The coming Cal-LEV crisis

Editor’s note: For more background on Cal-LEV / Cal-ZEV emissions standards, please check out our backgrounder here.

On November 15th the Colorado Air Quality ControlCommission, part of the Colorado Department of Public Health and Environment, decided 8-0 to adopt rules to formally commit the State of Colorado to California’s Low Emission Vehicle (Cal-LEV) standards.

This came about as a follow up to Governor Hickenlooper’s executive order from June announcing somewhat magisterially that Colorado would do just that.

It was, of course, a conspicuously political act; Mr. Hickenlooper has his eyes set on higher office, most likely a Presidential run in 2020, and for that bid to be successful he needs the support of a) a sizable chunk of his progressive base, and b) the financial help of some well-heeled friends, such as, say, ElonMusk of Tesla fame.

For review: each state in the union has the option of either adopting the federal emission standards, or signing onto a waiver, granted to California decades ago, enabling that state to concoct their own, stricter standards. There is a catch, of course; should a state elect to hop in the boat with California, they are then committed to those standards, including whatever changes California regulators decide to make to them.

This is the situation Colorado now finds itself in.

Essentially, the Cal-LEV standards dictate that 10 percent of an auto dealerships sales, by 2022, must come from low emission vehicles – electrics, hybrids, that sort of thing.

The problem is that those vehicles only account for about one percent of sales currently. That is a mighty gap for dealerships to close in a few short years, made more difficult yet by the concurrent facts that 1) most pickup trucks and SUV’s cannot reliably be powered by electric or even hybrid engines due to powertrain requirements that have proven elusive to being met by the LEV engine technology, and 2) Colorado’s climate, terrain, geography, and lifestyle demand extensive ownership of pickup trucks and SUV’s.

So now that the standards have been formally implemented, many are asking, “what happens going forward?”

First off, dealerships are going to be preparing for the 2022 day of reckoning, which will mostly involve discounting LEV-style vehicles, and making up the difference by increasing the price on the pickups and SUV’s people actually buy, meaning that if you are thinking of buying a new truck or SUV in the future, you had better be prepared to pay thousands more for it.

Given the rather soft demand for electric vehicles today, dealerships likely will be looking about for a place to buy Cal-LEV credits, which will be needed to offset the likely shortfall of the new 10 percent target.

Of course, the only outfit that will have credits to spare is Tesla, who sells nothing but electric cars (and few of those, which is why sale of Cal-LEV credits is so important to them).

Given these dynamics, any casual observer could reasonably conclude why announcing the adoption of the standards is so important to Hickenlooper, eager as he is for the financial and star-power support of his friends the Musks.

As a technical note, if, and when, California does decide to make their standards even more egregious for whatever reason (as they regularly do), since Colorado is now on the waiver, we will indeed be subject to them despite having no representation in the state which makes the change.

There is a bit of an escape hatch – a new rulemaking process would be convened to decide whether to stay on the waiver, or say to heck with the executive order, and rule-make our way back out.

Given the fact that the current commission voted unanimously to adopt the standards, and that the incoming administration is unlikely to submit any forthcoming appointments to the commission who are any less ideological in their outlook than the current one, any new rulemaking is unlikely to produce positive results.

Unfortunately, this is only the beginning of the bad news. California has another set of mandates as well, called the Zero Emission Vehicle standards. As the name implies, they do much the same thing as the Cal-LEV standards, however in this case they apply the sales quota to zero-emission cars – that is, only fully battery-powered. Hybrids need not apply. If you think the LEV standards will be a tough hill for dealerships to climb, you can imagine how steep a slope the specter of ZEV has them contemplating.

Even Hickenlooper realized that the ZEV windmill was too much for the state to tilt at, so that standard was not included in his executive order. So why is it now on the AQCC’s to-do list?

Back when the pre-hearing was held to set the stage for the LEV rule making, an army assembled by the environmental left was dispatched to attend, and essentially browbeat the commission into considering not only LEV, but ZEV as well. So now, we face another battle, to be held in May, around Colorado’s acceptance of this even bigger albatross.

The offense to the democratic process is striking. Imposing the mandate via executive order rather than through the normal legislative channels was bad form; forming public policy by capitulating to the demands of a handful of noisy activists evokes revolutionary France.

There may be one saving grace. President Trump has made gestures towards a policy revoking California’s waiver altogether, committing them to the same federal standards as the rest of the country. If that happens, it would certainly solve a looming economic and constitutional dilemma for Colorado.

It does open the door to re-examining the larger question – are vehicle emission standards a federal issue, since air pollution does not respect state boundaries; or is it more appropriately a state issue, as each state has unique characteristics and conditions, and we are, after all, a republic of 50 separate states?

It is a heady issue which demands serious thought, but two things ought to be certain out the gate – the issue should not be decided for one state by another, nor by the vagaries of a mob.

Mr. Sloan is an energy and environmental policy fellow at Centennial Institute and the Policy Director for Principles That Matter.