "negative or cooling feedback

loop.”

Large scientific uncertainty exists in defining the extent and importance of the overall

water vapor feedback (both positive and negative impacts). The uncertainties in the

cloud response are probably the largest contributor to this uncertainty. Climate

modeling studies provide circumstantial evidence for water vapor feedbacks. However,

as the authors themselves acknowledge, their findings are unable to completely confirm

the relationship.

There is an important difference between water vapor and other GHGs. Human

activities do not seem to be appreciably changing the atmospheric concentration of

water vapor in any direct way on the global average. Nor does water vapor accumulate

in the atmosphere over the multi-year periods that other GHGs do. Natural processes

(e.g., rain) remove water vapor when it reaches certain limits. Water stays in the

atmosphere for a few days, while other GHGs linger for decades or centuries.

2.2.F Other Radiatively Important Gases

In addition, there are a number of man-made pollutants, emitted primarily as byproducts

of combustion (both of fossil fuels and of biomass), that have indirect effects on

terrestrial or solar radiation absorption by influencing the formation or destruction of

other GHGs. These include carbon monoxide (CO), nitrogen oxides (NOX), nonmethane

volatile organic compounds (NMVOCs), and sulfur dioxide (SO2). These compounds,

regulated in the US and California pursuant to the Clean Air Act, are often referred to as

“criteria pollutants.” The criteria pollutants are reactive compounds, and they tend to

remain in the atmosphere for a much shorter time than the previously discussed gases.

As shown in Table 2.3-1, CO2, N2O, CH4, and HFC-134a have atmospheric lifetimes

ranging from a century to ten years. Reactive compounds typically last only hours to

months. The sequence of reactions that removes CO, NOX, and NMVOCs from the

atmosphere, however, tends to promote the formation of tropospheric O3. Ozone in the

stratosphere protects life on Earth from ultraviolet radiation, but O3 at ground level

causes respiratory distress in people and animals, and throughout the troposphere, O3

is a potent (though short-lived) GHG. The lifetime of criteria pollutants in the

atmosphere is short and varies by location and season. The reactions that produce O3

or alter the losses of CH4 are strongly affected by the relative concentrations of various

pollutants, the ambient temperature, and local weather conditions. At present, there is

large scientific uncertainty in estimating their radiative forcing effects.

California’s unique emissions and fuel standards for cars, trucks, buses, motorcycles,

and other motor vehicles have dramatically reduced criteria pollutant emissions, as

have controls on non-automotive pollution sources that are administered by the State’s

35 local air pollution control districts. California has achieved these improvements

despite the State’s substantial growth in population, vehicle use, and business activities.

Molecular hydrogen (H2) is a trace component of the lower atmosphere. Hydrogen is not

radiatively-active and therefore does not have a direct impact on climate; however, it
Initial Statement of Reasons

August 6, 2004

14

has an indirect impact on climate change as (a) it is involved in the production of

tropospheric ozone, and (b) it can modify the concentration of CH4 through its affect on

the concentration of the hydroxyl radical (OH) (Prather, 2003).

Since the 1980s, alternative options for fulfilling the global energy demand have been

developed. The use of H2 produced with renewable energy sources currently appears

to be a promising option, in particular for the transportation sector. Although H2 fuel

cells themselves are a "clean" technology, producing water vapor (a GHG) as exhaust,

concurrent changes in emissions of GHGs and ozone precursors associated with the

production and distribution of H2 must be considered as well as the changes in vehicle

fleet emissions (Schultz et al., 2003). Furthermore, the release of H2 may increase

because of leakage attributable to the production, transport, storage, and end use of H2

(Zittel and Altmann, 1996). At present, the average leak rate to be expected in a fullscale hydrogen-driven economy is very uncertain.

2.2.G Aerosols

Aerosols are extremely small particles or liquid droplets found in the atmosphere.

Various categories of aerosols exist, including naturally produced aerosols (e.g., soil

dust, sea salt, biogenic aerosols, volcanic aerosols), and anthropogenic aerosols (e.g.,

sulfates, ammonium nitrate, industrial dust, carbonaceous aerosols including black

carbon and organic carbon. Anthropogenic aerosols are derived directly or indirectly

from transportation, coal combustion, cement manufacturing, waste incineration, and

biomass burning. Aerosols affect radiative forcing in both direct and indirect ways:

directly by scattering and absorbing solar and thermal infrared radiation; and indirectly

by altering the cloud properties and atmospheric heating rates that in turn modify the

formation, precipitation efficiency, and radiative properties of clouds. The effect of

aerosols on regional and global climate is complex: in general, sulfate aerosols enhance

the reflection of sunlight and cool the Earth, while black carbon aerosols enhance the

absorption of sunlight and warm the Earth.

Understanding the role of aerosols in climate change requires inclusion of realistic

representations of aerosols and their radiative forcings in climate models. Compared to

the long-lived, well-mixed GHGs, however, the optical properties and temporal and

spatial patterns of the many different types of aerosols are heterogeneous. Further

uncertainty in aerosol radiative forcing arises because neither emissions, atmospheric

abundance, optical properties, nor indirect effects are fully known. The IPCC (2001)

and the NACIP (2002) have identified the total (direct and indirect) radiative forcing due

to aerosols, and in particular light absorbing aerosols, as one of the most uncertain

components of climate change models.

2.3 Global Warming Potentials

Radiative forcing is often defined as a net imbalance in energy flux in the atmosphere,

and is expressed in watts per square meter (W/m2), i.e. heat per area of the Earth's

surface. Radiative forcing of the surface-troposphere system, resulting, for example,

from a change in GHG concentrations, is the change in the balance between radiation
Initial Statement of Reasons

August 6, 2004

15

coming into the atmosphere and radiation going out. A positive radiative forcing tends,

on average, to warm the surface of the Earth, and negative forcing tends, on average,

to cool the surface. The impact of a GHG emission upon the atmosphere is related not

only to radiative properties of the gas and its initial abundance, but also to the length of

time the GHG remains in the atmosphere. Radiative properties control the absorption of

radiation per kilogram of gas present at any instant, but the lifetime of the gas controls

how long an emitted kilogram remains in the atmosphere and hence its cumulative

impact on the atmosphere's thermal budget. The climate system responds to changes

in the thermal budget on time-scales ranging from the order of months to millennia

depending upon processes within the atmosphere, ocean, and biosphere.

Gases in the atmosphere can contribute to the greenhouse effect both directly and

indirectly. Direct effects occur when the gas itself is a GHG. Indirect radiative forcing

occurs when chemical transformations of the original gas produce other GHGs, when a

gas influences the atmospheric lifetimes of other gases, and/or when a gas affects

atmospheric processes that alter the radiative balance of the Earth (e.g., cloud

formation). The concept of a Global Warming Potential (GWP) has been developed in

parallel to the concept of ozone depletion potential developed under the Montreal

Protocol to compare the ability of each GHG to trap heat in the atmosphere relative to

another gas. Carbon dioxide, as the primary anthropogenic GHG, has been chosen as

the reference gas. GWP is defined as the ratio of the time-integrated radiative forcing

from the release of 1 kilogram of a trace substance relative to that of 1 kg of CO2 (IPCC

2001). While any length of integration can be selected, the 100-year GWPs are

recommended by the IPCC and will be employed by the ARB for policy-making and

reporting purposes.

GWP values allow a comparison of the impacts of emission changes (reductions or

increases) of different gases. According to the IPCC (2001), GWPs typically have an

uncertainty of ±35 percent. In addition to communicating GHG emissions in units of

mass, we have also chosen to use GWPs to reflect their inventories in CO2 equivalent

terms because it effectively places all of the GHGs on the same comparative scale.

Table 2.3-1 lists GWPs for CO2, CH4, N2O, and HFC-134a for the 20-, 100-, and 500-

year time horizons. It should be noted that when the lifetime of the species in question

differs substantially from the response time of CO2 (nominally about 150 years), then

the GWP becomes very sensitive to the choice of time horizon. The GWP concept is

only relevant for compounds that have sufficiently long lifetimes to become globally wellmixed. Therefore, short-lived gases and aerosols with varying atmospheric distributions

and lifetimes pose a problem in the simple GWP framework.
Initial Statement of Reasons

August 6, 2004

16

Table 2.3-1. Numerical Estimates Of Global Warming Potentials Compared With CO2

(Kilograms Of Gas Per Kilogram Of CO2 -- Adapted From IPCC 2001).

Climate Global Warming Potential

Pollutants

Lifetime

(years) 20 years 100 years* 500 years

CO2 ~150 1 1 1

CH4 12 62 23 7

N2O 114 275 296 156

HFC-134a 14 3,300 1,300 400

* Recommended by IPCC (2001) and proposed by ARB staff for AB1493 regulation.

2.4 Pollutants Included in the Proposed Regulation

Assembly Bill 1493 calls for reductions in GHGs, which are defined in the bill as CO2,

CH4, N2O, HFCs, PFCs and SF6. The same list of GHGS was also included in the1997

Kyoto protocol, under United Nations Framework Convention on Climate Change

(UNFCCC) agreement. The first four of these identified global climate change pollutants

are clearly associated with motor vehicle use in California. PFCs and SF6 are not known

to be associated with motor vehicle emissions in California and therefore are not

addressed further in the staff report. Black carbon and criteria pollutant emissions from

motor vehicles are also known to have climate change impacts, although these

pollutants are not specifically defined as greenhouse gases in AB 1493.

The 2001 IPCC states that in addition to the gases targeted in the Kyoto Protocol, the

contribution of tropospheric O3 to the greenhouse effect is also important. The report

further states that in order to curb global warming it is necessary to reduce the

emissions of both GHGs and other gases that influence the concentration of GHGs. Air

pollutants such as NOX, CO, and NMVOC generate O3 and impact tropospheric OH

radicals, which in turn alters CH4 levels. Hence, they are called indirect GHGs. Due to

the basic uncertainties regarding the actual impact of criteria pollutant emissions on

climate, however, it is impossible at this time to have confidence in any numerical

prediction of the climate effect of their emissions from light-duty motor vehicles.

Because the uncertainties associated with the impact of criteria pollutants on climate

change are large, at this time the ARB has chosen not to consider the potential climate

change effects when regulating CO, NOX, NMVOC, or aerosols. As more definite

scientific evidence becomes available, the ARB will, if appropriate, consider the climate

change impacts of these criteria pollutants in its regulatory decisions.

2.5 Indicators of Climate Forcing and Climate Change In California

The climate is changing under the influence of human activity. Indicators of climate

forcing and actual climate change can be used to illustrate trends, measure the

suitability of particular actions in certain areas, and encourage public awareness of the
Initial Statement of Reasons

August 6, 2004

17

climate change impacts. The European Topic Center on Air and Climate Change

(ETC/ACC) has recently developed a list of climate change indicators that should

reflect, among other things, trends in GHG emissions, atmospheric GHG

concentrations, temperature increase and effects on biodiversity, human health, and

socio-economic sectors. One goal was that some indicators could show the progress

made in meeting climate change policy targets and should identify requirements for

adaptation and mitigation measures. Trends in GHG emissions are useful in these

areas. Atmospheric CO2 and other GHG concentrations are the key indicator for

international negotiations on emission reduction. Climate and atmospheric variables

such as temperature change and trends in precipitation are obvious parts of

assessments, which study climate change impacts. Emphasis up to now has often

been on changes in absolute trends. Extreme events and changes in seasonality have

also been investigated. Statistical analysis of climate data can be used to describe the

interrelationships in changes in the different climate parameters but might not be as

understandable to policy makers and the public as temperature or precipitation.

For the indicators that show impacts on human health and on economic sectors, no

suitable indicators were identified that could be available in the short-term. However

several indicators are expected to be available in the medium-term. In general,

indicators to describe the impact of climate change on human health are still limited due

to lack of data. Climate change can exacerbate heat waves resulting in higher rates of

morbidity and mortality. Furthermore, higher temperatures could lead to an increase of

water and food related diseases. The identification and evaluation of indicators for

climate change impacts on human health is one of the activities of the scientists who

are studying potential implications for human health.

In California, several potential climate change indicators have been suggested,

including anthropogenic GHG emissions, air temperature, annual Sierra Nevada snow

melt runoff, and sea level rise in California (EPIC, 2002). Temperature data have been

collected at many weather stations in the State for almost a century. The air

temperature indicator can be used to track trends in statewide surface air temperatures

and regional variations, allowing for a comparison of temperature changes in California

with those occurring globally. In California the less populated and rural areas have

shown the lowest average rate of temperature increase. For the period 1910 to 2000

these areas have shown a temperature increase of 0.7o F per century. (EPIC, 2002).

The warming of global climate could increase evaporation rates, thereby potentially

increasing precipitation and storms in the State. Snowmelt and runoff volume data can

be used as a climate change indicator to document changes in runoff patterns. These

specific regional changes are related, at least in part, to the climate change associated

with the observed global mean warming. In California, large accumulations of snow

occur in the Sierra Nevada and southern Cascade Mountains from October to March.

Each winter, at the high elevations, snow accumulates into a deep pack, preserving

much of California’s water supply in cold storage. If the winter temperatures are warm,

more of the precipitation falls as rain instead of snow, and water directly flows from

watersheds before the spring snowmelt. Thus, there is less buildup of snow pack; as a

result, the volume of water from the spring runoff is diminished. Lower water volumes of
Initial Statement of Reasons

August 6, 2004

18

the spring snowmelt runoff may indicate warmer winter temperatures or unusually warm

springtime temperatures. Figure 2-6 shows that throughout the 20th century, annual

April to July spring runoff in the Sierra Nevada has been decreasing. This decreased

runoff was especially evident after mid-century; since then the water runoff has declined

by about twelve percent.

Figure 2-6: Sacramento River Runoff (1910-2000) - April to July as a Percent of Total

Runoff (Roos, 2002).

Sea level rise also provides a physical measure of possible oceanic response to climate

change. Increasing global mean temperatures will result in the rise in mean sea level.

Warming of the ocean water will cause a greater volume of sea water because of

thermal expansion. This contributes the largest share of sea level rise, followed by

melting of mountain glaciers and ice caps (IPCC, 2001). Along California’s coast, sea

level already has risen by three to eight inches over the last century, consistent with the

global mean value of four to eight inches (IPCC, 2001). Long-term data from 10 of 11

California stations show increases in sea level (Figure 2-7, using San Francisco as an

example). Sea level rise is not expected to be uniform globally and is influenced by

shifts in weather patterns as well as the long-term motion of the continents.

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Water Year (October 1 - September 30)

Percent of Water Year Runoff
Initial Statement of Reasons

August 6, 2004

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Figure 2-7: 1855-2000 San Francisco yearly mean sea level (Roos, 2002).

The climate change indicators described in this report represent key properties of the

climate system that are considered sensitive to climate change. Many additional

potential indicators remain to be explored. For example, climate change may influence

the frequency of extreme weather events, ecosystem structures and processes, and

species distribution and survival. It may affect forestry, energy and other industries,

insurance and other financial services, and human settlements. In addition, the impacts

can vary from one region, ecosystem, species, industry, or community to the next.

Research into the regional impacts of climate change is ongoing, and the potential

climate change indicators will be updated and expanded as new information becomes

available.

2.6 Potential Impacts on California

Climate is a central factor in Californian life. It is at least partially responsible for the

State’s rapid population growth in the past 50 years, and largely responsible for the

success of industries such as agriculture and tourism. The potential effects of climate

change on California have been widely discussed from a variety of perspectives

(Lettenmaier and Sheer 1991; Gleick and Chalecki 1999; Wilkinson 2002). The signs of

a global warming trend continue to become more evident and much of the scientific

debate is now focused on expected rates at which future changes will occur. Rising

temperatures and sea levels, and changes in hydrological systems affecting water

resources are threats to California’s economy, public health, and environment. The

following section discusses evidence of a changing climate in California and provides

examples of why the State is particularly at risk from an increasingly warmer and more

variable climate.

8.0

8.2

8.4

8.6

8.8

9.0

9.2

9.4

9.6

9.8

10.0

1850 1865 1880 1895 1910 1925 1940 1955 1970 1985 2000

Year

MSL (Feet)
Initial Statement of Reasons

August 6, 2004

20

2.6.A Human Health and Air Pollution

Human health in California is likely to be impacted by climate change. Several recent

studies have addressed potential implications for human health at the national and

international levels (Patz et al., 2000). Greater climate variability and changes in

climate patterns would potentially cause both direct and indirect health effects. Direct

health impacts due to climate change include extreme events, such as heat waves,

droughts, increased fire frequency, and increased storm intensity resulting in flooding

and landslides. Secondary or indirect health effects include damages to infrastructure

causing, for example, sanitation and water treatment problems leading to an increase in

water-borne infections. Air quality impacts such as increases in tropospheric ozone due

to higher temperatures may also cause secondary health impacts.

The most obvious direct impacts of projected climate change are higher temperatures

and increased frequency of heat waves that may increase the number of heat-related

deaths and the incidence of heat-related illnesses. Studies of heat waves in urban

areas have shown an association between increases in mortality and increases in heat,

measured by maximum or minimum temperature, heat index (a measure of temperature

and humidity), or air-mass conditions (Semenza et al., 1996). For example, after a 5-

day heat wave in 1995 in which maximum temperatures in Chicago ranged from 93 to

104°F, the number of deaths increased 85 percent over the number recorded during the

same period of the preceding year. At least 700 excess deaths (deaths beyond those

expected for that period in that population) were recorded, most of which were directly

attributed to heat (Semenza et al., 1999).

Until recently, excess deaths occurring during heat waves have been attributed entirely

to heat-induced stress. However, analyses in the Netherlands (Fischer et al., 2004) and

the United Kingdom (Stedman, 2004) during the August 2003 heat wave in Europe

conclude that a substantial portion of the mortality is actually due to elevated O3 and

aerosol levels. Air quality has a very real and direct effect on the health of many

Californians who experience the worst air quality in the nation. Over 90 percent of

Californians are living in areas that violate the State ambient air quality standard for

ozone and/or particulate matter. In the Los Angeles area, population density and

sprawl, cars, climate, and geography conspire to create some of the nation’s worst air

quality.

Climate change can lead to changes in weather patterns that can influence the

frequency of meteorological conditions conducive to the development of high pollutant

concentrations. High temperatures, strong sunlight, and stable air masses tend to occur

simultaneously and increase the formation of ozone and secondary organic carbon

particles − weather conditions associated with warmer temperatures increase smog.

Figure 2-8 shows the relationship between ozone and temperature in the South Coast

Air Basin, and indicates that ozone air quality can be profoundly affected by changes in

climate and meteorology.
Initial Statement of Reasons

August 6, 2004

21

Figure 2-8: Relationship between ozone and temperature in the South Coast Air Basin,

1996-1998.

Climate change may alter the frequency, timing, intensity, and duration of extreme

weather events (meteorological events that have a significant impact on local

communities). Injury and death are the direct health impacts most often associated with

natural disasters. Indirect health effects of climate change include increases in the

potential transmission of vector-borne infectious diseases caused by the extensions of

ranges and seasons of some vector organisms and acceleration of the maturation of

certain infectious parasites. Most vector-borne diseases exhibit a distinct seasonal

pattern that clearly suggests that they are weather sensitive. Rainfall, temperature, and

other weather variables affect in many ways both the vectors and the pathogens they

transmit. In California, as in much of the world there is concern that increased heat and

moisture will facilitate the spread of emerging infectious diseases, many of which are

vector-borne. It has also been suggested that climate change will increase exposure to

natural allergens. Fungi have adapted to virtually all environments, but fungal growth is

often enhanced at increased temperature and/or humidity (Bernard et al., 2001).

In summary, serious effects on human health may result from climate change. It is clear

that heat waves and other extreme events pose serious public health concerns. Higher

temperatures are also likely to negatively affect health by exacerbating air pollution.

The elderly, infirm, and poor are most at risk because these conditions can exacerbate

pre-existing disease. Lack of access to air conditioning increases the risk of heatrelated illness. Secondary or indirect effects of changes in climate such as changes in

disease vectors may also pose concerns. Poor and immigrant populations (residence in

urban areas where the heat island effect actually increases warming and the

consequent effects of heat) are more vulnerable to climate change as they are often

0.00

0.05

0.10

0.15

0.20

0.25

0.30

40 60 80 100 120

Mean Maximum Temperature (oF)

Daily Maximum Ozone (ppm)
Initial Statement of Reasons

August 6, 2004

22

without adequate resources to control their environment with appliances such as air

conditioners, or to seek medical attention. Thus, these communities are the first to

experience negative climate change impacts like heat death and illness, respiratory

illness, infectious disease, and economic and cultural displacement.

2.6.B Water Resources

Much of California is semi-arid and, thus, water resources are a key factor in the State’s

economic and environmental well being. Water resources are affected by changes in

precipitation as well as by temperature, humidity, wind, and sunshine. Water resources

in drier climates, such as California, tend to be more sensitive to climate changes.

Because evaporation is likely to increase with warmer climate, it could result in lower

river flows and lake levels, particularly in the summer. In addition, changes in

meteorology could result in more precipitation occurring in intense events, which

reduces the ability to capture the water and could increase flooding. If stream flow and

lake levels drop, groundwater also could be reduced. The seasonal pattern of runoff

into California’s reservoirs could be susceptible to climatic warming. Winter runoff most

likely would increase, while spring and summer runoff would decrease. This shift could

be problematic, because the existing reservoirs are not large enough to store the

increased winter flows for the demand in summer. Increased winter flows to San

Francisco Bay could increase the risk of flooding (Gleick and Chalecki 1999; Miller, et

al., 2001; Roos 2002).

California is home to about 35 million people. Using the California Department of

Finance projections, it is estimated that California's population will grow by an average

of 1.4 percent per year over the next 20 years. This projection translates to

approximately 10 million more Californians by 2020. The combination of population

growth and climate warming could impose serious environmental challenges. Increased

water demands and decreased water availability raise substantially the costs of

providing water to urban, agricultural, and hydropower users. It is possible that

California’s water system could adapt to the population growth and climate change

impact. However, even with new technologies for water supply, treatment, and water

use efficiency, widespread implementation of water transfers and conjunctive use,

coordinated operation of reservoirs, improved flow forecasting, and the close

cooperation of local, regional, State, and federal government, this adaptation most likely

will be costly.

2.6.C Agriculture

If California’s water resource systems face challenges from climate change and

variability, so will the State's agricultural sectors. While agricultural production is

potentially vulnerable to climate change risks associated with adverse water system

impacts, this sector also faces other risks that come with increasingly unpredictable

variations in both temperature and precipitation. For example, increases in the

frequency of extreme weather at inopportune times can cause significant declines in

agricultural productivity (Wilkinson, 2002).
Initial Statement of Reasons

August 6, 2004

23

The impacts of global warming on crop yields and productivity will vary considerably by

region. But several studies, including one by the US Department of Agriculture, show

that maintaining today's levels of agricultural productivity would be difficult. At best, this

would require expensive adaptation strategies. Farmers will likely need to change crops

and cultivation methods because warming generally hinders crop yields, although the

beneficial effects of elevated CO2 in fertilizing plant growth may cancel out the effects of

warming. If climate warming is accompanied by increased drought, however, the

detrimental effects would be intensified.

In California, 87 percent of the crop area is irrigated, and increased drought could be

countered by human management. Yet there are severe constraints on increased

irrigation since 100 percent of the surface water is already allocated. Agricultural water

users in the Central Valley are the most vulnerable to climate warming. While wetter

future climates could increase water availability for these users, the drier climates could

significantly reduce agricultural water deliveries in the Central Valley. If the climate

shifts toward a severe drought, not only will more irrigation be needed, but also the

snow pack at higher elevations will be lacking. This can be disastrous for producers

that grow fruit trees and vines that will require years to reestablish production.

2.6.D Ecological Impacts

California is an ecologically diverse state, with 134 endangered and threatened species,

including the sea otter, the California condor, and the American bald eagle. California’s

unique ecosystems include 25,000 square miles of desert. California’s mountain

ecosystems in the Sierra Nevada, including Yosemite National Park, contain alpine

wilderness areas with large numbers of sequoia trees. The ranges of many species of

plants and animals are restricted and fragmented because of both natural and human

causes. Many invading species have colonized large areas and displaced native

species in the wake of environmental changes in recent centuries (Wilkinson and

Rounds, 1998).

Climate change could have an impact on many of California's species and ecosystems.

For example, aquatic habitats are likely to be significantly affected by climatic changes.

Most fish have evolved to thrive in a specific, narrow temperature range. As

temperatures warm, many fish will have to retreat to cooler waters. Species differ

significantly in their abilities to disperse and to become established in new locations with

more suitable climates. Poorly dispersed species such as oak trees and related

species, and amphibians, may not be able to survive the predicted rapid climatic

changes if they have narrow tolerances for specific environmental conditions. Even for

easily dispersed species, such as grasses and birds, other biological interactions (i.e.,

new predators, missing pollinators, lack of specific food sources) or physical

environments (i.e., different soils, roads, lack of suitable intervening habitat) may block

the success of migration.

With changes in climate, the extent of forested areas in California could also change.

The magnitude of change depends on many factors, including whether soils become

drier and, if so, how much. Hotter, drier weather could increase the frequency and
Initial Statement of Reasons

August 6, 2004

24

intensity of wildfires, threatening both property and forests. Along the Sierras, drier

conditions could reduce the range and productivity of conifer and oak forests. Farther

north and along the northern coast, drier conditions could reduce growth of the Douglas

fir and redwood forests. A significant increase in the extent of grasslands and chaparral

throughout the State could result. These changes would affect the character of

California forests and the activities that depend on them.

2.6.E Impact on Economy

California produces more than one-eighth of total U.S. economic output, which makes it

equivalent to the sixth largest economy in the world. Increased climate variability and

long-term climate change potentially will affect the state’s sectors in important and

different ways. Some activities and enterprises will be impacted directly through

changes in natural resource and ecosystem services. Water shortages and increased

insect damage to crops due to relatively rapid changes in insect populations, for

example, will have direct impacts on the State’s diverse agricultural sector. While field

crops may be switched by the season, perennial crops including vineyards and orchards

are long-term investments. The reported damages from the El Niño storms in 1997-98

for agricultural losses approached $100 million. From dairy farmers losing cows to

exhaustion as they try to escape the mud, or are attacked by diseases, to strawberry

growers losing crops to the rain, farmers have experienced significant losses due to

strong climate variability (Wilkinson and Rounds, 1998).

Precipitation falling as rain instead of snow will pose major problems for water

managers, as the existing capture will become inadequate, and distribution system

designed for the current supply and demand areas will develop bottlenecks. Higher

summer temperatures will cause more rapid deterioration of asphalt and concrete,

impacting the highway and rail systems. Sea level increases of up to three feet over the

next century, with consequent implications for coastal erosion, inundation of wetlands,

salt water intrusion of coastal and delta aquifers, and impacts on developed areas

would clearly be extremely costly to mitigate, and devastating to some ecosystems and

urban communities. Climate change has the potential to affect many aspects of

California—the survival of its unique ecosystems, its ability to produce electricity, its

supply of water and agricultural products, and the resources that support its economy.

2.7 Abrupt Climate Change

When most people think about climate change, they imagine gradual increases in

temperature and only marginal changes in other climatic conditions, continuing

indefinitely or even leveling off at some time in the future. It is assumed that human

societies can adapt to gradual climate change. However, recent climate change

research has uncovered a disturbing feature of the Earth's climate system: it is capable

of sudden, violent shifts. T his is a critically important realization. Climate change will

not necessarily be gradual, as assumed in most climate change projections, but may

instead involve relatively sudden jumps between very different states. A mounting body

of evidence suggests that continued GHG emissions may push the oceans past a

critical threshold and into a drastically different future. Abrupt climate change is the
Initial Statement of Reasons

August 6, 2004

25

subject of reports commissioned by the National Academy of Science (NRC 2002) and

the U.S. Department of Defense (Schwartz and Randall, 2003).

Change in any measure of climate or its variability can be abrupt, including a change in

the intensity, duration, or frequency of extreme events. For example, single floods,

hurricanes, or volcanic eruptions are important for humans and ecosystems, but their

effects generally would not be considered abrupt climate changes. A rapid, persistent

change in the number or strength of floods or hurricanes might, however, be an abrupt

climate change. Although more regionally limited, the apparent change in El Niño

behavior (Graham, 1994; Trenberth and Hoar, 1996) could also be considered an

abrupt change. El Niño is characterized by a large-scale weakening of the trade winds

and warming of the surface layers in the eastern and central equatorial Pacific Ocean.

El Niño is notorious worldwide for causing catastrophic disruptions in weather patterns.

Floods in California are countered by droughts in Australia.

Societies have faced both gradual and abrupt climate changes for millennia and have

learned to adapt through various mechanisms, such as developing irrigation for crops,

and migrating away from inhospitable regions. Nevertheless, because climate change

will likely continue in the coming decades, denying the likelihood or downplaying the

relevance of past abrupt events could be costly. Thus, in addition to the gradual (albeit

accelerated) climate changes projected by current climate models, Californians need to

be aware of the possibility of much more sudden climate shifts. These shifts have a

scientifically well-founded place among the possible futures facing the State and should

be among the possibilities accommodated in planning and adaptation measures.

2.8 Summary

Historically, atmospheric gases such as water vapor, CO2, CH4, N2O, O3, and halocarbons

have trapped terrestrial radiation in the Earth’s atmosphere, which has maintained a

temperature and climate hospitable to life over much of the Earth  a condition known as

the greenhouse effect. It is true that levels of natural GHGs have fluctuated in the past.

However, there are several reasons for attributing the rise in GHGs to man-made, rather

than natural, emissions. T he first indicator comes from comparing the current increase

with changes that have occurred in the past. At the end of the last ice age, the

concentration of CO2 increased by around 100 ppm (parts per million) over about 8,000

years, or approximately 1.25 ppm per century. Since the start of the industrial

revolution, the rate of increase has accelerated markedly. Since 1860, the

concentration of CO2 has increased by around 80 ppm, just over 50 ppm per century.

The rate of CO2 accumulation has continued to increase, and currently stands at around

150 ppm per century – over 200 times faster than the background rate for the past

15,000 years.

There is little doubt that climate change is happening today, that human-caused

increases in the atmospheric abundance of GHGs are a large cause of that change, and

the 21st century climate change will be greater than that we have experienced in the

20th. Much of that projected climate change is as yet unrealized warming from the
Initial Statement of Reasons

August 6, 2004

26

GHGs in the atmosphere today. Nevertheless, actions taken to reduce GHGs today

can reduce the magnitude and rate of climate change this century.

There is no scientific uncertainty about the fact that human activities have increased the

atmospheric abundance of GHGs. The uncertainties start when we try to predict exactly

what the climate changes will be in various local areas of the Earth, and what the effects

of clouds will be in determining the rate at which the mean temperature will increase.

There are also uncertainties associated with other consequences of a warmer planet:

sea level rise, spread of certain diseases out of their usual geographic range, the effect

on agricultural production, water supply, sustainability of ecosystems, increased

strength and frequency of storms, extreme heat events, air pollution episodes, and the

impact of these effects on the economy. Already, some of these effects have been

seen in California. Over the last hundred years, average temperatures have increased

0.7o F, sea levels have risen by three to eight inches, and spring run-off has decreased

12 percent.

California's transportation sector is the single largest contributor of GHGs in the State,

producing close to 60 percent of all such emissions. If current trends in transportation

energy consumption continue, the State’s inventory of GHGs could mirror the growth in

population. Transportation and land-use trends in California will likely continue to

increase GHG production. This proposal will reduce GHG emissions from motor

vehicles. The international community recognizes such GHG emission reduction

(mitigation) actions would lessen the pressures on natural and human systems from

climate change. Slower rates of increase in global mean temperature and sea level

would allow more time for adaptation. Consequently, mitigation actions are expected to

delay and reduce damages caused by climate change and thereby generate

environmental and socio-economic benefits.
Initial Statement of Reasons

August 6, 2004

27

3 CALIFORNIA ACTIONS TO ADDRESS CLIMATE CHANGE

The State of California has traditionally been a pioneer in efforts to reduce air pollution,

dating back to 1963 when the California New Motor Vehicle Pollution Control Board

adopted the nation’s first motor vehicle emission standards. California likewise has a

long history of actions undertaken in response to the threat posed by climate change.

Beginning with 1988 legislation that directed the California Energy Commission, in

consultation with the Air Resources Board and other agencies, to study the implications

of global warming on California’s environment, economy, and water supply, and

continuing on over the years through Governor Schwarzenegger’s April 2004 Executive

Order outlining his vision for the California Hydrogen Highway Network, California state

government has consistently recognized the necessity for state action on climate

change to protect California’s interests.

At the Air Resources Board, attention to the mechanisms and effects of climate change

dates back to 1989, when staff first updated the Board on the emerging science.

3.1 Summary of California Activities

Listed below is a chronology of major California activities to address climate change.

The noted activities illustrate the depth and breadth of California’s commitment. The

sections that follow provide more detail on major activities, beginning with state

legislation and concluding with administrative initiatives.

Chronology of California Activities Addressing Global Climate Change

1988

AB 4420—Directs California Energy Commission (CEC), in consultation with the Air

Resources Board and other agencies, to study and report on how global warming trends

may affect California’s energy supply and demand, economy, environment, agriculture,

and water supplies.

1989

CEC reports—Comparing the Impacts of Different Transportation Fuels on the

Greenhouse Effect; The Impacts of Global Warming on California

ARB—Board agenda item on global warming

1990

CEC releases 1988 Inventory of California Greenhouse Gas Emissions

1991

CEC report—1991 Global Climate Change Report

CEC sponsors Symposium on Global Climate Change

CEC report—Global Climate Change: Potential Impacts and Policy Recommendations
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1998

CEC report—1997 Global Climate Change Report: Greenhouse Gas Emission

Reduction Strategies for California

1999

CEC sponsors Global Climate Change Science Workshop

California Fuel Cell Partnership established

2000

CEC sponsors Global Climate Change Strategies Workshop

SB 1771—Establishes California Climate Action Registry, and designates CEC and

ARB with advisory functions

Executive Order D-16-00—directs Secretary for State and Consumer Services to

facilitate sustainable building practices

ARB— Public Meeting to Consider an Informational Report on Air Pollution Trends: Past

Progress and Future Challenges; included discussion of global warming

2001

SB 1170—cites global warming as one of the public health and environmental problems

associated with petroleum use. To mitigate such effects the bill required the

commission, the Air Resources Board and the Department of General Services to

develop and adopt fuel-efficiency specifications governing the purchase by the state of

motor vehicles and replacement tires.

California Stationary Fuel Cell Collaborative established

2002

CEC report—Inventory of California Greenhouse Gas Emissions and Sinks: 1990-1999

California Climate Action Registry launched

CEC reports—Guidance to the California Climate Action Registry: General Reporting

Protocol; Guidance to the California Climate Action Registry: Certification Protocol

AB 1493—directs Air Resources Board to adopt regulations that achieve the maximum

feasible and cost effective reduction of GHG emissions from motor vehicles

SB 812—directs California Climate Action Registry to include forest management

practices

SB 1078—establishes California Renewable Portfolio Standard Program

SB 1389—directs CEC to adopt Integrated Energy Policy Report every two years

AB 857—directs Governor to prepare comprehensive State Environmental Goals and

Policy Report

2003

CEC, California Power Authority and Public Utilities Commission issue Energy Action

Plan for the State of California

West Coast Governors adopt Global Warming Initiative

Office of Planning and Research issues Governor’s Environmental Goals and Policy

Report, which included discussion of climate change impacts

CEC submits first Integrated Energy Policy Report to Governor, including supporting

document entitled Climate Change and California
Initial Statement of Reasons

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29

CEC Public Interest Energy Research Program creates California Climate Change

Research Center

CEC Public Interest Energy Research Program reports—Global Climate Change and

California: Potential Implications for Ecosystems, Health and the Economy; Climate

Change Research, Development and Demonstration Plan

2004

CalTrans issues California Transportation Plan (DRAFT)

Executive Order S-7-04—outlines Governor Schwarzenegger’s vision for the California

Hydrogen Highway Network

Staff releases draft action plans for first five project topics in West Coast Governor’s

Global Warming Initiative

3.2 Legislation

This section provides a brief description of significant legislative actions taken to

address climate change in California.

AB 4420 (Chapter 1506, Statutes of 1988, Sher)

Assembly Bill 4420 was signed on September 28, 1988 and directed the Energy

Commission, in consultation with the Air Resources Board and other agencies, to “study

and report...on how global warming trends may affect California’s energy supply and

demand, economy, environment, agriculture, and water supplies”. Furthermore, “the

study shall include recommendations for avoiding, reducing, and addressing the

impacts.” In approving the bill the Legislature declared that “recent projections

regarding global warming trends raise long-range energy, economic, environmental

planning issues for the State of California.”

SB 1771 (Chapter 1018, Statutes of 2000, Sher)

Senate Bill 1771 was signed on September 30, 2000. This bill established the

California Climate Action Registry and designated the Energy Commission and the Air

Resources Board with advisory functions. It also required the Energy Commission to

periodically update the State’s GHG inventory, to “acquire and develop information on

global climate change,” to “convene an interagency task force consisting of state

agencies with jurisdiction over matters affecting climate change to ensure policy

coordination at the state level for those activities,” and to “establish a climate change

advisory committee.” The Legislature stated that “it is in the best interest of the State of

California, the United States of America, and the earth as a whole, to encourage

voluntary actions to achieve all economically beneficial reductions of greenhouse gas

emissions from California sources.” The bill’s stated purpose was to “encourage

voluntary actions to increase energy efficiency and reduce greenhouse gas emissions.”

SB 527 (Chapter 769, Statutes of 2001, Sher)

SB 1771 was followed by Senate Bill 527, which was signed on October 11, 2001. This

clean-up legislation authorized administrative penalties for certain violations of air

pollution laws and clarified and added language to SB 1771. In the bill the Legislature

repeated its statement that it “finds and declares [that it] is in the best interest of the
Initial Statement of Reasons

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30

State of California, the United States of America, and the earth as a whole, to

encourage voluntary actions to achieve all economically beneficial reductions of

greenhouse gas emissions from California sources.”

SB 1170 (Chapter 912, Statutes of 2001, Sher)

Senate Bill 1170 was signed on October 14, 2001. The bill cited global warming as one

of the “public health and environmental problems” associated with petroleum use.

Specifically, the bill mentioned “air pollution, acid rain, global warming, and the

degradation of California’s marine environment and fisheries." To mitigate such effects,

the bill required the commission, the Air Resources Board and the Department of

General Services to develop and adopt fuel-efficiency specifications governing the

purchase by the state of motor vehicles and replacement tires.

AB 1493 (Chapter 200, Statutes of 2002, Pavley)

Assembly Bill 1493, the subject of this staff report, was signed on July 22, 2002. It

required that the State Air Resources Board “develop and adopt regulations that

achieve the maximum feasible and cost-effective reduction of greenhouse gases from

motor vehicles”. In the bill the Legislature declared that “global warming is a matter of

increasing concern for public health and the environment in the state” and that ”the

control and reduction of emissions of greenhouse gases are critical to slow the effects

of global warming”. The bill also directed the California Climate Action Registry to adopt

protocols for reporting “reductions in greenhouse gas emissions from mobile sources”.

SB 812 (Chapter 423, Statutes of 2002, Sher)

Assembly Bill 812 was signed on September 7, 2002. It instructed the California

Climate Action Registry to include forest management practices as a mechanism to

achieve emission reductions and “to adopt procedures and protocols for the reporting

and certification of greenhouse gas emission reductions resulting from a project” and for

“the monitoring, estimating, calculating, reporting, and certifying of carbon stores and

carbon dioxide emissions resulting from the conservation and conservation-based

management of native forest reservoirs in California”

SB 1078 (Chapter 516, Statutes of 2002, Sher)

Senate Bill 1078 was signed on September 12, 2002 and established the California

Renewable Portfolio Standard Program. In the bill the Legislature finds that “[t]he

development of renewable energy resources may ameliorate air quality problems

throughout the state and improve health by reducing the burning of fossil fuels and the

associated environmental impacts.”

SB 1389 (Chapter 568, Statutes of 2002, Bowen)

Senate Bill 1389 was signed on September 14, 2002 and required that the Energy

Commission compile and “adopt an integrated energy policy report” every two years. In

the report the Commission shall develop public interest energy strategies that include

“reducing statewide greenhouse gas emissions and addressing the impacts of climate

change on California”.
Initial Statement of Reasons

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AB 857 (Chapter 1016, Statutes of 2002, Wiggins)

Assembly Bill No. 857 was signed on September 28, 2002 and instructed the Governor

to prepare a “comprehensive State Environmental Goals and Policy Report”. The bill

sets out the State’s planning priorities as being “to promote equity, strengthen the

economy, protect the environment, and promote public health and safety”. After

approval of the report it shall serve as a guide for state expenditures.

3.3 Administrative Initiatives

This section provides more detail on climate change initiatives that have been

undertaken by state agencies.

3.3.A Governor’s Office

A number of activities have been undertaken at the Governor’s Office level, as outlined

below.

Sustainable Building Practices. In 2000 Governor Gray Davis signed Executive Order

D-16-00, which directed the Secretary for State and Consumer Services to facilitate the

incorporation of sustainable building practices into the planning, operations,

policymaking, and regulatory functions of State entities. The Integrated Waste

Management Board mitigates emissions through actions contained in the “Sustainable

Building Implementation Plan.”

West Coast Governor’s Global Warming Initiative. On September 22, 2003 Governor

Davis announced the formation of the West Coast Governor’s Global Warming Initiative

in cooperation with the governors of Oregon and Washington. The three states intend to

reduce GHG emissions through six initial project areas. These areas include (1) using

the states' purchasing power to purchase fuel-efficient vehicles and low-rolling

resistance tires for motor pool fleets, (2) reducing emissions from diesel generators in

ships at west coast ports, and create a system of emission-free truck stops along the

Interstate 5 corridor, (3) encouraging the development of renewable electricity

generation resources and technologies, (4) improving efficiency standards, (5)

developing consistent and coordinated GHG emission inventories, protocols for

standard accounting and reporting methods for GHG emissions, and (6) promoting a

hydrogen fuel infrastructure for transportation. In April 2004 the staff of the three states

released draft initiatives covering the first five project areas for public comment. The

hydrogen fuel infrastructure draft initiative will be completed in the near future.

Environmental Goals and Policy Report. In November of 2003 the Governor’s

Environmental Goals and Policy Report was published by the Governor’s Office of

Planning and Research. The report details the significant impact of potential climate

change on California’s public health, agriculture, water supply, ecosystems, and

economy. The report encouraged the establishment of “achievable targets for

greenhouse gas emissions that are incorporated into regulatory programs and reflected

in subsequent investments in greenhouse gas reduction.” Analyses to estimate the

“cumulative effects of proposed government actions on total greenhouse gas emissions
Initial Statement of Reasons

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and require feasible mitigation measures that would achieve greenhouse gas emission

and fossil fuel use reduction targets” should also be undertaken.

California Hydrogen Highway Network. Governor Arnold Schwarzenegger signed

Executive Order (EO) S-7-04 on April 20, 2004. This EO acknowledged that hydrogen,

a non-carbon energy carrier, is ideally suited to address global, regional and local

energy and environmental challenges. The EO designated California’s 21 interstate

freeways as the “California Hydrogen Highway Network”. The EO directed the

California Environmental Protection Agency (Cal/EPA), in concert with the State

Legislature, and in consultation with the California Energy Commission and other

relevant state and local agencies, to develop the California Hydrogen Economy

Blueprint Plan (Blueprint Plan) for the rapid transition to a hydrogen economy. The

Blueprint Plan is due to the Governor and the Legislature in January 2005 and must

include recommendations that promote environmental benefits, including global climate

change benefits.

Cal/EPA has established a Hydrogen Highways Implementation Advisory Panel (Panel)

to direct the Blueprint Plan effort. The Panel Chair will be chaired by Cal/EPA Agency

Secretary Terry Tamminen and is made of up high-level executives from the public and

private sector, including representatives from environmental organizations, the

California Fuel Cell Partnership, the California Stationary Fuel Cell Collaborative, and a

representative of environmental justice organizations. The Panel will be advised by

Topic Teams that include experts in specific hydrogen-related issues. The Blueprint

Plan will undergo review by a Senior Review Committee that includes Cabinet members

and Legislators prior to going to the Governor and the full Legislature.

3.3.B California Energy Commission

As a result of AB 4420 the Energy Commission initiated several research efforts to

clarify the consequences of global warming on California. In April of 1989 a report

Comparing the Impacts of Different Transportation Fuels on The Greenhouse Effect

surveyed how crude oil, compressed natural gas, natural gas and coal transportation

fuels affected GHG emissions. In August of the same year another report The Impacts

of Global Warming on California examined the risk of significant global warming upon

water resources, electrical energy, agriculture, forestry, rising ocean level, natural

habitat, regional air quality and human health, and the California economy.

The efforts to complete an inventory of California’s GHG emissions were concluded in

October of 1990 with the release of the 1988 Inventory of California Greenhouse Gas

Emissions. It inventoried emissions of CO2, CH4, N20 and halocarbons, and included

estimates of emissions from some out-of-state electricity fuel supplies.

In January of 1991 the Energy Commission reported to the Governor and Legislature

with the 1991 Global Climate Change Report detailing the GHG emissions inventory,

GHG reduction strategies and recommended policies to avoid and reduce global

warming impacts. The following month leading climate scientists presented information

on climate change science, global climate change models, and the importance of
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California public policy at A Symposium on Global Climate Change. At the end of 1991

the Energy Commission compiled the findings of the earlier reports and recommended

actions to reduce GHG emissions and adapt to potential global climate change in the

Global Climate Change: Potential Impacts & Policy Recommendations.

In January of 1998 the emissions inventory was updated, and emission forecasts were

presented along with an overview of the progress of the policies recommended in 1991.

A follow-up to the global climate change symposium was conducted in 1999 with

presentations by ten of the nation's leading climate scientists on the latest scientific data

and information on global climate change potential impacts at the Global Climate

Change Science Workshop.

In June of 2000 a Global Climate Change Strategies Workshop included presentations

by California, national and international businesses who have adopted "early actions" to

reduce GHG emissions and elicited suggestions for strategies that could be

cooperatively undertaken by the State government and the private sector.

The Inventory of California Greenhouse Gas Emissions and Sinks: 1990-1999 was

presented in 2002. In addition to emission estimates it included an examination of

trends in GHG emissions over the decade of the 1990s.

Integrated Energy Policy Report. The California Energy Commission adopted the 2003

Integrated Energy Policy Report on November 12, 2003. This document contains

numerous recommendations to the Governor about current and potential energy issues

confronting the state. Recommendations on the topic of climate change focused on the

need to partner with neighboring states to take leadership positions in addressing global

warming. Specific actions mentioned include required reporting of GHG emissions as a

condition of state licensing of new electric generating facilities; use of sustainable

energy and environmental designs in all state buildings; and a requirement for all state

agencies to incorporate climate change mitigation and adaptation strategies in planning

and policy documents.

Public Interest Energy Research Program. The California Energy Commission’s Public

Interest Energy Research Environmental Area (PIER-EA) is engaged in a variety of

activities to address both the causes and impacts of global climate change. These

collaborative activities leverage public and private research expertise and funding, from

within California and throughout the world.

In 2003, the Energy Commission’s PIER Staff created the California Climate Change

Research Center (CCCRC) to initiate and implement climate-related research,

development, and demonstration projects. The CCCRC has three components. The

first, located at Scripps Institution of Oceanography, concentrates on scientific research

related to climate variability and change. The second, located at the University of

California at Berkeley, focuses on the economic and social aspects of climate change.

The third, located at the University of California’s Office of the President (UCOP),

manages a competitive grant program that funds research related to climate change.
Initial Statement of Reasons

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Also, in 2003, PIER-EA released two major climate-related reports. Global Climate

Change and California: Potential Implications for Ecosystems, Health, and the Economy

discusses various affects of climate change on the state. The Climate Change

Research, Development, and Demonstration Plan outlines the need for state-sponsored

climate change research, identifies research gaps, and prioritizes research activities to

address climate change and its impacts in a number of disciplines.

These interrelated programs and projects are building a strong foundation that enables

PIER-EA to collaborate with other organizations to address climate change issues that

are affecting the environmental and economic health of the state and the region.

Energy Efficiency Activities. The Energy Commission adopted 2005 building energy

efficiency standards in November 2003. These standards have growing positive effects.

The savings that these standards are expected to yield for each year of construction are

180 megawatts of electric demand, 475 giga-watt hours of electric energy and 8.8

million therms of natural gas. These energy savings will yield significant reductions in

criteria pollutant and GHG emissions.

CO2 Reporting in Power Plant Licensing. The Energy Commission staff is examining

the feasibility and advisability of CO2 reporting in power plant licensing. This

information would allow staff to estimate the amount of GHG emissions that will be

emitted by the project, and would prove useful in establishing a more comprehensive

and accurate inventory of GHG emissions from the electric generation sector within the

state. In addition, by identifying and quantifying these emissions strategies can be

developed, if appropriate, addressing the feasibility and cost-effectiveness of potential

mitigation measures. The staff will also examine whether it should recommend that the

Commission require power plant applicants, as a condition of certification, to submit

actual monthly operational emissions data for GHGs.

The staff also expects to study the issue of whether it would be advisable to require

power plant applicants to obtain carbon dioxide (CO2) emission offsets, as is currently

done in Oregon. If it were decided that a California CO2 emission offset market had

merit, this issue would be reviewed in cooperation with the Air Resources Board and

local air districts and would be the subject of public hearings.

3.3.C California Air Resources Board

Prior to being designated as lead role for implementation of AB 1493, the California Air

Resources Board had already taken a number of actions to better understand climate

change mechanisms and effects and encourage low GHG emission technologies. The

Board’s focus on the issue dates back to 1989, when staff provided to the Board a

presentation on the emerging science. At a Board hearing in 2000 staff updated the

scientific evidence and highlighted ARB and state actions on global climate change as

an air pollution challenge. Specific initiatives are summarized below.

Zero Emission Vehicle Regulation. This regulation, first adopted in 1990 and most

recently modified in 2003, requires manufacturers to offer for sale in California specified
Initial Statement of Reasons

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numbers of zero and near-zero emitting vehicles. Although the regulation focuses most

directly on criteria pollutants, the emerging technologies encouraged by the regulation,

such as battery electric, fuel cell and hybrid electric vehicles, also offer significant GHG

benefits.

California Fuel Cell Partnership. The California Fuel Cell Partnership, established in

1999, is a unique collaborative of auto manufacturers, energy companies, fuel cell

technology companies, and government agencies. The Partnership is committed to

promoting fuel cell vehicle commercialization as a means of moving towards a

sustainable energy future, increasing energy efficiency and reducing or eliminating

criteria pollutants and GHG emissions.

California Stationary Fuel Cell Collaborative. The mission of the California Stationary

Fuel Cell Collaborative, which was established in 2001, is to promote stationary fuel cell

commercialization. One of the Collaborative’s key objectives to be achieved through

commercialization of stationary fuel cell technology is the reduction or elimination of air

pollutants and GHG emissions. The Collaborative envisions fuel cell installations

pursued by state, local and public organizations as well as private entities. The

Collaborative will take specific actions to promote a wide variety of fuel cell

technologies, sizes and applications for installation in California.

Research. Global air pollution issues are specifically highlighted in the 10-year

research strategy adopted by the Board in 2001. The purpose of the ARB’s global

climate research program is to assess the effects of GHG emissions, global climate

change, and global transport of pollutants, especially as they impact the public health

and environment of California. This comprehensive scientific research and assessment

will help policymakers design the most appropriate control strategies to deal with these

very complex issues. Important research questions concerning global air pollution and

global climate change include the following:

• How can the GHG emission inventory be improved?

• What is the true contribution of motor vehicles to N2O emissions?

• What is the role of aerosols in climate change?

• What will be the effects of global climate change on human health?

• What are the possible economic impacts of global climate change on California?

One example of climate change related research is a study entitled Global Radiative

Effect of Particulate Black Carbon. The goal of this project, which is underway, is to

provide the ARB with state-of-the-science global radiative forcing estimates for black

carbon (BC) and other aerosols. Quantitative understanding of the absorbing aerosol’s

role in the climate change is required to accurately evaluate the radiative forcing

impacts of PM emissions. Such information is needed in order to determine whether

PM should at some point be incorporated into climate change regulations.

A second study, entitled Climate Change - Characterization of Black Carbon and

Organic Carbon Air Pollution Emissions and Evaluation of Measurement Methods, is

under consideration. This project will result in an improved understanding of the effect
Initial Statement of Reasons

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of different combustion sources and their particle emissions, in particular black carbon

and organic carbon, on air pollution and climate change.

ARB staff are currently reviewing climate change research proposals as part of the

2004/2005 research solicitation. The climate change proposals as well as those

addressing other air quality-related needs will be considered by the Research Screening

Committee. It is expected that the highest-ranking proposals will be presented to the

Board with the recommendation that they be funded.

Innovative Clean Air Technologies Program. The Innovative Clean Air Technologies

(ICAT) program provides co-funding for companies that are developing technologies

supporting ARB's clean air objectives for California. This program has funded several

projects on hydrogen, fuel cells, and hybrids, primarily for their GHG emission

reductions.

3.3.D California Climate Action Registry

Legislation passed in 2000 called for creation of the California Climate Action Registry

(CCAR), a non-profit organization with the primary function of promoting voluntary

annual reporting of GHG emissions inventories by California entities. In 2002 the

California Climate Action Registry was launched and several recommendations were

provided by the Energy Commission to the Registry's Board of Directors. These

included the Guidance to the California Climate Action Registry: General Reporting

Protocol and Guidance to the California Climate Action Registry: Certification Protocol.

The Registry has over 35 participants from business, industry, government, and other

types of organizations. Emissions data by Registry members are reported at the facility

level, and are verified by state approved certifiers.

Under the enabling legislation, the State of California agrees to provide “appropriate

consideration” of certified emissions that result in the future, when possible regulatory

regimes may be implemented to reduce GHG emissions at the international, national, or

state level. A forestry protocols workgroup has been convened and a power

generator/utility sector workgroup is currently being formed to draft industry-specific

GHG reporting and certification protocols. In addition, there is an effort underway to

establish oil and gas industry reporting protocols. Lastly, there is an effort underway to

quantify the “asset value” of GHG emissions reductions and move toward a marketbased system for recording actual emissions savings. The Oregon Climate Trust has

been instrumental in this effort.

3.3.E California Department of Transportation

The California Department of Transportation (CalTrans) is working on a California

Transportation Plan which “is a policy plan designed to guide transportation investments

and decisions at all levels of government and the private sector to enhance [California’s]

economy...and safeguard [California’s] environment for the benefit of all.” In a draft

version of the plan CalTrans stated that “the use of fossil fuels to transport people and

goods leads to air emissions that contribute to the warming of earth’s atmosphere”. The
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report cites “potential adverse impacts to public health, agriculture, forest, and other

systems, storm frequency and intensity, mountain snow pack, smog, and rising sea

levels resulting from climate change.”

CalTrans also has a Director’s Policy entitled "Energy Efficiency and Conservation

Policy." This policy promotes environmental stewardship, sustainable transportation,

reductions in GHG emissions, and educational programs.

3.3.F California Department of Water Resources

The California Department of Water Resources (DWR) has recognized that climate

change and variability can have important consequences for the state’s water resource

systems. As a result the Scripps Institution of Oceanography is partnering with DWR

and the PIER Program to improve data collection and regional climate modeling in an

effort to reduce the uncertainty surrounding predictions of how precipitation patterns

may change in California. DWR has also been documenting sea levels that dates back

to the mid-1800s measured at San Francisco Bay. DWR is evaluating these risks and

considering adaptive measures as part of the state’s planning process related to water

resources.

3.3.G Department of General Services

SB 1170 highlighted global warming as one of the public health and environmental

problems associated with petroleum use. In response to the bill the Department of

General Services (DGS) has developed “green” specifications for the procurement of all

new passenger and light duty vehicles. The DGS solicits bids and publishes annual

purchasing contracts for new passenger cars, pickups, passenger and cargo vans, and

utility vehicles. Currently, all new passenger and light duty vehicles offered for

purchase by state and local governmental fleets meet and in some cases exceed the

Ultra Low Emission Vehicle (ULEV) requirements as established by the CARB.

3.3.H Multi-Agency Initiatives

Renewable Portfolio Standard (RPS). The California Public Utilities Commission

(CPUC) and the Energy Commission have established a collaborative process to

implement the state’s RPS. Legislation currently requires retail sellers to increase

percentage of renewable energy sources in their portfolio by 1 percent of sales per year,

up to 20 percent by the year 2017. Additional legislation provides up to $135 million per

year to help achieve the objectives of the RPS and other renewable energy policies of

the state.

A plan has been developed for the proceedings and workshops have been held to

discuss implementation topics. A final document entitled “Renewable Resources

Development Report” was prepared for the Legislature that describes the renewable

resource potential in California and other states in the Western Electricity Coordinating

Council.
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Energy Action Plan – 2003. In 2003 the Energy Commission, the California Power

Authority, and the Public Utilities Commission joined to create an Energy Action Plan for

the State of California. One of the proposed actions was for “California [to] decrease its

per capita electricity use through increased energy conservation and efficiency

measures. This would minimize the need for new generation, reduce emissions of toxic

and criteria pollutants and greenhouse gases, avoid environmental concerns, improve

energy reliability and contribute to price stability.” The plan also argues that the state

should “encourage companies that invest in energy conservation and resource

efficiency to register with the state’s Climate Change Registry.” The plan states that

“the agencies will each take into account the effect the action will have on energy

expenditures, the environment and climate change, and the overall economy.” The

state’s Energy Action Plan also calls for an accelerated RPS goal of 20% renewable

energy electricity by the year 2010.

West Coast Regional Carbon Sequestration Partnership. In August 2003, the U. S.

Department of Energy selected the West Coast Regional Carbon Sequestration

Partnership as one of seven regional groups to evaluate a range of carbon

sequestration options. The partnership (which consists of the Western Governor’s

Association; various state agencies in California, Oregon, and Washington; and oil and

gas companies) is focusing on terrestrial and geological sequestration. California and

neighboring states will examine opportunities to capture and store CO2, including issues

related to transport, permitting, monitoring, verification, and public outreach. This

regional partnership approach is a cooperative effort between federal, state, and private

organizations and described as “the centerpiece” of federal efforts to understand the

potential of carbon sequestration to help mitigate GHG emissions.

The Energy Commission is managing the task-related working groups that are

addressing issues relating to CO2 transport, permitting, monitoring, verification, and

public outreach. Phase I projects are developing the framework, tools, and methods for

a regional assessment and identifying regional sequestration options and candidate

projects. In Phase II, participants will conduct terrestrial and geologic sequestration pilot

demonstrations to provide information for full-scale demonstrations.

Forest Management Practices. In response to SB 812 the Energy Commission and the

Department of Forestry and Fire Protection are participating in the Registry’s efforts to

develop guidance for protocols estimating emissions storage in forests. The Energy

Commission, the Department of Forestry and Fire Protection and the Department of

Food and Agriculture are also working to improve methods of establishing an extensive

inventory of carbon currently stored within California’s landscapes.
Initial Statement of Reasons

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39

4 SUMMARY OF PROPOSED REGULATION

4.1 Climate Change Emission Reduction Standard

Vehicle climate change emissions comprise four main elements: (1) CO2, CH4 and N2O

emissions resulting directly from operation of the vehicle, (2) CO2 emissions resulting

from operating the air conditioning system (indirect AC emissions), (3) refrigerant

emissions from the air conditioning system due to either leakage, losses during

recharging, sudden releases due to accidents, or release from scrappage of the vehicle

at end of life (direct AC emissions, and (4) upstream emissions associated with the

production of the fuel used by the vehicle. The climate change emission standard

incorporates all of these elements.

The staff proposal recommends that one standard be established for passenger cars

and the lightest trucks (PC and LDT1), and a separate standard for heavier trucks

(LDT2). Staff proposes setting near-term standards, phased in from 2009 through

2012, and mid-term standards, phased in from 2013 through 2016. The proposed

standards, expressed in terms of CO2 equivalent grams per mile, are shown in Table

4.1-1 below:

Table 4.1-1. CO2 Equivalent Emission Standards for Model Years 2009 through 2016

CO2-equivalent emission

standard by vehicle category

(g/mi) Tier Phase-in Year

PC/LDT1 LDT2

20% 2009 323 439

40% 2010 301 420

70% 2011 267 390 Near-term

100% 2012 233 361

20% 2013 227 355

40% 2014 222 350

70% 2015 213 341 Mid-term

100% 2016 205 332

To maintain simplicity, staff proposes to use the upstream emissions for vehicles that

use conventional fuels as a “baseline” against which to compare the relative merits of

alternative fuel vehicles. Therefore, the emissions standards as shown above do not

directly reflect upstream emissions. Rather, when certifying gasoline or diesel-fuel

vehicles manufacturers would report only the “direct” or, “on vehicle” emissions. For

alternative fuel vehicles, exhaust CO2 emissions values will be adjusted in order to

compensate for the differences in upstream emissions. This approach simplifies the

regulatory treatment of gasoline vehicles, while at the same time allowing for

appropriate treatment of alternative fuel vehicles.

Small Volume, Independent Low Volume, and Intermediate Volume manufacturers

would not be required to comply with the climate change requirements until the final
Initial Statement of Reasons

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40

year of the phase-in (2016). Beginning in 2016, these smaller manufacturers would be

required to meet the average CO2 equivalent emissions of all 2012 comparable vehicles

produced by the major vehicle manufacturers, beginning in 2016. A specialty low

volume vehicle that utilizes a powertrain from a major manufacturer from the same

model year would be considered compliant with the GHG emission standards if it

adopted the package without modifications. Should a comparable vehicle not be

available from a large manufacturer, the small volume manufacturer would be required

to meet the 2012 emission standard for large volume manufacturers in 2016 and

beyond.

4.2 Early Credits

AB 1493 directs that emission reduction credits be granted for any reductions in GHG

emissions achieved prior to the operative date of the regulations. ARB staff proposes

that (1) credit for early emission reductions should be available for model years 2000

through 2008, with manufacturers allowed to opt in to the program during any model

year during this timeframe, and (2) the baseline against which manufacturer emissions

are measured should be the fully phased in near term standard.

As noted in Table 6.1-5 above, staff has proposed that the fully phased in near term

standard for passenger cars and T1 trucks should be 233 grams per mile CO2

equivalent, and for T2 trucks should be 361 grams per mile. Thus under the staff early

credit proposal a manufacturer’s fleet average emissions, for model years beginning

with their first year of participation through 2008, would be compared to these

standards. If a manufacturer has fleet average emissions in a specific model year lower

than these standards, the manufacturer would earn early compliance credits. Any

emission reduction early credits earned could be used during model years 2009 through

2014, or traded to another manufacturer. To ensure that the regulation ultimately

achieves the greatest possible climate change reductions, staff proposes that the

credits generated by early compliance retain full value through the 2013 model year.

These credits will then be worth 50 percent of their initial value in MY 2014, 25 percent

of their initial value in MY 2015 and have no value thereafter.

4.3 Alternative Compliance

AB 1493 requires that the regulations “provide flexibility, to the maximum extent feasible

consistent with this section, in the means by which a person subject to the regulations ...

may comply with the regulations. That flexibility shall include, but is not limited to,

authorization for a person to use alternative methods of compliance with the

regulations.” Thus the use of alternative compliance strategies must not undercut the

primary purpose of the regulation, which is to achieve GHG reductions from motor

vehicles. Accordingly, the ARB's alternative compliance program will be limited to the

vehicles that are regulated through AB 1493, and their fuels. This is to ensure that the

program does not dilute the technology-forcing nature of the regulation, since the goal is

to improve the vehicles themselves. The major features of the staff proposal are:

• Projects must be located in California to be eligible as alternative methods of

compliance.
Initial Statement of Reasons

August 6, 2004

41

• Only companies regulated by AB 1493 (automakers) will be permitted to apply for

alternative compliance credits.

• Only those vehicles regulated under AB 1493 are eligible for alternative

compliance credits. This includes model year 2009 and later passenger vehicles

and light-duty trucks and other vehicles used for noncommercial personal

transportation in California.

• Staff proposes that eligible projects be limited to those that achieve GHG

reductions through documented increased use of alternative fuels in eligible

vehicles.
Initial Statement of Reasons

August 6, 2004

42

5 MAXIMUM FEASIBLE AND COST-EFFECTIVE TECHNOLOGIES

A key part of the staff’s technical work, and the focus of this section, is an assessment

of technologies and fuels that can contribute to a reduction of climate change emissions

in passenger vehicles from the 2009 model-year and beyond. The relevant portions of

AB 1493 that guide this technology and economic assessment read -

43018.5. (a) No later than January 1, 2005, the state board shall

develop and adopt regulations that achieve the maximum feasible

and cost-effective reduction of greenhouse gas emissions from motor

vehicles.... [where] (i) For the purposes of this section, the following

terms have the following meanings: (1) ‘‘Greenhouse gases’’ means

those gases listed in subdivision (g) of Section 42801.1. (2)

‘‘Maximum feasible and cost-effective reduction of greenhouse gas

emissions’’ means the greenhouse gas emission reductions that the

state board determines meet both of the following criteria: (A)

Capable of being successfully accomplished within the time provided

by this section, taking into account environmental, economic, social,

and technological factors. (B) Economical to an owner or operator of

a vehicle, taking into account the full life-cycle costs of a vehicle.

(Stats. 2002, Ch. 200, §3)

5.1 Background

The GHG emission standards being proposed are being incorporated into the Low

Emission Vehicle (LEV) program because it governs the emission cleanup of the cars

and trucks sold in California. Like the emission standards previously adopted in the

LEV program, the proposed GHG emission standards are also far reaching in that they

prescribe the levels of emissions that would be required through 2016. As in the case

of the earlier LEV program, staff is receiving initial comments from the automotive

industry suggesting that the standards being proposed are too stringent, too soon and

too expensive. As in the past, industry points to the considerable effort that would be

involved in revising their entire fleet of vehicles and caution that there is insufficient lead

time or resources for the task. Further, they generally believe that the staff’s cost

assessments are too optimistic, as they did in the earlier LEV program, usually by citing

costs as they exist in the near term rather than when the program would be fully phased

in and the technologies fully learned-out in a high volume competitive environment.

In the most recent major LEV program revisions that were adopted in November, 1998,

staff conducted an extensive evaluation of the technologies that might be developed

further to provide the near-zero emissions required from even the largest vehicles in the

fleet. Staff equipped numerous heavy large truck and sport utility test vehicles with

prototype emission control equipment and tested them in our laboratories to

demonstrate the proposed levels would be feasible, and projected costs for attaining the

standards based on estimates obtained from component suppliers. Despite the staff’s

considerable efforts to demonstrate the feasibility of the proposed standards at that

time, industry mounted an aggressive opposition campaign claiming that trucks and
Initial Statement of Reasons

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43

sport utility vehicles would no longer be available that would meet consumer

requirements or that they would be too expensive even if they could ultimately meet the

proposed levels. Today, however, the LEV program is clearly successful with vehicles

now meeting near zero criteria pollutant emissions ahead of schedule, bargain priced,

and with full model availability. They also provide longer emission warranties that

reflect the improved durability of the advanced emission control equipment.

For the GHG emission standards being proposed, staff has again sought out a very

reliable and industry accepted means of evaluating the potential for achieving the

standards. Because powertrain changes will be the focus for obtaining the reductions

sought in this rulemaking rather than aftertreatment technologies, staff could not

reasonably build prototypes and test them in our laboratory. Instead, staff relied on the

NESCCAF study that utilized the services of an experienced and recognized vehicle

simulation firm to provide projected reductions in GHG emissions. This is the only

reasonable means of accurately estimating the combined effects of multiple

technologies to reduce climate change emissions. The only other way would be to build

and develop prototype vehicles and directly test their emissions. Because building and

testing prototypes is so expensive and time consuming, even major automobile

manufacturers rely on vehicle simulation firms to predict the performance of new

technologies, either individually or in combination, and to assess their performance and

emissions. As was the case in the 1998 LEV program rulemaking, the technologies that

industry could utilize to meet the proposed climate change emission regulations are

already in production on some models, are in prototype form, or are being seriously

developed. Because of the large range of technologies that could be used, staff also

relied on the NESCCAF evaluation of costs conducted by a recognized authority that

the automotive industry itself relies on to obtain such costs. The same costing firm was

consulted informally by ARB staff in setting the LEV I and LEV II program standards to

compare notes on projected costs as a way of double checking our own estimates.

Although looking forward to 2016 and projecting what will be feasible in that timeframe

may appear daunting to the automotive industry, as it did in the past, staff believes that

the level of engineering analysis and rigor reflected in this staff report to demonstrate

feasibility and cost-effectiveness is comparable to the previous efforts in the LEV

program. Likewise, staff expects that the ultimate climate change emission reductions

being proposed can be achieved effectively, on schedule and economically. Staff also

expects that industry will once again exceed our expectations when we get there.

5.1.A Development of Staff Technology Assessment

Since passage of AB 1493, ARB has hosted several meetings to provide an update on

the process of formulating climate change emission standards and to solicit feedback

and public comment from relevant stakeholders, interested parties, and technology

developers. ARB hosted the International Technology Symposium in March of 2003 in

an effort to bring together international experts on climate change emission reduction

technologies. Leading researchers from the auto industry, vehicle component suppliers,

academia, and vehicle simulation firms were invited to speak, covering numerous

technologies and their potential to reduce climate change emissions of vehicles in the
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44

2009-2015 timeframe. Additional feedback on developing a climate change regulation

came from an update to the Board on November 20, 2003. ARB staff presented its

early findings on the individual technologies that are likely to be available in the 2009

timeframe and the potential for climate change emission reductions from these

technologies.

Building on the work presented at the earlier public meetings, on April 1, 2004 staff

released the Draft Technology and Cost Assessment for Proposed Regulations to

Reduce Vehicle Climate Change Emissions Pursuant to Assembly Bill 1493. That

report provided a comprehensive assessment of the technologies considered by the

ARB staff in formulating targets for the “maximum feasible and cost-effective reduction

of greenhouse gases.” ARB then hosted a public workshop on April 20, 2004 to receive

public comment on the draft technology assessment. Staff subsequently made

available on June 14, 2004 a draft of the Staff Proposal Regarding the Maximum

Feasible and Cost-Effective Reduction of Greenhouse Gas Emissions From Motor

Vehicles, containing the methodology for developing the standards and the preliminary

standards themselves. A workshop was conducted on July 7, 2004 in which staff

received valuable comments that were carefully considered in developing the final staff

proposal.

5.1.B Research Method Overview

The vehicle technology results presented in this report are derived primarily from a

comprehensive vehicle simulation modeling effort and a thorough cost analysis

performed for the Northeast States Center for a Clean Air Future (NESCCAF). The

participants in the study include AVL Powertrain Engineering, Inc. (AVL), Martec, and

Meszler Engineering Services. ARB staff has been monitoring progress of this

independent study and has been afforded various opportunities to provide comments on

the analysis. ARB staff believes the NESCCAF study is the most advanced and

accurate evaluation of vehicle technologies that reduce greenhouse emissions yet

performed. ARB staff also monitored a separate TIAX, LLC analysis of the GHG

benefits of alternative fuel vehicles, including upstream benefits, and the cost

associated with alternative fuel vehicle technologies. ARB staff also met with

representatives from EPA, the Society of Automotive Engineers, the Mobile Air

Conditioning Society, and the National Renewable Energy Laboratory to develop its

approach for reducing the effects of air conditioning refrigerant emissions and excess

CO2 emissions from air conditioning use on climate change.

A key part of the ARB staff’s technical work is to assess technologies that will be

available to reduce GHGs for model year 2009 and later light-duty passenger vehicles.

As directed by AB 1493, the technologies assessed need to “achieve the maximum

feasible and cost-effective reduction of greenhouse gas emissions from motor vehicles.”

This section provides a brief overview of the methodology used in the NESCCAF study

that serves as the basis of the ARB staff assessment of the potential GHG reductions

and the cost of various available and emerging vehicle technologies.
Initial Statement of Reasons

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45

In Section 5.2, the “Technology Assessment” section, we review NESCCAF’s 2002

baseline vehicle attributes, their contribution to atmospheric climate change emissions,

and evaluate technologies that have the potential to decrease these emissions. The

technologies being explored are currently available on vehicles in various forms or have

been demonstrated by auto companies and/or vehicle component suppliers in at least

prototype form. Brief generalized descriptions of the technologies and their level of

current and potential commercial deployment are provided. Results for climate change

emission reductions from more detailed analyses, with specific engine and drivetrain

technologies applied to specific vehicles, are presented and summarized. Mobile airconditioning systems are investigated to determine potential climate change emission

reductions from improved efficiency air-conditioning compressors, reduced refrigerant

leakage systems, and the use of alternative refrigerants. An assessment of technology

options to reduce climate change emissions with the use of alternative fuel vehicles is

provided, including analysis of both exhaust and fuel-cycle-related (i.e. “upstream”)

emissions. Lastly, potential climate change reductions from improved exhaust catalyst

technologies are considered.

Many different data sources were used for this analysis. U.S. Environmental Protection

Agency data (EPA, 2003) was used to estimate baseline vehicle characteristics, and

vehicle systems modeling simulations were used to analyze the potential benefits of

various technologies. As indicated before, staff has relied extensively on the NESCCAF

2004 study “Reducing Greenhouse Gas Emissions from Light-Duty Motor Vehicles” for

our analysis. It was tailored specifically for the task of formulating a cost-effective

vehicular GHG regulation, and offers the most definitive, contemporary, and relevant

research results to date.

The NESCCAF assessment of the costs and benefits of potential climate change

reduction technologies relies on vehicle computer modeling simulations in order to

reduce the potential error involved with overcounting the potential benefits of clusters of

technologies used simultaneously on vehicles. This study also projected 2009 baseline

vehicle performance using current trend lines and results of interviews with

manufacturers and suppliers concerning production plans relative to performance and

weight (the latter being constrained by pending implementation of a Corporate Average

Fuel Economy (CAFE) increase for light-duty trucks and influenced upward due to

pending side impact safety requirements), and the subsequent modeling maintained

those outcomes. The vehicle simulation data used in this assessment rely on a

validated model used by the auto industry that includes systems level analyses of the

subsystems of the vehicle, including the various types of fuel intake systems, engines,

drivetrain configurations, electrical systems, and overall vehicle drag and resistance

parameters.

Section 5.3, “Incremental Cost of Technologies,” examines the incremental cost of the

climate change reduction technologies of Section 5.2. The analysis includes a

collection of cost data for the technology packages modeled by NESCCAF. Our cost

estimates associated with the technologies of the previous section again rely to a large

extent on the portion of the NESCCAF study conducted by Martec, which specifically

analyzes the costs associated with the vehicle technology packages that were
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46

examined in the vehicle simulation modeling. Determination of the costs of these

technologies involved a detailed investigation of all of the components involved in

implementing them in baseline vehicles, with inclusion of the effects of the new

technologies on other vehicle systems. The level of detail in the cost analysis again

raises the bar relative to any other cost study that we have seen to date. However,

there are some aspects of the cost analysis that ARB staff believes need to be modified

to meet our long-term cost projection guidelines. Specifically, ARB staff applied

additional cost reduction factors for some emerging technologies that account for

additional innovation and higher volume learning than was assumed by Martec. In

some cases, cost estimates from various other sources were also included in our

assessment. California-specific vehicle use data, such as average annual vehicle use

and vehicle lifetime, were obtained from the California Department of Motor Vehicles

and the ARB’s EMFAC emission model.

Section 5.4, “Lifetime Cost of Technologies to Vehicle Owner-Operator,” includes a net

present value analysis of climate change emission reduction technologies. This

assessment is under the direction of AB 1493 to demonstrate climate change reduction

technologies that are “Economical to an owner or operator of a vehicle, taking into

account the full life-cycle costs of a vehicle.” Here we apply the initial incremental retail

price of the technologies, average vehicle use data, and the resulting lifetime cost

benefits to the consumer from the technologies to determine whether technology

packages are economical over the life of the vehicle.

5.2 Technology Assessment

NESCCAF established baseline vehicle characteristics and assessed technologies with

potential to reduce GHG emissions for CO2, N2O, CH4, and HFCs. This was done for

five current representative vehicles. These five base vehicles were established in order

to compare the differences of various GHG reduction technologies on various vehicle

platforms (e.g. cars, minivans, trucks) with differing characteristics (e.g., maximum

power, acceleration).

U.S. Environmental Protection Agency data (from EPA, 2003) was used to establish five

representative current vehicles using data from 2002 model year light-duty vehicles.

Representative vehicles were chosen to correspond to each of five passenger vehicle

classes – small cars, large cars, minivans, small trucks, and large trucks. Separating

the fleet into these five subdivisions was done to group vehicles that have similar

attributes (e.g. weight, size), have comparable performance (e.g., acceleration), have

similar technologies (e.g., transmission types, valvetrain designs), and that are

functionally similar. This approach makes the modeling exercise affordable by limiting

the number of modeling runs. The approach also acknowledges that some greenhouse

gas-reducing technologies may be more applicable to different vehicle classes than

others, and each vehicle modeling platform starts from a vehicle that is commercially

viable with compatible subsystems.

Table 5.2-1 shows each of the five representative vehicles that was chosen to represent

its vehicle class in terms of the following attributes: engine type, number of cylinders,
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47

transmission type, maximum power, engine displacement, curb weight, number of

transmission speeds, driveline type, and cam type. The table also includes average

vehicle class performance characteristics from the EPA (2003) data, including power

and acceleration characteristics. Instead of making idealized composite vehicles that

had the average or most common sales-weighted vehicle attributes, five actual 2002

model year vehicles were chosen based on closeness of fit to their class average

attributes, average performance parameters, and dominant technologies. By choosing

existing vehicles, not all characteristics are the exact average of their class. Instead, all

the characteristics closely match the class averages, and the vehicles have the

advantage of being based on actual existing vehicle platforms.

Table 5.2-1: Representative 2002 Vehicles (NESCCAF, 2004)

Vehicle class

Small car Large car Minivan Small truck Large truck

EPA-defined vehicle types

included

Subcompact and

compact

sedans

Mid-size

and large

sedans

Minivans

Small sport

utility vehicles

and small

pick-ups

Standard pickups and large

sport utility

vehicles

Curb weight (lbs) 2762 3380 3980 3714 4826

GVWR (lbs) 4867 7167

Engine displacement

(liters) 2.27 3.18 3.42 3.41 5.01

Engine Type L4 V6 V6 V6 V8

Charge Type NA NA NA NA NA

Cam Type DOHC DOHC OHV DOHC OHV

Driveline FWD FWD FWD 4WD 4WD

Transmission Type Automatic Automatic Automatic Automatic Automatic

Number of

Transmission Speeds 4 4 4 4 4

Class

average

vehicle

attributes

Rated power (hp) 148 194 199 195 257

Peak Torque (lb-ft) 152 208 222 218 311

Power/weight ratio

(HP/lb) Performance 0.0530 0.0569 0.0498 0.0524 0.0537

characteristics

Torque/weight ratio

(lb-ft/lb) 0.0545 0.0610 0.0558 0.0586 0.0649

Representative vehicles for

vehicle class

Chevrolet

Cavalier

2.2 L

I-4

Ford

Taurus

3.0 L

V-6

Daimler Chrysler

Town & Country

3.3 L

V-6

Toyota

Tacoma

3.4 L

V-6

GMC Sierra

5.3 L

V-8

Baseline exhaust CO2 emissions for each of five vehicle classes were based on a

combined EPA driving cycle. The EPA combined cycle includes a driving schedule of

specific speeds over time to simulate city driving, called the Federal Test Procedure

(FTP, also known as the Urban Dynamometer Driving Schedule (UDDS)), and another

cycle to simulate highway driving (HWY). Because the resulting emissions from the

FTP and HWY cycles are used to determine California vehicle emission certification
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48

compliance, using a weighted combination of the CO2 emissions results from both

cycles was deemed appropriate for this assessment.

The GHG emissions of interest in this report impact the atmospheric radiation budget

differently due to their distinct chemical and physical properties. For the purpose of this

report, they are expressed in terms of their CO2 equivalent global warming potential

(GWP). Table 5.2-2 lists the GWP value for these gases. The emission rate of 0.005

grams of CH4 per mile for 2009 baseline vehicles is derived using EMFAC. The

emission rate of 0.006 grams of N2O per mile driven was derived from the ratio of N2O

to oxides of nitrogen derived from emission test data generated at ARB’s vehicle test

facility.

Table 5.2-2: Global Warming Potential

Greenhouse Gas

Compound Global Warming Potential

Carbon Dioxide 1

Methane 23

Nitrous Oxide 296

HFC 134a 1300

HFC152a 120

Source: IPCC, Third Assessment Report, 2003

Mobile air conditioning has an environmental impact because of both “direct” refrigerant

releases and “indirect” exhaust CO2 emissions. Direct emissions include refrigerant

releases from vehicles through air conditioning system leakage (a slow process,

sometimes called “regular emissions”), during accidents or other events that suddenly

breach containment of the system refrigerant (sometimes called “irregular emissions”),

during service events, and when vehicles are dismantled without recovery of the

refrigerant. The refrigerant currently used in vehicle air conditioning systems is 1,1,1,2-

tetrafluoroethane, which is a hydrofluorocarbon commonly referred to as HFC-134a.

The NESCCAF study also included modeling runs to estimate the total amount of

“indirect” CO2 exhaust emissions that is associated with the use of the air conditioning

system. Both the “indirect” CO2 emissions and the CO2-equivalent “direct” HFC

emissions are summarized in Table 5.2-11 and Table 5.2-12.

In the following subsections (5.2.A) through (5.2.E), technologies with potential to

achieve net reductions in total baseline vehicle GHG emission levels are investigated.

The technologies involved are briefly described and the potential emission reduction

benefits are quantified. The assessment of technology options to reduce these

emissions is split into the five generalized technology areas:

5.2.A Engine, Drivetrain, and Other Vehicle Modifications – valvetrain,

transmission, vehicle accessory, hybrid-electric, and overall vehicle

modifications designed to reduce engine exhaust CO2 emissions from

conventional vehicles
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49

5.2.B Mobile Air-Conditioning System– air conditioning unit modifications to

reduce vehicle CO2 emissions and refrigerant modifications to reduce

emissions of HFC refrigerants, such as HFC-134a

5.2.C Alternative Fuel Vehicles – the use of vehicles that use fuels other than

gasoline and diesel to reduce the sum of exhaust emissions and “upstream”

fuel-delivery emissions of climate change gases

5.2.D Exhaust Catalyst Improvement – exhaust aftertreatment alternatives to

reduce tailpipe emissions of CH4 and N2O

5.2.A Engine, Drivetrain, and Other Vehicle Modifications

This section includes research into the potential to reduce tailpipe carbon dioxide

emissions with the introduction of various available or emerging valvetrain, engine,

transmission, vehicle accessory and body improvement technologies on conventional

gasoline and diesel vehicles by model year 2009. The assessment relies primarily on

the NESCCAF (2004) analysis, which establishes baseline 2009 vehicle characteristics

and evaluates the potential CO2 reductions from individual technologies and packages

of multiple technologies. Many of these technologies could also be applied to

alternative fuel vehicles, which would further increase their GHG benefits.

5.2.A.1 Carbon Dioxide Reduction Technologies

This subsection provides brief, generalized descriptions of the carbon dioxide reduction

technologies and their levels of commercial deployment. The technologies being

explored for carbon dioxide emission reductions are currently available on vehicles in

various forms or have been demonstrated by auto companies or vehicle component

suppliers in prototype form, so as to conform to the 2009 – 2015 timeframe of the

assessment. Although general estimates for potential CO2 reductions can be found in

the technical literature, they are not reported here because improved and more detailed

estimates are obtained from the vehicle simulation modeling results below for one or

more of these technologies on specific vehicles. These technologies are contained

either in or around the engine itself, pertain to the transfer of motive force between the

engine and the wheels through the drivetrain, or involve overall vehicle changes. Those

technologies contained in the engine include modifications to the functioning of the

intake and exhaust valves, the charge type, or the injection and preparation of the fuel

or fuel-air mix into the cylinders. Drivetrain technologies that could reduce GHGs

include modifications to the transmission and various degrees of hybridization. This

section offers a brief description of these technology options. Abbreviations for each of

the technologies within each description in this section are used to refer to the

technologies in shorthand in later sections of this report.

Factors that affect CO2 emissions from an engine include friction of internal components

and the presence of a throttle that restricts airflow into the engine, thereby resulting in

pumping losses. The remainder of the driveline also contributes to higher CO2

emissions due to frictional and hydraulic losses in the transmission and differential or

transaxle. Further, CO2 emissions are increased due to the work performed by the
Initial Statement of Reasons

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50

engine to run accessories needed to maintain the electrical system, operate the power

steering and air conditioning compressor, or from operation of other devices. CO2

emissions are further increased when the engine has to work to overcome inertial forces

due to vehicle weight during acceleration or hill climbing, to overcome wind resistance,

or to overcome tire rolling resistance. Shutting off the engine when possible during

idling reduces CO2 emissions and using a regenerative braking system for capturing

otherwise lost energy to assist in relaunching a vehicle from a stop also minimizes CO2

emissions production.

Engine Valvetrain Modification

Valve timing and lift have historically been fixed for most manufacturers regardless of

vehicle load demand. Variable valve timing, also known as “cam phasing,” and variable

valve lift can improve engine carbon dioxide emissions by more optimally managing

precisely when the valves open and close and exactly how much they open and close.

Cam phasing can be varied either by linking the intake and exhaust cams together and

rotating them with one phaser (CCP) or independently using dual cam phasers (DCP)

for varying engine operation conditions. Valve lift technologies can be introduced to

make continuous variations in lift (CVVL) or make discrete valve height lift increments

(DVVL). These technologies can also be introduced either singly or in combination,

providing reduced engine pumping losses, improved power output that permits engine

downsizing, and substantial CO2 reductions.

Increased control of intake and exhaust valves also provides for selective cylinder

deactivation (DeAct) by closing both sets of valves. The selective deactivation of

cylinders allows each of the other still-active cylinders to operate in more optimal

regions of higher loads (higher torque and/or engine speeds) and reduces pumping

losses. The technology has been found to be better suited for vehicles with relatively

high engine displacement to weight ratios and engines with at least six cylinders.

More advanced and offering even greater improvements are camless valve actuation

(CVA) systems that replace a belt, chain- or gear-driven camshaft system with variable

electrohydraulic or electromagnetic actuation of the valves. Electrohydraulic actuation

systems provide greater potential to reduce CO2 emissions than electromagnetic

systems since less power is required for system operation throughout the engine speed

range. As shown in Figure 5-1, electrohydraulic camless valve systems are relatively

simple in their design and operation. Electromagnetic systems continue to have issues

with valve closing force and attendant noise, but progress is being made according to

some. Also, electrohydraulic systems can incorporate variable valve lift more readily.

However, there are proponents for both systems who strongly believe they will be in

volume production in the 2012 timeframe. Camless valve actuation is the ultimate goal

of engine designers to achieve optimum valve position and lift for maximum engine

performance and lowest CO2 emissions over the full range of engine operation.

Engines with CVA systems do not need a throttle and can deactivate cylinders at

anytime as opportunity exists. Staff is aware of significant development activity taking

place in Europe and Japan. Manufacturers that develop this technology such that they

are first to market will have a strong competitive advantage. It also represents a more

logical next step for manufacturers of overhead valve engines than going to overhead
Initial Statement of Reasons

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51

cam designs that might be short-lived should camless valve actuation come to fruition

as early as the 2010 timeframe as is now predicted.

Variable valve timing and lift

(Honda V-tec system) Electrohydraulic valve actuation

(Sturman DHOS Valve Technology)

Figure 5-1: Two Variable Valve Systems

Charge Modification

In conventional gasoline-fueled passenger vehicles, air-fuel mixture (i.e. “charge”)

enters the cylinders near ambient pressure. Increasing, or “boosting”, the pressure of

the air-fuel mix in the cylinder results in a higher specific power output from the engine.

Therefore, the use of a supercharging or turbocharging compressor to increase the

charge entering the cylinders improves engine power output and offers the opportunity

to downsize the engine without compromising vehicle performance, thereby allowing

operation of the engine in more optimal, low-CO2 regions. A supercharger (Super)

offers this advantage by using mechanical power directly off the main engine. A

turbocharger system (Turbo) utilizes the otherwise lost thermal energy of the exhaust to

operate a turbine, which then drives a compressor. Both of these systems are shown

schematically in Figure 5-2. Superchargers were not modeled in the NESCCAF study

since they do not offer the level of CO2 benefits achieved from turbochargers and are

generally more costly. Current state of the art turbochargers incorporate a variable

geometry feature that provides quicker boost at all speeds to maintain performance

from downsized engines, especially at lower speeds where “turbo lag” can otherwise

result in sluggish performance.
Initial Statement of Reasons

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Mechanical power supercharging

(BorgWarner Turbo Systems)

Exhaust gas turbocharging

(BorgWarner Turbo Systems)

Figure 5-2: Schematics for Supercharged and Turbocharged Engines

Variable Compression Ratio

Engine compression ratio is a key determining factor for optimal engine operation and

lower CO2 emissions. Current gasoline engines generally use a compression ratio of

about ten-to-one and are limited from using higher ratios by pre-ignition or “knocking” at

high loads. Because knocking generally increases with engine load, overall CO2

emissions can be improved with the use of higher compression ratios at lower loads and

lower compression ratios under higher loads with the use of variable compression ratio

(VCR) technology that can vary cylinder geometry. This technology, however, is

relatively expensive to implement given its current state of development and greater

CO2 reductions can be obtained from other approaches at less cost. Therefore, the

NESCCAF study did not include modeling of this technology.

Gasoline Direct Injection

Carbon dioxide reductions can be achieved through modifications of the fuel injection

system of gasoline vehicles to directly inject the fuel into the cylinder (conventional

engines inject fuel into the intake manifold ahead of the intake valve, wherein fuel

evaporates and is inducted into the cylinder with the incoming air). This can be done

under stoichiometric (i.e., using only enough air to burn the fuel) or “lean burn” (i.e.,

excess air) conditions. Due to thermodynamic improvements, lean burn GDI (GDI-L)

systems can offer substantial CO2 reductions, but with some complications involved in

controlling oxides of nitrogen (NOx) emissions. Advances in lean burn aftertreatment

devices similar to those being developed for diesel engines may offer a solution.

Stoichiometric GDI (GDI-S) systems offer smaller CO2 reductions than GDI-L

technology, but without NOx aftertreatment concerns.

Homogeneous Charge Compression Ignition

Through precise control of the temperature and pressure in the combustion chamber,

spontaneous and homogeneous ignition of the air fuel mixture can occur. Since

combustion occurs simultaneously throughout the combustion chamber without forming

a flame front and at lower temperatures than conventional spark ignited engines,
Initial Statement of Reasons

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53

engine-out particulate matter (PM) and NOx emissions are very low. Homogeneous

charge compression ignition (HCCI) can offer substantial CO2 emission reductions and

can be applied to engines using a variety of fuels, including gasoline and diesel. While

significant effort is being directed to its development, some technical challenges remain

before it becomes commercially applicable. At present, HCCI operation is possible only

in a portion of the engine operating range. Therefore gasoline engines with this

capability are based on a direct injection engine wherein its spark ignition capability is

retained for the non-HCCI operating modes that will continue to require a spark to ignite

the mixture.

Diesel Fuel

High speed direct injection (HSDI) diesel vehicles have improved with the advancement

of several technologies. Diesel compression-ignition engines, with higher compression

ratios, turbocharging, and lean air-fuel ratios provide significant CO2 reductions

compared with conventional gasoline engines. Advancements in small diesel engines

running at high speeds (over 4000 rpm compared to heavy-duty diesel engines at about

2000 rpm) in the areas of fuel injection, emissions, noise, and vibration have addressed

many of the more objectionable aspects of these vehicles, making them more

acceptable to the public. Diesel vehicles are popular in Europe but face a substantial

challenge meeting more stringent emission standards in the U.S. Advanced multi-mode

diesel engines combine homogeneous charge compression ignition operation at lower

engine speeds and loads to minimize particulate matter (PM), NOx and CO2 emissions

compared to conventional diesels and revert to conventional diesel engine operation at

higher speeds and loads to ensure expected power levels. Maximum use of

homogeneous charge combustion operation reduces CO2 emissions and lessens the

burden of aftertreatment of NOx and PM emissions. Some manufacturers have

recently expressed considerable optimism regarding successful development of

advanced multi-mode engines that operate over a wide range of engine speeds and

loads. Accordingly, there is increased optimism that such diesel engines will be able to

meet very low NOx and PM emission levels with a minimum of aftertreatment.

Figure 5-3: Electric Water Pump (Pierburg)

Engine Accessory Improvement

Improvements to various electrical components on vehicles can provide significant

improvements in CO2 emissions. Electrification (eACC) of engine accessory
Initial Statement of Reasons

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54

subsystems, such as coolant pumps and other accessories, can reduce the overall

losses associated with powering them mechanically. Electrifying the power steering for

most cars or utilizing an electro-hydraulic power steering system for larger cars and

trucks is also being considered for its contribution to total vehicle CO2 emissions.

Improvements in the vehicle alternator (ImpAlt) that would power these accessories can

also provide benefits. Regarding electric coolant pumps, staff included these when 42

volt electrical systems were available on the base vehicles, but we have since learned

of these being applied on vehicles with conventional 12 volt systems. With further

changes to the engine to make the best use of electric coolant pumps, CO2 reductions

are also being claimed that are greater than were assumed in our modeling runs.

42 Volt Systems

Upgrading of vehicle electrical systems to 42 volts (42V), a step many manufacturers

are currently contemplating, is an enabling technology for more diverse electrical

opportunities. The 42-volt electrical system can accommodate more powerful electrical

accessories on-board the vehicle and an integrated starter generator. An integrated

starter-generator 42-volt vehicle system (ISG 42v) recoups energy while decelerating

through regenerative braking and provides instantaneous engine restart to avoid engine

idling; some variants can provide power assist in vehicle acceleration. The trend we are

seeing is for manufacturers to only provide 42 volt capability where needed on the

vehicle rather than converting the entire vehicle to 42 volts. This results in a more

economical package overall that still delivers the desired CO2 reductions.

Transmissions

Automatic transmissions on today’s vehicles generally have 4 gear ratios, or speeds.

Increasing the number of gears to 5- or 6-speeds, as has already been done in

numerous vehicle models, allows the engine to operate in more optimum

ranges for lowest CO2 emissions during the drive cycle. Each increase in number of

speeds corresponds approximately to a two percent reduction in CO2 emissions. More

advanced transmissions may offer more substantial improvements. The automated

manual transmission (AMT) acts like a conventional automatic transmission in that

shifting is performed automatically, but no torque converter used. AMTs with a dual wet

clutch system provide shift quality that equals or exceeds the smoothness of current

automatic transmissions. Although our cost assessment indicates these transmissions

will cost no more than current 6 speed automatic transmissions, we have heard some

speculate they will actually cost significantly less when in full volume production. In the

August 2004 issue of MOTOR TREND, an evaluator of an Audi TT equipped with this

so-called “direct shift gearbox – 6” concluded “If there is a more stunning piece of

technology than the TT’s transmission, I don’t know about it.” While this transmission

is currently being used in the Audi TT in the U.S., they are being used in Europe in

several models. Just as increasing the number of gears from 4 to 5 speeds or more

allows the engine to operate closer to its ideal operating point at any given time, the

continuously variable transmission (CVT) provides engines a greater ability to operate

at precisely the optimal speed for a given load. The CVT effectively acts as a

transmission with an infinite number of gears, using either a belt or chain on a system of

two pulleys (see Figure 5-4). At this time, however, manufacturers seem to be obtaining

most of the CO2 emission reductions of a CVT by using a 6-speed automatic
Initial Statement of Reasons

August 6, 2004

55

transmission at significantly less cost. Therefore, few of the modeling runs incorporated

CVTs. Because of the superior performance of the AMT coupled with is low CO2

emission performance, this transmission was chosen for most of our modeling

scenarios. Because it will likely cost less than current 6 seed automatics, we believe it

will therefore dominate in the future.

Honda CVT Schematic for CVT developed by General Motors

and Southwest Research Institute

Figure 5-4: Continuously Variable Transmissions

Hybridization

Hybridization, or use of both combustion engines and electric motors for propulsion, is

being actively explored by all major auto manufacturers. Hybridization of current and

planned vehicles varies widely from “mild” hybrids, which tend to be more similar to

conventional gasoline passenger vehicles to fully-integrated “advanced” hybrids that

use and store more electric energy on-board. Differentiating the mild system from more

advanced hybrids is the increased extent to which electrical power is stored on the

vehicle and used during driving. In a fully integrated hybrid (e.g., Toyota Prius), the

electric motor approaches the same size as the on-board combustion engine and

therefore can be used exclusively to power the vehicle during low-load, low speed

conditions. In the moderate “motor-assist” hybrid configuration, such as the Honda

Civic Hybrid, the maximum power output of the engine is substantially greater than that

of the electric motor. The electric motor then is generally used for times of higher load

demands, such as acceleration or hill climbing, providing for engine downsizing and

optimization for low load conditions such as cruising. Mild hybrids generally offer only

idle off capability. Compared with similar performing conventional vehicles, moderate to

aggressive hybrids can achieve improvements of over thirty percent in CO2 emissions.

Along with the commercially available Toyota and Honda hybrid vehicles, every major

automaker has plans to produce hybrid vehicles in the next few years. EPA is

investigating the potential of hydraulic hybrids and has published an interim report on

their progress.
Initial Statement of Reasons

August 6, 2004

56

At this time, staff is projecting that high volume production of advanced hybrids will not

be accomplished before the 2017 timeframe. The complexity of these vehicles and the

significant increase in resources to engineer and fully develop them will require a more

gradual roll out than for more conventional technologies. Further, there is considerable

debate about the eventual cost increase that these vehicles will require when in volume

production. Some manufacturers are skeptical that hybrids will achieve volume

production costs that make for a sound business case, and instead are betting that

diesels will eventually be a better solution for reduced climate change emissions.

Rather than attempt to sort out the costs of future hybrid vehicles at this time, staff

continues to rely on the NESCCAF estimates after applying a 30% reduction to the

incremental costs for hybrids cited by Martec, to account for expected improvements in

technology and processes to produce them in the future. A more detailed evaluation of

hybrid vehicles and their costs will take place in a few years as part of the review of ZEV

and near-ZEV technologies to be undertaken by the Independent Expert Technology

Panel .

Engine Friction Reduction

Due to the large number of internal parts in today’s engines coupled with numerous

accessory drives, improvements in the design of engine components and subsystems

can continue to drive friction reductions, resulting in improved engine operation and

reduced climate change emissions. Friction reductions in and around the engine can

result from such measures as engine component weight reduction, use of different

materials, more optimal thermal management, and improved computer-aided

understanding of component dynamics under various engine load and vibration

conditions. Further friction reductions result from the use of advanced multi-viscosity

engine and transmission oils.

Aerodynamic Drag and Rolling Resistance Reduction

Improvements in the overall force required to propel a vehicle reduces engine load

thereby leading to a reduction in vehicle exhaust CO2 emissions. Two ways to reduce

the engine load for a given vehicle are to reduce the opposing resistance or frictional

forces that act against the motion of the vehicle. Two prominent resistance forces are

aerodynamic drag and rolling resistance at the tires. The most obvious areas for

potential aerodynamic drag improvements are reducing the frontal area of the vehicle or

improving the shape of the body, with skirts, air dams, underbody covers, and other

features that have less aerodynamic friction. The rolling resistance force due to friction

between the tires and the road can be improved via shoulder design improvements or

with design and material modifications to the tire tread pattern, tire belts, or the traction

surface.

Aggressive Shift Logic

Shifting schedules, or the engine speed at which automatic transmissions switch from

one gear ratio to another, can have a substantial impact on CO2 emissions. Using a

more aggressive shift logic allows more flexible shifting of gears and thus allows for

operation of the engine at more optimal low CO2 emission regions of the engine maps.

Generally, aggressive shift logic entails moving transmission upshift points to lower
Initial Statement of Reasons

August 6, 2004

57

speeds and reducing the amount of downshifting. Driveability and acceleration

concerns must be accounted for carefully in these alterations of shifting schedules.

Early Torque Converter Lock-up

Conventional automatic transmissions employ a torque converter between the engine

and transmission. This is a fluid coupling with hydraulic torque multiplication capability

that helps provide a brisk “launch feel” to vehicles so-equipped. They also dampen

engine vibrations in the driveline and allow engines to remain at idle speeds with the

transmission engaged in a forward or reverse gear. Unfortunately, the torque

multiplication at launch and the other features result in higher CO2 emissions compared

to a manual transmission. In order to reduce slip, virtually all of today’s automatic

transmissions offer some degree of lock-up capability during some light accelerations

and during cruise conditions (this means the torque converter no longer slips needlessly

and provides direct or near-direct mechanical transmission of power to the drive wheels

much like a manual transmission). The conditions under which lock-up operation

occurs can be improved by doing so earlier than at present, especially when the number

of transmission speeds increases, thereby reducing CO2 emissions. As with early shift

speeds, however, care must be exercised to ensure smooth, responsive driveability and

low noise, vibration, and harshness. AVL was conservative in its modeling of these

features to ensure good driveability and minimum vibration.

Weight Reduction

Although ARB staff efforts do not rely on weight reductions in setting its proposed

climate change emission standards, manufacturers would still have the option of

lowering weight to improve CO2 emission performance. Lower weight results in lower

CO2 emissions by lowering the forces needed to accelerate the vehicle and climb

grades. Lower weight can be achieved by substitution of lighter materials, better

packaging, and shifting to a smaller platform. Besides the use of high strength low alloy

steels, some manufacturers are relying on more use of aluminum and magnesium

alloys and plastics to achieve greater weight savings, although at somewhat higher cost

than steel.

5.2.A.2 Summary of Vehicle Simulation Modeling Results

As was alluded to above, a detailed vehicle simulation model was used in the

NESCCAF study to estimate CO2 emission reductions from applying various

combinations of technologies to the baseline vehicles. The year 2002 is held as a base

year for the calculations because it is the year the modeling platforms were built upon

and is the most recent year for which extensive knowledge of the vehicle fleet was

available. Because the pending regulation would be applicable for model year 2009

and later vehicles, potential reductions for 2009 vehicles are also provided in the

summary.

The modeling presented here (and in the NESCCAF report) utilizes the vehicle

simulation model developed by AVL Powertrain Engineering, Inc. called CRUISE. The

modeling software is designed for the advanced study of various vehicle platforms to

provide estimates of vehicle performance, emissions, and fuel usage. The modular
Initial Statement of Reasons

August 6, 2004

58

systems-based nature of the CRUISE software allows for investigation of sophisticated

and detailed analyses of each vehicle component, from the fuel intake system and

engine through the drivetrain to the tires. An advantage of systems modeling such as

this is to allow a wide diversity of combinations of technologies to be modeled together

and examine how they interact when simulating a vehicle operating on various driving

cycles.

The AVL CRUISE model was first used to create the five 2002 representative vehicle

simulation models with representative attributes and to validate these models with the

known actual vehicle performance characteristics. In addition to modeling the 2002

representative vehicles, separate 2009 baseline vehicles were characterized through

analysis of vehicle trends and market research in order to quantify costs and benefits of

vehicle technologies. The NESCCAF study uses EPA data on vehicle trends to

characterize vehicle class characteristics and market research by Martec to forecast

vehicle technology platforms that will dominate the base case, or “business-as-usual,”

(i.e. absence of new climate change regulations) 2009 model year vehicles. With the

use of historical trends from the EPA (EPA 2003b) dataset, the baseline vehicle

characteristics of acceleration and weight were examined. The 0-60 miles-per-hour

acceleration changes for the five vehicle classes were projected to increase by seven to

sixteen percent for the 2009 model year. Averaged vehicle inertia weights were

projected to hold constant for all the classes except small cars based on an evaluation

of historical trends and consideration of input from manufacturers relative to their

product plans (which take into account implementation of federal CAFE regulations for

light duty trucks and pending safety requirements).

The NESCCAF study highlights several key technology changes for their “business-asusual” scenario for the 2009 model year. The Martec market research projected the

technologies that are likely to enter the vehicle fleet to deliver the power and

acceleration requirements for 2009 for each of the five vehicle classes. The primary

difference from the 2002 fleet is the widespread introduction of emerging engine

valvetrain and transmission technologies. Introducing cam phasing technology to alter

the timing of intake and/or exhaust valves during engine operation is forecast to

dominate in each vehicle class, and all classes but the large truck are expected to have

some form of variable valve lift technology. Each vehicle class is expected to increase

the number of transmission gears from four to either five (for small cars and minivans)

or six (large cars, small trucks, and large trucks). All vehicles were then modeled on a

combined EPA driving cycle. Using a 55/45 percent weighted combination of emissions

from the FTP and HWY cycles was deemed appropriate for the assessment because

emissions from these cycles are used to determine California vehicle emission

certification.

The technologies for reducing CO2 emissions were modeled both individually and in

various technology packages by AVL. A summary of the modeling results for individual

technologies from the NESCCAF study is shown in Table 5.2-3. In the table, the

baseline 2002 CO2 emission rates, in grams per mile, for each vehicle class are shown,

and the results from the other modeling runs are shown as percentage reductions from

these baseline values. Modeling of single technologies often was accomplished
Initial Statement of Reasons

August 6, 2004

59

through partial CRUISE modeling or use of other abbreviated simulation techniques to

save cost in the study. This seems reasonable since this step was only intended to

provide an estimate of the benefits in order to provide a basis for selecting the

technology combinations for full CRUISE modeling.

Table 5.2-3: Potential Carbon Dioxide Emissions Reductions from Individual

Technologies (from NESCCAF, 2004)

Vehicle Class

Small

car

Large car Minivan Small

truck

Large

truck

Baseline 2002 CO2 emissions (g/mi) 291.4 344.6 395.4 444.7 511.6

Technologies Percent reduction from 2002 baseline

Near Term Technologies 2009-2012

Intake Cam Phasing -2% -1% -1% -1% -2%

Exhaust Cam Phasing -2% -3% -2% -2% -3%

Dual Cam Phasing (DCP) -3% -4% -2% -3% -4%

Coupled Cam Phasing (CCP) -3% -4% -2% -2% -4%

Discrete Variable Valve Lift (DVVL) -4% -4% -3% -4% -4%

Continuous Variable Valve Lift (CVVL) -5% -6% -4% -5% -5%

2Turbocharging (Turbo) -6% -8% -6% -6%

3Electrically Assisted Turbocharging (EAT) -6% -8% -6% -6%

2Cylinder Deactivation (DeAct) -3% -6% -5% -6% -4%

1Variable Charge Motion (CBR) -3% -4% -2% -3% -4%

5Variable Compression Ratio -7% -7% -7% -7% -7%

5Gasoline Direct Injection - Stochiometric (GDI-S) 0% -1% 1% 1% 0%

2

4-Speed Automatic Transmission 0% 0% 0% 0% 0%

2

5-Speed Automatic -2% -1% -1% -1% -1%

2

6-Speed Automatic -3% -3% -3% -3% -2%

6

6-Speed Automated Manual -8% -7% -8% -8% -5%

2Continuously Variable Transmission (CVT) -4% -3% -4%

2Electric Power Steering (EPS) -1% -1%

3Electro-Hydraulic Power Steering (E-HPS) -1% -1%

2

Improved Alternator (Higher efficiency) -1% 0%

2Electric Accessories -3% -2%

3Aggressive Transmission Shift-Logic -1.5% -1.5% -1.5% -1.5% -1.5%

3Early Torque Converter Lock-up -0.5% -0.5% -0.5% -0.5% -0.5%

2Variable Displacement AC Compressor -10% -9% -7% -9%

2Aerodynamic Drag Coefficient (% CO2 / % Cd) 0.165 0.192

2

Improved Tire Rolling Resistance (% CO2 / % TRR) 0.180 0.204

Mid Term 2013-2015

1Electromagnetic Camless Valve Actuation (emCVA) -11% -11% -11% -11% -11%

2Electrohydraulic Camless Valve Actuation (ehCVA) -11% -16% -11% -13% -12%

5Gasoline Direct Injection - Lean-Burn Stratified (GDI-L) -6% -9% -4% -5% -8%

5Gasoline Homogeneous Compression Ignition (gHCCI) -4% -6% -3% -4% -5%

2Electric Water Pump (EWP) 0% 0%

2

42-Volt 10 kW ISG (Start Stop) -7% -4% -4% -4% -5%

2

42-Volt 10 kW ISG (Motor Assist) -10% -6% -6% -6% -5%

2Diesel – HSDI -20% -22% -24% -27% -23%

Long Term 2015-

6Moderate Hybrid-Electric Vehicle (HEV) 29% 29% 29% 29% 29%

6Advanced Hybrid-Electric Vehicle (HEV) 54% 54% 54% 54% 54%

2Diesel – Advanced Multi-Mode -13% -15% -18% -21% -17%

1 Based on Literature Search; 2 Based on Full AVL CRUISE Simulation; 3

 Based on Combined Literature/AVL CRUISE

Simulation; 4 Estimated Value; 5 Additional Reduction due to Downsizing is not Included; 6 HEV numbers based on internal

ARB analysis (not from NESCCAF, 2004), See Technical Support Document
Initial Statement of Reasons

August 6, 2004

60

This report relies on the NESCCAF analysis of hybrid electric vehicle costs and CO2

emission benefits since ARB staff has not performed a separate analysis at this time.

ARB is planning on reviewing this issue as part of the forthcoming ZEV and near-ZEV

technology assessment to be undertaken by the Independent Expert Review Panel.

Given the multitude of technologies available for reducing vehicle CO2 emissions, there

needs to be some engineering guidelines for choosing combinations that would be

economical to the consumer. Generally it is important to avoid combining technologies

that tend to address the same categories of losses or technologies that may not

complement each other from a driveability standpoint. For example, it would not be

advisable to combine cylinder deactivation capability with a lean burn gasoline direct

injection engine design since both technologies address reductions in pumping losses

within an engine. Also, when transitioning in and out of the deactivation mode,

operating in a lean burn mode at the same time could make the transitions more

noticeable to the driver since larger throttle changes would be needed to ensure

constant engine torque than if the vehicle were operating in a stoichiometric mode.

Some technologies are attractive to combine because their features enhance each

other. For example, combining cylinder deactivation with stoichiometric gasoline direct

injection makes sense since the transitions in and out of the deactivation mode tend to

introduce fuel control challenges due to the abrupt changes in operating modes that

occur. By using a direct injection concept where fuel is introduced directly into the

combustion chamber, control of transient fueling is much more precise. This is because

fuel preparation and wall wetting issues in the intake passages encountered with

conventional engines introduce fueling errors in transient engine operation. The more

precise control afforded by direct injection would therefore be an enabler for some

engines to meet the lowest emission categories in the Low-Emission Vehicle program

when utilizing cylinder deactivation or to reduce emission aftertreatment expense.

Some technologies are attractive because they provide elegant solutions to minimizing

CO2 emissions. One such technology is electrohydraulic camless valve actuation

combined with stoichiometric gasoline direct injection. This technology permits

operating the engine in modes that generate the lowest CO2 emissions at all times with

minimum complexity. It would allow operation without a throttle to minimize pumping

losses, could employ cylinder deactivation whenever it was useful, and would provide

the maximum flexibility necessary to achieve maximum performance from a given

engine displacement, thereby enabling smaller engine displacements. Again,

stoichiometric gasoline direct injection would further complement this technology

because it permits higher compression ratios due to the cooling effect of fuel

evaporation in the combustion chamber, thereby affording more optimal engine

operation from a low CO2 emission standpoint.

AVL provided a chart summarizing the most appropriate engine technologies for

achieving the most cost effective CO2 emission reductions (Figure 5-4). The chart is

read first across and then down (as illustrated by the arrow) to determine which

technologies are compatible. For example, turbocharging is considered compatible with

all technologies except GDI lean burn, since both technologies address the same
Initial Statement of Reasons

August 6, 2004

61

engine pumping losses. Therefore, it is unlikely that a manufacturer would combine

these two technologies. This figure was used by NESCCAF participants when they

constructed their technology combinations.

Feasible Technology Combinations

Cam Phaser - Single (Intake Cam)Cam Phaser - Single (Exhaust Cam)Cam Phaser - DualCam Phaser - CoupledVariable Valve Lift - DiscreteVariable Valve Lift - ContinuousCamless Valve Actuation - ElectrohydraulicTurbochargingElectrically Assisted Turbocharging (EAT)Cylinder DeactivationVariable Charge Motion (CBR)GDI StochiometricGDI Lean Burn StratifiedGasoline HCCIDiesel – HSDIDiesel – Advanced Multi-Mode

Cam Phaser - Single (Intake Cam)

Cam Phaser - Single (Exhaust Cam) NO

Cam Phaser - Dual NO NO

Cam Phaser - Coupled NO NO NO

Variable Valve Lift - Discrete YES YES YES YES

Variable Valve Lift - Continuous YES YES YES YES NO

Camless Valve Actuation - Electrohydraulic NO NO NO NO NO NO

Turbocharging YES YES YES YES YES YES YES

Electrically Assisted Turbocharging (EAT) YES YES YES YES YES YES YES NO

Cylinder Deactivation YES YES YES YES YES NO YES NO NO

Variable Charge Motion (CBR) YES YES YES YES YES YES YES NO NO YES

GDI Stochiometric YES YES YES YES YES YES YES YES YES YES YES

GDI Lean Burn Stratified YES YES YES YES NO NO NO NO NO NO NO NO

Gasoline HCCI YES YES YES NO YES NO YES NO NO NO NO NO NO

Diesel – HSDI NO NO NO NO NO NO YES YES YES NO NO NO NO NO

Diesel – Advanced Multi-Mode NO NO NO NO NO NO YES YES YES NO NO NO NO NO NO

Figure 5-5. Feasible Technology Combinations

Having selected a variety of engine technologies, further choices are available relative

to the rest of the driveline for enhancing low CO2 performance. Transmissions with

more gear ranges allow the engine to operate more of the time in a low CO2 mode, and

continuously variable transmissions provide an unlimited number of ratios for achieving

improvements. Use of a 6 speed automated manual transmission affords further

reductions in CO2 since it allows elimination of the torque converter utilized in a

conventional automatic transmission or continuously variable transmission. CO2

savings also result from use of integrated starter generators that permit shutoff of the

engine when the vehicle is not in motion. Further, more capable integrated starter

generators permit capture of braking energy that can be deployed during launch of the

vehicle to further minimize production of CO2.

Engine accessories can also be improved to reduce CO2 emissions through use of

variable displacement air conditioning compressors with external controls, electric

power steering, improved efficiency alternators and other approaches.
Initial Statement of Reasons

August 6, 2004

62

With these guidelines in mind, participants in the NESCCAF study assembled a wide

variety of combined technologies to evaluate through simulation modeling in order to

identify those that would provide the greatest CO2 reductions. ARB staff provided some

suggested technology combinations for full simulation modeling.

Table 5.2-4. Impacts and Costs of Additional CO2 Reduction Technologies

Transmission Type Technology

Automatic Automated Manual CVT

Impact 10% reduction in rolling resistance = 2% reduction in CO2

Improved Tires Cost $20 to $90 RPE

Engine Friction Reduction or Impact Reduced internal friction/lower viscosity oil, 0.5% CO2 reduction

Improved Lubricating Oil Cost $5 to $15 RPE

Impact 8-10% reduction in drag = 1.5-2% reduction in CO2 Aerodynamic Drag Reduction Cost $0 to $125 RPE

Impact 1.5% CO2 reduction 0.5% CO2 reduction Aggressive Shift Logic Cost $0 to $50 RPE $0 to $20 RPE None

Improved Torque Converter or Impact 0.5% CO2 reduction

Early Lockup Cost $0 to $10 RPE None

Total Potential (Excludes Impact 6% to 6.5% CO2 4.5% to 5% CO2 4% to 4.5% CO2

Weight Reduction) Cost $25 to $290 RPE $25 to $250 RPE $25 to $230 RPE

Average RPE per Percent CO2 $25 $29 $30

Impact 5% CO2 reduction 5% CO2 reduction 4% CO2 reduction Assumed Improvement Cost $125 RPE $145 RPE $120 RPE

Notes: from NESCCAF, 2004

Table 5.2-4 lists the CO2 improvements that can be achieved through various

technologies such as lower rolling resistance tires and aerodynamic drag reduction.

These improvements are included in the CO2 benefits listed in Table 5.2-5 through

Table 5.2-9 below containing the simulation modeling results for various combinations

of individual technologies using the 2002 vehicle platforms.

Guidelines contained in Table 5.2-3, as well as cost, served as the basis for the

selections in the following tables. The study participants also wanted to cover the full

spectrum of CO2 reductions that would be possible. We have partitioned the results into

three categories for near-, mid-, and long-term volume application.

Hybrid vehicles are available now in several models, and the current Zero Emission

Vehicle regulations will yield about 10 percent hybrids in the implementation timeframe

of this proposed regulation. Because these are not high volume requirements, hybrids

were grouped with the long-term strategies. Additional time is needed to sort out the

level of consumer acceptance, real world performance, suitability in various

applications, changes in maintenance costs, long term durability and other issues.

Further, hybrids are more resource intensive than conventional vehicles in terms of

engineering development and manufacturing investment, which also slows

implementation. Because hybrids are already being addressed in the Zero Emission

Vehicle regulations, changes in hybrid requirements will be more properly considered in

that context rather than this proposed regulation.
Initial Statement of Reasons

August 6, 2004

63

Diesels continue to improve rapidly in recent years in both performance and other

characteristics that should improve consumer acceptance. Diesel emission

aftertreatment technology, however, remains a challenge in terms of meeting Low

Emission Vehicle requirements over the full vehicle life. Given the current uncertainty in

consumer acceptance in the United States and low emission aftertreatment capability at

this time plus relatively high cost, staff has elected a conservative approach and

considers them a promising, but mid to long-term strategy.

In the following tables, CO2 emission reductions and package costs are shown relative

to both the 2002 and 2009 baselines that were established in the NESCCAF report.

When describing the results following each table, the text highlights the CO2 reductions

relative to the 2002 baseline because this is the reference most studies use. For

describing the costs, however, staff cites them relative to the 2009 baseline because

those would be the actual increment that the consumer would see when purchasing a

2009 and subsequent vehicle (i.e., NESCCAF predicted that even without regulations,

industry will be making improvements to vehicles that could reduce CO2 emissions by

2.6 percent to 9.0 percent and will increase their cost).

Table 5.2-5. Potential Carbon Dioxide Emissions Reductions from Small Car

 (NESCCAF, 2004)

Small Car Combined Technology Packages CO2

(g/mi)

Potential

CO2

reduction

from

2002

baseline

Retail Price

Equivalent

2002

Potential

CO2

reduction

from

2009

baseline

Retail Price

Equivalent

2009

DVVL,DCP,A5 (2009 baseline) 284 -2.6% $308 0% $0

DCP,CVT,EPS,ImpAlt 270 -7.6% $561 -5.1% $253

DCP,A4,EPS,ImpAlt 269 -7.6% $351 -5.2% $43

DCP,A5,EPS,ImpAlt 260 -10.7% $446 -8.3% $178

DCP,A6 260 -10.8% $346 -8.4% $38

DVVL,DCP,AMT,EPS,ImpAlt 233 -19.9% $457 -17.8% $149

Near Term

2009-2012

GDI-S,DCP,Turbo,AMT,EPS,

ImpAlt 215 -26.4% $1120 -24.4% $812

gHCCI,DVVL,ICP,AMT,EPS,ImpAlt 229 -21.6% $1767 -19.6% $1459

CVVL,DCP,AMT,ISG-SS,EPS,

ImpAlt

Mid Term 216 -25.7% $1379 -23.8% $1071

2013-2015

gHCCI,DVVL,ICP,AMT,ISG,

EPS,eACC 204 -29.9% $1767 -28.1% $1459

dHCCI,AMT,ISG,EPS,eACC 217 -25.5% $2635 -23.5% $2327

ModHEV 213 -45.4% $2546 -44.0% $2238

HSDI,AdvHEV 147 -49.5% $6060 -48.2% $5752

Long Term

2015-

AdvHEV 138 -53.3% $4009 -52.1% $3701

Notes: Costs are included here to place the technology benefits in context. Costs and their derivation are discussed

in greater detail in Section 5.3; Reductions and costs for all scenarios except the baseline include benefits and costs

listed in Table 5.2-4 and benefits and costs from improved air conditioning systems from NESCCAF (2004).

For the small car category, CO2 reductions were greatest using a turbocharged engine

that was downsized such that overall performance was maintained. Gasoline
Initial Statement of Reasons

August 6, 2004

64

stoichiometric direct injection engine technology was also included in this package

because it affords a higher compression ratio than would otherwise be possible in order

to further reduce CO2 emissions. Dual cam phasers provide additional flexibility relative

to optimum intake and exhaust valve timing and the use of a six speed automated

manual transmission, electric power steering and a more efficient alternator all

contribute to lower vehicle CO2 emissions as well. A lower cost runner-up approach in

terms of CO2 reductions for small cars was a package utilizing discrete variable valve lift

and dual cam phasers that also affords some engine downsizing and reduced pumping

losses, again combined with the same transmission and improved auxiliaries as the

previous case. These packages achieved CO2 reductions of about 20-26 percent

relative to the 2002 baseline. For the mid-term, technologies that combine gasoline

homogeneous charge compression ignition engines with or without an integrated starter

generator plus use of electrical engine water pump and more could reduce CO2

emissions approximately 22-30 percent. Instead of the 42 volt integrated starter

generator, a lower cost 42 volt belt assisted start-stop starter-alternator system could

also be incorporated, but with somewhat lower reductions in CO2 emissions (it should

be mentioned that this analysis assumes 42 volt capability is confined only to those

systems requiring it, and not the whole vehicle - this saves cost). In the longer term,

use of diesel homogeneous charge compression ignition engines and hybrids could

provide CO2 reductions of approximately 26-50 percent.
Initial Statement of Reasons

August 6, 2004

65

Table 5.2-6. Potential Carbon Dioxide Emissions Reductions from Large Car

(NESCCAF, 2004)

Large Car Combined Technology Packages CO2

(g/mi)

Potential

CO2

reduction

from

2002

baseline

Retail Price

Equivalent

2002

Potential

CO2

reduction

from

2009

baseline

Retail Price

Equivalent

2009

DVVL,DCP,A6 (2009 baseline) 322 -6.6% $427 0% $0

DCP,A6 304 -11.5% $479 5.6% $52

DCP,CVT,EPS,ImpAlt 303 -12.1% $709 -6.0% $282

CVVL,DCP,A6 290 -15.9% $864 -10.0% $437

DCP,DeAct,A6 286 -16.9% $662 -11.0% $235

DCP,Turbo,A6,EPS,ImpAlt 279 -19.2% $266 -13.5% -$161

CVVL,DCP,AMT,EPS,ImpAlt 265 -23.2% $874 -17.8% $447

GDI-S,DeAct,DCP,AMT,EPS,

ImpAlt 265 -23.2% $930 -17.8% $503

Near Term

2009-2012

GDI-S,DCP,Turbo,AMT,EPS,

ImpAlt 251 -27.2% $362 -22.1% -$65

gHCCI,DVVL,ICP,AMT,EPS,ImpAlt 272 -21.0% $881 -15.5% $454

DeAct,DVVL,CCP,A6,ISG,EPS,

eACC 259 -24.7% $1879 -19.4% $1452

ehCVA,AMT,EPS,ImpAlt 250 -27.4% $930 -22.2% $503

ehCVA,GDI-S,AMT,EPS,ImpAlt 242 -29.9% $1188 -24.9% $761

gHCCI,DVVL,ICP,AMT,ISG,EPS,

eACC 231 -32.9% $2002 -28.2% $1575

Mid Term

2013-2015

GDI-S,Turbo,DCP,A6,ISG,EPS,

eACC 224 -35.1% $1402 -30.5% $975

dHCCI,AMT,ISG,EPS,eACC 277 -19.7% $2037 -14.0% $1610

ModHEV 252 -45.4% $1968 -41.6% $11541

AdvHEV 163 -53.3% $3749 -50.0% $3322

Long Term

2015-

HSDI,AdvHEV 157 -54.4% $5695 -51.1% $5268

Notes: Costs are included here to place the technology benefits in context. Costs and their derivation are discussed

in greater detail in Section 5.3; Reductions and costs for all scenarios except the baseline include benefits and costs

listed in Table 5.2-4 and benefits and costs from improved air conditioning systems from NESCCAF (2004).

For the large car class, a turbocharged engine approach similar to the one modeled in

the small car class again provided maximum CO2 reductions in the near term of about

27 percent. Since the base engine was a 6 cylinder design, staff assumed that

downsizing to a 5 cylinder engine (for costing purposes) would maintain most of the

smoothness of a V6 configuration and remain attractive to consumers. Even then, there

was a projected small savings relative to a 2009 baseline model. CO2 emission

reduction results of about 23 percent were obtained (but at some net cost relative to a

2009 baseline vehicle this time) using cylinder deactivation in conjunction with a

gasoline stoichiometric direct injection engine with dual cam phasers (plus the same 6

speed automated manual transmission, electric power steering, and an improved

efficiency alternator). Another similar performing package (23.2 percent CO2 reduction)

for the near term utilized continuously variable valve lift and dual cam phasers plus the

same additional equipment at an additional cost in 2009 of $447. For the mid-term, a

number of alternatives provide substantial reductions in CO2 emissions. One of the

more effective technology clusters includes electrohydraulic camless valve actuation in

conjunction with gasoline stoichiometric direct injection plus the 6 speed automated
Initial Statement of Reasons

August 6, 2004

66

manual transmission, electric power steering and more efficient alternator, yielding up to

about 30 percent reduction in CO2 emissions at a cost increment of $761 in 2009. To

obtain even further reductions, integrated starter generators could also be utilized.

Other combinations that could be used with integrated starter generators to achieve

over a 30 percent reduction include gasoline homogeneous charge compression ignition

engines and again turbocharged engines with gasoline direct injection systems. For the

long term, moderate and advanced hybrids can achieve around 30-50 percent

reductions in CO2 emissions.

Table 5.2-7. Potential Carbon Dioxide Emissions Reductions from Minivan

(NESCCAF, 2004)

Minivan Combined Technology Packages CO2

(g/mi)

Potential

CO2

reduction

from

2002

baseline

Retail Price

Equivalent

2002

Potential

CO2

reduction

from

2009

baseline

Retail Price

Equivalent

2009

DVVL,CCP,A5 (2009 baseline) 370 -6.4% $315 0% $0

DCP,A6 348 -12.0% $670 -5.9% $355

GDI-S,CCP,DeAct,AMT,EPS,

ImpAlt 328 -17.0% $561 -11.2% $379

DVVL,CCP,AMT,EPS,ImpAlt 325 -17.7% $478 -12.1% $163

CCP,AMT,Turbo,EPS,ImpAlt, 325 -17.8% $325 -12.2% $-10

DeAct,DVVL,CCP,AMT,EPS,

ImpAlt 317 -19.9% $524 -14.4% $209

CVVL,CCP,AMT,EPS,ImpAlt 316 -20.2% $1011 -14.7% $696

Near Term

2009-2012

GDI-S,DCP,Turbo,AMT,EPS,

ImpAlt 307 -22.3% $887 -17.0% $572

ehCVA,GDI-S,AMT,EPS,ImpAlt 300 -24.1% $1414 -18.9% $1099 Mid Term

2013-2015 GDI-S,CCP,AMT,ISG,DeAct,EPS,

eACC 297 -25.0% $1904 -19.8% $1589

dHCCI,AMT,EPS,ImpAlt 313 -20.8% $1260 -15.3% $945

Mod HEV 389 -26.8% $2300 -21.8% $1985 Long Term

2015-

Adv HEV 188 -52.6% $4204 -49.3% $3889

Notes: Costs are included here to place the technology benefits in context. Costs and their derivation are discussed

in greater detail in Section 5.3; Reductions and costs for all scenarios except the baseline include benefits and costs

listed in Table 5.2-4 and benefits and costs from improved air conditioning systems from NESCCAF (2004).

Essentially the same technologies emerged as most effective in reducing CO2

emissions for the minivan as for the large car group.
Initial Statement of Reasons

August 6, 2004

67

Table 5.2-8. Potential Carbon Dioxide Emissions Reductions from Small Truck

(NESCCAF, 2004)

Small Truck Combined Technology Packages CO2

(g/mi)

Potential

CO2

reduction

from

2002

baseline

Retail Price

Equivalent

2002

Potential

CO2

reduction

from

2009

baseline

Retail Price

Equivalent

2009

DVVL,DCP,A6 (2009 baseline) 404 -9.0% $427 0% $0

DCP,A6 379 -14.7% $479 -6.3% $52

DCP,A6,Turbo,EPS,ImpAlt 371 -16.7% $266 -8.4% -$161

DCP,A6,DeAct 366 -17.7% $587 -9.5% $160

GDI-S,DCP,DeAct,AMT,EPS,

ImpAlt 334 -24.9% $841 -17.5% $414

DeAct,DVVL,CCP,AMT,EPS,

ImpAlt 330 -26.2% $671 -18.9% $244

Near Term

2009-2012

GDI-S,DCP,Turbo,AMT,EPS,

ImpAlt,DCP-DS 318 -28.4% $350 -21.3% -$77

DeAct,DVVL,CCP,A6,ISG,EPS,

eACC 316 -29.0% $1897 -22.0% $1470

ehCVA,GDI-S,AMT,EPS,ImpAlt 309 -30.5% $1169 -23.6% $742

Mid Term

2013-2015

HSDI,AMT,EPS,ImpAlt 307 -31.0% $1568 -24.2% $1141

dHCCI,AMT,EPS,ImpAlt 331 -25.6% $896 -18.3% $469

Mod HEV 325 -27.0% $1968 -19.7% $1844 Long Term

2015-

Adv HEV 210 -52.7% $3823 -48.0% $3396

Notes: Costs are included here to place the technology benefits in context. Costs and their derivation are discussed

in greater detail in Section 5.3; Reductions and costs for all scenarios except the baseline include benefits and costs

listed in Table 5.2-4 and benefits and costs from improved air conditioning systems from NESCCAF (2004).

Once again, the same technology clusters that were most effective in reducing CO2

emissions in the large car and minivan classes were also effective in the small truck

class. Of interest, high speed direct injection diesel engines using the same driveline

and accessory improvements didn’t achieve significantly lower CO2 emissions than the

electrohydraulic camless valve actuation/gasoline direct injection system that was

modeled in this class. This outcome is due largely to diesel fuel’s relatively high carbon

content that results in relatively higher CO2 emissions (diesel fuel has a higher density

than gasoline, so that a gallon of diesel has a greater mass of carbon in it than gasoline

– this results in about a 14 percent higher CO2 production from a gallon of diesel fuel).

Given the higher cost of diesels and their attendant emission cleanup challenges, they

are not necessarily clear CO2 emission improvement strategies.
Initial Statement of Reasons

August 6, 2004

68

Table 5.2-9. Potential Carbon Dioxide Emissions Reductions from Large Truck

(NESCCAF, 2004)

Large Truck Combined Technology Packages CO2

(g/mi)

Potential

CO2

reduction

from

2002

baseline

Retail Price

Equivalent

2002

Potential

CO2

reduction

from

2009

baseline

Retail Price

Equivalent

2009

CCP,A6 (2009 baseline) 484 -5.5% $126 0% $0

DVVL,DCP,A6 442 -13.6% $549 -8.6% $423

CCP,DeAct,A6 433 -15.4% $480 -10.5% $354

DCP,DeAct,A6 430 -15.9% $845 -11.0% $931

DeAct,DVVL,CCP,A6,EHPS,ImpAlt 418 -18.4% $789 -13.6% $663

Near Term

2009-2012

DeAct,DVVL,CCP,AMT,EHPS,

ImpAlt 396 -22.6% $677 -18.1% $551

CCP,DeAct,GDI-S,

AMT,EHPS,ImpAlt 416 -18.6% $827 -13.9% $701

DeAct,DVVL,CCP,A6,ISG,

EHPS,eACC 378 -26.2% $1885 -21.9% $1759

Mid Term

2013-2015

ehCVA,GDI-S,AMT,EHPS,ImpAlt 381 -25.5% $1621 -21.2% $1495

GDI-L,AMT,EHPS,ImpAlt 354 -24.4% $1460 -20.0% $1334

Mod HEV 372 -44.5% $2630 -41.3% $2504

dHCCI,AMT,ISG,EPS,eACC 362 -29.3% $2705 -25.2% $2579

GDI-L,AMT,ISG,EPS,ImpAlt 354 -30.7% $2537 -26.7% $2411

HSDI,AdvHEV 244 -52.2% $8363 -49.5% $8237

Long Term

2015-

AdvHEV 241 -52.5% $5311 -49.8% $5185

Notes: Costs are included here to place the technology benefits in context. Costs and their derivation are discussed

in greater detail in Section 5.3; Reductions and costs for all scenarios except the baseline include benefits and costs

listed in Table 5.2-4 and benefits and costs from improved air conditioning systems from NESCCAF (2004).

For large trucks, cylinder deactivation strategies in conjunction with variable valve timing

and lift strategies were the most effective in the near term, offering a CO2 reduction of

about 18 percent (also included 6 speed automated manual transmission,

electrohydraulic power steering, and an improved alternator). Strategies relying on

turbocharging and engine downsizing were avoided since large trucks may be more

likely to encounter periods of sustained high load operation where cylinder pressures

and temperature would be much higher than in non-turbo applications. In order to retain

adequate engine durability under such conditions, significant engine upgrades would

likely be needed, which were difficult to quantify. For the mid-term adding an integrated

starter generator and electric engine water pump brought the potential CO2 reduction to

about 26 percent. Use of electrohydraulic camless valve actuation coupled with

gasoline stoichiometric direct injection achieved about the same CO2 reduction without

an integrated starter generator. Use of the latter would improve the CO2 reductions

even more, though this was not specifically modeled. For the long term, gasoline lean

burn direct injection or use of diesel multi-mode technology, both coupled with an

integrated starter generator could allow about a 30 percent reduction in CO2, but both

technologies have aftertreatment issues remaining. Otherwise, moderate or aggressive

hybrids that rely on a downsized engine coupled with an electric motor for assist could

achieve around about a 30-50 percent CO2 reduction. However, some believe that the

short lived motor assistance based on battery storage capacity would limit the
Initial Statement of Reasons

August 6, 2004

69

attractiveness of such large truck hybrids when sustained high load operation might be

more likely. Perhaps an approach such as in the Lexus RX400H, wherein the base

engine stays constant and the hybrid system is added to boost short-term acceleration

and significantly improve CO2 emissions during normal driving, would be a better

approach for large trucks.

5.2.B Mobile Air Conditioning System

5.2.B.1 Improved Air Conditioning Systems

Mobile air conditioning contributes to GHG emissions through “direct” refrigerant

releases and “indirect” exhaust CO2 emissions. Direct emissions are due to releases

from vehicles through air conditioning system leakage (a slow process, sometimes

called “regular emissions”), during accidents or other events that suddenly breach

containment of the system refrigerant (sometimes called “irregular emissions”), during

service events, and when vehicles are dismantled without proper recovery of the

refrigerant. In new vehicles, the potential for reduction of direct emissions is

considerable. Industry sources estimate that existing systems can be cost-effectively

improved to achieve up to 50 percent reduction in refrigerant leakage. Strategies for

reducing direct emissions and estimates of the corresponding emission reductions are

presented in this section.

Although current emission certification testing procedures do not include operation of

vehicle air conditioning systems, their operation contributes significantly to exhaust CO2

emissions, also known as "indirect emissions." These emissions are largely due to the

added load on the engine from operation of the air conditioning system. It has been

estimated that CO2 emission reductions from 30 to 50 percent of the fraction attributable

to air conditioning use may be achievable by reducing the engine load requirements of

air conditioning systems. Potential measures for reducing indirect emissions are

presented in this section. The associated emission reductions were estimated through

vehicle simulation modeling performed by NESCCAF (2004). Again, these technologies

can be applied to air conditioner system operation in alternative fuel vehicles, thus

increasing their GHG reduction benefits.

5.2.B.2 Estimating Direct Emissions

Modern mobile air conditioning systems that enhance travel comfort and safety include

features such as integrated cooling, heating, demisting, defrosting, air filtering, and

humidity control. The basic components of a typical system are shown in Figure 5-6.
Initial Statement of Reasons

August 6, 2004

70

Figure 5-6. Typical Mobile Air-Conditioning System Components (Clodic et al, 2003)

The current refrigerant in new vehicles is HFC-134a (1,1,1,2-tetrafluoroethane), which

has a global warming potential (GWP) of 1,300. Direct lifetime emissions of HFC-134a

from vehicular air conditioning systems in California have been estimated using a

method developed by ARB staff based on 1) HFC-134a consumption data by nine

government and commercial fleets, 2) surveys of 966 vehicle owners on their air

conditioning system repair incidence, 3) data on repair incidence among 12,000 fleet

vehicles in California, and 4) information from automobile dismantlers. The data were

used to provide estimates of the averages of the parameters in a mass balance model

that equates vehicular lifetime emissions to lifetime inputs of HFC-134a. The analysis

yielded lifetime direct emissions of approximately 1.36 kg of HFC-134a for a typical

vehicle in the current California fleet, which has a 16-year median lifetime. This is

equivalent to emissions of 85 grams of HFC-134a per year of life per vehicle, although

the emissions may not be uniform over the vehicle's life. The limited data available

suggest that about 72 percent of the lifetime refrigerant emissions are due to leakage

(“regular emissions”), 22 percent are due to sudden or accidental releases (“irregular

emissions”), and 6 percent are due to releases during dismantling. Assuming 200,000

lifetime miles driven, this breaks down into approximately 6 CO2-equivalent grams per

mile from “regular” emissions, 2 CO2-equivalent grams per mile from “irregular”

emissions and 0.5 CO2-equivalent grams per mile from dismantling emissions.

5.2.B.3 Possible Measures to Reduce Direct Emissions

Reduction of direct emissions can be achieved through system improvements such as

the use of low-permeability hoses and improved elastomer seals and connections.

Work is in progress to define a component-specific blueprint for a baseline (current) air

conditioning system and to identify key components for potential improvement (reduced

leakage). It is anticipated that upgrades to a few key components (e.g., compressor

shaft seal) would result in a low-leak system that can achieve a 50 percent reduction in
Initial Statement of Reasons

August 6, 2004

71

“regular” emissions. However, improved containment would not reduce accidental

releases or releases during scrapping. A 50 percent reduction in “regular” leakage

emissions by a low-leak system translates into a reduction of approximately 3 CO2-

equivalent grams/mile, for an incremental increase in cost to the manufacturer of

approximately twelve dollars. Table 5.2-10 illustrates the principal components of

interest for upgrading to a low-leak system that halves "regular" emissions.

Table 5.2-10. Preliminary components of interest in a low-leak HFC-134a air

conditioning system.

Component Approximate Contribution

to Leakage Emissions

Flexible hose (high and low pressure)

construction and dimensions 25%

System component connections

(type and number) 25%

Compressor shaft seal 50%

Leakage emissions prior to component

improvements 6 CO2-equiv (g/mi)

5.2.B.3.1 50% Reduction in Leakage ~3 CO2-equiv (g/mi)

While low-cost improvements to current systems for reducing refrigerant leakage

appear feasible, other alternatives can achieve greater benefits. As mentioned earlier,

HFC-134a is the current refrigerant in vehicles manufactured during and since the 1995

model year. HFC-134a has a GWP of 1,300. Emissions of HFC-134a could be avoided

completely by using an alternative refrigerant with a lower GWP. The leading

alternatives are HFC-152a (1,1-difluoroethane), with a GWP of 120, and CO2, with a

GWP defined as one. HFC-152a could be introduced as a vehicular refrigerant on a

schedule that appears to be consistent with the requirements of AB 1493.

For systems equipped with HFC-152a, total refrigerant emissions would be reduced by

91 percent (on a CO2-equivalent mass basis). However, since HFC-152a is mildly

flammable under certain conditions, mitigation options are being considered.

Specifically, industry representatives report that they are currently evaluating technical

solutions for mitigating potential safety concerns associated with HFC-152a, including

the use of charge evacuation technologies that could be invoked in vehicle crash

situations. The schedule for which CO2 systems could be deployed is uncertain. For

systems that use CO2, the relative global warming impact of refrigerant emissions would

be virtually eliminated. Safety issues related to high system pressures and in-cabin

releases are currently under evaluation.

Table 5.2-11 presents estimates of emission reductions to be achieved from upgrading

to a low-leak HFC-134a system, a low-leak HFC-152a system, and a carbon dioxide

system. Note that it is only "regular" (leakage) emissions that would be impacted by the
Initial Statement of Reasons

August 6, 2004

72

upgrade of a current HFC-134a system, not all the lifetime emissions. That is,

approximately 72 percent of the lifetime emissions from a current HFC-134a system are

due to leakage. For a low-leak system, the relative proportions of "regular", "irregular",

"service events" and "dismantling" emissions are altered by factors consequential to

reduced leakage (e.g. increase in "dismantling" emissions due to a larger refrigerant

volume during dismantling). It is recommended that the reader consult the Technical

Support Document (emissions quantification) for the methodology used to estimate

emissions for low-leak systems.

A reduction of approximately 3 CO2-equivalent grams per mile is estimated for

upgrading to a low-leak HFC-134a system that achieves a 50 percent reduction in

leakage. In contrast, the use of alternative refrigerants with lower GWPs can result in

greater benefits because they reduce total lifetime emissions (i.e., regular, irregular, and

end-of-life releases). For upgrading to a low-leak HFC-152a system or a CO2 system,

the benefits are approximately 8.5 or 9 CO2-equivalent grams per mile, respectively.

Table 5.2-11: Direct Climate Change Emissions from Baseline and Alternative Mobile Air

Conditioning Systems

Air Conditioning System

HFC-134a

Baseline

Technology

Low-Leak

HFC-134a

Low-Leak

Primary

Expansion

HFC-152a1

Carbon

Dioxide2

Total refrigerant emissions (g/yr) 85 70 70 85

Total refrigerant emissions, in CO2 eq. (g/mi) 9 7 0.7 0.007

Refrigerant leakage emissions, in CO2 eq. (g/mi) 6 3 0.3 0.005

Reduction in CO2 eq (g/mi) Baseline 3 8.5 9

1 Assuming same mass leak rate as a low-leak HFC-134a system

2 Assuming same mass leak rate as a baseline HFC-134a system

5.2.B.4 Efforts by the European Union to Reduce Direct Emissions

In August of 2003, the European Commission advanced a proposal mandating the

future phaseout of HFC-134a for vehicle air conditioning systems. Beginning in 2005,

annual leakage rates would be limited for refrigerants with a GWP of 150 or higher.

Effectively, this action targets reductions for HFC-134a. A system of credits was also

proposed that would ultimately accomplish a phaseout by 2019 of any refrigerant with a

GWP of 150 or higher (Meszler, 2004). At the time of this report, the direction of the

proposed regulation appears to be shifting towards elimination of a credit system and a

future ban for new vehicles with a refrigerant having a GWP greater than 50. This

would remove HFC-152a as a refrigerant option, and require substitution with other

refrigerants, such as CO2 or hydrocarbons. While there are significant advantages to

substitution with CO2, including the fact that it has the lowest GWP of the leading

technologies, there are also disadvantages. Some characteristics of CO2 air

conditioning systems are: 1) significantly higher pressures and associated leak

tendency, 2) high component costs, 3) new service training would be needed, 4) an
Initial Statement of Reasons

August 6, 2004

73

internal heat exchanger would be necessary, 5) lower performance at higher ambient

temperature conditions, and 6) timing for deployment is uncertain.

The European Union regulation is not final, and the ultimate outcome remains uncertain.

However, because both the European Union and the United States each comprise

about one third of worldwide vehicle sales, it is likely that there will be some uniformity

in air conditioning system design. Note that the European Union's efforts did not result

in a proposal to address indirect emissions due to a lack of consensus on how to

address these emissions. 

5.2.B.5 Possible Measures to Reduce Indirect Emissions

The contribution of mobile air conditioning systems to exhaust CO2 (indirect) emissions

can be attributed to transportation of the unit’s mass and operation of the system. It is

estimated that reducing the engine load requirements from air conditioning systems can

reduce these emissions up to 50 percent. This can be accomplished by utilizing more

efficient variable displacement compressors (VDC) with better control systems, and

condensers and evaporators with improved heat transfer.

The engine load requirements for externally controlled VDCs are lower than those of

current fixed displacement compressors (FDCs) with current controls. Rather than

providing a constant flow of refrigerant with on/off cycling, VDCs with appropriate

controls modulate compressor displacement, allowing refrigerant flow to vary to meet

cooling demands. For example, under more mild ambient and solar load conditions, the

need for low temperature discharge air into the cabin is decreased, and a VDC with

external controls can increase discharge air temperature by reducing the amount of

refrigerant that is compressed in the VDC. Current FDC systems with current control do

not have this capability and instead compress the full charge of refrigerant to provide

near freezing evaporator air discharge temperatures and then blend in some heat to

achieve the same discharge air temperature. As cooling demands increase, the

benefits of VDCs decrease relative to those of current FDCs with internal controls. For

the limited conditions that require maximum compressor displacement, the benefit of

VDCs over FDCs approaches zero. It should also be noted that it may be possible to

incorporate external controls with FDCs, thereby allowing the compressor to cycle on

and off to maintain a discharge temperature above freezing as does the FDC

compressor with external controls under more mild conditions. While a FDC with

external controls would likely yield fewer CO2 emissions than one with current controls,

they would still be a little higher than when using a VDC with external controls.

VDCs are a currently available technology. Though not yet commonly employed in the

United States, VDCs are more prevalent in the European Union. The on/off cycling

associated with FDCs noticeably impacts the driveability of smaller engines.

Consequently, in the European Union, where the average engine displacement is less

than two liters, VDCs provide significant improvement to engine driveability.

Another means to enhance air conditioning system operation is to reduce the amount of

outside air admitted to the passenger compartment relative to recirculated air. This
Initial Statement of Reasons

August 6, 2004

74

reduces the amount of hot air from outside that needs to be cooled by the system. This

strategy can be applied to either manually or automatically controlled air conditioning

systems and is also currently feasible.

As mentioned previously, substitution with the refrigerant HFC-152a appears to have

significant near-term potential for reducing CO2-equivalent emissions associated with

the refrigerant. In addition, because HFC-152a transfers heat slightly more efficiently

than HFC-134a, there are also gains to be made with HFC-152a substitution from a

CO2 emission reduction (indirect emissions) standpoint. While the driving force behind

substitution with HFC-152a may be the reduction in direct emissions, the likelihood of

near-term implementation is favorable and therefore the indirect benefits were included

in the vehicle simulation modeling.

Other air conditioning system CO2 reduction strategies aim to reduce the vehicle solar

load. Use of solar reflective glass, modified glass angles, improved cabin insulation,

altering interior and exterior colors, and other measures can significantly reduce the

solar load and consequently ease the engine load from air conditioning systems.

However, these strategies are independent of air conditioning design and were not

incorporated into the simulation modeling. In the future, benefits from these types of

measures may be credited through the incorporation of whole vehicle testing that

simulates solar load. However, presently such testing is neither reliable nor accurate,

and needs further development.

Vehicle simulation modeling was performed to estimate the CO2 benefits from the use of

an improved air conditioning system for each of the five vehicle classes. Details of the

modeling inputs are provided in the Technical Support Document. Given the

considerations discussed in this section, operation with a conventional FDC was

compared to that of a system comprised of a VDC with external controls, air reuse

strategy, and substitution with HFC-152a refrigerant. Results are presented in Table

5.2-12 and have been adjusted to reflect data from an extensive study by the National

Renewable Energy Laboratory (NREL). This study indicates that within California,

vehicle air conditioning is operated for cooling or demisting during 29 percent of the

vehicle miles traveled (Johnson, 2002; Rugh and Hovland, 2003). Consequently, failure

to adjust the modeling results would have overestimated the benefits of upgrading the

air conditioning system.
Initial Statement of Reasons

August 6, 2004

75

Table 5.2-12: Indirect CO2 Emissions from Baseline and Improved Mobile Air

Conditioning Systems

Vehicle class

Small Car Large

Car Minivan SmallTruck

Large

Truck

With no A/C system operation 277.9 329.2 376.4 425.7 492.6

With baseline A/C system1 291.4 344.6 395.4 444.7 511.6

Due to baseline air conditioning 13.5 15.4 19.0 19.0 19.0

Emissions (g/mi)

With improved A/C system2 284.4 336.6 385.6 434.9 501.8

Reductions Due (g/mi) 7.1 8.1 10.0 10.0 10.0

To Improved In A/C emissions 52% 52% 52% 52% 52%

A/C System From baseline A/C system 2.4% 2.3% 2.5% 2.2% 1.9%

1

 Utilizes fixed displacement compressor

2 Equipped with a variable displacement compressor, air recirculation, and HFC-152a as the refrigerant

For upgrading to a VDC with external controls, air recirculation, and HFC-152a as the

refrigerant, the estimated indirect emission reduction is 7 CO2–equivalent grams per

mile for a small car, 8 CO2–equivalent grams per mile for a large car, and 9.8 CO2–

equivalent grams per mile for minivans, small trucks, and large trucks.

5.2.C Alternative Fuel Vehicles

Alternative fuel vehicles have been used for many years as a means of providing

reductions of smog-forming emissions. Alternative fuel vehicles may also provide

reductions of climate change pollutants, in two ways. First, during the combustion

process, alternative fuels produce lower climate changes emissions. Second,

alternative fuels have different upstream emissions than conventional gasoline or diesel.

The upstream emissions are the “well-to-tank” emissions, and include extraction,

transport, processing, distribution, and marketing. TIAX, LLC evaluated upstream

emissions from conventional and dedicated alternate fuel vehicles for cases that are

most likely to be available in the 2009 timeframe. This section, which relies in large part

on a report by TIAX entitled “Climate Friendly Alternative Fuel Vehicle Analysis,”

describes the estimated fuel cycle emission benefits and costs of various alternative fuel

vehicles .

Under the staff proposal, the regulatory treatment of alternative fuel vehicles will vary

depending on whether the vehicle is a “dedicated” vehicle, which uses only alternative

fuel, or has the capability to use multiple fuels. For dedicated alternative fuel vehicles,

the staff proposed methodology for dealing with relative differences in upstream

emissions is presented in section 6.4, which describes the basic regulatory standard.

For bi-fuel or flexible-fuel vehicles, the emissions benefits achieved are dependent on

the extent to which the alternative fuel is used. Under the basic regulatory standard,

emissions from such vehicles will be calculated assuming that the vehicle uses the

“dirtier” fuel. If a manufacturer can demonstrate that the vehicle uses an alternative fuel

with lower climate change emissions, the manufacturer can earn credit under the

alternative compliance mechanism described in section 6.6.
Initial Statement of Reasons

August 6, 2004

76

The following sections describe the climate change emission characteristics of various

alternative fuel vehicles.

Compressed Natural Gas (CNG) Vehicles

Compressed natural gas (CNG) has been effectively utilized to achieve NOx and PM

emission benefits from both light-duty and heavy-duty vehicles. Manufacturers market a

variety of CNG vehicles, including passenger cars, pick-up trucks, shuttle buses, school

buses, refuse haulers, and transit buses. In addition, a natural gas vehicle was the first

vehicle to be certified to the ARB’s lowest emissions category (partial zero-emission

vehicle or PZEV).

With regard to climate change emissions, current CNG vehicles have lower CO2

emissions than comparable gasoline vehicles, but higher emissions of methane (CH4).

Methane has a relatively high global warming potential, which could significantly

increase the overall climate change emissions of CNG vehicles. However, recent

studies have shown that the high methane emissions of CNG vehicles can be

significantly reduced through improved catalysts (increasing the cell density of the

catalyst). Since CNG vehicles have inherently lower CO2 emissions than gasoline

vehicles, staff believes manufacturers would incorporate the improved catalyst

technology on their future vehicles. Current CNG vehicles provide an estimated climate

change emissions benefit of approximately 16 percent.

Liquid Petroleum Gas (LPG Vehicles)

More than 33,000 LPG vehicles are currently operating in California. These vehicles

are popular in fleet applications where central refueling is possible. LPG is the most

cost-effective alternative fuel option identified. LPG provides modest combustion

benefits and significant upstream benefits of over 60 percent, compared to conventional

gasoline vehicles. Overall, LPG provides climate change emission reductions of

approximately 20 percent relative to gasoline vehicles.

Ethanol

Currently, approximately 2 percent of new vehicles sold in California are capable of

running on a blend of up to 85 percent ethanol and 15 percent gasoline (E85). Almost

all of these vehicles use primarily, if not exclusively, conventional gasoline. The

reasons for this are the high cost of ethanol, and the resulting lack of consumer

demand, the lack of fueling infrastructure, and E85 availability. As previously

discussed, for purposes of compliance with the basic regulation, emissions from flexfuel vehicles will be calculated assuming that they are running on gasoline. If a

manufacturer can demonstrate that the vehicle is using E85 then the manufacturer can

earn credit under the Alternative Compliance Strategies program. Ethanol derived from

corn has negative upstream climate change emissions because corn crops will remove

significant CO2 from the ambient air. Overall, dedicated E85 vehicles provide a climate

change emission reduction of approximately 23 percent.
Initial Statement of Reasons

August 6, 2004

77

Electricity

Both electricity and hydrogen are unique among alternative fuels in that they are

generally converted from hydrocarbon fuel feedstocks and energy sources into a

transportation fuel.

Battery electric vehicles (BEVs) have the largest potential to reduce climate change

emissions relative to any other alternative fuel vehicle or conventional technology option

under consideration. These vehicles can provide greater than 60 percent emission

reductions, depending upon how the electricity used by these vehicles is produced.

The emission benefits estimated here should be considered conservative for the long

term because many existing zero-emission sources are not included and future

combined cycle power plants will be more efficient and less polluting.

Unfortunately, building and marketing commercially viable and cost-effective “full

function” BEVs remains a significant challenge. With near-term cost projections and

technology options, staff believes that only relatively small neighborhood and “city”

BEVs have the potential to be commercially produced at attractive prices in the 2009

timeframe. These vehicles can also provide climate change emission reductions, albeit

smaller than those of full function BEVs.

Grid-connected hybrid electric vehicles (GHEVs) have the ability to operate on battery

power alone for some distance. Researchers studying GHEVs have been focusing on

those with zero emission range capabilities of 20-60 miles. For a GHEV, once the

battery is depleted to a given threshold, these vehicles operate similar to a conventional

non-grid HEV, with the engine being used for acceleration and cruise conditions.

GHEVs are analogous to bi-fuel vehicles in that their emissions benefit is dependent on

the extent to which the alternative fuel (electricity) is used. Therefore, these systems

are also considered as part of the discussion in Section 6.6, Alternative Compliance

Strategies.

The emissions benefit and cost evaluations for GHEVs are based on GHEVs capable of

a 20-mile all-electric range. To compare their relative emission benefits, staff relied on

performance data from the NESCCAF (2004) report on non-GHEVs. This data was

adjusted using data from a report by the Electric Power Research Institute entitled

“Comparing the Benefits and Impacts of Hybrid Electric Vehicle Options” to estimate the

relative benefits of GHEVs with a 20 mile range. The EPRI study assessed the benefits

of various HEVs, including non GHEVs and GHEVs, based on a mid-sized sedan and

thus provides a consistent comparison of the technologies. Staff applied the results of

this analysis to the emission benefit projections as presented in Table 5.3-8. The

results do not consider promising developments in the performance and cost of lithium

ion batteries.

Hydrogen

As stated above hydrogen is generally converted from hydrocarbon fuel feedstocks and

energy sources into a transportation fuel. Hydrogen also has the potential to be

generated from renewable resources, which would result in zero upstream climate
Initial Statement of Reasons

August 6, 2004

78

change emissions. The most likely near-term method of producing hydrogen in the

2009 timeframe is steam-reformation of natural gas.

Automobile manufacturers are currently aggressively pursuing the commercialization of

hydrogen fuel cell vehicles, which can provide transportation with zero GHG or criteria

pollutant tailpipe emissions. Hydrogen internal combustion engine vehicles also offer

significant potential for climate change emission reductions as their climate change

tailpipe emissions are near zero.

Availability of cost-effective vehicles and lack of fueling infrastructure make hydrogen

fuel cell and internal combustion engine vehicles challenging for consideration in the

2009 timeframe. However, a relatively small number of vehicles will be produced in that

timeframe in order to comply with the zero-emission vehicle requirements. Therefore,

the proposed regulation includes an adjustment factor for both hydrogen fuel cell and

hydrogen internal combustion engines vehicles.

Summary of Alternative Fuel Vehicle Emissions Benefits

Listed below are estimated CO2 emissions for current conventional vehicles and several

alternative fuels, as discussed above. As shown in the table, each alternative fuel

vehicle technology analyzed can provide positive climate change benefits relative to

comparable gasoline-fueled vehicles.

Table 5.2-13. Potential Carbon Dioxide Equivalent Emissions Reductions with Alternative

Fuel Vehicle Technologies for Passenger Cars

Sources: TIAX, LLC, Climate Change Friendly Alternative Fuel Vehicle Analysis; EPRI

report Comparing the Benefits and Impacts of Hybrid Electric Vehicle Options

5.2.D Exhaust Catalyst Improvement

Potential reduction of passenger vehicle GHG contribution could result from improved

exhaust catalysts to reduce emissions of CH4 and N2O. Catalysts would reduce N2O

and CH4 emissions from the tailpipe, as other air contaminants, including criteria air

pollutants, have been controlled for decades. Both of these gases, although their mass

emissions are much less than CO2 emissions from vehicles, have significant overall

contributions to global climate change. Each of these gases, due to their distinct

Vehicle type Vehicle CO2 

emissions (g/mi)

Upstream 

CO2 

equivalent 

emissions 

(g/mi)

Total CO2 

emissions (g/mi)

Lifetime CO2 

equivalent 

emissions (ton)

Lifetime CO2 

equivalent 

emissions reduced 

from 2002 baseline 

(ton)

Percent reduction 

from 

Conventional 

Gasoline Vehicle

Conventional vehicles 346.7 102.7 449 99.9 0.0 0%

Compressed natural gas (CNG) 284.8 92.9 378 83.9 15.9 16%

Liquid petroleum gas (LPG) 313.9 50.4 364 80.9 18.9 19%

HEV20 89.0 82.0 171 38.1 61.8 62%

Ethanol (E85) 356.9 -12.7 344 76.5 23.4 23%

Electric 0 150 150 33.4 66.5 67%
Initial Statement of Reasons

August 6, 2004

79

chemical properties, impacts the atmospheric energy balance differently than CO2, such

that a ton of CH4 in the atmosphere is estimated to have the same net warming effect

over 100 years as 23 tons of CO2. Emissions of N2O have an even more potent effect

on the atmosphere, with an estimated effect 296 times greater than CO2.

Methane is a component of the unburned hydrocarbons emitted by motor vehicles.

Since it has a very low potential to form ozone in the atmosphere, vehicular CH4

emissions are not specifically regulated. Methane emissions are generally proportional

to vehicle hydrocarbon (HC) and non-methane organic gas (NMOG) emissions.

However, as NMOG fleet average emissions approach near-zero levels by 2010 (i.e.,

0.035 grams/mile for passenger cars), CH4 emissions are also expected to be extremely

low. The expected CH4 emission rates for 2009 vehicles less than 8,500 lbs is 0.005

grams/mile (EMFAC, 2003).

Nitrous oxide emissions are a by-product of a vehicle’s aftertreatment catalyst and are

primarily formed during catalyst warm-up. Similar to CH4 emissions, N2O emissions are

generally proportional to vehicle oxides of nitrogen (NOx) emissions. In addition, as

fleet average NOx emissions approach near-zero levels by 2010, N2O emissions are

also expected to be extremely low. Since it is not specifically a regulated pollutant,

catalyst manufacturers are not currently pursuing strategies to reduce vehicle N2O

emissions. However, inclusion of N2O emissions in the proposed vehicle climate

change regulations may encourage more development work if a cost-effective solution

can be identified.

Table 5.2-14 shows estimates of the total contribution of N2O and CH4 emissions to the

climate change emission inventory for average light-duty vehicles. Although it is

conceivable that these emissions could be reduced through faster catalyst heating at

vehicle start-up and enhanced catalyst systems with either higher surface density or

higher and/or revised catalyst loadings, staff is not aware of such efforts at this time.

Table 5.2-14. Contribution of Nitrous Oxides and Methane to Vehicle Climate

Change Emissions

Nitrous oxide

(N2O)

Methane

(CH4)

Emission rate1 (g/mi) 0.006 0.005

Global warming impact (GWP) 296 23

Lifetime CO2 equivalent emissions (tons/vehicle) 0.4 0.03

Emission rate in CO2 equivalent g/mile 1.78 0.12

1 Emission rates based on EMFAC, 2003 estimates for the 2019 vehicle fleet

5.2.E Summary of Technology Assessment Results

For the purpose of providing perspective regarding the various sources of CO2

equivalent emissions that have been covered in this report, Table 5.2-15 itemizes the

various contributions of CO2 equivalent emissions and provides a total inventory. The
Initial Statement of Reasons

August 6, 2004

80

table also provides an indication of the degree of reduction that an ARB climate change

emission regulation could achieve.

Table 5.2-15. Summary of Technology Options and Potential Reductions

Vehicle/Fuel

System

Climate Change

Emission

Average lifetime

GHG contribution

(ton CO2 equiv.)

Percent of

lifetime GHG

contribution

Technologies

available for

GHG reduction

Maximum

percent GHG

reduction

studied here

Carbon dioxide 100.6 74.64%

Engine,

drivetrain,

alternative

fuels

technologies

up to 60%

Nitrous Oxide 0.4 0.30%

Improved

exhaust

catalyst

negl.

Exhaust

emissions

Methane 0.03 0.02%

Improved

exhaust

catalyst

negl.

FuelDelivery

“Upstream”

CO2, N2O, and CH4

31.8 23.59% Alternative

fuels up to 80%

Refrigerant

leakage

Hydrofluorocarbons

(HFCs) 1.95 1.45% Tighter A/Csystem, R-152 Up to 95%

 Total 134.78 100.0%

5.3 Incremental Costs Of Technologies

This section includes an analysis of the incremental cost of the climate change emission

technologies of Section 5.2 in reducing climate change emissions.

The initial cost is the incremental cost of the climate change reduction technology, or

package of technologies. These technology costs are discussed for specific

technologies in the sections below. Along with the initial cost of the new technology,

there are additional mark-up costs to account for the profit and overhead for the

companies that research, develop, and manufacture those technology components.

Our analysis uses a 40 percent mark-up rate, i.e. each of the technology costs is

multiplied by 1.4 to determine its retail price equivalent. This is between the

conventionally utilized retail price equivalent (RPE) multipliers for general environmental

technology assessments of 1.26 (EPA, 2004) and research studies of particular vehicle

components with factors of 1.5 and above (Vyas, et al, 2000).

5.3.A Engine, Drivetrain, and Hybrid-Electric Vehicle Technologies

Estimates of the incremental cost to the manufacturer for each of the technologies

considered were taken primarily from those supplied by Martec for the NESCCAF

(2004) study. Some of the key aspects of the methodology used in the NESCCAF

report for determining the costs of the engine and drivetrain technologies are
Initial Statement of Reasons

August 6, 2004

81

summarized here. For further documentation see NESCCAF (2004). The main source

of the price estimates were field interviews with representatives from automotive and

component manufacturing industries that are involved with the engineering, production,

product planning, and purchasing of new technologies. The costing assumes long term

learned-out production volumes of at least 500,000 units for each of the technologies,

and assumes a highly competitive purchasing environment including several suppliers.

Using cost projections that assume a competitive environment of three suppliers with

plants each producing 500,000 annual units, and using flexible manufacturing that can

produce a variety of models in one plant, represents an appropriate long term, learnedout volume assumption for purposes of this analysis. California annual sales of light

duty vehicles are approximately 1.7 million units. It is expected that some of the

northeast states that have adopted the LEV II program will adopt the low GHG

standards as well. Also, Canada has been actively working to establish low CO2

emission limits as part of its commitment under the Kyoto treaty. Canadian annual

sales are approximately 1.7 million units annually. Thus demand in North America for

vehicles that utilize the low GHG technologies identified in our analyses can be

expected to be at least 4 to 5 million annually.

Some of these vehicles are imported from Europe and Japan. The European Union and

Japan have adopted programs requiring reduced greenhouse gas emissions from lightduty vehicles sold domestically. Thus demand abroad for vehicles using low

greenhouse gas technologies, combined with export volumes to the North American

market, is also consistent with our volume assumptions.

Nearly all the near- and mid-term technology packages used to determine the emission

standards include automated manual transmissions, electric power steering and

improved alternator. By 2012, staff estimates that 76 percent of vehicles in the

PC/LDT1 class and 86 percent of vehicles in the LDT2 class would incorporate these

technologies. Assuming a 50/50 split between the two vehicle classes, North American

demand for these technologies exceeds 3 million, well in excess of the volume

assumptions used to determine our estimated program costs. Other supplier provided

technologies listed in the technology packages include integrated starter generator

(ISG) and turbocharging. By 2016, staff estimates demand for ISG, a mid-term

technology, to be 1.3 to 1.6 million units, again consistent with plant volume

assumptions used to determine costs. Turbochargers are already in production in high

volumes for North America.

Some adjustments were made to the Martec cost estimates. For some of the emerging

technologies, Martec did not account for additional cost reductions resulting from

unforeseen innovations in design and manufacturing. While this may be adequate for

technologies that are well defined and primarily mechanical in nature, staff expects that

further cost reductions for emerging technologies that incorporate electromechanical

and electronic components are highly probable. Based on our experience in the Low

Emission Vehicle program, it is inevitable that consolidation of parts and further

simplifications in production processes will take place when volumes reach into the

millions per year per supplier and numerous suppliers are competing. The prices that
Initial Statement of Reasons

August 6, 2004

82

ARB projects normally reflect components that have become commodity items. One

example is the dramatic cost reductions for consumer electronic devices a few years

after the first ones go on sale. Another example is the reduction in costs from initial

estimates for emission control components developed by manufacturers for LowEmission Vehicles. For example, there were projections of the need for multiple closecoupled catalysts to meet the SULEV emission levels when the Low Emission Vehicle

program was adopted and yet we now have at least one manufacturer utilizing only one

underfloor catalyst to meet these emission levels.

Usually, ARB estimates themselves tend to be high when high volume production is

achieved. The Martec costs for these emerging technologies, we believe, will ultimately

cost less in high volume production due to improvements from innovative design

changes and manufacturing techniques. Accordingly, they have been discounted by 30

percent, to make them consistent with ARB's experience in estimating costs in the Low

Emission Vehicle program. In discussions with some suppliers, it was their opinion that

such costs might be reduced as much as 50 percent depending on the level of

utilization of the part at present and the type of system in which it is utilized.

In addition, ARB staff reduced the cost of converting from an overhead valve engine to

a dual overhead cam system by the cost of the aluminum block that was included by

Martec. Although manufacturers may switch to an aluminum block when making such a

changeover, staff believes it is not a necessary step to accomplish the conversion.

Manufacturers may utilize an aluminum block to save weight or perhaps for competitive

marketing reasons, or others. Staff, therefore, reduced the conversion cost by $250 for

a V-6 engine and $300 for a V-8 engine relative to Martec’s estimates. For cylinder

deactivation, Martec indicated they did not include cost for controlling driveline noise

when in the cylinder deactivation mode since systems to accomplish this were in a

state of flux. Staff included an additional $50 for a long term solution that involves

modifications to the current exhaust system rather than inclusion of a special valve in

the exhaust or active engine mounts since at least one vehicle in current production

utilizes the more simple approach successfully.

Table 5.3-1 lists the estimated RPE costs of the individual technologies considered by

this study.
Initial Statement of Reasons

August 6, 2004

83

Table 5.3-1. Estimated Cost of Individual Technologies

Vehicle Class

Small

car

Large

car

Minivan Small

truck

Large

Technologies truck

Retail Price Equivalent ($)

Intake Cam Phasing 49 98 290 98 311

Exhaust Cam Phasing 49 98 49 98 49

Dual Cam Phasing (DCP) 98 388 196 409

Coupled Cam Phasing (CCP) 70 161 49 161 49

Discrete Variable Valve Lift (DVVL,ICP) 154 259 451 259 259

Discrete Variable Valve Lift (DVVL,DCP) 203 357 549 357 619

Discrete Variable Valve Lift (DVVL,CCP) 175 322 210 322 584

Continuous Variable Valve Lift (CVVL,ICP) 259 483 675 483 731

Continuous Variable Valve Lift (CVVL,DCP) 308 581 773 581 829

Continuous Variable Valve Lift (CVVL,CCP) 280 546 738 546 794

Electromagnetic Camless Valve Actuation (emCVA) 676 764 1078 764 1274

Electrohydraulic Camless Valve Actuation (ehCVA) 564 637 882 637 1078

Turbocharging (Turbo) 560 (210) -18 (210) -

Cylinder Deactivation (DeAct) - 113 113 113 147

Cylinder Deactivation (DeAct,DVVL) - - - - -

Cylinder Deactivation (DeAct,DVVL,ICP) - 265 399 265 472

Cylinder Deactivation (DeAct,DVVL,DCP) - 333 467 333 541

Cylinder Deactivation (DeAct,DVVL,CCP) - 309 443 309 289

Variable Charge Motion (CBR)

Gasoline Direct Injection - Stochiometric (GDI-S) 189 259 259 259 294

Gasoline Direct Injection - Lean-Burn Stratified (GDI-L) 728 959 1043 1057 1554

Gasoline Homogeneous Compression Ignition (gHCCI) 392 588 - 588 -

Diesel – HSDI 2100 1225 1802 1260 2521

Diesel – Advanced Multi-Mode 1225 588 953 568 1275

4-Speed Automatic Transmission 0 0 0 0 0

5-Speed Automatic 140 140 140 140 140

6-Speed Automatic 70 105 105 105 112

6-Speed Automated Manual 0 0 0 0 0

Continuously Variable Transmission (CVT) 210 245 245 245 -

12-volt 2kW BAS (Start Stop) 196 - - - -

42-Volt 10 kW ISG (Start Stop) 559 - - - -

42-Volt 10 kW ISG (Motor Assist) 1107 1107 1107 1107 1107

Electric Power Steering (EPS) 20 39 39 39 -

Electro-Hydraulic Power Steering (E-HPS) - - - - 60

Improved Alternator (Higher efficiency) 56 56 56 56 56

Electric Water Pump (EWP) 70 70 70 70 70

Improved AC 88 88 88 88 88

ModHEV 2546 2546 2300 1968 2340

AdvHEV 4009 4009 4204 3823 5311

Manufacturer Investment

At the July 7, 2004 workshop, staff received several comments that investments needed

to achieve the reductions specified in this proposal would reach into the billions of

dollars and might affect the viability of some major vehicle manufacturers. The

commenters apparently envisioned the need for complete redesign of all existing

engines and transmissions as well as other vehicle changes.

Staff spent some time evaluating these remarks in terms of lead time, phase in periods,

flexibility, and the likely sources of the various revised powertrain components that

would be needed (whether from a supplier or designed in-house). Also considered was
Initial Statement of Reasons

August 6, 2004

84

the forecast provided by Martec regarding the content of 2009 vehicle powertrains in

terms of advanced technology in the absence of any regulatory requirements relative to

climate change.

Martec’s forecast was that all 2009 engines would incorporate some form of variable

valve timing using either single, coupled, or dual cam phasers. These changes will

require cylinder head revisions to incorporate the mechanisms for overhead camshaft

engines and some modification to the camshaft drive for overhead valve engines. They

also concluded that virtually all models would incorporate newly designed 5 and 6

speed automatic transmissions.

For overhead camshaft engines, it would be possible to account for additional features

in camshaft phasing and valve lift control as manufacturers redesign their cylinder

heads to incorporate variable cam phasing for 2009 according to current plans. The

basic engine block architecture would generally not require much revision. For

example, provisions for incorporating discrete or continuously variable intake valve lift or

even cylinder deactivation could be accounted for during their planned cylinder head

revisions to incorporate variable valve timing for the 2009 timeframe. Manufacturers of

overhead valve engines would probably benefit from considering moving to a new

cylinder head that incorporates electrohydraulic camless valve actuation rather than

designing a new overhead camshaft variant that will likely become obsolete in a few

years. Conventional overhead valve engines could also incorporate changes to

accommodate cylinder deactivation or variable valve lift as they are modified to

accommodate the changes slated for 2009. For example, Daimler Chrysler uses a

conventional overhead valve train in the Hemi 5.7 liter engine used in their Ram truck

applications, but the version used in the passenger cars incorporates cylinder

deactivation. The latter was accomplished inexpensively because initial design of the

engine was done with the eventual incorporation of cylinder deactivation in mind.

Another change that involves primarily the engine cylinder head(s) again is

incorporation of gasoline direct injection. To get the most out of this technology, engine

downsizing while maintaining performance would also be included in the revision, but

this could be done without changing the basic cylinder block design, thereby saving any

large investment costs in that respect (it would involve revised bore size and associated

internal parts to reduce engine displacement and to raise compression ratio associated

with GDI). There would be attendant changes to the fuel system to achieve higher fuel

pressures, but such changes should not be high investment items. Given these

considerations, staff expects that cylinder head redesign investment that will be taking

place in the future anyway could include concurrent planning for further revisions to

meet the proposed climate change emission standards without substantial increased

investment cost.

While the above scenarios are one approach to improving CO2 emissions, the proposed

requirements contain sufficient flexibility and credit mechanisms to allow for other

technology approaches. As an alternative to further revising valve trains, engines such

as the General Motors’ in-line 6 cylinder used in a number of their models could be

downsized by reducing cylinder count to 5 and incorporating turbocharging in order to

reduce CO2 emissions. This technology is readily available and such a changeover
Initial Statement of Reasons

August 6, 2004

85

could be accomplished in the 2009 to 2013 timeframe as needed. Overall cost for such

an engine would remain favorable relative to their current 6 cylinder engine since such a

new 5 cylinder turbocharged engine would not have much change in the net number of

components. In designing some of the engines for their newest vehicles, General

Motors claims they are already capable of handling the additional stresses of

turbocharging without further revisions. Again, the investment to incorporate additional

technologies can be greatly minimized by judicious planning for the future and providing

sufficient lead time and phase-in periods.

One commenter at the workshop also expressed the view that lead time for designing a

new automated manual transmission and incorporating it in a manufacturer’s product

line would require more than the four to five years lead time provided in the proposed

regulation. It was pointed out that new transmissions require considerable investment

and that industry was generally planning on introducing new 5 and 6 speed automatic

transmissions in the 2006 model year if not earlier. Evidence of the magnitude of

investment is the joint venture between Ford and General Motors to design a new front

and all wheel drive automatic 6 speed transmission. Normally each manufacturer would

have designed its own transmission. It is a reasonable point that these manufacturers

would need to recover their investment in the redesign before making another large

investment in designing an automated manual transmission. In recognition of this, staff

elected to include an additional 2 years of phase-in time compared to the original

proposal to minimize the need for large investments and to allow industry to amortize

their costs over a longer period of production. At the same time, however, staff also

expects that independent automatic transmission suppliers such as ZF, Aisin, and

others would follow Borg Warner’s lead in developing the automated manual dual clutch

transmission (with partner Volkswagen-Audi) in order to keep pace with advancing

technology and ensure their future competitiveness. Such transmissions are a

compelling choice for the future since they provide excellent shift quality, perhaps even

lower cost than a 6 speed automatic, and significantly reduced CO2 emissions.

Accordingly, these transmissions suppliers would absorb the bulk of investment costs,

not the vehicle manufacturers.

One further point is that manufacturers could avoid incorporation of an automated

manual transmission in the near term by incorporating instead all of the conventional

valve train technology that gets them most of the way to the benefits of electrohydraulic

camless valve actuation. This would be dual cam phasers with continuously variable

valve lift for the overhead camshaft engines. An example of this technology currently in

production is BMW’s “Valvetronic” system available in the in-line 6 cylinder and V12

engines. This is a superb design that allows throttleless engine operation most of the

time (i.e., except when purging is needed to maintain clean vapor canister conditions).

By gaining the CO2 reduction benefits of this technology in the near term, ahead of the

schedule laid out for such technology earlier, incorporating an automated manual 6

speed transmission could be delayed to the mid-term, assuming incorporation of the

other technologies covered earlier as well (i.e., electric or electrohydraulic power

steering, improved alternator, electric water pump, etc.). Alternatively, manufacturers

could incorporate integrated starter generators in some near term models should they

choose to delay incorporating other technologies to meet the CO2 requirements in the
Initial Statement of Reasons

August 6, 2004

86

near term (e.g., they could delay changeover from overhead valve engines in

expectation that camless valve actuation will be available later).

With an additional two years of phase-in time now, the flexibility provided by an

assortment of technology paths that a manufacturer could take, the credit and banking

system afforded, and by providing for incorporation of advanced valvetrain technologies

during redesign of valvetrains/cylinder heads that will take place with already planned

updates to powertrains for the 2009 timeframe, there should be no need for large

investments by the auto manufacturers to meet the proposed regulations. Large

investment costs were also avoided in the Low Emission Vehicle programs by providing

adequate lead time and phase-in time so that revisions could take place with already

planned updates to powertrains that were already planned to maintain competitiveness

in the industry. While the scope an magnitude of the changes is somewhat greater in

the proposed climate change regulation than in the Low Emission Vehicle program, with

the added phase-in time and credit provisions that have been included plus the added

reliance of vehicle manufacturers on suppliers to absorb investment costs, this

regulation should also be phased in economically without large investment.

Maintenance Costs

With adoption of additional new technologies in motor vehicle powertrains, commenters

suggested staff should indicate where owners might expect increased maintenance

costs.

Looking at the new valvetrain technologies, there will be additional valvetrain

components that comprise more complex systems than at present. The new elements

include camshaft phasers, lost motion linkages, solenoids, hydraulic valves, and more.

However, staff is not aware of any expectation that these components couldn’t be

designed to perform as reliably as other engine components. Similarly, for electric

water pumps, electric power steering, improved alternators, integrated starter

generators, and similar driveline components, there is no reason to expect that these

components would need servicing more frequently than any other components.

Discussions with manufacturers indicate generally uniform durability requirements for

powertrain components, which is a lifetime of 200,000 miles before maintenance would

be needed. In the case of automated manual transmissions, there are fewer and less

complex systems involved compared to today’s automatic 6 speed transmissions. For

the continuously variable automatic transmissions, there may be some issues with the

long term durability of the chain, belt, or toroidal power transfer system, but staff

expects that these issues have been mostly sorted out after some initial start up issues

with some designs.

Perhaps more problematic are the hybrid electric vehicles that have significantly more

components and a greater proportion of high voltage system elements than in

conventional vehicles. Of course, the life of the battery pack may also be an issue. In

discussing this topic with some manufacturers, it seems they are confident that nickel

metal hydride batteries will generally be capable of achieving a 10 year life and at least

150,000 miles of operation before there is a decline in battery performance. By better
Initial Statement of Reasons

August 6, 2004

87

controlling cooling of the battery packs to achieve more uniform temperature distribution

and by carefully controlling the depth of discharge and other control issues such as

recharge strategy, battery life should continue to improve. Also, materials

improvements are a constant pursuit of battery manufacturers. It seems reasonably

likely that by 2009 further improvements would enable these batteries to last the life of

the vehicle. Some hybrids utilize ultracapacitors for rapid current discharge that have a

cycle life well beyond the vehicle life, but are able to store less energy than batteries.

Hybrid vehicles generally tend to have tires that are of lower rolling resistance than the

norm and which also tend to have shorter life than more traditional tires. Therefore,

there will likely be additional tire replacement costs for hybrids.

Until repair technicians have greater experience in repairing hybrid electric vehicles,

there may be additional repair difficulties experienced by consumers. Nonetheless, the

presence of detailed and comprehensive On-Board Diagnostic II systems required on

hybrids as well as conventional vehicles should provide considerable help in identifying

faulty systems and components.

Listed below in Table 5.3-2 through Table 5.3-6 are the incremental cost to the

manufacturer and the RPE cost to the consumer for the technology combinations

modeled for each vehicle class. Again these technologies are separated into near-,

mid-, and long-term according to their relative readiness for potential widespread market

penetration. The package costs listed here include credit for the elimination of

duplicate technologies such as the exhaust gas recirculation (EGR) valve that can be

eliminated when using variable valve timing or cam phasing, elimination of the

conventional starter and alternator when using ISG systems, or engine downsizing

when using turbocharging. Note that these costs are relative to the incremental cost for

the 2009 baseline vehicle in each vehicle class. Each of the technology packages,

along with the technologies listed, also includes the improved variable-displacement

compressor/external control air-conditioning systems, aggressive shift logic, improved

rolling resistance tires, and engine friction reduction technologies.
Initial Statement of Reasons

August 6, 2004

88

Table 5.3-2. Estimated Incremental Costs for Carbon Dioxide Reduction

Technologies for Small Car Relative to 2009 Baseline

Small Car Combined Technology Packages

Technology

cost

($)

Retail Price

Equivalent

($)

DCP,EPS,A4,ImpAlt 31 43

DCP,CVT,EPS,ImpAlt 181 253

DVVLd,A5 (2009 baseline) 0 0

DCP,A6 27 38

DCP,A5,EPS,ImpAlt 127 178

DVVL,DCP,AMT,EPS,ImpAlt 106 149

Near Term

2009-2012

GDI-S,DCP,Turbo,AMT,EPS,ImpAlt 580 812

gHCCI,DVVLi,AMT,EPS,ImpAlt 255 357

gHCCI,DVVL,ICP,AMT,ISG,EPS,eACC 1042 1459

Mid Term

2013-2015

CVVL,DCP,AMT,ISG-SS,EPS,ImpAlt 765 1071

ModHEV 1599 2238

dHCCI,AMT,ISG,EPS,eACC 1662 2327

AdvHEV 2644 3701

Long Term

2015-

HSDI,AdvHEV 4109 5752

Table 5.3-3. Estimated Incremental Costs for Carbon Dioxide Reduction

Technologies for Large Car Relative to 2009 Baseline

Large Car Combined Technology Packages

Technology

cost

($)

Retail Price

Equivalent

($)

DCP,A6 37 52

DCP,CVT,EPS,ImpAlt 201 282

DVVL,DCP,A6 (2009 baseline) 0 0

CVVL,DCP,A6 319 447

DCP,DeAct,A6 168 235

DCP,Turbo,A6,EPS,ImpAlt (115) (161)

CVVL,DCP,AMT,EPS,ImpAlt 319 447

GDI-S,DeAct,DCP,AMT,EPS,ImpAlt 359 503

Near Term

2009-2012

GDI-S,DCP,Turbo,AMT,EPS,ImpAlt (46) (65)

gHCCI,DVVL,ICP,AMT,EPS,ImpAlt 324 454

DeAct,DVVL,CCP,A6,ISG,EPS,eACC 1037 1452

ehCVA,AMT,EPS,ImpAlt 359 503

ehCVA,GDI-S,AMT,EPS,ImpAlt 544 761

gHCCI,DVVL,ICP,AMT,ISG,EPS,eACC 1125 1575

Mid Term

2013-2015

GDI-S,Turbo,DCP,A6,ISG,EPS,eACC 696 975

dHCCI,AMT,42V,EPS,eACC 1150 1610

ModHEV 1101 1541

AdvHEV 2373 3322

Long Term

2015-

HSDI,AdvHEV 3763 5268
Initial Statement of Reasons

August 6, 2004

89

Table 5.3-4. Estimated Incremental Costs for Carbon Dioxide Reduction

Technologies for Minivan Relative to 2009 Baseline

Minivan Combined Technology Packages

Technology

cost

($)

Retail Price

Equivalent

($)

DVVL,CCP,A5 (2009 baseline) 0 0

DCP,A6 254 355

GDI-S,CCP,DeAct,AMT,EPS,ImpAlt 271 379

DVVL,CCP,AMT,EPS,ImpAlt 116 163

CCP,AMT,Turbo,EPS,ImpAlt 7 10

DeAct,DVVL,CCP,AMT,EPS,ImpAlt 149 209

CVVL,CCP,AMT,EPS,ImpAlt 497 696

Near Term

2009-2012

GDI-S,DCP,Turbo,AMT,EPS,ImpAlt 409 572

Mid Term GDI-S,CCP,AMT,ISG,DeAct,EPS,eACC 1135 1589

2013-2015 ehCVA,GDI-S,AMT,EPS,ImpAlt 785 1099

ModHEV 1418 1985

AdvHEV 2778 3889

Long Term

2015-

dHCCI,AMT,EPS,ImpAlt 675 945

Table 5.3-5. Estimated Incremental Costs for Carbon Dioxide Reduction

Technologies for Small Truck Relative to 2009 Baseline

Small Truck Combined Technology Packages

Technology

cost

($)

Retail Price

Equivalent

($)

DCP,A6 37 52

DVVL,DCP,A6 (2009 baseline) 0 0

DCP,A6,Turbo,EPS,ImpAlt (115) (161)

DCP,A6,DeAct 114 160

GDI-S,DCP,Turbo,AMT,EPS,ImpAlt,

DCP-DS (55) (77)

DeAct,DVVL,CCP,AMT,EPS,ImpAlt 174 244

Near Term

2009-2012

GDI-S,DCP,DeAct,AMT,EPS,ImpAlt 296 414

DeAct,DVVL,CCP,A6,ISG,EPS,

eACC 1050 1470

ehCVA,GDI-S,AMT,EPS,ImpAlt 530 742

Mid Term

2013-2015

HSDI,AMT,EPS,ImpAlt 815 1141

ModHEV 1101 1541

AdvHEV 2426 3396

Long Term

2015-

dHCCI,AMT,EPS,ImpAlt 335 469
Initial Statement of Reasons

August 6, 2004

90

Table 5.3-6. Estimated Incremental Costs for Carbon Dioxide Reduction

Technologies for Large Truck Relative to 2009 Baseline

Large Truck Combined Technology Packages

Technology

cost

($)

Retail Price

Equivalent

($)

CCP,A6 (2009 baseline) 0 0

DVVL,DCP,A6 302 423

CCP,DeAct,A6 253 354

DCP,DeAct,A6 514 719

DeAct,DVVL,CCP,A6,EHPS,ImpAlt 474 663

Near Term

2009-2012

DeAct,DVVL,CCP,AMT,EHPS,ImpAlt 394 551

CCP,DeAct,GDI-S,

AMT,EHPS,ImpAlt 501 701

DeAct,DVVL,CCP,A6,ISG,EPS,

eACC 1256 1759

Mid Term

2013-2015

ehCVA,GDI-S,AMT,EHPS,ImpAlt 1068 1495

GDI-L,AMT,EHPS,ImpAlt 953 1334

dHCCI,AMT,ISG,EPS,eACC 1842 2579

ModHEV 1789 2504

AdvHEV 2590 3626

HSDI,AdvHEV 5884 8237

Long Term

2015-

GDI-L,AMT,42V,EPS,ImpAlt 1722 2411

Figure 5-7 through Figure 5-11 show the results of the incremental cost assessments of

each technology package for the five different vehicle types. These figures plot each

packages’ incremental costs versus the resulting GHG reduction from the technology

packages.

The diagonal lines in the figures show, for given economic assumptions, the break-even

cut-off for the technologies. Thus the furthest right-most point that is under the “breakeven” line is the maximum potential cost-effective reduction GHGs for that vehicle class.

Almost all of the GHG reduction technologies evaluated are below the break even lines,

which means that they result in lifetime operating cost savings that exceed their

incremental cost. The methodology to determine the “break-even” point is outlined

below in section 5.4. More detailed results in tabular form are summarized at the end of

the section in Table 5.3-8.

The data points have been shaped differently to denote their expected market

readiness. Near-term technology packages are diamonds, mid-term are triangles, and

long-term are “X”s.

For the small cars (see Figure 5-7), the near-term technologies have incremental costs

ranging from $38 to $812. Of these near-term technologies, the maximum reduction

technology package was the one with a turbocharged stoichiometric gasoline direct

injection (GDI-S) engine with dual cam phasing (DCP) and an automated manual
Initial Statement of Reasons

August 6, 2004

91

transmission (AMT), and various other technology improvements. This package yielded

a 24 percent CO2 emission reduction for an incremental cost of $812 from the 2009

small car baseline. Due to the reduction in operating cost that is also achieved by this

package, the package results in a net present value (lifetime savings) of $1,141. That

is, over the life of the vehicle, the operating cost savings is sufficient to entirely pay for

the initial cost of the technology, and provide an additional $1,141 in savings to the

owner. The next highest near-term package CO2 reduction came from discrete variable

valve lift (DVVL), dual cam phasing (DCP), and an automated manual transmission

(AMT). This package yielded an 18 percent CO2 reduction with respect to the 2009

baseline small car at an incremental cost of $149, with a lifetime savings of $1,275. The

highest mid-term technology scenario for small cars included homogeneous combustion

compression ignition (HCCI) technology and offered a 28 percent CO2 emission

reduction for an additional cost of $1459, with a lifetime savings of $787. Some of the

longer-term (beyond 2009) technologies, such as advanced hybrid-electrics and diesels,

resulted in higher potential CO2 reductions, but had incremental costs ranging from

$2238 to $5752. Many of these technologies nevertheless resulted in lifetime savings.

Small Car

DVVL,DCP,A5 DCP,A6

DCP,EPS,ImpAlt

DCP,A5,EPS,ImpAlt

DCP,CVT,EPS,ImpAlt

DVVL,DCP, AMT,EPS,ImpAlt

gHCCI,DVVL, 

ICP,AMT,EPS,ImpAlt

GDI-S,DCP,Turbo, 

AMT,EPS,ImpAlt

gHCCI,DVVL,ICP, 

AMT,ISG,EPS,eACC

ModHEV

dHCCI,AMT, ISG,EPS,eACC

AdvHEV

HSDI,AdvHEV

Break-even (d=5%, $1.74/gal, 16-yr)

CVVL,DCP,AMT, ISGSS,EPS,ImpAlt

-500

500

1,500

2,500

3,500

4,500

5,500

0% 10% 20% 30% 40% 50%

Percent CO 2 Reduction from 2009 Baseline

Incremental Cost ($)

Figure 5-7. Incremental Costs for Technology Packages on 2009 Baseline Small Cars

For large cars (see Figure 5-8), the incremental costs to the consumer for the near-term

technology scenarios ranged from a cost savings of $161 to a cost increase $503. The

maximum reduction from a near-term technology was from the turbocharged

stoichiometric gasoline direct injection (GDI-S) engine with dual cam phasing (DCP),

and an automated manual transmission (AMT). This package yielded a 22 percent

reduction in exhaust CO2 emissions for a cost savings of $65 compared to the 2009

baseline large car technology package, with a lifetime savings of $2,067. The maximum

reduction mid-term technology package in the analysis had a very similar technology

package – a turbocharged stoichiometric gasoline direct injection (GDI-S) engine with

dual cam phasing (DCP), a 6-speed automatic transmission (A6), and also had an
Initial Statement of Reasons

August 6, 2004

92

integrated starter generator (ISG). This package yielded a 30 percent reduction in

exhaust CO2 emissions for an increased initial cost of $975 from the 2009 large car

baseline, with a lifetime savings of $1,794.

Large Car

GDI-S,DCP,Turbo, 

AMT,EPS,ImpAlt

DCP,DeAct,A6

CVVL,DCP,A6

CVVL,DCP,

AMT,EPS,ImpAlt

gHCCI,DVVL, 

ICP,AMT,EPS,ImpAlt

GDI-S,Turbo,DCP, 

A6,ISG,EPS,eACC

DeAct,DVVL,CCP, 

A6,ISG,EPS,eACC

gHCCI,DVVL,ICP, 

AMT,ISG,EPS,eACC dHCCI,AMT,ISG, EPS,eACC

Moderate HEV

Advanced HEV

CVAeh,AMT,EPS,ImpAlt

DVVL,DCP,A6

GDI-S,DeAct,DCP, 

AMT,EPS,ImpAlt

Break-even (d=5%, $1.74/gal, 16-yr)

CVAeh,GDI-S, 

AMT,EPS,ImpAlt

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Percent CO 2 Reduction from 2009 Baseline

Incremental Cost ($)

Figure 5-8. Incremental Costs for Technology Packages on 2009 Baseline Large Cars

For the minivan (see Figure 5-9), the maximum reduction from a near-term technology

package in the analysis was determined to be the stoichiometric gasoline direct injection

(GDI-S) engine with dual cam phasing (DCP), turbocharging, and an automated manual

transmission (AMT). This package yielded a 17 percent reduction in exhaust CO2

emissions for an increased initial cost of $36 from the 2009 minivan baseline, with a

lifetime savings of $1865. A similar package that also included cylinder deactivation

(DeAct) and a 42-volt integrated starter-generator (ISG) resulted in a 20 percent CO2

reduction at an initial cost of $1520, with a lifetime savings of $627.
Initial Statement of Reasons

August 6, 2004

93

Minivan

DVVL,CCP,A5

DCP,A6

DVVL,CCP,AMT, EPS,ImpAlt

CVVL,CCP,AMT, EPS,ImpAlt

GDI-S,DCP,Turbo, 

AMT,EPS,ImpAlt

DeAct,DVVL,CCP, 

AMT,EPS,ImpAlt

GDI-S,CCP,DeAct, 

AMT,EPS,ImpAlt

CCP,AMT, 

Turbo, EPS,ImpAlt

dHCCI,AMT, EPS,ImpAlt

GDI-S,CCP,AMT,ISG, 

DeAct,EPS,eACC

CVAeh,GDI-S, AMT,EPS,ImpAlt

AdvHEV

Break-even (d=5%, $1.74/gal, 19-yr)

ModHEV

-500

500

1,500

2,500

3,500

4,500

5,500

0% 10% 20% 30% 40% 50%

Percent CO 2 Reduction from 2009 Baseline

Incremental Cost ($)

Figure 5-9. Incremental Costs for Technology Packages on 2009 Baseline Minivans

For the small truck vehicle type (see Figure 5-10), the incremental costs for the nearterm scenarios ranged from a cost savings of $161 to a cost increase of $414. The

near-term scenario with turbocharging, stoichiometric gasoline direct-injection, dual cam

phasing (DCP), and an automated manual transmission (AMT), yielded a 21 percent

reduction in exhaust CO2 emissions at a cost savings of $77compared to the 2009

baseline, and a lifetime savings of $2680. The stoichiometric gasoline direct-injection

engine with electrohydraulic camless valve actuation and an automated manual

transmission (AMT) offered a 24 percent CO2 emission reduction at an additional cost of

$742, and a lifetime savings of $2,147.
Initial Statement of Reasons

August 6, 2004

94

Small Truck

DVVL,DCP,A6

DCP,A6 DCP,A6,Turbo, EPS,ImpAlt

DCP,A6,DeAct

GDI-S,DCP,Turbo, 

AMT,EPS,ImpAlt

DeAct,DVVL,CCP, 

AMT,EPS,ImpAlt

DeAct,DVVL,CCP, 

A6,ISG,EPS,eACC

GDI-S,DCP,DeAct, 

AMT,EPS,ImpAlt dHCCI,AMT, EPS,ImpAlt

HSDI,AMT, EPS,ImpAlt

CVAeh,GDI-S, AMT,EPS,ImpAlt

AdvHEV

Break-even (d=5%, $1.74/gal, 19-yr)

ModHEV

-500

500

1,500

2,500

3,500

4,500

5,500

0% 10% 20% 30% 40% 50%

Percent CO 2 Reduction from 2009 Baseline

Incremental Cost ($)

Figure 5-10. Incremental Costs for Technology Packages on 2009 Baseline Small Trucks

For the large trucks (see Figure 5-11), the maximum reduction near- and mid-term

scenario packages involved cylinder deactivation, coupled cam phasing, and variable

valve lift. The near-term version, which included an automated manual transmission

(AMT), had an 18 percent CO2 emission reduction and a cost increase of $551 relative

to the 2009 baseline vehicle, with a lifetime savings of $2,096. The more advanced

mid-term version of this package also included a 42-volt integrated starter-generator

(ISG) and had a 22 percent CO2 reduction with a $1,759 incremental cost from the 2009

large car baseline, with a lifetime savings of $1,445.
Initial Statement of Reasons

August 6, 2004

95

Large Truck

CCP,A6

DVVL,CCP,A6

DCP,DeAct,A6

CCP,DeAct,A6

DeAct,DVVL,CCP, 

A6,EHPS,ImpAlt

DeAct,DVVL,CCP, 

AMT,EHPS,ImpAlt

GDI-L,AMT, 

EHPS,ImpAlt DeAct,DVVL,CCP, 

A6,ISG,EPS,eACC

dHCCI,AMT, 

42V, EPS,eACC

AdvHEV

HSDI,AdvHEV

GDI-L,AMT,ISG, EPS,ImpAlt

Break-even (d=5%, $1.74/gal, 19-yr)

CVAeh,GDI-S, AMT,EHPS,ImpAlt

CCP,DeAct,GDI-S, 

AMT,EHPS,ImpAlt

-500

500

1,500

2,500

3,500

4,500

5,500

6,500

7,500

0% 10% 20% 30% 40% 50%

Percent CO 2 Reduction from 2009 Baseline

Incremental Cost ($)

Figure 5-11. Incremental Costs for Technology Packages on 2009 Baseline Large Trucks

5.3.B Alternative Fuel Vehicles

This section presents ARB staff’s assessment of the incremental costs of alternative

fueled vehicles as compared to gasoline vehicles. The incremental cost estimates

include only those costs directly related to the vehicle and while not exhaustive, provide

a general sense of the relative cost of these vehicles. Thus, in the case of E85 where

there are no additional costs to modify the vehicle, the incremental cost is zero.

Table 5.3-7. Incremental Costs of Alternative Fuel Vehicles

Sources: TIAX, LLC, Climate Change Friendly Alternative Fuel Vehicle Analysis; EPRI

report Comparing the Benefits and Impacts of Hybrid Electric Vehicle Options; CEC and

ARB report Reducing Petroleum Dependency

Vehicle type

Lifetime CO2 

equivalent 

emissions (ton)

Lifetime CO2 

equivalent 

emissions reduced 

from 2002 baseline 

(ton)

Percent reduction 

from 

Conventional 

Gasoline Vehicle

Incremental 

technology cost 

($)

Conventional vehicles 99.9 0.0 0% -

Compressed natural gas (CNG) 83.9 15.9 16% 3300

Liquid petroleum gas (LPG) 80.9 18.9 19% 370

HEV20 38.1 61.8 62% 4500

Ethanol (E85) 76.5 23.4 23% 0

Electric 33.4 66.5 67% 8800
Initial Statement of Reasons

August 6, 2004

96

5.3.C Summary of Incremental Cost Assessment

Technology improvements to vehicle engine, drivetrain, and air-conditioning systems all

result in incremental cost increases for light-duty vehicles. Improvements in the air

conditioning system include an improved variable displacement compressor/external

controls, reduced leakage systems, and the use of an alternative refrigerant (HFC152a). Other technologies such as improved aerodynamics and improved tires also

resulted in increased vehicle costs. These costs are shown in Table 5.3-8.. The table

summarizes for each technology package the results for exhaust CO2 emissions, the

percentage change from the 2009 baseline emissions, and the retail price increment for

the five vehicle classes that were studied. There is a near-term, or off-the-shelf,

technology package in each of the vehicle classes evaluated (small and large car,

minivan, small and large truck) that resulted in a reduction of CO2 emissions of at least

15 to 20 percent from baseline 2009 values. In addition, there is generally a near-term

technology package in each of the vehicle classes that results in about a 25 percent

CO2 emission reduction. .
Initial Statement of Reasons

August 6, 2004

97

Table 5.3-8. Summary of Cost-Effectiveness Parameters for Climate Change Emission Reduction Engine, Drivetrain, and

Hybrid-Electric Vehicle Technologies

Vehicle Class Combined Technology Packages Technology readiness

CO2

emissions

(g/mi)

CO2

change

from 2002

baseline

Lifetime

CO2

reduced

from 2002

baseline

(ton)

CO2

change

from 2009

baseline

Lifetime

CO2

reduced

from 2009

baseline

(ton)

Retail cost

incremental

(2004$)

Cost

incremental

from 2009

baseline

(2004$)

Lifetime Net

Present Value

(2004$)

Payback

period (yr)

Small car DVVL,DCP,A5 Near-term 284 -2.6% 1.7 0.0% 0.0 308 0 0 0

DCP,A6 Near-term 260 -10.8% 7.0 -8.4% 5.3 346 38 635 1

DCP,EPS,ImpAlt Near-term 269 -7.6% 4.9 -5.2% 3.3 351 43 372 1

DCP,A5,EPS,ImpAlt Near-term 260 -10.7% 6.9 -8.3% 5.3 446 178 487 3

DCP,CVT,EPS,ImpAlt Near-term 269 -7.6% 4.9 -5.1% 3.2 561 253 158 8

DVVL,DCP, AMT,EPS,ImpAlt Near-term 233 -19.9% 12.9 -17.8% 11.3 457 149 1,275 1

gHCCI,DVVL, ICP,AMT,EPS,ImpAlt Mid-term 229 -21.6% 14.0 -19.5% 12.3 665 357 1,202 3

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt Near-term 215 -26.4% 17.1 -24.4% 15.4 1,120 812 1,141 5

gHCCI,DVVL,ICP, AMT,ISG,EPS,eACC Mid-term 204 -29.9% 19.4 -28.1% 17.7 1,767 1,459 787 8

dHCCI,AMT, ISG,EPS,eACC Long-term 217 -25.5% 16.5 -23.5% 14.9 2,635 2,327 383 13

HSDI,AdvHEV Long-term 147 -49.5% 32.1 -48.2% 30.4 6060 5752 -1340 >16

CVVL,DCP,AMT, ISG-SS,EPS,ImpAlt Mid-term 216 -25.7% 16.7 -23.8% 15.0 1,379 1,071 830 7

Advanced HEV Long-term 138 -53.3% 34.1 -52.1% 32.5 4009 3701 465 13

Moderate HEV Long-term 213 -45.4% 17.5 -44.0% 15.8 2546 2238 1280 8

Large car DVVL,DCP,A6 Near-term 322 -6.6% 5.1 0.0% 0.0 427 0 0 0

DCP,DeAct,A6 Near-term 286 -16.9% 12.9 -11.0% 7.9 662 235 764 3

CVVL,DCP,A6 Near-term 290 -15.9% 12.2 -10.0% 7.2 864 437 469 6

DCP,A6 Near-term 304 -11.9% 9.1 -5.6% 4.0 479 52 459 1

DCP,Turbo,A6,EPS,ImpAlt Near-term 279 -19.2% 14.7 -13.5% 9.6 266 -161 1,381 0

CVVL,DCP,AMT,EPS,ImpAlt Near-term 265 -23.2% 17.8 -17.8% 12.7 874 447 1,165 3

gHCCI,DVVL, ICP,AMT,EPS,ImpAlt Mid-term 272 -21.0% 16.1 -15.5% 11.1 881 454 948 4

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt Near-term 251 -27.2% 20.9 -22.1% 15.8 362 -65 2,067 0

DCP,CVT,EPS,ImpAlt Near-term 303 -12.1% 9.3 -6.0% 4.3 709 282 258 6

GDI-S,Turbo,DCP, A6,ISG,EPS,eACC Mid-term 224 -35.1% 26.9 -30.5% 21.9 1,402 975 1794 4

DeAct,DVVL,CCP, A6,ISG,EPS,eACC Mid-term 259 -24.7% 19.0 -19.4% 13.9 1,879 1,452 308 12

gHCCI,DVVL,ICP, AMT,ISG,EPS,eACC Mid-term 231 -32.9% 25.2 -28.2% 20.2 2002 1575 981 8

dHCCI,AMT,ISG, EPS,eACC Long-term 277 -19.7% 15.1 -14.0% 10.1 2037 1,610 720 9

HSDI,AdvHEV Long-term 157 -54.4% 41.7 -51.1% 36.6 5695 5268 -32 >16

GDI-S,DeAct,DCP, AMT,EPS,ImpAlt Near-term 265 -23.2% 17.8 -17.8% 12.8 930 504 1,112 4

CVAeh,AMT,EPS,ImpAlt Mid-term 250 -27.4% 21.0 -22.2% 15.9 930 503 1,513 3

CVAeh,GDI-S, AMT,EPS,ImpAlt Mid-term 242 -45.4% 22.9 -41.6% 17.8 1,188 761 1,497 4

Advanced HEV Long-term 163 -53.3% 40.4 -50.0% 35.3 3749 3322 1210 10

Moderate HEV Long-term 252 -45.4% 20.7 -41.6% 15.6 1968 1541 2230 5
Initial Statement of Reasons

August 6, 2004

98

Table 5.3-8 (cont.) Summary of Incremental Cost Parameters for Climate Change Emission Reduction Engine, Drivetrain,

and Hybrid-Electric Vehicle Technologies

Vehicle Class Combined Technology Packages Technology readiness CO2

emissions

(g/mi)

CO2

change

from 2002

baseline

Lifetime

CO2

reduced

from 2002

baseline

(ton)

CO2

change

from 2009

baseline

Lifetime

CO2

reduced

from 2009

baseline

(ton)

Retail cost

incremental

(2004$)

Cost

incremental

from 2009

baseline

(2004$)

Lifetime Net

Present Value

(2004$)

Payback

period (yr)

Minivan DVVL,CCP,A5 Near-term 370 -6.4% 6.3 0.0% 0.0 315 0 0 0

DCP,A6 Near-term 348 -12.0% 11.7 -5.9% 5.4 670 355 308 7

DVVL,CCP,AMT, EPS,ImpAlt Near-term 325 -17.7% 17.3 -12.1% 11.0 478 163 1,190 2

CVVL,CCP,AMT, EPS,ImpAlt Near-term 316 -20.2% 19.7 -14.7% 13.4 887 572 1329 4

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt Near-term 307 -22.3% 21.8 -17.0% 15.5 561 36 1865 1

DeAct,DVVL,CCP, AMT,EPS,ImpAlt Near-term 317 -19.9% 19.4 -14.4% 13.2 524 209 1,335 2

GDI-S,CCP,DeAct, AMT,EPS,ImpAlt Near-term 328 -17.0% 16.5 -11.2% 10.3 694 379 809 4

CCP,AMT,Turbo, EPS,ImpAlt Near-term 325 -17.8% 17.4 -12.2% 11.1 325 -10 1350 1

dHCCI,AMT, EPS,ImpAlt Long-term 313 -20.8% 20.2 -15.3% 14.0 1260 945 2053 4

GDI-S,CCP,AMT,ISG, DeAct,EPS,eACC Mid-term 297 -25.0% 24.3 -19.8% 18.1 1904 1589 628 11

CVAeh,GDI-S, AMT,EPS,ImpAlt Mid-term 300 -24.1% 23.5 -18.9% 17.2 1,414 1,099 1016 7

Advanced HEV Long-term 188 -53.0% 51.2 -49.8% 44.9 4204 3889 1676 10

Moderate HEV Long-term 289 -42.0% 26.1 -41.6% 19.9 2300 1985 2266 6

Small truck DVVL,DCP,A6 Near-term 404 -9.0% 9.9 0.0% 0.0 427 0 0 0

DCP,A6 Near-term 379 -14.7% 16.1 -6.3% 6.2 479 52 713 1

DCP,A6,Turbo, EPS,ImpAlt Near-term 371 -16.7% 18.3 -8.4% 8.4 266 -161 1,186 0

DCP,A6,DeAct Near-term 366 -17.7% 19.3 -9.5% 9.4 587 160 928 2

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt Near-term 318 -28.4% 31.1 -21.3% 21.2 350 -77 2,680 0

DeAct,DVVL,CCP, AMT,EPS,ImpAlt Near-term 328 -26.2% 28.7 -18.9% 18.8 671 244 2062 1

DeAct,DVVL,CCP, A6,ISG,EPS,eACC Mid-term 316 -29.0% 31.8 -22.0% 21.9 1,897 1,470 1,214 7

GDI-S,DCP,DeAct, AMT,EPS,ImpAlt Near-term 334 -24.9% 27.3 -17.5% 17.4 841 414 1,720 2

dHCCI,AMT, EPS,ImpAlt Long-term 331 -25.6% 28.1 -18.3% 18.2 896 469 3,117 2

HSDI,AMT, EPS,ImpAlt Long-term 307 -31.0% 34.0 -24.2% 24.1 1,568 1,141 3,069 3

CVAeh,GDI-S, AMT,EPS,ImpAlt Mid-term 309 -30.5% 33.5 -23.6% 23.6 1,169 742 2,147 3

Advanced HEV Long-term 209 -53.0% 57.7 -47.6% 47.8 3375 2948 2960 7

Moderate HEV Long-term 258 -42.0% 29.5 -38.9% 19.6 2071 1644 2785 5

Large truck CCP,A6 Near-term 484 -5.5% 6.9 0.0% 0.0 126 0 0 0

DVVL,CCP,A6 Near-term 442 -13.6% 17.1 -8.6% 10.2 549 423 829 4

DCP,DeAct,A6 Near-term 430 -15.9% 20.0 -11.0% 13.1 845 719 887 6

CCP,DeAct,A6 Near-term 433 -15.4% 19.4 -10.5% 12.5 480 354 1,182 3

DeAct,DVVL,CCP, A6,EHPS,ImpAlt Near-term 418 -18.4% 23.1 -13.6% 16.2 789 663 1,330 4

DeAct,DVVL,CCP, AMT,EHPS,ImpAlt Near-term 396 -22.6% 28.5 -18.1% 21.6 677 551 2,096 3

GDI-L,AMT, EHPS,ImpAlt Long-term 387 -24.4% 30.7 -20.0% 23.8 1,460 1,334 1,589 6

DeAct,DVVL,CCP, A6,ISG,EPS,eACC Mid-term 378 -26.2% 33.0 -21.9% 26.1 1,885 1,759 1,445 7

dHCCI,AMT,ISG, EPS,eACC Long-term 362 -29.3% 36.9 -25.2% 30.0 2705 2,579 1107 10

HSDI,AdvHEV Long-term 244 -52.2% 65.8 -49.5% 58.9 8363 8237 -8 >19

GDI-L,AMT,ISG, EPS,ImpAlt Long-term 354 -30.7% 38.7 -26.7% 31.8 2,537 2,411 1,493 9

CVAeh,GDI-S, AMT,EHPS,ImpAlt Mid-term 381 -25.5% 32.1 -21.2% 25.2 1,621 1,495 3,162 4

CCP,DeAct,GDI-S, AMT,EHPS,ImpAlt Mid-term 416 -18.6% 23.5 -13.9% 16.6 827 701 1,333 4

Advanced HEV Long-term 243 -52.5% 66.7 -49.8% 59.8 5311 5185 2087 11

Moderate HEV Long-term 284 -44.5% 34.4 -41.3% 27.5 2340 2214 3818 5
Initial Statement of Reasons

August 6, 2004

99

5.4 Lifetime Cost Of Technologies To Vehicle Owner-Operator

Following the direction of AB 1493 to demonstrate maximum cost-effective GHG

reductions that are “economical to an owner or operator of a vehicle, taking into account

the full life-cycle costs of a vehicle,” this portion of the assessment provides estimations

of the lifetime impact to vehicle operators for the GHG reduction technologies that were

described previously. Such a detailed analysis has not been needed for previous

California motor vehicle emission standards and regulations to meet federal

requirements and is not needed here for that purpose; it is introduced here to satisfy AB

1493.

Applying estimations for the technology costs and assumptions for vehicle use and

economic variables, estimations of the lifetime vehicle costs are quantified using a net

present value (NPV) framework. This section conducts a NPV analysis on the engine,

drivetrain, hybrid-electric, and alternative fuel vehicle technologies that were described

in the technology section. The ARB staff is currently investigating ways to integrate the

air conditioning cost-effectiveness work presented in the previous section with the

engine, drivetrain, and other technologies into this section on lifetime costs. This NPV

analysis involves an assessment of an initial consumer cost for the climate change

reduction technologies and the potential net lifetime benefits in the future that result

from the initial investment. If the sum of net future benefits outweighs the initial

technology cost within the lifetime of the technology, the investment in the new

technology is cost beneficial. The first year in which the net future benefits exceed the

initial cost of the technology is called the break-even, or payback, period. The total

initial cost to consumers, including the manufacturing cost plus the 40 percent mark-up

for profit, and overhead, is K0 . 

NPV0 = −K0

Future vehicle operator benefits and costs due to the new technology are discounted by

the discount rate, or time value of money, d, to correct for the difference in the value of

money in hand today versus money in the future (based primarily on interest rate and

inflation). The NPV of the investment one year from now (in current dollars) is

calculated,

1 0 1

(1 )

( , 1) ( , 1)

d

Benefits year Costs year

NPV NPV

+

−

= + ∑ ∑

Or, more generally in any year x,

x x x

d

Benefits year x Costs year x

NPV NPV

(1 )

( , ) ( , )

1

+

−

= +

∑ ∑

−
Initial Statement of Reasons

August 6, 2004

100

Following historical trends, the analysis uses a real discount rate, or time value of

money, of 5 percent. These values for the discount rate are based on ten-year

averages of automobile interest rate and the general inflation rate.

The costs of the alternative fuels that are considered in this report were taken from the

TIAX, LLC alternative fuel vehicle study. For gasoline and diesel fuels, the prices are

inflation adjusted from the values in the California Energy Commission (CEC) Integrated

Energy Policy Report (CEC, 2004). For gasoline the price is $1.74 per gallon, and the

diesel price is $1.73 per gallon (in 2004 dollars). These values are roughly consistent

with the 3-yr historical California fuel prices.

5.4.A Engine, Drivetrain and Hybrid Electric Vehicle Technologies

The GHG reduction technologies evaluated in this report yield reductions in operating

cost over the lifetime of the vehicle. The effects of the new engine and drivetrain

technology systems are not expected to increase vehicle maintenance costs, with the

possible exception of hybrids as explained earlier. Until diesel aftertreatment systems

are better defined, it is difficult to predict whether there will be additional maintenance

costs for these systems. Staff expects lower leakage rate air conditioning systems

should reduce maintenance costs. Due to a lack of comprehensive data, staff assumed

no change in air conditioning maintenance costs for the purpose of this analysis.

Therefore, the potential savings resulting from the elimination of a service event due to

improved containment of the refrigerant is not reflected in the staff analysis.

The costs and lifetime benefits for the technology packages were evaluated over the

vehicle lifetime, using the same vehicle use parameters as Section 5.3. The results are

shown in the “lifetime Net Present Value” and “Payback Period” columns in Table 5.3-8.

Nearly all of the technologies evaluated provide a positive lifetime net present value,

and thus are economical to the owner over the lifecycle of the vehicle.

5.4.B Alternative Fuel Vehicles

ARB staff has estimated the incremental costs of deploying alternative fuel vehicles to

reduce GHGs. This analysis compared the life-cycle costs of alternative fuel vehicles to

the life-cycle cost of a conventional gasoline vehicle. The analysis is similar to the net

present value analysis of engine and drivetrain technologies presented above. For this

analysis, however, comprehensive data on how alternative fuel vehicle technologies

differ among different vehicle types (e.g. small cars and large trucks) were not available.

Therefore, the analysis compared a mid-sized alternative-fueled vehicle produced in

volume production to a baseline conventional vehicle. The baseline conventional

vehicle represents the California-specific sales weighting of 2009 small and large cars

(i.e. trucks, minivans and SUVs are excluded).

ARB staff relied on modeling and cost information presented as part of the TIAX LLC

analysis. To estimate fuel costs, staff consulted with the California Energy Commission.

For purposes of this comparison, staff has used the CEC’s estimated gasoline price of
Initial Statement of Reasons

August 6, 2004

101

$1.74 per gallon. The analysis includes an evaluation of the incremental retail costs

associated with equipping vehicles to operate on alternative fuels and the costs of the

alternative fuels for 2009. The analysis does not include transitional costs such as

vehicle development, certification or fuel transition infrastructure costs. Projecting fuel

cost for 2009 is particularly difficult and can substantially affect the overall net present

value. All cost estimates are presented in Table 5.4-1. The analysis uses the same

methodology to determine net present value as described in Section 5.4.

The results demonstrate that two alternative fuel technologies can meet the life cycle

costs of conventional gasoline vehicles. These include plug-in HEVs with an all-electric

range of 20 miles, and LPG. Both alternative fuels are also projected to provide

significant climate change emission reductions and can thus provide automakers with

additional cost effective compliance pathways in meeting the regulation.

Table 5.4-1. Life Cycle Cost of Alternative Fuel Vehicles

Sources: TIAX, LLC; California Energy Commission, EPRI

5.5 Conclusions

Identified in this analysis are a large number of technologies that reduce GHG

emissions. The technologies range from low friction oils to advanced hybrid electric

drive trains to alternative fuel vehicles. Many of the technologies, especially those

involving the engine valve train and transmission, are used on some cars now, and

could be in near universal use in the 2009 timeframe. Other technologies are still

undergoing development, and can be expected to be available for widespread use after

2010. These include advanced valve trains and advanced hybrid electric drives.

Logical combinations of these technologies have been modeled to determine the

potential to reduce GHG emissions from different size vehicles. The cost of the

technology packages has also been determined, as has their impact on operating costs.

Reductions in CO2-equivalent emissions, compared to emissions of 2009 models in the

absence of government regulation, vary widely, from a few percent to over 45 percent.

In general the higher percentage reductions involve technologies that may not be widely

available in 2009, but are expected to be available sometime after 2010.

Several technologies stood out as providing significant reductions in emissions at

favorable costs. These include discrete variable valve lift, dual cam phasing,

Vehicle-fuel systems

Distance per fuel 

usage (miles/fuel 

unit)

Sales-average 

fuel usage (fuel 

unit/mi)

fuel unit

Fuel 

cost 

($/fuel 

unit)

Cost 

increment 

from 2009 

baseline

Lifetime (16-yr) 

Net Present 

Value (2004$)

Payback 

period

Conventional vehicles 24.8 0.040 GGE 1.74 0 (0) 0

Compressed natural gas (CNG) 24.8 0.040 GGE 1.50 3300 (1,919) >16

Liquid petroleum gas (LPG) 18.8 0.053 LPG gal 1.12 370 1,161 3

2.96 0.337 kWh 0.074 - - -

59 0.017 GGE 1.74 - - -

4500 3,824 8

Ethanol (E85) 17.6 0.057 e85 gal 1.76 0 (4,203) none

Electric 2.86 0.350 kWh 0.074 8800 (2,530) >16

HEV20 
Initial Statement of Reasons

August 6, 2004

102

turbocharging with engine downsizing, automated manual transmissions, and camless

valve actuation. Packages containing these and other technologies such as improved

air conditioning compressors provided substantial emission reductions at prices that

ranged from a saving to several hundreds of dollars. Nearly all technology

combinations modeled provided reductions in lifetime operating costs that exceeded the

retail price of the technology.

Two alternative fueled vehicle technologies are also projected to provide positive life

cycle cost benefits when compared to conventional vehicles. These include LPG and

HEVs with an all-electric range of 20 miles.

.
Initial Statement of Reasons

August 6, 2004

103

6 CLIMATE CHANGE EMISSION STANDARDS

Vehicle climate change emissions comprise four main elements, 1) CO2, CH4

and N2O emissions resulting directly from operation of the vehicle, 2) CO2

emissions resulting from operating the air conditioning system (indirect AC

emissions), 3) refrigerant emissions from the air conditioning system due to

either leakage, losses during recharging, or release from scrappage of the

vehicle at end of life (direct AC emissions), and 4) upstream emissions

associated with the production of the fuel used by the vehicle. The climate

change emission standard incorporates all of these elements.

This section also outlines the staff proposal with respect to credits for early

action, and credit for alternative compliance projects.

Staff elected to incorporate the CO2 equivalent emission standards into the

current LEV program along with the other light and medium-duty automotive

emission standards. The FTP urban and highway test cycles used as a basis in

setting the existing LEV emission standards are also used in setting the climate

change emission standards. Accordingly, there would be a CO2 equivalent fleet

average emission requirement for the passenger car/light-duty 1 (PC/LDT1)

category and another for the light-duty truck 2 (LDT2) category, just as there are

fleet average emission requirements for criteria pollutants for both categories of

vehicles in the LEV program.

The fleet average requirements in the current LEV program rely on results of FTP

urban cycle testing, with the highway test being used to ensure proper control of

NOx emissions under all driving conditions. In the more distant past, when

emission controls consisted primarily of engine modifications, it was possible to

calibrate these controls to be effective in reducing emissions during FTP urban

driving while being less effective during highway driving, especially relative to

NOx emissions. With the advent of the LEV program, however, where emission

control is dominated by effective aftertreatment devices, vehicles capable of

passing the FTP test virtually always pass the highway test requirements with

considerable margin. Hence the highway test serves more of a “capping”

function to ensure that NOx emissions are well-controlled under all driving

conditions.

In the case of CO2 tailpipe emissions, however, there generally are no

aftertreatment devices that can be applied to reduce engine out CO2 emissions,

so there is greater reliance on engine modifications to achieve these reductions

(in concert with other powertrain and vehicle modifications). Accordingly it is

important to ensure that vehicles are achieving maximum reductions under all

driving conditions. Therefore, it is necessary to use both the FTP urban and

highway cycles in determining the fleet average CO2 equivalent emissions. In

order to best reflect real world fleet emissions based on the two test cycles, the
Initial Statement of Reasons

August 6, 2004

104

NESCCAF study presented its findings in terms of a combined 55 percent

urban/45 percent highway harmonic average. This split represents the national

mix of urban and rural driving historically used by government agencies in reports

that rely on this statistic. The statistic comes from the US Department of

Transportation, Federal Highway Administration. In the absence of more

applicable data for California driving, staff has also adopted this apportionment.

6.1 Determination of Maximum Feasible Emission Reduction Standard

For each of the vehicle classes, NESCCAF modeled numerous technology

combinations in order to determine the most effective packages for reducing CO2

emissions. This section outlines how the ARB staff utilized the NESCCAF

modeling results to propose emission standards for the two LEV program vehicle

classes – passenger cars and light duty trucks with test weights under 3751 lbs

loaded vehicle weight (PC/LDT1), and light duty trucks with test weights between

3751 lbs. loaded vehicle weight and 8,500 lbs. gross vehicle weight (GVW)

(LDT2). Medium-duty passenger vehicles (MDPVs) between 8,500-10,000 lbs.

GVW would be included with manufacturers’ LDT2 vehicles when determining

compliance with the climate change emission standards.

Before describing the procedure used to develop the climate change emission

standards below, it should be noted that different methodologies must be used

when transitioning from an analysis of the potential benefits of the technology

packages to setting emission standards based on these packages. First, in

section 5 (Maximum Feasible and Cost-Effective Technologies) that describes

the technology packages and their emission benefits relative to 2002, the

baseline 2002 vehicle emissions include the indirect CO2 emissions resulting

from the use of an air conditioning system with a conventional fixed displacement

compressor and current controls. The emission benefits listed in section 5

compare, against their respective baseline vehicles, the results from modeling

vehicles using the chosen technology packages along with the additional benefits

resulting from the use of an air conditioning system incorporating improved

controls and a variable displacement compressor, and the CO2 reductions that

can be achieved from the use of lower friction tires, early lock-up torque

converters, better aerodynamics and other technologies. This methodology is

appropriate if the purpose of the analysis is to approximate the reductions that

would be realized when the vehicles are operated under real world conditions.

Vehicles demonstrating compliance with the proposed emission standards,

however, would not be tested under real world conditions but would be tested on

a chassis dynamometer where the air conditioning system is not operated.

Therefore, it is appropriate to first establish the emission values that would be

measured on a dynamometer for each of the selected technology packages

before including the emissions (indirect and direct) resulting from the operation of

mobile air conditioning systems. Consequently, the emission values listed in the

tables in this section do not reflect the values listed in the tables in section 5.
Initial Statement of Reasons

August 6, 2004

105

While NESCCAF was able to predict the penetration of new technologies into the

vehicle fleet in the 2009 timeframe using the projections from Martec, thereby

enabling the construction of the appropriate baseline vehicles for 2009, staff is

unable to translate these baseline vehicles into a representative California fleet

for 2009. Individual manufacturer market share and consumer vehicle

preferences may change depending on many factors. Accordingly, staff relied on

its analysis of the 2002 fleet to determine climate change emission standards for

2009 and beyond.

Currently, minivans are classified as light-duty trucks and fall into the LDT2

category since their test weights are on the order of 4,000 lbs. However, these

vehicles are generally based on a passenger car chassis and an examination of

the NESCCAF data reveals that their CO2 emissions are more properly aligned

with passenger cars than trucks. Given this finding and because minivans

constitute a farily small portion of the T2 fleet (about 12 percent), staff concluded

that the standards for the T2 category would be more representative by not

including them in the regression for setting the category standard.

Determination of the climate change emission standards involves several steps.

First, the maximum feasible emission reductions were modeled (NESCCAF

2004) for the five vehicle types with various technology packages (e.g., engine,

drivetrain, and air-conditioning systems). These technology packages were then

categorized with respect to their technology readiness (i.e. near-, mid-, or longterm). Second, manufacturer specific data was collected for the California fleet in

order to evaluate individual manufacturer product mix. The proposed emission

standards for each category were then developed based on the manufacturer

with the highest average weight vehicles to ensure all manufacturers can comply

with the standards (i.e. not simply according to the average of all the

manufacturers).

To summarize the process, the steps taken to derive the climate change

emission standards are:

1) Select appropriate technology packages from the NESCCAF study for

setting the near and mid-term emission standards.

2) From the NESCCAF modeling results, determine average CO2 exhaust

emission values for each group of selected technology packages.

3) Adjust these values to reflect the CO2 equivalent reductions achievable

from improved mobile air conditioning systems, and include vehicle

emissions of CH4 and N2O.

4) Using the resulting CO2 equivalent emission values, derive the regression

lines for setting the near and mid term climate change emissions

standards.

5) Determine the baseline CO2 emissions for California 2002 model year

light-duty vehicles.
Initial Statement of Reasons

August 6, 2004

106

6) Using California baseline data, establish the baseline CO2 emission rates

for the PC/LDT1 and LDT2 classes from which the standards will be

derived using the manufacturer with the heaviest fleet (this ensures that

the proposed reductions are feasible for all manufacturers).

7) Derive the near and mid-term emission standards using the vertical

intersection between the baseline emission rates for each vehicle class

and the regression lines determined in step 6.

This process is explained in detail below.

6.1.A Selection of Technology Packages for Setting the Near- and MidTerm CO2 Equivalent Requirements

As a prelude to setting CO2 equivalent emission standards, staff grouped the

various packages into near, mid and long-term applicability based on the

projected readiness of the individual technologies for implementation in large

volumes in the given timeframes. A brief description of the chosen technology

packages is offered here, and a tabular summary of the technologies and their

CO2 equivalent emission levels are shown below in Table 6.1-2 (for near-term)

and Table 6.1-3 (for mid-term).

Near-term technologies were considered in assessing technological feasibility in

the 2009 to 2012 timeframe. For the 2009 through the 2012 model years (MYs),

staff developed the CO2 equivalent emission standards based on the two

packages in each of the five vehicle classes modeled in the NESCCAF study that

yielded the greatest emission reductions. There was no need to further

distinguish these packages on the basis of cost since each was relatively low (in

fact, two of the packages yielded a cost savings). These packages generally

include gasoline direct injection engines in conjunction with either turbocharging

or cylinder deactivation, plus an automated manual 6-speed transmission and

other technologies.

In assessing feasible reductions for 2013 and on, the mid-term technology

package emission levels were utilized. For the 2013 and subsequent model

years, staff developed CO2 equivalent emission standards based on the top two

or three potentially successful packages that yielded the greatest emission

reductions while moderating costs. Selecting several packages provides

manufacturers with greater flexibility to match technologies with their particular

designs. Incremental costs for these packages ranged from $761 to $1759 as

compared to the 2009 baseline. The technology packages generally included

either electrohydraulic camless valve actuation in conjunction with gasoline direct

injection, or various other engine technologies (e.g., turbochargers, advanced

valvetrain systems, gasoline HCCI, cylinder deactivation, etc.) coupled with an

integrated starter generator system providing regenerative braking and some

launch assist.
Initial Statement of Reasons

August 6, 2004

107

6.1.B Inclusion of Mobile Air Conditioning CO2 Equivalent Emissions in

the Standard

Since no test protocol exists at this time to measure HFC emissions, either direct

or indirect, these emissions have been included in the emission standards in the

form of a credit such that manufacturers making improvements to their air

conditioning systems can apply the credit towards their measured exhaust

emissions when demonstrating compliance with the standard. Specifically, the

emission reductions achievable from improved air conditioning systems have

been subtracted from the emission values derived from the NESCCAF modeling

of the near term and mid term technology packages used to set the climate

change standards

Direct Air Conditioning System Emissions

Where a manufacturer demonstrates that their systems employ advanced leak

reduction components such as improved seals, connections and hoses, the

credit ranges from 3 grams per mile CO2 equivalent emissions for systems using

HFC 134a to 8.5 grams per mile CO2 equivalent emissions for systems using

HFC152a. Staff anticipates that manufacturers can readily incorporate low leak

air conditioning systems in their vehicles for the near term (2009-2012), and will

be converting to HFC 152a systems in the mid term (2013 and beyond).

Therefore, staff has increased the stringency of the near term and mid term

climate change emission standards accordingly.

Using the best information available at this time, reasonable criteria for crediting

a "low-leak air conditioning system" are as follows:

A. All pipe and hose connections must be equipped with multiple orings, seal washers, or metal gaskets only (e.g., no single o-rings);

and

B. All hoses in contact with the refrigerant must be equipped with an

ultra-low permeability barrier or veneer hose on both the highpressure and the low-pressure sides of the system (e.g., no rubber

hoses); and

C. Only multiple-lip compressor shaft seals may be used (with either

body o-rings or gaskets).

For a "low-leak air conditioning system" using HFC-134a as the refrigerant, a

direct emission credit of 3.0 CO2-equivalent grams per mile will apply. A direct

emission credit greater than 3.0 and not to exceed 6.0 CO2-equivalent grams per

mile may be applied to an air conditioning system that reduces refrigerant

leakage further than would be obtained from the above "low-leak air conditioning

system."

Note that for an air conditioning system equipped with HFC-134a as the

refrigerant, a direct emission credit of 3 CO2-equivalent grams per mile
Initial Statement of Reasons

August 6, 2004

108

corresponds to a 50 percent reduction in leakage emissions (also referred to as

"regular" emissions). Further, a direct emission credit of 6.0 CO2-equivalent

grams per mile would apply to a system in which the refrigerant and all

components exposed to refrigerant are fully sealed. To obtain a credit greater

than 3.0 CO2-equivalent grams per mile, the manufacturer would need to provide

an engineering evaluation that supports the requested credit.

For air conditioning systems equipped with HFC-134a as the refrigerant, a direct

emission credit, if applicable, will range from 3.0 to 6.0 CO2-equivalent grams

per mile and will be based solely on reduced refrigerant leakage. However, for

systems using a refrigerant having a GWP of 150 or less, the direct emission

credit will be larger because, besides factoring in reduced leakage (if applicable),

the credit will also take into account emission reductions from the lower global

warming potential of the refrigerant.

The direct emissions credit for an air conditioning system equipped with a

refrigerant having a GWP of 150 or less will be calculated through the following

equation:

Direct Emissions Credit = A - (B x C)

where "A" equals 9 CO2-equivalent grams per mile, which are the lifetime

refrigerant emissions from an air conditioning system containing HFC134a. This value results from the following equation:

A = 85 grams/year * 16 year vehicle * GWPHFC-134a / 200,000 vehicle miles

 lifetime refrigerant traveled per

emissions lifetime

where B = 9 CO2-equivalent * GWPsubstitute refrigerant

 grams per mile 1300

"B" represents the lifetime refrigerant emissions from an air conditioning

system using a refrigerant with a GWP of 150 or less. "B" is obtained by

multiplying the lifetime emissions from a system containing HFC-134a

(9 CO2-equivalent grams per mile) by the relative GWPs of the substitute

refrigerant to that of HFC-134a (GWP = 1300)

where C = 1 - (reduced leakage credit x 0.72)

6

which simplifies into: C = 1 - (0.12 * reduced leakage credit)

"C" is an adjustment factor that incorporates the benefit from improved

leak tightness.
Initial Statement of Reasons

August 6, 2004

109

For systems that do not obtain credit for low-leakage, C = 1

The "reduced leakage credit" ranges from 3 to 6 grams CO2-equivalent

grams per mile

"0.72" is the fraction of lifetime refrigerant emissions attributed to leakage

("regular") emissions (refer to Section 5.2.B.2 of this report)

"6" is the "reduced leakage credit" that would apply to a fully contained

refrigerant system.

Indirect Air Conditioning System Emissions

Indirect HFC emissions from conventional fixed displacement compressors and

variable displacement compressors with external controls were modeled in the

NESCCAF study. The study demonstrated that using variable displacement

compressors in conjunction with other system improvements can significantly

reduce the exhaust CO2 emissions associated with air conditioning use.

Therefore, manufacturers incorporating improved air conditioning systems using

variable displacement compressors and other features can apply a credit towards

the measured exhaust emissions when demonstrating compliance with the

emission standard. One comment staff received at its workshop indicated that

fixed displacement compressors with improved thermal control can also reduce

the indirect emissions associated with air conditioning operation. Manufacturers

using improved air conditioning systems with fixed displacement compressors

that can demonstrate CO2 reductions can also apply some portion of the credit

towards meeting the CO2 equivalent emission standard. Staff believes that these

advanced systems can be readily incorporated in vehicles in the near-term and

has, therefore, increased the stringency of the climate change emission

standards accordingly. The reductions of indirect air conditioning CO2 emissions

from improved air conditioning systems range from 7.1 grams CO2 per mile for

small cars up to 10 grams CO2 per mile for light trucks. Manufacturers that

choose to incorporate other advanced climate change technologies to achieve

the standards may of course forego improvements to their air conditioning

systems if they so choose.

The CO2 equivalent emission values for indirect air conditioning system

emissions from the NESCCAF study and direct CO2 equivalent emissions from

Table 5.2-11 used to adjust the chosen technology packages are listed in Table

6.1-1.
Initial Statement of Reasons

August 6, 2004

110

Table 6.1-1. Improved Air Conditioning System CO2 Equivalent Emission

Reductions

Direct CO2 Equivalent

Emission Reduction (g/mi)

Total A/C System

Reduction 4 (g/mi)

Indirect CO2 Equivalent

Reduction from Advanced

AC VDC system 1 (g/mi) Near-term 2 Mid-term3 Near-term Mid-term

Small car 7.1 3 8.5 10.1 15.6

Large car 8.1 3 8.5 11.1 16.6

Minivan 10.0 3 8.5 13.0 18.5

Small truck 10.0 3 8.5 13.0 18.5

Large truck 10.0 3 8.5 13.0 18.5

1 improved efficiency air conditioning VDC or FDC system. 2

 improved low leak HFC 134a system.

3 improved low-leak HFC 152a. 4 sum of direct and indirect emission reduction credits.

As noted above, the air conditioning system credits were subtracted from the

modeled gram-per-mile CO2 levels for each of the different technology packages.

The resulting CO2 equivalent gram per mile values including CH4 and N2O are

shown in Table 6.1-2 and Table 6.1-3 for the near- and mid-term, respectively.

The average CO2 gram-per-mile values of the selected technology packages

were then used to determine the maximum feasible CO2 equivalent reduction for

each of the two LEV II vehicle classes.

Table 6.1-2. Maximum Feasible Near-Term CO2 Reduction Levels

Vehicle

Class Combined Technology Packages

Test CO2,

without A/C

(g/mi)

Test CO2

equivalent with

A/C credit

(g/mi)

Maximum feasible

reduction tested

CO2 equivalent

with A/C credit for

vehicle class (g/mi)

DVVL,DCP, AMT,EPS,ImpAlt 229 219 Small car

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt 210 200

209

GDI-S,DeAct,DCP, AMT,EPS,ImpAlt 259 248 Large car

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt 245 234

241

CVVL,CCP,AMT, EPS,ImpAlt 299 287 Minivan

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt 290 279

283

DeAct,DVVL,CCP, AMT,EPS,ImpAlt 321 308 Small truck

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt 311 298

303

DeAct,DVVL,CCP, A6,EHPS,ImpAlt 410 398 Large truck

DeAct,DVVL,CCP, AMT,EHPS,ImpAlt 389 376

387
Initial Statement of Reasons

August 6, 2004

111

Table 6.1-3. Maximum Feasible Mid-Term CO2 Reduction Levels

Vehicle

Class Combined Technology Packages

Test CO2,

without A/C

(g/mi)

Test CO2

equivalent with

A/C credit

(g/mi)

Maximum feasible

reduction tested

CO2 equivalent

with A/C credit for

vehicle class

(g/mi)

CVVL,DCP,AMT, ISG-SS,EPS,ImpAlt 212 196 Small car

gHCCI,DVVL,ICP, AMT,ISG,EPS,eACC 200 184

190

CVAeh,GDI-S, AMT,EPS,ImpAlt 236 220

Large car gHCCI,DVVL,ICP, AMT,ISG,EPS,eACC 226 209

GDI-S,Turbo,DCP, A6,ISG,EPS,eACC 218 202

210

CVAeh,GDI-S, AMT,EPS,ImpAlt 282 266 Minivan

GDI-S,CCP,AMT,ISG, DeAct,EPS,eACC 280 263

265

DeAct,DVVL,CCP, A6,ISG,EPS,eACC 309 290

Small truck CVAeh,GDI-S, AMT,EPS,ImpAlt 302 283

HSDI,AMT, EPS,ImpAlt 298 280

284

CVAeh,GDI-S, AMT,EHPS,ImpAlt 374 355 Large truck

DeAct,DVVL,CCP, A6,ISG,EPS,eACC 370 352

354

6.1.C Light-Duty Vehicle Fleet Baseline

Characterizing California light-duty vehicle fleet baseline CO2 emissions and

vehicle weights by manufacturer is necessary in determination of feasibility of the

standard for each manufacturer. That is, the maximum feasible standard must

be set relative to the manufacturer with the highest average baseline emissions

and/or average vehicle test weights.

The 2002 model year baseline is derived from California Department of Motor

Vehicles records for registered 2002 model year vehicles adjusted to include the

CO2 equivalent emissions of CH4 and N2O. Table 6.1-4 shows sales-averaged

CO2 data, and sales-averaged test weight data for the six major light-duty vehicle

manufacturers. Because the form of the climate change emission standard is

structured similar to the LEV standard, the baseline for the California fleet is

segmented into two light-duty classes (PC/LDT1 and LDT2) for each

manufacturer. Smaller auto companies were grouped with their parent

companies where applicable.
Initial Statement of Reasons

August 6, 2004

112

Table 6.1-4. 2002 Baseline CO2 Equivalent Emissions and Test Weight by

Manufacturer

Percent of vehicles

for each auto (2002)

Sales-averaged test

weight (lb)

Sales-averaged CO2

(g/mi) Company1

PC/LDT1 LDT2 PC/LDT1 LDT2 PC/LDT1 LDT2

Daimler Chrysler 45% 55% 3,644 4,729 346 451

Ford 44% 56% 3,569 4,909 334 445

General Motors 41% 59% 3,470 5,113 318 459

Honda 82% 18% 3,248 4,544 282 379

Nissan 61% 39% 3,369 4,393 305 447

Toyota 59% 41% 3,462 4,555 301 422

Average (6 major auto companies) 53% 47% 3457 4833 312 443

1 The following models are included within each larger company name: Daimler Chrysler – Dodge, Chrysler,

Mercedes, Jeep; Ford – Ford, Lincoln, Mercury, Jaguar, Rover, Mazda; General Motors – Chevrolet, Pontiac, Buick,

GMC, Cadillac, Geo, Saturn; Honda – Honda, Acura; Nissan – Nissan, Infiniti; Toyota – Toyota, Lexus

Manufacturer data for sales-weighted averages of CO2 emissions and test weight

(from Table 6.1-4) are plotted along with the maximum feasible reduction CO2

equivalent levels (from Table 6.1-2 and Table 6.1-3) in Figure 6-1 for the

PC/LDT1 category and in Figure 6-2 for the LDT2 category. In these figures, the

labeled points represent each manufacturer’s average CO2 emission level and

test weight. The maximum feasible reduction levels are shown in the diagonal

lines: solid black for the near-term, and dotted gray for the mid-term. The

regression lines are based on the small and large car maximum feasible

reduction CO2-equivalent values in Table 6.1-2 and Table 6.1-3 for the PC/LDT1

category, and the small and large truck CO2-equivalent values for the LDT2

category.

Setting the maximum feasible reduction level for each category that is feasible for

all manufacturers according to their baseline fleet would call for setting the

standard to the rightmost (i.e. heaviest) manufacturer point in each of the figures.

Noting that the technology assessment indicated that for a given weight (within

given vehicle classes) a certain gram-per-mile CO2 is technically feasible, for the

PC/LDT1 category this would entail drawing a line straight down from the Daimler

Chrysler point in Figure 6-1 until it intersects the black “near-term” line. That

point, 242 grams of CO2 equivalent per mile would be the near-term standard.

Similarly, this would make 211 grams CO2 equivalent per mile the mid-term

standard.
Initial Statement of Reasons

August 6, 2004

113

Figure 6-1. Manufacturer Baseline CO2 and Maximum Feasible Regression Lines

for PC/LDT1 Vehicle Category

However, because trading between the two categories would be allowed for each

manufacturer, the CO2 equivalent standard for both the PC/LDT1 and the LDT2

categories need not be set according to the rightmost, heaviest manufacturer in

both of the categories. Trading offers flexibility for each manufacturer to overcomply with one category’s standard and trade those credits to compensate for a

debit, or under-compliance, within the other category. Because of trading, each

category’s standard can be set using the same manufacturer, achieving greater

total CO2 equivalent emission reductions while still maintaining technical

feasibility for all manufacturers. In this case, the maximum total emission

reduction results from setting both standards according to the General Motors

CO2 and test weight points of Figure 6-1 and Figure 6-2. General Motors was

chosen to set the standard because it is the manufacturer with the heaviest

overall average vehicle weight. Graphically this is shown by the vertical gray

dotted lines running down from the “GM” point in those figures. This equates to a

PC/LDT1 standards of 233 g/mi CO2 equivalent in the near-term and 205 g/mi

CO2 equivalent in the mid-term. The LDT2 standards are 361 g/mi in the nearterm and 332 g/mi in the mid-term.

DC Ford

GM

Honda

Nissan

Toyota

150

180

210

240

270

300

330

360

390

420

2750 3000 3250 3500 3750 4000

Test Weight (lb)

CO2 Equivalent (g/mi)

near-term PC/LDT1 standard regression

mid-term PC/LDT1 standard regression

Near-term PC/LDT1 standard

Mid-term PC/LDT1 standard
Initial Statement of Reasons

August 6, 2004

114

Figure 6-2. Manufacturer Baseline CO2 and Maximum Feasible Regression Lines

for LDT2 Vehicle Category

The proposed near-term and mid-term standards are to be phased-in by 20

percent, 40 percent, 70 percent and 100 percent over four-year time periods. For

the near-term, this entails phasing in the standard from MY 2009 through MY

2012. For example, in MY 2009, the standard is 20 percent of the way from the

highest 2002 baseline CO2 level for any of the major manufacturers (323 g/mi

CO2 equivalent/mi for PC/LDT1, 439 g/mi CO2 equivalent/mi for LDT2) to the

near-term standard. Similarly, for MY 2010 the standard is 40 percent of the way

from the highest 2002 baseline CO2 level to the near-term standard. The 2012

CO2 equivalent standard emission levels then are set to the near-term standards

shown above in Figure 6-1 and Figure 6-2.

The mid-term standards are phased-in from MY 2013 through 2016. The phasein from the 2013 near-term standards to the 2016 mid-term standards is set with

interim 20 percent, 40 percent, and 70 percent steps in MY 2013, 2014, and

2015, respectively. A tabular summary of the proposed climate change emission

standards is presented in Table 6.1-5.

DC

Ford GM

Honda

Nissan

Toyota

250

280

310

340

370

400

430

460

490

520

550

4000 4250 4500 4750 5000 5250 5500

Test Weight (lb)

CO2 Equivalent (g/mi)

near-term LDT2 standard regression

mid-term LDT2 standard regression

Near-term LDT2 standard

Mid-term LDT2 standard
Initial Statement of Reasons

August 6, 2004

115

Table 6.1-5. CO2 Equivalent Emission Standards for Model Years 2009 through

2016

CO2-equivalent emission

standard by vehicle category

(g/mi) Tier Phase-in Year

PC/LDT1 LDT2

20% 2009 323 439

40% 2010 301 420

70% 2011 267 390 Near-term

100% 2012 233 361

20% 2013 227 355

40% 2014 222 350

70% 2015 213 341 Mid-term

100% 2016 205 332

6.2 Determination of Effect of Standard on the Fleet

Since each manufacturer starts at a different baseline CO2 emission level, each

manufacturer will have a different percentage of vehicles that must be improved

to comply with the regulation, and different resulting average costs. This section

provides an estimation of the percent of vehicles that will need to be improved

during the near- and mid-term phase-in periods in order to comply with the

proposed climate change emission standards. It is assumed here that all of the

major six manufacturers will be in compliance with the standard at all phases.

Also, it is assumed that the use of the major six manufacturers offers a

representative picture of the entire vehicle fleet for these emission reduction and

control cost calculations.

6.2.A Emission Reduction by Model Year

The manufacturer average CO2 equivalent levels, resulting from compliance with

the standard, are shown in Table 6.2-1. Because for the 2009 and 2010 model

year phase-in some of the manufacturers’ fleets are already in compliance (i.e.,

below the proposed standards), their CO2 levels are assumed to remain the

same as the 2002 baseline. For example, the average Honda CO2 emission

value is unchanged during 2009 and 2010 because its baseline emission values

are already below each of those years’ standards. The last column, “All major 6,”

in the following tables shows the sales-weighted averages based on 2002

California vehicle sales by the six major manufacturers.
Initial Statement of Reasons

August 6, 2004

116

Table 6.2-1. Average CO2 Equivalent Emissions (g/mi) by Vehicle Model Year

Year DC Ford GM Honda Nissan Toyota All major 6

PC/LDT1 323 323 318 282 305 301 307

2009 LDT2 439 439 439 379 439 422 433

PC/LDT1 301 301 301 282 301 301 297

2010 LDT2 420 420 420 379 420 420 418

PC/LDT1 267 267 267 267 267 267 267

2011 LDT2 390 390 390 379 390 390 390

PC/LDT1 233 233 233 233 233 233 233

2012

Near-term

phase-in

LDT2 361 361 361 361 361 361 361

PC/LDT1 227 227 227 227 227 227 227

2013 LDT2 355 355 355 355 355 355 355

PC/LDT1 222 222 222 222 222 222 222

2014 LDT2 350 350 350 350 350 350 350

PC/LDT1 213 213 213 213 213 213 213

2015 LDT2 341 341 341 341 341 341 341

PC/LDT1 205 205 205 205 205 205 205

2016

Mid-term

phase-in

LDT2 332 332 332 332 332 332 332

Table 6.2-2 tabulates the percent reduction from 2002 model year baseline

emission values that each manufacturer must achieve to become compliant with

the proposed emission standards.

Table 6.2-2. Average Percent CO2 Emission Change by Vehicle Model Year

Year DC Ford GM Honda Nissan Toyota All major 6

PC/LDT1 -7% -3% 0% 0% 0% 0% -1.3%

2009 LDT2 -3% -1% -4% 0% -2% 0% -2.1%

PC/LDT1 -13% -10% -5% 0% -1% 0% -4.4%

2010 LDT2 -7% -6% -9% 0% -6% -1% -5.5%

PC/LDT1 -23% -20% -16% -5% -12% -11% -14.0%

2011 LDT2 -13% -12% -15% 0% -13% -8% -11.8%

PC/LDT1 -33% -30% -27% -17% -24% -23% -24.9%

2012

Near-term

phase-in

LDT2 -20% -19% -21% -5% -19% -14% -18.3%

PC/LDT1 -34% -32% -28% -19% -25% -25% -26.7%

2013 LDT2 -21% -20% -23% -6% -21% -16% -19.6%

PC/LDT1 -36% -34% -30% -21% -27% -26% -28.5%

2014 LDT2 -22% -21% -24% -8% -22% -17% -20.9%

PC/LDT1 -38% -36% -33% -24% -30% -29% -31.2%

2015 LDT2 -24% -23% -26% -10% -24% -19% -22.9%

PC/LDT1 -41% -39% -35% -27% -33% -32% -33.9%

2016

Mid-term

phase-in

LDT2 -26% -25% -28% -12% -26% -21% -24.8%

6.2.B Percent of Vehicles Controlled by Model Year

In order achieve the CO2-equivalent emission reduction levels shown in Table

6.2-2, each manufacturer will need to deploy technology packages in their new

vehicle fleet for years 2009 through 2016. To estimate the impact on

manufacturers, it is assumed that the maximum feasible “near-term” technologies

will first be used only on those vehicles necessary to comply with the proposed
Initial Statement of Reasons

August 6, 2004

117

emission standards. The following scenarios assume that manufacturers will

apply the lowest cost approaches to complying with the proposed emission

standards. Daimler Chrysler, for example, with the highest PC/LDT1 2002

baseline CO2 value, would need to install the near-term technology package on

20 percent, 40 percent, 70 percent, and 100 percent of PC/LDT1 vehicles from

2009 to 2012. Since some manufacturers’ baseline values are closer to the 2012

standard, fewer of their vehicles would need to employ the same technology

packages in order to be compliant. The baseline CO2 value of Honda, for

example, is closer to the PC/LDT1 standard for 2012 and, therefore, Honda

would need to utilize the “near-term” technology packages on only 53 percent of

its PC/LDT1 vehicles to become compliant by 2012. (Of course, Honda could

also choose to apply less technology to more of its vehicles). The estimated

percentages of each manufacturers’ vehicles equipped with near-term

technology packages are shown in Table 6.2-3.

For the mid-term 2013-2016 phase-in, some manufacturers could not achieve the

emission standards using only the “near-term” technology packages. Once a

manufacturer’s entire fleet has the near-term technology package installed and

further reductions are needed, the mid-term technology packages are utilized to

the extent necessary to comply with the 2013-2016 standards. Table 6.2-4

shows the projected use of mid-term technology packages. Table 6.2-5 sums

the values of Table 6.2-3 and Table 6.2-4 to show the total number of vehicles

that have some CO2-reduction control technology.

Table 6.2-3. Percent of Vehicles Equipped with Near-Term Technology Package

by Vehicle Model Year

Year DC Ford GM Honda Nissan Toyota All major 6

2009 PC/LDT1 20% 9% 0% 0% 0% 0% 4%

LDT2 12% 6% 20% 0% 8% 0% 10%

2010 PC/LDT1 40% 30% 16% 0% 4% 1% 14%

LDT2 32% 27% 40% 0% 29% 3% 26%

2011 PC/LDT1 70% 61% 49% 16% 38% 35% 51%

LDT2 63% 58% 70% 0% 60% 35% 55%

2012 PC/LDT1 100% 92% 81% 53% 72% 69% 76%

Near-term

phase-in

LDT2 94% 88% 100% 22% 91% 68% 86%

2013 PC/LDT1 80% 98% 87% 59% 78% 75% 79%

LDT2 99% 95% 80% 30% 97% 74% 84%

2014 PC/LDT1 60% 89% 92% 65% 84% 81% 79%

LDT2 81% 98% 60% 37% 91% 81% 77%

2015 PC/LDT1 30% 58% 99% 74% 92% 89% 75%

LDT2 51% 67% 30% 47% 61% 90% 56%

2016 PC/LDT1 0% 27% 66% 83% 98% 98% 65%

Mid-term

phase-in

LDT2 20% 36% 0% 58% 30% 100% 36%
Initial Statement of Reasons

August 6, 2004

118

Table 6.2-4. Percent of Vehicles Equipped with Mid-Term Technology Package by

Vehicle Model Year

Year DC Ford GM Honda Nissan Toyota All major 6

2009 PC/LDT1 0% 0% 0% 0% 0% 0% 0%

LDT2 0% 0% 0% 0% 0% 0% 0%

2010 PC/LDT1 0% 0% 0% 0% 0% 0% 0%

LDT2 0% 0% 0% 0% 0% 0% 0%

2011 PC/LDT1 0% 0% 0% 0% 0% 0% 0%

LDT2 0% 0% 0% 0% 0% 0% 0%

2012 PC/LDT1 0% 0% 0% 0% 0% 0% 0%

Near-term

phase-in

LDT2 0% 0% 0% 0% 0% 0% 0%

2013 PC/LDT1 20% 0% 0% 0% 0% 0% 2%

LDT2 0% 0% 20% 0% 0% 0% 6%

2014 PC/LDT1 40% 11% 0% 0% 0% 0% 7%

LDT2 19% 2% 40% 0% 9% 0% 16%

2015 PC/LDT1 70% 42% 1% 0% 0% 0% 16%

LDT2 49% 33% 70% 0% 39% 0% 39%

2016 PC/LDT1 100% 73% 34% 0% 2% 0% 32%

Mid-term

phase-in

LDT2 80% 64% 100% 0% 70% 0% 62%

Table 6.2-5. Total Percent of Vehicles Equipped with Near- and Mid-Term

Technology Packages by Vehicle Model Year

Year DC Ford GM Honda Nissan Toyota All major 6

PC/LDT1 20% 9% 0% 0% 0% 0% 4%

2009 LDT2 12% 6% 20% 0% 8% 0% 10%

PC/LDT1 40% 30% 16% 0% 4% 1% 14%

2010 LDT2 32% 27% 40% 0% 29% 3% 26%

PC/LDT1 70% 61% 49% 16% 38% 35% 51%

2011 LDT2 63% 58% 70% 0% 60% 35% 55%

PC/LDT1 100% 92% 81% 53% 72% 69% 76%

2012

Near-term

phase-in

LDT2 94% 88% 100% 22% 91% 68% 86%

PC/LDT1 100% 98% 87% 59% 78% 75% 81%

2013 LDT2 99% 95% 100% 30% 97% 74% 90%

PC/LDT1 100% 100% 92% 65% 84% 81% 86%

2014 LDT2 100% 100% 100% 37% 100% 81% 93%

PC/LDT1 100% 100% 100% 74% 92% 89% 92%

2015 LDT2 100% 100% 100% 47% 100% 90% 96%

PC/LDT1 100% 100% 100% 83% 100% 98% 96%

2016

Mid-term

phase-in

LDT2 100% 100% 100% 58% 100% 100% 98%

6.2.C Cost of Control by Model Year

To translate the percent of vehicle fleet utilizing the near- and mid- term

technology packages (from Table 6.2-3 and Table 6.2-4) into average cost-ofcompliance estimations, the costs associated with the maximum feasible CO2

reduction technologies are applied. These costs, directly associated with the

technology packages of Table 6.1-2 and Table 6.1-3 above, are shown below in

Table 6.2-6 and Table 6.2-7. The costs are shown as the incremental cost with

respect to the 2009 baseline vehicle cost within each of the five vehicle classes.

The costs are then aggregated into a sales-averaged cost for each of the two
Initial Statement of Reasons

August 6, 2004

119

vehicle categories, PC/LDT1 and LDT2, according to the estimated percentage

of the 2002 California fleet that each vehicle class represents. The average cost

of control for maximum feasible climate change emission reductions for nearterm technology packages on a vehicle in the PC/LDT1 category is estimated to

be $382. The average cost of control for maximum feasible reductions for nearterm technology packages on a vehicle in the LDT2 category is estimated to be

$358. These costs do not include any operating cost savings, which staff has

determined to be more than sufficient to offset the upfront incremental cost.

Table 6.2-6. Technology Cost for Maximum Feasible Near-Term CO2 Reduction by

Vehicle Category

Category Vehicle

Class Combined Technology Packages

Cost

incremental

from 2009

baseline

(2004$)

Average

cost

incremental

from 2009

baseline

(2004$)

Estimated

percentage

of CA 2002

fleet

Average

cost for

near-term

control

technology

for vehicle

category ($)

DVVL,DCP, AMT,EPS,ImpAlt 149 Small car

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt 812

481 34%

GDI-S,DeAct,DCP, AMT,EPS,ImpAlt 504

PC/LDT1

Large car

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt -65

219 20%

382

CVVL,CCP,AMT, EPS,ImpAlt 696 Minivan

GDI-S,DCP,Turbo, AMT,EPS,ImpAlt 572

634 9%

Small DeAct,DVVL,CCP, AMT,EPS,ImpAlt 244

truck GDI-S,DCP,Turbo, AMT,EPS,ImpAlt -77

84 22%

DeAct,DVVL,CCP, A6,EHPS,ImpAlt 663

LDT2

Large

truck DeAct,DVVL,CCP,

AMT,EHPS,ImpAlt 551

607 15%

358

Similar calculations were performed for the maximum feasible emission

reductions for mid-term technology packages. The average cost of control to

achieve the maximum feasible reduction for a vehicle in the PC/LDT1 category is

estimated to be $1,204. The average cost of control to achieve the maximum

feasible reduction for vehicles in the LDT2 category is estimated to be $1,326.

Again, these costs do not include operating cost savings.
Initial Statement of Reasons

August 6, 2004

120

Table 6.2-7. Technology Package Cost for Maximum Feasible Mid-Term CO2

Reduction by Vehicle Category

Category Vehicle

Class Combined Technology Packages

Cost

incremental

from 2009

baseline

(2004$)

Average

cost

incremental

from 2009

baseline

(2004$).)

Estimated

percentage

of CA 2002

fleet

Average

cost for

mid-term

control

technology

for vehicle

category

($)

CVVL,DCP,AMT, ISG-SS,EPS,ImpAlt 1,071 Small car

gHCCI,DVVL,ICP, AMT,ISG,EPS,eACC 1,459

1,265 34%

CVAeh,GDI-S, AMT,EPS,ImpAlt 761

gHCCI,DVVL,ICP, AMT,ISG,EPS,eACC 1,575

PC/LDT2

Large car

GDI-S,Turbo,DCP, A6,ISG,EPS,eACC 975

1104 20%

1204

CVAeh,GDI-S, AMT,EPS,ImpAlt 1,099

Minivan GDI-S,CCP,AMT,ISG,

DeAct,EPS,eACC 1,589

1,344 9%

DeAct,DVVL,CCP, A6,ISG,EPS,eACC 1,470

CVAeh,GDI-S, AMT,EPS,ImpAlt 742 Small

truck

HSDI,AMT, EPS,ImpAlt 1,141

1118 22%

CVAeh,GDI-S, AMT,EHPS,ImpAlt 1,495

LDT2

Large

truck DeAct,DVVL,CCP, A6,ISG,EPS,eACC 1,759

1,627 15%

1326

Multiplying the cost-of-control estimations (Table 6.2-6 and Table 6.2-7) with the

corresponding percentages of the each manufacturer’s fleet that has these

packages installed to achieve compliance (Table 6.2-3 and Table 6.2-4) results in

the average cost increase per vehicle manufacturer per model year under the

proposed climate change regulation. These average costs per vehicle for each

manufacturer for each model year are shown in Table 6.2-8. The final column

“All major 6” shows the estimated cost increase averaged across all vehicle sales

of the six manufacturers.

Table 6.2-8. Average Cost of Control by Vehicle Model Year ($)

Year DC Ford GM Honda Nissan Toyota All major 6

PC/LDT1 76 36 0 0 0 0 16

2009 LDT2 43 21 72 0 30 0 36

PC/LDT1 153 115 61 0 16 2 52

2010 LDT2 116 95 143 0 104 10 93

PC/LDT1 267 234 186 61 146 134 194

2011 LDT2 226 206 251 0 214 127 199

PC/LDT1 382 353 311 202 276 265 292

2012

Near-term

phase-in

LDT2 335 317 358 80 324 244 308

PC/LDT1 547 373 332 225 298 287 330

2013 LDT2 357 339 552 106 346 266 382

PC/LDT1 711 470 352 248 319 309 383

2014 LDT2 539 377 745 131 442 289 491

PC/LDT1 958 726 394 283 351 341 483

2015 LDT2 834 676 1036 169 740 324 723

PC/LDT1 1204 982 663 318 395 374 626

2016

Mid-term

phase-in

LDT2 1129 975 1326 208 1038 358 955
Initial Statement of Reasons

August 6, 2004

121

6.3 Compliance with the Emission Standards

The proposed climate change emission standards incorporate the three elements

listed above. Therefore, to demonstrate compliance with these standards,

manufacturers will need to report the CO2 equivalent emission values of their

vehicles over the combined driving cycle. The structure of the standard can be

expressed as follows:

Vehicle GHG emissions (gm/mi) = CO2 (exh) + N2O (exh) + CH4 (exh) - MAC (dir) - MAC (indir)

Where:

CO2 (exh) = CO2 exhaust emissions in grams per mile measured over the

applicable test cycle.

N2O (exh) = N2O exhaust emissions in grams per mile measured over the

applicable test cycle expressed as CO2 equivalent (N2O

emissions times 296).

CH4 (exh) = CH4 exhaust emissions in grams per mile measured over the

applicable test cycle expressed as CO2 equivalent (CH4

emissions times 23)

MAC (dir) = Allowance in grams per mile CO2 equivalent for low leak A/C

system if applicable.

MAC (indir) = Allowance in grams per mile CO2 equivalent for improved A/C

system if applicable.

The gram per mile CO2 equivalent values for HFC(dir) for the PC/LDT1 and LDT2

classes are listed above in Table 6.1-1. These values are 3 grams per mile for

the near term standard and 8.5 grams per mile for the mid term standard.

As mentioned above, the CO2 equivalent reductions of A/C indirect emissions

from improved systems were derived from the NESCCAF study. In the

NESCCAF study, a factor was established for the exhaust CO2 emission

reductions determined by modeling the use of variable displacement

compressors per 100cc displacement. The factor was then adjusted depending

on the size of compressors in general use for each of the five vehicle categories.

For example, the small car category was assumed to use a compressor with a

150cc displacement. Therefore, the calculated value was adjusted upward by a

factor of 1.5. Staff is proposing that when certifying to the climate change

emission standards, manufacturers use the factor derived from the NESCCAF

study (adjusted for California A/C use) and adjust it according to the size of the

A/C compressor used in their vehicles. In grams per mile CO2 per 100cc of

compressor displacement, the factor is equal to 5 for the combined UDDS cycle

and highway cycle.

Regarding emissions of N2O and CH4, preliminary emission rates for these gases

are contained in the technical support document. Staff is proposing that

manufacturers use these emission rates when demonstrating compliance, rather
Initial Statement of Reasons

August 6, 2004

122

than measuring them when testing their vehicles. Manufacturers can retain the

option to measure these gases if they believe that their vehicles emit at lower

emission rates or they have incorporated technologies to reduce N2O and/or CH4

emissions.

Similar to the LEV II requirements, when complying with the climate change

requirements, manufacturers must separately calculate the average fleet

emissions for their PC/LDT1 and LDT2 classes to determine compliance with the

standards. Also, similar to the LEV II non-methane organic gas fleet average

requirement, debits in one vehicle class may be offset by credits earned in the

other. In addition, overall debits occurring during the phase-in periods for both

the near and mid-term standards need not be offset prior to one year after the

applicable phase-in period has ended. Similarly, credits will be discounted by 50

percent the second year after accrual, another 50 percent the third year after

accrual, and fully discounted in the fourth year.

Small Volume, Independent Low Volume, and Intermediate Volume

manufacturers would not be required to comply with the climate change

requirements until the final year of the phase-in, that is in 2016. Based on the

requirements of AB 1493, staff interpreted the language to require that these low

volume manufacturer offerings need to be preserved in the marketplace to

ensure continued consumer choice of specialty vehicles. Given their more

limited resources to make major revisions to their powertrains, it was also

important to provide such manufacturers with greater lead time to make

improvements to their products. In addition, staff needed to consider that major

volume manufacturers could produce specialty offerings in direct competition with

these smaller manufacturer offerings, but offset their potentially poorer GHG

emission performance by making other easier to control cars in their fleet

incrementally cleaner. These small volume manufacturer offerings also tend to

be high performance vehicles.

Given these constraints, staff decided to require these smaller manufacturers to

meet the average CO2 equivalent emissions of all 2012 comparable vehicles

produced by the major vehicle manufacturers, beginning in 2016. In determining

the group of comparable vehicles, staff would consider principally weight and

horsepower to weight ratio in determining a comparable vehicle. A specialty low

volume vehicle that utilizes a powertrain (at least the engine, transmission and

related controls) from a major manufacturer from the same model year would be

considered compliant with the GHG emission standards if it adopted the package

without modifications. Should a comparable vehicle not be available from a large

manufacturer, the small volume manufacturer would be required to meet the

2012 emission standard for large volume manufacturers in 2016 and beyond.
Initial Statement of Reasons

August 6, 2004

123

6.3.A Aggregation Provisions for Small Volume Manufacturers

The LEV II program currently allows small volume manufacturers to meet less

stringent requirements than those applicable to larger manufacturers in

recognition that small volume manufacturers have fewer resources and product

line flexibility to meet these requirements.

The areas in which a small volume manufacturer receives special treatment

include: (1) the application of the fleet average non-methane organic gas

(NMOG) requirements; (2) the phase-in requirements for the LEV II exhaust and

evaporative emission standard; (3) the optional durability demonstration

requirement for small volume manufacturers in the certification test procedures;

and (3) the optional in-use verification testing requirement for small volume

manufacturers. Small volume manufacturers are also not subject to zeroemission vehicle (ZEV) requirements.

Currently if 10 percent or more of a small volume manufacturer is owned by a

larger manufacturer, that small volume manufacturer is not eligible to use the

optional durability demonstration requirements or in-use verification testing

requirements. Rather, the larger manufacturer assumes responsibility for

compliance by the small volume manufacturer. Aggregation provisions do not

apply for the purpose of applying small volume manufacturer fleet average

requirements and phase-in requirements because of an error of omission by ARB

during the 1998 LEV II rulemaking.

Staff is currently proposing that the 10 percent aggregation criteria apply for the

purpose of determining a small volume manufacturer’s obligations under this

GHG rulemaking. Because the GHG requirements do not begin until the 2009

model year, the definition of a small volume manufacturer in title 13, CCR section

1900 has been changed to include a 10 percent aggregation provision that

begins with the 2009 model year. This change will also apply for the purpose of

determining compliance with the LEV II fleet average NMOG requirements

beginning with the 2009 model year. Including a 10 percent aggregation criteria

in California’s definition of a small volume manufacturer will provide consistency

with California’s definition of an Independent Low Volume Manufacturer, which

contains this criteria and it will harmonize California’s treatment of small volume

manufacturers with that of the U.S. Environmental Protection Agency. Finally,

adopting aggregation criteria for small volume manufacturers should not cause

undue hardship for manufacturers because of the long lead time involved. (This

change will not affect the phase-in requirements for the LEV II exhaust and

evaporative emission standard, which will be fully phased-in in the 2007 model

year.)
Initial Statement of Reasons

August 6, 2004

124

6.3.B Test Groups

Similar to LEV II, certification to the GHG requirements will be determined by

demonstrating compliance using GHG vehicle test groups. In LEV II, test groups

can include several vehicle models with different engine displacements and

inertia weights. Since the vehicle model within the test group with the “worst

case” emissions is selected to represent the test group emissions, compliance

with the emission standards is assured for all vehicles in the test group.

However, GHG emissions can vary depending on vehicle inertia weight and

engine displacement, therefore test group emissions determined by a “worst

case” vehicle may overstate the GHG emissions of the test group .

Ideally, test groups composed of a single vehicle model would provide the most

accurate determination of a manufacturer’s fleet average GHG emissions.

However, this would present a significant test burden for manufacturers.

Therefore, staff proposes to maintain the current LEV II definition of a test group

and modify the protocol for choosing emission data vehicles, thus retaining

flexibility for the manufacturers in determining the composition of their test

groups. Since manufacturers may choose to include different vehicle models

with different inertia weights and engine displacements within their test groups,

selection of a single representative GHG emission data vehicle for the test group

is problematic. Therefore, staff proposes that the “worst case” vehicle within the

test group be selected for emission testing (generally the vehicle with the highest

inertia weight and largest engine displacement). However, manufacturers would

be allowed to select as many additional vehicles in the test group as they wish

whereby their emissions would be weighted with the emissions of the “worst

case“ vehicle to determine the GHG emissions of the test group. The emissions

of the “worst case” vehicle would be weighted to represent the entire test group

minus that percentage of the test group represented by the additional emission

data vehicle(s). When selecting the additional vehicle(s), manufacturers would

be required to provide data demonstrating that weighting the emissions of the

vehicles would more accurately represent the GHG emissions of the test group.

6.4 Treatment of Upstream Emissions

Historically, alternative fuel vehicles have been an important but small

percentage of total light-duty vehicle sales. Therefore, staff originally considered

treating all fuels as having the same upstream emissions until an alternative fuel

reached a minimum sales threshold. The primary benefit of such an approach

was simplicity. Comments on the proposal, however, indicated that this

approach did not appropriately account for the upstream benefits of the initial

vehicles, and thus did not provide the proper incentives to manufacturers. Staff

agrees that it is more accurate, and fair, to consider the relative upstream

emissions for all vehicles produced, without consideration of a minimum

threshold.
Initial Statement of Reasons

August 6, 2004

125

Approximately 31 percent of the total CO2 emissions associated with

conventional gasoline-fueled vehicles are a result of the upstream emissions

(diesel-fueled vehicles result in approximately the same upstream emissions

fraction as gasoline vehicles.) To maintain simplicity, staff proposes to use the

upstream emissions fraction of conventional fuels as a “baseline” against which

to compare the relative merits of alternative fuel vehicles. Therefore, the

emissions standards as described in Table 6.1-5 above do not directly reflect

upstream emissions. Rather, when certifying gasoline or diesel-fuel vehicles

manufacturers would report only the “direct” or, “vehicle” emissions. For

alternative fuel vehicles, however, exhaust CO2 emissions values will be adjusted

in order to compensate for the differences in upstream emissions. This approach

simplifies the regulatory treatment of gasoline vehicles, while at the same time

allowing for appropriate treatment of alternative fuel vehicles.

For vehicles other than zero emission vehicles, the exhaust CO2 emissions will

be multiplied by the CO2 Adjustment Factor for the alternative fuel, as shown in

Table 6.4-1. These factors reflect the upstream benefit (or disbenefit) of the

alternative fuel, relative to conventional vehicles. Manufacturers may use

different factors if they can demonstrate to the Executive Officer that the vehicle

model being certified produces substantially different emission values.

Table 6.4-1. Upstream Adjustment Factor for Alternative Fuel Vehicles1

Fuel

Fuel Cycle

Emission Ratio

(upstream g CO2/

exhaust g CO2)

Fuel Cycle

Factor

(g/g CO2)

CO2 Adjustment Factor

- ratio to RFG

(g/g CO2)

Fuels with Direct CO2 Emissions

Conventional vehicles

(RFG) 0.31 1.31 1.00

Compressed natural

gas (CNG) 0.35 1.35 1.03

Liquid propane gas

(LPG) 0.17 1.17 0.89

E85, corn -0.04 0.96 0.74

Fuels with No Direct CO2 Emissions 2

Electricity n/a n/a 115 g/mi

Hydrogen –ICE3 n/a n/a 290 g/mi

Hydrogen – Fuel cell3 n/a n/a 210 g/mi

1 Emission estimates from TIAX, LLC.

2 Emission estimates have been reduced by 31 percent to be consistent with the Adjustment Factors for vehicles with

direct emissions.

3 Assumes a fuel usage of 32 miles per kilogram for an internal combustion engine vehicle and 45 miles per kilogram

for a fuel cell vehicle (DOE Fuel Economy Guide). Hydrogen produced by on-site steam reformation which is

consistent with the goals set forth by the California Hydrogen Economy Blueprint Plan for the 2009 timeframe.

Hydrogen production emission estimate from TIAX, LLC.
Initial Statement of Reasons

August 6, 2004

126

For example, assume that a mid-size LPG passenger car has measured exhaust

emissions of 192.0 g/mile CO2. The adjusted emissions value would then be:

192.0 g/mile * (0.89) = 170.9 g/mile Adjusted CO2

The manufacturer would use the value of 170.9 g/mile CO2 to determine

compliance with the applicable standards.

Several technologies require special consideration. First, since the CO2 exhaust

emissions of ZEVs (BEVs or hydrogen fuel cells) are zero, manufacturers would

use the default values shown in Table 6.4-1. As mentioned above, a

manufacturer may petition the Executive Officer to adjust the values presented in

the Table 6.4.1 to reflect differences in specific vehicle operating characteristics.

Second, emissions from vehicles that can operate on two alternate fuels, (e.g., a

CNG-hydrogen internal combustion vehicle) will be calculated based on the

worst-case fuel.

6.5 Early Reduction Credits

AB 1493 directs that emission reduction credits be granted for any reductions in

GHG emissions achieved prior to the operative date of the regulations.

Specifically, the bill states that in developing the regulations, the state board shall

“Grant emissions reductions credits for any reductions in greenhouse gas

emissions from motor vehicles that were achieved prior to the operative

date of the regulations...to the extent permitted by state and federal law

governing emissions reductions credits, by utilizing the procedures and

protocols adopted by the California Climate Action Registry.

The bill further provides that:

“the state board shall utilize the 2000 model year as the baseline for

calculating emission reduction credits.”

This section presents the ARB staff proposal for implementing this element of the

legislation.

6.5.A Background

The early credit provision of the bill raises several complex issues that need to be

addressed. First of all, how should the regulation take into account the fact that

the various manufacturer fleets have different initial GHG emission levels? As

noted in the technology assessment and standard development discussions

above, GHG emissions are affected by the average size and weight of a

manufacturer’s fleet, and also by the level of technology employed on the
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127

vehicles. Thus the model year 2000 unregulated GHG emissions vary across the

different manufacturers.

This in turn leads to a dilemma. If one uses each manufacturer’s actual model

year 2000 emissions as the base against which to measure reductions, then a

manufacturer could earn early reduction credit even though it had higher

emissions than another manufacturer that did not earn credit. Imagine, for

example, that the model year 2000 fleet average emissions are 400 grams per

mile for manufacturer A and 300 grams per mile for manufacturer B. Using

actual emissions as the base, then manufacturer A would earn credit for reducing

its emissions to 350, even though it still had higher emissions than manufacturer

B. Manufacture B would in effect be penalized for having lower initial emissions.

If one instead uses the average model year 2000 emissions across all

manufacturers, however, other issues arise. Building on the previous example,

imagine that average model year 2000 emissions across all manufacturers are

350 grams per mile. In that scenario, manufacturer A would earn no credit for

reducing its emissions from 400 to 350, but manufacturer B would earn credit

even if it did nothing and its emissions remained at 300.

This dilemma is related to the second issue to be addressed, which is should the

early credit provision reward actions that were taken prior to the passage of the

bill, or encourage manufacturers to make future changes? The answer to this

question affects the “start date” for the granting of credits. If the intent is to

encourage changes, then given the 2002 passage of the bill the earliest date by

which changes could be reflected in the manufacturer’s production vehicles

would be the 2005 or 2006 model years. If on the other hand the intent is to

reward past actions, then the granting of early credits could go back as far as

one wanted to go.

Finally, careful consideration is needed to ensure that any apparent reductions

are real. For example, one possible approach would be to provide credit to

manufacturers for exceptional vehicles whose GHG emissions are below a

certain threshold. Depending on what happens with the remaining vehicles in the

manufacturer fleet, however, it is possible that a manufacturer could build large

numbers of such low emission vehicles and still have an overall emission

increase.

In attempting to sort through these and other issues, ARB staff began by

evaluating alternative credit structures based on two basic approaches:

generating credits based on industry-average levels, or generating credits based

on automaker-specific emissions. Staff also explored the various issues related

to program implementation start date.

As part of its background research, staff attempted to gain an understanding of

legislative intent through review of documentary information and also through
Initial Statement of Reasons

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128

discussions with stakeholders familiar with the 2002 legislative debate. Staff also

solicited comments regarding the various program design issues at a public

workshop held on September 18, 2003. General comments received during this

workshop suggested that the early credit program should meet existing state and

federal early credit criteria. That is, in order to earn credit reductions must be

real, surplus, verifiable, enforceable, and quantifiable. In addition, commenters

suggested that the program should push technology development and only

reward reductions achieved over an automaker’s entire fleet. One automaker

recommended that the early emission reduction credit program should be

consistent with the form of the standard adopted for the 2009 model year.

Taking into account all of the information available, ARB staff has developed a

proposed approach that is intended to meet the intent of the legislation while

avoiding undesirable results. More specifically, the ARB staff has sought to

ensure that early reduction emission credits are real, surplus, verifiable,

enforceable, and quantifiable, while at the same time rewarding early actions

taken that push commercialization of technologies to reduce climate change

emissions.

6.5.B Early Credit Program Staff Proposal

ARB staff proposes that (1) credit for early emission reductions should be

available for model years 2000 through 2008, with manufacturers allowed to opt

in to the program during any model year during this timeframe, and (2) the

baseline against which manufacturer emissions are measured should be the fully

phased in near term standard.

As noted in Table 6.1-5 above, staff has proposed that the fully phased in near

term standard for passenger cars and T1 trucks should be 233 grams per mile

CO2 equivalent, and for T2 trucks should be 361 grams per mile. Thus under the

staff early credit proposal a manufacturer’s fleet average emissions would be

compared to these standards. If a manufacturer has fleet average emissions in a

specific model year lower than these standards, the manufacturer would earn

early compliance credits. Any emission reduction early credits earned could be

used during model years 2009 through 2014, or traded to another manufacturer.

To ensure that the regulation ultimately achieves the greatest possible climate

change reductions, staff proposes that the credits generated by early compliance

retain full value through the 2013 model year. These credits will then be worth

50 percent of their initial value in MY 2014, 25 percent of their initial value in MY

2015 and have no value thereafter.

The proposed program thus is consistent with the form of the standard proposed

for 2009. Staff has chosen this approach because the two tier form of the

standard represents staff’s best thinking as to how to balance among a number

of competing concerns, and as such it is appropriate to apply it during the early

credit period as well.
Initial Statement of Reasons

August 6, 2004

129

Staff notes that the legislative language directs that the 2000 model year be used

as the baseline for calculating early emission reduction credits. Staff believes

that among the alternatives available, the proposed approach best meets the

intent of the legislation. First of all, the staff proposal uses model year 2000 as

the start date for the granting of credits. Second, staff’s understanding of the

legislative intent underlying the early credit proposal is that the legislature wanted

to ensure that automakers would not be penalized for having taken aggressive

steps to reduce climate change emissions prior to 2009. This would have been

of particular concern if the 2009 standard required automakers to make a uniform

percentage reduction against their own manufacturer-specific starting emissions.

Given that the proposed 2009 standards do not impose an automaker-specific

uniform percent reduction, however, the concern that actions taken prior to the

program’s adoption would adversely affect an automaker’s position is no longer

warranted. Meanwhile, using model year 2000 data to set the standard against

which early credits are measured can lead to undesirable outcomes no matter

how the standard is structured.

6.6 Alternative Compliance Strategies

This section describes the role of alternative compliance in the climate change

regulation, the criteria proposed by staff to evaluate alternative methods of

compliance, the types of projects that will be considered, and how emission

reductions achieved by using an alternative compliance strategy can be used to

earn credits for meeting the Climate Change regulation.

6.6.A Introduction

AB 1493 requires that the regulations:

“provide flexibility, to the maximum extent feasible consistent with this section,

in the means by which a person subject to the regulations ... may comply with

the regulations. That flexibility shall include, but is not limited to, authorization

for a person to use alternative methods of compliance with the regulations.”

Proposed criteria and guidelines for alternative methods of compliance are

described below. These guidelines provide additional flexibility for

manufacturers, yet are also structured in a manner that safeguards against

strategies that do not meet the goals of the legislation. These goals include:

• Achieving the maximum feasible reduction of climate change emissions from

passenger vehicles and light-duty trucks and other vehicles used for

noncommercial personal transportation in California,

• Providing flexibility, to the maximum extent feasible, in the means by which a

manufacturer may comply with those reductions, and
Initial Statement of Reasons

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130

• Ensuring that any alternative methods of compliance achieve equivalent or

greater reductions in emissions of GHGs as the regulations.

6.6.B Purpose of Alternative Compliance Strategies

Alternative compliance strategies are intended to provide auto manufacturers

with flexibility in meeting the Climate Change regulations. Greenhouse gas

emission reductions achieved using an alternative compliance strategy or project

will be verified by the ARB in order to qualify as alternative compliance credits. A

manufacturer can then use the credits to meet the Climate Change regulation.

As noted above, AB 1493 calls for the regulation to provide flexibility “to the

maximum extent feasible consistent with this section." Thus the use of

alternative compliance strategies must not undercut the primary purpose of the

regulation, which is to achieve GHG reductions from motor vehicles.

Accordingly, the staff proposed alternative compliance program is limited to the

vehicles that are regulated through AB 1493, and their fuels. This is to ensure

that the program does not dilute the technology-forcing nature of the regulation,

since the goal is to improve the vehicles themselves.

6.6.C Elements of the Staff Proposal

The following sections discuss in turn the major features of the staff proposal:

• The primary flexibility provisions (aggregating, averaging, banking and

trading)

• Criteria for awarding credit to alternative compliance projects

• Eligibility considerations

• The application process

• Program approach

• Issuance and use of alternative compliance credits

• Recordkeeping, auditing and enforcement requirements.

Aggregating, Averaging, Banking and Trading Greenhouse Gas Emissions

As required by the legislation, the staff proposal allows manufacturers significant

flexibility in complying with the proposed emission standards. Specifically, the

staff proposal would allow manufacturers to average emissions across their

vehicle models, aggregate the different climate change pollutants, bank excess

credits for later use, and trade credits in order to meet the climate change

emission standards. In addition, manufacturers would have the ability to earn

early compliance credits.

Criteria for Awarding Credit to Alternative Compliance Projects

Consistent with existing credit trading programs, prior to approval, any alternative

compliance strategy must meet the criteria outlined below. Under such an
Initial Statement of Reasons

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131

approach, if any one criterion is not met, the project would not be approved. The

criteria are:

Real or Additional. Real or additional emission reductions are those that have

actually occurred, not emissions that could have been emitted but were not or

are avoided emissions. This means that the emission reductions result from

actions taken that are beyond the course of normal activity such that the

emission reductions are not considered "business as usual."

Quantifiable. Quantifiable means that the amount of the emission reductions can

be measured with reasonable certainty. This would involve determination of a

baseline for each project. Quantification would then involve determining the

emissions associated with the alternative compliance project.

Finally, because upstream emissions play a role in the GHG emissions from

mobile sources, alternative compliance projects will use a baseline that accounts

for upstream emissions. For a discussion of these adjustment factors, see

section 6.4. These values will be periodically reviewed in order to ensure that

they reflect changes in fuel production and distribution.

Regulatory Surplus. Emissions reductions must be surplus of any reductions

required by local, state or federal regulations or measures contained in a regional

air quality plan or government commitment or agreement.

Alternative compliance credits will be determined, verified, and applied to a

manufacturer’s climate change obligation on an annual basis.

Enforceable. Enforceable means that the reductions can be independently

verified and are legally binding. Enforcement is an essential element of any

alternative compliance strategy. Projects thus must be accessible to inspection

by California staff. Details regarding enforcement and record keeping are

described below.

Permanent. Permanent means that the life of the emission reductions is

reasonably established and commensurate with the proposed use of the credits.

Projects should be “irreversible”; that is, the reductions achieved should not be

subject to backsliding or vulnerable to changes in external conditions. .

Evaluation of Non-Climate Change Emissions/Impacts. Staff will evaluate any

potential negative environmental impacts due to an alternative compliance

strategy. In order to receive approval for an alternative compliance project, it

must not result in any increase in criteria or toxic emissions as well as cause any

other negative environmental impacts, especially in areas with environmental

justice concerns.
Initial Statement of Reasons

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132

Leakage. Leakage occurs when a project changes the availability or quantity of a

product or service that results in changes in GHG emissions elsewhere 1. Staff

will explore ways to evaluate leakage and to ensure that alternative compliance

strategies do not increase GHG emissions outside the boundaries of the

alternative compliance project.

6.6.D Eligibility Considerations

Project Location. Projects must be located in California to be eligible as

alternative methods of compliance. This is to ensure that the ARB can easily

access the project location in order to verify compliance with the alternative

compliance plan.

Applicant Eligibility. In order to ensure some level of prior project review, only

companies regulated by AB 1493 (automakers) will be permitted to apply for

alternative compliance credits. In fleet applications, automakers must partner

with a fleet and/or a fuel provider to submit an application. In consumer

applications, automakers can apply directly to the ARB.

Vehicle Eligibility. To ensure maximum focus on improvements to vehicles, only

those vehicles regulated under AB 1493 are eligible for alternative compliance

credits. This includes model year 2009 and later passenger vehicles and lightduty trucks, and other vehicles used for noncommercial personal transportation

in California. Projects involving commercial fleets, such as taxi or delivery

services, that use 2009 and later passenger vehicles and light-duty trucks would

be eligible.

Project Eligibility. The ARB views vehicles and fuels as a system. Therefore to

provide maximum flexibility while still focusing on improvements to the new

vehicle fleet, staff proposes that eligible projects be limited to those that achieve

GHG reductions through documented increased use of alternative fuels in eligible

vehicles.

Staff evaluated two such scenarios. The first, which we refer to as alternative

fuel vehicle projects, involves increased use of alternative fuels in bi-fuel, flex fuel

and grid connected hybrid electric vehicles. The second, referred to as

alternative fuel projects, involves increased use of alternative fuels in

conventional vehicles. Staff has concluded that it is appropriate to grant credit

for the former (alternative fuel vehicle projects) but not the latter.

 

1 World Resources Institute/ World Business Council for Sustainable Development. The

Greenhouse Gas Protocol. A Corporate Accounting and Reporting Standard - Revised Edition.

March 2004. For more information, visit www.ghgprotocol.org
Initial Statement of Reasons

August 6, 2004

133

Alternative Fuel Vehicle Projects

Dedicated alternative fuel vehicles are vehicles that can only operate on an

alternative fuel, such as CNG or hydrogen vehicles. Because such vehicles

always use the alternative fuel, the calculation of their emissions is

straightforward and are included as part of a manufacturer's baseline fleet within

the climate change regulation. Such vehicles earn GHG reduction credit based

on their tailpipe and upstream emission characteristics, as discussed in section

6.

Bi-fuel vehicles are vehicles that can operate on two different fuels, typically

gasoline and an alternative fuel. Such vehicles have two tanks, one for gasoline

and one for either natural gas or propane, depending on the vehicle. The

vehicles can switch between the two fuels. In the future, we may see bi-fuel

vehicles that can switch between two alternative fuels.

Flex-fuel vehicles are vehicles that that can be fueled with gasoline or, depending

on the vehicle, with either methanol (M85) or ethanol (E85). The vehicles have

one tank and can accept any mixture of gasoline and the alternative fuel.

Currently, due to a lack of infrastructure and cost considerations, most fleets do

not use the alternative fuel in these types of vehicles. Therefore, in ARB

emission control regulations the usual baseline assumption is that these vehicles

are using the “dirtier” fuel and are not entitled to any credit for the use of

alternative fuels.

Grid-connected hybrid electric vehicles (GHEVs) are similar to bi-fuel vehicles in

that two "fuels" are used, gasoline and electricity. As with bi-fuel vehicles the

climate change benefit of GHEVs is determined by the extent in which the

alternative fuel (electricity) is used. There are no GHEVs in production today.

Staff proposes that a project that ensures and documents the use of an

alternative, lower GHG emitting fuel in bi-fuel, flex fuel, or grid connected hybrid

vehicles would be eligible for alternative compliance credits. Thus the alternative

compliance program would encourage and reward fleets that use lower GHG

alternative fuels rather than using conventional gasoline.

Staff recognizes that the GHG and criteria pollutant emissions associated with

the production and use of alternative fuels will vary greatly depending on the

specific feedstock used as well as the production and distribution methods

employed. In addition, the use of crops as feedstock for alternative fuels has

broader implications for land use, water supply, pesticide use, and other critical

factors. It is clear that the evaluation of alternative fuel projects will need to

encompass upstream as well as tailpipe emissions.

Credits may not be earned that are merely the result of shifting the same volume

of fuel from one use to another. For instance, a fuel provider cannot take the
Initial Statement of Reasons

August 6, 2004

134

same volume of fuel it would have used in blends and instead use it in bi-fuel

vehicles. This does not achieve any net decrease in GHG emissions but could, if

left unchecked, provide a manufacturer with a substantial number of credits.

Alternative Fuel Projects

Alternative fuel projects are those that use different conventional fuel blends,

such as increased ethanol in gasoline, to decrease GHG emissions from model

year 2009 and later conventionally fueled vehicles. The staff proposal would not

award credit for such projects. Given the fact that the “business as usual”

ethanol content in gasoline will vary according to economics, refinery strategies

and the status of the oxygenate waiver, staff believes that it would be difficult if

not impossible to ensure that reductions associated with the use of such blends

are real and surplus, as required under the criteria outlined above. In addition

the effect of such blends on criteria air pollutants is of concern. This uncertainty

persuaded staff to recommend against such an approach.

6.6.E Program Approach

The staff proposal would allow manufacturers to make use of an optional

alternative compliance mechanism. Under this approach, manufacturers that

demonstrate the use of alternative fuels in vehicles in a given model year will be

allowed to certify vehicles in the following year based at the appropriate

alternative fuel emission level.

Specifically, beginning with the 2010 model year, a manufacturer that

demonstrates that a bi-fuel, fuel-flexible, dual-fuel, or grid-connected hybrid

electric GHG vehicle test group will be operated in use in California on the

alternative fuel may be eligible to certify those vehicles using the optional

alternative compliance procedure, upon approval of the Executive Officer.

To demonstrate that bi-fuel, fuel-flexible, dual-fuel, or grid-connected hybrid

electric vehicles within a GHG vehicle test group will be operated in use in

California on the alternative fuel, the manufacturer shall provide data that shows

the previous model year sales of such vehicles to fleets that provide the

alternative fuel on-site or, for grid-connected hybrid electric vehicles, to end users

with the capability to recharge the vehicle on-site. This data shall include both

the total number of vehicles sales that were made to such fleets or end users

with the capability to recharge the vehicle on-site and as the percentage of total

GHG vehicle test group sales. The manufacturer shall also provide data

demonstrating the percentage of total vehicle miles traveled by the bi-fuel, fuelflexible, dual-fuel, or grid-connected hybrid electric vehicles sold to each fleet or

to end users with the capability to recharge the vehicle on-site, in the previous

model year using the alternative fuel and using gasoline.
Initial Statement of Reasons

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135

6.6.F Application Process

In order to obtain alternative compliance credits, a manufacturer shall first submit

a Climate Change Alternative Compliance Application to the ARB. The purpose

of the application is to determine the fleet's baseline emissions as well as the

projected reductions in GHG emissions anticipated from the alternative

compliance project. The baseline emissions are those GHG emissions that

would have been emitted in the absence of the alternative compliance project.

ARB will use the information provided to calculate the baseline emissions and the

GHG emission reductions that will result from the project.

6.6.G Issuance and Use of Alternative Compliance Credits

The proposed climate change regulations will apply to MY 2009 and later

passenger cars and light duty trucks. Alternative compliance strategies can only

be applied to vehicles subject to the climate change regulation, therefore, this

program will take effect when these vehicles are available. Prior to that date,

ARB staff will work with manufacturers to assist in developing project applications

that meet the ARB's requirements.

6.6.H Recordkeeping, Auditing, and Enforcement Requirements

Fleet Programs. In cases where an automaker is partnering with a fleet, the fleet

operator will be responsible for storing and maintaining data records for each

vehicle and the fuel used. The ARB must also be afforded access to audit any

files or records created to comply with recordkeeping requirements or require

vehicle operators to submit such records to the ARB upon request. The ARB

must also be afforded access to inspect the vehicles at vehicle operators'

facilities. An agreement governing the ownership and liability of alternative

compliance credits must be reached between the participating parties and

included with the application. A tracking system will need to be established to

track the banking and trading of credits. The California Climate Action Registry

may also be a resource for tracking alternative compliance strategy credits.

Consumer Programs. In cases where an automaker will be selling or leasing

vehicles eligible for credits directly to consumers, the automaker will be

responsible for proposing a data collection plan that will represent the vehicles on

the road including the miles traveled and the fuel used. Upon ARB approval of

this data collection plan, automakers must submit the data to the ARB prior to

receiving credits toward compliance with the climate change regulation.

Ownership and Liability of Alternative Compliance Strategy Credits. Because an

automaker will need to partner with a fleet and/or fuel provider to apply for

alternative compliance credits, an ownership agreement must be worked out

between the participating parties and included with the application.
Initial Statement of Reasons

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136

California Climate Action Registry. Senate Bill (SB) 1771 (Sher, Chapter 1018,

Statutes of 2000) established the California Climate Action Registry (Registry)

with technical changes being made to the statute in SB 527 (Sher, Chapter 769,

Statutes of 2001). The Registry is a non-profit voluntary registry for GHG

emissions. The purpose of the Registry is to help companies and organizations

with operations in the state to establish GHG emissions baselines against which

any future GHG emission reduction requirements may be applied.

The Registry encourages voluntary actions to increase energy efficiency and

decrease GHG emissions. Using any year from 1990 forward as a base year,

participants can record their GHG emissions inventory. The State of California, in

turn, will offer its best efforts to ensure that participants receive appropriate

consideration for early actions in the event of any future state, federal or

international GHG regulatory scheme. Registry participants include businesses,

non-profit organizations, municipalities, state agencies, and other entities.

ARB is coordinating with the Registry and the California Energy Commission on

our mobile source climate change regulations, in particular alternative

compliance strategies. Projects certified by the Registry under their other

programs are not automatically eligible to receive alternative compliance strategy

credits under ARB's mobile source climate change regulations. However, staff is

continuing to explore ways to involve the Registry in the alternative compliance

strategy criteria and implementation.
Initial Statement of Reasons

August 6, 2004

137

7 REGULATORY ALTERNATIVES

7.1 Less Stringent or No New Vehicle Standards

One alternative considered was to propose less stringent or no new vehicle

standards. This alternative was rejected because Chapter 200, Statutes of 2002

(AB 1493) requires the Board to adopt regulations that achieve the maximum

feasible and cost effective reduction of GHG emissions from new motor vehicles.

The staff analysis has demonstrated that the reductions achieved under the staff

proposal are both feasible and cost effective. Therefore the alternative of no or

less stringent standards was rejected because it would not achieve the maximum

reductions and therefore would fail to meet the statutory requirement.

7.2 More Stringent New Vehicle Standards

Staff also considered proposing more stringent vehicle standards. This could be

accomplished by shortening the phase-in period, or by building into the standard

some degree of early penetration of technologies that the staff technical analysis

determined would not be available for widespread application in the near and/or

mid term periods. Staff concluded that in either case, manufacturers would have

a very difficult time incorporating the needed technologies across their fleet as

rapidly as would be necessary. Comments received from manufacturers and

their consultants on the June 14, 2004 draft staff proposal, which used a threeyear phase in schedule rather than the four-year phase in schedule

recommended now, served to reinforce this point. Staff therefore rejected this

alternative on the grounds that more stringent standards would not be technically

feasible.

7.3 Standards for Mobile Air Conditioner Refrigerant Emissions

Staff also considered proposing standards that only regulate mobile air

conditioner refrigerant emissions. While the staff analysis has shown that

regulation of mobile air conditioner refrigerant emissions can achieve significant

GHG reductions, staff rejected this approach for two reasons. First, this would

amount to a mandate to use specific technologies or equipment, rather than a

performance standard. In general staff favors performance standards, which

provide manufacturers flexibility to meet any given remission reduction target in

the most cost-effective manner. Second, as noted above the staff analysis has

identified a variety of other vehicle technology improvements that are feasible

and cost effective, and would result in greater GHG emission reductions.

Therefore the alternative of mobile air conditioner refrigerant regulation also

failed to meet the statutory requirement to achieve the maximum feasible and

cost effective reductions.
Initial Statement of Reasons

August 6, 2004

138

7.4 Summary

Staff has performed a thorough analysis of possible ways to reduce GHG

emissions from motor vehicles, quantifying the emission reductions achieved and

their cost. No alternatives or combination of alternatives have been identified

that would be equally effective in achieving the emission reductions projected

under, and less burdensome to affected private persons than, the staff proposal.
Initial Statement of Reasons

August 6, 2004

139

8 ENVIRONMENTAL IMPACTS

This chapter presents the emissions impacts of the proposed regulation, along

with the baseline emissions inventory. Included is a discussion of the methods

used to develop the inventory and assess impacts. Also included is an

assessment of the impacts on upstream emissions and other environmental

media.

8.1 Baseline Inventory Development

Staff has estimated the baseline climate change emissions from light duty

vehicles for calendar years 2010, 2020 and 2030. These inventories are shown

in Table 8.1-1. These inventories can also be expressed in terms of total CO2

equivalent emissions based on the global warming potentials presented in Table

2.3-1 in section 2.3, Global Warming Potentials. Table 8.1-2 shows the total CO2

equivalent emissions in tons per day. These inventories represent what

emissions from the light duty fleet are expected to be without the proposed

regulation, and serve as a baseline from which to estimate the benefits of the

proposed regulation. The following subsections describe how these inventories

were developed and validated. Additional detail is presented in the Technical

Support Document.

8.1.A CO2 and Methane

Staff has used the EMFAC2002 mobile source emissions model, version 2.2

(April 2003), to estimate the inventory for CO2 and methane. The EMFAC model

estimates the emissions of CO2 and methane based on data collected from inuse vehicle testing at ARB’s Haagen-Smit laboratory over various driving cycles

that simulate real world conditions. Methane emission rates are derived from

total hydrocarbon rates by the use of conversion factors based on speciation

profiles.

8.1.B Nitrous Oxide

The ARB has collected N2O emissions data from vehicles that have been tested

as part of the ARB's 16th and 17th Vehicle Surveillance Projects (VSPs) at the

Haagen-Smit Laboratory in El Monte, California. The purpose of the emissions

testing effort is to gain a better understanding of the factors that lead to the

formation of N2O, and to develop applicable emission factors that can be used to

develop an emissions inventory. The VSPs are conducted to measure in-use

emissions from a fleet of light-duty gasoline vehicles including passenger cars

and light-duty trucks up through 8,500 lb. GVWR. A total of approximately 120

light duty cars and trucks have been tested.
Initial Statement of Reasons

August 6, 2004

140

Table 8.1-1: Baseline Inventory for Light Duty Motor Vehicles

Calendar Year 2010 Emissions in Tons per Day2

CH4 CO2 N2O HFCs

PC/T1 (Passenger Cars and

Trucks 0-3750 lb. LVW3)

26 296,320 12 4

T2 (Trucks 3751 lb. LVW3- 8500

lb. GVWR4)

11 120,760 8 1

Total Light Duty 37 417,080 20 5

Calendar Year 2020 Emissions in Tons per Day2

CH4 CO2 N2O HFCs

PC/T1 (Passenger Cars and

Trucks 0-3750 lb. LVW3)

12 341,640 7 5

T2 (Trucks 3751 lb. LVW3 -

8500 lb. GVWR4)

7 143,510 4 2

Total Light Duty 19 485,150 11 7

Calendar Year 2030 Emissions in Tons per Day2

CH4 CO2 N2O HFCs

PC/T1 (Passenger Cars and

Trucks 0-3750 lb. LVW3)

8 390,600 5 6

T2 (Trucks 3751 lb. LVW3 -

8500 lb. GVWR4)

5 171,670 4 2

Total Light Duty 13 562,270 9 8

 

2 Annual average

3 Loaded vehicle weight equals curb weight plus 300 lb.

4 It is recognized that there are a few vehicle models over 8,500 lbs. gross vehicle weight rating (GVWR) that are used

for noncommercial transportation and are thus subject to the climate change regulations. Likewise, there are some

vehicles weighing less that 8,500 lbs. that are used in commercial service. It does not appear possible to accurately

identify these two sets of vehicles from license registration records. Because both sets of vehicles make up a very

small portion of the light duty fleet, we believe that no significant error is introduced by defining the inventory as all

vehicles up to 8,500 lbs.
Initial Statement of Reasons

August 6, 2004

141

Table 8.1-2: CO2 Equivalent Inventory for Light Duty Motor Vehicles

2010

(tons per day)

2020

(tons per day)

2030

(tons per day)

PC/T1 (Passenger Cars and

Trucks 0-3750 lb. LVW5)

305,400 350,500 400,000

T2 (Trucks 3751 lb. LVW5 -

8500 lb. GVWR6)

124,800 146,900 175,500

Total Light Duty 430,200 497,400 575,500

Both the NOX and N2O emission rates measured as part of the VSPs have been

used to develop the N2O inventory. Staff utilized statistical analysis software to

develop a correlation between the grams per mile emission rate of NOX and the

grams per mile emissions of N2O. The resulting correlation equation was then

applied to the model year specific grams per mile NOX emission rates estimated

by EMFAC 2002, version 2.2 (April 2003), in order to develop model year specific

grams per mile N2O emission factors. Each model year’s N2O emission factor

was then multiplied by an estimate of miles per day driven by those model year

vehicles during the calendar year to yield a tons per day inventory for N2O.

8.1.C Hydrofluorocarbons

ARB staff has developed a method to estimate direct emissions of HFC-134a

from vehicular AC systems in California that is based on 1) data on HFC-134a

consumption by nine government and commercial fleets, 2) surveys of 966

vehicle owners on their AC system repair incidence, 3) data on repair incidence

among 12,000 fleet vehicles in California, and 4) information from dismantlers.

The data were used to provide estimates of the averages of the parameters in a

mass balance model that equates vehicular lifetime emissions to lifetime inputs

of HFC-134a. That model is expressed by:

LE = C * (1 - g + N * f)

where: LE is the lifetime (16-year) mass of refrigerant emitted from a vehicle

C is the AC system capacity (mass) for HFC-134a

“1” represents the initial charge at the time of manufacture

g is the fraction of C recovered by the dismantler

N is the number of times the vehicle is recharged during its life

f is the fraction of charge C missing (leaked or released) before each

recharging

The values obtained for the model parameters are:

 

5 Loaded vehicle weight equals curb weight plus 300 lb.

6 Gross vehicle weight rating
Initial Statement of Reasons

August 6, 2004

142

C -- 951 grams per vehicle

f -- 0.52

g -- .085 (assumes an average recovery of half the refrigerant present

in vehicles reaching the dismantling yards)

N -- 1 recharge over 16 yrs

This analysis yields direct emissions of 1.36 kg of HFC-134a per 16-year

average lifetime of an LDV in California. This is equivalent to 85 grams per year

of life per vehicle, although the emissions may not be uniform through the

average vehicular lifetime. However, since not all vehicles “last” 16 years, the

actual average annual emission rate among in-use vehicles is slightly different.

The ARB staff has estimated that rate by two methods. By taking into account

the fractions of the on-road population by model year and (separately) by using

HFC-134a consumption data, we arrived at 80 grams/year/vehicle.

All the numbers above reflect the vehicle fleet of 2003. Evolution in design or

assembly of AC systems that may be occurring now, and may continue in the

future as suggested by the industry, could lead to a different set of estimates if

the analysis were repeated in some future year. The current data do not allow us

to estimate how the future results would differ from those shown here.

These estimates reflect only emissions from vehicles and fugitive emissions

incidental to professional servicing. They do not include emissions due to

wastage during “do-it-yourself (DIY)” repairs of vehicles with HFC-134a systems

or due to leakage from vehicles with older R-12 systems that are recharged with

HFC-134a. These extra emissions may be substantial. Unfortunately, there are

no substantiated estimates of the overall importance of the excess DIY

emissions.

8.2 Emissions Benefits of Proposed Regulation

The emissions benefits are based on the projected reductions in CO2 equivalent

emission rates resulting from implementation of this proposed regulation. Using

the emission reductions required under the standard, as outlined in section 6,

and the proposed phase-in schedule for the regulation, ARB staff has estimated

the percent reduction in CO2 emissions rates by model year for those vehicles

subject to the proposed regulation. Staff applied the percent reductions to the

baseline CO2 emissions by model year from the EMFAC2002 mobile source

emissions model, version 2.2 (Apr03) for calendar years 2020 and 2030. The

reductions in CO2 emissions were then subtracted from the baseline CO2

equivalent inventory for 2020 and 2030 to obtain the adjusted CO2 equivalent

inventory reflecting the impact of the proposed regulation. Total CO2 equivalent

benefits were estimated by subtracting the adjusted CO2 equivalent inventory

from the baseline CO2 equivalent inventory. Table 8.2-1 presents the baseline
Initial Statement of Reasons

August 6, 2004

143

inventory from Table 8.1-2, the adjusted inventory with the proposed regulation in

place, and the estimated benefits of the regulation.

Table 8.2-1: Light Duty Fleet CO2 Equivalent Emissions and Reductions

Baseline Inventory without Proposed Regulation

2020

(tons per day)

2030

(tons per day)

PC/T1 (Passenger Cars and

Trucks 0-3750 lb. LVW7)

350,500 400,000

T2 (Trucks 3751 lb. LVW7 -

8500 lb. GVWR8)

146,900 175,500

Total Light Duty 497,400 575,500

Adjusted Inventory with Proposed Regulation

2020

(tons per day)

2030

(tons per day)

PC/T1 (Passenger Cars and

Trucks 0-3750 lb. LVW7)

282,600 281,500

T2 (Trucks 3751 lb. LVW7 -

8500 lb. GVWR8)

127,400 139,500

Total Light Duty 410,000 421,000

Emissions Reductions for Proposed Regulation

2020

(tons per day)

2030

(tons per day)

PC/T1 (Passenger Cars and

Trucks 0-3750 lb. LVW7)

67,900 118,500

T2 (Trucks 3751 lb. LVW7 -

8500 lb. GVWR8)

19,500 36,000

Total Light Duty 87,400 154,500

The proposed regulation will reduce climate change emissions by an estimated

87,400 CO2 equivalent tons per day statewide in 2020 and by 154,500 CO2

equivalent tons per day in 2030. This translates into an 18 percent overall

reduction in climate changes emissions from the light duty fleet in 2020 and a 27

percent overall reduction in 2030.

Staff estimates that baseline emissions today (2004) are 386,600 CO2 equivalent

tons per day, and in 2010 will be 430,200 CO2 equivalent tons per day. Thus

 

7 Loaded vehicle weight equals curb weight plus 300 lb.

8 Gross vehicle weight rating
Initial Statement of Reasons

August 6, 2004

144

with the regulation emissions will continue to grow from today’s level through

2009 when the regulation takes effect, but emissions in 2020 and in 2030 will be

lower than in 2010. Figure 8-1 shows this information in graphic form. Please

note that there would also be a slight reduction due to the regulation in 2010, not

accounted for in this figure.

Figure 8-1. Motor Vehicle GHG Emissions (Excluding Upstream Emissions)

0

100000

200000

300000

400000

500000

600000

700000

2000 2005 2010 2015 2020 2025 2030 2035

Calendar Year

Tons Per DAy

Without Regulation

With Regulation

-18% -27%

8.3 Emission Impact of the Staff Proposal in a Broader Context

This staff report highlights the important potential consequences of climate

change for California and its citizens. In light of these consequences, and

consistent with the mandate contained in Chapter 200, Statutes of 2002

(AB 1493) the staff recommends that the Board adopt control measures to

reduce GHG emissions from motor vehicles. The staff analysis concludes that

the staff proposal would reduce GHG emissions from the light duty California

vehicle fleet by about 87,400 tons per day in 2020 and 154,500 tons per day in

2030.

Some commenters, noting that GHG emissions from California light duty vehicles

are only a fraction of total California GHG emissions and a much smaller fraction

of global emissions, have asked staff to describe the impact of the staff proposal

in the context of the global problem. Based on California’s relatively small

contribution to global emissions, these commenters then question the value of
Initial Statement of Reasons

August 6, 2004

145

California action, stating that measures adopted in California will have no

discernable effect on global climate change and thus no effect on the potential

public health and environmental consequences of climate change in California.

Finally, they go on to argue that California vehicle owners will bear the cost of the

regulation but the benefits will accrue globally.

It is true that GHG emissions from California light duty vehicles are a small

fraction of the global total. Based on inventory data from various sources, GHG

emissions from California light duty vehicles are about 30 percent of California

CO2 equivalent GHG emissions from all sources and about 2 percent of total

United States GHG emissions. Although estimates of global GHG emissions

vary greatly, it is clear that emissions from California light duty vehicles will

amount to less than 1 percent of the total. Thus the proposed California

regulation, viewed in isolation, will not wholly mitigate the potential consequences

of climate change in California.

It does not necessarily follow, however, that California should do nothing.

Rather, there are several compelling reasons to move forward with the proposed

regulation, even while recognizing that by itself it will not solve the climate

change problem. First of all, the proposed regulation is a “no regrets” policy that

addresses climate change emissions but at the same time provides economic

benefit to the state. As noted in the economic analysis, staff concludes that

adoption of the proposed regulation would increase personal income and create

jobs statewide. Staff believes that given the significant potential consequences

of climate change for the state it is prudent to take steps that begin to address

the problem while offering other direct benefits as well.

Second, California would not be acting in isolation. Other states in the United

States, and other countries internationally, have already taken or are

contemplating steps to address GHG emissions from a variety of sectors and

sources. Thus the staff proposal should not be viewed as California acting in

isolation, but rather as California stepping forward along with others to help

address a problem that cannot be solved by any single jurisdiction. California’s

citizens have a long history of environmental stewardship, and the proposed

regulation, consistent with that history, would represent California’s commitment

to be an active participant in the solution.

Moreover, California action specifically to control greenhouse gases is strongly

supported by the public. The July 2004 Special Survey on Californians and the

Environment, conducted by the Public Policy Institute of California, found that

eight in ten Californians support a state law that requires automakers to further

reduce the emission of greenhouse gases from new cars in California by 2009.

Similarly high levels of support were evident in the June 2002 and July 2003

surveys.
Initial Statement of Reasons

August 6, 2004

146

Finally, the longstanding technology-forcing role of California regulation should

not be understated. There have been many instances where other jurisdictions

have adopted motor vehicle controls that were pioneered in California. Thus

there is potential for the proposed regulation to spread to other jurisdictions and

thereby add momentum to the already existing set of measures that are

underway around the globe. The attention focused on this rulemaking is an

indication of its potentially far-reaching effects.

Climate change, being truly global in nature, raises the issue of the value of

unilateral state action more squarely than many other environmental issues.

When faced threats to California’s pubic health and environment, however,

California citizens and public institutions have consistently demonstrated a firm

resolve to take action. Staff believes that climate change should be viewed in

that context and that the staff proposal thus lies squarely in California’s long

tradition of environmental awareness and concern.

8.4 Fuel Cycle Emissions

The goal of the proposed regulation is to reduce climate change emissions from

passenger cars and light-duty trucks. The ARB’s efforts to reduce vehicular

climate change emissions will also have a positive impact on the emissions that

occur during the fuel cycle. These activities, which include refining, marketing

and distribution of the gasoline, produce both climate change and criteria

pollutant emissions.

Staff has quantified the marginal fuel cycle emissions from conventional vehicles

using information from TIAX, LLC. As discussed in Section 6.4, the results show

that the fuel cycle climate change emissions for gasoline vehicles are 31 percent

of the vehicle emissions on a CO2 equivalent basis. Thus, for each gram of CO2

reduced per mile from the vehicle, an additional 0.31 gram of CO2 will be

eliminated from the fuel cycle. Table 8.4-1 estimates the reductions in total fuel

cycle climate change emissions for 2020 and 2030.

Table 8.4-1: Climate Change Fuel Cycle Emission Reductions

(tons per day)

2020 2030

CO2 Equivalent Emissions 27,000 47,900

In terms of criteria pollutants, the proposed regulation will also provide fuel cycle

benefits. The ARB staff has quantified the emission reductions of non-methane

organic gases, oxides of nitrogen, and carbon monoxide for 2020 and 2030 using

data from TIAX LLC. The analysis calculates the reductions in criteria pollutant

emissions using marginal fuel cycle emission factors based on an average

vehicle. Table 8.4-2 shows the estimated reduction in criteria pollutant fuel cycle
Initial Statement of Reasons

August 6, 2004

147

emissions. Please note that due to their smaller scale these reductions are show

in terms of tons per year.

Table 8.4-2: Criteria Pollutant Fuel Cycle Emission Reductions

(tons per year)

2020 2030

Non-Methane Organic Gases 2.8 4.0

Oxides of Nitrogen 0.2 0.3

Carbon Monoxide 0.1 0.2

8.5 Energy Cost and Demand

Recent disruptions in fuel supplies have at times greatly increased California fuel

prices. Technologies and strategies required by the proposed regulation to

reduce climate change emissions are also expected to reduce future demand for

gasoline as compared to current trends. Reduced demand will mitigate the

potential impacts from shortages of cleaner-burning gasoline and thus help

stabilize fuel prices. To the extent that alternative-fueled vehicles are used, this

will also help reduce gasoline demand and have a positive impact on fuel cost.

8.6 Other Environmental Media

At times, the refining, marketing and distribution of gasoline adversely affects

water quality due to leaks, spills, and wastewater discharge. Any reduction in

fuel use will reduce the opportunity for such occurrences. Consequently, the

ARB staff projects that the proposed regulation will have a positive impact on

water quality.

8.7 Other Considerations

Staff is investigating the possible effect of the regulation on consumer behavior.

For example, a reduction in the operating cost of vehicles may induce some

motorists to drive more, which would tend to decrease the climate change

benefits and might result in criteria pollutant emission above the levels estimated

here. Changes in vehicle attributes, such as the initial price of the vehicle or the

operating cost of the vehicle, are expected to affect consumer purchases. This

too could affect the emission consequences of the regulation for both climate

change and criteria pollutant emissions. The results of the staff investigation are

reported in section 12.
Initial Statement of Reasons

August 6, 2004

148

9 COST EFFECTIVENESS

This section presents the methodology used to calculate the cost effectiveness of

the proposed regulation to reduce climate change emissions from light-duty

vehicles. Staff has calculated the cost effectiveness for calendar years 2020 and

2030, based on a comparison of the cost (annualized costs minus annualized

operating cost savings) and the emission reduction benefits.

Typically, emission control regulations impose a cost. Cost effectiveness is a

measure of the cost imposed per ton of reduction achieved, and thus is a useful

tool to compare various possible approaches. In this instance, however,

AB 1493 requires that the regulations be economical to the consumer over the

life cycle of the vehicle. Consistent with this direction, the technology packages

that provide the basis for the standard result in operating cost savings that

exceed the capital cost, resulting in a net savings to the consumer over the

lifecycle of the vehicle. This translates to a “negative” cost effectiveness value

(there is a cost savings per ton reduced).

9.1 Cost Data and Emission Reductions

ARB staff estimated the net costs of this proposed regulation primarily by using

cost data from the 2004 study “Reducing Greenhouse Gas Emissions from LightDuty Motor Vehicles” done for the Northeast States Center for a Clean Air Future

(NESCCAF). The initial costs are based on the expected increases in vehicle

cost resulting from the technology improvements needed to meet the standards

in the proposed regulation. The proposed regulation includes a phase-in

schedule whereby earlier model year vehicles will meet a less stringent standard

and, on average, will require less new technology than later model vehicles.

ARB staff has estimated the average cost increases by model year, using data

from the NESCCAF study and other sources. Staff has used these cost data,

along with the assumption that average vehicle life is 16 years, to calculate the

total annualized costs by calendar year. The total annualized costs are estimated

to be roughly $837 million for calendar year 2020 and $1,686 million for 2030.

Staff also estimated annual savings in operating cost, again based on information

provided in NESCCAF as well as other sources. The annual savings are

estimated to be $5,223 million in 2020 and $9,292 million in 2030, well in excess

of the annualized cost. This results in net annual savings of $4,386 million in

2020 and $7,606 million in 2030.

The cost effectiveness in dollars per ton for a given calendar year is calculated

by dividing the total annualized costs for that year by the total CO2 equivalent

emission reductions for that year. As detailed in section 8 of this report, the CO2

equivalent emissions benefits of the proposed regulation are 87,400 tons per day

in 2020 and 154,500 tons per day in 2030. Converting these figures to annual
Initial Statement of Reasons

August 6, 2004

149

totals yields 31.9 million tons per year in 2020 and 56.4 million tons per year in

2030.

9.2 Cost Effectiveness

Table 9.2-1 provides the cost effectiveness in calendar years 2020 and 2030

based on the annualized vehicle costs and the estimated benefits.

Table 9.2-1. Cost Effectiveness9 of Proposed Regulation

2020 2030

Net Annualized Costs (Savings) $4,386 million $7,606 million

Emissions Reduction (tons/year) 31.9 million 56.4 million

Cost effectiveness ($/ton) -138 -135

 

9 In 2003 dollars
Initial Statement of Reasons

August 6, 2004

150

10 ECONOMIC IMPACTS

The climate change regulation may impact several sectors of the economy. The

steps that manufacturers will need to take to comply with the regulatory

standards are expected to lead to price increases for new vehicles. Many of the

technological options that manufacturers choose to comply with the regulation

are also expected to reduce operating costs. These two responses to the

regulation have combined positive and negative impacts on California

businesses and consumers. The vehicle price increase will be borne by

purchasers and may negatively affect businesses. However, the operating cost

savings from the use of vehicles that comply with the regulation will positively

impact consumers and most businesses. Based on the staff analysis, the net

effect of the regulation on the economy is expected to be small but positive.

The major tool used for the analysis of the economic impact of the proposed

regulation is a model of the California economy developed by the University of

California, Berkeley, named the Environmental Dynamic Revenue Analysis

Model (E-DRAM). This chapter explains the legal requirements for economic

analysis, the methodologies employed, and the results obtained. Technical

support documents to this report further explain the economic impact analyses.

10.1 Legal Requirements

The legal requirements for economic analysis are included in the Government

Code and the Health and Safety Code. This section explains the requirements

that must be satisfied for economic analyses of the proposed regulations.

Section 11346.3 of the Government Code, which applies to all agencies

statewide and predates AB 1493, requires State agencies to assess the potential

adverse economic impacts on California business enterprises and individuals

when such agencies propose to adopt or amend any administrative regulation.

The assessment shall include a consideration of the impact of the proposed

regulation on California jobs, business expansion, elimination or creation, and the

ability of California business to compete with businesses in other states. Health

and Safety Code section 43018.5(c)(2), added by AB 1493, repeated many of

these criteria. That section also added two criteria specific to this regulation,

namely, to evaluate economic impacts on the State’s automotive workers and

affiliated businesses, and on minority and low income communities.

State agencies also are required to estimate the cost or savings to any State or

local agency and school district, in accordance with instructions adopted by the

Department of Finance (DOF). The estimate shall include any non-discretionary

cost or savings to local agencies and the cost or savings in federal funding to the

State.
Initial Statement of Reasons

August 6, 2004

151

Finally, Health and Safety Code section 57005 requires the Air Resources Board

to perform an economic impact analysis of submitted alternatives to a proposed

regulation before adopting any major regulation. A major regulation is defined as

a regulation that will have a potential cost to California business enterprises in an

amount exceeding ten million dollars in any single year.

10.2 Potential Impacts on Business Creation, Elimination, or Expansion

The climate change regulation affects only light duty vehicles whose primary use

is noncommercial personal transportation. Therefore, many vehicles that

businesses use would not be covered under the proposed regulation. However,

if the businesses purchase the same vehicles as consumers, they would be

expected to pay higher prices for the vehicles but save on operating costs, as is

discussed in Section 5 above. As noted in that section, staff expects that

reduced operating costs will more than outweigh the effect of the increase in

price over the life cycle of the vehicle.

It is very likely that savings from reduced vehicle operating costs would end up

as expenditures for other goods and services. These expenditures would flow

through the economy, causing expansion or creation of new businesses in

several sectors. Staff's economic analysis shows that as the expenditures occur,

jobs and personal income increase. Jobs increase by 3,000 in 2010, by 55,000

in 2020, and 83,000 in 2030 compared to the baseline economy that excludes

the proposed regulation. Similarly, income grows by $160 million in 2010, by $5.3

billion in 2020, and $8.5 billion 2030.

The E-DRAM model was used to assess the overall impact of the regulation on

California’s economy. Specifically, E-DRAM was used to estimate impacts on

California's output of goods and services, personal income, and employment.

The estimates of the regulation's impact on these economic factors are used to

assess the potential impacts on business creation, elimination, or expansion in

California. The next section describes E-DRAM.

10.2.A Environmental-Dynamic Revenue Analysis Model (E-DRAM)

The overall impact of all direct and indirect economic effects that may result from

the proposed regulation are estimated using a computable general equilibrium

(CGE) model of the California economy. A direct impact affects the automobile

and oil industries, and their consumers. The proposed regulation may affect

other economic sectors indirectly. For example, consumers may redirect the

money from operating cost savings to spend on other sectors. In addition, the

automobile industry would be expected to purchase goods and services from

other sectors to comply with the proposed regulation. These expenditures

caused by the regulation would indirectly affect the California economy.
Initial Statement of Reasons

August 6, 2004

152

A CGE model simulates various economic relationships in a market economy,

where prices and production adjust in response to changes caused by

regulations to establish an equilibrium in markets for all goods and services and

factors of production (i.e., labor and capital). The CGE model used for this

analysis is a modified version of the California Department of Finance's Dynamic

Revenue Analysis Model (DRAM).10 The DRAM has been used for several tax

policy evaluations. The modified model accounts for environmental sectors and

is called Environmental-DRAM (E-DRAM).11 It has been used to assess the

economic impacts of California’s air quality State Implementation Plans,

reformulated gasoline regulations, the petroleum dependency study required by

AB 2076, and other regulations.

E-DRAM describes the relationships among California producers, California

consumers, government, and the rest of the world. The model consists of over

1,000 equations designed to capture the interactions among over 100 industrial

sectors, 2 factors of production sectors (labor and capital), 9 consumer good

sectors, 7 household sectors (classified by income level), 1 investment sector, 45

government sectors (8 federal, 21 State, and 8 local), and the rest of the world.

The impacts of regulations are estimated by changing the inputs to the model

that represent regulation effects on the industry or consumer sectors. Such

changes to the model enable it to assess the economic impacts of large-scale

environmental regulations. The economic impact results are estimated in terms

of changes in the State output of goods and services, personal income, and

employment.

The data for the industrial sectors originated with the Bureau of Economic

Analysis of the U.S. Department of Commerce, based on the Census of Business

– a detailed survey of companies conducted in the U.S. every five years, the

most recent one done in 1999. The conversion of national data to updated

California data is accomplished by Impact Analysis for Planning (IMPLAN), a

program that primarily utilizes state-level employment data to scale national-level

industrial data down to the size of a state.

In much the same way as firms, households are also aggregated. California

households are divided into categories based upon their taxable income. There

are seven such categories in the model, each one corresponding to a California

personal income tax marginal tax rate (0, 1, 2, 4, 6, 8, and 9.3 percent). Thus,

the income for the “one-percent” household is calculated by adding up the

income from all households in the one-percent bracket.

 

10 For a complete description of DRAM, see Peter Berck, E. Golan and B. Smith, "Dynamic Revenue Analysis for

California", California Department of Finance, Summer 1996.

11 Berck, Peter, "Developing a Methodology for Assessing the Economic Impacts of Large Scale Environmental

Regulations", Prepared for California Air Resources Board, February 2000.
Initial Statement of Reasons

August 6, 2004

153

Similarly, the expenditure of the one-percent household on agricultural goods is

calculated by adding up all expenditures on agricultural goods for these

households. The total expenditure on agricultural goods is found by adding the

expenditure of all households together.

Firms and households relate through factor markets and goods-and-services

markets. Firms sell goods and services to households on the goods-andservices markets. Households sell labor and capital services to firms on the

factor markets. There is a price in each of the factor and goods-and-services

markets. Equilibrium in the factor markets and the goods-and-services markets

means that prices adjust in response to changes caused by regulations to equate

quantities supplied and demanded in all markets in about four years. That is, the

full effects of a change take four years to work their way through the economy.

Compliance Cost Estimates

Based on the implementation of a combination of these technologies in different

vehicle classes, staff estimates that the proposed near term (2009-2012)

regulations would increase the average retail prices of passenger cars (PC) and

small trucks (T1) by $16 in 2009 to $292 in 2012, and large trucks (T2) by $36 to

$308. In the mid term (2013-2016) the price increases for PC/T1 vehicles as

compared to the 2009 baseline would range from $382 in 2013 to $955 in 2016,

and for T2 vehicles would range from $330 to $626. The incremental retail prices

for all affected vehicles would remain unchanged after 2016.

These increases are expected to be passed on to consumers in one form or

another. This section annualizes these costs and estimates the corresponding

operating cost savings for an analysis of impacts on the California economy. The

net impact of vehicle price increases on consumers is discussed later in this

section.

The new vehicles are expected to last 16 years, during which time they will

provide transportation at lower operating costs, a benefit. To match the costs to

the 16 years of benefits, we annualized the costs over the life of the vehicles.

Annualized costs are estimated using a real discount rate of five percent based

on an average of the past ten-year interest rates on car loans. Table 10.2-1

provides estimates of total annualized costs of the proposed climate change

regulations from 2009 to 2030. The total cost was derived by multiplying new

vehicle sales by the average cost increase per vehicle estimated in section 5.

The total costs to consumers vary each year from 2009 to 2030. Annualized

costs of the proposed regulations are estimated to be approximately $12 million

in 2010, $837 million in 2020, and $1.7 billion in 2030. The annualized cost

increases over time, due to additional sales of new cars at the higher price as

multiple model years are annualized over the same period. For example, the

annualized cost in 2011 of $40 million reflects the annualized costs of model

years 2009, 2010, and 2011. Thus the annualized costs for each year are for

cumulative sales of new cars since 2009. The $837 million in annualized cost in
Initial Statement of Reasons

August 6, 2004

154

2020 represents the cost, in 2020, of all complying vehicles sold from 2009

through 2020. The new vehicle sales totals are based on projected numbers of

vehicles sold in that year as forecast by the EMFAC model.

Table 10.2-1. Estimates of Total Annual Costs of the Proposed Climate Change

Regulations for 2009 through 2030 (millions of 2003 Dollars)

Model

Year

Annualized

Costs to

Consumers

of PC/T1

Annualized

Costs to

Consumers

of T2

Incremental

Annualized Costs

to consumers of

2009+ Vehicles

Cumulative

Annualized

Cost

2009 $ 2 $ 1 $ 3 $ 3

2010 $ 6 $ 3 $ 9 $ 12

2011 $ 23 $ 6 $ 29 $ 40

2012 $ 35 $ 9 $ 44 $ 84

2013 $ 39 $ 11 $ 50 $ 135

2014 $ 46 $ 15 $ 61 $ 196

2015 $ 59 $ 23 $ 82 $ 279

2016 $ 77 $ 30 $ 107 $ 386

2017 $ 78 $ 31 $ 109 $ 495

2018 $ 80 $ 32 $ 112 $ 606

2019 $ 81 $ 32 $ 113 $ 719

2020 $ 82 $ 33 $ 115 $ 834

2021 $ 80 $ 32 $ 112 $ 947

2022 $ 82 $ 33 $ 115 $ 1,061

2023 $ 83 $ 33 $ 116 $1,178

2024 $ 85 $ 33 $ 118 $ 1,296

2025 $ 86 $ 34 $ 120 $ 1,413

2026 $ 87 $ 35 $ 122 $ 1,527

2027 $ 89 $ 37 $ 126 $ 1,621

2028 $ 90 $ 38 $ 128 $ 1,682

2029 $ 92 $ 39 $ 131 $ 1,704

2030 $ 93 $ 40 $ 133 $ 1,676

Source: Sales data from ARB EMFAC model.
Initial Statement of Reasons

August 6, 2004

155

Many of the technologies that reduce climate change emissions will also reduce

the operating costs of vehicles. Lifetime maintenance costs are also expected to

remain the same or decline, depending on the technologies chosen by

manufacturers. For example, improved containment of air conditioning

refrigerant may reduce the need for mobile air conditioning servicing and

therefore reduce maintenance costs to consumers. Due to a lack of

comprehensive data, however, staff assumed no change in maintenance costs

for the purpose of this analysis. Estimates of the average reduction in operating

cost of the new vehicles range from about 1 percent to 31 percent for PC/LDT1,

and about 2 percent to 26 percent for LDT2. Table 10.2-2 provides estimates of

annual operating cost savings from 2009 through 2030. Data used to derive

estimated reductions in operating cost are generated from the EMFAC model.

The analysis assumes a gasoline price of $1.74 per gallon, taken from the 2004

California Energy Commission (CEC) Integrated Energy Policy Report. As

shown in Table 10.2-2, for every dollar of the cost, the regulation could save $5

to $11 for the consumers. Figure 10-1 illustrates the savings to costs ratio in

graphic form.
Initial Statement of Reasons

August 6, 2004

156

Table 10.2-2. Estimates of Total Annual Value of New Vehicle Operating Cost

Savings (millions of 2004 Dollars)

Model

Year

Operating

Cost Savings

(millions of

2004$)

Saving to

Cost

Ratio

2009 $27 9.2

2010 $124 10.3

2011 $415 10.4

2012 $921 11.0

2013 $1,407 10.5

2014 $1,913 9.8

2015 $2,464 8.9

2016 $3,050 7.9

2017 $3,620 7.3

2018 $4,172 6.9

2019 $4,706 6.5

2020 $5,223 6.2

2021 $5,734 6.0

2022 $6,194 5.8

2023 $6,635 5.6

2024 $7,055 5.4

2025 $7,451 5.3

2026 $7,913 5.2

2027 $8,286 5.1

2028 $8,640 5.1

2029 $8,976 5.2

2030 $9,292 5.5

Overall, purchasers of new vehicles in 2009 and beyond would experience a

significant reduction in their operating cost.
Initial Statement of Reasons

August 6, 2004

157

Figure 10-1: Statewide Costs and Benefits of the Proposed Climate Change

Regulations

Economic Impacts

Higher vehicle prices provide a means to estimate the direct expenditures that

will be incurred by California businesses, governments, and individuals to meet

the requirements of the proposed climate change regulations. These

expenditures would in turn bring about additional (indirect) changes in the

California economy that may change the overall costs of the regulation to the

economy. Increased vehicle prices, for example, may result in a reduction of

demand for other goods and services as consumers use more of their money to

Statewide Costs and Benefits of Pavley 

Vehicles

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

20092012201520182021202420272030

Annualized Costs and Benefits (millions of dollars)

Total Annualized Costs

Annual Value of Operating Cost Savings (in millions of 2003$)
Initial Statement of Reasons

August 6, 2004

158

pay for the price increase. California firms may respond by cutting back

production and decreasing employment. On the other hand, in response to the

proposed regulations automobile manufacturers are expected to choose

technologies that reduce vehicle operating costs, leaving consumers with

additional money to spend on products and services. This would, in turn, induce

firms supplying those products and services to expand their production and

increase their hiring of workers. A third type of effect occurs when purchase of

the new vehicles directly lowers demand for the petroleum refining and gasoline

distribution sectors.

The changes caused by the proposed regulations will affect industries both

negatively and positively. The net effect on the California economy of these

activities hinges on the extent to which products and services are obtained

locally. Using the E-DRAM model of the California economy, staff estimated the

net effects of these activities on affected industries and the overall economy.

The California industries and individuals affected most by the proposed climate

change regulations are those engaged in the production, distribution, sales,

service, and use of light-duty passenger vehicles as well as the refining and

distribution of gasoline.

Table 10.2-3, Table 10.2-4 and Table 10.2-5 summarize the impacts of the

proposed climate change regulations on the California economy for fiscal years

2010, 2020, and 2030 respectively. Since the E-DRAM model is built to

reproduce the economic conditions of fiscal year 1998/99, we first extrapolated

the model out to 2010 based on State population, personal income, and industryspecific forecasts12. Higher vehicle prices were then adjusted to fiscal year 2010,

2020, and 2030.

The results of the E-DRAM simulation show that the changes caused by the

proposed regulations would reduce the California economic output by roughly

$40 million (0.002 percent) in 2010, $2.5 billion (0.08 percent) in 2020, and $4.8

billion (0.1 percent) in 2030. Personal income, however, would increase by

roughly $160 million (0.01 percent) in 2010, $5.3 billion (0.3 percent) in 2020,

and $8.5 billion (0.3 percent) in 2030. As a result, California net employment

impact due to the proposed regulation would also increase by over 3,000 jobs

(0.02 percent) in 2010, 55,000 (0.3 percent) in 2020, and 83,000 (0.4 percent) in

2030.

Table 10.2-3. Economic Impacts of the Proposed Climate Change Regulations on

the California Economy in Fiscal Year 2010 (2003$)

California Economy Without Climate

Change

Regulations

With Climate

Change

Regulations

Difference % of

Total

 

12 For a more detail description of the E-DRAM extrapolation to “out years”, see “Benefits of Reducing Demand for

Gasoline and Diesel,” a joint report to California Air Resources Board and California Energy Commission prepared by

Arthur D. Little, Inc., March, 2002.
Initial Statement of Reasons

August 6, 2004

159

Output (Billions) $2,228.06 $2,228.02 - $0.04 - 0.002

Personal Income (Billions) $1,451.01 $1,451.17 + $0.16 + 0.01

Employment (thousands) 16,354 16,357 + 3 + 0.02

Table 10.2-4. Economic Impacts of the Proposed Climate Change Regulations on

the California Economy in Fiscal Year 2020 (2003$)

California Economy Without Climate

Change

Regulations

With Climate

Change

Regulations

Difference % Total

Output (Billions) $3,078.02 $3,075.49 - $2.53 - 0.08

Personal Income (Billions) $2,009.54 $2,014.81 + $5.27 + 0.3

Employment (thousands) 18,661 18,716 + 55 + 0.3

Table 10.2-5. Economic Impacts of the Proposed Climate Change Regulations on

the California Economy in Fiscal Year 2030

California Economy Without Climate

Change

Regulations

With Climate

Change

Regulations

Difference % Total

Output (Billions) $4,241.54 $4,236.71 - $4.83 - 0.1

Personal Income (Billions) $2,781.44 $2,789.91 + $8.47 + 0.3

Employment (thousands) 21,763 21,846 + 83 + 0.4

These results indicate that higher vehicle prices result in consumers redirecting

other expenditures. Consumers would spend more on the purchase of motor

vehicles, thus having less money to spend on the purchase of other goods and

services. Since most automobile manufacturing occurs outside of the State, the

increased consumer expenditures on motor vehicles would be a drain on the

California economy. The reduction in operating costs that results from improved

vehicle technology would, however, reduce consumer expenditures and would

therefore leave California consumers with more disposable income to spend on

other goods and services. Businesses that serve local markets are most likely to

benefit from the increase in consumer expenditures. The increase would in turn

boost the California economy, resulting in the creation of additional jobs.

10.3 Potential Impact on California Business Competitiveness

Automobile manufacturing in California represents a small fraction of the State’s

economy, about 0.27 percent. The California businesses impacted by this

regulation tend to be affiliated businesses such as gasoline service stations,

automobile dealers, and automobile repair shops. Affiliated businesses are

mostly local businesses. These businesses compete within the State and

generally are not subject to competition from out-of-state businesses. Therefore,

the proposed regulations are not expected to impose significant competitive

disadvantages on affiliated businesses.
Initial Statement of Reasons

August 6, 2004

160

10.4 Potential Costs to Local and State Agencies

There are about 420,000 State and local agency-owned vehicles in California, or

1.74 percent of the total state fleet of about 24 million vehicles, according to a

report from California Energy Commission13. A typical agency-owned vehicle is

driven an average of 12,500 miles each year. This usage rate is very similar to

those of private consumers. The staff analysis indicates that for individual

consumers, the increased initial cost is more than offset by operating cost

savings over the life of the vehicle. Therefore, staff expects that the same would

hold true for public agencies--savings from the lower operating costs of the

proposed regulation would outweigh the higher price that the State and local

agencies would pay for vehicles in 2009 and later.

Lower fuel consumption by the new complying vehicles would affect gasoline and

vehicle sales tax revenues. Gasoline taxes include fixed state and federal excise

taxes, and the state sales tax. If tax rates remain the same, staff estimates that

gasoline excise and sales tax revenues will decline by about $36 million in 2010

compared to the no regulation scenario, of which about $8 million will be offset by

increased sales taxes from higher priced vehicles. In 2020, fuel taxes would

decline by $1.3 billion compared to a no regulation scenario, of which about $132

million will be offset by increased vehicle sales tax revenues. Though not

quantified, it is expected that a considerable percentage of the increase in

personal income due to the proposed regulations would be expended on goods

subject to local sales tax

10.5 Potential Impact on Individual Consumers

To provide perspective on the potential impact of the proposed regulations on the

monthly cash flow for typical purchasers of new vehicles, staff considered a

vehicle-financing period of five years at an interest rate of 5 percent. Table 9.5-1

provides estimates of potential increases in monthly loan payments and

decreases in operating cost based on the average increase to vehicle prices for

the PC/LDT1 and LDT2 categories when the regulation is fully phased-in (2016).

Operating cost savings are estimated based on the EMFAC model estimates of

the annual average vehicle miles traveled in the vehicle’s first five years of life.

According the EMFAC model, the classes of vehicles belonging to the PC/LDT1

and LDT2 categories travel, on average, about 15,000 annually during the first

five years.

As shown in Table 10.5-1 below, the proposed regulations are expected to

increase the average monthly payment for a typical consumer by about $11.89

for the PC/LDT1 category and $18.12 for the LDT2 category. Concurrently,

 

13 California Alternative Fuels Infrastructure Program Evaluation 2003, California Energy Commission Report # 600-

03-018
Initial Statement of Reasons

August 6, 2004

161

typical consumers would benefit from monthly operating cost savings ranging

from about $23.62 to $24.65 for the PC/LDT1 and LDT2 categories, respectively,

resulting in net savings on a monthly basis of $6.54 for the PC/LDT1 and $11.73

for the LDT2.

It should be noted that most vehicles still retain a significant portion of their

original value after a five-year financing period. For example, passenger cars

retain about 37 to 46 percent of their original value while trucks retain about 46 to

59 percent. These values tend to effectively reduce the increase in monthly

payments if they are realized after the completion of the loan payments. Even

without the realization of the residual value, the monthly savings from new

vehicle operations exceeds the increase in monthly loan payments for both the

PC/LDT1 and LDT2 categories.

Table 10.5-1. Potential Impact on Monthly Loan Payment and Operating Savings

for New Vehicles

Description PC/LDT1 LDT2

Average Increase in New Car Price $630 $960

Increase in Monthly Loan Payment $11.89 $18.12

Monthly Operating Savings $23.62 $24.65

Net Monthly Savings $11.73 $6.54

A similar analysis is presented for used vehicles is presented in section 11

(Impacts on Minority and Low Income Communities).

10.6 Conclusion

The proposed climate change regulation has a net positive impact on the State's

economy. The regulation may lead to a net creation or expansion of businesses,

and could increase jobs in California. Because those businesses that are

affected are local, there will not be any impact on the ability of California

business to compete with businesses in other states. State and local agencies

will not be adversely impacted and are likely to realize a net reduction in their

cost of fleet operations.
Initial Statement of Reasons

August 6, 2004

162

11 IMPACTS ON MINORITY AND LOW INCOME COMMUNITIES

This section provides information on the ARB's activities to involve minority and

low-income communities in the development of the climate change regulations.

Staff also has assessed whether the regulation would impose economic or

environmental impacts on minority or low income communities.

11.1 ARB Environmental Justice Policy

The ARB has made the achievement of environmental justice an integral part of

its activities. State law defines environmental justice as the fair treatment of

people of all races, cultures, and incomes with respect to the development,

adoption, implementation, and enforcement of environmental laws, regulations,

and policies.

The Board approved Environmental Justice Policies and Actions (Policies) on

December 13, 2001. These Policies establish a framework for incorporating

environmental justice into the ARB's programs consistent with the directives of

State law. The Policies apply to all communities in California, but recognize that

environmental justice issues have been raised more in the context of low-income

and minority communities.

As the ARB developed the climate change regulations, staff worked closely with

community leaders involved with environmental justice as well as with

environmental and public health organizations to maintain an ongoing dialogue

and thus successfully implement the ARB's environmental justice policies.

11.2 AB 1493 Requirements

Assembly Bill 1493 emphasizes the importance of considering the economic

impacts of the climate change regulations on communities in an environmental

justice context. The bill specifically directs ARB to,

"consider the impact the regulations may have on the economy of the

state, including, but not limited to...the ability of the state to maintain and

attract businesses in communities with the most significant exposure to air

contaminants, localized air contaminants, or both, including, but not limited

to, communities with minority populations or low-income populations, or

both."

In addition, the bill requires ARB to report to the Legislature and the Governor on:

“the impact of the regulations on communities in the state with the most

significant exposure to air contaminants or toxic air contaminants, or both,

including, but not limited to, communities with minority populations or lowincome populations, or both.”
Initial Statement of Reasons

August 6, 2004

163

The bill also recognizes the importance of engaging these communities

throughout the entire regulatory development process and includes specific

requirements that the ARB

"conduct public workshops in the state, including, but not limited to, public

workshops in three of the communities in the state with the most significant

exposure to air contaminants or localized air contaminants, or both,

including, but not limited to, communities with minority populations or lowincome populations, or both."

In order to accomplish the Board's over-arching environmental justice goals, the

ARB has actively engaged communities with environmental justice concerns.

These efforts have also served to meet the specific requirements set forth in the

bill.

11.2.A Outreach to Minority and Low Income Communities

As ARB developed the climate change regulations, staff benefited from the

support of community leaders working for environmental justice. Staff

successfully identified a core group of leaders in communities with environmental

justice concerns who were willing to work with staff to ensure the development of

effective and defensible regulations. This core group of environmental justice

representatives included environmental, health-based and environmental justice

organizations. It was important to ensure that issues specifically impacting

communities with environmental justice concerns were identified and addressed.

Members of this core group regularly attended ARB workshops and Board

hearings in order to have accurate information about our climate change

activities. For those unable to attend the scheduled workshops and hearings,

staff sent targeted emails with information prior to each workshop followed by a

summary of the meeting specifically addressing issues that may be of concern to

these communities.

In order to get communities intimately involved in the entire regulatory

development process, staff made it a priority to attend local environmental justice

community meetings. At these meetings, staff provided general background

information on climate change and updated the groups on the ARB's climate

change activities and potential issues that might arise. Provided below is a list of

meetings staff attended:
Initial Statement of Reasons

August 6, 2004

164

Date Organization

February 27, 2003 Los Angeles Environmental Justice Forum

July 22, 2003 Oakland Environmental Justice Meeting

October 30, 2003 California League of Conservation Voters

Education Fund Environmental Justice Forum

May 13, 2004 Partnership for the Public Health, Environmental

Justice Sub-Committee Meeting

May 20, 2004 Bluewater Network Environmental Justice Forum

"Global Warming, Air Quality and Environmental

Justice: Finding Common Ground"

June 10, 2004 3

rd Street Celebration, North Richmond

June 26, 2004 Multi Cultural Celebration, North Richmond

Staff will continue to attend local environmental justice meetings in the Bay Area,

Los Angeles area and the Central Valley. Staff has also worked with

environmental and health based organizations to coordinate outreach messages

and materials for communicating with these communities. In addition, all of the

ARB climate change fact sheets were translated into Spanish and staff

developed additional fact sheets and outreach materials that specifically address

climate change in an environmental justice context.

11.2.B Public Workshops

Staff not only attended local community meetings, but also conducted workshops

in communities with environmental justice concerns. The dates of all the

workshops were as follows:

Date Location

February 18, 2004 Huntington Park

July 6, 2004 Oakland

July 8, 2004 Fresno

July 13, 2004 Pacoima

The first workshop, held in Huntington Park in February 2004, allowed staff to

receive input from community members prior to the development of a draft

proposal. Working with a core group of stakeholders, a panel was put together

for this workshop to provide attendees with an overview of climate change and

how it may impact their community. This panel included staff from the Union of

Concerned Scientists, Redefining Progress and a volunteer from the American

Lung Association. In addition, staff invited Mr. Carlos Porras of Citizens for a

Better Environment to emcee the workshop. This provided a good link between

the panel, ARB staff and the community. This first workshop was beneficial and

established the groundwork for subsequent efforts. Staff continued to work with

the stakeholder group to plan the followup workshops to ensure that they were

effective and met the needs of the specific audiences.
Initial Statement of Reasons

August 6, 2004

165

The three workshops in July opened with someone from the local community

providing introductory remarks and then focused on the ARB's draft staff

proposal. The opening remarks in Oakland were provided by Mr. Henry Clark of

the West Oakland Toxics Coalition, in Fresno by Mr. Rey Leon of the Latino

Issues Forum and in Pacoima by Assemblymember Montañez. Having local

community members and leader participate in the workshops was greatly

appreciated and added value and a local context to ARB's presence in these

communities.

There were a number of different comments and concerns expressed at each

workshop. Communities were interested in our authority to regulate GHG

emissions from other transportation sources, primarily heavy-duty diesel trucks.

In Oakland, they were also concerned about controlling diesel emissions from

ships and ports. In response, staff pointed out that AB 1493 focused specifically

on passenger cars and trucks but that the ARB has many other programs to

control diesel emissions from heavy-duty trucks. In addition, the West Coast

Governors’ Global Warming Initiative is looking into controlling other sources of

GHG emissions.

There were also questions at several workshops regarding localized impacts of

GHG emissions. Staff pointed out that although GHG emissions themselves are

not harmful, the resulting climate change impacts can have important

consequences. Most attendees were interested in the work that Redefining

Progress is doing to research the impacts of climate change on communities and

are interested in getting involved in the process and seeing the results of that

study.

Community members recognized and understood the impacts to used car prices

and were interested in seeing a comparable assessment of the prices of new

cars. Therefore, staff has included in the final staff report the annual increase in

the cost of a new car and the annual savings in operating costs. In addition, the

used car analysis will be done based on a 5-year loan rather than the eight years

used previously to assess these costs and savings.

There were comments made at the Oakland workshop regarding staff's

projections of GHG emissions out to 2020 and 2030 that pointed out that in 2030

the emissions begin to increase again due to growth and the increasing number

of vehicle miles traveled. It was stated that in order to reduce GHG emissions,

the ARB should implement policies that get people out of their cars and

encourages them to use public transit, to walk and to use other alternative means

of transportation. Although these are excellent ways to reduce GHG emissions,

and programs that achieve these goals are an important and necessary step in

reducing GHG emissions, the mandate provided by AB 1493 is focused on

technical improvements to the vehicles and cannot include these types of

programs. Although the ARB as well as the local air districts and local
Initial Statement of Reasons

August 6, 2004

166

governments support and encourage these alternative modes of transportation

through non-monetary incentive programs, the ARB cannot impose any

regulatory mandates to achieve these goals at this time.

There were also several comments asking about subsidies for low-income

households to purchase the more expensive technologies. ARB staff stated that

although this idea has appeal, our staff analysis found that the cost increase of

both new and used vehicles would not be overly burdensome and due to lower

operating costs would be paid back to the consumer in a reasonable timeframe.

There was some discussion of the impacts of this regulation on criteria pollutants.

Staff noted that although there will be some decrease in criteria pollutant

emissions due to less fuel production and distribution, these benefits will be

small. In addition, there is a link between climate change, hotter days and

increased asthma, but this regulation by itself will not eliminate climate change

and its consequences. Rather, it represents California’s commitment to work

along with others to address this critical issue. California is particularly

vulnerable to the adverse impacts of climate change due to our expansive

coastline, limited water supply and valuable agricultural industry.

In general, community leaders were very supportive of the work ARB is doing to

take steps to reduce GHG emissions.

11.3 Potential Environmental Impacts

The staff analysis concluded that the climate change regulation will have a

negligible impact on criteria pollutant emissions. However, to the degree that

there are upstream benefits associated with reduced petroleum shipping, storage

and distribution, emissions will be reduced. Many of these shipping and storage

facilities are located in low income and minority communities. Distribution of

petroleum takes place along freeway corridors near communities often identified

with environmental justice concerns. Staff therefore has not identified any

mechanisms by which the climate change regulation would result in a

disproportionate negative impact on low income or minority communities. In fact,

the upstream emission reductions are likely to provide benefits to these

communities.

11.4 Potential Economic Impacts

Staff has evaluated the economic effects of the climate change regulation on lowincome and minority communities. For residents in these communities who

purchase new vehicles, the economic effects of the regulations would be no

different than in any other community. However, because residents in lowincome communities tend to purchase used vehicles at a higher rate than

residents in middle and high income communities, staff evaluated the effects of

the regulation on the used vehicle market and, more specifically, on residents in
Initial Statement of Reasons

August 6, 2004

167

low-income communities that purchase used vehicles. Staff invites comment on

other possible economic impacts.

In section 12.6 of this report staff evaluated the broader impacts of the regulation

on job and business creation in representative San Diego communities with

environmental justice concerns. The evaluation concluded that the regulations

would likely result in an increase in jobs and business creation.

11.4.A Potential Impact on a Typical Low-income Household

The proposed climate change regulation is likely to require changes in vehicle

technology that will increase the price of new vehicles sold in California. This

increase in turn is expected to increase the price of used vehicles. Low-income

households often purchase used vehicles. In this analysis, California households

of three members with an annual family income of $15,000 or less are

considered to be economically disadvantaged.14 According to the 2001 National

Household Travel Survey, low-income households with an average annual

income of $20,000 (closest bracket to poverty level of $15,000) tend to purchase

vehicles with an average age of 10 to 12 years15.

The impact on low-income used car buyers was assessed by considering the

annual vehicle price increase as a percent of income. The analyses showed that

the proposed regulations should not have a significant impact on low-income

households that purchase used cars.

11.4.B Approach

The approach used to assess the potential impact of the proposed regulations on

typical low-income purchasers of used vehicles is outlined as follows:

(1) Changes in prices of used vehicles caused by the proposed regulations

for vehicles associated with the PC/LDT1 and LDT2 categories were

estimated using historical retention value. For example, a $500 increase

in the price of a new vehicle belonging to the PC/LDT1 category is

expected to increase the price of a 10-year-old vehicle by $115 assuming

a retention value of 23 percent.

(2) Changes in prices of used vehicles were annualized over the remaining

life of the vehicles. For example, an $115 increase in the price of a 10-

year-old PC/LDT1 used vehicle is equivalent to a $22 annual cost

increase for the vehicle over its median remaining useful life of 8 years.

 

14 U.S. Department of Labor and U.S. Department of Health and Human Services, Poverty Guidelines

15 2001 National Household Travel Survey, the U.S. Department of Transportation,

http://nhts.ornl.gov/2001/html_files/introduction.shtml
Initial Statement of Reasons

August 6, 2004

168

(3) The annualized cost increase was compared with the median income of

typical low-income households to assess the extent of the impact on

typical low-income household purchasers of used vehicles.

11.4.C Assumptions

The following assumptions were used to estimate the potential economic impacts

of the proposed regulations on typical low-income households:

(1) The proposed regulations would increase the average price of a PC/LDT1

by about $630 and the average price of a LDT2 by $960 when the

regulation is fully phased in (2016).

(2) Most low-income households purchase vehicles that are at least 10 years

old. This assumption is based on the information obtained from the 2001

National Household Travel Survey.

(3) A 10-year-old used PC/LDT1 has a retention value of about 23 percent. A

10-year-old LDT2 has a retention value of about 32 percent.

(4) A real discount rate of 10 percent was used for this analysis. The

inflation-adjusted interest rate on car loans was about 5 percent in the

past 10 years16. A 5 percent risk premium was added to the historical car

loan rate to reflect a higher risk associated with financing used vehicles.

(5) New passenger cars and trucks (PC/LDT1) are expected to have median

useful life of 16 years, and new large trucks and minivans (LDT2) have a

median useful life of 19 years17. Based on the data from EMFAC, a 10-

year-old car has a median remaining useful life of 8 years and a 10-yearold truck has a median remaining useful life of 11 years.

(6) California households of three with an annual family income of $15,000 or

less are considered to be economically disadvantaged18.

(7) Low-income households do not typically experience savings from

reduction in operating cost during the first 10 years of the proposed

regulations.

 

16 Historical car loan data, Federal Reserve Statistical release,

http://www.federalreserve.gov/releases/g19/hist/cc_hist_tc.html

Historical Consumer Price Index, U.S. Department of Labor, Bureau of Labor Statistics,

http://research.stlouisfed.org/fred2/data/CPIAUCNS.txt

17 Please see “Draft Technology and Cost Assessment for Proposed Regulations to Reduce Vehicle Climate change

Emissions Pursuit to AB 1493,” Air Resources Board.

18 U.S. Census Bureau, Poverty 2003
Initial Statement of Reasons

August 6, 2004

169

11.4.D Results

Typical California low-income households are affected by the proposed climate

change regulations to the extent that the implementation of the regulations would

alter their annual disposable income. Using the previously stated assumptions,

staff estimated that the increase in annual costs of used vehicle ranges from 0.2

to 0.3 percent of the annual family income of $15,000 for a low-income

household, as shown in the table. This represents a minor change in the

average income of typical low-income households.

The analysis discussed here assumes that low-income households would be

able to finance the increase in used car prices either from their own income or

from borrowing. As shown in Table 11.4-1, the increase in used car prices would

be $145 for vehicles belonging to the PC/LDT1 category and $307 for vehicles

belonging to the LDT2 category. It is thus possible that some low-income

households may have difficulty raising additional funds to purchase their

vehicles. We believe this case is not typical as 70 percent of vehicles owned by

households with family income of less than $15,000 are passenger cars19.

These households are likely to replace their vehicles with similar vehicles.

Therefore, the additional costs of used cars to most low-income households

would be about $145. This amounts to about 0.2 percent of their annual income.

Table 11.4-1. Potential Impacts of Proposed Regulation on Low-Income

Households

Description PC/LDT1 LDT2

Increase in New Vehicle Prices $630 $960

Increase in Used Vehicle Prices $145 $307

Median Remaining useful life (years) 8 11

Annualized Cost of Used Vehicle $27 $47

Poverty Income Level $15,000 $15,000

% Change 0.2 0.3

The climate change regulation may cause vehicle prices to increase, but the lowincome purchasers of used vehicles are not likely to face the increase for several

years. When they do pay higher prices for their vehicle, they will see a significant

reduction in vehicle operating costs. The savings far outweigh the annualized

cost of purchasing the vehicle (price increase spread over the years of

ownership). Purchase costs may increase by a small percentage of their income,

but will be more than offset by the operating cost savings, as discussed in the

next section.

 

19 2001 National Household Travel Survey.
Initial Statement of Reasons

August 6, 2004

170

11.4.E Potential Impact on Monthly Loan Payment and Operating

Savings

To assess the potential impact of the proposed regulations on the monthly cash

flow of typical low-income purchasers of used vehicles, we consider a vehiclefinancing period of three years at an interest rate of 10 percent. Table 11.4-2

below table provides estimates of the potential increases in monthly payments

and decreases in operating cost savings for the PC/LDT1 and LDT2 categories.

As shown in the table, the proposed regulations are expected to increase the

average monthly payment for a typical low-income household from about $4.68

for the PC/LDT1 category and by $9.91 for the LDT2 category. Concurrently,

typical low-income consumers would benefit from monthly operating cost savings

ranging from about $14.11 (LDT2) to $14.34 (PC/LDT1), resulting in a net

monthly savings of $9.43 for PC/LDT1 and $4.43 for LDT2. The vehicle miles

traveled are estimated using EMFAC accrual rates for 10-year-old vehicles and

discounting by 20 percent to reflect the fact that low-income consumers tend to

drive somewhat less than the average for the population.

It should be noted here that most used vehicles still retain a significant portion of

their value after a three-year financing period. These values tend to effectively

reduce the increase in monthly payments if they are realized after the completion

of the loan payments. Even without the realization of the residual value, monthly

savings from vehicles impacted by the regulation exceed the increase in monthly

loan payments for both the PC/LDT1 and LDT2 categories.

Table 11.4-2. Potential Impact on Monthly Loan Payment and Operating Cost

Savings for Used Vehicles

Description PC/LDT1 LDT2

Average Increase in Used Vehicle Price $145 $307

Increase in Monthly Loan Payment $4.68 $9.91

Monthly Operating Cost Savings $14.11 $14.34

Net Monthly Savings $9.43 $4.43

* Example baseline consumption based on 0.0348 gallons/mile for PC/LDT1 and 0.0495

gallons/mile for LTD2.
Initial Statement of Reasons

August 6, 2004

171

12 OTHER CONSIDERATIONS

This chapter describes several approaches that supplement the standard

economic analysis presented in Section 10. The methods used in this chapter

rely on recent tools and studies that provide additional insight into the potential

impacts of the regulation. Using those tools and studies to investigate possible

secondary impacts of the regulation, this section presents additional perspectives

on the potential impact of the proposed regulation on fleet mix, emissions, the

State’s economy, small businesses, and low-income households. The methods

discussed in this chapter are in the early stages of development relative to the

standard analysis presented in Section 10. As such, it is expected that these

methods will be further refined.

12.1 Consumer Response Effects on Emissions and State Economy

The ARB’s climate change regulation will increase new vehicle prices, starting

with model year 2009. In addition to an increase in price, however, it is expected

that many of the technologies that manufacturers employ to lower GHG

emissions to comply with the regulation will, as an outgrowth, result in vehicles

with lower operating costs than comparable pre-regulation vehicles. AB 1493

requires ARB to evaluate such operating costs as a component of owner or

operator life-cycle costs. Changes in vehicle prices and other attributes may

affect consumer purchase decisions and could affect how consumers

subsequently use vehicles. For example, not all consumers would be willing to

pay more for the vehicle that they might have otherwise purchased. Some may

purchase a different vehicle commensurate with their budget. Others may wait

until the following year, or respond in some other way. Still other consumers may

highly value the reduction in operating cost, in which case the vehicle would be

more attractive. Such decision changes, referred to as consumer response, can

affect the California vehicle fleet mix and possibly emissions.

12.1.A Background

A model, known as CARBITS, was used to estimate consumer response (i.e., the

estimated change in the type and number of vehicles sold) to changes in vehicle

attributes. The model is fully explained in the Technical Support Document. The

attribute changes considered are a vehicle price increase necessary to cover the

estimated compliance costs of the climate change regulation, and a reduction in

vehicle operating costs which is an outgrowth of the technology employed to

reduce GHG emissions.

The CARBITS model is a consumer choice model and was developed by the

Institute of Transportation Studies at the University of California, Davis. The

ultimate objective of the modeling effort is to investigate the potential fleet mix

changes and any criteria pollutant impact that may result as a side effect of the

climate change regulation. The results show that even if there is a consumer
Initial Statement of Reasons

August 6, 2004

172

response to potential price increases and changes in operating costs, the staff

proposal would have a negligible effect on tailpipe criteria pollutant emissions.

Consumer response may manifest itself in different ways. The consumer

response to the regulations is defined as the difference in the California fleet mix

between the forecasted baseline and the regulation scenarios. The baseline

scenario is a depiction of the passenger vehicle fleet in the absence of the

climate change regulation.

While vehicle prices are likely to go up with respect to the regulatory scenarios,

the operating costs are expected to be lower. As a consequence of the price

increase, consumers could respond by purchasing fewer new vehicles and

holding on to their current vehicles a bit longer. Such a shift in vehicle holdings

would lead to aging of the vehicle fleet. The aging of the fleet could result in

older, relatively higher polluting cars staying in service longer than they would

have remained otherwise. This delay in fleet turnover could slow the progress

that California is making in reducing criteria pollutant emissions from mobile

sources. On the other hand, the reduction in operating cost could make new

vehicles more attractive, creating a factor that would increase new vehicle sales.

This would lessen and potentially more than offset the impact of any price

effects. The purpose of the CARBITS model is to quantitatively investigate the

possible magnitude and direction of such changes.

12.1.B Impacts on Vehicle Prices and Operating Costs

Using the cost estimates from section 5 of this report, staff developed a

regulatory scenario to use as inputs to CARBITS in an effort to estimate

consumer response to changes in price and operating cost. Table 12.1-1 shows

the baseline vehicle prices for the fourteen vehicle classes that the model uses.

Table 12.1-2 shows the estimated average price increase needed to cover

manufacturer compliance cost. This estimated price increase takes into account

the phase-in of the standard and the fact that not all vehicles will need to be

modified in order for each manufacturer to comply with the standard. The

derivation of these estimates is described in section 6. Table 12.1-3 shows the

price increase in percentage terms. These price changes are calculated for the

near-term phase (2009-2012) of the regulation as well as the mid-term (2013-

2016) phase. A combination of near and mid-term price changes were

calculated for some years based on the assumption that the regulation will be

phased in over a period of years. Starting in 2016, when the mid-term

technologies are fully phased in, the price changes remain the same.

The costs presented in section 5 were estimated for 5 vehicle classes. However,

CARBITS uses 14 vehicle classes. To translate the costs from 5 to 14 classes,

staff assumed that vehicles of similar size will have the same price and operating

cost changes. For example, mini, sub-compact, and compact cars fit in the same

class as the small car category in the cost estimates presented in section 5 and
Initial Statement of Reasons

August 6, 2004

173

therefore see the same price change. Similarly, staff assumes that operating

cost would decrease by the same percentage for the mini, sub-compact, and

compact cars.

Table 12.1-1. Predicted Baseline Vehicle Prices by CARBITS Classes ($2003)

Cars: Mini SubcompactCompact Midsize Large Luxury Sport

2009 $14,787 $16,612 $16,830 $21,931 $25,195 $47,761 $22,129

2010 $14,850 $16,612 $16,910 $22,010 $25,274 $47,839 $22,193

2011 $14,899 $16,612 $16,975 $22,069 $25,333 $47,899 $22,241

2012 $14,931 $16,612 $17,022 $22,108 $25,372 $47,937 $22,274

2013 $14,947 $16,612 $17,054 $22,127 $25,392 $47,958 $22,290

2014 $14,947 $16,612 $17,070 $22,127 $25,392 $47,958 $22,290

2015 $14,947 $16,612 $17,070 $22,127 $25,392 $47,958 $22,290

2016 $14,947 $16,612 $17,070 $22,127 $25,392 $47,958 $22,290

2017 $14,947 $16,612 $17,070 $22,127 $25,392 $47,958 $22,290

2018 $14,947 $16,612 $17,070 $22,127 $25,392 $47,958 $22,290

2019 $14,947 $16,612 $17,070 $22,127 $25,392 $47,958 $22,290

2020 $14,947 $16,612 $17,070 $22,127 $25,392 $47,958 $22,290

Table 12.1-1. (Continued) Predicted Baseline Vehicle Prices by CARBITS Classes

($2003)

Trucks: Small

pickups

Large

pickups

Minivans Standard

vans

Mid

SUVs

Large

SUVs

Mini

SUVs

2009 $14,485 $19,816 $26,248 $23,817 $28,583 $37,054 $19,353

2010 $14,564 $19,858 $26,312 $23,859 $28,663 $37,096 $19,433

2011 $14,623 $19,890 $26,361 $23,891 $28,721 $37,127 $19,491

2012 $14,663 $19,911 $26,394 $23,912 $28,761 $37,149 $19,531

2013 $14,682 $19,921 $26,410 $23,922 $28,780 $37,158 $19,550

2014 $14,682 $19,921 $26,410 $23,922 $28,780 $37,158 $19,550

2015 $14,682 $19,921 $26,410 $23,922 $28,780 $37,158 $19,550

2016 $14,682 $19,921 $26,410 $23,922 $28,780 $37,158 $19,550

2017 $14,682 $19,921 $26,410 $23,922 $28,780 $37,158 $19,550

2018 $14,682 $19,921 $26,410 $23,922 $28,780 $37,158 $19,550

2019 $14,682 $19,921 $26,410 $23,922 $28,780 $37,158 $19,550

2020 $14,682 $19,921 $26,410 $23,922 $28,780 $37,158 $19,550
Initial Statement of Reasons

August 6, 2004

174

Table 12.1-2. Climate Change Regulation Scenario, Vehicle Price Changes

2009 – 2020 ($2003)

Cars: Mini SubcompactCompact Midsize Large Luxury Sport

2009 $20 $20 $20 $9 $9 $9 $20

2010 $65 $65 $65 $30 $30 $30 $65

2011 $244 $244 $244 $112 $112 $112 $244

2012 $367 $367 $367 $167 $167 $167 $367

2013 $409 $409 $409 $200 $200 $200 $409

2014 $465 $465 $465 $248 $248 $248 $465

2015 $568 $568 $568 $344 $344 $344 $568

2016 $710 $710 $710 $490 $490 $490 $710

2017 $710 $710 $710 $490 $490 $490 $710

2018 $710 $710 $710 $490 $490 $490 $710

2019 $710 $710 $710 $490 $490 $490 $710

2020 $710 $710 $710 $490 $490 $490 $710

Table 12.1-2 (Continued) Climate Change Regulation Scenario, Vehicle Price

Changes 2009 – 2020 ($2003)

Trucks: Small

pickups

Large

pickups

Minivans Standard

vans

Mid

SUVs

Large

SUVs

Mini

SUVs

2009 $9 $60 $64 $60 $9 $60 $9

2010 $22 $157 $164 $157 $22 $157 $22

2011 $47 $336 $351 $336 $47 $336 $47

2012 $73 $521 $544 $521 $73 $521 $73

2013 $138 $609 $615 $609 $138 $609 $138

2014 $247 $732 $707 $732 $247 $732 $247

2015 $486 $982 $886 $982 $486 $982 $486

2016 $727 $1,232 $1,064 $1,232 $727 $1,232 $727

2017 $727 $1,232 $1,064 $1,232 $727 $1,232 $727

2018 $727 $1,232 $1,064 $1,232 $727 $1,232 $727

2019 $727 $1,232 $1,064 $1,232 $727 $1,232 $727

2020 $727 $1,232 $1,064 $1,232 $727 $1,232 $727
Initial Statement of Reasons

August 6, 2004

175

Table 12.1-3. Climate Change Regulation Scenario, Percentage Change in

Vehicle Price 2009 - 2020

Cars: Mini SubcompactCompact Midsize Large Luxury Sport

2009 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.1%

2010 0.4% 0.4% 0.4% 0.1% 0.1% 0.1% 0.3%

2011 1.6% 1.4% 1.4% 0.5% 0.4% 0.2% 1.1%

2012 2.4% 2.1% 2.1% 0.7% 0.6% 0.3% 1.6%

2013 2.6% 2.4% 2.3% 0.9% 0.8% 0.4% 1.8%

2014 3.0% 2.7% 2.6% 1.1% 0.9% 0.5% 2.0%

2015 3.7% 3.3% 3.2% 1.5% 1.3% 0.7% 2.5%

2016 4.6% 4.1% 4.0% 2.1% 1.9% 1.0% 3.1%

2017 4.6% 4.1% 4.0% 2.1% 1.9% 1.0% 3.1%

2018 4.6% 4.1% 4.0% 2.1% 1.9% 1.0% 3.1%

2019 4.6% 4.1% 4.0% 2.1% 1.9% 1.0% 3.1%

2020 4.6% 4.1% 4.0% 2.1% 1.9% 1.0% 3.1%

Table 12.1-3 (Continued) Climate Change Regulation Scenario, Percentage

Change in Vehicle Price 2009 - 2020

Trucks: Small

pickups

Large

pickups

Minivans Standard

vans

Mid

SUVs

Large

SUVs

Mini

SUVs

2009 0.1% 0.3% 0.2% 0.2% 0.0% 0.2% 0.0%

2010 0.1% 0.8% 0.6% 0.6% 0.1% 0.4% 0.1%

2011 0.3% 1.6% 1.3% 1.4% 0.2% 0.9% 0.2%

2012 0.5% 2.5% 2.0% 2.1% 0.2% 1.4% 0.4%

2013 0.9% 3.0% 2.2% 2.5% 0.5% 1.6% 0.7%

2014 1.6% 3.5% 2.6% 3.0% 0.8% 1.9% 1.2%

2015 3.2% 4.8% 3.2% 4.0% 1.6% 2.6% 2.4%

2016 4.8% 6.0% 3.9% 5.0% 2.4% 3.2% 3.6%

2017 4.8% 6.0% 3.9% 5.0% 2.4% 3.2% 3.6%

2018 4.8% 6.0% 3.9% 5.0% 2.4% 3.2% 3.6%

2019 4.8% 6.0% 3.9% 5.0% 2.4% 3.2% 3.6%

2020 4.8% 6.0% 3.9% 5.0% 2.4% 3.2% 3.6%

Section 5 presented data on operating cost reductions due to the proposed

regulation. The reductions were translated to the 14 CARBITS classes and are

presented in Table 12.1-4. Because the regulation is phased in over the years,

the operating costs reductions account for the portion of the fleet that would

become compliant with the proposed regulation in each year.
Initial Statement of Reasons

August 6, 2004

176

Table 12.1-4. Climate Change Regulation Scenario, Percentage Reduction in Fuelrelated Operating Cost 2009 - 2020

Cars: Mini SubcompactCompact Midsize Large Luxury Sport

2009 1.0% 1.0% 1.0% 0.9% 0.9% 0.9% 1.0%

2010 3.3% 3.3% 3.3% 2.9% 2.9% 2.9% 3.3%

2011 11.3% 11.3% 11.3% 10.1% 10.1% 10.1% 11.3%

2012 16.0% 16.0% 16.0% 14.4% 14.4% 14.4% 16.0%

2013 17.0% 17.0% 17.0% 15.4% 15.4% 15.4% 17.0%

2014 18.0% 18.0% 18.0% 16.6% 16.6% 16.6% 18.0%

2015 19.5% 19.5% 19.5% 18.4% 18.4% 18.4% 19.5%

2016 21.0% 21.0% 21.0% 20.6% 20.6% 20.6% 21.0%

2017 21.0% 21.0% 21.0% 20.6% 20.6% 20.6% 21.0%

2018 21.0% 21.0% 21.0% 20.6% 20.6% 20.6% 21.0%

2019 21.0% 21.0% 21.0% 20.6% 20.6% 20.6% 21.0%

2020 21.0% 21.0% 21.0% 20.6% 20.6% 20.6% 21.0%

Table 12.1-4 (Continued) Climate Change Regulation Scenario, Percentage

Reduction in Fuel-related Operating Cost 2009 - 2020

Trucks: Small

pickups

Large

pickups

Minivans Standard

vans

Mid

SUVs

Large

SUVs

Mini

SUVs

2009 3.3% 2.4% 2.9% 2.4% 3.3% 2.4% 3.3%

2010 9.5% 6.9% 8.3% 6.8% 9.5% 6.8% 9.5%

2011 20.3% 14.6% 17.8% 14.6% 20.3% 14.6% 20.3%

2012 22.3% 16.4% 19.7% 16.4% 22.3% 16.4% 22.2%

2013 24.0% 18.3% 21.4% 18.3% 23.9% 18.3% 23.9%

2014 26.3% 21.3% 23.9% 21.3% 26.3% 21.3% 26.3%

2015 26.3% 21.3% 23.9% 21.3% 26.3% 21.3% 26.3%

2016 26.3% 21.3% 23.9% 21.3% 26.3% 21.3% 26.3%

2017 26.3% 21.3% 23.9% 21.3% 26.3% 21.3% 26.3%

2018 26.3% 21.3% 23.9% 21.3% 26.3% 21.3% 26.3%

2019 26.3% 21.3% 23.9% 21.3% 26.3% 21.3% 26.3%

2020 26.3% 21.3% 23.9% 21.3% 26.3% 21.3% 26.3%

These percentage operating cost savings were then converted into cent per mile

savings. The results are shown in Table 12.1-5.
Initial Statement of Reasons

August 6, 2004

177

Table 12.1-5. Operating Cost Savings, Cents Per Mile

Cars: Mini SubcompactCompact Midsize Large Luxury Sport

2009 0.0 0.0 0.1 0.1 0.1 0.1 0.1

2010 0.2 0.2 0.2 0.2 0.2 0.2 0.2

2011 0.5 0.5 0.6 0.6 0.7 0.7 0.8

2012 0.8 0.8 0.9 0.9 1.0 1.0 1.1

2013 0.8 0.8 0.9 0.9 1.0 1.1 1.2

2014 0.9 0.9 1.0 1.0 1.1 1.1 1.2

2015 0.9 0.9 1.0 1.1 1.3 1.3 1.3

2016 1.0 1.0 1.1 1.3 1.4 1.4 1.4

2017 1.0 1.0 1.1 1.3 1.4 1.4 1.4

2018 1.0 1.0 1.1 1.3 1.4 1.4 1.4

2019 1.0 1.0 1.1 1.3 1.4 1.4 1.4

2020 1.0 1.0 1.1 1.3 1.4 1.4 1.4

Table 12.1-5. (Continued) Operating Cost Savings, Cents Per Mile

Trucks: Small

pickups

Large

pickups

Minivans Standard

vans

Mid

SUVs

Large

SUVs

Mini

SUVs

2009 0.1 0.1 0.2 0.2 0.2 0.2 0.1

2010 0.3 0.3 0.4 0.4 0.5 0.4 0.4

2011 0.7 0.7 0.8 0.8 0.9 0.8 0.7

2012 1.0 1.0 1.1 1.2 1.3 1.2 1.0

2013 1.1 1.1 1.2 1.3 1.4 1.3 1.1

2014 1.1 1.2 1.2 1.4 1.4 1.4 1.1

2015 1.2 1.3 1.3 1.5 1.5 1.6 1.2

2016 1.2 1.5 1.4 1.7 1.6 1.7 1.3

2017 1.2 1.5 1.4 1.7 1.6 1.7 1.3

2018 1.2 1.5 1.4 1.7 1.6 1.7 1.3

2019 1.2 1.5 1.4 1.7 1.6 1.7 1.3

2020 1.2 1.5 1.4 1.7 1.6 1.7 1.3

12.1.C Impacts on Vehicle Sales, Fleet Size, and Average Age

The impacts of the proposed regulation were assessed by forecasting a baseline

future fleet mix that assumes that, absent the regulation, vehicle prices and

operating costs change only slightly in real terms. This baseline then is

compared to a regulatory scenario that takes into account the estimated price

and operating cost changes resulting from the regulation. Table 12.1-6 shows

vehicle sales, the size of the fleet, and the average age of the fleet under the

baseline and regulation scenarios.
Initial Statement of Reasons

August 6, 2004

178

Table 12.1-6. Results of Baseline and Climate Change Regulation Scenarios

Year Baseline Scenario Regulation Scenario

Vehicle

Sales

(x1000)

Fleet Size

(x1000)

Average

Age

(years)

Vehicle

Sales

(x1000)

Fleet Size

(x1000)

Average

Age

(years)

2009 1,687 26,875 9.17 1,689 26,845 9.17

2010 1,710 27,608 9.28 1,717 27,582 9.27

2011 1,728 28,302 9.38 1,745 28,281 9.36

2012 1,754 29,158 9.48 1,774 29,133 9.45

2013 1,775 29,837 9.59 1,786 29,815 9.56

2014 1,804 30,736 9.71 1,805 30,706 9.68

2015 1,849 31,805 9.84 1,835 31,768 9.81

2016 1,879 32,658 9.95 1,840 32,611 9.93

2017 1,926 33,677 10.05 1,882 33,615 10.04

2018 1,966 34,759 10.16 1,913 34,688 10.16

2019 2,005 35,629 10.25 1,947 35,549 10.26

2020 2,049 36,708 10.34 1,988 36,629 10.36

Table 12.1-7 shows the differences in sales, fleet mix, and average age of fleet

between the baseline and regulation scenarios. The full analysis is presented in

the Technical Support Document.

Table 12.1-7. Climate Change Regulation Impacts on Vehicle Sales, Fleet Size,

and Fleet Age

Years Changes in Sales Changes in Fleet Size Changes in

Average Age

(years)

In

Thousands

Percent

Change

In

Thousands

Percent

Change

2009 3 0.2% 0 0.0% 0.00

2010 7 0.4% 0 0.0% 0.00

2011 18 1.0% 1 0.0% -0.01

2012 19 1.1% -2 0.0% -0.02

2013 11 0.6% -12 0.0% -0.03

2014 2 0.1% -13 0.0% -0.03

2015 -13 -0.7% -15 0.0% -0.03

2016 -37 -1.9% -25 -0.1% -0.02

2017 -43 -2.2% -29 -0.1% -0.01

2018 -52 -2.6% -42 -0.1% -0.01

2019 -54 -2.7% -54 -0.2% 0.01

2020 -61 -3.0% -58 -0.2% 0.02
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179

As can be seen by reviewing the table, in the initial years of the regulation the

model predicts a sales increase. This implies that the negative effect on

consumer demand brought about by the estimated price increase is more than

offset by an increase in consumer demand due to the attractiveness of vehicles

with reduced operating cost. As the more stringent second stage of the

regulation is phased in, the model predicts that the combined effect of the

changes in vehicle attributes would be a slight decrease in vehicle sales. As

noted above, these are preliminary estimates and staff will continue to refine this

work.

The changes in the fleet mix affect the average age of the fleet. If fewer new

cars are sold and consumers hold on to their older cars, the fleet gets older.

That is, the average age of vehicles on the road could increase. As Table 12.1-7

shows, the fleet aging associated with the regulatory scenario is minimal. It stays

either unchanged, as illustrated by 2009 and 2017, or goes up or down by at

most 0.03 years, or about 11 days.

The assumptions for this analysis do not consider other reductions in operating

costs that may be associated with the regulation such as the potential elimination

of a mobile air conditioning service event through improved refrigerant

containment strategies that manufacturers may choose to employ. Further, the

model does not consider the potential increase in the price of used vehicles in

response to new vehicle price increases associated with the regulation. Both of

these effects would be expected to translate into a further increase in the sales of

new vehicles. Finally, the model does not take into account changes to other

vehicle attributes associated with the regulation that consumers may value, such

as the environmental benefits. Because the model does not take into account

such factors that would serve to increase sales, ARB staff believes that the

model may understate the sale of new vehicles with respect to the regulatory

scenario.

12.1.D Impacts on Criteria Emissions

Changes in the fleet size and age would affect criteria emissions. Newer cars

emit less, and will produce a steady decline in most vehicle pollutants as new

vehicles replace existing ones. If the fleet ages, then the rate of emission

reduction from the fleet could slow. Older cars tend to be driven less, however,

implying that the emissions may not significantly change. The model results

indicate small changes to the fleet. The small changes were input into EMFAC

model to estimate the emissions. The emissions impacts assessments are

shown in Table 12.1-8, Table 12.1-9, and Table 12.1-10 below. The tables show

projected changes in ROG, NOx and PM10 emissions.
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180

Table 12.1-8. Climate Change Regulation Consumer Response, Changes in ROG

Emissions (tons/day)

Year Vintages Baseline

ROG (tpd)

Regulation

ROG (tpd)

Difference

(tpd)

2020 1975-2008 197.70 196.67 -1.03

2020 2009-2020 33.26 33.47 0.21

2020 Total 230.96 230.14 -0.82

Table 12.1-9. Climate Change Regulation Consumer Response, Changes in NOx

Emissions (tons/day)

Year Vintages Baseline

NOx (tpd)

Regulation

NOx (tpd)

Difference

(tpd)

2020 1975-2008 157.24 156.51 -0.73

2020 2009-2020 32.96 32.97 0.01

2020 Total 190.20 189.48 -0.72

Table 12.1-10. Climate Change Regulation Consumer Response, Changes in PM10

Emissions (tons/day)

Year Vintages Baseline

PM10 (tpd)

Regulation

PM10 (tpd)

Difference

(tpd)

2020 1975-2008 17.23 17.15 -0.08

2020 2009-2020 25.52 25.55 0.03

2020 Total 42.75 42.70 -0.05

As can be seen from the tables, the regulation is predicted to slightly decrease

criteria pollutant emissions in 2020, but only by a very small amount. In

considering and interpreting these results, staff believes that the increase in

vehicle sales in the early years of the regulation results in a small acceleration in

the retirement of higher polluting older cars from the pre-regulation period. This

results in slightly lower fleet emissions. On the other hand, the slight projected

decrease in sales in the later years of the regulation results in a longer average

life for the much less polluting cars of 2009-2020 vintage. This will tend to

increase emissions from that group, but to a lesser extent because the newer

cars are cleaner than the older cars. The net effect is a very small, but positive,

effect on emissions and air quality.
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181

12.2 Alternative Approach to Assessing Consumer Response

The CARBITS model considers many factors at the household analytical level in

predicting fleet change. Staff also investigated a simplified alternative approach

that uses an aggregate sales response factor, known as price elasticity of

demand, to assess the consumer response and emission implications of vehicle

price increases due to the proposed regulation. This simplified approach was

developed as a screening tool and to provide a cross-check against the

CARBITS results.

The ratio of a percentage change in sales to a percentage change in price is

referred to as price elasticity of demand. Price elasticity of demand is the most

commonly used measure of consumers’ sensitivity to price. It measures the

change in demand for a good or service caused by a given change in price.

Table 12.2-1 provides estimates of the price elasticity of demand for automobiles

by various sources.

Table 12.2-1. Estimated Price Elasticity of Demand for Automobiles

Estimator Price Elasticity of Demand Source

CARBITS -1.4 ITS, UCD

NERA/Sierra -1.0 GM Study of ZEV Mandate, Volume II

Mackinac -1.2 to -1.5 (short-run)

-0.2 (Long-run)

The Mackinac Center for Public Policy, Michigan

Patrick McCarty -0.87 MIT Press, 1996

David Greene -1.0 Kleit, Andrew 1990

Range -0.2 to -1.5

ARB staff, after reviewing a number of these studies, selected for this screening

exercise a sales elasticity of minus one (-1) as an approximate average of the

observed values. A sales elasticity of -1 means that the percentage decrease in

new vehicle sales is equal to the percentage increase in price. Thus, for the

percent increases in price given in Table 12.2-2, sales of new vehicles would

decrease by the same amount.

Table 12.2-2. Percentage Price and Sales Changes by Vehicle Class

Vehicle Type Change in

Price

Change in

Sales

Passenger Cars (All) 2.7 - 2.7

Trucks (0-3750 lb. Loaded Vehicle Weight20) 3.1 - 3.1

Trucks (3751-5750 lb. Loaded Vehicle Weight20) 2.5 - 2.5

Trucks (5751 lb. Loaded Vehicle Weight20 - 8500 lb.

GVWR21

2.2 - 2.2

 

20 Loaded vehicle weight (LVH) equals curb weight plus 300 lb.

21 Gross vehicle weight rating
Initial Statement of Reasons

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182

A comparison of the sales changes projected by this screening analysis (from

Table 12.2-2) versus the sales changes predicted by CARBITS (from Table

12.1-7) shows that the screening results are in general agreement with the

CARBITS results for the fully phased in regulation (2015 and beyond).

It is important to note that this simplified approach assumes that the estimated

price increase is applied to every vehicle in the fleet. In fact, as is shown in

section 6.2, not all vehicles need to be modified in order for all manufacturers to

comply with the regulation, particularly during the phase-in periods. Thus this

methodology, which staff developed for screening purposed and to compare to

the CARBITS results, is an overestimate of the actual impact. Staff also notes

that this methodology does not take into account the effect of any desirable

changes in vehicle attributes, such as a reduction in operating cost or more

attractive environmental performance, that may be associated with the price

increase.

12.3 Effects of Regulation on Vehicle Miles Traveled

The climate change regulation is designed to reduce emissions of GHGs. As

noted above, many of the technologies employed by manufacturers to reduce

climate change emissions will, as an outgrowth, reduce the operating cost of the

vehicle. All other factors being equal, economic theory suggests that people will

drive more as operating costs decline. Thus a decrease in the cost of driving may

lead to an increase vehicle miles traveled (VMT), lessening the GHG emission

reductions associated with the climate change regulation as well as potentially

increasing emissions of criteria pollutants relative to a baseline scenario. This

section evaluates the possible impact of the proposed regulatory scenario with

respect to increases in VMT due to reduced operating costs.

ARB staff has carried out two separate analyses of the effect of operating cost on

vehicle miles traveled. The first incorporates the results to date of UC Irvine

econometric studies, applying VMT increases potentially associated with lower

operating cost to affected vehicles according to their ages in calendar years 2020

and 2030, then comparing these to a baseline case. The econometric analysis

does not account for certain other factors that influence travel decisions,

especially those related to the available transportation system in urban areas. A

second analysis was performed is to estimate the change in travel demand when

vehicle operating costs decline in the context of the transportation system in the

South Coast Air Basin. The second analysis uses travel demand model outputs

from the Southern California Association of Governments, comparing scenarios

with changes in fuel cost assumptions to baseline cases in 2020 and 2030.

12.3.A Background

The phenomenon where measures designed to reduce the use of a product

actually produce some incentives to increase its use is known as the “rebound
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183

effect”. This effect has been studied in the context of energy efficiency, where,

for example, more efficient air conditioners tend to be used more often. The

economics literature also contains a number of studies of the effect of gasoline

prices on driving, based on national data. The rebound effect associated with the

cost of driving, however, is sensitive to household income and traffic conditions,

and there are no California-specific studies of this effect. Staff does not believe

that the national studies are necessarily representative of California. California

has higher income and worse traffic conditions than other states, which would

reduce the tendency for consumers to increase driving due to reduced operating

costs. A few pennies of fuel savings per mile may not induce much driving in

areas where people already drive all they need. If driving occurs in congested

areas, the time cost of driving is high. It has been demonstrated that any cost

savings must be quite large to compensate for the time cost. That is, people

value their time highly enough that a few pennies in operating cost savings per

mile is not going to encourage them to drive more.

To reflect the rebound effect, if any, in emission calculations, myriad technical

and analytical issues need to be addressed. The ARB and CEC commissioned a

study by the University of California at Irvine (UCI). The purpose of the study is

to evaluate the potential impact of reduced operating costs on vehicles miles

traveled in California in response to a scenario consistent with the proposed

regulation (i.e., increased prices for new vehicles with lower operating costs).

Most studies consider only the operating cost effects on VMT. They ignore the

effects of increased initial cost of purchasing a vehicle. The increase in the

purchase price works in the opposite direction as the lower operating cost and

can cancel additional driving. The results of the UCI study suggest that savings

from reduced operating costs are directed towards the increased vehicle

payments due to the higher vehicle price.

As noted above, the literature has addressed the "rebound effect" extensively,

but the studies are generally national in scope and do not consider factors that

are specific to California (e.g., very heavy traffic congestion and high personal

income). Most studies attempt to explain VMT on the basis of a number of

factors, including the fuel price per mile. These studies either use aggregate

data or disaggregate data. Aggregate data are either in the form of pure timeseries (one observation per year) or a combined cross-sectional and time series

referred to as aggregate panel (e.g., one observation per state per year).

Greene (1992) is a good example of an aggregate time series study. Using U.S.

time series data for 1957-1989, Greene estimates the rebound effect to be

between 5 and 15 percent for both the short-run and long-run, with a best

estimate of 12.7 percent. He also finds some evidence that the rebound effect

declines over time. Haughton and Sarkar (1996) provide an example of an

aggregate panel study. This study uses both U.S. time series data from 1970-

1991 and cross-sectional data for all of the 50 states plus the District of
Initial Statement of Reasons

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184

Columbia. They estimate a rebound effect of 16 percent in the short-run, and 22-

23 percent in the long-run.

A number of recent studies have used disaggregate data to estimate the rebound

effect. Disaggregate data are data on individuals, either in the form of a cross

section of data in a single year or a panel covering multi-year observations on the

same people. A review of the literature by Greene, Kahn, and Gibson (1999)

finds that disaggregate studies show a wider range in their estimates of the

rebound effect than aggregate studies. Estimates of the rebound effect from

these studies range from zero to about 50 percent. Using disaggregate data,

Goldberg (1998) finds a rebound effect of zero when accounting for simultaneity

between the vehicle purchase and vehicle usage decision. Pickrell and Schimek

(1999) estimate a rebound effect of 4 percent when controlling for ownership

levels and hence for fuel efficiency. Using a series of large micro data sets

covering six years from 1979 and 1994, Greene, Kahn, and Gibson (1999) find a

long-run rebound effect of 23 percent, with a range of 17 percent for threevehicle households to 28 percent for one-vehicle households.

The nationally-based literature thus offers an estimated range of zero to 50

percent for the rebound effect. The UCI study found, however, that when

California household income and transportation conditions are accounted for, the

rebound estimate is very small. The study provided short-run and long-run

estimates as well as a dynamic estimate which collectively considers the shortrun (one year) and the long-run (two to four years) effects for a specific change in

operating cost in a specific year. The dynamic rebound effect for the year 2020

calculated for this analysis is 3.08 percent according to the equations reported in

the UCI study. Using this dynamic rebound effect estimate and a 25 percent

reduction in operating costs would yield an increase in VMT of 0.77 percent (25 x

0.0308). Table 12.3-1 reports the short-run and long-run rebound effect

estimates by UCI. These estimates are based on the model estimates which

include income. Real income growth is assumed at 1.6 percent per year based

on historical data, causing the short-run and long-run effects to diminish over the

years. That is, as operating costs become a smaller portion of total income, any

cost change becomes less significant with respect to driving decisions.
Initial Statement of Reasons

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185

Table 12.3-1. Rebound Effect - Preliminary Estimates for California

Year Income

(2003$)

Short

Run

(%)

Long Run

(%)

2009 $37,926 1.55 7.17

2010 $38,553 1.47 6.82

2011 $39,189 1.40 6.49

2012 $39,839 1.33 6.16

2013 $40,496 1.26 5.84

2014 $41,167 1.19 5.54

2015 $41,847 1.13 5.24

2016 $42,539 1.06 4.96

2017 $43,242 1.00 4.69

2018 $43,958 0.95 4.43

2019 $44,685 0.89 4.17

2020 $45,423 0.84 3.93

2021 $46,173 0.79 3.70

2022 $46,938 0.74 3.48

2023 $47,714 0.69 3.27

2024 $48,502 0.65 3.06

2025 $49,304 0.61 2.87

2026 $50,121 0.57 2.68

2027 $50,948 0.53 2.51

2028 $51,791 0.49 2.34

2029 $52,647 0.46 2.18

2030 $53,519 0.42 2.03

The main concern regarding the rebound effect is its ability to reduce the

intended effects of the climate change regulation. Increased driving would offset

some of the GHG emission reductions and would also offset some of the

reductions in upstream criteria pollutant emissions. To estimate the extent of the

rebound effects on emissions, staff used ARB's EMFAC model.

12.3.B Analysis Using Econometric Study

As noted above, ARB has contracted with Dr. Kenneth Small at the University of

California, Irvine (UC Irvine) to undertake a study of how changes in vehicle

operating costs affect changes in travel. As part of the study, Dr. Small

developed a methodology to calculate dynamic rebound. The ARB staff used

this methodology to calculate a dynamic rebound in 2020 of 3.08 percent. Staff

used this dynamic rebound with the estimated percent change in operating cost

by model year to estimate the percent VMT increase in 2020.

To examine the impact of the rebound effect on emissions, ARB staff ran the

EMFAC model to reflect these adjustments to VMT. We used the EMFAC2002
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186

mobile source emissions model, version 2.2 (April 2003), to estimate the

emissions changes resulting from changes in travel brought about by the

rebound effect. VMT in EMFAC is the product of vehicle population times

accrual rate. The accrual rate is the miles traveled per year per vehicle for each

vehicle class. Staff adjusted the accrual rates for model year 2009 and newer

vehicles in the classes subject to the proposed regulation to reflect the estimated

percent VMT increase. The emissions from these runs were compared to

baseline runs to assess the rebound impact. Results for the vehicle classes

subject to the proposed regulation are shown in Table 12.3-2.

Table 12.3-2. Impacts of Rebound Effect, Total Light Duty Fleet < 8500 lbs.

GVWR22 VMT and Emissions (tons per day)

CY2020

Baseline Adjusted % Difference

VMT23 1,020,478 1,025,761 0.52%

ROG 230.95 230.70 -0.11%

NOx 190.20 190.78 0.30%

PM10 42.74 43.01 0.63%

CO 2096.98 2104.83 0.37%

CO2 485,150 487,550 0.49%

Again, this methodology assumes that all vehicles are modified in response to

the regulation. Thus this approach will tend to overestimate the rebound impact.

12.3.C Analysis Using Travel Demand Model

The response of motorists to changes in vehicle operating cost occurs in

the context of the transportation systems available to them. In California’s

urban areas, highway networks are often constrained by traffic congestion,

which has bearing on decisions regarding when, where, how and even

whether to travel. Many of the factors that affect these decisions are

incorporated in travel demand models, which are the principal tools used

by transportation planners to forecast travel activity within the limits of

regional transportation systems.

Travel demand models contain a series of sequential calculations and

iterative feedback loops through four principal steps: (1) the generation of

person trips, (2) the distribution of trips among likely origins and

destinations, (3) transportation mode choice, and (4) the assignment of

vehicle trips to the transportation system. Among the variables

considered in the mode choice step is the cost of motor vehicle operation,

including the price of fuel. Because mode choice and travel time outputs

 

22 Gross vehicle weight rating

23 Vehicle miles traveled in thousands of miles
Initial Statement of Reasons

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187

are linked back to trip distribution, operating costs also affect the relative

attractiveness of travel destinations and the miles driven to access goods

and services. Fuel cost is one among the many variables affecting travel

demand, and transportation modelers have found its impact to be

relatively minor. Indeed the time cost involved with additional travel,

especially in congested conditions, mitigates the travel-inducing effect of

reduced operating cost.

To examine the rebound effect in the context of urban travel demand, ARB

worked with modeling staff at the Southern California Association of

Governments (SCAG), who operate the travel demand model for the sixcounty region of southern California. Use of the SCAG model enabled

staff to examine the emission impacts of changes in both the amount and

the speed of motor vehicle travel, relative to the cost of gasoline per mile

traveled. For purposes of this analysis, ARB staff used travel model

outputs of vehicle miles of travel (VMT) and the distribution of speed by

vehicle class for the South Coast Air Basin.24

For calendar year 2020, SCAG staff ran the travel demand model for

baseline cases that assume an automobile operating cost of 12.76 cents

per mile in 1989 dollars. Automobile operating costs include gasoline at

8.14 cents per mile and maintenance costs at 4.62 cents per mile. SCAG

staff then ran several separate scenarios with varying decreases in the

assumed cost of gasoline (maintenance costs were kept constant).

Among the scenarios for 2020, a SCAG model run assumed a 17.3

percent reduction in gasoline cost. This figure represents a hypothetical

25 percent gasoline cost reduction applied to the 69 percent of light and

medium duty VMT that will be driven in the (post-2008) vehicles subject to

AB 1493 requirements in 2020.

To estimate emissions, ARB staff applied the VMT and speed distribution

outputs from the SCAG model runs by vehicle class, through the scenario

generator in EMFAC2002 (version 2.2, April 2003). EMFAC output was

generated under each scenario for the South Coast Air Basin, annual

average. Results for the light duty fleet affected by the proposed

regulation are shown in Table 12.3-3.

 

24 The SCAG travel models produce a distribution of VMT by speed for light and medium duty vehicles

combined, and a separate distribution for heavy duty trucks. EMFAC2002 applies speed correction factors

specific to vehicle class in its emissions calculation. Although heavy duty vehicles will not be directly

affected by regulations established pursuant to AB 1493, their relative travel speed in urban areas, and thus

their emissions, would be affected by additional light duty travel. Thus, a travel demand model analysis

enables ARB staff to consider these broader emissions impacts.
Initial Statement of Reasons

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188

Table 12.3-3. Impacts of Fuel Cost Reduction: Travel Demand Model Analysis

South Coast Air Basin, Total Light Duty Fleet <8500 lbs. GVWR25 VMT and

Emissions (tons per day)

CY2020

Baseline Adjusted % Difference

VMT 360,900 363,173 0.63%

ROG 86.20 86.33 0.15%

NOx 70.23 70.61 0.54%

PM10 15.03 15.14 0.73%

CO 772.35 776.70 0.56%

CO2 169,000 170,250 0.74%

Among vehicle classes affected by proposed regulation, the results from

SCAG indicate an elasticity of VMT to fuel cost of about –0.04. Emissions

impacts are minor, and vary from VMT impacts due to altered speed

distributions and the emissions processes not tied to miles traveled.

In 2002, the Bay Area Metropolitan Transportation Commission (MTC)

used its travel demand model to conduct a sensitivity test of the

responsiveness of VMT to travel cost per mile, with similar results. In the

MTC analysis the gasoline cost per mile was decreased by 25 percent in

calendar year 2025. Daily VMT increased as a result by 0.66 percent,

showing an elasticity of VMT to fuel cost of about –0.03.

12.4 Combined Effect on Criteria Pollutant Emissions

The staff analysis evaluated three pathways by which the proposed regulation

could affect criteria pollutant emissions. In Section 8.4 staff considered the

impact of the higher efficiency of the regulated vehicles on upstream emissions.

In section 12.1 staff considered the possible effects of changes in vehicle

attributes on vehicle sales, and hence on the composition of the fleet and its

resulting emissions. In section 12.3 staff estimated the possible emission impact

of changes in travel due to the likely reduced operating cost of regulated

vehicles.

In the draft staff proposal staff did not present an estimate of the combined effect

of all of these pathways, due to the developmental nature of the fleet turnover

and rebound analyses and the complexity of the interactions between fleet age

and VMT. In order to provide as complete a picture as possible of the

environmental effect of the staff proposal, however, staff believes that it is useful

to present our best estimate of the overall impact of the proposal on criteria

pollutant emissions. This section therefore outlines staff’s current thinking

regarding the combined effect of all pathways. For this evaluation, the two

 

25 Gross vehicle weight rating
Initial Statement of Reasons

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189

methodologies used to determine the combined effect on emissions in 2020

were:

• Adding the emission impacts from the analysis of vehicle sales

impacts and VMT effects as described in sections 12.1.D and

12.3.B above.

• Adjusting EMFAC to reflect both the changes in new sales as

determined in section 12.1.C and the mileage accrual adjustments

reflected in section 12.3.B.

By any measure, the combined impact is small. Table 12.4-1 below shows the

combined changes in terms of tons per day, and also in terms of the percent

change from baseline emissions from the regulated light duty fleet. As the table

shows, looking at the combined effect of all possible mechanisms that would

impact fleetwide emissions, ROG and NOx emissions are expected to decrease

by a combined total of approximately 1 ton per day, or less than half of one

percent. PM 10 emissions would increase by approximately 0.2 tons per day,

again about 1 percent, primarily due to increased tire and brake wear associated

with increased VMT.

Table 12.4-1. Estimated Emissions Impact of Rebound Effect, Fleet Turnover and

Fuel Cycle Benefits, Calendar Year 2020 Criteria Pollutant Tons Per Day

ROG NOx PM10

Baseline Emissions 231 187 43

Rebound Effect -0.25 0.58 0.27

(July EMFAC Analysis with UC Irvine methodology)

Fleet Turnover Changes -0.82 -0.72 -0.05

(July EMFAC Analysis with CARBITS inputs)

Fuel Cycle Changes -0.00763 -0.00055 -0.00003

(TIAX estimates from Tom Evashenk)

Combined Impacts (additive) -1.08 -0.14 0.22

Combined Impacts (one EMFAC run) -0.75 -0.48 0.18

Percent change (additive) -0.47% -0.07% 0.51%

Percent change (EMFAC) -0.33% -0.26% 0.42%

Staff notes that it is likely that any change to new vehicle sales would also

change VMT, but this interactive relationship was not considered for this
Initial Statement of Reasons

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190

evaluation. Because our analysis indicates that any changes in vehicle

sales and VMT due to the regulation are relatively small, any error related

to the interaction of the two effects will likewise be relatively small. The

larger the change in vehicle sales and VMT, the greater the potential for

error in using these methodologies.

12.5 Manufacturer Response

The economic impact analysis of the climate change regulation presented in

section 10 provides conservative estimates. The results are conservative in that

the analysis assumes that the compliance costs of the regulation will not change

over time. It further assumes that the costs will be passed on to consumers in

their entirety beginning the first year and continue on with no additional change

due to innovation, and no distribution of costs to different vehicle classes or nonprice methods of recovering costs.

Staff adopted this approach because there is a lack of quantitative information

available to quantify the impact of the factors listed above. Nevertheless, there is

ample evidence that automobile marketers use a variety of price and non-price

tools in an effort to optimize sales. The purpose of this section is to provide a

qualitative assessment of the options that are available to automobile

manufacturers, and that they have used historically, to maintain sales while

simultaneously complying with various regulatory requirements.

Staff reviewed consultant reports from ITS and the literature to assess the

information available on these points. Staff believes, based on its review, that

the increases in vehicle prices due to the regulation could well be less than the

estimates provided in section 5. Staff's main findings with respect to strategies

that automobile manufacturers may employ to comply with regulatory

requirements are presented here and are discussed in more detail in the

Technical Support Document to this report.

To comply with the climate change regulation, automobile manufacturers have a

number of options. The option that they choose will depend on costs, sales

strategy, market conditions, and consumer preferences. Whichever way they

choose to respond, it is likely that the automobile manufacturers will employ

methods that soften the impact of compliance costs on vehicle sales. They can

use marketing tools and technology-based cost decreases over time to bring

down the compliance costs to a fraction of what the consumer response analysis

assumed. Manufacturers have complied in the past with regulations that

increase vehicle production cost. Review of such cases helps to shed light on

manufacture response. This section provides findings from a review of regulatory

compliance costs in the automobile market over the past three decades.

The climate change regulations discussed in this staff proposal address

automotive emissions. We therefore reviewed past compliance costs associated
Initial Statement of Reasons

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191

with emission control regulations. Because the industry response to other

regulatory regimes may shed light on general trends, we also reviewed the

response of automobile manufacturers and their customers to two other

disparate cases of increased cost: the regulation of automotive safety and fuel

consumption. We found that when put in a historical perspective, the economic

impact analysis outlined here can easily be characterized as a conservative

scenario. Specifically, our historical review found that:

• Average, per-vehicle actual compliance costs are considerably higher in the

initial years of regulatory implementation than in subsequent years. The cost

of compliance tends to decline with passing years, due to the influence of

economies of scale, learning curve effects and technological innovation. The

cost of airbag systems, for example, dropped by 75 percent over the first 15

years of compliance.

• Automobile manufacturers do not typically pass along 100 percent of

increased compliance costs as higher retail prices in the first year of

compliance. One conservative estimate by an industry analyst indicates that

automobile manufacturers absorb 100 percent of compliance cost increases

in the first year, then pass along roughly two thirds of that cost in the following

year, and the balance in later years.

• Automobile manufacturers do not recover the same proportion of compliance

cost increases across all product lines. Instead, the relevant price increases

focus on the vehicle classes and customers seen as least sensitive to such

changes. Typically, higher price increases for popular and high-end models

cross-subsidize lower price increases to “economy-class” models.

• Automobile manufacturers use methods other than price increases to recoup

compliance cost increases, including changes in “standard” vehicle content

and adjustments to incentive packaging and financing terms.

• If consumers regard compliance-related improvements as valuable, new

vehicle sales may increase, despite increased prices. In the European Union,

sales of diesel vehicles have doubled despite an average price that is $1567

higher than comparable gasoline-fueled vehicles.

These findings on the options available to manufacturers to comply with

regulations help put the economic impact analysis into perspective. In short, the

estimated impacts would likely be on the high side and furthermore do not

consider the ongoing reductions due to further improvements.

12.6 Impact on Businesses in Low Income and Minority Communities

Businesses in low-income and minority communities (communities) in the State

may be impacted by the proposed regulation. AB 1493 directs the Board to

assess:

"The ability of the State to maintain and attract businesses in the

communities with the most significant exposure to air contaminants,
Initial Statement of Reasons

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192

localize air contaminants, or both, including, but not limited to,

communities with minority populations, or low-income populations, or

both."

In section 10 staff presents its analysis of the direct effect of the regulation. Here

staff again explores the use of new approaches to examine possible indirect

impacts.

For the purposes of this analysis, communities in the San Diego area were used

as a surrogate to characterize the potential impacts of the regulations on

affiliated businesses in communities statewide. Specifically, communities as

designated by the San Diego County Air Pollution Control District (SDCAPCD)

for environmental justice programs were selected as a surrogate to represent the

impacts of the proposed climate change regulations on communities with minority

population, or low-income population, or both across the State. San Diego

County comprises 291 ZIP Code areas. Of these, 37 are designated by the

SDCAPCD as environmental justice communities. San Diego County is home to

approximately 3 million Californians or about 8.3 percent of California’s

population in 200326. The income distribution in the county roughly mirrors the

income distribution for the entire State27. It should be noted that the SDCAPCD

employs a broad definition for designating environmental justice communities,

encompassing much of the district. Narrower definitions such as those based on

lower income level would lead to a reduction in the estimated impacts on low

income and minority communities as presented in this analysis. The potential

economic impacts were assessed on businesses that are linked to automobiles,

such as automobile dealers, gasoline stations, and automobile repair.

The reduction in operating cost due to the proposed regulation is expected to

save consumers, including consumers in low income and minority communities,

a significant amount of money. This analysis shows that the regulation may

result in a reduction in employment growth in some businesses affiliated with the

automobile industry, such as gasoline service stations. However, the potential

reductions are likely to be more than offset by the creation of jobs elsewhere in

unaffiliated (non-automotive) businesses, where consumers will spend their

savings from the reduced operating costs of the new vehicles.

12.6.A Affiliated Businesses

Table 12.6-1 provides a list of the types of affiliated businesses used in this

analysis. The businesses evaluated were selected as those determined to be

most likely to be impacted due to their direct relationship with automobile sales,

service, and operation.

 

26 California Statistical abstract, Department of Finance, 2003.

27 2000 Census Bureau, U.S. Department of Commerce.
Initial Statement of Reasons

August 6, 2004

193

Table 12.6-1. Socioeconomic Profile of Industries Affiliated with the Automobile

Industry for the San Diego ZIP Codes Considered in our Analysis. (2003 Data)

SIC Code Industry Number of

Businesses

Total

Employment

Total Sales

(million $)

5541 Gasoline service stations 293 1,964 287

5599 Automotive dealers 37 198 24

7537 Automobile transmission

repair shops

91 342 23

7539 Automotive repair shops 342 1,431 114

7549 Automotive services 251 1,402 84

Total 1,014 5,337 532

Source: Dun and Bradstreet Marketplace Database, Dun and Bradstreet data were adjusted to

reflect employment and sales data for all businesses.

Staff identified 1,014 businesses in communities in San Diego County that may

be directly affected by the proposed climate change regulations. These

businesses employ over 5,300 people and generate over $500 million in annual

sales. These businesses, in aggregate, generate about $100,000 per employee

as calculated by dividing total sales by total employment.

To estimate the impacts of the regulation, changes in revenues caused by the

proposed regulations for each affiliated industry were estimated. Then,

profitability ratios published by Dun and Bradstreet28 were used to estimate the

impact on their profits. Sales-to-employment ratios were derived from the data,

and used to estimate the impact on employment in each affected industry.

The affiliated business may experience some sales reduction because of vehicle

price increases due to the proposed regulation. For purposes of this analysis

staff used a price increase of $630 for 2016 and thereafter. This corresponds to

roughly the average of the fully phased in estimated cost increases for PC/LDT1

and LDT 2 vehicles. This increase represents about 2.5 percent increase on an

average new vehicle price of $25,000, which would reduce sales by 2.5 percent

assuming a price elasticity of -1.029. Staff chose the elasticity from literature

reviews 30. Further assumptions were made that new vehicles have 6 percent

market penetration rate per year based on vehicle expected life of 16 years, and

their operating cost declines by 25 percent. Because vehicle prices would

increase, and people tend to maintain their cars more often in an attempt to

retain the value of their car, staff assumed that the revenues of some of the

affiliated business would increase such that the demand for automotive services

and repairs increases by one percent.

 

28 Industry Norms and Key Business Ratios, One Year desktop Edition, Dun and Bradstreet, 2003.

29 See Klein, T.M., E. Hertz, and S. Borener (1991), A Collection of Recent Analyses of Vehicle Weight and Safety,

Technical Report No. DOT HS 677, National Highway Traffic Safety Administration, Washington, DC.

30 Paul S McCarthy, Market Price and Income Elasticities of New Vehicle Demands, The Review of Economics and

Statistics, Vol. 78, No. 3 (August 1996), pp 543-547
Initial Statement of Reasons

August 6, 2004

194

12.6.B Potential Impacts on Affiliated Businesses

This section presents the estimated impact of the proposed regulation on the

profitability of affiliated (automotive) businesses. As discussed below, staff

expects that any negative impacts on affiliated businesses would be more than

offset by positive impacts on the broader economy, due to increased purchasing

power.

Using the assumptions noted above, staff estimated the impact on profitability of

affiliated businesses. To provide a “maximum impact” estimate, this analysis

assumes that the entire fleet is made up of regulated vehicles. Impacts in the

initial years, as regulated vehicles enter into the fleet, would be less. As shown

in Table 12.6-2, the impact on profitability would be the most severe on gasoline

service stations. When regulated vehicles make up the entire fleet (which will not

occur until 2020 and beyond) the affected service stations would experience an

estimated decline of $72 million in revenues and $502,000 in profits as compared

to the no regulation scenario. This finding reflects a reduction in the growth of

profitability rather than an actual decline. The profitability impact on other

affiliated businesses would be negligible. No change is expected on the

profitability of automotive dealers. That is because the loss in profit associated

with a 2.3 percent loss of sales volume is estimated to be roughly equivalent to

the increase in their profits associated with a 2.3 percent price increase.

Table 12.6-2. Impact on Profitability of Affiliated Businesses

Industry Changes in

Revenues

Profit as %

of Revenues

Changes in

Profitability

Service stations ($71,725,000) 0.7 ($502,000)

Automotive dealers* 0 0.9 0

Automobile transmission

repair shops

$227,000 4.3 $9,800

Automotive repair shops $1,137,000 2.3 $26,100

Automotive services $837,000 2.3 $19,300

Total ($69,524,000) ($446,800)

*Dealers’ loss of sales volume was roughly compensated by the increase in vehicle prices.

12.6.C Potential Impact on Employment

This section discusses the potential impact on employment in affiliated

businesses. It likewise provides a “maximum impact” analysis that assumes that

the entire fleet consists of regulated vehicles. In addition, as noted below, any

negative impacts are expected to be more than offset by gains in other sectors.
Initial Statement of Reasons

August 6, 2004

195

Table 12.6-3 provides ratios of revenue per employee and per business for

affected businesses. For example, a typical service station in communities of

San Diego County earns about $1 million in revenues annually or $146,000 per

employee. On average, an affiliated business generated about $525,000 in

revenues per year or about $100,000 per employee.

Table 12.6-3. Affiliated Businesses’ Revenue Per Employee and Per Business in

San Diego Communities

Industry Revenue Per Employee Revenue Per Business

Service stations $146,000 $1,000,000

Automotive dealers $123,000 $660,000

Automobile transmission

repair shops

$66,000 $250,000

Automotive repair shops $79,000 $330,000

Automotive services $60,000 $330,000

Typical Business $100,00031 $525,00031

Table 12.6-4 provides an assessment of the impact of the proposed regulations

on jobs in affiliated businesses in communities in San Diego County. As shown

in the table, when the entire fleet consists of regulated vehicles service stations

are expected to have approximately 491 fewer jobs than in the no regulation

scenario. This is not an actual loss of existing jobs when the regulation is in full

effect, but rather a reduction from what the levels would otherwise be in the

future. The estimated reduction in jobs is an indicator of a slight reduction in

service station business growth due to the regulation. This employment

reduction is likely to be partially offset by the creation of 31 jobs in other affiliated

businesses. In addition, the reduction in operating cost is expected to save

consumers a significant amount of money. Depending upon where the

consumers direct their expenditures, many unaffiliated businesses such as food

service, wholesale trade, etc. will benefit from the proposed regulations, as

discussed in section 10.

Staff believes that the numbers of jobs created by these unaffiliated businesses

will significantly exceed the number of new jobs foregone at service stations.

San Diego County has a population of 3,017,200 (8.3 percent of the state)

according to California Department of Finance. To estimate the job gains in

communities in San Diego, the 55,000 increase in statewide jobs from the

regulation in 2020, as estimated in section 10, can be apportioned to San Diego

based on population. The communities have a population of about 2 million, or

two-thirds of the total. Apportioning the total to these communities would mean a

gain of about 3,000 jobs. This more than outweighs the reduction of 460 in these

communities and results in a net increase of more than 2,500 new jobs because

of the proposed climate change regulation.

 

31 Derived from the revenue and number of business data in Table 12.6-1.
Initial Statement of Reasons

August 6, 2004

196

Table 12.6-4. Net Impact of the Proposed Regulations on Jobs and Affiliated

Businesses In San Diego Communities

Industry Number of Jobs

Relative to No

Regulation )

Business Creation

(Elimination) Relative to

No Regulation

Service stations (491) (72)

Automotive dealers 0 0

Automobile transmission repair

shops

3 1

Automotive repair shops 14 3

Automotive services 14 3

Impact on affiliated businesses (460) (65)

Impact on other businesses 3,000 487

Net Impact 2,540 422

12.6.D Potential Impact on Business Creation, Expansion and

Elimination

As shown in Table 12.6-4, the proposed regulations, when fully embodied in the

fleet, are estimated to result in the equivalent of 72 fewer service stations in

communities of San Diego County than under the no regulation scenario. Seven

affiliated businesses, however, will be created. The proposed regulations are

also expected to result in the creation or expansion of 487 unaffiliated equivalent

businesses, depending upon where the consumers redirect their savings from

the reduction in operating cost. Overall, the number of businesses created or

expanded is expected to exceed the number of businesses eliminated by 422.

This magnitude of business elimination may be an overestimate because the

service stations draw revenues from other on-site activities such as vehicle repair

and convenience stores. These profit centers may keep them in business in

spite of reduced fuel sales.

12.7 Effect of Increased Fuel Price

Many of the measures that manufacturers will employ to achieve climate change

emission reductions will result in reduced vehicle operating costs, due to the fact

that the vehicles will be more efficient. These operating cost savings in turn feed

into the staff analysis of the economic impact of the regulation and its costeffectiveness.

The dollar value to consumers of a given motor vehicle GHG reduction and any

associated increase in vehicle efficiency will vary depending on the price of fuel.

Throughout the staff report analysis the staff has assumed a fuel price of $1.74

per gallon for gasoline and $1.73 per gallon for diesel. These prices are the

inflation adjusted equivalent of the values used in the California Energy
Initial Statement of Reasons

August 6, 2004

197

Commission (CEC) Integrated Energy Policy Report (CEC, 2004). These values

are roughly consistent with 3-year historic California fuel prices.

Several commenters have noted that these assumed fuel prices do not

correspond to current conditions, and have suggested that staff assess the

extent to which its findings and conclusions would change given higher fuel

prices. This approach is intended to take into account the possibility that future

fuel prices may be consistently higher than past historic averages, due to

international political factors as well increasing demand in China, India and other

rapidly growing emerging economies. In response to these comments staff has

replicated relevant portions of the analysis using an assumed fuel price of $2.30

per gallon, which is intended to be more representative of recent prices.

12.7.A No Effect on the Standard

Almost all of the technology packages evaluated by staff paid for themselves

over the lifecycle of the vehicle at the assumed fuel price of $1.74 per gallon.

The choice of the technology packages to use for setting the near term and mid

term standards was driven more by technical lead time and developmental

constraints rather than by payback concerns. Thus although using a fuel price of

$2.30 per gallon reduces the payback period and increases the net present value

to consumers for all technology packages, this change by itself would not allow

staff to set a more stringent standard. Rather, the limiting factor on the standard

is the availability of technology packages for widespread deployment.

12.7.B Positive Effect on Economic Impacts

The primary staff analysis concluded that at a fuel price of $1.74 per gallon the

GHG reduction technologies would more than pay for themselves over the life of

the vehicle, and the regulation as a whole would have small but overall positive

effects on the California economy. As would be expected, if fuel prices are $2.30

per gallon rather than $1.74 per gallon, net benefits increase both for individual

consumers and for the state as a whole. The specific impacts are summarized in

Table 2.3-1 and then discussed below.
Initial Statement of Reasons

August 6, 2004

198

Table 12.7-1. Effect of Increased Fuel Price on Economic Impacts

Variable

@ $1.74 per gallon @$2.30 per gallon

Individual Consumer:

Net Monthly Savings, New Vehicle* $6.53 to $11.73 $14.48 to $19.32

Net Monthly Savings, Used Vehicle** $4.43 to $9.43 $9.05 to $13.98

California Economy, 2020

Annualized Savings $5.2 billion $6.9 billion

Change in Output -$2.5 billion -$3.3 billion

Change in Personal Income +$5.3 billion +$7.0 billion

Change in Jobs +55,000 +74,000

 *Loan Payment (5 year loan) minus Operating Cost Savings

**Loan Payment (3 year loan) minus Operating Cost Savings

Value

Purchasers of new vehicles

Section 10.5 showed the effect of the regulation on monthly expenses for

purchasers of new vehicles. That analysis looked at the increase in monthly loan

payment, assuming a 5 year loan, that would result from the average increase in

vehicle prices associated with the fully phased in regulation. The analysis then

factored in the monthly decrease in operating expenses associated with the

modeled technology package. The analysis concluded that the average net

monthly savings for purchasers of new vehicles would range from $6.53 to

$11.73.

As is shown in Table 12.7-1, if future fuel prices average $2.30 per gallon, then

the monthly savings increase to a range of $14.48 to $19.32.

Purchasers of used vehicles

For purchasers of used vehicles the staff analysis calculated the increase in loan

payment assuming a three year loan. The analysis concluded that purchasers of

used vehicles would have a monthly net benefit ranging from $4.43 to $9.43. If

future fuel prices average $2.30 per gallon that monthly net benefit will increase

to a range of $9.05 to $13.98.

California economy

Section 10.2 showed the effect of the regulation on the California economy. The

analysis concluded that the regulation would have a small but positive effect on

the economy as a whole, with a slight decrease in output but slight increases in

personal income and employment. As is shown in Table 12.7-1, using an

assumed fuel price of $2.30 per gallon slightly increases all of these impacts.

Using 2020 as an example, annualized savings to vehicle owners would be $6.9

billion rather than $5.2 billion. The decrease in output would be $3.3 billion

rather than $2.5 billion, the increase in personal income would be $7.0 billion

rather than $5.3, and the increase in jobs would be 74,000 rather than 55,000.

All of these changes appear to be proportional; that is, the percent change in
Initial Statement of Reasons

August 6, 2004

199

each impact corresponds closely to the percent change in fuel price (about 32

percent).

12.8 Summary and Conclusions

The economic impact analysis presented in section 10 considers vehicle price

increases and operating cost decreases resulting from the climate change

regulation. The economic impact analysis is based on the staff assessment that

the lower vehicle operating cost resulting from the regulation will be sufficiently

attractive to new car buyers to compensate for the vehicle price increase, and

results in vehicle sales that are unchanged from the levels that would have been

the case without the regulation.

In this section, staff assessed what the consequences would be if one assumes

that the changes in vehicle attributes do affect sales. Staff analyzed the potential

effect of price and operating cost changes on sales, fleet size, and fleet age

using a consumer choice model, CARBITS, developed by researchers at the

University of California, Davis. The results show that the net effect of increased

new vehicle prices and lower operating costs is a tendency to increase sales in

the near term, and slightly decrease sales in the longer term as the more

stringent second step of the regulation is fully phased in. This effect had no

significant impact on criteria pollutant emissions.

We also evaluated potential adverse environmental impacts associated with

increased VMT due to lower operating costs. Our analysis indicates that the

benefits of reduced climate change emission from the regulation will not be

negated significantly by any increase in driving that lower operating costs may

induce.

Automotive related businesses in communities with low income and minority

households may be impacted and some future growth in those areas may be

foregone. An increase in the overall economic activity because of lowered

operating costs of vehicles would, however, be expected to create sufficient

number of jobs to more than offset any reductions.

Staff concludes that the standard economic analysis presented in section 10 is a

conservative one that errs on the side of overestimating the cost impacts of the

regulation. We have also made an effort to apply additional tools in our analysis

as discussed in this section. Though these tools are continuing to be further

developed, they are valuable in providing further insight with respect to the

proposed regulation. Specifically, considering other issues such as the impact of

the regulation on vehicle sales via a consumer choice model as well as the

rebound effect also suggests that the regulation would not be expected to have

any significant adverse impacts on the California economy, the environment or

the consumer. Minority and low-income communities are expected to benefit

from the operating cost savings that will be redirected to non-affiliated
Initial Statement of Reasons

August 6, 2004

200

businesses. Generally, the economic impacts of the proposed climate change

regulation tend to be positive. The magnitude of positive effects for individual

vehicle owners and for the economy as a whole will increase if future fuel prices

exceed recent historical averages.
Initial Statement of Reasons

August 6, 2004

201

13 SUMMARY AND STAFF RECOMMENDATION

California has a long history of environmental leadership. This tradition of

environmental leadership continues to this day. In 2002, recognizing that global

warming would impose compelling and extraordinary impacts on California, the

legislature adopted and the Governor signed AB 1493. That bill directs the

California Air Resources Board (Board) to adopt regulations to achieve the

maximum feasible and cost-effective reduction of GHG emissions from motor

vehicles. This Initial Statement of Reasons presents the staff proposal that will

be considered by the Board at its September 2004 public hearing.

13.1 Summary of Staff Proposal

The staff proposal recommends that one standard be established for passenger

cars and the lightest trucks (PC and LDT1), and a separate standard for heavier

trucks (LDT2). Staff proposes setting near-term standards, phased in from 2009

through 2012, and mid-term standards, phased in from 2013 through 2016. The

proposed standards, expressed in terms of CO2 equivalent grams per mile, are

shown in Table 13.1-1 below:

Table 13.1-1. Proposed Standards

CO2-equivalent emission

standard by vehicle category

(g/mi) Tier Phase-in Year

PC/LDT1 LDT2

20% 2009 323 439

40% 2010 301 420

70% 2011 267 390 Near-term

100% 2012 233 361

20% 2013 227 355

40% 2014 222 350

70% 2015 213 341 Mid-term

100% 2016 205 332

To maintain simplicity, staff proposes to use the upstream emissions for vehicles

that use conventional fuels as a “baseline” against which to compare the relative

merits of alternative fuel vehicles. Therefore, the emissions standards as shown

above do not directly reflect upstream emissions. Rather, when certifying

gasoline or diesel-fuel vehicles manufacturers would report only the “direct” or,

“on vehicle” emissions. For alternative fuel vehicles, exhaust CO2 emissions

values will be adjusted in order to compensate for the differences in upstream

emissions. This approach simplifies the regulatory treatment of gasoline

vehicles, while at the same time allowing for appropriate treatment of alternative

fuel vehicles.
Initial Statement of Reasons

August 6, 2004

202

Small Volume, Independent Low Volume, and Intermediate Volume

manufacturers would not be required to comply with the climate change

requirements until the final year of the phase-in (2016). Beginning in 2016, these

smaller manufacturers would be required to meet the average CO2 equivalent

emissions of all 2012 comparable vehicles produced by the major vehicle

manufacturers, beginning in 2016. A specialty low volume vehicle that utilizes a

powertrain from a major manufacturer from the same model year would be

considered compliant with the GHG emission standards if it adopted the package

without modifications. Should a comparable vehicle not be available from a large

manufacturer, the small volume manufacturer would be required to meet the

2012 emission standard for large volume manufacturers in 2016 and beyond. As

an option, these small volume vehicles could meet the fleet average for large

manufacturers.

ARB staff proposes that (1) credit for early emission reductions should be

available for model years 2000 through 2008, with manufacturers allowed to opt

in to the program during any model year during this timeframe, and (2) the

baseline against which manufacturer emissions are measured should be the fully

phased in near term standard. Staff has proposed that the fully phased in near

term standard for passenger cars and T1 trucks should be 233 grams per mile

CO2 equivalent, and for T2 trucks should be 361 grams per mile. Thus under the

staff early credit proposal a manufacturer’s fleet average emissions, for model

years beginning with their first year of participation through 2008, would be

compared to the 2012 standards. If a manufacturer has fleet average emissions

below the standard for a specific model year, the manufacturer would earn credit.

The staff proposed alternative compliance program is limited to the vehicles that

are regulated through AB 1493, and their fuels. The major features of the staff

proposal are:

• Projects must be located in California to be eligible as alternative methods

of compliance.

• Only companies regulated by AB 1493 (automakers) will be permitted to

apply for alternative compliance credits.

• Only those vehicles regulated under AB 1493 are eligible for alternative

compliance credits. This includes model year 2009 and later passenger

vehicles and light-duty trucks and other vehicles used for noncommercial

personal transportation in California.

• Staff proposes that eligible projects be limited to those that achieve GHG

reductions through documented increased use of alternative fuels in

eligible vehicles.

13.2 Staff Recommendation

Staff recommends that the Board adopt section 1961.1, title 13, California Code

of Regulations and incorporated test procedures, and amend sections 1900,
Initial Statement of Reasons

August 6, 2004

203

1961 and the incorporated “California Exhaust Emission Standards and Test

Procedures for 2001 and Subsequent Model Passenger Cars, Light-Duty Trucks,

and Medium-Duty Vehicles". The regulation is set forth in the Proposed

Regulation Order in Appendix A.
Initial Statement of Reasons

August 6, 2004

204
Initial Statement of Reasons

August 6, 2004

205

LIST OF ACRONYMS AND ABBREVIATIONS

A4: 4-speed automatic transmission

A5: 5-speed automatic transmission

A6: 6-speed automatic transmission

AB 1493: Assembly Bill 1493

AdvHEV: Advanced hybrid

ARB: California Air Resources Board

AMT: Automated Manual Transmission

CCP: Coupled cam phasing

CH4: Methane

CNG: Compressed natural gas

CO2: Carbon dioxide

CVVL: Continuous variable valve lift

CVT: Continuously variable transmission

DCP: Dual cam phasing

DeAct: Cylinder deactivation

dHCCI Diesel homogeneous charge compression ignition

DMV: California Department of Motor Vehicles

DOHC: Dual overhead cam

DVVL: Discrete variable valve lift

DVVLd: Discrete variable valve lift, includes dual cam phasing

DVVLi: Discrete variable valve lift, includes intake valve cam phasing

eACC: Improved electric accessories

EAT: Electronically assisted turbocharging

EGR: Exhaust gas recirculation

ehCVA: Electrohydraulic camless valve actuation

emCVA: Electromagnetic camless valve actuation

EHPS: Electrohydraulic power steering

EPS: Electric power steering

EMFAC: ARB Emission Factors model (EMFAC2002 v.2.2 April 23, 2003)

EWP: Electric water pump

FDC: Fixed displacement compressor

FWD: Front-wheel drive

GDI-S: Stoichiometric gasoline direct injection

GDI-L: Lean-burn gasoline direct injection

gHCCI Gasoline homogeneous charge compression ignition

GVWR: Gross vehicle weight rating

GWP: Global warming potential

HC: Hydrocarbons

HEV: Hybrid-electric vehicle

HFC: Hydrofluorocarbon

hp: Horsepower

HSDI: High-speed (diesel) direct injection

ICP: Intake cam phaser

ImpAlt. Improved efficiency alternator
Initial Statement of Reasons

August 6, 2004

206

ISG: Integrated starter-generator system

ISG-SS: Integrated starter-generator system with start-stop operation

L4: In-line four-cylinder

MAC: Mobile Air Conditioning

ModHEV: Moderate hybrid

NMOG: Non-methane organic gas

N2O: Nitrous oxide

NOx: Oxides of nitrogen

R-134a: Refrigerant 134a, tetrafluoroethane (C2H2F4)

R-152a: Refrigerant 152a, difluoroethane (C2H4F2)

RPE: Retail price equivalent

TRR: Tire rolling resistance

Turbo: Turbocharging

V6: Vee-formation six-cylinder

V8: Vee-formation eight-cylinder

VDC: Variable displacement compressor

4WD: Four-wheel-drive

42V ISG: 42-volt integrated starter-generator system
Initial Statement of Reasons

August 6, 2004

207

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Initial Statement of Reasons

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214
Initial Statement of Reasons

August 6, 2004

215

APPENDIX A: PROPOSED AMENDMENTS

1. Proposed Regulation Order: Amendments to Sections 1900 and 1961,

and adoption of new Section 1961.1, Title 13, California Code of Regulations

Attached

2. Proposed amendments to California Exhaust Emission Standards And

Test Procedures For 2001 And Subsequent Model Passenger Cars,

Light-Duty Trucks, And Medium-Duty Vehicles

Copies of the Test Procedures are available on the ARB Internet site for this

rulemaking at http://www.arb.ca.gov/regact/grnhsgas/grnhsgas.htm, or may

also be obtained by contacting the agency contact person for this rulemaking,

Mr. Chuck Shulock, at 916-322-6964 or cshulock@arb.ca.gov.
Initial Statement of Reasons

August 6, 2004

216
Date of Release: 8/6/04; 45-day Notice version A-1

Board Hearing: 9/23/04

APPENDIX A

PROPOSED REGULATION ORDER

Amendments to Sections 1900 and 1961, and

Adoption of new Section 1961.1,

Title 13, California Code of Regulations

Set forth below are the proposed amendments to title 13 of the California Code of

Regulations. Proposed amendments are shown in underline to indicate additions and

strikeout to indicate deletions.

§ 1900. Definitions.

(a) [No change.]

(b) In addition to the definitions incorporated under subdivision (a), the following

definitions shall govern the provisions of this chapter.

Definitions (b)(1) through (7). [No change.]

(8 21) “Independent low volume manufacturer” means a manufacturer with California

annual sales of less than 10,000 new passenger cars, light-duty trucks and medium-duty vehicles

following aggregation of sales pursuant to this section 1900(b)(8 21). Annual sales shall be

determined as the average number or sales sold for the three previous consecutive model years for

which a manufacturer seeks certification; however, for a manufacturer certifying for the first time

in California, annual sales shall be based on projected California sales for the model year. A

manufacturer’s California sales shall consist of all vehicles or engines produced by the

manufacturer and delivered for sale in California, except that vehicles or engines produced by the

manufacturer and marketed in California by another manufacturer under the other manufacturer’s

nameplate shall be treated as California sales of the marketing manufacturer. The annual sales

from different firms shall be aggregated in the following situations: (1 A) vVehicles produced by

two or more firms, one of which is 10% or greater part owned by another; or (2 B) vVehicles

produced by any two or more firms if a third party has equity ownership of 10% or more in each

of the firms; or (3 C) vVehicles produced by two or more firms having a common corporate

officer(s) who is (are) responsible for the overall direction of the companies; or (4 D) vVehicles

imported or distributed by all firms where the vehicles are manufactured by the same entity and

the importer or distributor is an authorized agent of the entity.

(9 19) “Intermediate volume manufacturer” means any pre-2001 model year manufacturer

with California sales between 3,001 and 60,000 new light- and medium-duty vehicles per model

year based on the average number of vehicles sold by the manufacturer each model year from

1989 to 1993; any 2001 through 2002 model year manufacturer with California sales between

4,501 and 60,000 new light- and medium-duty vehicles per model year based on the average
Date of Release: 8/6/04; 45-day Notice version A-2

Board Hearing: 9/23/04

number of vehicles sold by the manufacturer each model year from 1989 to 1993; and any 2003

and subsequent model year manufacturer with California sales between 4,501 and 60,000 new

light- and medium-duty vehicles based on the average number of vehicles sold for the three

previous consecutive model years for which a manufacturer seeks certification. For a

manufacturer certifying for the first time in California, model year sales shall be based on

projected California sales. A manufacturer’s California sales shall consist of all vehicles or

engines produced by the manufacturer and delivered for sale in California, except that vehicles or

engines produced by the manufacturer and marketed in California by another manufacturer under

the other manufacturer’s nameplate shall be treated as California sales of the marketing

manufacturer. For purposes of applying the 2005 and subsequent model year zero-emission

vehicle requirements for intermediate-volume manufacturers under section 1962(b), the annual

sales from different firms shall be aggregated in the case of (1) vehicles produced by two or more

firms, each one of which either has a greater than 50% equity ownership in another or is more

than 50% owned by another; or (2) vehicles produced by any two or more firms if a third party

has equity ownership of greater than 50% in each firm.

For purposes of applying the 2009 and subsequent model year Greenhouse Gas requirements for

intermediate volume manufacturers under section 1961.1, the annual sales from different firms

shall be aggregated in the following situations: (1) vehicles produced by two or more firms, each

one of which either has a greater than 10% equity ownership in another or is more than 10%

owned by another; or (2) vehicles produced by any two or more firms if a third party has equity

ownership of greater than 10% in each firm.

(10 20) “Large volume manufacturer” means any 2000 and subsequent model year

manufacturer that is not a small volume manufacturer, or an independent low volume

manufacturer, or an intermediate volume manufacturer.

(11 8) “Light-duty truck” means any 2000 and subsequent model motor vehicle certified

to the standards in section 1961(a)(1) rated at 8,500 pounds gross vehicle weight or less, and any

other motor vehicle rated at 6,000 pounds gross vehicle weight or less, which is designed

primarily for purposes of transportation of property or is a derivative of such a vehicle, or is

available with special features enabling off-street or off-highway operation and use.

(12) “Medium-duty passenger vehicle” means any medium-duty vehicle with a gross

vehicle weight rating of less than 10,000 pounds that is designed primarily for the transportation

of persons. The medium-duty passenger vehicle definition does not include any vehicle which:

(1) is an “incomplete truck” i.e., is a truck that does not have the primary load carrying device or

container attached; or (2) has a seating capacity of more than 12 persons; or (3) is designed for

more than 9 persons in seating rearward of the driver’s seat; or (4) is equipped with an open

cargo area of 72.0 inches in interior length or more. A covered box not readily accessible from

the passenger compartment will be considered an open cargo area, for purposes of this definition.

(13 9) “Medium-duty vehicle” means any pre-1995 model year heavy-duty vehicle

having a manufacturer’s gross vehicle weight rating of 8,500 pounds or less; any 1992 through

2006 model-year heavy-duty low-emission, ultra-low-emission, super-ultra-low-emission or
Date of Release: 8/6/04; 45-day Notice version A-3

Board Hearing: 9/23/04

zero-emission vehicle certified to the standards in section 1960.1(h)(2) having a manufacturer’s

gross vehicle weight rating of 14,000 pounds or less; any 1995 through 2003 model year heavyduty vehicle certified to the standards in section 1960.1(h)(1) having a manufacturer’s gross

vehicle weight rating of 14,000 pounds or less; and any 2000 and subsequent model heavy-duty

low-emission, ultra-low-emission, super-ultra-low-emission or zero-emission vehicle certified to

the standards in Section 1961(a)(1) or 1962 having a manufacturer’s gross vehicle weight rating

between 8,501 and 14,000 pounds.

(14 10) "Modified part" means any aftermarket part intended to replace an original

equipment emission-related part and which is not functionally identical to the original equipment

part in all respects which in any way affect emissions, excluding a consolidated part.

(15 11) "Motorcycle engine" means an engine which is used to propel a new, street-use

motorcycle.

(16) [Reserved.]

(17 12) “Passenger car” means any motor vehicle designed primarily for transportation of

persons and having a design capacity of twelve persons or less.

(18 17) “Reactivity adjustment factor” means a fraction applied to the NMOG emissions

from a vehicle powered by a fuel other than conventional gasoline for the purpose of determining

a gasoline-equivalent NMOG level. The reactivity adjustment factor is defined as the ozoneforming potential of clean fuel vehicle exhaust divided by the ozone-forming potential of

gasoline vehicle exhaust.

(19 13) "Recall" means:

Subparagraphs (16)(A) and (B). [No change.]

(20 14) "Replacement part" means any aftermarket part intended to replace and original

equipment emissions-related part and which is functionally identical to the original equipment

part in all respects which in any way affect emissions (including durability), or a consolidated

part.

(21 15) “Subgroup” means a set of vehicles within an engine family distinguishable by

characteristics contained in the manufacturer’s application for certification.

(22 18) “Small volume manufacturer” means, with respect to the 2001 and subsequent

model-years, a manufacturer with California sales less than 4,500 new passenger cars, light-duty

trucks, medium-duty vehicles, heavy-duty vehicles and heavy-duty engines based on the average

number of vehicles sold for the three previous consecutive model years for which a manufacturer

seeks certification as a small volume manufacturer; however, for manufacturers certifying for the

first time in California model-year sales shall be based on projected California sales. A

manufacturer’s California sales shall consist of all vehicles or engines produced by the

manufacturer and delivered for sale in California, except that vehicles or engines produced by the
Date of Release: 8/6/04; 45-day Notice version A-4

Board Hearing: 9/23/04

manufacturer and marketed in California by another manufacturer under the other manufacturer’s

nameplate shall be treated as California sales of the marketing manufacturer. Except as provided

in the next paragraph, beginning with the 2009 model year, the annual sales from different firms

shall be aggregated in the following situations: (1) vehicles produced by two or more firms, one

of which is 10% or greater part owned by another; or (2) vehicles produced by any two or more

firms if a third party has equity ownership of 10% or more in each of the firms; or (3) vehicles

produced by two or more firms having a common corporate officer(s) who is (are) responsible for

the overall direction of the companies; or (4) vehicles imported or distributed by all firms where

the vehicles are manufactured by the same entity and the importer or distributor is an authorized

agent of the entity.

For purposes of compliance with the zero-emission vehicle requirements, heavy-duty vehicles

and engines shall not be counted as part of a manufacturer’s sales. For purposes of applying the

2005 and subsequent model year zero-emission vehicle requirements for small-volume

manufacturers under section 1962(b), the annual sales from different firms shall be aggregated in

the case of (1) vehicles produced by two or more firms, each one of which either has a greater

than 50% equity ownership in another or is more than 50% owned by another; or (2) vehicles

produced by any two or more firms if a third party has equity ownership of greater than 50% in

each firm.

Note: Authority cited: Sections 39600, 39601, 43013, 43018, 43101, and 43104 Health and Safety Code.

Reference: Sections 39002, 39003, 39010, 39500, 40000, 43000, 43013, 43018.5, 43100, 43101, 43101.5,

43102, 43104, 43106, and 43204, Health and Safety Code.
Date of Release: 8/6/04; 45-day Notice version A-5

Board Hearing: 9/23/04

§ 1961. Exhaust Emission Standards and Test Procedures - 2004 and Subsequent Model

Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles.

Introduction. [No change.]

Sections (a) through (c). [No change.]

(d) Test Procedures. The certification requirements and test procedures for

determining compliance with the emission standards in this section are set forth in the

“California Exhaust Emission Standards and Test Procedures for 2001 and Subsequent Model

Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles,” as amended May 28, 2004

[INSERT DATE OF AMENDMENT], and the “California Non-Methane Organic Gas Test

Procedures,” as amended July 30, 2002, which are incorporated herein by reference. In the case

of hybrid electric vehicles and on-board fuel-fired heaters, the certification requirements and test

procedures for determining compliance with the emission standards in this section are set forth

in the “California Exhaust Emission Standards and Test Procedures for 2005 and Subsequent

Model Zero-Emission Vehicles, and 2001 and Subsequent Model Hybrid Electric Vehicles, in

the Passenger Car, Light-Duty Truck and Medium-Duty Vehicle Classes,” incorporated by

reference in section 1962.

Section (e). [No change.]

Note: Authority cited: Sections 39500, 39600, 39601, 43013, 43018, 43101, 43104 and 43105, Health and

Safety Code. Reference: Sections 39002, 39003, 39667, 43000, 43009.5, 43013, 43018, 43100, 43101,

43101.5, 43102, 43104, 43105, 43106, 43107, 43204, and 43205.5, Health and Safety Code.
Date of Release: 8/6/04; 45-day Notice version A-6

Board Hearing: 9/23/04

Adopt new Section 1961.1, Title 13, Article 2, within Chapter 1, Division 3, California Code of

Regulations, to read as follows: (Note: the entire text of section 1961.1 set forth below is new

language proposed to be added to the California Code of Regulations.)

§ 1961.1. Greenhouse Gas Exhaust Emission Standards and Test Procedures - 2009 and

Subsequent Model Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles.

(a) Greenhouse Gas Emission Requirements. The greenhouse gas emission levels

from new 2009 and subsequent model year passenger cars, light-duty trucks, and medium-duty

passenger vehicles shall not exceed the following requirements. Light-duty trucks from 3751 lbs.

LVW – 8500 lbs. GVW that are certified to the Optional LEV II NOx Standard in section

1961(a)(1) are exempt from these greenhouse gas emission requirements, however, passenger

cars, light-duty trucks 0-3750 lbs. LVW, and medium-duty passenger vehicles are not eligible for

this exemption.

(1) Fleet Average Greenhouse Gas Requirements for Passenger Cars, Light-Duty

Trucks, and Medium-Duty Passenger Vehicles.

(A) The fleet average greenhouse gas exhaust mass emission values from

passenger cars, light-duty trucks, and medium-duty passenger vehicles that are produced and

delivered for sale in California each model year by a large volume manufacturer shall not exceed:
Date of Release: 8/6/04; 45-day Notice version A-7

Board Hearing: 9/23/04

FLEET AVERAGE GREENHOUSE GAS

EXHAUST MASS EMISSION REQUIREMENTS FOR

PASSENGER CAR, LIGHT-DUTY TRUCK, AND MEDIUMDUTY PASSENGER VEHICLE WEIGHT CLASSES1

(4,000 mile Durability Vehicle Basis)

Fleet Average Greenhouse Gas Emissions 

Model Year (grams per mile CO2-equivalent)

All PCs;

LDTs 0-3750 lbs. LVW

LDTs

 3751 lbs. LVW - 8500

lbs. GVW; MDPVs

2009 323 439

2010 301 420

2011 267 390

2012 233 361

2013 227 355

2014 222 350

2015 213 341

2016+ 205 332

1

 Each manufacturer shall demonstrate compliance with these values in accordance with section 1961.1(a)(1)(B).

(B) Calculation of Fleet Average Greenhouse Gas Value.

1. Basic Calculation.

a. Each manufacturer shall calculate both a “city” grams per mile average

CO2-equivalent value for each GHG vehicle test group and a “highway” grams per mile average

CO2-equivalent value for each GHG vehicle test group, including vehicles certified in accordance

with section 1960.5 and vehicles certified in accordance with section 1961(a)(14), using the

following formula. Greenhouse Gas emissions used for the “city” CO2-equivalent value

calculation shall be measured using the “FTP” test cycle (40 CFR, Part 86, Subpart B).

Greenhouse Gas emissions used for the “highway” CO2-equivalent value calculation shall be

based on emissions measured using the Highway Test Procedures.

CO2-Equivalent Value = CO2 + 296 x N2O + 23 x CH4 - A/C Direct Emissions Allowance - A/C Indirect

Emissions Allowance

A manufacturer may use N2O = 0.006 grams per mile in lieu of measuring N2O exhaust

emissions.
Date of Release: 8/6/04; 45-day Notice version A-8

Board Hearing: 9/23/04

b. A/C Direct Emissions Allowance. A manufacturer may use the following

A/C Direct Emission Allowances, upon approval of the Executive Officer, if that manufacturer

demonstrates that the corresponding requirements are met. Such demonstration shall include

specifications of the components used and an engineering evaluation that verifies the estimated

lifetime emissions from the components and the system. A manufacturer shall also provide

confirmation that the number of fittings and joints has been minimized and components have

been optimized to minimize leakage.

i. A “low-leak air conditioning system” shall be defined as one that

meets all of the following criteria:

A. All pipe and hose connections are equipped with multiple o-rings,

seal washers, or metal gaskets only (e.g., no single o-rings);

B. All hoses in contact with the refrigerant must be ultra-low

permeability barrier or veneer hose on both the high-pressure and

the low-pressure sides of the system (e.g., no rubber hoses); and

C. Only multiple-lip compressor shaft seals shall be used (with either

compressor body o-rings or gaskets).

ii. For an air conditioning system that uses HFC-134a as the

refrigerant:

A. An A/C Direct Emissions Allowance of 3.0 CO2-equivalent grams

per mile shall apply if the system meets the criteria for a “low-leak

air conditioning system.”

B. An A/C Direct Emissions Allowance of 3.0 CO2-equivalent grams

per mile shall apply if the manufacturer demonstrates alternative

technology that achieves equal or lower direct emissions than a

“low-leak air conditioning system.”

C. An A/C Direct Emissions Allowance greater than 3.0 CO2-

equivalent grams per mile may apply for an air conditioning system

that reduces refrigerant leakage further than would be obtained

from a “low-leak air conditioning system.” A maximum A/C

Direct Emissions Allowance of 6.0 CO2-equivalent grams per mile

may be earned for an air conditioning system that has 100 percent

containment of refrigerant during “normal operation.” To obtain

an A/C Direct Emissions Allowance greater than 3.0 CO2-

equivalent grams per mile, the manufacturer must provide an

engineering evaluation that supports the allowance requested.

iii. For an air conditioning system that uses HFC-152a, CO2

refrigerant, or any refrigerant with a GWP of 150 or less:

An A/C Direct Emissions Allowance shall be calculated using the following

formula:

A/C Direct Emissions Allowance = A – (B x C)
Date of Release: 8/6/04; 45-day Notice version A-9

Board Hearing: 9/23/04

where: A = 9 CO2-equivalent grams per mile (the lifetime vehicle emissions

expected from an air conditioning system that uses refrigerant HFC-134a);

1300

GWP B = 9 CO2 − equivalent g/mi ×

where: B is the lifetime vehicle emissions expected from an air

conditioning system that uses a refrigerant with a GWP of 150 or

less, and

“GWP” means the GWP of this refrigerant; and

C = 1, except for an air conditioning system that meets the criteria of a

“low-leak air conditioning system.”

For an air conditioning system that meets or exceeds the criteria of a “low-leak air

conditioning system,” the following formula shall apply:

C =1− (0.12× credit )

where: “credit” equals 3.0 CO2-equivalent grams per mile for a “low-leak air

conditioning system” that meets the criteria of section

1961.1(a)(1)(B)1.b.i., or

“credit” equals a value greater than 3.0 CO2-equivalent grams per mile for

an air conditioning system that reduces refrigerant leakage further than

would be obtained from a “low-leak air conditioning system.” A

maximum credit of 6.0 CO2-equivalent grams per mile may be earned for

an air conditioning system that has 100 percent containment of refrigerant

during normal operation. To obtain a credit greater than 3.0 CO2-

equivalent grams per mile, the manufacturer must provide an engineering

evaluation that supports the credit requested.

c. A/C Indirect Emissions Allowance. A manufacturer may use the following

A/C Indirect Emissions Allowances, upon approval of the Executive Officer, if the manufacturer

demonstrates using data or an engineering evaluation that the air conditioning system meets the

corresponding requirements. A manufacturer may use the following A/C Indirect Emissions

Allowances for other technologies, upon approval of the Executive Officer, if that manufacturer

demonstrates that the air conditioning system achieves equal or greater CO2-equivalent grams per

mile emissions reductions.
Date of Release: 8/6/04; 45-day Notice version A-10

Board Hearing: 9/23/04

i. An allowance of 5.0 CO2-equivalent grams per mile per 100ccs of

compressor displacement shall be given for an air conditioning system optimized

for energy efficiency by utilizing state-of-the-art high efficiency components,

managed outside and recirculated air balance to achieve comfort, demisting, and

safety requirements, based on such factors as temperature, humidity, pressure, and

level of fresh air in the passenger compartment, and an externally controlled

compressor (such as an externally controlled variable displacement or variable

speed compressor or an externally controlled fully cycling fixed displacement

compressor) that adjusts evaporative temperature to minimize the necessity of

reheating cold air to satisfy occupant comfort.

ii. An allowance of 0.2 CO2-equivalent grams per mile per 100ccs of

compressor displacement shall be given for an air conditioning system equipped

with a refrigerant having a GWP of 150 or less.

d. Upstream Greenhouse Gas Emission Adjustment Factors for Alternative

Fuel Vehicles. A grams per mile average CO2-equivalent value for each GHG vehicle test group

certifying on a fuel other than conventional gasoline, including vehicles certified in accordance

with section 1960.5 and vehicles certified in accordance with section 1961(a)(14), shall be

calculated as follows:

(CO2 + A/C Indirect Emissions) x (Fuel Adjustment Factor) +

296 x N2O + 23 x CH4 + A/C Direct Emissions

where:

A/C Indirect Emissions = 9.0 CO2-equivalent grams per mile per 100ccs of

compressor displacement – A/C Indirect Emissions Allowance as calculated per

section 1961.1(a)(1)(B)1.c.

A/C Direct Emissions = 9 CO2-equivalent grams per mile – A/C Direct Emissions

Allowance as calculated per section 1961.1(a)(1)(B)1.b.

The Fuel Adjustment Factors are:

Fuel Fuel Adjustment Factor

Natural Gas 1.03

LPG 0.89

E85 0.74
Date of Release: 8/6/04; 45-day Notice version A-11

Board Hearing: 9/23/04

e. Calculation of CO2-Equivalent Emissions for Hydrogen Internal

Combustion Engine Vehicles and for Electric and Hydrogen ZEVs. The grams per mile average

CO2-equivalent value for each GHG vehicle test group certifying to ZEV standards, including

vehicles certified in accordance with section 1960.5 and vehicles certified in accordance with

section 1961(a)(14), shall be:

A/C Direct Emissions + 130 CO2-equivalent grams per mile for electric ZEVs,

A/C Direct Emissions + 290 CO2-equivalent grams per mile for hydrogen internal

combustion engine vehicles, and

A/C Direct Emissions + 210 CO2-equivalent grams per mile for hydrogen ZEVs.

where: A/C Direct Emissions = 9 CO2-equivalent grams per mile – A/C Direct Emissions

Allowance as calculated per section 1961.1(a)(1)(B)1.b.

2. Calculation of Greenhouse Gas Values for Bi-Fuel Vehicles, Fuel-Flexible

Vehicles, Dual-Fuel Vehicles, and Grid-connected Hybrid Electric Vehicles. For bi-fuel, fuelflexible, dual-fuel, and grid-connected hybrid electric vehicles, a manufacturer shall calculate a

grams per mile average CO2-equivalent value for each GHG vehicle test group, in accordance

with section 1961.1(a)(1)(B)1., based on exhaust mass emission tests when the vehicle is

operating on gasoline.

a. Optional Alternative Compliance Mechanisms. Beginning with the 2010

model year, a manufacturer that demonstrates that a bi-fuel, fuel-flexible, dual-fuel, or gridconnected hybrid electric GHG vehicle test group will be operated in use in California on the

alternative fuel may be eligible to certify those vehicles using this optional alternative

compliance procedure, upon approval of the Executive Officer.

i. To demonstrate that bi-fuel, fuel-flexible, dual-fuel, or gridconnected hybrid electric vehicles within a GHG vehicle test group will be

operated in use in California on the alternative fuel, the manufacturer shall

provide data that shows the previous model year sales of such vehicles to fleets

that provide the alternative fuel on-site or, for grid-connected hybrid electric

vehicles, to end users with the capability to recharge the vehicle on-site. This data

shall include both the total number of vehicles sales that were made to such fleets

or end users with the capability to recharge the vehicle on-site and as the

percentage of total GHG vehicle test group sales. The manufacturer shall also

provide data demonstrating the percentage of total vehicle miles traveled by the

bi-fuel, fuel-flexible, dual-fuel, or grid-connected hybrid electric vehicles sold to

each fleet or to end users with the capability to recharge the vehicle on-site in the

previous model year using the alternative fuel and using gasoline.

ii. For each GHG vehicle test group that receives approval by the

Executive Officer under section 1961(a)(1)(B)2.a.i., a grams per mile CO2-

equivalent value shall be calculated as follows:

CO2-equivalent value = [A× B× C]+ [(1- A× B)×D]
Date of Release: 8/6/04; 45-day Notice version A-12

Board Hearing: 9/23/04

where: A = the percentage of previous model year vehic les within a GHG vehicle

test group that were operated in use in California on the alternative fuel

during the previous calendar year;

B = the percentage of miles traveled by “A” during the previous calendar

year ;

C = the CO2-equivalent value for the GHG vehicle test group, as

calculated in section 1961.1(a)(1)(B)1, when tested using the alternative

fuel; and

D = the CO2-equivalent value for the GHG vehicle test group, as

calculated in section 1961.1(a)(1)(B)1, when tested using gasoline.

3. Calculation of Fleet Average Greenhouse Gas Values.

a. Each manufacturer’s PC and LDT1 fleet average Greenhouse Gas value

for the total number of PCs and LDT1s produced and delivered for sale in California, including

vehicles certified in accordance with section 1960.5 and vehicles certified in accordance with

section 1961(a)(14), shall be calculated as follows:

[0.55 x (Σ City Test Group Greenhouse Gas Values) + 0.45 x (Σ Highway Test Group

Greenhouse Gas Values)] ÷ Total Number of PCs and LDT1s Produced, Including ZEVs and

HEVs

where: City Test Group Greenhouse Gas Value = [(Total Number of Vehicles in a Test Group -

Σ Number of Vehicles in Optional GHG Test Vehicle Configurations) x “worst-case”

calculated CO2-equivalent value + Σ (Number of vehicles in Optional GHG Test Vehicle

Configurations x applicable calculated CO2-equivalent value)] measured using the FTP

test cycle; and

Highway Test Group Greenhouse Gas Value = [(Total Number of Vehicles in a Test

Group - Σ Number of Vehicles in Optional GHG Test Vehicle Configurations) x “worstcase” calculated CO2-equivalent value + Σ (Number of vehicles in Optional GHG Test

Vehicle Configurations x applicable calculated CO2-equivalent value)] measured using the

Highway Test Procedures.

b. Each manufacturer’s LDT2 and MDPV fleet average Greenhouse Gas

value for the total number of LDT2s and MDPVs produced and delivered for sale in California,

including vehicles certified in accordance with section 1960.5 and vehicles certified in

accordance with section 1961(a)(14), shall be calculated as follows:
Date of Release: 8/6/04; 45-day Notice version A-13

Board Hearing: 9/23/04

[0.55 x (Σ City Test Group Greenhouse Gas Values) + 0.45 x (Σ Highway Test Group

Greenhouse Gas Values)] ÷ Total Number of LDT2s and MDPVs Produced, Including ZEVs and

HEVs

where: City Test Group Greenhouse Gas Value = [(Total Number of Vehicles in a Test Group -

Σ Number of Vehicles in Optional GHG Test Vehicle Configurations) x “worst-case”

calculated CO2-equivalent value + Σ (Number of vehicles in Optional GHG Test Vehicle

Configurations x applicable calculated CO2-equivalent value)] measured using the FTP

test cycle; and

Highway Test Group Greenhouse Gas Value = [(Total Number of Vehicles in a Test

Group - Σ Number of Vehicles in Optional GHG Test Vehicle Configurations) x “worstcase” calculated CO2-equivalent value + Σ (Number of vehicles in Optional GHG Test

Vehicle Configurations x applicable calculated CO2-equivalent value)] measured using the

Highway Test Procedures.

(C) Requirements for Intermediate Volume Manufacturers.

1. Before the 2016 model year, compliance with this section 1961.1 shall be

waived for intermediate volume manufacturers.

2. For each intermediate volume manufacturer, the manufacturer’s baseline

fleet average greenhouse gas value for PCs and LDT1s and baseline fleet average greenhouse gas

value for LDT2s and MDPVs shall be calculated, in accordance with section 1961.1(a)(1)(B)

using its 2002 model year fleet.

3. In 2016 and subsequent model years, an intermediate volume manufacturer

shall either:

a. not exceed a fleet average greenhouse gas emissions value of 233 g/mi for

PCs and LDT1s and 361 g/mi for LDT2s and MDPVs, or

b. not exceed a fleet average greenhouse gas value of 0.75 times the baseline

fleet average greenhouse gas value for PCs and LDT1s and 0.82 times the baseline fleet average

greenhouse gas value for LDT2s and MDPVs, as calculated in section 1961.1(a)(1)(C)2.

4. If a manufacturer's average annual California sales exceed 60,000 units of

new PCs, LDTs, MDVs and heavy-duty engines based on the average number of vehicles sold for

the three previous consecutive model years, the manufacturer shall no longer be treated as a

intermediate volume manufacturer and shall comply with the fleet average requirements

applicable to large volume manufacturers as specified in section 1961.1(a)(1) beginning with the

fourth model year after the last of the three consecutive model years.

5. If a manufacturer’s average annual California sales fall below 60,001 units

of new PCs, LDTs, MDVs and heavy-duty engines based on the average number of vehicles sold

for the three previous consecutive model years, the manufacturer shall be treated as a
Date of Release: 8/6/04; 45-day Notice version A-14

Board Hearing: 9/23/04

intermediate volume manufacturer and shall be subject to the requirements for intermediate

volume manufacturers beginning with the next model year.

(D) Requirements for Small Volume Manufacturers and Independent Low

Volume Manufacturers.

1. Before the 2016 model year, compliance with this section 1961.1 shall be

waived for small volume manufacturers and independent low volume manufacturers.

2. At the beginning of the 2013 model year, each small volume manufacturer

and independent low volume manufacturer shall identify all 2012 model year vehicle models,

certified by a large volume manufacturer that are comparable to that small volume manufacturer

or independent low volume manufacturer’s 2016 model year vehicle models, based on

horsepower and horsepower to weight ratio. The small volume manufacturer and independent

low volume manufacturer shall demonstrate to the Executive Officer the appropriateness of each

comparable vehicle model selected. Upon approval of the Executive Officer, s/he shall provide to

the small volume manufacturer and to the independent low volume manufacturer the CO2-

equivalent value for each 2012 model year vehicle model that is approved. The small volume

manufacturer and independent low volume manufacturer shall calculate an average greenhouse

gas emissions value for each its greenhouse gas vehicle test groups based on the CO2-equivalent

values provided by the Executive Officer.

3. In the 2016 and subsequent model years, a small volume manufacturer and

an independent low volume manufacturer shall either:

a. not exceed the fleet average greenhouse gas emissions value calculated for

each GHG vehicle test group for which a comparable vehicle is sold by a large volume

manufacturer, in accordance with section 1961.1(a)(1)(D)2; or

b. not exceed a fleet average greenhouse gas emissions value of 233 g/mi for

PCs and LDT1s and 361 g/mi for LDT2s and MDPVs; or

c. upon approval of the Executive Officer, if a small volume manufacturer

demonstrates a vehicle model uses an engine, transmission, and emission control system that is

identical to a configuration certified for sale in California by a large volume manufacturer, those

small volume manufacturer vehicle models are exempt from meeting the requirements in

paragraphs 3.a. and b. of this section.

4. If a manufacturer's average annual California sales exceed 4,500 units of

new PCs, LDTs, MDVs and heavy-duty engines based on the average number of vehicles sold for

the three previous consecutive model years, the manufacturer shall no longer be treated as a

small volume manufacturer and shall comply with the fleet average requirements applicable to

larger volume manufacturers as specified in section 1961.1(a)(1) beginning with the fourth model

year after the last of the three consecutive model years.

5. If a manufacturer's average annual California sales exceed 10,000 units of

new PCs, LDTs, MDVs and heavy-duty engines based on the average number of vehicles sold

for the three previous consecutive model years, the manufacturer shall no longer be treated as an
Date of Release: 8/6/04; 45-day Notice version A-15

Board Hearing: 9/23/04

independent low volume manufacturer and shall comply with the fleet average requirements

applicable to larger volume manufacturers as specified in section 1961.1(a)(1) beginning with the

fourth model year after the last of the three consecutive model years.

6. If a manufacturer’s average annual California sales fall below 4,501 units

of new PCs, LDTs, MDVs and heavy-duty engines based on the average number of vehicles sold

for the three previous consecutive model years, the manufacturer shall be treated as a small

volume manufacturer and shall be subject to the requirements for small volume manufacturers

beginning with the next model year.

(b) Calculation of Greenhouse Gas Credits/Debits.

(1) Calculation of Greenhouse Gas Credits for Passenger Cars, Light-Duty Trucks,

and Medium-Duty Passenger Vehicles.

(A) In the 2000 through 2008 model years, a manufacturer that achieves fleet

average Greenhouse Gas values lower than the fleet average Greenhouse Gas requirement

applicable to the 2012 model year shall receive credits for each model year in units of g/mi

determined as:

[(Fleet Average Greenhouse Gas Requirement for the 2012 model year)

 - (Manufacturer’s Fleet Average Greenhouse Gas Value)]

x (Total No. of Vehicles Produced and Delivered for Sale

in California, Including ZEVs and HEVs).

 (B) In 2009 and subsequent model years, a manufacturer that achieves fleet

average Greenhouse Gas values lower than the fleet average Greenhouse Gas requirement for the

corresponding model year shall receive credits in units of g/mi Greenhouse Gas determined as:

[(Fleet Average Greenhouse Gas Requirement) - (Manufacturer’s Fleet Average

Greenhouse Gas Value)] x (Total No. of Vehicles Produced and Delivered for Sale

in California, Including ZEVs and HEVs).

(2) A manufacturer with 2009 and subsequent model year fleet average Greenhouse

Gas values greater than the fleet average requirement for the corresponding model year shall

receive debits in units of g/mi Greenhouse Gas equal to the amount of negative credits

determined by the aforementioned equation. For the 2009 and subsequent model years, the total

g/mi Greenhouse Gas credits or debits earned for PCs and LDT1s and for LDT2s and MDPVs

shall be summed together. The resulting amount shall constitute the g/mi Greenhouse Gas

credits or debits accrued by the manufacturer for the model year.

(3) Procedure for Offsetting Greenhouse Gas Debits.

(A) A manufacturer shall equalize Greenhouse Gas emission debits by earning

g/mi Greenhouse Gas emission credits in an amount equal to the g/mi Greenhouse Gas debits, or
Date of Release: 8/6/04; 45-day Notice version A-16

Board Hearing: 9/23/04

by submitting a commensurate amount of g/mi Greenhouse Gas credits to the Executive Officer

that were earned previously or acquired from another manufacturer. For 2012 and for 2016 and

subsequent model years, manufacturers shall equalize emission debits by the end of the following

model year. For the 2009, 2010 and 2011 model years, a manufacturer shall equalize

Greenhouse Gas debits for PCs , LDTs, and MDPVs within four model years and prior to the end

of the 2013 model year. For the 2013, 2014 and 2015 model years, a manufacturer shall equalize

Greenhouse Gas debits for PCs, LDTs, and MDPVs within four model years and prior to the end

of the 2017 model year. If emission debits are not equalized within the specified time period, the

manufacturer shall be subject to the Health and Safety Code section 43211 civil penalty

applicable to a manufacturer which sells a new motor vehicle that does not meet the applicable

emission standards adopted by the state board. The cause of action shall be deemed to accrue

when the emission debits are not equalized by the end of the specified time period. For the

purposes of Health and Safety Code section 43211, the number of passenger cars and LDT1s not

meeting the state board’s emission standards shall be determined by dividing the total amount of

g/mi Greenhouse Gas emission debits for the model year by the g/mi Greenhouse Gas fleet

average requirement for PCs and LDTs 0-3750 lbs. LVW applicable for the model year in which

the debits were first incurred. For the purposes of Health and Safety Code section 43211, the

number of LDT2s and MDPVs not meeting the state board’s emission standards shall be

determined by dividing the total amount of g/mi Greenhouse Gas emission debits for the model

year by the g/mi Greenhouse Gas fleet average requirement for LDTs 3751 lbs. LVW – 8500 lbs.

GVW and MDPVs applicable for the model year in which the debits were first incurred.

(B) Greenhouse Gas emission credits earned in the 2000 through 2011 model

years shall be treated as if they were earned in the 2011 model year and shall retain full value

through the 2012 model year. Greenhouse Gas emission credits earned in the 2012 through 2015

model years shall be treated as if they were earned in the 2015 model year and shall retain full

value through the 2016 model year. Greenhouse Gas emission credits earned in the 2016 and

subsequent model years shall retain full value through the subsequent model year. The value of

any credits earned in the 2000 through 2011 model years that are not used to equalize debits

accrued in the 2009 through 2012 model years shall be discounted by 50% at the beginning of the

2014 model year, shall be discounted to 25% of its original value if not used by the beginning of

the 2015 model year, and will have no value if not used by the beginning of the 2016 model year.

The value of any credits earned in the 2012 through 2015 model years that are not used to

equalize debits accrued in the 2012 through 2016 model years shall be discounted by 50% at the

beginning of the 2018 model year, shall be discounted to 25% of its original value if not used by

the beginning of the 2019 model year, and will have no value if not used by the beginning of the

2020 model year. Any credits earned in the 2016 and subsequent model years that are not used to

equalize the previous model year’s debit shall be discounted by 50% at the beginning of the

second model year after being earned, shall be discounted to 25% of its original value if not used

by the beginning of the third model year after being earned, and will have no value if not used by

the beginning of the fourth model year after being earned.

(c) Test Procedures. The certification requirements and test procedures for

determining compliance with the emission standards in this section are set forth in the

“California Exhaust Emission Standards and Test Procedures for 2001 and Subsequent Model
Date of Release: 8/6/04; 45-day Notice version A-17

Board Hearing: 9/23/04

Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles,” incorporated by reference in

section 1961(d). In the case of hybrid electric vehicles and on-board fuel-fired heaters, the

certification requirements and test procedures for determining compliance with the emission

standards in this section are set forth in the “California Exhaust Emission Standards and Test

Procedures for 2005 and Subsequent Model Zero-Emission Vehicles, and 2001 and Subsequent

Model Hybrid Electric Vehicles, in the Passenger Car, Light-Duty Truck and Medium-Duty

Vehicle Classes,” incorporated by reference in section 1962.

(d) Abbreviations. The following abbreviations are used in this section 1961.1:

“ccs” mean cubic centimeters.

"CH4 " means methane.

"CO2 " means carbon dioxide.

“E85” means a blend of 85 percent ethanol and 15 percent gasoline.

“FTP” means Federal Test Procedure.

"GHG" means greenhouse gas.

“g/mi” means grams per mile.

“GVW” means gross vehicle weight.

“GVWR” means gross vehicle weight rating.

“GWP” means the global warming potential.

“HEV” means hybrid-electric vehicle.

“LDT” means light-duty truck.

“LDT1” means a light-duty truck with a loaded vehicle weight of 0-3750 pounds.

“LDT2” means a “LEV II” light-duty truck with a loaded vehicle weight of 3751 pounds

to a gross vehicle weight of 8500 pounds.

“LEV” means low-emission vehicle.

“LPG” means liquefied petroleum gas.

“LVW” means loaded vehicle weight.

“MDPV” means medium-duty passenger vehicle.

“MDV” means medium-duty vehicle.

“mg/mi” means milligrams per mile.

“N2O” means nitrous oxide.

 “PC” means passenger car.

“SULEV” means super-ultra-low-emission vehicle.

“ULEV” means ultra-low-emission vehicle.

“ZEV” means zero-emission vehicle.

(e) Definitions Specific to this Section. The following definitions apply to this section

1961.1:

(1) “A/C Direct Emissions” means any refrigerant released from a motor vehicle's air

conditioning system. 

(2) “A/C Indirect Emissions” means any increase in motor vehicle exhaust CO2

emissions that can be attributed to the operation of the air conditioning system.
Date of Release: 8/6/04; 45-day Notice version A-18

Board Hearing: 9/23/04

(3) “GHG Vehicle Test Group” means vehicles that have an identical test group,

vehicle make and model, transmission class and driveline, aspiration method (e.g., naturally

aspirated, turbocharged), camshaft configuration, valvetrain configuration, and inertia weight

class.

(4) “Greenhouse Gas” means the following gases: carbon dioxide, methane, nitrous

oxide, and hydrofluorocarbons.

(5) “Grid-Connected Hybrid Electric Vehicle” means a hybrid electric vehicle that has

the capacity for the battery to be recharged from an off-board source of electricity and has some

all-electric range.

(6) “GWP” means the 100-year global warming potential specified in IPCC

(Intergovernmental Panel on Climate Change) 2000: Emissions Scenarios. N. Nakicenovic et. al.

editors, Special Report of Working Group III of the IPCC, Cambridge University Press,

Cambridge UK, ISBN 0-521-80493-0.

(7) “Normal Operation” of an air conditioning system means typical everyday use of

the A/C system to cool a vehicle. “Normal Operation” does not include car accidents,

dismantling of an air conditioning system, or any other non-typical events.

(8) “Optional GHG Test Vehicle Configuration” means any GHG vehicle

configuration that is selected for testing by the manufacturer as allowed by section G.2.3 of the

“California Exhaust Emission Standards and Test Procedures for 2001 and Subsequent Model

Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles,” other than the worst-case

configuration.

(9) “Variable Displacement Compressor” means a compressor in which the mass

flow rate of refrigerant is adjusted independently of compressor speed by the control system in

response to cooling load demand.

(10) “Variable Speed Compressor” means a compressor in which the mass flow rate of

refrigerant can be adjusted by control of the compressor input shaft speed, independent of vehicle

engine speed. For example, a variable speed compressor can have electric drive, hydraulic drive,

or mechanical drive through a variable speed transmission.

(11) “Worst-Case” means the vehicle configuration within each test group that is

expected to have the highest CO2-equivalent value, as calculated in section 1961.1(a)(1)(B)1.

(f) Severability. Each provision of this section is severable, and in the event that any

provision of this section is held to be invalid, the remainder of this article remains in full force

and effect.

Note: Authority cited: Sections 39500, 39600, 39601, 43013, 43018, 43018.5, 43101, 43104 and 43105,

Health and Safety Code. Reference: Sections 39002, 39003, 39667, 43000, 43009.5, 43013, 43018,
Date of Release: 8/6/04; 45-day Notice version A-19

Board Hearing: 9/23/04

43018.5, 43100, 43101, 43101.5, 43102, 43104, 43105, 43106, 43204, 43205, and 43211, Health and Safety

Code.