California just started the clock on a future that a few years ago would have been unthinkable: dealerships full of nothing but zero-emissions vehicles.
On Wednesday last week, California Governor Gavin Newsom ordered regulators to phase out the internal combustion engine and ban the sale of all new gasoline-powered vehicles after 2035.
With that, California became the first US state to impose such a prohibition and delivered the biggest jolt yet to automakers already under pressure to give up fossil fuels and deliver a new generation of electric vehicles (EV).
While the industry depends on gasoline-powered sports utility vehicles and pickup trucks for most of its profit, traditional automakers are investing billions of dollars in electrification and announcing new EV models — with start-ups such as Rivian Automotive and Lucid Motors right on their heels. California’s ban ups the ante.
“There’s an arms race going on here,” said Mary Nichols, chairwoman of the powerful California Air Resources Board, which regulates the emissions of everything from oil refineries to power plants to vehicles.
Newsom’s announcement adds to worldwide momentum in the fight against climate change, coming less than a day after China pledged to become carbon neutral by 2060 — a bold move from the world’s largest polluter that, while still 40 years out, caught environmentalists by surprise.
California is joining more than a dozen countries, including Canada, France and the UK, that are phasing out the internal combustion engine, BloombergNEF data showed. The UK is considering whether to push forward its ban to 2035.
‘AGGRESSIVE’ TARGET
What California wants would be a huge leap for the auto industry. Less than 8 percent of new vehicles registered in the state through the first half of the year were electric.
In 2035, BloombergNEF predicts that about half of US passenger vehicle sales would be battery and plug-in hybrid electric vehicles.
The target is “aggressive,” but it has the potential to speed the pace of EV adoption among automakers, said Stephanie Brinley, a principal automotive analyst for IHS Markit.
“If it actually happens, it does create a reason and impetus to make change happen faster,” Brinley said. If “you have the opportunity for volume there, and you’re going to be able to sell the car, then you can put more money into investing and increasing your capacity faster.”
Newsom’s order — signed on the hood of the forthcoming electric Ford Mustang Mach-E — would inevitably set the tone for states across the US.
‘KISS OF DEATH’
Not only is California the largest auto market in the US, it is also one of the nation’s biggest gasoline consumers and the world’s second-largest EV market, behind only China.
The strength of its transportation policy has always hinged on the fact that automakers, other like-minded states and often the nation have tended to follow suit.
The ban is “a kiss of death for gasoline and petroleum as California tends to be a trendsetter,” said Patrick DeHaan, head of petroleum analysis for fuel-pricing firm GasBuddy.
Key questions remain, including whether California would allow plug-in hybrid sales (used gasoline car sales would be allowed) — and whether the rest of the US would follow. Much of the latter hinges on the upcoming presidential election.
While the administration of US President Donald Trump has aggressively fought California’s efforts to squeeze emissions out of transportation, Democratic presidential nominee Joe Biden has advocated for the widespread adoption of electric vehicles and a national charging network to power them.
There is also the question of enforcement: Combustion engine phaseouts in other parts of the world have lacked the necessary teeth to be effective, such as penalties for dealerships that break the rules and sell gasoline-fueled vehicles. Newsom’s executive order does not lay out exactly how California would ensure that only zero-emissions vehicles are sold.
Still, the Golden State has long been a champion of hybrid and electric vehicles powered by batteries and fuel cells, with aggressive targets that have pushed and prodded automakers to comply.
Its zero-emissions vehicle (ZEV) program requires automakers to sell electric vehicles and trucks and has been adopted by several states including New York, New Jersey and Oregon.
The ZEV regulation has allowed homegrown companies like Palo Alto, California-based Tesla to earn revenue selling emission credits to automakers who cannot meet the mandate.
While 2035 has long been a goal for California to reach zero emissions, Newsom is doubling down on that time line as the state confronts the grim consequences of climate change: Heat waves and massive wildfires have scorched millions of hectares and choked much of the West Coast with toxic air pollution.
The deadline “gives everyone who works in transportation — including the fuel suppliers, planners, manufacturers and fleet managers — a real target to work towards,” Nichols said.
Anyone who thinks Newsom’s goal is symbolic, only cementing where California was already headed, is mistaken, BloombergNEF analyst Nick Albanese said.
“Despite its ambitious policies, I do not think California was on track to hit a 100 percent passenger EV sales share in 2035 before this announcement,” he said.
TRANSITION YEARS
The next 15 years are to be ones of transition, as automakers put forward more vehicles, consumers become more comfortable driving electric and the cost of batteries drops, Nichols said.
Tesla’s “Battery Day” on Tuesday last week did not go unnoticed in the state’s capital, Sacramento. Nichols cited the electric carmaker’s plan to halve the cost of batteries and, consequently, build EVs that more people can afford to buy.
“It’s an electric race to get to cheaper and more effective batteries, and it’s one that manufacturers around the world are competing in,” Nichols said. “That’s the prize: the zero-emission vehicle that’s affordable to everybody.”
Not everyone is happy. Questions remain about charging infrastructure, and how low-income consumers would be able to afford electric vehicles that are largely associated with coastal wealth.
Roughly 2 million new passenger cars and light-duty vehicles are sold in California each year, and the California New Car Dealers Association has several questions about how the directive would be met.
DEALERS CONCERNED
“Banning new non-ZEV vehicles and limiting choice, even 15 years from now, is significantly more difficult than striving to achieve the goals the governor has set forth,” association president Brian Maas wrote in an e-mail. “While we support the state’s goals to combat climate change, there are many questions and factors that need to be thoughtfully considered.”
Newsom’s executive order tasks Nichols’s agency with writing the regulations. There might be some wiggle room in how automakers can achieve the state’s goal. In the past, the air board has made changes when it was clear the market and the technology could not match the rules.
“There’s still some things to figure out, but it’s a significant direction to lay down,” Brinley said.
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