Attachment C 

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ATTACHMENT C 

ARB Staff Response to March 26, 2008 Comment Letter: 

“2008 Proposed Solutions to Potential Loopholes in the 

Amendments to the California Zero Emission Vehicle Program 

Regulation, Agenda Item 08-3-5” 

 

Comment Submitted By: Natural Resources Defense Council, Union of 

Concerned Scientists, American Lung Association of California, Center for 

Energy Efficiency and Renewable Technologies, Coalition for Clean Air, Energy 

Independence Now, and Friends of the Earth 

Resolution 08-24, adopted on March 27, 2008, directed the Executive Officer of 

the California Air Resources Board (ARB or the Board) to review and consider 

comments presented by members of the environmental community on March 26, 

2008 in regards to the Zero Emission Vehicle (ZEV) program. ARB staff met with 

environmental stakeholders, Spencer Quong (Union of Concerned Scientists), 

Luke Tonachel (Natural Resources Defense Council), Jamie Knapp (ZEV 

Alliance), Dave Modisette (California Electric Transportation Coalition), and John 

Shears (Center for Energy Efficiency and Renewable Technologies), on 

Thursday, April 24, 2008 to discuss each loophole in further detail. Staff then 

had three subsequent meetings to discuss ARB direction and modifications on 

each of the loopholes including possible regulatory revisions on Thursday, June 

19, Monday, July 7, and Thursday, July 10, 2008 before the release of these 

documents for public comment. 

After reviewing each loophole, staff has modified some of the regulatory 

language originally proposed in the Initial Statement of Reasons (ISOR), 

released on February 8, 2008. The proposed modifications, along with other 

proposed changes, will be made available for a public comment period of at least 

15 days. 

Staff reviewed each loophole within the scope of the overall Board direction, and 

made decisions to modify or keep the originally proposed regulatory language. 

In some cases, staff recognized the issue highlighted by the loophole, but chose 

to approach the issue from a different direction than suggested in the March 26 

comment letter. Some loopholes were dealt with during the March 27 hearing in 

the Board’s direction to staff to modify regulatory language. Other loopholes staff 

concluded were not in fact loopholes, or reflect broader issues that are better 

dealt with in the redesign of the ZEV program over the next two years. 

Staff chose to make modifications based on the following 3 loopholes: 
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Loophole # 1: “Limit hydrogen internal combustion engine vehicles to AT-PZEV 

(non-Enhanced) and PZEV credits due to their limited benefit and 

potential for gaming.”1

 

o Loophole Explanation and Author Reasoning: At low vehicle 

volumes hydrogen internal combustion engine (HICE) vehicles 

are unlikely to significantly push hydrogen infrastructure 

development. These hydrogen fueled vehicles fail to drive ZEV 

technology because their drive trains are not electrified. Another 

concern was these vehicles present auto manufacturers with a 

low cost alternative to gain credits with minimal investment in ZEV 

vehicles. The authors proposed that HICE be limited to fulfill 

non-Enhanced advanced technology partial zero emission vehicle 

(AT-PZEV) or partial zero emission vehicle (PZEV) credits only, 

because these vehicles do not offer the same technology 

advancement benefits. 

 

o Staff Response: Overall, staff does not view this so much as a 

loophole, but as a broader policy issue. The definition of an 

Enhanced AT PZEV as presented in staff’s proposed regulatory 

language at the Board hearing in 1962.1(j)(6) states that an 

“’Enhanced AT PZEV’... makes use of a ZEV fuel” and the ISOR 

clearly defined a HICE vehicle as falling under that definition. 

Because the Board did not direct staff to make changes to this 

definition, staff does not believe the solution proposed by the 

environmental groups is appropriate. However, staff is proposing 

modifications to help ensure that HICE vehicles result in ZEV 

technology advancement. 

o Staff Decision: Staff increased the requirements for the hydrogen 

storage system on HICE vehicles from 3600 to 5000 pounds per 

square inch to ensure that only the most advanced HICE vehicles 

are placed to meet ZEV requirements. This will promote the use 

of advanced hydrogen storage systems and further development 

and commercialization of hydrogen tanks. 

o Affected Regulatory Sections:

• 1962.1(c)(4)(A) 

Loophole # 2: “Extend Carry Forward Provision to Enhanced AT-PZEVs to 

ensure that banked credits do not create long “blackout” periods 

when none of these vehicles are produced.”1 

 

1

 March 26, 2008. Executive Summary. “Re: 2008 Proposed Solutions to Potential Loopholes in 

the Amendments to the California Zero Emission Vehicle Program Regulations, Agenda Item 08-

3-5”
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o Loophole Explanation and Author Reasoning: Without the carry 

forward limitation being applied to Enhanced AT PZEVs, 

manufacturers could bank credits and avoid production in later 

years. If a manufacturer chose to build low volumes of Enhanced 

AT PZEVs during Phase II when a 3 times multiplier is applicable 

or over comply in Phase III, the result could be few or no 

Enhanced AT PZEVs placed in Phase IV. The carry forward 

provision should be extended to Enhanced AT PZEVs through the 

end of 2017. 

o Staff Response: Staff does not agree that the carry forward 

provision should apply to Enhanced AT PZEV credits. Large 

numbers of Enhanced AT PZEVs, namely plug-in electric vehicles 

(PHEV), are not expected to be produced in large numbers during 

the 2009 to 2011 timeframe. These vehicles have never been 

produced, and it is unlikely that a sudden ramp up of volumes 

would occur in such a limited timeframe. Additionally, if a 

manufacturer were to be successful in their early production of an 

Enhanced AT PZEV, it would be unlikely that the manufacturer 

would stop production during the 2012 to 2014 timeframe. 

However, staff does believe a multiplier applicable to PHEVs 

delivered for sale during the 2009 to 2011 timeframe would allow 

a manufacturer to earn 3 times the credit for each PHEV delivered 

for sale, which reduced the number of vehicles and increases the 

number of credits. This PHEV multiplier could create an artificial 

bank of credits that could be used to comply during the 2012 to 

2014 timeframe. 

Staff believes that extending the carry forward provision to include 

Enhanced AT PZEVs would decrease the likelihood of vehicle 

demonstrations prior to 2012. It would penalize manufacturers 

deploying Enhanced AT PZEVs early by not allowing them to 

bank credits for more than three years. Instead, staff chose to 

address the overall credit discrepancy between PHEVs and pure 

ZEVs during the 2009 to 2011 timeframe. 

o Staff Decision: Staff has proposed to decreased the value of the 

multiplier offered to plug-in hybrid electric vehicles (PHEV) 

delivered for sale or extended lease during the 2009 through 2011 

from 3.0 to 1.25, which is the same value as the multiplier offered 

for ZEVs sold or leased for three years, with the option to lease 

for an additional two years. This would provide credit, though less 

than what would have been given in staff’s original proposal, to 

plug-in electric vehicles produced and delivered for sale during 

the 2009 to 2011 timeframe while ensuring that pure ZEVs would 

not be put at a comparative disadvantage. Also, there will be 
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limited potential for an excessive number of banked credits which 

could result in a black out during the 2012 to 2014 timeframe. 

o Affected Regulatory Sections:

• 1962.1(c)(7)(B), (d)(5)(D) 

Loophole # 8: “Prevent product blackouts caused by NEV credits for the pure 

ZEV minimum requirement and early introduction of Enhanced 

AT-PZEVs. This can be accomplished by limiting the use of NEV 

credits earned before 2008 to the (non-Enhanced) AT-PZEV or 

PZEV categories after 2011 and restricting NEV credits earned 

after 2008 from the pure ZEV floor.”1 

o Loophole Explanation and Author Reasoning: In the early 2000’s 

auto manufacturers placed low cost, low technology 

neighborhood electric vehicles (NEV) in California for a short 

period of time only to fulfill their pure ZEV requirement. NEVs 

were then abandoned or removed with almost no benefit to air 

quality and technology advancement. Because of this, auto 

manufacturers have banked over 123,000 pure ZEV credits from 

NEVs. Because NEVs have been used as a pure ZEV credit 

loophole, the authors recommended limiting the use of the 

existing banked credits earned before 2008 to the 

(non-Enhanced) AT PZEV or PZEV categories after 2011. NEV 

credits earned after 2008 could be applied to all categories 

outside of pure ZEV floor. 

o Staff Response: Staff agrees the large number of banked NEV 

credits will slow the introduction of new, advanced technology 

ZEVs unless their use is restricted. 

o Staff Decision: Staff proposes to limit the use of NEV credits, both 

2001-through-2005 credits as well as 2006 and subsequent 

model year NEV credits. With these modifications, 2001-through2005-MY-NEV credits are not available to meet the portion of the 

obligation that must be met with ZEV in 2012 through 2014. Also, 

the 2001-through-2005-MY-NEV banked credits are capped at 

50% usage within the obligation that may be fulfilled with 

Enhanced AT PZEVs or AT PZEVs for the 2012 to 2014 

timeframe. These modifications limit the use of 2006 and beyond 

NEV credits within the minimum ZEV floor during the 2012 to 

2014 timeframe while still allowing them to be fully used to meet 

requirements that may be met with Enhanced AT PZEVs, AT 

PZEVs, and PZEVs. 
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The following tables will be placed into the regulatory language in 

section1962.1(g)(6)(A) as a modification: 

(2001 through 2005 MY NEV credits) 

Years ZEV Obligation that:

Percentage limit 

for NEVs allowed 

to meet each 

Obligation:

2009 –

2011 Must be met with ZEVs 50%

2009 75%

2010 –

2011

May be met with AT PZEVs but not 

PZEVs 50%

2009 –

2011 May be met with PZEVs No Limit

Must be met with ZEVs 0%

May be met with Enhanced AT PZEVs 

and AT PZEVs 50% 2012 –

2014

May be met with PZEVs No Limit

(2006 and Subsequent MY NEV credits) 

Years ZEV Obligation that:

Percentage Limit 

for NEVs allowed 

to meet each 

Obligation:

May be met through compliance with 

Primary Requirements No Limit

May be met through compliance with 

Alternative Requirements, and must 

be met with ZEVs

2009 - 0%

2011

May be met through compliance 

Alternative Requirements, and may be 

met with AT PZEVs or PZEVs

No Limit

Must be met with ZEVs 0%

2012 –

2014 May be met with Enhanced AT 

PZEVs, AT PZEVs, or PZEVs No Limit
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Also, to ensure that only the highest performing NEVs receive 

credit, staff included additional requirements for 2010 MY NEVs. 

These requirements mirror the NEV America Standards, set forth 

in “NEV America: Neighborhood Electric Vehicles (NEV) 

Technical Specifications” (Revision 2)2

, including acceleration, top 

speed, and constant speed range specifications as well as battery 

and warranty requirements. 

o Affected Regulatory Sections: 

• 1962.1(d)(5)(F); (g)(6) 

The Board made modifications to staff’s proposal which consequently dealt with 

two of the loopholes presented. 

Loophole # 4: “Raise performance requirement for Type IV ZEV to a level that is 

not already exceeded by the recent models of fuel cell vehicles on 

the road today. Also, ensure the new class does not result in a 

decrease of pure ZEVs required in Phase II.”1

o Loophole Explanation and Author Reasoning: Type IV ZEV is not 

a more advanced fuel cell vehicle and does not encourage 

technology development. The addition of the Type IV ZEV results 

in backsliding of the pure ZEV requirement. The authors 

proposed that staff adjust the credit system so there is no 

decrease in pure ZEV requirement in Phase II and also consider 

the following requirements: 

1) 300 mile range with no measurable decrease in other 

performance metrics (e.g. luggage, and passenger volume) 

 2) Fast refueling capability 

 3) Federal Motor Vehicle Safety and Standard certified 

4) Achieves a minimum number of FreedomCar and Fuel 

Technical Goals 

5) Available to the public for sale or a minimum three year 

lease 

o Board Direction: The Board proposed and approved a new gold 

category of ZEV, Type V, which earns 7 credits, and must have a 

300 mile or more range and 15 minute fast refueling capability. 

This new category ZEV meets many of the suggestions described 

in the fore mentioned loophole. 

 

2 NEV America: Neighborhood Electric Vehicles (NEV) Technical Specifications (Revision 2), 

December 1, 2004:

http://www1.eere.energy.gov/vehiclesandfuels/avta/pdfs/nev/nev_tech_spec.pdf 
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In discussions with authors of the March 26 comment letter, staff 

received further comment that the new Type V vehicle satisfies 

some requests, but that they still wanted more stringent standards 

to be placed on Type IV ZEVs. Not all of the OEMs have 

successfully built a Type III ZEV, let alone a Type IV ZEV. 

Requiring more stringent standards on a new ZEV type could 

hinder development. Staff felt that the requirements for a Type IV 

ZEV were adequate and appropriate, and did not propose 

modifications to requirements for a Type IV ZEV. 

o Affected Regulatory Sections:

• 1962.1(d)(5)(A), (d)(5)(B), (d)(5)(C), (d)(5)(D), (d)(5)(E), (j)(11) 

Loophole # 9: “Modify six year extension of Intermediate Volume Manufacturer 

(IVM) timeline as this increases the time these manufacturers 

have to comply with the program to twelve years.”1

 

o Loophole Explanation and Author Reasoning: Staff proposed to 

lengthen the intermediate volume manufacturer (IVM) transition 

period by six years. This means that an IVM does not have to 

produce any fuel cell vehicles or battery electric vehicles, and 

must produce only a fraction of their AT PZEV requirement, for 

twelve years after exceeding large volume manufacturer (LVM) 

threshold. Because of the importance of advancing pure ZEV 

technologies, supplier base, and infrastructure among all large 

manufacturers, the authors opposed the six year extension of 

timeline for transition from IVM to LVM. 

o Board Direction: The Board did not adopt staff’s proposed 

modifications to the regulation to allow the IVMs a 12 year 

transition period into LVM requirements. IVMs will still be subject 

to LVM requirements at the start of the sixth model year following 

the start of the transition. 

o Affected Regulatory Sections:

• 1962.1(b)(7)(A) 

ARB staff reviewed and took into consideration the other four loopholes, and 

concluded it was unnecessary to modify the regulation. Discussions held with all 

stakeholders lead staff to believe that these were in fact, not loopholes to the 

regulation and did not pose a threat to the purposes or overall goals of the ZEV 

program, or that they would be better dealt in the context of a larger public 

process during the redesign of the ZEV program. 
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Loophole # 3: “Limit travel provision for Type III and IV ZEV to 2014 because 

increased volumes in the pre-commercialization phases after 

2015 are necessary to encourage expansion and cost reduction in 

component and infrastructure suppliers.”1 

o Loophole Explanation and Author Reasoning: The end of the 

travel provision means that the auto companies must meet the 

ZEV regulations in California and ten other states that have 

adopted the ZEV regulations. This doubles the number of ZEVs 

the auto companies have to produce nationwide. The current 

regulation requirements in addition to eliminating the travel 

provision means the auto manufacturers have to produce 100,000 

vehicles nationally. Extending the travel provision to 2017 hinders 

the Board’s ability to remove the provision during Phase IV if the 

Board finds that nationwide commercialization of pure ZEVs is 

feasible. Because of the need to support future growth of pureZEV technologies, suppliers, and infrastructure, plus the 

advantage of future flexibility in the regulations, the authors 

proposed limiting the extension of the Travel Provision to 2014. 

o Staff Response: This is not a loophole; it is a policy decision. 

Staff proposed that the travel provision be extended to 2017 

during the March 27 hearing, and the Board approved this 

provision. The principle involved is vehicle types that are 

pre-commercial in volume and require new fueling infrastructure 

are considered to be in a demonstration phase and the benefit of 

requiring demonstrations from 10 other states is weakened by the 

high cost and lack of new information obtained. Staff believes 

that PHEVs will jump directly to commercial volumes, and no new 

infrastructure is required. Thus it did not recommend a travel 

provision for this technology. Fuel cells, on the other hand, are 

likely to undergo several more demonstration phases to validate 

durability and lower cost designs for new fueling infrastructure 

(several million dollars per station). Thus, staff believes travel 

through 2017 model year is appropriate so that demonstrations 

are limited to only a few areas. Likewise, battery electric vehicles 

may need future demonstrations to establish customer 

acceptance. Based on this assessment, staff believes the travel 

provision for Type III, Type IV, and Type V ZEVs through 2017 is 

appropriate. 

Staff does not think that the provision will compromise its ability to 

redesign the ZEV program. The redesign will begin with a clean 

sheet of paper, and all provisions of the current ZEV program will 

be up for reconsideration. 
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o Staff Decision: Staff did not make modifications to the regulatory 

text in response to this loophole. 

Loophole # 5: “Eliminate extension of Type C hybrid electric vehicle (HEV) 

because it is an off-the-shelf technology that offers limited benefit 

to advancing technology.”1

o Loophole Explanation and Author Reasoning: Type C hybrid 

electric vehicles (HEV) do not contribute to technology 

advancement and the auto companies have a financial incentive 

to use the technology as a loophole to meet their AT-PZEV 

requirement. The authors recommended not extending the 

credits for Type C HEV unless they use lithium ion batteries or 

other advanced energy storage systems not currently in 

commercial production. 

o Staff Response: In the regulation, a Type C HEV is a vehicle with

an electric motor with greater than or equal to 10 kW of power 

output and less than 60 volts for its traction drive system voltage. 

Type C HEVs are also required to be equipped with an advanced 

traction energy storage system, such as lithium ion batteries, 

nickel metal-hydride batteries, or ultracapacitors. Staff believes 

that Type C hybrids still provide environmental benefits and 

should be an option for a manufacturer. Manufacturers need as 

much flexibility as possible to design vehicles for a variety of 

applications. Additionally, Type C requires a manufacturer to 

utilize advanced batteries, which are not “off the shelf”. Not all 

LVMs have deployed hybrids, so to limit them could be fateful for 

further hybrid deployment. Additionally, an LVM who makes a 

larger vehicle as a mild hybrid provides greater greenhouse 

benefit to California than a small mild hybrid. 

o Staff Decision: Staff did not make modifications to the regulatory 

text in response to this loophole. 

Loophole # 6: “Place 50% cap on the use of Type I and Type I.5 ZEV that do not 

use advanced batteries and limit their Travel Provision to 2011 

[rather than 2014] because they have limited long-term benefits 

and open a program loophole.”1

o Loophole Explanation and Author Reasoning: ARB has 

introduced a new Type I.5 ZEV and removed the cap on Type I 

and I.5 ZEV. This means that an automaker can meet its entire 

pure ZEV floor requirement with Type I.5. The authors saw the 

advantages of early introduction of Type I.5s as a low cost 

loophole to fulfill the pure ZEV floor requirement with limited long-
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term benefits to the program. The authors proposed keeping the 

50% cap on Type I and I.5 ZEV and limiting their Travel Provision 

to 2011, if they do not use advanced batteries. 

o Staff Response: Type I ZEVs are vehicles with an all electric 

UDDS range between 50 and 75 miles. Type I.5 ZEVs are 

vehicles with an all electric range between 75 and 100 miles. 

Many consider Type I.5 ZEVs to be city electric vehicles. Staff 

does not see this so much as a loophole but as a broader policy 

issue. Staff received direction in the Board’s Resolution 07-18 

after its May 24, 2007 Board Hearing to provide more even 

treatment of battery electric vehicles. The original proposal to 

remove the limits placed on Type I and I.5 ZEVs presented to the 

Board on March 27 reflects this overall Board direction. At this 

time, staff does not believe it is necessary to cap these vehicles, 

because they do require an advanced battery and trade 

transparency should limit manufacturers in their production or 

trades of “cheaply produced” vehicles. 

Staff believes Type I, I.5, and IIs still will be produced in 

demonstration–like quantities in the 2012 to 2014 timeframe and 

that duplicate demonstrations in many other states is not needed. 

Thus, staff believes the travel provision is appropriate for these 

vehicles. 

o Staff Decision: Staff did not make modifications to the regulatory 

text in response to this loophole. 

Loophole # 7: “Quantitatively define the term ‘advanced battery’ to reward 

production of truly new technologies as opposed to high power 

nickel-metal hydride batteries available in today’s mass market 

hybrids.”1

o Loophole Explanation and Author Reasoning: The ZEV 

regulations use the term ‘advanced batteries’ to define a Type C 

AT-PZEV. ‘Advanced battery’ is a term that is both vague and 

changing, depending on the development of the technology. High 

powered nickel metal-hydride batteries are being mass produced 

for use in hybrid vehicles on the road today and do not represent 

the advanced batteries needed for the pure ZEV and Enhanced 

AT-PZEV requirements. ‘Advanced batteries’ should more 

appropriately refer to the deep cycle nickel metal-hydride and 

lithium batteries not currently in widespread use. The authors 

requested that ARB define term using a quantitative metric that 

acknowledges commercialization status in vehicles. 
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o Staff Response: Staff does not view this as a potential loophole 

to compliance with the ZEV program. Staff believes that the 

current examples provided in 1962.1(c)(4)(B)4. for an advanced 

energy storage system are adequate for the purposes of the 

regulation. The Board supports technology neutrality, as 

evidenced in its Resolution 07-18 following the May 7, 2007 

Board Hearing. Staff does not agree that defining advanced 

battery supports this neutrality. Staff believes that nickel 

metal-hydride batteries are advanced batteries and demonstrate 

innovative technology. These batteries are long lasting and have 

been very successful in hybrids currently available. 

Additionally, as the scoping process begins for the revision of the 

ZEV program, staff believes it is important to promote nickel 

metal-hydride batteries on the road to commercialization in the 

marketplace. The more commercially successful these batteries 

are, the easier it will be for the greenhouse gas program to rely on 

hybrid electric vehicle technology for setting the greenhouse gas 

fleet standards. 

o Staff Decision: Staff did not make modifications to the regulatory 

text in response to this loophole.