California Leads the Way in Decarbonizing Medium- and Heavy-Duty Transportation: What it Means for Fleet Owners Across the U.S.

Stay in the know with Edison Energy’s Pulse on Policy series, a biweekly publication covering the latest in global legislation and regulation that impact corporate procurement plans and sustainability goals.

As the U.S. reaches its tipping point towards mass adoption of light-duty electric vehicles, the focus shifts towards an increasingly crucial challenge: electrifying medium-and heavy-duty vehicles (MHDV). The transportation sector is the largest source of emissions in the U.S., accounting for 27% of all  greenhouse gas emissions as of 2020, with medium- and heavy-duty trucking responsible for a quarter of these emissions.

While incentives have been a common tool for accelerating EV adoption across the U.S., there has been a recent shift towards sticks rather than carrots alone. With the EV market maturing, more states are turning to regulations that require zero-emission vehicles (ZEVs) to make up a specific percentage of all manufacturer sales or require their purchase. Medium- and heavy-duty vehicles are not exempt from this, as we have seen from two recent regulations in California.

This week’s Pulse on Policy will explain how California’s Advanced Clean Trucks and Advanced Clean Fleets regulations work in tandem to decarbonize the MHDV sector, with insights from Simon Horton, Edison Energy’s Director of EV Design & Delivery, on potential impacts to fleet owners across the U.S. and how they can begin preparing for increased EV adoption targets in the coming years.

Benefits of MHDV Electrification

The business case for MHDV electrification is being made – electric medium-and heavy-duty vehicles offer the advantage of long-term operational cost savings through reduction of maintenance and fuel costs over the lifespan of the vehicles. Higher upfront costs are being addressed through federal tax credits, vehicle incentives, and infrastructure support. However, the benefits to decarbonizing this sector of transportation go beyond the bottom line.

In addition to its greenhouse gas emissions, MHDVs produce tailpipe emissions like nitrogen oxide, particulate matter, and volatile organic compounds, causing air pollution and air quality-related health issues. These pollutants disproportionately impact disadvantaged communities and communities of color – an American Lung Association study finds that people of color are up to three times more likely to live in areas with air pollution. Electrifying MHDVs can help reduce negative health outcomes, clean up the air, and save lives.

How California rules drive EV adoption across the U.S.

California has been a frontrunner when it comes to transportation electrification policy and adoption, with EVs reaching 18% of all new car sales in the state, compared to just 6% in the U.S. as a whole. California’s Air Resource Board (CARB) is responsible for much of this policy, enacting or proposing several mandates in recent years that have subsequently been adopted by other states. This includes Advanced Clean Trucks and Advanced Clean Fleets, which target medium-and heavy-duty vehicles and large fleets for electrification.

At the federal level, the Environmental Protection Agency (EPA) has tightened up its emissions standards for heavy-duty vehicles, yet its latest rule lags California.

Under the Clean Air Act of 1970, CARB was granted federal authority to set its own emission standards – far stricter than federal standards. Since then, CARB has continually set leading standards for air quality, pollution, and most recently, greenhouse gas emissions that exceed federal limits.

Because of this, 17 other states, shown below, have adopted CARB emissions standards in full or at least in part.

With this streamlined pathway for adoption, many of these 17 states have also continued to follow CARB regulations that require the manufacturing or sale of EVs. Since CARB’s release of the Advanced Clean Trucks regulation in 2020, six other states have joined California in adopting the rule. It is expected that additional states will join in the coming years and that Advanced Clean Fleets will follow a similar path after it is fully enacted.

^{States that have adopted CARB emissions standards}

Advanced Clean Trucks (ACT) Rule

The Advanced Clean Trucks rule was the first of its kind policy unanimously passed by CARB in 2020, requiring manufacturers to meet an increasing percentage of medium- and heavy-duty ZEV sales beginning in 2024. The sales targets vary by vehicle class, but each increases every year, with an eventual goal of 100% medium- and heavy-duty ZEV sales by 2045.

ACT Sales Targets by year and vehicle class

^{Source: California Air Resource Board Final ACT Regulation}

Requiring manufacturers to meet sales targets should increase the medium and heavy-duty EV options available to fleet owners, while also helping to drive down costs in the long term. While ACT does not require that fleet owners purchase the vehicles, it does mandate that employers with 50 or more trucks report on their fleet operations to better inform future strategies and regulations.

The ACT rule has already been adopted by other states through the CARB pathway. Six states, including Oregon, Washington, New York, New Jersey, Massachusetts, and Vermont have fully adopted ACT, with North Carolina, Illinois, Maine, and Maryland working through the approval and rulemaking processes.

Proposed Advanced Clean Fleets (ACF) Rule

While the ACT rule requires manufacturers to sell medium- and heavy-duty zero-emission vehicles, the proposed Advanced Clean Fleets (ACF) rule targets the other side of the solution: fleet owners and operators.

Under the proposed rule, specific fleet types must begin purchasing only ZEVs by a specific target year. These targets vary by fleet type, highlighted below:

• Drayage Fleets: Beginning in 2024, fleet owners can only purchase zero-emission trucks, while internal combustion vehicles must be retired as the end of their useful life. Drayage fleets must reach 100% zero-emission vehicles by 2035.
• Public Fleets: State, local, and county agencies must ensure that 50% of vehicles purchased are zero-emission beginning in 2024, reaching 100% of purchases by 2027.

In addition to public and drayage fleets, federal fleets and high-priority fleets are also impacted by ACF. High-priority fleets are defined as entities with gross revenue of at least $50 million that own at least one vehicle over 8,500 lbs., or entities that own and operate a fleet of at least 50 vehicles over 8,500 lbs. High-priority and federal fleets can meet ACF compliance through one of two pathways:

1. Model Year Schedule: Begin purchasing only zero-emission vehicles in 2024 and retire legacy vehicles at the end of their useful life
2. ZEV Milestone Schedule: Requires that a certain percentage of the total fleet be zero-emission at specific year milestones, with different requirements based on vehicle type

^{Source: California Air Resource Board ACF Fact Sheet}

Beyond setting fleet targets, ACF will also include an accelerated sales mandate for manufactures, moving up their 100% ZEV target from 2045 to 2040.

While this is still a proposed rule and it may undergo changes, ACF stands to be another first-of-its-kind policy that drives zero-emission medium- and heavy-duty vehicle adoption in California. Similar to ACT, it is likely that other states will follow California’s lead and adopt ACF or a similar regulation, pushing fleets across the country towards ZEVs.

How Can Fleet Owners Plan for Regulations?

With ACT going into effect in 2024, and ACF likely to follow, MHDV fleet owners and operators face a rapidly changing landscape in the coming years. They must be ready to not only be compliant with new regulations, but to also account for operational, procurement, infrastructure, and energy changes that come with transitioning to zero-emission vehicles.

Simon Horton, Director of EV Design and Delivery, provided the following best practices and early actions for fleet owners and operators to successfully plan for the regulatory changes:

Identify internal and external stakeholders to champion the transition

• Regulations, incentives, and corporate mandates notwithstanding, fleet operators need to identify and foster champions at all levels to avoid unintentional roadblocks to the transition. These include internal stakeholders such as facility managers, fleet operators, yard supervisors, and procurement staff, as well as external stakeholders such as financing partners, city officials, and utilities.

Get ahead of the regulations

• Review pending state and local regulations to understand how they will impact your fleet and what targets will need to be met. There will likely be logjams with utilities, equipment providers, and permitting agencies once enforcement of the regulations commences. Early engagement with design and technology providers and OEMs will place operators and owners earlier in the queue for all of these long lead challenges.

A long-term strategic electrification roadmap is key to guiding the transition

• Early-stage projects are a great way to start, but understanding future goals will inform intelligent design considerations, capital budget forecasting, future power needs, and total cost of ownership calculations.

Don’t be afraid to get started – pilot sites can be great case studies

• Carefully designed pilot projects that identify vehicles and route cycles that work within current technology constraints ensure that the pilots are set up for success. Work with your partners to ensure that the pilot infrastructure can be incorporated into broader-scale deployments in the future.

Get in touch with our Transportation Electrification team to learn more.

Explore previous installments in our Pulse on Policy series.