A controversial move to adopt California’s zero-emission vehicle mandate is now heading down a divided road after the state’s rule-making body agreed to consider new regulations.
In one lane, the Colorado Air Quality Control Commission voted unanimously on Friday to return in August to decide whether Colorado should adopt the stricter vehicle emissions. Such a mandate would require auto manufacturers to make electric vehicles nearly 5% of their vehicles for sale in Colorado by 2023, with higher rates in following years.
But another effort, led by auto manufacturers, wants this to be voluntary. Automakers suggested they could make all of the electric vehicle models they sell in California available in Colorado — which is something local electric-vehicle shoppers have been demanding for years, leaving some wondering why automakers weren’t doing this already.
Will Toor, executive director of the state’s Energy Office, said both plans should proceed.
“We think if it’s possible to get to an alternative passway that could get more electric vehicles on the road earlier and faster, that is well worth considering,” Toor testified during Friday’s hearing. “…In the meantime, our understanding from the industry is that we would pursue this conversation (with automakers) in parallel with the rule-making process.”
Colorado is already known as a proponent of electric vehicles with its generous $5,000 tax credits on purchases plus back-to-back governors who prioritized EV proliferation as key to cleaning up the air citizens breathe. Just days into his new gig, Gov. Jared Polis signed an executive order to join California as a zero emission vehicle state.
All of that has meant increased EV sales and investment. The Colorado Automobile Dealers Association said EV sales made up 3.5% of the market as of March. That’s double the 1.57% in 2017, according to the Alliance of Automobile Manufacturers, which also ranked Colorado among the top five states for EV sales. The state’s Department of Transportation has spent VW-settlement money on electric buses and EV charging stations. And the legislature passed at least four laws to encourage the use of electric vehicles.
The ZEV mandate would apply to new cars only and requires automakers to make EVs or plug-in hybrid EVs available in the state, said Doug Decker, mobile sources program manager with the state Air Pollution Control Division, which analyzed the impact of a ZEV rule on Colorado.
“Nothing in this (ZEV) rule limits customer choice and in fact, customer choice may be enhanced by the addition of several vehicle models not available in Colorado today,” Decker said.
Still, some in the auto industry have pushed back hard. Some said Friday that Colorado already has EV momentum and doesn’t need more regulations. They say the state’s charging-station infrastructure isn’t ready. And consumers in Colorado still buy mostly pickups and SUVs, which are very limited in electric forms.
“We believe there are better ways to achieve electrification than a cumbersome regulatory mandate,” said Scott Spendlove, with Global Automakers, a Washington, D.C.-based trade association representing international automakers.
What happens if Colorado adopts ZEV?
According to the Alliance of Automobile Manufacturers, which proposed the volunteer effort to increase EV availability, more than 40 zero-emission vehicles were available at the end of 2018, but only about 30 were offered for sale in Colorado. Kelley Blue Book, however, counted up 12 EV models in Colorado last year, compared with 48 in California.
The nine states that follow California’s ZEV policy have seen a greater number of electric vehicles made available in their state because of ZEV, supporters said.
“We’ve heard about how the market will take care of electric vehicle demand,” said RJ Harrington, with Sustainable Action Consulting in Louisville. “If that were true, Colorado would have more vehicles available.”
Colorado has two choices: Join or reject California ZEV mandate. California created its own standard in 1966 to combat pollution. When the U.S. Environmental Protection Agency started in 1970 and later set national goals, it gave California a waiver. Under President Barack Obama, the two standards were unified on the same lower-emission goals.
Last year, things got more complicated. The EPA proposed freezing goals at 2020 levels and getting rid of California’s waiver. That’s when Gov. John Hickenlooper aligned with California to keep Colorado on track to reduce car emissions beyond 2020. In November, the state took the first step toward ZEV and joined California’s low-emission vehicle standard.
But now, joining California’s stricter ZEV mandate would put Colorado in an even smaller minority, along with New York, Oregon, Washington — or 10 total states, including California. The majority of states follow the national standard, while a few others adopted the lower-emission standard, but not ZEV.
(The EPA has not yet changed the goals but still plans to in “the coming months,” according to Reuters.)
What Colorado cannot do is create its own standard. But if it doesn’t adopt California’s ZEV mandate, the state’s Air Pollution Control Division said in a report that “the ZEV market will continue to be unregulated and both sales and vehicle selection will suffer compared to ZEV states elsewhere.”
Should Colorado become a ZEV state, the new rules would kick in with model year 2023. Automakers would need to make sure an estimated 4.85% of their fleet for sale in Colorado runs on electricity or hydrogen fuel. That translates to 13,484 of the state’s projected new car sales for that year.
Division staff, by the way, came up with the 4.85% estimate based on how California sets ZEV goals, which aren’t based on how many cars are sold. Rather, it’s based on credits with vehicles that are able to drive farther on a single charge qualifying for more credits. If automakers fail to hit that minimum, they can either buy someone else’s credits, like Tesla’s, or face fines.
In 2025, the minimum EV rate in Colorado jumps to 6.21%, which — again based on the division’s estimate — would be 17,622 electric vehicles. According to the auto alliance, roughly 7,000 electric vehicles were sold in Colorado last year and made up less than 3% of the state’s new vehicle sales.
The cost of EVs
Electric vehicles cost more than a comparable gasoline car but not for long, concluded the state Air Pollution Control Division report.
The division said the average electric vehicle will cost $6,303 more than a gasoline vehicle in 2023. However, fuel savings and lower maintenance translates into consumer savings of $3,874 after 150,000 miles. The division’s research also put the cost of gasoline fuel at 2.5 times higher than electric fuel. (The agency’s estimate on prices are higher for plug-in hybrids because they require two engines — electric and gasoline.)
But every year, the cost of EVs are expected to decline until they are priced about the same as a gasoline vehicle in 2028, according to the division’s economic impact report. The estimates did not consider any state incentives, so that could bring price parity sooner.
“We assume ZEV costs will continue to decline as the technology and supply improves over time,” Decker said.
Another benefit is improved air quality. Vehicle emissions are the state’s second largest contributor to greenhouse gases after the energy sector, which has resulted in the state having some terrible air quality. A ZEV mandate would reduce greenhouse gas emissions by 2.2 million metric tons by 2030, he said. That’s like keeping 450,000 cars parked for a year. The staff analysis and data is available here.
Meanwhile, auto alliance officials, who met with Gov. Polis on April 15 to discuss a volunteer program, proposed several things they could do “absent a mandated regulatory structure based on the CA ZEV program,” according to a document the alliance shared with The Colorado Sun.
Automakers would invest in ZEV infrastructure, like charging stations, and provide greater incentives and marketing of EVs in Colorado beyond what the state and federal incentives do. They would also commit to offering all California EV models in Colorado starting January 2020.
But that left some folks wondering why automakers didn’t do that in the first place.
“A lot of people here are saying we can do better so we shouldn’t have regulations,” testified Josh Maynard, who works for auto-mechanic Boulder Hybrids. “However, if we can do better we would have done better, so we should have regulations.”
Shannon Baker-Branstetter, manager of cars and energy for Consumer Reports, said in a letter to the commission that the volunteer effort is suspect, especially when some automakers have already “been caught cheating or misleading consumers over the last five years on fuel economy and emissions.”
The voluntary suggestions “indicate that automakers know how to increase electric vehicle sales in order to meet and exceed the requirements of a ZEV program. Instead, they have chosen to leave Colorado consumers to fend for themselves,” she said in the letter.
What it may really come down to for the auto industry is that EVs aren’t as profitable as other cars. A new report from McKinsey & Company found that it costs $12,000 more to produce an EV than a comparable gasoline-powered car.
“They’re losing $12,000, and with the mandate they have to make it (profits) up on the other vehicles,” said Tim Jackson, CEO of the Colorado Automobile Dealers Association.
In ZEV states, automakers have the financial incentive to make vehicles available, otherwise they must buy credits or pay fines.
“That’s why they’re getting those cars. So then they say over here, ‘We’re not getting the cars. We’re going to slap you with a dictate.’ Well, rather than getting the dictate, let’s do a voluntary option and then we’ll get you the cars so we don’t have to pay the fines,” Jackson said.
The reason automakers don’t offer all their EVs in Colorado is because it’s a different market than California, said Bryan Goodman, a spokesman for the auto alliance.
“Trucks and large cars are big sellers in Colorado while Californians appear to prefer smaller cars,” Goodman said in an email. “Also, for consumers in Colorado to buy these cars, an infrastructure, similar to that in California, needs to be in place. That includes building charging stations across the state. That being said, there are currently 30 electric car models in all shapes and sizes at the dealerships and on the roads in Colorado and many more are coming soon.”
The automakers and the state officials plan a whirlwind four weeks of negotiations, followed by four weeks of analysis, peer review and public comment, said Toor, director of the state’s energy office.
“There would have to be clearly defined metrics and measurements,” Toor said. “While an agreement would be voluntarily entered into it would have to be an enforceable agreement in order for us to seriously consider it as an alternative.”
Meanwhile, the commission will continue on its own rule-making path and consider ZEV rules in a public hearing scheduled for the week of August 13.
“I like the idea of the automakers coming together to come up with a plan,” Chuck Grobe, a commissioner, said during the hearing. “I’d like to see them coming up with a plan for us to move forward rather than us dictating something. But there’s got to be penalties because voluntary ideas can fall by the wayside, too.”