U.S. and California Policy Updates

Friday, January 20, 2012

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National Policy

The U.S. Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) are moving ahead with proposed efficiency and greenhouse gas emissions standards for light-duty vehicles. The standards would go into effect in 2017, aiming for a fleet-wide average of 54.5 MPG for new vehicles in 2025. Details on the proposal, including advanced technology credit multipliers and other compliance flexibilities, can be found in the program fact sheet. EPA and NHTSA are in the midst of hearings around the country and the debate around technical feasibility, cost and job creation is ratcheting up.
With Iran’s threats to close the Strait of Hormuz and predicted gas price spikes, energy security is again an issue for discussion. Domestic drilling, the Keystone Pipeline and proposed vehicle standards are all part of the larger energy security debate. No doubt things will get even more contentious as we get closer to the summer “driving season” and fall elections.
In other federal news, cost-cutting continues to be a major theme. A wide variety of federal incentives expired in 2011, including ethanol credits. The outlook for new federal support for advanced transportation is uncertain, particularly during a contentious election year. Meanwhile, Congressional bickering continues over highway and transit funding, and high speed rail also continues to be a controversial topic.

California Policy

The California Air Resources Board (CARB) will discuss some high profile regulations and programs at its January board meeting. In December, CARB released details on a proposed suite of regulations, known as the Advanced Clean Cars Program. The regulations include a ramped-up Zero Emission Vehicle (ZEV) program, calling for 15% of new vehicle sales in 2025 to be ZEVs. It also calls for a Clean Fuels Outlet regulation to ensure that refueling infrastructure for ZEVs (particularly fuel cell vehicles) keeps up with vehicle sales and for vehicle emission standards that are in line with EPA’s announced GHG standards. Summary information and links to the proposal can be found in CARB’s December 7th press release, Advanced Clean Cars. As expected, the regulations are at the center of a lively debate over costs, technical feasibility, and the State’s role in driving innovation.
While California is moving ahead with the Advanced Clean Cars regulations, another state program was dealt a serious blow. A federal District Court judge ruled that the Low Carbon Fuel Standard (LCFS) violates the Commerce Clause of the U.S. Constitution.  LCFS was set to create a gradually declining carbon intensity standard for transportation fuels. However, the initial ruling effectively blocks implementation for the time being, creating an environment of uncertainty for investors and fuel producers.
With all of the new and proposed targets and regulations and the growing concerns over energy security, CALSTART is launching an effort to ensure that California is able to continue providing financial incentives for advanced technology development and deployment. California has money to invest through AB 118 and related programs, but funds are set to sunset over the next several years. Ongoing incentives are needed to ensure that the State can meet its economic and environmental goals.