The so-called ZEV Alliance announced a most ambitious goal late last year: eliminate the sale of traditionally fueled passenger cars by 2050.
Comprising California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, Vermont, Germany, Norway, the Netherlands, the United Kingdom, British Columbia and Quebec, the Zero-Emission Vehicle Alliance was formed to allow states and nations to swap ideas on how to better promote electric vehicles.
Already, ZEV markets in those cities and countries are the most successful in the world, representing almost 40 percent of global electric vehicle sales, though they constitute just 7 percent of the overall auto market. The partners say their pledge is an important way to promote a technology that could bring cleaner air locally while staving off climate change globally.
"We want to be action-oriented. We want to send a strong signal to all of the pieces of the zero-emission vehicle ecosystem that ZEVs are ready now as a climate change mitigation solution and there are government actors willing to support them," said Mark Wenzel, who manages the ZEV Alliance for the California Environmental Protection Agency.
But taking traditional vehicles off the market is still a tall order. Just last year, the United States fell nearly two-thirds short of an Obama administration goal to put 1 million electric cars on American roads by 2015 (Greenwire, May 21, 2015).
Auto industry leaders already doubt that the eight American members of the alliance have robust enough regulations for automakers to meet a pre-existing mandate to put 3.3 million ZEVs on the road by 2025, to say nothing of the 2050 ambition.
To meet the 2025 goals, each state must achieve different ZEV sales figures, depending on its population. In California, for example, automakers would have to sell 1.5 million more electric cars in just 10 years to comply with regulations — multiplying by 10 the number of ZEVs already on the road in that state.
Because of a quirk in the Clean Air Act, the eight alliance states all use the same ZEV regulations as California in order to achieve their numbers. Those regulations work as a cap-and-trade program for electric vehicles, requiring automakers to sell an increasing number of ZEVs over time and allowing automakers to buy credits from other companies if they can’t meet their numbers.
Even though states are part of a ZEV program, the regulation also assigns credits for "transitional zero-emission vehicles," like hybrids and other plug-in electrics that rely on both batteries and engines.
The California Air Resources Board says the inclusion works because companies receive credits based on how many miles each vehicle can drive without polluting. So while a pure electric car that can drive 200 miles between charges receives five credits, a hybrid would receive fewer credits based on the range it can travel on just battery power.
Some experts, like Tesla Motors Inc. Vice President of Development Diarmuid O’Connell, say that by including hybrids, the regulations meant to incentivize companies to develop ZEVs actually give them a pass.
"The goal that the ARB stipulated is zero-emissions vehicles, and hybrids and plug-ins do not have zero emissions," he said. "It’s a half step toward a future we need to bring forward very quickly in order to address climate change."
Regulatory requirements under the ZEV program will start accelerating in 2018, with automakers required to accumulate more credits based on their market share while the maximum number of credits per vehicle drops. In 2018, for example, a pure ZEV with a range of 350 miles between charges would receive the maximum of four credits.
O’Connell says the current regulations set the bar too low, allowing automakers to meet ZEV standards by buying credits instead of selling more electric cars. In fact, Tesla analysis shows that automakers have enough credits that they would only need to maintain their current annual sales rate through 2022 to comply with the law, bringing fewer than 100,000 new vehicles onto the road annually.
Tesla itself has earned more than $534 million since 2009 for selling its credits to automakers. In the first quarter of 2015, credit sales amounted to 7 percent of the company’s $940 million revenue. And with the company planning to boost its annual California sales by 2020, O’Connell says the market will continue to be flooded with credits unless regulators quadruple requirements through 2025.
"Tesla was never imagined when these regulations were put in place, and we are basically causing inflation in this market," he said. "We got into this business to build electric vehicles, not to sell credits. Even so, it’s hard to imagine us building all the electric vehicles the country would need. Part of our strategy is to get other companies into this space."
ARB disputes Tesla’s calculations. Agency spokesman Dave Clegern says it is unrealistic to think that annual sales would stagnate for 10 years.
"We don’t have any reason to believe that," he said.
Instead, ARB projects that by 2025 in California, annual sales of ZEVs and plug-in hybrids would reach 600,000.
"We are fairly confident that this is the scenario we are looking at," he said, noting that ARB has met with Tesla about the company’s projections and that "Tesla knows what we think about their numbers."
The Alliance of Automobile Manufacturers is similarly skeptical that the states can meet their ZEV goals, albeit for different reasons.
It says that the regulations force automakers to manufacture cars that are unattractive to consumers and that they are unable to sell.
"Our data is that people research before they shop, and they certainly know what type of fuel they want to use," said spokesman Daniel Gage. "So suggesting that the dealer is going to get them into a ZEV or that adding 50 more units to a showroom floor will do it, our readers don’t show that’s realistic. Most people don’t buy a car blind."
The Alliance of Automobile Manufacturers has lobbied ARB, asking that it not limit the inclusion of hybrids in its ZEV regulations, saying the industry already relies on hybrid sales and credit purchases in order to meet the mandate because of a lack of consumer interest in electric vehicles.
Gage said states should be doing more to encourage consumers to ditch diesel if they want automakers to sell more electric cars.
"Automakers are motivated to sell whatever vehicles consumers are clamoring to buy, and if more consumers were clamoring for ZEVs, I’m sure they’d put them out there," he said.
Nic Lutsey, who monitors ZEV initiatives for the International Council on Clean Transportation, defended the states’ regulation, saying that though it may be imperfect, it’s the only one of its kind globally that mandates sales quotas for ZEVs.
Globally, other members of the ZEV Alliance rely on financial incentives and charging networks to persuade consumers to go electric — something the eight stateside members are also doing.
"Of course there are barriers for consumers to embrace these vehicles, but the state members of the ZEV Alliance are cognizant of that and, in addition to the stick of regulations, have some good carrots to motivate drivers to go electric," Lutsey said.
All eight states offer financial incentives for purchasing electric vehicles on top of the up to $7,500 tax credit the federal government gives ZEV buyers. The states also offer nonfinancial incentives to nudge consumers toward electric vehicles. In California, which is famous for its bottlenecks, ZEV drivers are allowed to use highway high-occupancy vehicle lanes free of charge, regardless of how many passengers they are carrying.
States are also working to tackle a lack of charging infrastructure, something that experts say is key to alleviating consumers’ fear of running out of power while on the road.
To date, Massachusetts has spent $1.5 million in rebate programs both for consumers who purchase electric vehicles and employers who install charging stations in office parking lots.
So far, there are just 1,500 electric vehicles in the state, but Christine Kirby, director of the Air and Climate Division at the Department of Environmental Protection, says the state is looking for ways to encourage more drivers.
"We’re looking now at how to invest in the public infrastructure and what is our state role in doing that and what’s the private market role," she said.
In California, the state has invested a whopping $48 million on 8,300 charging stations, which Energy Commissioner on Transportation Janea Scott says are the best advertising for ZEVs.
"No one wants to buy a car you can’t fuel up," she said. "Once you put it out there, people see it and realize it is a possibility for them. It’s an ‘if you build it, they will come’ situation."
Elaine O’Grady, who works at the Northeast States for Coordinated Air Use Management and helps manage ZEV policies for those states, said workplace charging incentives in particular can have a "transformative effect."
"Workplaces offering charging can make the difference between someone being confident, or not, that if they need a charge, they can get it," she said. "It essentially provides a second showroom so that people are exposed to the vehicles, they talk about them at the water cooler and they realize charging isn’t more of a hassle than filling up a tank with gas."
The members of the alliance say they hope that by teaming up, they will be able to have a better idea of what incentives and regulations work best to promote ZEVs and get consumers to buy the cars.
"The more we grow this consumer ecosystem of awareness and desire, the more we incentivize manufacturers to make the cars, the more people see the cars, the more people want the cars," said Wenzel, from the California EPA. "It’s a virtuous cycle."