Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

1 Final Regulation Order – Part 3

ZERO-EMISSION VEHICLE STANDARDS FOR 2018 AND SUBSEQ UENT MODEL YEAR PASSENGER CARS, LIGHT-DUTY TRUCKS, AND MEDIUM- DUTY VEHICLES

Note: Set forth below are the 2012 amendments to th e California zero emission vehicle (ZEV) regulation. This is a newly adopted regulatio n, shown without underline as permitted by California Code of Regulations, title 1, section 8.

Adopt Title 13, Motor Vehicles, Division 3, Air Res ources Board, Chapter 1, Motor Vehicle Pollution Control Devices, Article 2, Appro val of Motor Vehicle Pollution Control Devices (New Vehicles), § 1962.2, Zero-Emission Veh icle Standards for 2018 and Subsequent Model Year Passenger Cars, Light-Duty Tr ucks, and Medium-Duty

Vehicles. to read:

§ 1962.2 Zero-Emission Vehicle Standards for 2018 and Subsequent Model

Year Passenger Cars, Light-Duty Trucks, and Medium- Duty Vehicles.

(a) ZEV Emission Standard. The Executive Officer shall certify new 2018 and subsequent model year passenger cars, light-dut y trucks, and medium-duty vehicles as ZEVs, vehicles that produce zero exhaus t emissions of any criteria pollutant (or precursor pollutant) or greenhouse gas, excludi ng emissions from air conditioning systems, under any possible operational modes or co nditions.

(b) Percentage ZEV Requirements.

(1) General ZEV Credit Percentage Requirement.

(A) Basic Requirement. The minimum ZEV credit percentage requirement for each manufacturer is listed in the table below as the percentage of the PCs and LDTs, produced by the manufacturer and deli vered for sale in California that must be ZEVs, subject to the conditions in this sub division 1962.2(b). The ZEV requirement will be based on the annual NMOG produc tion report for the appropriate model year.

Model Year Credit Percentage Requirement

2018 4.5%

2019 7.0%

2020 9.5%

2021 12.0%

2022 14.5%

2023 17.0%

2024 19.5% 2025 and subsequent 22.0%Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

2

(B) Calculating the Number of Vehicles to Which the Per centage ZEV Requirement is Applied

. For 2018 and subsequent model years, a manufactur er’s production volume for the given model year will be based on the three-year average of the manufacturer’s volume of PCs and LDTs, produced and delivered for sale in California in the prior second, third, and fourth m odel year [for example, 2019 model year ZEV requirements will be based on California p roduction volume average of PCs and LDTs for the 2015 to 2017 model years]. This p roduction averaging is used to determine ZEV requirements only, and has no effect on a manufacturer’s size determination (eg. three-year average calculation m ethod). In applying the ZEV requirement, a PC or LDT, that is produced by one m anufacturer (e.g., Manufacturer A), but is marketed in California by another manufa cturer (e.g., Manufacturer B) under the other manufacturer’s (Manufacturer B) nameplate , shall be treated as having been produced by the marketing manufacturer (i.e., Manuf acturer B).

1. [Reserved]

2. [Reserved]

3. A manufacturer may apply to the Executive Officer to be permitted to base its ZEV obligation on the number of PCs and LDTs, produced by the

manufacturer and delivered for sale in California t hat same model year (ie, same model-year calculation method) as an alternative to the three-year averaging of prior year production described above, for up to two mode l years, total, between model year 2018 and model year 2025. For the same model-year calculation method to be allowed, a manufacturer’s application to the Execut ive Officer must show that their volume of PCs and LDTs produced and delivered for s ale in California has decreased by at least 30 percent from the previous year due t o circumstances that were unforeseeable and beyond their control.

(C) [Reserved]

(D) Exclusion of ZEVs in Determining a Manufacturer’s S ales

Volume. In calculating a manufacturer’s applicable sales, using either method described in subdivision 1962.2(b)(1)(B), a manufac turer shall exclude the number of NEVs produced and delivered for sale in California by the manufacturer itself, or by a subsidiary in which the manufacturer has more than 33.4% percent ownership interest.

(2) Requirements for Large Volume Manufacturers.

(A) [Reserved]

(B) [Reserved]

(C) [Reserved]Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

3

(D) [Reserved]

(E) Requirements for Large Volume Manufacturers in 2018 and through 2025 Model Years. LVMs must produce credits from ZEVs equal to minimu m ZEV floor percentage requirement, as enumerated bel ow. Manufacturers may fulfill the remaining ZEV requirement with credits from TZEVs, as enumerated below.

Model Years Total ZEV

Percent Requirement Minimum

ZEV floor TZEVs

2018 4.5% 2.0% 2.5%

2019 7.0% 4.0% 3.0%

2020 9.5% 6.0% 3.5%

2021 12.0% 8.0% 4.0%

2022 14.5% 10.0% 4.5%

2023 17.0% 12.0% 5.0%

2024 19.5% 14.0% 5.5%

2025 22.0% 16.0% 6.0%

(F) Requirements for Large Volume Manufacturers in Mode l Year 2026 and Subsequent. In 2026 and subsequent model years, a manufacturer must meet a total ZEV credit percentage of 22%. The max imum portion of a manufacturer’s credit percentage requirement that may be satisfied by TZEV credits is limited to 6% of the manufacturer’s applicable California PC and LDT production volume. ZEV credits must satisfy the remainder of the manufacturer’s re quirement.

(3) Requirements for Intermediate Volume Manufacturers

. For 2018 and subsequent model years, an intermediate volume manu facturer may meet all of its ZEV credit percentage requirement, under subdivision 19 62.2(b), with credits from TZEV.

(4) Requirements for Small Volume Manufacturers

. A small volume manufacturer is not required to meet the ZEV credit percentage requirements. However, a small volume manufacturer may earn, bank , market, and trade credits for the ZEVs and TZEVs it produces and delivers for sal e in California.

(5) [Reserved]

(6) [Reserved]

(7) Changes in Small Volume and Intermediate Volume Man ufacturer

Status.Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

4

(A) Increases in California Production Volume

. In 2018 and subsequent model years, if a small volume manufactu rer’s average California production volume exceeds 4,500 units of new PCs, L DTs, and MDVs based on the average number of vehicles produced and delivered f or sale for the three previous consecutive model years (i.e., total production vol ume exceeds 13,500 vehicles in a three-year period), for three consecutive averages, the manufacturer shall no longer be treated as a small volume manufacturer, and must co mply with the ZEV requirements for intermediate volume manufacturers beginning wit h the next model year after the last model year of the third consecutive average. For e xample, if (a small volume) Manufacturer A exceeds 4,500 PCs, LDTs, and MDVs fo r their 2018 – 2020, 2019 – 2021, and 2020 – 2022 model year averages, Manufact urer A would be subject to intermediate volume requirements starting in 2023 m odel year.

If an intermediate volume manufacturer’s average Ca lifornia production volume exceeds 20,000 units of new PCs, LDTs, and M DVs based on the average number of vehicles produced and delivered for sale for the three previous consecutive model years (i.e., total production volume exceeds 60,000 vehicles in a three-year period), for three consecutive averages, the manufa cturer shall no longer be treated as an intermediate volume manufacturer and shall compl y with the ZEV requirements for large volume manufacturers beginning with the next model year after the last model year of the third consecutive average. For example , if (an intermediate volume) Manufacturer B exceeds 20,000 PCs, LDTs, and MDVs f or its 2018 – 2020, 2019 – 2021, and 2020 – 2022 average, Manufacturer B would be subject to large volume manufacturer requirements starting in 2023 model ye ar.

Any new requirement described in the this subdivisi on will begin with the next model year after the last model year of the th ird consecutive average when a

manufacturer ceases to be a small or intermediate v olume manufacturer in 2018 or subsequent years due to the aggregation requirement s in majority ownership situations.

(B) Decreases in California Production Volume

. If a manufacturer’s average California production volume falls below 4, 500 or 20,000 units of new PCs, LDT1 and 2s, and MDVs, based on the average number of vehicles produced and delivered for sale for the three previous consecuti ve model years, for three consecutive averages, the manufacturer shall be treated as a sm all volume or intermediate volume manufacturer, as applicable, and shall be subject t o the requirements for a small volume or intermediate volume manufacturer beginnin g with the next model year. For example, if Manufacturer C falls below 20,000 PCs, LDTs, and MDVs for its 2019 – 2021, 2020 – 2022, and 2021 – 2023 averages, Manufa cturer C would be subject to IVM requirements starting in 2024 model year.

(C) Calculating California Production Volume in Change of Ownership Situations. Where a manufacturer experiences a change in owners hip in a particular model year, the change will affect app lication of the aggregation requirements on the manufacturer starting with the next model year. When a manufacturer is simultaneously producing two model years of vehicles at the time of aFinal Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

5 change of ownership, the basis of determining next model year must be the earlier model year. The manufacturer’s small or intermedia te volume manufacturer status for the next model year shall be based on the average C alifornia production volume in the three previous consecutive model years of those man ufacturers whose production volumes must be aggregated for that next model year . For example, where a change of ownership during the 2019 calendar year occurs and the manufacturer is producing both 2019 and 2020 model year vehicles resulting in a requirement that the production volume of Manufacturer A be aggregated with the pro duction volume of Manufacturer B, Manufacturer A’s status for the 2020 model year will be based on the production

volumes of Manufacturers A and B in the 2017 – 2019 model years. Where the production volume of Manufacturer A must be aggrega ted with the production volumes of Manufacturers B and C for the 2019 model year, a nd during that model year a change in ownership eliminates the requirement that Manufacturer B’s production volume be aggregated with Manufacturer A’s, Manufac turer A’s status for the 2020 model year will be based on the production volumes of Manufacturers A and C in the 2017 – 2019 model years. In either case, the lead time provisions in subdivisions 1962.2(b)(7)(A) and (B) will apply.

(c) Transitional Zero Emission Vehicles (TZEV).

(1) Introduction. This subdivision 1962.2(c) sets forth the criteri a for identifying vehicles delivered for sale in Californ ia as TZEVs.

(2) TZEV Requirements

. In order for a vehicle to be eligible to receive a ZEV allowance, the manufacturer must demonstrate co mpliance with all of the following requirements:

(A) SULEV Standards. Certify the vehicle to the 150,000-mile

SULEV 20 or 30 exhaust emission standards for PCs a nd LDTs in subdivision 1961.2(a)(1). Bi-fuel, fuel flexible and dual-fuel vehicles must certify to the applicable 150,000-mile SULEV 20 or 30 exhaust emission standa rds when operating on both fuels. Manufacturers may certify 2018 and 2019 TZE Vs to the 150,000-mile SULEV

exhaust emission standards for PCs and LDTs in subd ivision 1961(a)(1);

(B) Evaporative Emissions. Certify the vehicle to the evaporative emission standards in subdivision 1976(b)(1)(G). M anufacturers may certify 2018 and 2019 TZEVs to the evaporative standards for PCs and LDTs in subdivision 1976(b)(1)(E);

(C) OBD. Certify that the vehicle will meet the applicable on-board diagnostic requirements in sections 1968.1 or 1968. 2, as applicable, for 150,000 miles;

and

(D) Extended Warranty

. Extend the performance and defects warranty period set forth in subdivisions 2037(b)(2 ) and 2038(b)(2) to 15 years or 150,000 miles, whichever occurs first except that t he time period is to be 10 years for aFinal Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

6 zero emission energy storage device used for traction po wer (such as a battery, ultracapacitor, or other electric storage device).

(3) Allowances for TZEVs

(A) Zero Emission Vehicle Miles Traveled TZEV Allowance

Calculation

. A vehicle that meets the requirements of subdivis ion 1962.2(c)(2) and has zero-emission vehicle miles traveled (VMT), as defined by and calculated by the

"California Exhaust Emission Standards and Test Pro cedures for 2018 and Subsequent Model Zero-Emission Vehicles and Hybrid Electric Ve hicles, in the Passenger Car, Light-Duty Truck and Medium-Duty Vehicle Classes," adopted March 22, 2012, which is incorporated herein by reference, and measured as e quivalent all electric range (EAER) capability will generate an allowance according to the following equation:

UDDS Test Cycle Range (EAER) Allowance

<10 all electric miles 0.00

≥ 10 all electric miles TZEV Credit = [(0.01) * EAER + 0.30]
>80 miles (credit cap) 1.10

1. Allowance for US06 Capability. TZEVs with US06 all electric range capability (AER) of at least 10 miles shall e arn an additional 0.2 allowance. US06 test cycle range capability shall be determined in accordance with section E.8 of the

“California Exhaust Emission Standards and Test Pro cedures for the 2018 and Subsequent Model Zero-Emission Vehicles, and Hybrid Electric Vehicles in the Passenger Car, Light-Duty Truck, and Medium Duty Ve hicle Classes,” adopted March 22, 2012, which is incorporated herein by reference

.

(B) [Reserved]

(C) [Reserved]

(D) [Reserved]

(E) Credit for Hydrogen Internal Combustion Engine Vehi cles. A hydrogen internal combustion engine vehicle that me ets the requirements of subdivision 1962.2(c)(2) and has a total range of at least 250 UDDS miles will earn an allowance of 0.75, which may be in addition to allowances earned in subdivision 1962.2(c)(3)(A), and subject to an overall credit cap of 1.25

(d) Qualification for Credits From ZEVs

.

(1) [Reserved]Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

7 (2) [Reserved]

(3) [Reserved]

(4) [Reserved]

(5) Credits for 2018 and Subsequent Model Year ZEVs.

(A) ZEV Credit Calculations

. Credits from a ZEV delivered for sale are based on the ZEV’s UDDS all electric range, det ermined in accordance with the

“California Exhaust Emission Standards and Test Pro cedures for the 2018 and Subsequent Model Zero-Emission Vehicles, and Hybrid Electric Vehicles in the Passenger Car, Light-Duty Truck, and Medium Duty Ve hicle Classes,” adopted March 22, 2012, which is incorporated herein by reference , using the following equation:

ZEV Credit = (0.01) * (UDDS range) + 0.50

1. A ZEV with less than 50 miles UDDS range will recei ve zero credits.

2. Credits earned under this provision 1962.2(d)(5)(A) are be capped at 4 credits per ZEV.

(B) [Reserved]

(C) [Reserved]

(D) [Reserved]

(E) Counting Specified ZEVs Placed in Service in a Sect ion 177

State and in California. Large volume manufacturers and intermediate volu me manufacturers with credits earned from hydrogen fue l cell vehicles that are certified to the California ZEV standards applicable for the ZEV ’s model year, delivered for sale and placed in service in California or in a section 177 state, may be counted towards compliance in California and in all section 177 sta tes with the percentage ZEV requirements in subdivision 1962.2(b). The credits earned are multiplied by the ratio of a manufacturer’s applicable production volume for a model year, as specified in subdivision 1962.2(b)(1)(B), in the state receiving credit to the manufacturer’s applicable production volume as specified in subdiv ision 1962.2(b)(1)(B), for the same model year in California(hereafter, “proportional v alue”). Credits generated from ZEV placement in a section 177 state will be earned at the proportional value in the section 177 state, and earned in California at the full val ue specified in subdivision 1962.2(d)(5)(A).

1. Optional Section 177 State Compliance Path.Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

8

a . Reduced ZEV and TZEV Percentages. Large volume manufacturers

and intermediate volume manufacturers that have ful ly complied with the optional section 177 state compliance path requirements in s ubdivision 1962.1(d)(5)(E)3. are allowed to meet ZEV percentage requirements and opt ional TZEV percentages reduced from the minimum ZEV floor percentages and TZEV percentages in subdivision 1962.2(b)(2)(E) in each section 177 sta te equal to the following percentages

of their sales volume determined under subdivision 1962.2(b)(1)(B):

ZEVs

Model Year 2018 2019 2020 2021

Existing Minimum ZEV Floor 2.00% 4.00% 6.00% 8.00% Section 177 State Adjustment for Optional Compliance Path 62.5% 75% 87.5% 100%

Minimum Section 177 State ZEV Requirement 1.25% 3.00% 5.25% 8.00%

TZEVs

Model Year 2018 2019 2020 2021

Existing TZEV Percentage 2.50% 3.00% 3.50% 4.00%

Section 177 State Adjustment for Optional Compliance Path 90.00% 100% 100% 100%

New Section 177 State TZEV Percentage 2.25% 3.00% 3 .50% 4.00%

Total Percent Requirement

Model Year 2018 2019 2020 2021 New Total Section 177 State Optional Requirements 3.50% 6.00% 8.75% 12.00%

i. Trading and Transferring ZEV and TZEV Credits wi thin West Region Pool and East Region Pool. Manufacturers that have fully complied with the optional section 177 s tate compliance path requirements in subdivision 1962.1(d)(5)(E)3. may trade or transfer specified model year ZEV and TZEV credits within the West Region pool to meet the same model year requir ements in subdivision 1962.2(d)(5)(E)2.a, and will incur no p remium on their credit values. For example, for a manufacturer to make up a 2019 model year shortfall of 100 credits in State X, the manufacturer may transfer 100 (2019 model year) ZEV credits from State Y, within the West Region pool. Manufacturers that ha ve fully complied with the optional section 177 state compli ance path requirements in subdivision 1962.1(d)(5)(E)3. may t rade or transfer specified model year ZEV and TZEV credits within th e East Region pool to meet the same model year requirements in su bdivisionFinal Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

9

1962.2(d)(5)(E)2.a, and will incur no premium on th eir credit values. For example, for a manufacturer to make up a 2019 m odel year shortfall of 100 credits in State W, the manufactur er may transfer 100 (2019 model year) ZEV credits from State Z, wit hin the East Region pool.

ii. Trading and Transferring ZEV and TZEV Credits between the West Region Pool and East Region Pool

. Manufacturers that have fully complied with the opt ional section 177 state compliance path requirements in subdivisi on 1962.1(d)(5)(E)3. may trade or transfer specified m odel year ZEV and TZEV credits to meet the same model year requi rements in subdivision 1962.2(d)(5)(E)2.a. between the West Re gion pool and the East Region pool; however, any credits traded w ill incur a premium of 30% of their value. For example, in ord er for a manufacturer to make up a 2019 model year shortfall of 100 credits in the West Region Pool, the manufacturer may trans fer 130 (2019 model year) credits from the East Region Pool. No credits may be traded or transferred to the East Region pool or We st Region pool from a manufacturer’s California ZEV bank, or from the East Region pool or West Region pool to a manufacturer’s California

ZEV bank.

b. Reporting Requirements. On an annual basis, by May 1st of the calendar year following the close of a model year, each manufacturer that elects the optional section 177 state compliance path under su bdivision 1962.1(d)(5)(E)3, shall submit, in writing, to the Executive Officer and ea ch section 177 state a report, including an itemized list, that indicates where vehicles hav e been placed within the East Region pool and within the West Region pool. The itemized list shall include the following:

i. The manufacturer’s total applicable volume of PCs and

LDTs delivered for sale in each section 177 state w ithin the regional pool, as determined under subdivision 1962 .2(b)(1)(B).

ii. Make, model, vehicle identification number, credit earned, and section 177 state where delivery for sale of ea ch TZEV and ZEV occurred and to meet manufacturer’s requirement s under subdivision 1962.2(d)(5)(E)2.a.

c. Failure to Meet Optional Section 177 State Complia nce Path Requirements. A manufacturer that elects the optional section 177 state compliance path under subdivision 1962.1(d)(5)(E)3, and does n ot meet the modified percentages in subdivision 1962.2(d)(5)(E)2.a. in a model year or make up their deficit within the specified time and with the specified credits allow ed by subdivision 1962.2(g)(7)(A) in all section 177 states of the applicable pool, shal l be treated as subject to the total ZEV percentage requirements in section 1962.2(b) for th e 2018 through 2021 model years inFinal Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

10 each section 177 state, and the pooling provisions in subdivision 1962.2(d)(5)(E)2.a. shall not apply. Any transfers of ZEV or TZEV credi ts between section 177 states will be null and void if a manufacturer fails to comply, an d ZEV or TZEV credits will return to

the section 177 state in which the credits were ear ned. Penalties shall be calculated separately by each section 177 state where a manufa cturer fails to make up the ZEV deficits by the end of the 2018 model year.

d. The provisions of section 1962.2 shall apply to a m anufacturer electing the optional section 177 state compliance path, exc ept as specifically modified by this subdivision 1962.2(d)(5)(E)2.

(F) NEVs. NEVs must meet the following to be eligible for 0.1 5 credits:

1. Specifications

. A NEV earns credit when it meets all the followin g specifications:

a. Acceleration. The vehicle has a 0-20 mph acceleration of 6.0 seconds or less when operating with a payload of at least 332 pounds and starting with the battery at a 50% state of charge.

b. Top Speed. The vehicle has a minimum top speed of 20 mph when operating with a payload of at least 332 pound s and starting with the battery at a 50% state of charge. The vehicle’s top speed shall not exceed 25 mph when tested in accordance with 49 CFR 571.500 (68 FR 43972, July 2 5, 2003).

c. Constant Speed Range. The vehicle has a minimum 25-mile range when operating at constant top speed with a p ayload of least 332 pounds and starting with the battery at 100% state of charge.

2. Battery Requirement

. A NEV must be equipped with one or more sealed, maintenance-free batteries.

3. Warranty Requirement

. A NEV drive train, including battery packs, must be covered for a period of at least 24 months. The first 6 months of the NEV warranty period must be covered by a full warra nty; the remaining warranty period may be optional extended warranties (available for purchase) and may be prorated. If the extended warranty is prorated, the percentage o f the battery pack's original value to be covered or refunded must be at least as high as the percentage of the prorated coverage period still remaining. For the purpose o f this computation, the age of the battery pack must be expressed in intervals no larg er than three months. Alternatively, a manufacturer may cover 50 percent of the original value of the battery pack for the full period of the extended warranty.

Prior to credit approval, the Executive Officer may request that the manufacturer provide copies of representative vehic le and battery warranties.Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

11

4. NEV Charging Requirements. A NEV must meet charging requirements specific in subdivision 1962.3(c)(2).

(G) BEVx. A BEVx must meet the following in order to receiv e credit, based on its all electric UDDS Range, through subdi vision 1962.2(d)(5)(A):

1. Emissions Requirements. BEVxs must meet all TZEV requirements, specified in subdivision 1962.2(c)(2) (A) through (D).

2. APU Operation. The vehicle’s UDDS range after the APU first starts and enters “charge sustaining hybrid operati on” must be less than or equal to the vehicle’s UDDS all-electric test range prior to APU start. The vehicle’s APU cannot start under any user-selectable driving mode unless the e nergy storage system used for traction power is fully depleted.

3. Minimum Zero Emission Range Requirements. BEVxs must have a minimum of 75 miles UDDS all electric range.

(e) [Reserved]

(f) [Reserved]

(g) Generation and Use of Credits; Calculation of Penal ties

(1) Introduction. A manufacturer that produces and delivers for sal e in California ZEVs or TZEVs in a given model year exce eding the manufacturer’s ZEV requirement set forth in subdivision 1962.2(b) shal l earn ZEV credits in accordance with this subdivision 1962.2(g).

(2) ZEV Credit Calculations.

(A) Credits from ZEVs. The amount of credits earned by a manufacturer in a given model year from ZEVs shall be expressed in units of credits, and shall be equal to the number of credits from ZE Vs produced and delivered for sale in California that the manufacturer applies towards meeting the ZEV requirements, or, if applicable, requirements specified under subdivisio n 1962.2(d)(5)(E)2.a. for the model year subtracted from the number of ZEVs produced an d delivered for sale in California by the manufacturer in the model year.

(B) Credits from TZEVs. The amount of credits earned by a manufacturer in a given model year from TZEVs shall be expressed in units of credits, and shall be equal to the total number of TZEVs pro duced and delivered for sale in California that the manufacturer applies towards me eting its ZEV requirement, or, if applicable, requirements specified under subdivisio n 1962.2(d)(5)(E)2.a. for the model year subtracted from the total number of ZEV allowa nces from TZEVs produced and delivered for sale in California by the manufacture r in the model year.Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

12

(C) Separate Credit Accounts. Credits from a manufacturer’s ZEVs, BEVxs, TZEVs, and NEVs shall each be maintained in separate accounts.

(D) Rounding Credits. ZEV credits and debits shall be rounded to the

nearest 1/100 th only on the final credit and debit totals using th e conventional rounding

method.

(3) ZEV Credits for MDVs

. Credits from ZEVs and TZEVs classified as MDVs, may be counted toward the ZEV requirement for PCs and LDTs, and included in the calculation of ZEV credits as specified in this subdivision 1962.2(g) if the manufacturer so specifies.

(4) ZEV Credits for Advanced Technology Demonstration P rograms.

(A) [Reserved]

(B) ZEVs. ZEVs, including BEVxs, excluding NEVs, placed in a small

or intermediate volume manufacturer’s California ad vanced technology demonstration program for a period of two or more years, may earn ZEV credits even if the vehicle is not “delivered for sale” or registered with the Cal ifornia DMV. To earn such credits, the

manufacturer must demonstrate to the reasonable sat isfaction of the Executive Officer that the vehicles will be regularly used in applica tions appropriate to evaluate issues related to safety, infrastructure, fuel specificati ons or public education, and that for 50 percent or more of the first two years of placement the vehicle will be operated in California. Such a vehicle is eligible to receive the same credit that it would have earned if delivered for sale, and for fuel cell veh icles, placed in service. To determine vehicle credit, the model year designation for a de monstration vehicle shall be consistent with the model year designation for conv entional vehicles placed in the same timeframe. Manufacturers may earn credit for up to 25 vehicles per model, per section 177 state, per year under this subdivision1962.2(g) (4). A manufacturer’s vehicles in excess of the 25-vehicle cap will not be eligible f or advanced technology demonstration program credits.

(5) ZEV Credits for Transportation Systems.

(A) [Reserved]

(B) [Reserved]

(C) Cap on Use of Transportation System Credits

.

1. ZEVs

. Transportation system credits earned or allocated by ZEVs or BEVxs pursuant to subdivision 1962.1 (g)(5), no t including any credits earned by the vehicle itself, may be used to satisfy up to one-te nth of a manufacturer’s ZEV obligation in any given model year, and may be used to satisfy up to one-tenth of aFinal Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

13 manufacturer’s ZEV obligation which must be met wit h ZEVs, as specified in subdivision 1962.2(b)(2)(E) or, if applicable, requ irements specified under subdivision 1962.2(d)(5)(E)2.a..

2. TZEVs

. Transportation system credits earned or allocated by TZEVs pursuant to subdivision 1962.1(g)(5), not inc luding all credits earned by the vehicle itself, may be used to satisfy up to one-te nth of the portion of a manufacturer’s ZEV obligation that may be met with TZEVs, or, if a pplicable, the portion of a manufacturer’s obligation that may be met with TZEV s specified under subdivision 1962.2(d)(5)(E)2.a. in any given model year, but ma y only be used in the same manner as other credits earned by vehicles of that categor y.

(6) Use of ZEV Credits

. A manufacturer may meet the ZEV requirements in a given model year by submitting to the Executive O fficer a commensurate amount of ZEV credits, consistent with subdivision 1962.2(b). Credits in each of the categories may be used to meet the requirement for that catego ry as well as the requirements for lesser credit earning ZEV categories, but shall not be used to meet the requirement for a greater credit earning ZEV category, except for d iscounted PZEV and AT PZEV credits. For example, credits produced from TZEVs may be used to comply with the portion of the requirement that may be met with cre dits from TZEV, but not with the portion that must be satisfied with credits from ZE Vs. These credits may be earned previously by the manufacturer or acquired from ano ther party.

(A) Use of Discounted PZEV and AT PZEV Credits and NEV

Credits. For model years 2018 through 2025, discounted PZEV and AT PZEV credits, and NEV credits may be used to satisfy up to one-qu arter of the portion of a manufacturer’s requirement that can be met with cre dits from TZEVs, or, if applicable, the portion of a manufacturer’s obligation that may be met with TZEVs specified under subdivision 1962.2(d)(5)(E)2.a.. Intermediate volu me manufacturers may fulfill their entire requirement with discounted PZEV and AT PZEV credits, and NEV credits in model years 2018 and 2019. These credits may be ea rned previously by the manufacturer or acquired from another party. Disco unted PZEV and AT PZEV credits may no longer be used after model year 2025 complia nce.

(B) Use of BEVx Credits. BEVx credits may be used to satisfy up to 50% of the portion of a manufacturer’s requirement that must be met with ZEV credits.

(C) GHG-ZEV Over Compliance Credits.

1. Application. Manufacturers may apply to the Executive Officer, n o later than December 31, 2016, to be eligible for th is subdivision 1962.2(g)(6)(C), based on the following qualifications:

a. A manufacturer must have no model year 2017 compli ance debits and no outstanding debits from all previous model year compliance with sections 1961.1 and 1961.3, andFinal Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

14

b. A manufacturer must have no model year 2017 complia nce debits and no outstanding debits from all previous model year compliance with section 1962.1, and

c. A manufacturer must submit documentation of its pro jected product plans to show over compliance with the manu facturer’s section 1961.3 requirements by at least 2.0 gCO 2 /mile in each model year through the entire 2018 through 2021 mod el year period, and its commitment to do so in each year.

2. Credit Generation and Calculation. Manufacturers must calculate their over compliance with section 1961.3 requirements for model years 2018 through 2021 based on compliance with the previous model year standard. For example, to generate credits for this subdivision 1 962.2(g)(6)(C) for model year 2018,

manufacturers would calculate credits based on mode l year 2017 compliance with

section 1961.3.

a. At least 2.0 gCO 2 /mile over compliance with section 1961.3

is required in each year and the following equation must be used to calculate the amount of ZEV credits earned for purp oses of this subdivision 1962.2(g)(6)(C), and:

[(Manufacturer US PC and LDT Sales) x (gCO 2 /mile below manufacturer GHG standard for a given model year)] / (Manufacturer GHG standard for a given model year)

b. Credits earned under section 1961.3(a)(9) may not b e included in the calculation of gCO 2 /mile credits for use in the above equation in subdivision a.

c. Banked gCO 2 /mile credits earned under sections 1961.1 and 1961.3 from previous model years or from other manu facturers may not be included in the calculation of gCO 2 /mile credits for use in the above equation in subdivision a.

3. Use of GHG-ZEV Over Compliance Credits. A manufacturer may use no more than the percentage enumerated in t he table below to meet either the total ZEV requirement nor the portion of their ZEV requirement that must be met with ZEV credits, with credits earned under this subdivi sion 1962.2(g)(6)(C).

Credits earned in any given model year under this s ubdivision 1962.2(g)(6)(C) may only be used in the applicable model year and may not be used in any other model year.

2018 2019 2020 2021

50% 50% 40% 30%Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

15 gCO 2 /mile credits used to calculate GHG-ZEV over compli ance credits under this provision must also be removed from the manufacture r’s GHG compliance bank, and cannot be banked for future compliance toward 1961. 3.

4. Reporting Requirements. Annually, manufacturers are required

to submit calculations of credits for this subdivis ion 1962.2(g)(6)(C) for the model year, any remaining credits/debits from previous model ye ars under 1961.3, and projected credits/debits for future years through 2021 under 1961.3 and this subdivision 1962.2(g)(6)(C).

If a manufacturer, who has been granted the ability to generate credits under this subdivision 1962.2(g)(6)(C), fails to over comply b y at least 2.0 gCO 2 /mile in any one year, the manufacturer will be subject to the full ZEV requirements for the model year and future model years, and will not be able to ear n credits for any other model year under this subdivision 1962.2(g)(6)(C).

5. If the Executive Officer does not make a determinat ion that a Federal greenhouse gas fleet standard is functionally equiv alent to subdivision 1961.3, than this subdivision 1962.2(g)(6)(C) 1. through 4. is unavai lable for use by any manufacturer.

(7) Requirement to Make Up a ZEV Deficit

.

(A) General. A manufacturer that produces and delivers for sal e in California fewer ZEVs than required in a given mode l year shall make up the deficit by the next model year by submitting to the Executive Officer a commensurate amount of ZEV credits. The amount of ZEV credits required to be submitted shall be calculated by [i] adding the number of credits from ZEVs produced and delivered for sale in California by the manufacturer for the model year to the numbe r of credits from TZEVs produced and delivered for sale in California by the manufac turer for the model year (for a LVM, not to exceed that permitted under subdivision 1962 .2(b)(2)), and [ii] subtracting that total from the number of credits required to be pro duced and delivered for sale in California by the manufacturer for the model year. BEVx, TZEV, NEV, or converted AT

PZEV and PZEV credits are not allowed to be used to fulfill a manufacturer’s ZEV deficit; only credits from ZEVs may be used to fulf ill a manufacturer’s ZEV deficit.

(8) Penalty for Failure to Meet ZEV Requirements. Any manufacturer that fails to produce and deliver for sale in California the required number of ZEVs and submit an appropriate amount of credits and does no t make up ZEV deficits within the specified time allowed by subdivision 1962.2(g)(7)( A) shall be subject to the Health and Safety Code section 43211 civil penalty applicable to a manufacturer that sells a new motor vehicle that does not meet the applicable emi ssion standards adopted by the

state board. The cause of action shall be deemed t o accrue when the ZEV deficit is not balanced by the end of the specified time allowed b y subdivision 1962.2(g)(7)(A). For the purposes of Health and Safety Code section 4321 1, the number of vehicles notFinal Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

16 meeting the state board’s standards shall be equal to the manufacturer’s credit deficit,

rounded to the nearest 1/100 th , calculated according to the following equation, p rovided that the percentage of a manufacturer’s ZEV require ment for a given model year that may be satisfied with TZEVs or credit from such veh icles may not exceed the percentages permitted under subdivision 1962.2(b)(2 ):

(No. of ZEV credits required to be generated for th e model year) – (Amount of credits submitted for compliance for the model year )

(h) Test Procedures

.

(1) Determining Compliance

. The certification requirements and test procedures for determining compliance with this sec tion 1962.2 are set forth in

"California Exhaust Emission Standards and Test Pro cedures for 2018 and Subsequent Model Zero-Emission Vehicles and Hybrid Electric Ve hicles, in the Passenger Car, Light-Duty Truck and Medium-Duty Vehicle Classes," adopted March 22, 2012, which is incorporated herein by reference.

(2) NEV Compliance. The test procedures for determining compliance wi th subdivision 1962.1(d)(5)(F)1. are set forth in ETA- NTP002 (revision 3) “Implementation of SAE Standard J1666 May 93: Electric Vehicle Acce leration, Gradeability, and Deceleration Test Procedure” (December 1, 2004), an d ETA-NTP004 (revision 3) “Electric Vehicle Constant Speed Range Tests” (Febr uary 1, 2008), both of which are incorporated by reference herein.

(i) ZEV-Specific Definitions. The following definitions apply to this section

1962.2.

(1) “Auxiliary power unit” or “APU” means any device th at provides electrical or mechanical energy, meeting the requirements of s ubdivision 1962.2(c)(2), to a BEVx, after the zero emission range has been fully deplet ed. A fuel fired heater does not qualify under this definition for an APU.

(2) “Charge depletion range actual” or “R cda ” means the distance achieved by a hybrid electric vehicle on the urban driving cycl e at the point when the zero emission energy storage device is depleted of off-vehicle ch arge and regenerative braking derived energy.

(3) “Conventional rounding method” means to increase the last digit to be retained when the following digit is five or greate r. Retain the last digit as is when the following digit is four or less.

(4) “Discounted PZEV and AT PZEV credits” means credit s earned under section 1962 and 1962.1 by delivery for sale of PZE Vs and AT PZEVs, discounted according to subdivision 1962.1(g)(2)(F).Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

17 (5) “East Region pool” means the combination of Section 177 states east of the Mississippi River.

(6) “Energy storage device” means a storage device abl e to provide the minimum power and energy storage capability to enab le engine stop/start capability, traction boost, regenerative braking, and (nominal) charge sustaining mode driving capability. In the case of TZEVs, a minimum range threshold relative to certified, newvehicle range capability is not specified or requir ed.

(7) “Hydrogen fuel cell vehicle” means a ZEV that is fu eled primarily by hydrogen, but may also have off-vehicle charge capa bility.

(8) “Hydrogen internal combustion engine vehicle” mean s a TZEV that is fueled exclusively by hydrogen.

(9) “Majority ownership situations” means when one manu facturer owns another manufacturer more than 33.4%, for determina tion of size under CCR Section

1900.

(10) “Manufacturer US PC and LDT Sales” means a manufact urer’s total passenger car and light duty truck (up to 8,500 pou nds loaded vehicle weight) sales sold in the United States of America in a given mod el year.

(11) “Neighborhood electric vehicle” or “NEV” means a m otor vehicle that meets the definition of Low-Speed Vehicle either in section 385.5 of the Vehicle Code or in 49 CFR 571.500 (as it existed on July 1, 2000 ), and is certified to zero-emission

vehicle standards.

(12) “Placed in service” means having been sold or leas ed to an end-user and not to a dealer or other distribution chain entity, and having been individually registered for on-road use by the California DMV.

(13) “Proportional value” means the ratio of a manufactu rer’s California applicable sales volume to the manufacturer’s Secti on 177 state applicable sales volume. In any given model year, the same applicabl e sales volume calculation method must be used to calculate proportional value.

(14) “Range Extended Battery Electric Vehicle” or “BEVx ” means a vehicle powered predominantly by a zero emission energy sto rage device, able to drive the vehicle for more than 75 all-electric miles, and al so equipped with a backup APU, which does not operate until the energy storage device is fully depleted, and meeting requirements in subdivision 1962.2(d)(5)(G).

(15) “Section 177 state” means a state that is administe ring the California ZEV requirements pursuant to section 177 of the federal Clean Air Act (42 U.S.C. § 7507).Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

18 (16) “Transitional zero emission vehicle” or “TZEV” mean s a vehicle that meet the all criteria of subdivision 1962.2(c)(2) and qu alifies for an allowance in subdivision 1962.2(c)(3)(D) or (E).

(17) “West Region pool” means the combination of Sectio n 177 states west of the Mississippi River.

(18) “Zero emission vehicle” or “ZEV” means a vehicle t hat produces zero exhaust emissions of any criteria pollutant (or pre cursor pollutant) or greenhouse gas under any possible operational modes or conditions.

(19) “Zero emission vehicle fuel” means a fuel that pro vides traction energy in on-road ZEVs. Examples of current technology ZEV f uels include electricity, hydrogen, and compressed air.

(j) Abbreviations. The following abbreviations are used in this sect ion

1962.2:

“AER” means all-electric range. “APU” means auxiliary power unit. “AT PZEV” means advanced technology partial zero-e mission vehicle. “BEVx” means range extended battery electric vehicl e. “CFR” means Code of Federal Regulations.

“CO 2 ” means carbon dioxide. “DMV” means the California Department of Motor Vehi cles. “EAER” means equivalent all electric range. “FR” means Federal Register. “g” means grams. “HEV” means hybrid-electric vehicle. “LDT” means light-duty truck. “LDT1” means a light-truck with a loaded vehicle we ight of 0-3750 pounds. “LDT2” means a “LEV II” light-duty truck with a loa ded 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. “LVM” means large volume manufacturer. “MDV” means medium-duty vehicle. “NMOG” means non-methane organic gases, or the tota l mass of oxygenated and non-oxygenated hydrocarbon emissions. “NEV” means neighborhood electric vehicle. “NOx” means oxides of nitrogen. “PC” means passenger car. “PZEV” means partial allowance zero-emission vehicl e “SAE” means Society of Automotive Engineers. “SULEV” means super-ultra-low-emission-vehicle.

“TZEV” means transitional zero emission vehicle. “UDDS” means urban dynamometer driving cycle.Final Regulation Order – Part 3 Final §1962.2

Hearing Date: January 26 and 27, 2012 Adopted: March 22, 2012

19 “US” means United States of America. “US06” means the US06 Supplemental Federal Test Pro cedure

“VMT” means vehicle miles traveled.

“ZEV” means zero-emission vehicle.

(k) Severability. Each provision of this section is severable, and in the event that any provision of this section is held to be in valid, the remainder of this article

remains in full force and effect.

(l) Public Disclosure. Records in the Board’s possession for the vehicle s subject to the requirements of section 1962.2 shall be subject to disclosure as public

records as follows:

(1) Each manufacturer’s annual production data and th e corresponding credits per vehicle earned for ZEVs and TZEVs for t he 2018 and subsequent model years; and

(2) Each manufacturer’s annual credit balances for 201 8 and subsequent years for:

(A) Each type of vehicle: ZEV (minus NEV), BEVx, NEV, T ZEV, and

discounted PZEV and AT PZEV credits; and

(B) Advanced technology demonstration programs; and

(C) Transportation systems; and

(D) Credits earned under section 1962.2(d)(5)(A), inclu ding credits acquired from, or transferred to another party, and the parties

themselves.

Note: Authority cited: Sections 39600, 39601, 4301 3, 43018, 43101, 43104 and 43105, Health and Safety Code. Reference: Sections 38562, 39002, 39003, 396 67, 43000, 43009.5, 43013, 43018, 43018.5, 43100, 43101, 43101.5, 43102, 43104, 43105, 43106, 43107, 43204, and 43205.5, Health and Safety

Code.