CALIFORNIA May Cap ZEV-Credit Sales

California emission rules require high-volume automakers to sell either battery-electric or hydrogen fuel-cell cars in proportion to their overall sales.

Some manufacturers build “compliance cars” purely to satisfy this mandate, while others buy credits from automakers that sell more zero-emission vehicles than required by the rules.

Since Tesla builds only electric cars, it has a large surplus of credits to sell.

A portion of the company’s income in recent years has come from those sales, though CEO Elon Musk has said the company doesn’t bank on that revenue going forward.

But now California regulators are considering changing the rules to make it harder for carmakers to meet targets by simply buying credits, rather than building their own zero-emission cars, according to Bloomberg.

The California Air Resources Board (CARB) previously predicted that zero-emission vehicles would achieve a 15.4-percent market share by 2025.

But there are now enough credits available for carmakers to meet the law’s requirements if battery-electric and fuel-cell cars make up just 6 percent of sales, CARB estimates.

CARB boss Mary Nichols told Bloomberg that she hadn’t decided yet how to deal with the glut of credits.

Among the options: the agency could increase the number of credits required for carmakers to comply with the mandate, or cap the number of credits individual carmakers could earn.

CARB plans to conduct a review of the ZEV mandate in the fourth quarter of this year.

That review will arrive during discussions of the mid-term review of Federal Corporate Average Fuel Economy (CAFE) standards that’s expected to be released this year as well.

Regulators and carmakers will gauge progress toward meeting the 54.5-mpg fleet average mandated fro 2025, which is equivalent to about 38 or 39 mpg on the window sticker.

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