California considers stricter ZEV mandate, but might leave Tesla out of it

California’s Air Resources Board is starting to realize that it might have made a mistake by projecting a 15.4 percent market share for zero-emission vehicles (ZEVs) by 2025. The state, which pioneered incentivizing automakers to sell electric vehicles, is being outpaced by countries, like Norway and the Netherlands, exploring the idea of ZEVs having a 100 percent market share within the same timeframe.

Furthermore, because of Tesla, which only sells ZEVs, and the popularity of a few plug-in hybrid models, like the Volt, ZEV credits have flooded the market and now automakers would only need to achieve a 6 percent ZEV market share in the state and compensate with credits bought from other automakers in order to comply with CARB’s mandate without being fined.

The idea is that automakers get ZEV credits when they sell zero-emission vehicles in California. If they sell enough ZEVs as part of their entire sales in the state, they comply with the mandate and they will not get fined, but if they didn’t sell enough, they will be fined or they can purchase ZEV credits (at a discount on the fine) from other automakers with a surplus.

It’s a way to both finance the program and help automakers who are committed to electric vehicles.

Since Tesla only sells electric vehicles and California is an important market for the automaker, the company always has a significant surplus of credits. The company sold $168.7 million worth of ZEV and other regulatory credits (but mainly ZEVs) last year.

Dan Sperling, a professor of civil engineering and environmental science at the University of California at Davis who serves on the board, told Bloomberg that CARB was looking into accelerating the ZEV mandate:

“If anything, the inclination here is to make the mandate tougher,’’

But he also added that they are considering limiting the number of credit per automaker in order for the program not to be seen as favoring Tesla:

The board could strengthen the mandate by simply raising the number of credits and sales automakers need to comply. Or, conscious that the requirements could be seen as a “Tesla subsidy program,’’ regulators could limit the credits that any individual automaker can sell, Sperling said.

Tesla responded that it welcomes a stricter mandate, but that it wouldn’t be fair to cap the credits:

“Diarmuid O’Connell, Tesla’s vice president for business development, said he supports higher emission targets. But he rejects the idea of capping credit trades, which he calls “an extremely stupid idea: You’d be punishing people who are doing the most to put EVs on the road.”

CARB’s goal is for all automakers to eventually only sell ZEVs in California, something Chairman Mary Nichols made clear. Tesla already only sells ZEVs in the state so the goal is to slowly push other automakers to do like Tesla. It’s hard to imagine how the program shouldn’t benefit the company complying the most with the mandate.