This document provides clear and specific advice on how a ZEV sales standard could be designed. It is intended to serve as an example and is by no means the only approach to SSR design. This document breaks down the ZEV sales standard into component parts, or design elements. For each design element, policy guidance is provided on the specific features that could be included in the element.
The design elements discussed in this document include:
- Scope
- Standard setting
- Vehicle & credit accounting
- Flexibilities
- Reporting
- Compliance & Enforcement
The guidance for each element is split across "simplicity levels" (from highest simplicity to lowest simplicity), indicating the level of simplicity associated with the design and administration of the SSR. For regions with limited resources - this can include few employees, limited SSR information or expertise, limited existing data collection, and/or limited funding - implementing a simple SSR may be the most feasible option. "Simplicity" as defined here relates to the simplicity of the SSR design, as well as administrative simplicity.
The simplicity levels are, for the most part, additive. This means that users wishing to incorporate design guidance from the "Medium simplicity" level into their SSR, will also include guidance from the "High simplicity" level as well. Likewise, users wishing to include design guidance from the "Low simplicity" level will incorporate guidance from the "High simplicity" and "Medium simplicity" levels. The exception to this is the Vehicle & credit accounting design element where the levels are not additive but a substitute for previous levels.
Users should note that there is a high level of assumed knowledge in the presentation of the policy design guidance in the tables below. It is strongly encouraged that users also read the Policy design manual that provides in-depth explanations of each of the design elements, including:
- An overview of what the design element is, and why it may or may not be important for inclusion in the ZEV sales standard
- Examples of how other regions with existing ZEV sales standards have approached the design element.
- An in-depth discussion on the different ways the design element can be designed.
- A summary of the important takeaways from each design element section, including key considerations and best practices.
Scope
Regulated vehicles
This design element identifies and defines the vehicles being regulated under the standard.
Table 1 provides policy design guidance for the regulated vehicles design element. The information is presented in simplicity levels with each level decreasing in simplicity.
Table 1. Regulated vehicle policy design guidance presented in levels of simplicity
| Simplicity level | Design | Resource requirements |
|---|---|---|
| High simplicity | At a minimum, this design element should define the following:
For a LDV regulation, this design element should identify regulated vehicles by physical characteristics (i.e. weight), intended function, or structural characteristics. If a region does not have existing vehicle type definitions, it may choose to adopt definitions from another region. Vehicle types under the LDV classification usually include 'passenger vehicles' and 'light commercial vehicles' or 'cars' and 'trucks'. For an example of this design feature, refer to Article 2 section 1(a) and 1(b) of the EU standard or section (a) of the California standard. This design element should identify the fuel types being regulated. For a ZEV sales standard, FCEVs, BEVs, and PHEVs should be included as regulated vehicles. It is not recommended that HEVs or biofuel vehicles be included under this definition. For an example of this design feature, refer to section (b) and section (e)(1) of the California standard. Minimum all-electric range requirements should be defined for each fuel type. Only vehicles that meet the minimum range requirement should be counted under the standard. The minimum all-electric range requirement for ZEVs should be higher than PHEVs. If a region cannot certify range, it may choose to use range certification information from another region. For an example of this design feature, refer to section (d)(1) of the California standard. Finally, this design element should identify and define whether the regulation applies to new vehicles, used vehicles, or both. Most existing SSRs apply to new vehicle sales. Although, regions that predominantly or solely import vehicles may choose to regulate both new and used vehicles. In these instances, the regulatory emphasis is on the importation of vehicles instead of the registration, sale, or production of vehicles. For an example of a region with an import market, refer to section 12 of the Australia standard. A "new vehicle" is often defined as a vehicle that has not previously been registered or sold to the ultimate purchaser. For an example of a region with a large domestic manufacturing market, refer to Article 2 section 1(a) and 1(b) of the EU standard. | Data required on new and/or used vehicle sales by vehicle type and fuel type. |
| Medium simplicity | If a region does not have existing vehicle type definitions, or a process for measuring vehicle range, it could develop these standards and processes. To measure vehicle range, the region must have the capability to undertake drive-cycle testing. This testing should use one of the prominent existing drive-cycle testing procedures. For more information, refer to the Measuring SSR metrics section in the Metrics & measurement methods document. | Creation and implementation of vehicle definitions. Implementation of drive-cycle processes and procedures. |
| Low simplicity | - | - |
Refer to the Regulated vehicles section of the Policy design manual for further information.
Regulated entities
This design element identifies and defines the entities being regulated under the standard.
Table 2 provides policy design guidance for the regulated entities design element. The information is presented in simplicity levels with each level decreasing in simplicity.
Table 2. Regulated entities policy design guidance presented in levels of simplicity
| Simplicity level | Design | Resource requirements |
|---|---|---|
| High simplicity | At a minimum, this design element should:
This design element should define the entities being regulated under the standard. SSRs regulate the highest upstream vehicle supplier possible. This can include vehicle auto manufacturers or entities involved in the importation and sale of vehicles, depending on the region's vehicle market. Usually, the entity granted vehicle type approval is the regulated entity. For an example of a region with an import market, refer to section 12 of the Australia standard. For an example of a region with a large domestic manufacturing market, refer to section (a) of the California standard. To reduce the number of entities being regulated under the standard, regulated entities that are connected through financial, or leadership means could be regulated as a group. This approach may be more appropriate for regions with domestic manufacturing. For an example of this design feature, refer to Article 3 section 2 of the EU standard. To further reduce the number of entities being regulated under the standard, entities with small sales and/or production volumes should be exempt from the regulation. The actual value that qualifies a regulated entity for an exemption should be contextually relevant to the region. If a regulated entity sells/produces less than the threshold volume in a given year, they should be exempt from the standard. Likewise, if a regulated entity sells/produces more than the threshold, they should be required to meet the standards. Note that this exemption should have an end date, at which time the definition of regulated entities should be broadened to include smaller volume entities. For an example of this design feature, refer to Article 10 section 1 of the EU standard. | Data required on entities being granted vehicle type approval (or other data identifying regulated entities), and sales and/or production volume for each regulated entity. |
| Medium simplicity | In addition to the "High simplicity" requirements above, the regulated entities design element could include the following:
Instead of a total exemption for entities with small sales/production volumes, alternative standards could be required, including:
For an example of this design feature, refer to section (b)(2) of the California standards. | No additional data requirements. Additional data tracking, monitoring, and enforcement requirements for regulating entities. Additional reporting requirements for small volume regulated entities. |
| Low simplicity | - | - |
Refer to the Regulated entities section of the Policy design manual for further information.
Standard setting
ZEV sales targets
This design element sets ZEV sales percentage targets across future years.
Table 3 provides policy design guidance for the target design element. The information is presented in simplicity levels with each level decreasing in simplicity.
Table 3. Target policy design guidance presented in levels of simplicity
| Simplicity level | Design | Resource requirements |
|---|---|---|
| High simplicity | At a minimum, this design element should:
This design element should define the percentage of ZEV sales a regulated entity is required to meet across multiple future years (this can be model year, calendar year, or financial year). Targets should align with the region's broader economic, social, and environmental goals. A region may choose to adopt the ZEV targets of an existing SSR such as the California, Canada, or UK standards. Targets should include at least five consecutive future years to foster regulatory certainty. Note that BEVs, FCEVs, and PHEVs are all considered ZEVs under this standard. For examples of this design feature, refer to section (c)(1)(B) of the California standard and section 30.12 of the Canada standard. | Information on broader economic, social, and environmental goals and understanding of how those goals can be translated into ZEV sales targets. |
| Medium simplicity | In addition to the "High simplicity" requirements above, the targets design element could include:
To incentivize the sale of BEVs and FCEVs, a limit could be placed on the percentage of PHEVs that can count toward the ZEV target. The PHEV allowance could be a fixed percentage across regulated years (e.g., 20 percent), or it can decrease across years (e.g., from 45 percent to 20 percent across multiple years). For examples of this design feature, refer to section (e)(1)(C) of the California standard and section 30.13(1)(b) of the Canada standard. | No additional data requirements. Additional monitoring, and enforcement requirements for regulating entities. |
| Low simplicity | - | - |
Refer to the Standard setting and ZEV sales targets sections of the Policy design manual for further information.
Vehicle & credit accounting
This design element defines the credit value of each vehicle type under the standard.
Table 4 provides policy design guidance for the vehicle & credit accounting design element. The information is presented in simplicity levels with each level decreasing in simplicity.
Table 4. Vehicle & credit accounting policy design guidance presented in levels of simplicity
| Simplicity level | Design | Resource requirements |
|---|---|---|
| High simplicity | At a minimum, this design element should:
This design element should define the credit value of each BEV, FCEV, and PHEV sold in a given year. The most straightforward accounting approach is to indiscriminately award one credit per ZEV sale (i.e., BEV, FCEV, and PHEV sales all have a credit value of one). Therefore, the number of ZEV sales required by a regulated entity would be: ZEV sales target × sales production volume Where: ZEV sales target is the ZEV sales percentage for a given year Sales/production volume is the total vehicle sales of the regulated entity in the same year. Note that only vehicles that meet the minimum all-electric range requirement should be counted under the standard. Minimum ranges for each fuel type should be defined in the regulated vehicles design element. | Data on vehicle fuel type and all-electric range required. |
| Medium simplicity | While the calculation for the number of ZEV sales required by a regulated entity would be the same as above, the minimum requirements for a vehicle to be counted under the standard could be more stringent. Instead of the "High simplicity" accounting system above, this design element could discriminately assign credit values based on fuel type. Credit values could be based on minimum vehicle requirements, including:
If the region does not have their own versions of these requirements, a region may choose to adopt requirements from California. BEVs/FCEVs and PHEVs should be separate within the regulation as requirements for each of these fuel types will be different. If a BEV/FCEV or PHEV can meet the requirements listed above, each vehicle could be assigned up to one credit. For BEVs that do not meet the requirements, no credits should be awarded. For PHEVs that do not meet all requirements, partial credits could be awarded. For an example of this design feature, refer to section (d)(1-7) and section (e)(1)(A-B) of the California standard. | Creation and implementation of additional standardized charging, durability, battery labeling, and warranty requirements. Additional data tracking, monitoring, and enforcement requirements for regulating entities Additional reporting requirements for regulated entities. |
| Low simplicity | In addition to the "Medium simplicity" requirements above, the regulated vehicles design element could also include the following:
In acknowledgement of technological advancements and to incentivize longer all-electric range PHEVs, the regulation could require increasing minimum all-electric ranges across years to earn the same credit value per vehicle. For an example of this design feature, refer to section 30.13(1)(a) of the Canada standard. | Additional data tracking, monitoring, and enforcement requirements for regulating entities. Additional reporting requirements for regulated entities. |
Refer to the Vehicle & credit accounting section of the Policy design manual for further information.
Flexibilities
This section provides guidance on the inclusion of flexible design elements that can reduce regulatory compliance costs for the regulated entity. Note that flexibilities are optional and are non-essential for the functioning of the SSR.
Table 5 provides policy design guidance for flexible design elements. The information is presented in simplicity levels with each level decreasing in simplicity.
Table 5. Policy design guidance for flexible design elements presented in levels of simplicity
| Simplicity level | Design | Resource requirements |
|---|---|---|
| High simplicity | The simplest SSR design does not require the inclusion of flexible design elements. | None. |
| Medium simplicity | Decision makers wishing to increase the economic efficiency of their SSR and incentivize over compliance from regulated entities could include the following flexible design elements: Trading between regulated entities allows those that are under compliant to purchase credits from those that are over compliant. Trading is largely unsupervised by the regulating entity; however, the regulation should include reporting requirements to determine the number of credits traded and the regulated entities involved in the trade. For an example of this design element, refer to section 45 and section 46 of the Australia standard and section (f)(4) of the California standard. Credit banking allows regulated entities to "bank" surplus credits for future years and incentivizes over compliance. If credit banking is included in the regulation, a time limit or expiration date of between two and five years should be placed on the credits. This is to avoid the buildup of large stores of credits by any one regulated entity. For an example of this design feature, refer to section (f)(3)(C) of the California standard. | Additional data tracking, monitoring, and enforcement requirements for regulating entities. Additional reporting requirements for regulated entities. |
| Low simplicity | Decision makers negotiating with regulated entities may choose to include some or all of the following flexible design elements: If any of these flexibilities are included in the regulation, they should be phased out over time. | Additional data tracking, monitoring, and enforcement requirements for regulating entities. Additional reporting requirements for regulated entities. |
Refer to the Flexibilities section of the Policy design manual for further information.
Reporting
This design element stipulates specific reporting requirements for regulated and regulating entities.
Table 6 provides policy design guidance for the reporting design element. The information is presented in simplicity levels with each level decreasing in simplicity.
Table 6. Reporting policy design guidance presented in levels of simplicity
| Simplicity level | Design | Resource requirements |
|---|---|---|
| High simplicity | At a minimum, the reporting design element should outline:
If decision makers choose the simplest ZEV sales standard design then each regulated entity should report on the following:
To reduce administrative burden, a report template should be included in the regulation so that regulated entities are required to provide reports to regulating entities in a uniform manner. The design element should include record keeping requirements. The regulation should require regulated entities to maintain documents and information for at least five years after the submission of the report. The design element should also include details on the procedure for providing report documents to the regulating entity upon request. The regulation should stipulate a maximum number of days the regulated entity has to provide these records to the regulating entity (e.g., 30 days). The regulation should stipulate a reporting deadline by which time all regulated entities must submit their annual report. For an example of this design element, refer to section (j) of the California standard. | Review and audit of reports by regulating entities. Creation and submission of reports by regulated entities. |
| Medium simplicity | In addition to the reporting requirements outlined in the "High simplicity" section above, if flexibilities are included in the regulation, each regulated entity should report on the following:
| Additional review and audit of report by regulating entity. Additional reporting requirements by regulated entities. |
| Low simplicity | In addition to the reporting requirements outlined in the "Medium simplicity" section above, the regulation could include a requirement for the public release of ZEV records by regulating entities to improve data transparency. The following information could be disclosed:
For an example of this design element, refer to section (k) of the California standard. | Creation and maintenance of central location (online) to host the publicly available ZEV records by the regulating entity. |
Refer to the Reporting section of the Policy design manual for further information.
Compliance & enforcement
This design element outlines penalties for non-compliance and incorrect reporting of information.
Table 7 provides policy design guidance for the compliance & enforcement element. The information is presented in simplicity levels with each level decreasing in simplicity.
Table 7. Compliance & enforcement policy design guidance presented in levels of simplicity
| Simplicity level | Design | Resource requirements |
|---|---|---|
| High simplicity | At a minimum, the compliance & enforcement design element should outline the following:
This design element should stipulate a penalty amount for non-compliant regulated entities. The penalty amount should be high enough to deter non-compliance but not so high as to cause large increases in vehicle prices by regulated entities. The regulation should include a per credit penalty calculated using the following formula: Penalty = credit deficit × penalty Where: Credit deficit = the number of shortfall vehicle values Penalty = the penalty amount in regional currency For an example of this design element, refer to section (m)(3) of the California standard. Enforcement is required to ensure that regulated entities that are non-compliant are penalized. While enforcement activities are not usually outlined in the regulation, they are implicit in the issuing of a penalty. | Monitoring technology, skilled personnel, and an operational legal system. |
| Medium simplicity | In addition to the "High simplicity" section above, this design element could include the penalties for regulated entities for submitting incorrect information to the regulating entity. This penalty is designed to deter the provision of incorrect information. The regulation may include a grace period where upon notification of incorrect information, regulated entities have a specified amount of time (e.g. 30 days) to resubmit the correct information. Beyond this point, penalties could be issued. These penalties should be of lower value than the penalty for non-compliance but should be high enough to deter submission of incorrect information. | Additional burden on prosecuting regulated entities. |
| Low simplicity | - | - |
In the case that monetary penalties are not feasible in a region, the regulation could include non-monetary penalties for non-compliance. For example, type approval could be withheld in future years for non-compliant regulated entities. This would result in a regulated entity not being able to sell vehicles in the region.
Refer to the Compliance & enforcement section of the Policy design manual for further information.
Review process
In addition to the design elements listed above, users should consider the inclusion of a periodic review process. The regulation should stipulate what the review process will involve, and the frequency or timing of the process. The review should include an assessment of the effectiveness of the policy in achieving the policy goals, and an opportunity to propose and finalize updates to the policy if required.