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Press Release · September 14, 2007

In California’s Global Warming Venture, Zero-Emissions Vehicle Program Has Valuable Lessons To Teach

SAN FRANCISCO, California, September 14, 2007 — An ambitious California program aimed at reducing vehicle emissions may have overreached in its technological goals. But its outcome could serve as a vital lesson in the state’s efforts to combat global warming through regulation, according to a study released today by the Public Policy Institute of California (PPIC).

The 1990 Zero-Emission Vehicle Program was designed to require the auto industry to develop zero-emission vehicles. Given the technology available, the program became a de facto mandate to develop battery-powered vehicles. But to date, it has had little effect on private sector improvement of the cost-effectiveness or performance of battery-electric technology.

The problem? The program’s regulatory goals were tightly tied to this single, very advanced technology—and overestimated how rapidly battery-electric vehicles could become market-ready. When the technology failed to live up to performance or cost expectations, the state made major changes to the program. This sent uncertain demand signals to business—potentially slowing industry innovation.

“Although disappointing, the program has valuable implications for California’s current efforts to curb global warming,” says PPIC research fellow Louise Bedsworth, co-author of the study with Margaret Taylor, assistant professor of public policy at the University of California at Berkeley. “As with the zero-emission vehicle program, meeting the state’s global warming goals will require significant technological advances. The challenge for policymakers is how to use regulation to inspire this development in the private sector—a delicate balancing act that could have a better chance of success if it accounts for technological and industrial realities.”

One recommendation is that any action or mandate be technology-neutral. Linking everything to the fate of one technology is more volatile for business and can result in over-commitment to something that does not, perhaps cannot, meet expectations. It also fails to consider the potential for “off-shoot” technological advances. For example, the zero-emissions program made complicated changes to take advantage of spillover technology—such as providing credits for hybrid vehicles. “This demonstrates the role regulation can play in pushing technology, but also highlights the risks of betting on a single technology,” says Bedsworth.

The Public Policy Institute of California is a private, nonprofit organization dedicated to improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett.