The Clean Air Act (Section 209) provides California with a mechanism for setting tailpipe emission standards that are stricter than Federal ones. Once California standards go into effect, other states can opt-in. Nine states in the Northeast have chosen to do so.
Since 1990, California has had mandated a share of registered cars with zero emissions, although no zero emission vehicles existed at the time. California’s program is “technology forcing,” setting goals and assigning credits to manufacturers for achieving emissions lower than their gasoline vehicles produce.
Battery-powered vehicles receive full credit and hybrids partial credit. Automakers are required to maintain ZEV credits equal to a set percentage of non-electric sales. The credit requirement is 4.5 percent of internal combustion vehicle sales by 2018, rising to 22 percent by 2025. Because California is the largest auto market in the country, manufacturers have no alternative but to comply. Otherwise, they are not allowed to sell cars in California.
California’s program was originally designed to help it meet national air quality standards issued under the Clean Air Act. It then morphed into a program to reduce carbon emissions, which has led it to wasteful cost increases.
The reason is that the term “zero emission vehicle” is a misnomer. While a battery electric vehicle does not produce tailpipe emissions, its manufacture and operation does. And many of those emissions happen elsewhere. Whatever benefit California receives in zero tailpipe emissions is partially offset by higher emissions in states where ZEV batteries are manufactured and where power is generated to charge ZEV batteries.
An issue of Seeking Alpha, the financial blog and newsletter, made this point very clear. Battery manufacture is energy intensive and the emissions are directly related to battery output. Author John Peterson concluded that battery manufacture doubles GHG emissions relative to internal combustion vehicle manufacture. The following chart presents the results of his analysis. The numbers 24, 40, 60 and 85 refer to battery output in kilowatt hours (kWh). The latter 3 are based on Tesla Model S batteries.
*Global Warming Potential Units
Ironically, Nevada gave Elon Musk $1.4 billion to build his Giga factory there. Musk benefits, and Nevada produces CO2 emissions so that wealthy California drivers can make an environmental statement. According to a survey by Teslarati, Model S and X owners have average incomes of $503,000 and $267,000. The question of why they should be subsidized is intriguing.
Although battery electric vehicles (BEVs) are registered in all most all states, about half are located in California and in 2016, and about half of the sales took place in California according to fleetcarma. According to the EIA, 65 percent of California’s electricity is generated by natural gas with another 25 percent being imported. So, every time a California BEV owner charges his car, more than 85 percent of the electricity consumed produces CO2 emissions.
California’s ZEV mandate is not as green as it seems. While the environment gains a small benefit in terms of lower CO2 emissions, the big winner is Tesla’s Elon Musk. Until other manufacturers can make enough BEVs to achieve their credit goals, they have to buy them from Musk. That has been a money-making proposition. According to the Los Angeles Times, Tesla has earned $517 million by selling environmental credits to other automakers
The Trump Administration has not signed off on Obama’s 12th hour mid-course review of CAFE standards for the 2022-2025 timeframe. If the Administration changes those standards to make them less stringent on the basis of excessive cost or unnecessary to achieve CAA air quality standards, it could also argue that California’s existing waiver is no longer necessary. Alternatively, if California has to apply for a new waiver because of the new CAFE standards, EPA could deny the request.
There is no precedent for rescinding a waiver and an attempt to do so would certainly be litigated and probably end up going to the Supreme Court. Congress could rewrite the CAA and attempt to eliminate section 209. Having observed the CAA amendment process for a few decades, it is doubtful that Congress has the stomach for taking on a rewrite, although one is certainly needed. Since California is not using the waiver for the purpose it was intended—air quality improvement—EPA should have a strong legal basis to deny any new request made in connection with the CAFE standards to take effect in 2022.
William O'Keefe is the former CEO of the George C. Marshall Institute and president of Solutions Consulting. You can follow him on Twitter here.
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