CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY 

AIR RESOURCES BOARD 

STAFF REPORT: INITIAL STATEMENT OF REASONS 

2008 PROPOSED AMENDMENTS TO THE 

CALIFORNIA ZERO EMISSION VEHICLE PROGRAM REGULATIONS 

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: February 8, 2008 

 Scheduled for Consideration: March 27, 2008 
Initial Statement of Reasons 

February 8, 2008 

i 

EXECUTIVE SUMMARY 

In 1990, the California Air Resources Board (ARB or the Board) adopted an ambitious 

program to significantly reduce the environmental impact of light-duty vehicles through the 

commercial introduction of zero emission vehicles (ZEV) into the California fleet. 

The ZEV program is vital in meeting California’s environmental goals. Zero-emission 

technologies can greatly reduce or even eliminate some of the persistent environmental 

problems with motor vehicles. The ZEV program promotes the use of the cleanest 

gasoline technologies available, while still encouraging the development of pure zero 

emission technologies. 

The ZEV program has been modified four times since its inception – in 1996, 1998, 

2001, and most recently in 2003. While the program requirements have been changed 

to reflect the status of technology, the original objective has not changed. California 

continues to maintain a strong commitment to the commercialization of zero-emission 

passenger cars and light-duty trucks. 

In response to the Board’s actions, automakers have developed and demonstrated 

limited numbers of ZEVs to evaluate their technological and commercial feasibility. 

Parallel to these efforts, automakers have commercialized “near-zero” emission 

vehicles and hybrid electric vehicles (HEV) that have been supportive of the ZEV 

program goals and have significantly reduced vehicle emissions. 

The ZEV program was last modified in 2003 to resolve legal challenges and to better 

address the state of technology. Given the uncertainty in the pace of technology 

development, the Board directed that an independent panel of experts (Panel) be 

convened to report on the status of ZEV technologies and their readiness for 

commercialization. 

The Panel’s findings were presented to the Board in May 2007. Subsequent to 

presentations by the ARB staff and Panel, and after taking public comment, the Board 

adopted Resolution 07-18 directing ARB staff to return to the Board with proposed 

changes that address the state of technologies needed to meet the regulation. In 

directing that changes were needed, the Board affirmed its support for the program and 

emphasized that any changes should strengthen the overall objectives of the program. 

Proposed Amendments to the Regulations

In response to the Board’s direction, ARB staff is now proposing amendments to the 

program that are designed to better reflect the state of technology and create incentives 

for new vehicle designs. Other proposed changes are intended to clarify and simplify 

specific program requirements pertaining to 2009 and subsequent model years (MY). 

The most significant proposed amendments pertain to Phase III and Phase IV (2012 – 

2017), while Phase II (2009 – 2011) requirements remain largely unchanged. The 
Initial Statement of Reasons 

February 8, 2008 

ii 

proposed amendments are expected to maintain pressure on the commercialization of 

pure ZEV technologies while recognizing the technological limitations and costs of 

current vehicles. The key elements of staff’s proposal are the following: 

A. Creation of the “New Path” for 2012. Combine the Base Path and Alternative Path 

requirements into a New Path where the ZEV obligation and the options to use other 

vehicle types are expressed as annual percentage requirements. The pure ZEV 

requirement may be offset by up to 90 percent “Enhanced” Advanced Technology 

Partial ZEVs (Enhanced AT PZEV), a new classification of vehicle in Phase III (2012 – 

2014). In Phase IV (2015 – 2017), 50 percent of the ZEV target requirement could be 

met with Enhanced AT PZEVs. Enhanced AT PZEVs1 are AT PZEVs with credit 

allowances2 totaling more than 1.0 and which use fuels that can be used in a ZEV, like 

electricity or hydrogen. Examples of Enhanced AT PZEVs are plug-in hybrid electric 

vehicles (PHEVs) and hydrogen internal combustion engine vehicles. The proposed 

changes act to simplify the regulation while maintaining the overall outcome of the 

Alternative Path. Establish a new Type IV category to recognize longer range ZEVs 

and adjust ZEV credits such that Type III ZEVs earn 4 credits and Type IV ZEVs earn 5 

credits through 2017. 

B. Establish Carry-Forward and Carry-Back provisions for ZEV credits. Modify the 

credit provisions under the proposed “New Path” to be consistent with the existing 

provisions contained in the Alternative Path which allow compliance over a three year 

window. Additionally, modify the way credits may be used after a specified time to limit 

the possibility that amassed credits could cause a black out of ZEV production for an 

extended period of time and to make the regulatory requirements better reflect the 

expected outcome in terms of vehicles produced.

C. Provide More Equal Treatment of Battery Electric Vehicles. Eliminate the cap on the 

use of full-function and city battery electric vehicles (EV) within the Alternative 

Compliance Path. Change the ratio for substitution for each vehicle type to be 

consistent with the credits earned by the vehicle rather than a separate ratio established 

only for pure ZEV obligation compliance. Create a new Type I.5 to recognize 

opportunity for a marketable longer range city EV. 

D. Adjust Credits for AT PZEVs. Modify the AT PZEV requirements, primarily to address 

PHEVs. The proposed amendments include addressing deployment of “blended” HEVs 

through an equivalent all electric range (EAER) credit, adjusting the credits for 

advanced componentry and fuel cycle emissions, and other conforming changes. 

E. Increase Credit for Neighborhood Electric Vehicles. Double the existing credit for 

neighborhood electric vehicles (NEV) to 0.3 credits per vehicle to reflect the vehicle’s 

 

1

 In discussion papers and conversations with stakeholders, this classification of vehicles has been 

referred to as Silver Plus. 

2

 Allowances are part of a vehicle’s credit calculation and credits are the sum of the allowances given. 
Initial Statement of Reasons 

February 8, 2008 

iii 

positive environmental benefits but limited functionality compared with full function 

battery or fuel cell EVs. 

F. Extend “Travel” Provision. Extend the provision that allows Type III ZEVs placed in 

any state that has adopted California’s ZEV program to count towards California’s ZEV 

requirement through 2017, and include Type IV ZEVs. Include battery EVs within the 

provision but sunset the application of this provision for these vehicles in 2014. 

G. Modify Transition for Intermediate Automakers. Create a ramp-up period of six years 

for intermediate volume manufacturers (IVM) who are transitioning to large volume 

status. During this time, an automaker would be allowed to meet its ZEV requirements 

with increasing numbers of partial ZEV allowance (PZEV) of which a percentage must 

be AT PZEVs. 

H. Public Availability of ZEV Credit Data. Require that all production data be publicly 

available starting with the 2009 model year and release ZEV credit bank balance 

information for the 2010 model year and beyond. 

Effect of Proposed Amendments 

2009 – 2011: The staff proposal is not expected to change the number of pure ZEVs 

(e.g., fuel cell and battery EVs) in the near term. However, the changes made do allow 

additional flexibility for the use of battery EVs, should products be available in this 

timeframe. Since many automakers still retain sufficient banked credits to assist with 

their compliance plans for this time period, staff expects they will aggressively use 

banked credits to meet the requirements in this timeframe since ZEV technologies 

remain very expensive. Thus the actual number of new ZEVs produced is expected to 

be lower than the 2,500 commonly referred to for this time period. Additionally, the 

amendments provide a clearer path for the use of PHEVs which are under 

development. 

2012 – 2017: The staff proposal is expected to decrease the number of pure ZEVs (e.g. 

fuel cell and battery EVs) introduced during this timeframe relative to the existing 

program. Where the existing program would call for 75,000 ZEVs between 2012 and 

2017, the staff proposal could result in as few as 27,500 ZEVs if manufacturers comply 

using the highest credit earning ZEVs. A mix of ZEV types used for compliance in this 

time period, including fuel cell vehicles and a range of battery EVs, would result in a 

higher number of ZEVs. The overall number of advanced technology vehicles should 

increase as manufacturers are allowed to meet a part of the requirements with a new 

class of vehicle, referred to as Enhanced AT PZEVs. More than 150,000 Enhanced AT 

PZEVs could result in the 2012 – 2017 timeframe. The exact number of vehicles that 

will be placed is unknown; however use of banked credits will not be as significant in 

this timeframe, meaning that production of ZEVs should more closely match the stated 

requirements than in previous years of the program. 
Initial Statement of Reasons 

February 8, 2008 

iv 

2018 and subsequent: No changes are proposed to the ZEV requirements for the long 

term. The current 16% requirement beginning in 2018 remains in place. It is expected 

that the program will be revisited prior to the implementation of this portion of the 

regulation to determine if the pace of vehicle introduction is correct or if it can be 

accelerated. 

The proposal is expected to reduce the cost of compliance by reducing the number of 

vehicles incorporating the most expensive technologies (fuel cell and battery EVs) 

needed during the 2012 – 2017 timeframe. The estimated annual savings averages 

$1.3 billion in 2012 – 2014 and nearly $0.9 billion in 2015 – 2017. 

The ZEV program continues to provide positive air quality impacts as compared to no 

program. The changes proposed by staff significantly reduce an automaker’s cost of 

compliance, but still provide increased air quality benefits primarily because they rely 

upon the proven emissions benefits of commercially viable and increasingly available 

AT PZEVs. Staff believes that a reduction in the near term production volume of ZEVs 

is warranted because technological and cost hurdles remain that are best solved 

through continued lower volume demonstrations of the technologies. In making these 

changes, the program will reduce criteria pollutant emissions by 7,000 tons over the life 

of the affected vehicles. The proposed changes further encourage AT PZEV 

technologies as well as Enhanced AT PZEV technologies, both of which enable pure 

ZEV technology. 

Staff Recommendation 

The ARB staff recommends that the Board adopt the amendments as proposed in this 

Initial Statement of Reasons (ISOR). The proposed amendments respond to the 

current state of ZEV technology, and reduce the overall cost of compliance to industry, 

while maintaining the push toward ZEV commercialization. 
TABLE OF CONTENTS 

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

2. BACKGROUND ...................................................................................................................................2

2.1 ZEV PROGRAM OBJECTIVES ..........................................................................................................2

2.2 AIR QUALITY IN CALIFORNIA............................................................................................................2

2.3 ZERO EMISSION VEHICLE PROGRAM HISTORY.................................................................................3

2.4 CURRENT PROGRAM ......................................................................................................................4

2.5 MANUFACTURER COMPLIANCE STATUS...........................................................................................5

3. SUMMARY OF PROPOSED AMENDMENTS ....................................................................................7

3.1 CREATION OF THE “NEW PATH” (2012 ONWARD) .............................................................................7

3.2 ZEV CREDITS: CARRY FORWARD/CARRY BACK ............................................................................10

3.3 PROVIDE FOR MORE EQUAL TREATMENT OF BATTERY ELECTRIC VEHICLES....................................12

3.4 ADJUST CREDIT DETERMINATION METHODS FOR AT PZEVS .........................................................14

3.5 INCREASE CREDIT FOR NEIGHBORHOOD ELECTRIC VEHICLES ........................................................19

3.6 EXTEND TRAVEL PROVISION.........................................................................................................20

3.7 MODIFY TRANSITION FOR INTERMEDIATE VOLUME MANUFACTURERS..............................................21

3.8 ADDITIONAL MODIFICATIONS.........................................................................................................22

4. EFFECT OF PROPOSED CHANGES...............................................................................................26

4.1 CREATION OF THE “NEW PATH” (2012 ONWARD) AND CHANGES TO TREATMENT OF BATTERY EVS..26

4.2 INCREASE CREDIT FOR NEIGHBORHOOD ELECTRIC VEHICLES ........................................................27

4.3 EXTEND “TRAVEL” PROVISION ......................................................................................................28

4.4 MODIFY TRANSITION FOR AUTOMAKERS........................................................................................28

4.5 OVERALL ANTICIPATED IMPACTS...................................................................................................28

5. REGULATORY ALTERNATIVES......................................................................................................30

5.1 DO NOT AMEND PROGRAM...........................................................................................................30

5.2 ADOPT SUBSTANTIAL REVISIONS TO THE ZEV REGULATION...........................................................30

6. ECONOMIC IMPACTS ......................................................................................................................32

6.1 LEGAL REQUIREMENT...................................................................................................................32

6.2 DIRECTLY AFFECTED BUSINESSES................................................................................................32

6.3 POTENTIAL IMPACT ON MANUFACTURERS......................................................................................32

6.4 INCREMENTAL PER-VEHICLE COST ESTIMATES..............................................................................33

6.5 COST SAVINGS ............................................................................................................................34

6.6 POTENTIAL IMPACT ON DEALERSHIPS............................................................................................35

6.7 POTENTIAL IMPACTS ON VEHICLE OPERATORS ..............................................................................35

6.8 POTENTIAL IMPACT ON BUSINESS COMPETITIVENESS.....................................................................35

6.9 POTENTIAL IMPACT ON EMPLOYMENT............................................................................................36

6.10 POTENTIAL IMPACT ON BUSINESS CREATION, ELIMINATION OR EXPANSION.....................................36

6.11 POTENTIAL COSTS TO LOCAL AND STATE AGENCIES......................................................................36

7. ENVIRONMENTAL IMPACTS...........................................................................................................37

7.1 PROGRAM BENEFITS ....................................................................................................................37

7.2 BENEFITS OF PROPOSED AMENDMENTS........................................................................................37

7.3 ENERGY DIVERSITY AND ENERGY DEMAND ...................................................................................38

7.4 ENVIRONMENTAL JUSTICE ............................................................................................................39

7.5 CALIFORNIA ENVIRONMENTAL QUALITY ACT ..................................................................................39

8. COST-EFFECTIVENESS...................................................................................................................40

9. SUMMARY AND STAFF RECOMMENDATION ...............................................................................41
9.1 SUMMARY OF STAFF PROPOSAL ...................................................................................................41

9.2 STAFF RECOMMENDATION............................................................................................................41

10. REFERENCES...............................................................................................................................42

 

APPENDIX A: PROPOSED REGULATION ORDER: AMENDMENTS TO THE 

ZERO-EMISSION VEHICLE REGULATION
Table of Acronyms 

AER ............ All Electric Range 

ARB ............ California Air Resources Board 

AT PZEV .... Advanced Technology Partial ZEV Allowance Vehicle 

CNG ........... Compressed Natural Gas 

EAER ......... Equivalent All Electric Range 

EMFAC ....... ARB’s mobile emissions inventory modeling program 

EV .............. Electric Vehicle 

HEV ............ Hybrid-Electric Vehicle 

ISOR .......... Initial Statement of Reasons 

IVM.............. Intermediate Volume Manufacturers 

LDT1 .......... Light Duty Truck with a loaded vehicle weight of 0-3750 pounds 

LDT2 .......... Light Duty Truck with a loaded vehicle weight of 3751 pounds to a gross 

vehicle weight of 8500 pounds, or a “LEV I” light-duty truck with a loaded 

vehicle weight of 3751-5750 pounds 

LEV I .......... First generation Low Emission Vehicle program, adopted in a 1990-1991 

rulemaking, and generally applicable in the 1994-2003 model years 

LEV II ......... Second generation Low Emission Vehicle program, adopted in a 1998-

1999 rulemaking, and generally applicable in the 2004 and subsequent 

model years 

LFCE........... Low Fuel Cycle Emissions 

LVM............. Large Volume Manufacturers 

MY .............. Model Year 

NEV............. Neighborhood Electric Vehicle 

NOx ............ Oxides of Nitrogen 

PHEV ......... Plug-in Hybrid-Electric Vehicle 

PZEV .......... Partial ZEV Allowance Vehicle 

ROG ........... Reactive Organic Gases 

Type 0 ........ Utility EV, less than 50 mile range 

Type I ......... City EV, range of 50 to less than 75 miles 

Type I.5 ....... City EV, range of 75 to less than 100 miles 

Type II ........ Full Function EV, range of 100 or more miles 

Type III ....... ZEV, range of 100 or more miles plus fast refueling 

Type IV........ ZEV, range of 200 or more miles plus fast refueling 

UDDS ......... Urban Dynamometer Driving Schedule 

ULEV I ........ Ultra-Low Emission Vehicle, pre-1998 regulations 

ULEV II ....... Ultra-Low Emission Vehicle, post-1998 regulations 

VMT ............ Vehicle Miles Traveled 

ZEV ............ Zero Emission Vehicle 
1 

1. INTRODUCTION 

In 1990, the California Air Resources Board (ARB or the Board) adopted an ambitious 

program to dramatically reduce the environmental impact of light-duty vehicles through 

the gradual introduction of zero emission vehicles (ZEV) into the California fleet. The 

ZEV program, which affects passenger cars and light-duty trucks (LDT1 and LDT2), has 

been adjusted four times since its inception: in 1996, 1998, 2001 and 2003. The 

fundamental goal of the program, however, has not changed. California remains 

committed to the commercialization of ZEV technologies. 

California’s strong commitment to the ZEV program reflects the essential need for ZEV 

technology in order to achieve the State’s public health protection goals. Health-based 

state and federal air quality standards continue to be exceeded in regions throughout 

California. California’s growing population and increasing use of motor vehicles mean 

continued upward pressure on statewide emissions. 

Zero-emission technologies can greatly reduce or even eliminate some of the persistent 

emissions related environmental problems with motor vehicles. Combustion-based 

engines are prone to deterioration over time and result in higher fuel cycle emissions. 

Catastrophic failures are also a concern. Older gasoline-powered vehicles, for 

example, become gross emitters if their emission control systems fail. Combustible 

fuels also have significant “upstream” impacts. Refining, fuel storage and delivery all 

have associated emissions. Apart from upset conditions that may occur during electric 

power generation or hydrogen fuel production and distribution, ZEVs have none of 

these vulnerabilities. 

While ZEVs can provide significant environmental benefits, it is also necessary that they 

be economically viable. Since the program’s inception, substantial technological 

improvements have occurred. These improvements have raised the level of vehicle 

performance and have resulted in attractive solutions to personal mobility. However, 

the cost goals necessary for such technologies to compete successfully in the 

marketplace have not been met, preventing widespread introduction of the technology. 

This rulemaking provides another opportunity for the Board to consider mid-course 

corrections that address the realities of the state of technologies while encouraging the 

introduction of new, innovative plug-in hybrid electric vehicle (HEV) designs to reduce 

the environmental impacts from light-duty vehicles and further support ZEV 

commercialization through deployment of enabling technologies. 
2 

2. BACKGROUND 

2.1 ZEV Program Objectives 

The ongoing adjustments to the ZEV program are the result of the continuing need to 

balance the pressure on vehicle manufacturers to develop ZEVs with the recognition of 

real-world status of the available technologies. Since its adoption, the ZEV program 

has pushed the boundaries of ZEV development, while taking into account the cost, 

performance, suitability for volume production and long-term prospects of the 

technologies. The following are the main objectives of the ZEV program and of staff’s 

proposed changes: 

• Maintain the pure ZEV requirement as a technology forcing-element of ARB’s 

overall effort to achieve long term public health and air quality goals 

• Take full advantage of technology options and accelerate ZEV development 

through deployment of advanced vehicles with ZEV enabling technology 

• Maximize air quality benefits by allowing automakers the flexibility to meet 

portions of the regulation with conventional technologies substantially cleaner 

than required by other motor vehicle requirements 

• Simplify the structure of the ZEV program 

The program has not yet resulted in the commercial introduction of ZEVs. However, the 

tremendous progress that has been made in a variety of advanced technologies can, at 

least in part, be attributed to the existence of the ZEV requirement. Furthermore, ARB 

staff believes that continued regulatory requirements are needed to push the 

development of pure ZEVs. 

2.2 Air Quality in California 

Air quality in California has improved dramatically over the past 30 years, largely due to 

continued progress in controlling pollution from motor vehicles. Faced with ever more 

stringent regulations, vehicle manufacturers have made remarkable progress in 

advancing vehicle technology. Vehicles meeting ARB’s most stringent emission 

certification standards achieve emission levels that seemed impossible when the ZEV 

program was adopted in 1990. 

Despite this progress, air quality in many areas of the state still does not meet federal or 

state health-based ambient air quality standards. Mobile sources still are responsible 

for well over half of the ozone-forming emissions in California. The relative contribution 

of passenger cars and small trucks is expected to decline over time as new standards 

phase in, but in 2020 such vehicles will still be responsible for approximately 10 percent 

of total emissions based on the ARB emissions inventory.1

 State and federal law 

 

1

 ARB 2007a, 2007 Almanac Data, 2007. 
3 

requires the implementation of control strategies to attain ambient air quality standards 

as quickly as practicable and as mandated. 

Other programs and legislation, including Assembly Bill 1007 (State Alternative Fuels 

Plan), require the state to prepare new plans to increase the use of alternative fuels in 

California. These other programs indicate the need for significant use of the electric 

drive train as well as other actions to meet California’s air quality and emission 

reduction goals. 

 

2.3 Zero Emission Vehicle Program History 

Manufacturers originally pursued the development of battery electric vehicles (EV) to 

meet the ZEV requirements. In 1996, the ARB eliminated the requirements for the 1998 

through 2002 model years (MY) due to cost and performance issues to allow additional 

time for battery research and development. To ensure a significant market for 

advanced battery manufacturers, ARB entered into agreements with manufacturers to 

place in California roughly 1,800 advanced-battery EVs between 1998 and 2000. The 

agreements were designed to provide battery developers with the necessary initial 

production volumes to meet the cost and performance goals needed for commercial 

production. 

Contrary to expectations, advanced battery costs have remained too high for 

commercial viability. For example, research in 2000 showed that full-sized nickel metalhydride battery packs would cost approximately $7,000 to $9,000 each at production 

levels exceeding 100,000 battery packs per year, and would cost twice as much at 

lower production levels. Notwithstanding these costs, several manufacturers continued 

to place a modest number of battery EVs after meeting their agreement volumes. 

These vehicles earned ZEV credits that have been used for compliance with the 

regulation. 

Manufacturers began to look seriously at hydrogen fuel cell vehicles in the late 1990’s 

as an alternative to battery EVs. This interest led to cooperative efforts among the 

ARB, industry and other governmental agencies to create the California Fuel Cell 

Partnership in 1999. The Partnership demonstrates fuel cell vehicle technology while 

exploring the paths to commercialization. Changes to the program in 2003 provided 

new incentives for fuel cell vehicles. 

The most recent changes to the ZEV program in 2003 resolved legal challenges and 

addressed the state of various vehicle technologies. Given these changes and the 

uncertainty in technology development, the Board directed that an independent panel of 

experts (Panel) be convened to report on the status of ZEV technologies and their 

readiness for commercialization prior to 2009. 
4 

From the results of the Panel report2, in May 2007, the Board found that some changes 

to the program were needed to align the requirements with the state of technology. 

However, the Board’s overall direction was that any changes should be limited in scope 

to the greatest extent possible and that no “backsliding” of the program should result. 

The proposed amendments presented in this rulemaking respond to this direction and to 

the Board’s findings contained within Board Resolution 07-183. 

2.4 Current Program 

Shown below in Table 2.1 is the structure of the current ZEV regulation for MY 2009. 

Table 2.1: 2009 ZEV Program Requirements - Base Path 

1

 Percent of total California sales differs from percentage requirement because credits per vehicle 

type vary. 

The three categories of vehicles used to meet the ZEV regulation are referred to as ZEV 

or “gold,” advanced technology partial zero emission vehicles (AT PZEV) or “silver,” and 

partial ZEV allowance vehicles (PZEV) or “bronze.” To date, approximately 4,500 ZEVs 

have been demonstrated, while over 100,000 AT PZEVs and nearly 700,000 PZEVs 

have been commercially introduced, resulting in significant emissions reductions. An 

example of an AT PZEV is the Toyota Prius HEV while examples of a PZEV are the 

Ford Focus and BMW 325. 

The Board’s 2003 amendments increased the requirements for ZEVs to 11 percent 

starting in 2009 and ultimately increasing to 16 percent in 2018. Large volume 

manufacturers (LVM – those with annual California sales exceeding 60,000 vehicles) 

are allowed to comply using either the Base Compliance Path with the percentage ZEV 

requirements shown in Table 2.1 or the Alternative Path shown in Table 2.2 below. The 

 

2 Kalhammer, et al. Status and Prospects for Zero Emission Vehicle Technology: Report of the ARB 

Independent Expert Panel 2007, April 13, 2007

3

 ARB 2007b, Board Resolution 07-18, May 24, 2007 

Certification Standards 

% Requirement % of Total 

Vehicle Sales1 Vehicle Type Category Technical Description 

2.5 < 1 Zero Emission 

Vehicle (ZEV) Gold 

Zero tailpipe emissions: 

battery electric vehicles and 

hydrogen fuel cells. 

2.5 5 

Advanced 

Technology 

PZEV 

(AT PZEV) 

Silver 

Vehicles certified to PZEV 

standards and employing 

ZEV-enabling technologies: 

e.g. hybrids or compressed 

natural gas vehicles. 

6 30 

Partial Zero 

Emission 

Vehicle (PZEV) 

Bronze 

Conventional vehicles 

certified to the most stringent 

tailpipe emission standards, 

zero evaporative emissions, 

and extended warranty. 

11 35 Total ZEV Requirement 
5 

Alternative Compliance Path was included in the ZEV program in 2003 to promote the 

commercialization of fuel cell vehicles and to ensure that new ZEVs continued to be 

produced. The Alternative Compliance Path also allows AT PZEVs to fulfill a greater 

share of the top five percent of obligations (the gold and silver commitments), provided 

that the manufacturer meets the requirements specified below. 

Table 2.2: Alternative Compliance Path Fuel Cell Requirements

 

As illustrated in Table 2.2, the requirement for ZEVs, e.g., fuel cell vehicles, increases 

by factors of ten for Phases II and III and then doubles for Phase IV, as the technology 

was expected to make the transition from demonstration to full commercialization. 

Volumes in Phases I and II reflected the early development process, with further 

technological changes expected prior to ramp-up toward commercialization. Phases III 

and IV were designed to establish new commercial markets for the technology. 

2.5 Manufacturer Compliance Status 

Twenty-two auto manufacturers are subject to the ZEV regulation. Six are defined as 

LVMs: General Motors, Toyota, Ford, Honda, Chrysler LLC and Nissan. The remaining 

16 are intermediate volume manufacturers (IVM). IVMs can meet the regulation entirely 

with PZEVs. 

All manufacturers are currently in compliance with the ZEV regulation. The product 

plans and technology development strategies vary from manufacturer to manufacturer. 

Most manufacturers have enough banked credits from ZEVs already produced and 

placed to comply with the regulation through approximately 2009. It should be noted 

however, that while all of the large manufacturers have active fuel cell vehicle 

demonstrations, some of these manufacturers have chosen to comply using the Base 

Path and not need to produce any additional fuel cell vehicles between now and the end 

of 2008 to comply with the regulation. 

To meet the AT PZEV portion of the regulation, manufacturers are either producing AT 

PZEVs (primarily HEVs) or using banked credits from previously produced 

neighborhood electric vehicles (NEVs). Four of the six large manufacturers have 

commercialized AT PZEVs; two of these manufacturers, Toyota and Honda, dominate 

the volumes produced to date. On aggregate, manufacturers have sufficient banked AT 

PZEV and NEV credits to meet the AT PZEV portion of the regulation for the next four 

to five years. 

Phase During Model Years Manufacturer’s Market Share of: 

I 2005 – 2008 250 fuel cell vehicles 

II 2009 – 2011 2,500 fuel cell vehicles 

III 2012 – 2014 25,000 fuel cell vehicles 

IV 2015 – 2017 50,000 fuel cell vehicles 
6 

Regardless of the method with which manufacturers are meeting the AT PZEV portion 

of the program, the number of AT PZEVs produced to date is beyond what is required 

by the ZEV regulation. In 2005, twice as many AT PZEVs were produced as required to 

meet AT PZEV portion of the program due mostly from production from two 

manufacturers. Over-compliance will change within the next model year or so as the 

optional volume of AT PZEVs increases to 8 percent of the total fleet for those 

manufacturers on the Alternative Path. 

Table 2.3 presents the approximate total number of gold, silver and bronze vehicles 

placed as of MY 2006. Manufacturers have been producing PZEVs at a rate greater 

than needed in aggregate (in 2005, manufacturers produced 40 percent more PZEVs 

than the industry-wide PZEV option). 

Table 2.3: Vehicle Placements by Type 

1

 Estimates of total vehicle placements from 1994 through 2006. 

Table 2.4 shows the current aggregate ZEV credit balances by vehicle type for the six 

LVMs. The balances reflect compliance with the AT PZEV and PZEV requirements in 

2005 and 2006. However, for manufacturers on the Alternative Path, gold credits have 

not yet been spent since Phase I does not end until the end of the 2008 MY. 

Table 2.4: Current Aggregated ZEV Bank Credits 

Vehicle Type Vehicle Credit 

ZEV “Gold” 43,726 

ZEV from NEVs1123,271 

AT PZEV “Silver” 110,839 

PZEV “Bronze” 113,734 

 

1NEV credits can only meet the PZEV or AT PZEV portion of the regulation 

Vehicle Type Quantity1

ZEV Fuel cell 160 

ZEV Battery electric 4,400 

ZEV Neighborhood electric 26,000

AT PZEV Hybrid/Compressed Natural Gas 109,000 

PZEV Conventional 672,000 
7 

3. SUMMARY OF PROPOSED AMENDMENTS 

In response to the Board’s direction, and in consideration of the issues related to 

technology commercialization, staff is now proposing amendments to the program that 

are designed to reflect the state of technology and create an opportunity for new 

emerging vehicle technologies to count towards the pure ZEV requirement. Other 

proposed changes are intended to clarify and simplify specific program requirements. 

The areas identified in this section represent the most significant changes being 

proposed. 

3.1 Creation of the “New Path” (2012 onward) 

Staff Proposal: Merge the existing compliance paths into a single path beginning in 

2012 and allow high-scoring AT PZEVs to meet up to 90 percent of the pure ZEV 

requirement in 2012 – 2014, and 50 percent in 2015 – 2017. 

This set of changes is aimed at accomplishing a number of goals and includes a 

number of different elements. The goals include: 

• Establish an appropriate volume of ZEVs given the state of the technologies 

• Acknowledge new ZEV Types that hold promise for commercialization including 

mid-range battery EVs and longer range fuel cell vehicles 

• Establish an appropriate relationship between ZEV types by adjusting the 

number of credits awarded 

• Incentivize production of certain AT PZEV technologies that facilitate the 

commercialization of pure ZEVs 

• Simplify the regulation 

3.1.1 Adjustment of ZEV Volumes 

Based on the projections of the Panel, production of thousands of fuel cell vehicles per 

year globally is achievable within the next five years given the pace of effort underway 

by manufacturers and suppliers. This projection is generally consistent with the existing 

requirements for Phase II (2,500 over a three year period). Maintaining Phase II is also 

important as manufacturers struggle to engage hydrogen fueling partners to seriously 

respond to the need for infrastructure, since greater use of stations is necessary for 

further investment by fuel providers. Staff, therefore, believes that the current Phase II 

requirements which represent a ten fold increase of Phase I requirements should 

remain unchanged. 

However, the Panel found the Phase III and Phase IV requirements to be significantly 

higher than what is reasonable to expect in the 2012 – 2017 timeframe given the state 

of fuel cell technologies. According to the Panel, high costs and continuing challenges 

with durability and life expectancy of the technology could be prohibitive to 

manufacturers significantly growing the production volumes of vehicles. Similarly, the 

Panel found that battery technology, while making progress, has yet to reach a point 
8 

where significant ramp up of vehicle volumes could be mandated as costs remain high 

and some battery chemistries have yet to prove lifetime durability. The Board accepted 

these findings from the Panel at their May 2007 Board Hearing and directed that 

adjustments be made to address these issues while still embracing the overall 

objectives of the ZEV program to the greatest feasible extent. 

In response, staff is now proposing changes that are more in line with the findings of the 

Panel. The proposal creates a more feasible program by adjusting the number of pure 

ZEVs downward beginning in 2012. The existing ZEV production floor for Phase III and 

Phase IV are 25,000 and 50,000 ZEVs respectively. Staff proposes to reduce this floor 

to 2,500 ZEVs in Phase III and 25,000 ZEVs in Phase IV. 

3.1.2 New ZEV Types and Adjustments to Existing ZEV Types 

As staff assessed the types of ZEVs that may be used to meet the ZEV regulation in the 

coming years, two new types emerged. The first, described as a Type I.5 ZEV falls 

between a Type I ZEV (generally described as a City EV with minimum range of 50 

miles) and a Type II ZEV (generally described as a full function battery EV with 

minimum range of 100 miles). The second, described as a Type IV ZEV is a ZEV with 

200 miles range that is fast refuel capable. 

The Type I.5 ZEV is proposed because staff learned that an optimal, cost effective, and 

marketable BEV may soon evolve, but that these might offer a driving range that is short 

of the 100 mile requirement for Type II but greatly exceeds the 50 mile requirement for 

Type I. Several manufacturers have indicated a strong interest in the creation of this 

new tier. To recognize this new BEV and provide appropriate incentives, staff proposes 

to award them with credit of 2.5. 

The definition of the Type IV would be a ZEV that has a range of at least 200 miles and 

fast refueling capabilities. This would likely be an advanced fuel cell vehicle. It is 

proposed that the Type IV be given 5 credits per vehicle. This additional credit, 

compared to battery EVs and lower range fuel cell vehicles would be available in the 

near term to reflect the greater challenges for fuel cell vehicles to reach marketability 

and their higher development costs. Credit for these vehicles would become consistent 

with Type II and Type III vehicles beginning in 2018. 

Type III ZEVs are defined as ZEVs with range greater than 100 miles and fast refueling 

capabilities. Staff is proposing to broaden that definition to allow ZEVs with range 

greater than 200 miles, but not fast refuel capable to be Type III ZEVs. This would 

mean that a battery EV with range greater than 200 miles would earn the same credit as 

a fuel cell vehicle with range less than 200 miles; the differentiation being the fast 

refueling capability. 
9 

3.1.3 Adjustment of Credits for ZEVs 

With the addition of the two new ZEV types, and in consideration of the state of 

development of each vehicle type involved, staff has adjusted the credits for several 

ZEV types to establish distinction between them. As described above, Type I.5 ZEVs 

are assigned 2.5 credits and Type IV ZEVs are assigned 5 credits. Staff is also 

proposing that the 4 credits currently earned by a Type III ZEV (typically a fuel cell 

vehicle with less than 200 miles) in 2009 – 2011 be continued through 2012 – 2017 

timeframe. This recognizes the state of development and continued high cost of fuel 

cell technology in this timeframe. Table 3.1 presents the credits for both existing and 

proposed ZEV categories. Expanding the vehicle types provides greater flexibility and 

opportunities for manufacturers to comply with the regulation. 

Table 3.1: Credits for ZEVs 2009 to 2017 

Tier Expected 

Technology Range Existing Proposed

Type I Battery EV 50 – 74 miles 2 2 

Type I.5 (new) Battery EV 75 – 99 miles NA 2.5 

Type II Battery EV > 100 miles 3 3 

Type III Fuel Cell or Battery EV 

Fuel Cell – 100 – 199 miles 

Battery EV > 200 miles 

4 4 

Type IV (new) Fuel Cell > 200 miles NA 5 

3.1.4 Incentives for Enhanced AT PZEVs 

Staff proposes to create a new classification of vehicle called “Enhanced AT PZEVs” 

and to incentivize their production by allowing them to meet up to 90 percent of the ZEV 

target in 2012 – 2014, and 50 percent of the ZEV target in 2015 – 2017. 

An Enhanced AT PZEV by definition would earn one or more credits per vehicle and 

use a “ZEV fuel.” Those that don’t are considered conventional AT PZEVs. Enhanced 

AT PZEVs, though not gold in terms of zero tailpipe emissions, are extremely clean in 

terms of both criteria pollutant and climate change fuel cycle emissions and, even more 

than conventional AT PZEVs make use of fuels and vehicle systems directly enabling 

further advancement of ZEVs. Examples of Enhanced AT PZEVs include plug-in hybrid 

electric vehicles (PHEVs) and hydrogen internal combustion engine vehicles. 

Enhanced AT PZEVs would provide the option to lower the number of pure ZEVs 

required in Phase III and Phase IV. That is, manufacturers would be allowed to produce 

Enhanced AT PZEVs in sufficient quantities to replace the credits from the reduced 

number of pure ZEVs in each Phase, thereby providing a “backfill” as requested by the 

Board. Because the per vehicle credit for an Enhanced AT PZEV is less than the credit 

for a pure ZEV, use of the backfill option will result in a greater number of total vehicles 

produced. 
10 

3.1.5 Simplify the Program with the “New Path” 

The staff also proposes to combine the existing Alternative and Base Paths into a single 

“New Path” beginning in 2012. The New Path would return the compliance calculation 

to an annual percentage requirement for ZEVs with options to comply with percentages 

of PZEVs, AT PZEVs and Enhanced AT PZEVs. Table 3.2 illustrates the New Path 

percentages and the expected numbers of vehicles for 2012 – 2014 and 2015 – 2017. 

Table 3.2: Proposed “New Path” Requirement by Vehicle Category 

 

2012 – 2014 

(12 % Total Requirement)1

2015 – 2017 

(14 % Total Requirement)1

Percent Vehicles 

Per Year2

Vehicles over 

period2 Percent Vehicles Per Year* 

Vehicles over 

period* 

ZEV3

0.3%– 3% 840 – 8,353 2,500 – 25,000 3% – 6% 8,333-16,660 25,000 – 50,000 

Enhanced 

AT PZEV 0 – 2.7% Up to 

25,000 Up to 75,000 Up to 3% Up to 28,000 Up to 83,000 

AT PZEV 3% 65,000 195,000 2% 51,000 153,000 

PZEV 6.0% 420,000 1,260,000 6.0% 420,000 1,260,000 

1

 Based on annual California vehicle sales of 1.4 million passenger cars, light-duty trucks (LDT 1 and

LDT 2) by the six large volume auto manufacturers. 

2

 Assumes that Enhanced AT PZEVs earn 1.5 credits, AT PZEVs earn 0.65 credits in 2012 – 2014, and 

0.55 credits 2015 – 2017. Credits earned vary by vehicle technology, and thus the number of vehicles 

produced may vary from the volumes in this table. 

3

 Assumes Type IV ZEV. 

Approximately 75,000 Enhanced AT PZEVs could be placed to backfill ninety percent of 

the gold requirement in 2012 – 2014. This increases to roughly 83,000 vehicles in 2015 

– 2017. The AT PZEV or “silver” percentage requirement is based on the existing 

Alternative Path and results in approximately 195,000 vehicles in 2012 – 2014. 

Concerning AT PZEVs, the existing program allows manufacturers to use AT PZEVs 

under the Alternative Path to meet a majority of the ZEV requirements. The number of 

standard AT PZEVs decreases in the 2015 – 2017 timeframe due to the creation of the 

new Enhanced AT PZEV category and due to the increasing requirement for the ZEV 

category. The PZEV option would remain unchanged during the six year period and 

stay consistent with the existing program. 

The New Path is intended to increase flexibility and incentivize the introduction of 

innovative advanced vehicle technologies. Returning to a single path simplifies the 

regulatory structure and provides for a more easily described and understood 

regulation. The New Path results in more certainty and transparency about how many 

vehicles will be produced and what impacts the program will have on commercialization 

and air quality improvement. 

3.2 ZEV Credits: Carry Forward/Carry Back 

Staff Proposal: Modify the credit provisions under the proposed “New Path” to be 

consistent with the existing provisions contained in the Alternative Path which allow 

compliance over a three-year window. The proposal would also modify the way credits 
11 

may be used after a specified time to avoid excessive credit build up and help assure a 

smooth and continuous ramp up in production volume. 

The ZEV regulation allows the banking and trading of credits earned from early 

introduction and/or over-compliance with the regulation. Because of the lag between 

early demonstrations and implementation of the regulation, automakers amassed 

substantial credit accounts with early actions, including production and placement of 

NEVs. This has caused delays in the introduction of increasing numbers of ZEVs into 

the market. In addition, the banked ZEV credits create uncertainty as to what actions 

automakers will take to comply with the ZEV requirement, which, in turn, impacts the 

Board’s ability to accurately forecast the environmental impacts of the program. Staff is 

therefore proposing to change the long-term applicability of how banked credits can be 

used. 

3.2.1 Carry Forward 

Staff proposes that all ZEV credits earned thru 2008 MY retain their full flexibility thru 

2011. Beginning in MY 2012, these credits would no longer be allowed to offset the 

ZEV requirement; instead they would only be allowed to meet portions of the regulation 

that could be met with PZEVs, AT PZEVs or Enhanced AT PZEVs. Credits earned in 

the 2009 MY and later would be allowed to be carried forward for two additional years 

for application to the gold requirement. For example, gold credits earned in 2010 would 

retain full flexibility until 2013, at which time “stale” credits could not be used to comply 

with the gold requirements. Existing provisions for banked AT PZEV and PZEV credit 

would remain unchanged. The proposed amendments will help alleviate the possibility 

of long black out periods during which pure ZEV production is curtailed, while, at the 

same time, allow automakers to build up short term reserves so that they may choose 

production phases that fit their product planning cycles. 

3.2.2 Carry Back 

The ZEV regulation currently includes a one-year-carry-back provision for gold-category 

vehicles, meaning that if an automaker fails to meet its obligation in one year, the 

obligation may be made up in the next year, after fulfilling the past year’s compliance 

obligation. Staff proposes to change the carry back provision to two years, meaning 

that an automaker may fulfill an obligation for year one and/or two after meeting the 

year-three compliance obligation. Like the carry-forward provision described above, this 

provides flexibility to automakers to match their production development schedules with 

technology demonstration phases. The stretch from one to two years coincides with the 

three-year windows originally established in the Alternative Path. The regulation 

already allows for a two-year carry back for silver and bronze vehicles and would also 

cover Enhanced AT PZEVs. 

Figure 3.1 illustrates the proposed changes. As shown in the figure, a manufacturer 

producing in 2009 can use those credits to meet requirements in 2009, 2010 and 2011 

without restriction. Beginning in 2012 the credits can only be used to meet a 
12 

manufacturer’s PZEV or AT PZEV requirements. Regarding carry back, a manufacturer 

producing vehicles in 2014 can use those credits in MYs 2012 and 2013 to fulfill the 

requirements after fulfilling their full obligation for the 2014 MY. 

Figure 3.1: Carry Forward/Carry Back Scenarios

Scenarios 2009 2010 2011 2012 2013 2014 

Carry Forward 

Gold ZEV 

credit 

earned 

 Only useful 

for meeting 

AT PZEV 

and PZEV 

requirements 

 

Carry Back 

 

Gold 

requirement 

not met 

Gold 

requirement 

not met 

Gold vehicles 

produced 

In the worst case, using a combination of both carry forward and carry back an auto 

manufacturer could have a four-year “black out” in ZEV production. This is also 

possible under the existing Alternative Path compliance option as a manufacturer can 

front load Phase II and end load Phase III to achieve compliance. This gap is also 

consistent with product development cycles, which for demonstration volumes of 

vehicles is helpful for spacing out generations of technology. As the requirement grows, 

staff believes carry back will not be heavily relied upon because the risk of carrying such 

a significant debt is too great. 

3.3 Provide for More Equal Treatment of Battery Electric Vehicles 

Staff Proposal: Eliminate the cap on the use of full-function and city EVs within the 

Alternative Compliance Path. Change the ratio for substitution for each vehicle type to 

be consistent with the credit earned by the vehicle. 

Battery EVs were the primary compliance strategy in the early years of the ZEV 

program. In 2003, findings on cost and durability pointed to an extremely limited 

commercial market (ARB 2003). In an effort to refocus the regulation towards a 

technology with mass market commercial potential, the Board shifted the regulation 

towards acceleration of fuel cell vehicle technology. Many stakeholders expressed a 

concern that these changes would hinder development of battery EVs. In response, in 

2003, the Board provided limited incentives for battery EVs by allowing a portion of the 

Alternative Path to be met with the technology. However, battery EVs used as 

substitutes for fuel cell vehicles within the Alternative Path were required to substitute at 

a ratio between 5:1 and 20:1. 

In response to continued public interest in battery EV technology, the ARB has been 

monitoring the state of battery technology and the prospects for battery EV 

commercialization. The Board directed that staff reassess the development of battery 

EV technology and cost in the Panel’s technology assessment. The Panel found that 

Retains Full Credit Value 
13 

significant effort is going into development of improved batteries for use in vehicles. 

Lithium and nickel-metal-hydride technologies are receiving the greatest focus and are 

expected to meet the performance and life cycle demands of customers. However, 

while technological progress has been made and life cycle cost is starting to look more 

attractive as gasoline prices increase, cost remains high and at least for lithium, lifetime 

durability is not yet proven. The Panel concluded that a small market is possible for the 

technology. 

Some automakers are now showing renewed interest in bringing battery EVs to market. 

Improvements in battery chemistry and announcements by battery companies and 

start-up automakers have raised new optimism that the technology may be viable in the 

mid-term. Given the progress made in battery technology and the possibility of 

automakers coming back into the battery EV market, staff is now proposing that the 

ZEV regulation be modified to provide for more even treatment of battery EVs (Type I 

and Type II ZEVs). The amendments would remove the cap for use of battery EVs to 

meet the gold requirement and would establish compliance ratios for their use based on 

the credits they earn rather than a secondary “substitution ratio” as was the case in the 

Alternative Path in the current regulation. 

Tables 3.3 and 3.4 demonstrate the existing and proposed treatment of battery EVs 

under the New Path. Under the existing Alternative Path, manufacturers must meet at 

least 50 percent of the requirement with Type III vehicles, or fuel cell vehicles. This was 

included to ensure that fuel cell technology would have the necessary focus and 

attention. Type I and II vehicles (battery EVs) could be used to meet the remaining 50 

percent, but at the credit ratios shown in Table 3.3. The large ratios between fuel cell 

and battery EVs meant that much larger numbers of battery EVs had to be produced if a 

manufacturer chose to meet the regulation with the technology. Additionally, a 

manufacturer had to produce two ZEV technologies to comply with the regulation – fuel 

cell vehicles and battery EVs. 

Table 3.3: Existing Cap and Substitution Ratio for Type I and II ZEVs 

ZEV Type Cap 

(percent) 

Ratio to Type III 

(2005-2011) 

Ratio to Type III 

(2012-2017) 

I (City EVs) 50 20:1 10:1 

II (Full Function EVs) 50 10:1 5:1 

The staff proposes to remove the cap and modify the ratios for substitution to be 

consistent with those in Table 3.2. Table 3.4 illustrates the proposed ratios as they 

relate to Type IV vehicles. For example, 5 full-function-battery EVs would be required in 

lieu of 3 Type IV fuel cell vehicles during the 2012 – 2014 timeframe. 
14 

Table 3.4: Proposed Ratio for Type I and II Vehicles 

Type Cap 

(percent) Ratio to Type IV (2009-2017) 

I (City EV) 0 2.5 : 1 

I.5 (City EV) 0 2 : 1 

II (Full Function EV) 0 5 : 3 

By returning to technology neutrality and considering battery EVs and fuel cell vehicles 

similarly, ARB recognizes the equal air quality benefit of both technologies. The market 

has changed since the amendments to the program in 2003, with several manufacturers 

showing a renewed interest in battery technology. Current fuel cell development is 

strong and does not need as much regulatory advantage as is provided by the existing 

program. It is likely that some manufacturers will pursue more advanced battery EV 

development as a result of this proposal. Still, staff believes the strong interest and 

investment in fuel cell vehicle development will continue regardless of these changes. 

3.4 Adjust Credit Determination Methods for AT PZEVs 

The credit allowances provided to AT PZEVs are intended to accelerate the 

development and deployment of ZEV technologies in the marketplace. Examples of 

such technologies include electric drive systems, energy-storage systems, and gaseous 

fuel storage used in compressed natural gas (CNG) and hydrogen internal combustion 

engine vehicles. Staff believes that promoting the widespread adoption of ZEV 

technologies in AT PZEVs leads to component performance improvements and cost 

reductions that are necessary for ZEV commercialization. The Expert Panel agreed, 

even though sales of HEVs are steadily increasing, the critical components HEVs share 

with ZEVs, such as advanced technology batteries, are continuing to rapidly evolve. 

Although automotive manufacturers are given a wide variety of AT PZEV options, staff 

is currently aware of near-term AT PZEV production plans only for CNG vehicles, HEV, 

and PHEVs. 

Staff is proposing several modifications to the treatment of credits for HEV AT PZEVs, 

primarily to address PHEVs. They include addressing (1) treatment of “blended” 

PHEVs through an establishment of an equivalent all electric range (EAER), (2) 

adjusting the allowance for advanced componentry and Type C HEV credit, and (3), 

PHEV low fuel cycle emissions (LFCE). 

3.4.1 Zero-Emission VMT PZEV Allowance 

Staff Proposal: Replace the former “all electric range” (AER) calculation used in the 

zero-emission-vehicle-miles-traveled (VMT) allowance

4

 determination with a newly 

defined EAER to enable blended PHEVs to be appropriately treated relative to nonblended PHEVs. 

 

4

 Allowances are part of a vehicle’s credit calculation and credits are the sum of the allowances given. 
15 

PHEVs5 are HEVs which are capable of recharging from off-vehicle power sources in 

the same way battery EVs do. Since staff last examined the prospects for deployment 

of PHEVs, manufacturers have indicated an interest in deployment of “blended” PHEVs 

that have a more limited electric-only driving range. When PHEVs were last 

considered during 2003 ZEV regulation amendments, it was envisioned that all PHEVs 

would run off of the battery until it was depleted and then transition to combined engine 

and electric hybrid operation. Since 2003, the concept of a blended PHEV has 

emerged as an intermediate step between conventional hybrids and PHEVs. In some 

cases, it is anticipated that existing HEV models will evolve into blended PHEVs with 

the addition of extra battery capacity and an on-vehicle charger while their conventional 

HEV powertrain may remain much the same. A blended PHEV still plugs in and 

accumulates energy from an off-vehicle electrical power source. Blended PHEVs differ 

from an AER PHEV in electric range because the engine may start anytime during 

range testing, usually much before the off vehicle charge energy has been fully 

depleted. Proponents of blended PHEVs claim they provide the reductions in GHG 

emissions and petroleum dependency as AER PHEVs do, but through near-term, 

less-challenging transitional step between existing HEVs and higher-powered, more 

expensive AER PHEVs. Under the existing regulation, blended PHEVs would not earn 

the zero-emission-VMT allowance because they could not achieve 10 miles of Urban 

Dynamometer Driving Schedule (UDDS) range without their internal combustion 

engines starting. 

Staff proposes to retain the existing 10 mile minimum AER requirement for this 

allowance, but would allow blended PHEVs to qualify with 10 or more miles of VMT 

EAER described below. Staff also proposes that the AER value used for credit 

determination be replaced with the EAER value. EAER will be defined as the UDDS 

miles driven by the PHEV until it has depleted its off-vehicle accumulated energy 

(charge depleting range or Rcd), but this range value is then multiplied by the fraction of 

those miles derived from off-vehicle electricity (electric range fraction or ERF) relative to 

electricity and gasoline. 

EAER = (Rcd * ERF)

For PHEVs with significant AER that can satisfy UDDS cycle(s) in electric mode, the 

ERF is 1.0 and the EAER is equal to the former AER. The allowance for the zeroemission, AER of PHEVs was formerly calculated using the following equation: 

Allowance = (33.8 + [0.5 * AER])/25), 

where the AER is measured on city driving cycle test until the engine turned on. 

Staff proposes to replace this allowance formula with the following: 

 

5

 PHEVs are also described as Off-Vehicle Charge Capable HEVs. 
16 

Allowance = EAER x (1 – UFRcd) / 14.6 

Where: 

o Rcd is the UDDS range of the PHEV until the off-vehicle accumulated 

charge energy is depleted. 

o ERF is the electric range fraction (electric energy/ total energy) 

o UFRcd is the Utility Factor based on the charge depletion range according 

to the 0-100 mile 4th order polynomial curve fit from SAE’s J17116, March 

1999, page 52., which expresses the likelihood a vehicle will accumulate a 

daily range in miles. 

The reason that the former linear equation is replaced by the utility-factor based function 

is to better reflect the likelihood that the range capability of a PHEV will be used by the 

general population. Under the proposed treatment, allowance per mile is very high near 

the 10-mile range because it is likely that these zero emission miles will be routinely 

driven, while the allowance per mile decrease to a lower value as range increases 

because of the decreased likelihood that these miles will be routinely driven. This new 

method results in the AER allowance (shown in blue as the “former method) compared 

to the EAER allowance (shown in pink for three different examples of electric-rangefraction values) as shown in Figure 3.2 below: 

Figure 3.2: AER Credit Allowance VS EAER 

 

6 SAE. SAE International, Recommended Practice for Measuring the Exhaust Emissions and Fuel 

Economy of Hybrid-Electric Vehicles, March 1999 

0.000

0.200

0.400

0.600

0.800

1.000

1.200

1.400

1.600

1.800

2.000

0 10 20 30 40 50 60

EAER (miles)

AER Credit Allowance

Former

Method

Examples with different EERF

(100%, 80% and 60%)
17 

These proposed amendments will also result in low range AER PHEVs receiving less 

AER allowance under this proposal than they did formerly, but they will also receive 

additional advanced componentry allowance (see below) to offset this decrease. This 

combination of changes in allowances is necessary in order to appropriately reward the 

AER PHEVs relative to blended PHEVs.

3.4.2 PHEV Advanced Componentry Allowance 

Staff Proposal: Extend the allowance sunset for Type C HEVs, and add a new 

higher-power Type F HEV category. 

Advanced Componentry Allowance – Staff proposes to implement a phase-down 

schedule and eliminate the allowance sunset for Type C HEVs. The Type C 

modification is recommended in response to comments that post-2011 hybrids with 

significant (>10 kW) power capability can still make an important contribution to 

technology development even if sub-systems operate at lower-voltage levels that might 

not be suitable for full-function ZEVs. This is true because Type C HEVs must still 

make use of advanced energy storage systems that are expected to be used on ZEVs. 

Staff believes that Type C HEVs may be well suited for very high volume markets where 

tighter cost constraints may restrict other HEV technologies from being deployed. Staff 

recommends that the allowance for Type C hybrids be extended indefinitely, but at a 

reduced allowance level relative to other HEV designs. 

Staff also proposes to add a new, higher battery capacity Type F HEV category for 

HEVs that demonstrate sufficient power capability to propel an HEV through the UDDS 

driving test cycle on electric power alone. Type F HEVs must also qualify for the zeroemission-VMT allowance, and must demonstrate at least 10 UDDS miles of AER, 

instead of EAER (i.e., blended PHEVs would not be Type F HEVs). 

The Type F HEV category is intended to encourage the deployment of higher battery 

capacity HEV drive systems interchangeable with those deployed in Type III ZEVs. In 

this way, design, development, tooling, and other costs can be shared with the systems 

destined for ZEVs in order to further drive down costs and deploy ZEVs sooner. The 

allowance schedule proposed is shown in Table 3.5 below: 

Table 3.5: Proposed HEV Componentry Allowance Schedule 

Year 

Type C 

10 kW 

Type D 

10 kW 

Type E 

50 kW 

Type F (NEW) 

>= 10 mile 

UDDS Capable 

2005-2011 0.2 0.4 0.5 0.85 

2012-2014 0.15 0.35 0.45 0.8 

2015+ 0.1 0.25 0.35 0.7 
18 

3.4.3 PZEV Low-Fuel-Cycle-Emissions-Allowance 

Staff Proposal: Eliminate the LFCE allowance for vehicles that do not make exclusive 

use of LFCE fuels. PHEVs receive additional allowance under AER and Advanced 

Componentry to make up for this loss of LFCE allowance. As a result, only dedicated 

LFCE fueled vehicles will now be eligible for AT PZEV LFCE allowance. Examples of 

AT PZEVs still eligible include CNG and hydrogen internal combustion vehicles. 

3.4.4 Overall Effect of Changes to PHEV Allowances 

The proposed changes would result in PHEVs receiving overall pre-multiplier 

allowances as shown in examples listed in the Table 3.6 below, where B20, B30 and 

B40 are blended PHEV examples and P20, P40 and P60 are AER examples. 

Table 3.6: PHEV Allowances

2011 Allowance 

PHEV Type Rcd 

ERF 

(%) Existing Proposed 

B12.5 Blended PHEV 12.5 80 0.7 1.24 

B20 Blended PHEV 20 80 0.7 1.45 

B30 Blended PHEV 30 80 0.7 1.65 

B40 Blended PHEV 40 80 0.7 1.78 

P10 AER PHEV 10 100 1.9 1.62 

P20 AER PHEV 20 100 2.1 1.99 

P40 AER PHEV 40 100 2.4 2.4 

P60 AER PHEV 60 100 2.7 2.57 

Table 3.5 shows that for AER PHEVs, the allowances awarded are not significantly 

changed from the existing regulation. Blended PHEVs which under the existing 

regulation could earn no more than 0.7 credits as a conventional hybrid, can now earn 

more than double. However, the table also shows that blended PHEVs also do not earn 

as much as AER PHEVs even if their “range” is similar. 

3.4.5 AT PZEV Credit Cap 

Staff proposes to implement a pre-multiplier credit cap of 3.0 for all AT PZEVs. While 

AT PZEV attributes may be attractive features that advance deployment of ZEVs, 

earning pre-multiplier credit that is greater than that earned by a full function Type II 

ZEV is not justified. 
19 

Table 3.7: AT PZEV Post-Multiplier Credit

2009-2011 2012 and beyond 

AT-PZEV Type Description 

PreMultiplier Final Credit Final Credit 

Type E HEV 0.70 0.70 0.65 

CNG 

Compressed 

Natural Gas 

Engine 

0.70 0.70 0.70 

HICE 

Hydrogen Internal 

Combustion 

Engine 

2.30 6.90 2.30 

B12.5/ 80% ERF Blended PHEV 1.24 3.72 3.57 

B40/ 80% ERF Blended PHEV 1.78 5.34 5.18 

P10 AER PHEV 1.62 4.86 4.85 

P40 AER PHEV 2.40 7.20 7.19 

3.5 Increase Credit for Neighborhood Electric Vehicles 

Staff Proposal: Double the credit earned by NEVs to 0.3 credits per vehicle to reflect 

the vehicle’s positive environmental benefits but limited functionality compared with full 

function ZEVs. 

During the 2003 ZEV amendments, ARB committed to reviewing the credit value for 

NEVs. NEVs are low speed vehicles that have a maximum speed of 25 miles per hour 

and are only allowed to be driven on roads with a maximum speed limit of 35 miles per 

hour. The positive benefits of NEVs include reducing emissions from cold starts, 

providing zero tailpipe emissions, providing high consumer usage for short trips and 

providing a future market and demand for more robust ZEVs. However, NEVs are 

limited to a niche market due to the small number of areas in California where speed 

limits are low and due to a limited driving range, currently 30 miles per charge. 

According to research to done by DiamlerChrysler and GEM7

, approximately 2 cold 

starts on average per day are reduced due to the use of NEVs. Cold starts represent a 

large portion of a conventional gasoline vehicle’s environmental impacts. Consequently 

NEVs can eliminate up to one third of an owner’s yearly ozone precursor emissions due 

to the reduction in cold starts. 

 

7GEM. Surveys of NEV Owner Behavior in California. December, 2005 Prepared for GEM by 

Mightycomm and Access Research Group. 
20 

In analyzing the credit value of NEVs, staff is mindful that higher credit values in the 

past encouraged mass production of low quality NEVs many of which remained in 

California for only a short period of time. Staff proposes an increase in the NEV credit 

value from 0.15 to 0.3 reflecting the positive benefits listed above balanced with the 

limited use of the vehicle. 

3.6 Extend Travel Provision 

Staff Proposal: Extend the provision that allows Type III ZEVs placed in any state that 

has adopted California’s ZEV program to count towards California’s ZEV requirement 

through 2017. Also, allow Type IVs placed in any state to count towards the California 

requirements. Include Type I and Type II ZEVs but sunset the application of the 

provision for these vehicles in 2014. 

Section 177 of the federal Clean Air Act allows other states to adopt California motor 

vehicle emission standards, including the ZEV regulation. The current ZEV regulation 

allows Type III vehicles placed in service in section 177 states to be counted towards 

compliance with the California percentage ZEV requirements as if they are placed in 

service in California. Similarly, a vehicle placed in California counts towards compliance 

in a section 177 state. This “travel” provision was added in 2003 to encourage the initial 

development of higher cost Type III vehicles by starting with a lower volume production 

nationwide until the technology is ready to become commercially viable. The travel 

provision is set to sunset in 2011 under the current regulation. (ARB 2003) 

Ten section 177 states have adopted the ZEV regulations: Connecticut, Maine, 

Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Rhode Island, 

and Vermont. If manufacturers were to meet the ZEV requirements in each state, the 

number of ZEVs required nationally more than double and hinder the ability of auto 

manufacturers to bring these vehicles to market. Therefore, staff proposes that the 

travel provision for Type III and Type IV vehicles be extended through MY 2017. 

Stakeholders also proposed that Type I and Type II vehicles be eligible for the travel 

provision. Similar to Type III vehicles, the cost to produce and introduce Type I and 

Type II vehicles into the market is high. In examining this proposal staff believes that 

technology neutrality is necessary to encourage all advanced technologies to come to 

market as soon as possible. Staff notes that the successful introduction of AT PZEV 

hybrids began with low volumes in select states and still represents a small percentage 

of the overall market and that ZEV technologies must start with low production volumes 

until the vehicles are commercially viable. Staff proposes that Type I, Type I.5 and 

Type II vehicles be eligible for the section 177 travel provision through MY 2014 when 

they are estimated to be commercially viable. Table 3.8 shows the existing and 

proposed schedule for sun-setting the travel provision.
21 

Table 3.8: Travel Provision Sunset Schedule 

Vehicle Type Type I Type I.5 Type II Type III Type IV 

Current: N/A N/A N/A 2011 N/A 

Extended to: 2014 2014 2014 2017 2017 

3.7 Modify Transition for Intermediate Volume Manufacturers 

Staff Proposal: Extend the transition period by six years for IVMs. During this time, an 

automaker would be allowed to meet their ZEV obligations with PZEVs and AT PZEVs, 

where a minimum percentage would have to be AT PZEVs. 

ARB’s regulations define LVMs as automakers with annual California sales in excess of 

60,000 passenger cars and light-duty trucks (LDT 1, LDT 2, and MDVs). They define 

IVMs as automakers with annual California sales between 3,001 and 60,000 passenger 

cars, LDT 1s, LDT 2s, and MDVs. 

The 60,000 vehicle sales volume threshold was established to acknowledge the 

significant gap between intermediate volume and large volume automakers. While 

BMW, Mercedes, Hyundai, and VW, all IVMs, are nearing the 60,000 vehicle threshold, 

their relative size has not changed in relation to the six largest automakers – Toyota, 

General Motors, Ford, Honda, Chrysler, and Nissan because the volume of vehicles 

sold in California has been increasing across the board. This gap is illustrated in figure 

3.3 below. 

Figure 3.3: Market Share by Manufacturer 

Toyota

General Motors

Ford

Honda

Chrysler

Nissan

BMW

Volkswagen

Mercedes Benz

Hyundai

Mitsubishi

Kia

Mazda

Volvo

Jaguar

Suzuki

Land Rover

Hyundai 

Mercedes 

Volkswagen 

BMW 
22 

Once an automaker exceeds the threshold for three consecutive years, they are defined 

as a LVM. That automaker then has six years before having to meet the requirements 

for LVMs. Under the existing regulation, that means they must begin to produce pure 

ZEVs vehicles or acquire the appropriate credits. 

During the May 2007 technology report to the Board, the ARB suggested the threshold 

for LVMs transitioning to LVMs be changed upward to reflect changes in the overall 

automobile market. After taking comment, the Board directed that the threshold remain 

unchanged. However, the Board also directed staff to identify ways to ease the 

transition for intermediate volume automakers. 

Staff is now proposing to provide an additional transition period of six years. During this 

time, transitioning automakers would be required to produce a growing percentage of 

AT PZEVs if they do not comply with gold vehicles as described in Table 3.9. In the first 

three years of the extend transition, newly defined LVMs would have the option to meet 

the ZEV requirements with a combination of PZEVs and AT PZEVs, of which at least a 

quarter would have to be AT PZEVs. In the second three years of the ramp-up phase, 

these manufacturers would continue to meet the ZEV regulation requirements with a 

combination of PZEVs and AT PZEVs, of which at least a third would have to be 

AT PZEVs. 

Table 3.9: Intermediate to Large Volume Transition 

Current Regulation Proposed Amendment 

Years 

3 years of 

volume in 

excess of 

60,000 

1-6 

Lead Time 

7-9 

AT PZEV 

Transition 1 

10-12 

AT PZEV 

Transition 2 

13 and 

beyond 

Full ZEV 

Requirement 

Status IVM LVM LVM LVM LVM 

PZEVs 100 % of ZEV 

Obligation 

100% of ZEV 

Obligation 

75% of ZEV 

Obligation 

67% of ZEV 

Obligation 

Full LVM 

Obligations as 

dictated by 

regulation 

These changes act as a way to bridge IVMs into ZEV production and provide additional 

time to develop full ZEV technologies while bringing them into the AT PZEV market with 

ZEV enabling technologies. 

3.8 Additional Modifications 

3.8.1 ZEV Credits for Advanced Technology Demonstration Programs 

Staff Proposal: Establish new restrictions on the placement of advanced technology 

demonstration vehicles. 

Under the current program, vehicles that are placed in a California advanced technology 

demonstration program may earn ZEV credits even if they are not “delivered for sale.” 
23 

In addition, vehicles in these programs are only required to be in California for six 

months. Staff believes that the nature of demonstrations for these vehicles has 

changed and that vehicles receiving credit should be demonstrated in California for a 

longer period of time. 

Staff also wants to encourage manufacturers to lease these advanced vehicles to the 

public or to fleet operators. Thus, staff is proposing that vehicles in an advanced 

technology demonstration program remain in California for the first year of a two year 

placement requirement and that the number of vehicles eligible for this provision per 

manufacturer is six. Beyond six vehicles, manufacturers would then need to certify 

vehicles through the regular certification process. Additionally, staff is proposing that 

the advanced technology demonstration program provision be phased out at the end of 

2014 when it is anticipated that small scale demonstration programs will no longer be 

needed. 

3.8.2 ZEV Credits for Transportation Systems 

Staff Proposal: Clarify minimum participation requirements for transportation system 

credit. 

Under the current ZEV regulation, vehicles that are placed as part of a transportation 

system, such as a car-share program, can earn additional ZEV credits. Originally the 

vision for vehicles in these programs was that they would remain in the program for at 

least two years; however, this was never explicitly stated in the regulatory language. 

Staff proposes that vehicles in transportation systems remain in these programs for two 

years. At the same time, staff proposes the level of credits that these vehicles earn be 

reduced, and would sunset for PZEV and AT PZEV in 2011. ZEVs would continue to 

receive transportation system credits beyond this sunset. 

3.8.3 Fast Refueling 

Staff Proposal: Modify the description of fast refueling capability for Type III ZEVs. 

Since the 2003 ZEV regulation amendments were adopted, there have been several 

inquiries regarding the specific details on how the fast refueling capability requirement 

for Type III ZEVs will be applied. Unfortunately, ARB staff cannot yet cite industry 

definitions, standards, or test procedures because these are still under development. 

The fast refueling criterion is important because this distinction between Type II and 

Type III & IV is crucial to manufacturers who wish to take advantage of the additional 

incentives ARB is providing for Type III & IV ZEVs through 2017. 

The majority of hydrogen fuel cell vehicle prototypes made to date are equipped with 

compressed hydrogen storage. Since 2003, compressed hydrogen storage systems 

have become available at an alternative 10,000 pounds per square inch (psi) pressure 

rating in order to further improve the range of hydrogen vehicles. This increase in 

pressure results in a hydrogen vehicle range increase of approximately 67 percent for 
24 

the same external tank volume. At the time of the 2003 amendments, the feasibility of 

refilling 5,000 psi tanks in less than 10 minutes seemed certain, and ARB received very 

little comment regarding challenges involved in meeting the proposed Type III fast 

refueling criterion of 10 minutes. (ARB 2003) 

However, most demonstration vehicles outside of the manufacturer’s test facilities 

currently refuel under conservative default or “non-communication” procedures that 

were developed at the California Fuel Cell Partnership. Fast refueling is not yet 

achievable using 10,000 psi storage systems with some of these preliminary fill 

procedures. The longer refueling times for these systems will eventually decrease as 

refueling standards and dispensing equipment technology mature and the industry 

settles on solutions to accelerate the refueling process. Furthermore, ARB staff 

believes that existing fuel cell vehicles with 10,000 psi hydrogen storage tanks will 

ultimately be capable of sub-10-minute refueling when used with refueling apparatus 

that will be deployed for public use. Staff does not intend to require that this fast 

refueling requirement be met at any currently-existing refueling or charging station. 

Even at today’s refueling stations, 10,000 psi capable vehicles are refueling in nearly 

10-minute times; the impact of this technology change is not burdensomely long 

refuelings. 

Staff proposes to clarify the regulation to require a Type III ZEV to have the capability to 

accumulate at least 95 miles of UDDS range in 10 minutes or less. This change is to 

align standards with those suggested in ARB’s Manufacturers’ Advisory 

Correspondence 2006-02: Policy Regarding the “Fast Refueling Capability” Criterion 

For 2003 and Subsequent Model-Year Type III Zero-Emission Vehicles (ZEV)8

. It is 

expected that the “maximum rated energy capacity” value that a manufacturer declares 

will be the same value used to determine vehicle range and that this “maximum-ratedenergy-capacity” value has already compensated for unusable fuel and fast-fill 

limitations. Since the requirement is that 95 percent of this capacity be delivered to the 

vehicle fuel system in 10 minutes or less and since Type III ZEVs must achieve a 

minimum 100 mile UDDS range, it is, therefore, equivalent to the current ZEV regulation 

requirement, but would be clarified by staff’s proposed amendments. 

3.8.4 Release of Production Data and Credit Bank Balances 

Staff Proposal: Require that all production data be publicly available beginning in 2009 

and release specified ZEV credit bank balance information in MY 2010. 

To provide greater transparency to interested stakeholders, staff is proposing that all 

production credits earned and submitted by automakers in the 2009 MY and beyond be 

public information. The ZEV bank credit balances of automakers in specified categories 

would be considered public information beginning in the 2010 MY. This change is 

 

8

 ARB 2006b. California Air Resources Board, Manufacturers’ Advisory Correspondence 2006-02: Policy 

Regarding the “Fast Refueling Capability” Criterion For 2003 and Subsequent Model-Year Type III ZeroEmission Vehicles (ZEV). May 10, 2006. 
25 

proposed to allow stakeholders and the public to better understand how manufacturers 

are complying with this regulation, and to assure they can more fully participate in future 

regulatory hearings on this subject. 

3.8.5 Revise the Definition of Independent Low Volume Manufacturer 

Staff Proposal: Revise the existing definition of independent low volume manufacturer. 

In response to the industry consolidation that was occurring in the late 1990s, ARB 

adopted percentage ownership criteria and set the value at 50 percent for aggregation 

of production volume for determination of manufacturer size. Doing so created a fair 

method to determine aggregation that was objective and equitable for all manufacturers 

involved in partial ownership scenarios. Adopting this provision also recognized the 

challenging technical nature of the program and the fact that the requirements to 

develop and market ZEV technologies place a greater than normal risk and burden on 

smaller companies. For independent low volume manufacturers, a different aggregation 

value of 10 percent was adopted. 

The inconsistency in aggregation percentages used to determine ZEV requirements 

could create a situation in which aggregation between two firms with a qualified 

ownership scenario is asymmetrical. An independent low volume manufacturer that 

accumulates a capital investment in another firm with ownership totaling greater than 10 

percent would be forced to aggregate its sales with the other firm to determine its ZEV 

obligation. However should the other firm be either an intermediate or small volume 

manufacturer, this company would not aggregate with the independent low volume 

manufacturer until ownership exceeded 50 percent. To address this issue, staff is 

proposing to amend the definition to include a clause in which the Executive Officer can 

allow an exemption if it is determined that 10% or greater ownership by one of the firms 

does not result in responsibility for overall direction of both firms. 

3.8.6 Revise Phase II Vehicle Requirement Methodology 

The existing regulation calculates the Alternative Compliance Path requirements based 

on a LVM’s market share of the target ZEV volume. Using this method creates 

uncertainty due to shift in market between LVMs. Staff is therefore proposing to use 

production data from MYs 2003 – 2006 to provide certainty for the requirements during 

this timeframe for each manufacturer. 
26 

4. EFFECT OF PROPOSED CHANGES 

This section provides an assessment of the number of vehicles that may be produced 

due to the proposed changes. Sections 6 and 7 then use these estimates to project the 

economic and environmental impacts of the proposed changes. 

The ZEV program has by far the largest impact on the LVMs as IVMs are able to meet 

the requirements with PZEVs. Consequently, the analysis focuses on the impact on the 

six LVMs. Due to the small number of automakers affected and to the resulting 

confidentiality concerns, staff’s analysis of the proposed changes reflects the overall 

impact to the industry. 

Creating further uncertainty in the assessment is the fact that each automaker is in a 

unique situation. Some have smaller numbers of banked credits, while others have 

credits sufficient to cover their compliance obligations for a number of years. In 

addition, manufacturers differ in the status of fuel cell development, the availability of 

PZEV or AT PZEV products in the near term, and the technologies to be emphasized in 

their corporate strategy. All of these factors affect a manufacturer’s compliance status, 

and, therefore, the compliance pathways it pursues. Because of these factors, 

predicting the impacts for the proposed changes with certainty is not possible. Rather 

the estimates represent plausible outcomes from the proposed amendments based on 

current ZEV credit accounts, numerous discussions with industry and other information 

gathered. 

The most significant proposed changes are presented below along with their expected 

impacts to the number and types of vehicles produced. 

4.1 Creation of the “New Path” (2012 onward) and Changes to Treatment of 

Battery EVs 

As a result of this proposal, the minimum number of Type IV ZEVs required in Phase III 

(2012 – 2014) would be reduced from 25,000 to 2,500 vehicles. This pure ZEV 

requirement could be met with either fuel cell vehicles or battery EVs. If manufacturers 

choose to produce city EVs, the total production required would increase due the 

differences in credit value. 

Table 4.1 shows the impact from removing the cap and modifying the credit ratios for 

ZEV Types. The proposed changes are expected to make this approach less costly 

than producing fuel cell vehicles. However, the amount of interest in battery EV 

production will depend largely on improvements in battery technology in the near future 

and their marketability. 
27 

Table 4.1: Production Requirements for Zero Emission Vehicles

Vehicle Type 2009 – 2011 2012 – 2014 2015 – 2017 

Type I (City EV) 5,000 6,250 62,500 

Type I.5 (City EV) 4,000 5,000 50,000 

Type II (Full Function) 3,333 4,167 41,667 

Type III (Fuel Cell) 2,500 3,125 31,250 

Type IV (Fuel Cell) 2,000 2,500 25,000 

By comparison, the existing program requires 2,500 Type III vehicles in 2009 to 2011 

and 25,000 in 2012 – 2014. The existing program limits the substitution of battery EVs 

to 50 percent of the requirement with significantly higher credit ratios resulting in much 

higher production requirements. 

The proposal would allow Enhanced AT PZEVs to make up the “shortfall” or difference 

with the existing requirements. Table 4.2 shows the incremental production of 

Enhanced AT PZEVs over the three-year period that would be required. To give a 

sense of the increase in total vehicles required, two Enhanced AT PZEVs are 

considered, a PHEV with a 40 mile AER, and a blended Enhanced AT PZEV with 12.5 

miles of AER. The number of “offset” vehicles varies due to the differences in credit 

earned for each vehicle type but will exceed the existing 25,000 requirement for Type III 

vehicles. For purposes of estimating cost and emissions later in Section 6 and 7, a 

value of 1.5 was used to represent a weighted average Enhanced AT PZEV credit. 

Table 4.2: Incremental Production Using Enhanced AT PZEVs as Gold Backfill 

2012 – 2014 

Vehicle Type Proposed Credit Incremental Production 

AT PZEV 

HEV: 40 mile AER 2.4 46,875 

Blended HEV: 22 mile electric range 1.5 75,000 

Blended HEV: 12.5 mile electric 

range 

1.24 90,725 

4.2 Increase Credit for Neighborhood Electric Vehicles 

Doubling the level of credit for NEVs increases the incentives for manufacturers to 

produce them. This increase will not necessarily result in overwhelming the market with 

new NEVs, but will provide a modest incentive for those already in production. Since 

the 2001 to 2005 timeframe, the number of NEVs placed in California has dropped 

dramatically. Thus, the impact from this proposed change is expected to be extremely 

small. Because of the limitations on the use of NEVs for compliance, they are typically 

used to offset PZEV or AT PZEV requirements. Therefore, the increase in credits for 

NEVs will reduce the number of AT PZEVs that are produced. The resulting impact is 

approximately one less AT PZEV for every four NEVs placed. 
28 

4.3 Extend “Travel” Provision 

Extending the “travel” provision can reduce the industry obligation in states that have 

adopted the California program. California sales are nearly equal to the sales from all 

states that have adopted the ZEV requirements. Consequently, this change is 

anticipated to reduce the number of ZEVs needed in other states by approximately 

2,500 vehicles in the 2012 – 2014 timeframe. The proposal would extend the provision 

for Type III and IV ZEVs through 2017. To the extent that fuel cell vehicles are 

produced to meet the requirements in that timeframe, this proposal will reduce the 

number of vehicles by the amount placed in states that have adopted the ZEV program. 

Similarly, since battery EVs are also included in the travel provision, battery EVs could 

be reduced by half nationwide. 

4.4 Modify Transition for Automakers 

Several automakers with a collective market share of roughly 10 percent are projected 

to be affected by this aspect of staff’s proposal. When compared to the existing 

transition where gold ZEVs are required, the net effect would be a reduction of several 

hundred pure ZEVs and a corresponding “backfill” or increase of approximately 3,000 to 

4,000 PZEVs and AT PZEVs in the 2012 timeframe. Due to the large numbers of 

PZEVs and AT PZEVs, the overall impact would be a net reduction in cost and 

emissions. 

4.5 Overall Anticipated Impacts 

Staff has also looked at the existing ZEV bank on an industry wide basis, as shown in 

Table 2.4. Using the industry wide aggregate totals for the ZEV bank, staff examined 

the possible numbers of vehicles to be placed between 2009 and 2017. Presented 

below are two scenarios of the number of vehicles manufacturers will place, dependent 

on their use of banked ZEV credits. Staff took into account limited applicability of NEV 

credits for use in gold and silver categories. Scenario 1, presented in Table 4.3, shows 

the approximate number of vehicles that would be placed if the manufacturers used no 

banked ZEV credits. 
29 

Table 4.3: Scenario 1 – No Credit Use

Vehicle Type 2009-2011 2012-2014 2015-2017 

ZEVs 

Fuel Cell Vehicle Type IV, or 2,000 2,500 25,000 

Fuel Cell Vehicle Type III, or 2,500 3,125 31,250 

Battery Vehicle Type II, or 3,333 4,167 41,667 

City EV Type I.5, or 4,000 5,000 50,000 

City EV Type I 5,000 6,250 62,500 

Enhanced AT PZEVs 0 75,000 83,333 

AT PZEV 207,000 195,000 153,000 

PZEV 1,260,000 1,260,000 1,260,000 

Assumes Enhanced AT PZEVs earn 1.5 credits, silver vehicles earn 0.65 credits in 2012 – 2014, and 

0.55 credits 2015 – 2017. Based on annual California vehicle sales of 1.4 million passenger cars, 

light-duty trucks (LDT 1 and LDT 2) by the six large volume auto manufacturers. 

For Scenario 2, as presented in Table 4.4, staff projected the total number of vehicles to 

be placed by manufacturers using a combination of banked credits and new production. 

As shown, existing banked credits are largely spent in the 2009 – 2011 timeframe with 

minimal impact in 2012. The number of fuel cell vehicles estimated for 2009 – 2011 

reflect staff’s understanding of industry wide plans for the technology. For both 

scenarios the number of pure ZEVs is not added together, but rather reflects the 

number of vehicles that would be needed to meet the requirements for each technology 

type. Given the current state of battery technology, staff does not anticipate that 

manufacturers will produce any battery EVs prior to 2012. 

 

Table 4.4: Scenario 2 – Probable Credit Use

Vehicle Type 2009-2011 2012-2014 2015-2017 

ZEVs 

Fuel Cell Vehicle Type IV or 250 2,500 25,000 

Fuel Cell Vehicle Type III or 200 3,125 31,250 

Battery Vehicle Type II or 0 4,167 41,667 

City EV Type I.5 or 0 5,000 50,000 

City EV Type I 0 6,250 62,500 

Enhanced AT PZEVs 30,000 75,000 83,333 

AT PZEV 107,000 95,000 153,000 

PZEV 700,000 1,260,000 1,260,000 

Assumes Enhanced AT PZEVs earn 1.5 credits, silver vehicles earn 0.65 credits in 2012 – 2014, and 

0.55 credits 2015 – 2017. Based on annual California vehicle sales of 1.4 million passenger cars, 

light-duty trucks (LDT 1 and LDT 2) by the six large volume auto manufacturers. 
30 

5. REGULATORY ALTERNATIVES 

5.1 Do Not Amend Program 

ARB staff considered not recommending any amendments to the ZEV regulations. In 

this case, large volume manufacturers would need to produce and place 25,000 

advanced technology vehicles between 2012 and 2014. Based on the data obtained, 

the technology needed will not be ready for such large volumes and will result in the 

imposition of a large cost burden on the manufacturers. 

The vehicles would need to be priced aggressively to meet the sales targets, and this 

would reduce the revenue available to the manufacturers to offset their costs. To the 

extent that the state provides subsidies in order to assist with vehicle marketing, such a 

large number of vehicles needing subsidies would result in large state expenditures. 

Under the current program, manufacturers would most likely use their entire amount of 

banked credits before needing to produce costly additional ZEVs to meet their program 

requirements. 

5.2 Adopt Substantial Revisions to the ZEV Regulation 

As part of the regulatory development process, ARB staff considered three options 

regarding the number of vehicles required under the Alternative Compliance Path, as 

shown in Table 5.1. The options were evaluated in the context of strengthening the 

program by deploying advanced technology vehicles to further advance ZEV 

commercialization and manufacturing capacity while considering balancing the overall 

costs and compliance feasibility. 

Table 5.1: Possible Options 

Phase II III IV 

Years 2009-2011 2012-2014 2015-2017 

*Option 1 Staff Proposal 2,500 2,500/ Enhanced 

AT PZEV offset 

25,000/ Enhanced 

AT PZEV offset 

*Option 2 Combined Phase 5,000 10,000 to 15,000 

*Option 3 No Change 2,500 25,000 50,000 

* Each LVM would be required to produce their sales-weighted share. 

Option 1 would maintain the pressure to continue the development of emerging ZEV 

technologies. At the same time, the proposal would take greater advantage of the 

recent interest in new technology options and provide manufacturers with greater 

flexibility in meeting the ZEV program requirements. 

Option 2, suggested by some automakers, provides flexibility around product plans and 

allows greater time for technology advancement before introducing larger numbers of 

vehicles. However, staff rejected this option because of the significant risk that it would 

create a gap in vehicle production as automakers back-load their obligation. 

 
31 

Option 3, suggested by several environmental organizations, delays any action in 

proposing amendments to Phase III. However, staff rejected this approach as 

automakers have indicated that product planning and development schedules for the 

2012-2014 MYs are now in place and a feasible regulation is needed for this timeframe. 

Staff’s proposed amendments to ZEV program maintain the on going goals of pure ZEV 

commercialization while taking into consideration the current cost and associated 

technological barriers. The changes proposed by staff significantly reduce an 

automaker’s cost of compliance, but still provide increased air quality benefits primarily 

because they rely upon the proven emission benefits of commercially viable and 

increasingly available AT PZEVs. Staff believes that relinquishing a portion of the 

research and development production volume in exchange for reduced costs to 

automobile manufacturers and increased near term emission benefits is a compromise 

that benefits almost all stakeholders. The proposed amendments are the most feasible 

and cost effective option. 
32 

6. ECONOMIC IMPACTS 

The proposed amendments to the ZEV program are projected by ARB staff to reduce 

the costs of compliance for automobile manufacturers. Staff believes, therefore, that 

the proposed amendments would cause no noticeable adverse impact on California 

employment, business status, and competitiveness when compared to the existing 

program. Because the ZEV regulations provide considerable flexibility to 

manufacturers, the magnitude of these savings is difficult to estimate with certainty. 

6.1 Legal Requirement 

Sections 11346.3 and 11346.5 of the Government Code require state agencies to 

assess the potential for adverse economic impacts on California business enterprises 

and individuals when proposing to adopt or amend any administrative regulation. The 

assessment shall include consideration of the impact of the proposed regulation on 

California jobs, business expansion, elimination, or creation, and the ability of California 

businesses to compete. 

State agencies are also required to estimate the cost or savings to any state or local 

agency and school districts in accordance with instruction adopted by the Department of 

Finance. This estimate is to include any nondiscretionary costs or savings to local 

agencies and the costs or savings in federal funding to the state. 

6.2 Directly Affected Businesses 

LVMs that produce passenger cars and light-duty trucks in California would be directly 

affected by the proposed amendments. Also affected are businesses that supply parts 

for these vehicles. California accounts for only a small share of total nationwide motor 

vehicle and parts manufacturing. There are about 40 companies worldwide that 

manufacture California-certified light- and medium-duty vehicles and heavy-duty 

gasoline engines. All but the largest six would not be affected by the amendments with 

the exception of those IVMs that transition to LVMs due to increasing production 

volume. Current projections show that one to four IVMs will transition to LVMs. Only 

one motor vehicle manufacturing plant is located in California, the NUMMI facility, which 

is a joint venture between GM and Toyota. Since NUMMI does not produce vehicles 

affected by the amendments to the ZEV regulation, staff expects there to be no 

California based impacts. 

6.3 Potential Impact on Manufacturers 

The proposed amendments are expected to reduce costs to motor vehicle 

manufacturers. The key factors that determine the cost of compliance with the ZEV 

program are the number and types of vehicles that are required, and the incremental 

cost per vehicle. The changes that would result from the proposed amendments are 
33 

estimated below and are subject to considerable uncertainty because of the flexibility 

allowed by the regulation. 

6.4 Incremental Per-Vehicle Cost Estimates 

ARB staff used the incremental costs per vehicle from the 2003 regulatory amendment 

process as the starting point for the staff estimates. Where appropriate, staff modified 

the projected costs based on gathered estimates of technology costs and to reflect 

changes in volume and timing. 

Fuel cell Vehicles 

The 2003 rulemaking estimated the incremental cost of fuel cell vehicles for 

development Phase III at $120,000 per vehicle (ARB 2003). However, this assumed a 

vehicle production of tens of thousands of vehicles. Because the proposal would repeat 

the volumes required in Phase II with 2,500 vehicles, this analysis uses the cost 

estimates from 2003 for development required for Phase II. Consequently, the 

incremental cost is estimated to be $250,000 per vehicle in the 2012 – 2014 timeframe. 

Fuel cell vehicles with greater range are typically more expensive due to efficiency 

improvements, and/or greater on-board fuel storage. Staff therefore assumes an 

average additional incremental cost of $50,000 for these vehicles in the near term, and 

$25,000 in the mid-term. 

Battery Electric Vehicles 

Recent announcements have increased optimism in new battery chemistries, namely 

lithium-based batteries. However, price fluctuations and lithium-ion battery availability 

make recent cost numbers uncertain, so staff will continue to use the estimates from 

2003 until these batteries become available in large pack quantities. The 2003 

rulemaking estimated the incremental costs for Type II battery EVs at $17,000 and 

Type I city EVs at $8,000 (ARB 2003). These estimates, however, were based on 

larger volume production than would be needed to meet the requirements in 2012 – 

2014 and would underestimate the cost to industry. Since the cost of the vehicles will 

depend on several factors including the battery chemistry used, a sizable cost range is 

used for Type I and Type II vehicles. Increased range for Type I.5 is largely dependent 

on greater battery size. In small volumes this increased range is expected to raise the 

cost of the vehicle by $15,000 over the 2012-2014 timeframe. In much high production 

quantities over all costs for both are expected to be reduced significantly. 

Plug-in Hybrid Electric Vehicle 

Staff has relied on a report by EPRI entitled “Comparing the Benefits and Impacts of 

Hybrid Electric Vehicle Options for Compact Sedan and Sport Utility Vehicles”9

 to 

 

9

 “Comparing the Benefits and Impacts of Hybrid Electric Vehicle Options for Compact Sedan and Sport 

Utility Vehicles”, EPRI, Palo Alto, CA: 2002. 1006892.
34 

estimate the average incremental cost for Enhanced AT PZEVs vehicles produced in 

low volumes. 

Table 6.1 presents the incremental cost estimates for each vehicle technology. 

Table 6.1: Incremental Vehicle Cost Estimates

Vehicle Type 2012 to 2014 2015 to 2017 

ZEVs 

Fuel Cell Vehicle: Type IV $300,000 $150,000 

Fuel Cell Vehicle: Type III $250,000 $125,000 

Battery Vehicle: Type II $80,000 to $120,000 $40,000 to $60,000 

Battery Vehicle: Type I.5 $40,000 to $80,000 $20,000 to $40,000 

Battery Vehicle: Type I $35,000 to $65,000 $15,000 to $35,000 

AT PZEVs 

Plug-in Hybrid Electric Vehicle $25,000 $12,500 

The estimates for the various vehicle types are subject to great uncertainty associated 

with projecting future costs for evolving technology. As such, though the direction of the 

cost impact of the proposed amendments is clear, the magnitude of the savings is much 

more difficult to assess.10

6.5 Cost Savings 

The incremental vehicle costs from Table 6.1 were used to estimate the costs from the 

proposed changes to the Phase III and Phase IV requirements. The incremental costs 

were combined with the projected changes in Table 4.1 to estimate the costs for 

complying with the proposed amendments through each of the ZEV technologies 

allowed. Scenarios 1 through 5 present compliance costs assuming the minimum 

required numbers of ZEVs (“floor” requirement) combined with the maximum use of 

Enhanced AT PZEVs for backfill. The proposed amendments allow varying amounts of 

different ZEV technologies to be used to meet the floor requirement. The five scenarios 

reflect these proposed changes. 

Though the number of required vehicles decreases for higher scoring vehicles (e.g., 

Type III and Type IV), overall costs are higher due to greater incremental cost per 

vehicle. As compared to the existing regulation, the overall cost of compliance 

strategies using the combination of vehicle types is lower. These estimates are 

summarized below in Table 6.2, where the annual cost of each scenario is subtracted 

from the projected annual cost of the existing regulation ($2,083 million) 

 

10 ARB 2008. California Air Resources Board, Excel Spreadsheet: Vehicle Estimates and Costs, 

February 2008
35 

Table 6.2: Estimated Annual Costs and Savings from Proposal 

(In millions) 

1

 Assumes fuel cell vehicle, not battery EV. 

Table 6.2 also presents the savings from the proposed amendments when compared to 

the existing program. As shown, the proposed amendments greatly decrease overall 

cost due to the reduction in vehicle numbers of the most expensive technologies. 

6.6 Potential Impact on Dealerships 

The extent to which motor vehicle dealerships are affected by the current ZEV 

regulation, or the amended regulation, depends on the specifics of the interaction 

between the dealership and the manufacturer. The proposed changes are expected to 

have limited impact on dealers as many of the vehicle technologies affected are not 

expected to be sold commercially and those that will be are placed in relatively small 

numbers. 

6.7 Potential Impacts on Vehicle Operators 

The proposed changes would reduce the number of fuel cell and battery EVs 

demonstrated. These vehicles are not expected to be sold or leased in the timeframe 

under consideration as a commercial product. As is the case with dealerships, the 

impact of the current regulation or the amended regulation on vehicle purchasers will 

depend on the extent to which manufacturers choose, and are able, to pass along any 

increased costs. Once again, staff cannot estimate the extent to which this would 

occur, but it is clear that the proposed amendments would serve to reduce any possible 

cost increases for vehicle purchasers as compared to the current regulation. 

6.8 Potential Impact on Business Competitiveness 

Because the proposed amendments are anticipated to reduce costs faced by California 

businesses, they would have no adverse impact on the ability of California businesses 

to compete with businesses in other states. 

Scenarios Vehicle Types 

2012-2017 

Annual 

Cost 

2012-2017 

Annual 

Savings 

Existing 

Regulation Type III $2,083 N/A 

1 Type IV + Enhanced AT PZEV $1,236 $847 

2 Type III1 + Enhanced AT PZEV $1,267 $816 

3 Type II + Enhanced AT PZEV $903 $1,180 

4 Type I.5 + Enhanced AT PZEV $786 $1,297 

5 Type I + Enhanced AT PZEV $799 $1,284 
36 

6.9 Potential Impact on Employment 

The proposed amendments are not expected to cause a noticeable change in California 

employment because California accounts for only a small share of motor vehicle and 

parts manufacturing employment, which is not expected to be affected by the regulation. 

6.10 Potential Impact on Business Creation, Elimination or Expansion 

Staff sees a potential benefit to start up companies specializing in advanced battery 

technology and ZEVs. The proposed amendments are not expected to affect business 

creation, elimination or expansion. 

6.11 Potential Costs to Local and State Agencies 

The proposed amendments are not expected to result in an increase in costs for state 

and local agencies. 
37 

7. ENVIRONMENTAL IMPACTS 

This section includes a discussion of the emission impacts of the ZEV program, and, 

separately the proposed regulatory amendments. The first analysis calculates the 

projected benefits of the total ZEV program. The analysis includes both criteria 

pollutant and climate change emissions. 

7.1 Program Benefits 

The Mobile Source Emission Inventory, EMFAC200711, was used to assess the overall 

emission benefits of the ZEV program. Using EMFAC, staff modeled the ZEV program 

and compared these results to a vehicle program with no ZEV component. This 

comparison is applicable to the South Coast Air Basin and represents the emissions 

from vehicles subject to this regulation. It includes passenger cars and light-duty trucks 

weighing less than 3,751 pounds gross vehicle weight, plus light duty trucks weighing 

less than 8,500 pounds gross vehicle weight phased in beginning in 2008. 

Table 7.1 presents the difference in emissions for the South Coast Air Basin in 2020 

and 2030 for the current ZEV program compared to not having a ZEV program. As 

shown in Table 7.1 staff estimates that the proposed changes will result in a net 

decrease of about 13.83 tons per day of direct emissions of reactive organic gases 

(ROG) and oxides of nitrogen (NOx) in 2020. For 2030, Table 7.1 shows a net 

decrease of about 15.52 tons per day of direct emissions of ROG and NOx from the 

proposed amendments when compared to the current program. 

 

Table 7.1: Summertime Emissions, South Coast Air Basin in 2020 and 2030 

(Tons per day)

2020 ROGexh. ROGevap. NOx Total 

No ZEV Program 36 63 66 164 

Current Program 26 60 64 151 

Benefit of Current Program v. No Program 10 3 2 13 

2030 ROGexh. ROGevap. NOx Total 

No ZEV Program 22 55 38 115 

Current Program 14 49 36 100 

Benefit of Current Program v. No Program 8 6 2 16 

As illustrated, the ZEV requirements provide benefits beyond that achieved by using a 

fleet emissions average. As important, the program continues to push new technology 

that will reduce emissions in the future. 

7.2 Benefits of Proposed Amendments 

The Greenhouse gases, Regulated Emissions, and Energy use in Transportation 

(GREET)12 model was used to directly compare the emission impacts from the changes 

 

11 ARB 2007c, EMFAC2007. Version 2.3, Updated November 2006 
38 

being proposed by staff. The most significant element of the proposal affects the 

requirements for pure ZEVs beginning in 2012. 

Using the GREET model, staff analyzed the five scenarios presented in Section 6.5 to 

show the lifetime emissions benefit of the proposed changes. The analysis considers 

the impacts from reducing the floor number of gold vehicles and backfilling with 

Enhanced AT PZEVs. All scenarios were run on a well-to-wheel basis with an assumed 

150,000 mile vehicle life. Presented below in Table 7.2 and Table 7.3 are the average 

lifetime emissions for criteria pollutants and climate change emissions for Phase III and 

Phase IV respectively. 

Table 7.2: Total Lifetime Emissions of Proposed Changes for 2012 – 20141

(Tons in thousands)

Scenarios Lifetime Emissions 

ROG + NOx Climate Change (CO2) 

Existing Regulation 11 13,200 

Average of Five Scenarios 6 9,750 

Average Emission Benefit 5 3,450 

1

In all scenarios, the emissions from conventional vehicles were included as necessary to make 

the total number of vehicles, 145,833, consistent for each scenario. 

Table 7.3: Total Lifetime Emissions of Proposed Changes for 2015 – 20171

(Tons in thousands) 

Scenarios Lifetime Emissions 

ROG + NOx Climate Change (CO2) 

Existing Regulation 6 7,800 

Average of Five Scenarios 4 5,700 

Average Emission Benefit 2 2,100 

1

In all scenarios, the emissions from conventional vehicles were included as necessary to make 

the total number of vehicles, 145,833, consistent for each scenario. 

As shown in Table 7.2 and 7.3, the flexibility provided by the proposed amendments will 

reduce emissions during the 2012 – 2017 timeframe. In terms of climate change 

emissions, all alternatives analyzed reduce overall emissions. 

7.3 Energy Diversity and Energy Demand 

The vehicle technologies expected to be used to comply with the ZEV program typically 

use fuel more efficiently, and thus when fully commercialized will reduce demand for 

petroleum fuels. These technologies also use non-petroleum fuels, such as electricity 

and hydrogen, which helps diversify the transportation fuel market. The ZEV program 

 

12 ARB et al 2007d, Modified California GREET model "greet1.7ROW_US_CA_v92" 

_ftp://ftp.arb.ca.gov/carbis/fuels/ab1007/CA_Greet_june07_ June, 2007 
39 

and the proposed amendments are consistent with recent reports that recommend 

increased vehicle efficiency and increased use of alternative fuels. 

7.4 Environmental Justice 

The proposed regulation is consistent with the ARB’s Environmental Justice Policy to 

reduce health risks from criteria pollutants in all communities, including low-income and 

minority communities. Many communities are located near heavily traveled freeways. 

By reducing emissions of air pollutants from light duty vehicles, the proposed regulation 

will provide air quality benefits by reducing exposure to and associated health risk from 

these pollutants. 

7.5 California Environmental Quality Act 

The California Environmental Quality Act (CEQA) and ARB policy require an analysis to 

determine the potential environmental impacts of proposed regulations. Because the 

ARB's program involving the adoption of regulations has been certified by the Secretary 

of Resources pursuant to Public Resources Code section 21080.5, the CEQA 

environmental analysis requirements may be included in the Initial Statement of 

Reasons (ISOR) for this rulemaking. In the ISOR, ARB must include a “functionally 

equivalent” document, rather than adhering to the format described in CEQA of an Initial 

Study, a Negative Declaration, and an Environmental Impact Report. In addition, staff 

will respond, in the Final Statement of Reasons for the regulation, to all significant 

environmental issues raised by the public during the public review period or at the 

Board public hearing. 

Public Resources Code section 21159 requires that the environmental impact analysis 

conducted by ARB include the following: an analysis of reasonably foreseeable 

environmental impacts of the methods of compliance; an analysis of reasonably 

foreseeable feasible mitigation measures; and an analysis of reasonably foreseeable 

alternative means of compliance with the regulation. 

Compliance with the proposed regulation is expected to directly affect air quality and 

potentially affect other environmental media as well. Our analysis of the reasonable 

foreseeable environmental impacts of the methods of compliance is presented below. 

Regarding mitigation measures, CEQA requires an agency to identify and adopt 

feasible mitigation measures that would minimize any significant adverse environmental 

impacts described in the environmental analysis. 

Because this regulatory proposal identifies no new potentially significant environmental 

effects, it would not have any significant or potentially significant effects on the 

environment. Therefore no alternatives or mitigation measures are proposed to avoid or 

reduce any significant effects on the environment. 
40 

8. COST-EFFECTIVENESS 

This section discusses the cost-effectiveness of the proposed amendments. 

Determining the cost-effectiveness of the ZEV program has always been more difficult 

and uncertain than for other regulatory measures due to the far-reaching nature and 

longer lead times of the program. Predicting the future cost of technologies that are still 

in the demonstration stage is difficult at best. In addition, the ZEV program has always 

combined two distinct objectives – first, achieving emission reductions today through 

expanded introduction of commercially available near-zero emission technology, and 

second, accelerating the development of pure ZEV technologies that have the potential 

to provide significant air quality benefits over the long term, but have minimal immediate 

air quality impact given their pre-commercial status and limited production. 

Cost-effectiveness is a measure of the cost incurred to achieve a specific outcome, as 

compared to other ways to reach that same end. Under the proposed amendments, the 

primary impact would be to reduce the number of fuel cell and battery EVs required in 

the 2012 – 2017 timeframe. As noted in Section 6.5, the estimated annual savings to 

industry from these changes would be $1.3 billion in 2012 – 2014 and $0.9 billion in 

2015 – 2017 depending upon the compliance strategy chosen, though some 

compliance options would increase a manufacturer’s costs if chosen. Consequently, 

when compared to the existing program, the proposed amendments produce positive 

cost-effectiveness. That is, the overall impact to the environment is improved at less 

cost due to the expected commercialization of larger numbers of AT PZEVs. 
41 

9. SUMMARY AND STAFF RECOMMENDATION 

9.1 Summary of Staff Proposal 

Staff’s proposed modifications would recognize the state of development for the leading 

ZEV technologies, provide greater flexibility in manufacturer compliance and increase 

the near-term air quality benefits through the commercialization of larger numbers of AT 

PZEVs. In addition, the proposed amendments maintain pressure toward the 

commercialization of ZEV technologies while at the same time reflecting the current 

state and cost of ZEV technology. The staff proposal contains the following specific 

amendments: 

Table 9.1: Summary of Proposed Modifications 

Goal Solution 

Address technology challenges of fuel cell 

vehicles 

Lower required numbers of fuel cells during Phase 

III and IV (2012 – 2014 & 2015 – 2017) and create 

Type IV ZEV. 

Incentivize PHEVs with zero emission mile 

capability 

Allow Enhanced AT PZEVs in Phase III to count for 

90% of gold requirement. Establish new 

calculations for AT PZEV credits to account for new

plug in hybrid configurations. 

Simplify regulation Create “New Path” to replace two path system. 

Remove barriers to using Battery EVs for 

compliance 

Remove caps on Type I and II battery EVs; change 

ratio for use and create Type I.5 ZEV, however 

maintain higher credits for fuel cell vehicles 

compared to battery EVs to reflect relative state of 

development. 

Fulfill commitment to revisit role of NEVs Up credit to 0.3 to recognize environmental benefits. 

Smooth transition for IVMs going to LVM Create transition period emphasizing AT PZEVs. 

Program compliance transparency Release of ZEV production data beginning in 2009 

and ZEV credit balances in 2010. 

Conforming changes Extend travel provision. 

9.2 Staff Recommendation 

ARB staff recommends that the Board amend section 1962, Title 13, California Code of 

Regulations, and the incorporated test procedures and related regulations, and adopt 

section 1962.1. The proposed amendments and adoptions are set forth in the 

Proposed Regulation Order in Appendix A. 
42 

10. REFERENCES 

ARB 2000. California Air Resources Board, Staff Report, 2000 Zero Emission Vehicle 

Program Biennial Review, August 7, 2000. 

ARB 2001. California Air Resources Board, Final Statement of Reasons, Amendments 

to the California Zero Emission Vehicle Program Regulations, December 2001. 

ARB 2003. California Air Resources Board, Staff Report, 2003 Proposed Amendments 

to the California Zero Emission Vehicle Program Regulations, January 10, 2003. 

ARB 2004. California Air Resources Board, Initial Statement of Reasons for Proposed 

Rulemaking, Public Hearing to Consider Adoption of Regulations to Control 

Greenhouse Gas Emissions from Motor Vehicles, August 2004. 

ARB 2006a. California Air Resources Board, California Hydrogen Highway Network: 

Year End Progress Report to the Legislature, December 2006. 

ARB 2006b. California Air Resources Board, Manufacturers’ Advisory Correspondence 

2006-02: Policy Regarding the “Fast Refueling Capability” Criterion For 2003 and 

Subsequent Model-Year Type III Zero-Emission Vehicles (ZEV). May 10, 2006. 

ARB 2007a. California Air Resources Board, 2007 Almanac Data, 2007. 

ARB 2007b. California Air Resources Board, Board Resolution 07-18, May 24, 2007. 

ARB 2007c. California Air Resources Board, EMFAC2007. Version 2.3, Updated, 

http://www.arb.ca.gov/msei/onroad/latest_version.htm November 2006. 

ARB 2007d. ARB, Tiax, CEC, Argonne National Labs, Modified California GREET 

Model: "greet1.7ROW_US_CA_v92" 

ftp://ftp.arb.ca.gov/carbis/fuels/ab1007/CA_Greet_june07_ June, 2007 

ARB 2007e. California Air Resources Board, Status Report on the California Air 

Resources Board’s Zero Emission Vehicle Program, April 20, 2007 

ARB 2007f. California Air Resources Board, Concept Paper: Staff’s Suggested 

Modifications to the Zero Emission Vehicle (ZEV) Program, November 9, 2007 

ARB 2008. California Air Resources Board, Excel Spreadsheet: Vehicle Estimates and 

Costs, February 2008 

EPRI. Duvall, et al. Comparing the Benefits and Impacts of Hybrid Electric Vehicle 

Options. Palo Alto, CA: 2001 1000349. 
43 

GEM. Surveys of NEV Owner Behavior in California. December, 2005 Prepared for 

GEM by Mightycomm and Access Research Group. 

Kalhammer, F., Kopf, B., Swan, D., Roan, V., Walsh, M., Status and Prospects for Zero 

Emissions Vehicle Technology: Report of the ARB Independent Expert Panel 2007, 

April 13, 2007. 

SAE. SAE International, Recommended Practice for Measuring the Exhaust Emissions 

and Fuel Economy of Hybrid-Electric Vehicles, March 1999 
44 

APPENDIX A: PROPOSED AMENDMENTS 

1. Proposed Regulation Order: Amendments and Adoption to the Zero-Emission 

Vehicle Program

Attached 

2. Proposed Amendments to the test procedures incorporated by reference in 

sections 1962 and 1962.1, title 13, California Code of Regulations. 

 Copies of the Test Procedures are available on the ARB’s Internet site at 

http://www.arb.ca.gov/msprog/zevprog/2007rule/2007rule.htm, or may also be 

obtained by contacting the agency contact person for this rulemaking, 

Mark Williams, at (916) 327-5610 or via email at mwilliam@arb.ca.gov.