Dan Walters

California wants more ZEVs on the road, but will it reach its goal?

Tesla buyers line up in Rocklin to reserve a Model 3

About 350 people wanting to purchase the newest Tesla, the Model 30, waited in line Thursday morning, March 31, 2016, in Rocklin. They came from all around the region. Some arrived the day before.
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About 350 people wanting to purchase the newest Tesla, the Model 30, waited in line Thursday morning, March 31, 2016, in Rocklin. They came from all around the region. Some arrived the day before.

One of California’s many strategies to reduce the state’s carbon footprint is encouraging automakers to produce – and motorists to buy – “zero emission vehicles.”

The Air Resources Board’s initial goal for ZEVs, as they are dubbed, is rather modest – 1.5 million cars powered by electricity or hydrogen by 2025, and 15.4 percent of new car sales by then.

Were the 1.5 million-ZEV goal to be reached, it would be, at most, just 5 percent of the vehicles on California roads by then, a long way from the 100 percent ZEV goal that the state hopes, in its plans, to eventually achieve.

Even so, reaching the 2025 mark will be difficult, given the slow sales, even with buyer subsidies, of about 60,000 battery-powered ZEVs and plug-in hybrids per year, roughly 3 percent of total auto sales.

ZEVs, particularly the luxury models produced by Tesla, are expensive. Long-distance or rural ZEV driving is difficult without convenient recharging stations. Low gasoline prices are still another drag on sales.

The ARB is beginning to consider more ZEV changes, and a squabble has developed over whether the state is serious about having 1.5 million ZEVs on the road or will let automakers off the hook via fine print.

While the 1.5 million-ZEV goal is widely cited, the actual rule counts “credits” that are supposedly the equivalent in carbon emission reduction. It allows automakers to partially meet goals with some hybrid models and buying credits from ZEV makers such as Tesla.

Environmental groups, led by the Natural Resources Defense Council, dislike the offsets, saying they won’t create a large and permanent ZEV industry.

The NRDC projects that California’s goals, as well as those of the seven other states in the ZEV encouragement program, could be met just by Tesla’s production and the sale of its credits to other automakers. Instead of having 1.5 million ZEVs on the road by 2025, it says, California could have as few as 1 million. The percentage of sales could be 6 percent instead of 15.4 percent and still technically comply.

NRDC and others want to require automakers other than Tesla to actually build and sell more ZEVs, principally by reducing the number of credits that could be used in lieu of sales.

That obviously puts them at odds with major automakers. Testifying on a pending bill that would raise penalties for noncompliance with ARB’s dictates, auto industry lobbyist Gene Erbin cited low demand for ZEVs and complained that it could cost automakers as much as $150,000 for each unsold car.

“We have to give these vehicles away to avoid the penalties,” Erbin told lawmakers.

But the environmental group demands also irritate Tesla, which generates a surplus of ZEV credits that it sells to other automakers, and is pushing for a more ambitious ZEV mandate that could make its credits even more valuable.

Tesla, which has never earned an annual profit and reported another quarterly loss last week, sold $168.7 million worth of regulatory credits last year, mostly from luxury ZEVs.

Diarmuid O’Connell, a Tesla vice president, told electrek.co, a website devoted to electric vehicles, that limiting credits is “an extremely stupid idea. You’d be punishing people who are doing most to put (electric vehicles) on the road.”

Gov. Jerry Brown and his ARB may be on the spot – either maintaining the status quo, which could, environmentalists say, undermine the 1.5 million-ZEV goal, or damaging the cash flow of Tesla, the state’s green economy showcase.