In California, Clean Air Rules Force Changes in Autos

July 22, 2002
By DANNY HAKIM

DETROIT, July 21 - While automakers rail against landmark
California legislation that would force them to cut
greenhouse gas emissions by the end of the decade, they
face a much more immediate challenge from the state.

On Monday, Gov. Gray Davis of California will sign a bill
requiring automakers to cut carbon dioxide emissions by the
2008 model year. The bill directs the California Air
Resources Board to decide how much to reduce emissions over
all and how to do it.

But of more immediate concern for automakers is one of
California's last big initiatives on air pollution - a
decade-old mandate to create zero-emission vehicles that
could soon force them to sell more than 100,000 electric
cars and other fuel-efficient vehicles in the state each
year.

Although the zero-emission standard, which was scheduled to
take effect with the 2003 model year, has been delayed by a
court injunction, it has prompted automakers to spend
billions of dollars developing technologies to cut harmful
tailpipe emissions and has led them to start promoting and
selling electric vehicles. In addition, New York and
Massachusetts plan versions of the Z.E.V. mandate, as it is
known, meaning the zero-emissions requirement could cover
almost one-fifth of the American auto market. Other states
could follow suit.

The mandate, set in motion in 1990, aims to cut emissions
of nitrogen oxide and hydrocarbons, large contributors to
smog, and particulates, which lead to respiratory ailments.
But the mandate has been delayed by a legal challenge from
General Motors and DaimlerChrysler, which won an injunction
in federal court last month.

State regulators have appealed and insist they will be able
to tweak the regulation, if necessary, to mollify legal
objections.

The rule requires large automakers to derive 10 percent of
sales from vehicles that produce nearly zero emissions,
including at least 2 percent from vehicles with no
emissions. Auto executives say that 2 percent requirement
has forced them to keep alive a technology they would just
as soon give up on: the battery-powered automobile, the
only pure zero-emission vehicle now made.

To comply, carmakers are already selling everything from
armies of beefed-up golf carts to a few electric versions
of sport utility vehicles to highly efficient versions of
gas vehicles. Nissan is equipping most Sentra sedans sold
in California with an extra catalytic converter. Toyota is
advertising an electric version of its RAV4 sport utility
vehicle on a billboard in Berkeley, at nearly double the
normal price.

Some executives worry that they will have to take
additional steps to meet the mandate, like subsidizing
sales of costly electric vehicles and spending thousands of
dollars a vehicle to convert gas cars to electrics.

"I remember I had a meeting in Tokyo where they showed me
all the cost of this stuff. I said, `Oh my God, the others
have to do this too?' " Carlos Ghosn, the chief executive
of Nissan, said.

"Nobody believes in it, but you have to do it," Mr. Ghosn
said. "It's a huge cost, but it's part of the cost of doing
business."

California regulators, as well as environmental groups,
counter that the rule has forced automakers to accelerate
the development of cleaner technologies with sound
prospects. These include hybrid engines, which run on both
gasoline and electricity, as well as hydrogen fuel cells, a
zero-emission technology widely considered as the power
source of the future.

"They wouldn't have been topics of discussion if not for
Z.E.V.," said Jerry Martin, a spokesman for the California
Air Resources Board, the regulatory body that established
the mandate. "The standard fare for drivers around the
world would be 8,500-pound S.U.V.'s, probably half of them
powered by diesel." The air resources board has also
modified the regulation several times to give automakers
credit for cars with low emissions.

Many zero-emission vehicles in California are more golf
cart than car and meant for gated communities,
city-sponsored car sharing programs and corporate and
government fleets. The Think division of Ford sells a
beefed-up golf cart called the Neighbor for $6,500, which
needs six to eight hours to recharge after traveling 30
miles. Ford is also considering bringing an electric
subcompact sold in Europe, the Think City, to California.

For a Think Neighbor "we had a man trade in his Cadillac,"
said H. L. Fletcher, fleet manager of Fritts Ford in
Riverside, Calif., who sells 40 to 50 Neighbors a month.

Mr. Fletcher said the man, in his mid-80s, was "too old to
drive a big car and bought a Think to drive back and forth
from the grocery store and get himself around."

But many car executives say the development of realistic
technologies is being sacrificed for the money-losing,
obsolete idea of electric cars.

California has shown some flexibility, though. Nissan, for
instance, has a varied compliance plan. It makes an
electric station wagon, the Altra, that can travel 100
miles between charges and is being leased to power
companies like Southern California Edison. It also makes a
big golf cart, the Hypermini, that is being used in
Pasadena and Palm Springs for parking enforcement. And
Nissan will get credits for its modified Sentra.

The most familiar vehicle is the electric version of
Toyota's RAV4, which can go up to 78 miles an hour and
travel up to 126 miles before it requires a recharge. The
RAV4 EV sells for $42,510, versus a $17,000 starting price
for a gasoline version, although it is eligible for $13,000
in state and federal rebates. Toyota has sold 120 since
February. "We lose large amounts of money on every EV we
sell," said Mike Love, Toyota's national regulatory affairs
manager. "They cost us in excess of $100,000 apiece to
build."

New York and Massachusetts have plans to adopt mandates
that would give automakers until the 2006 model year before
they have to produce any pure zero-emission vehicles. Until
then, car companies could comply by selling hybrids,
efficient gas cars or cars that use alternative fuels.

"The small neighborhood-type vehicles really aren't as
marketable here in the Northeast," said Gina McCarthy,
assistant secretary for the environment in the
Massachusetts executive office of environmental affairs.
"Residents in Massachusetts are really looking to get
access to hybrids. They're buying them now, and they're on
waiting lists. We want more hybrids."

Erin M. Crotty, the commissioner of the New York State
Department of Environmental Conservation, said earlier this
year that the state's Z.E.V. mandate will be a strong
incentive for automakers.

For the moment, though, both states are awaiting the
outcome of the legal challenge in California.

In 1990, when California's zero-emission mandate was
formulated, there were hopes that the electric vehicle
would be viable for the mass market by the end of the
decade. But technology has still not solved the crucial
drawbacks: short range and long charging time.

G.M., now the most outspoken opponent of the Z.E.V.
mandate, was a pioneer in electric vehicle development in
the 1990's with its EV-1 sedan, spending more than $1
billion before abandoning it.

G.M. plans to use credits from sales of the EV-1 to help
meet the requirement, though it is not clear how it will
comply if its legal challenge fails. Part of its plan,
which has angered competitors, is to give away electric
vehicles it has purchased from Club Car, a golf cart maker.


"You don't mandate markets," said Chris Preuss, a G.M.
spokesman. The Z.E.V. mandate, he added, was "completely
unworkable both in California and anywhere else."

The suit in federal court filed by G.M. and
DaimlerChrysler, along with some state dealers, contends
the mandate is superseded by federal fuel economy
standards. Though reducing gas mileage is one way to cut
harmful emissions, direct action on that is reserved for
the federal government. A federal judge in Fresno granted
the plaintiffs an injunction last month, saying the
automakers had a strong case because of a 2001 amendment
that gave credits for high-mileage vehicles.

The air quality board, which at first threatened to enforce
an older version of the regulation, has since appealed and
says it will rewrite the mandate if necessary.

Environmental groups say they have little choice but to
turn California into a battleground. The auto industry has
successfully lobbied since the 1980's to prevent
significant increases in federal gas mileage standards, and
the Bush administration rejected the Kyoto protocol, the
international treaty to reduce global warming emissions.

Since California's air quality regulations predate the
federal Clean Air Act, it has its own, tougher rules, and
other states can choose whether to follow them. The Z.E.V.
rule was set in motion before global warming was a
hot-button issue and was aimed at pollutants that lead to
smog and other environmental hazards. Whether carbon
dioxide, linked to global climate change, is itself a
pollutant is a matter of much debate, but the Z.E.V.
mandate will have the practical effect of curbing such
emissions as well.

"It forced the auto industry to evaluate and use
technologies they never wanted to even look at," said
Daniel Becker, director of global warming strategies at the
Sierra Club, adding, "As a direct result of that, we have
hybrid electric vehicles on sale today."

http://www.nytimes.com/2002/07/22/business/22ZERO.html?ex=1028352510&ei=1&en=234c9901ce3d24d3