CSG Law Alert: NJDEP Considering Regulation Barring the Sale of Most Gas and Diesel Passenger Vehicles and Light Duty Truck Vehicles by 2035

New Jersey environmental regulators recently unveiled an ambitious rule change aimed at increasing the number of electric vehicles on the road over the next 12 years while significantly curtailing the number of vehicles which use fossil fuels, effectively barring the sale of most fossil-fueled vehicles by 2035.

On August 21, 2023, the New Jersey Department of Environmental Protection (“NJDEP”) proposed adopting California’s Advanced Clean Car Rule II or “ACC II,” (the “Proposed Rule;” See 55 N.J.R. 1773(a)).  If adopted, the Proposed Rule will incorporate the ACC II in New Jersey, and by 2027, accelerate a Zero Emission Vehicle (“ZEV”) sales requirement beginning with Model Year (“MY”) 2027 and increasing each MY until MY 2035 and thereafter, when there would be a 100% ZEV sales requirement. The Proposed Rule would be applicable to manufacturers for the sale of both passenger cars and light-duty trucks. The Proposed Rule is bold in setting and accelerating timeframes for phasing out vehicles fueled with fossil fuels. It remains to be seen how this proposal fits in with other actions necessary to transform the electrification of the passenger vehicle fleet, such as increasing New Jersey’s electrical grid capacity and charging infrastructure.

Overview of the Proposed Rule

Under the Proposed Rule, as of January 1, 2027, no person who is a resident of New Jersey, or who is operating an established place of business within New Jersey, shall sell, lease, import, deliver, purchase, acquire, register, receive, otherwise transfer in the State, or offer for sale, lease, or rental in New Jersey, a new MY 2027 or subsequent MY passenger car, light duty truck, or medium duty vehicle, unless the vehicle has been certified by the California Air Resources Board (“CARB”). Although the ACC II commences in California in MY 2026, NJDEP is accounting for the eventual transition in New Jersey, and commences the Proposed Rule applicable to MY 2027 vehicles. New MY 2026 passenger cars, light duty trucks and medium duty vehicles that were produced and delivered for sale in New Jersey after December 31, 2025, but before January 1, 2027, are not required to be certified by CARB.

There are certain vehicle transactions that are not subject to the ACC II prohibitions: certain emergency and military vehicles; a non-New Jersey registered vehicle that is held for daily lease or rental to the general public engaged in interstate commerce; vehicles acquired as a result of replacing a vehicle that was damaged or inoperative beyond reasonable repair, or was stolen while out of New Jersey; inherited vehicles; vehicles transferred by court decree; a vehicle certified by CARB or EPA that was originally registered in another state by a resident of that state that subsequently establishes residence in New Jersey; a vehicle transferred directly from one dealer to another dealer; a vehicle sold to be wrecked or dismantled; or a vehicle sold exclusively for off-highway use.

As a result of the transition to the new ACC II, NJDEP is also proposing that the existing Low Emission Vehicle (“LEV”) program end with MY 2025. The LEV program in New Jersey was adopted in 2006 and is based upon California’s prior emissions standards.

The Proposed Rule incorporates by reference a significant portion of California’s Code of Regulations that establish the ACC II. NJDEP’s stated goal of the Proposed Rule is to increase the number of ZEV sales in New Jersey that meet California’s new technical requirements. Under the Proposed Rule, Battery Electric Vehicles, and fuel cell electric vehicles (“FCEVs”) would generally meet the definition of ZEV.

The ACC II program being incorporated in the Proposed Rule is an annual ZEV requirement on manufacturers that increases every model year. California’s annual ZEV program begins in MY 2026 at 35% of sales, and increases every year until MY 2035 and later, when there is a 100% annual sales requirement. ACC II includes both battery electric vehicles and fuel cell vehicles in the definition of ZEV as long as the vehicle meets CARB’s minimum technical requirements. To determine the annual ZEV requirement, manufacturers must multiply an annual ZEV requirement by the manufacturer’s production volume in a given model year based upon “whole vehicles.” CARB generally provides a single vehicle value to ZEVs and plug-in hybrid electric vehicles (“PHEV”).

The ACC II provides certain flexibilities for manufacturers, including the following:

  • Manufacturers are allowed to “bank” ZEV vehicle values from previous years to meet its current model year requirements, including credits from prior versions of the ZEV requirement.
  • A manufacturer can “pool” its values by over complying in one state to satisfy its requirements in another state.
  • A manufacturer that produces FCEVs in California or a state that has adopted ACC II can receive extra vehicle values in New Jersey, based upon the sales volumes in the state where the company sells the most FCEVs.
  • A manufacturer may earn a partial vehicle credit for a PHEV that does not meet the minimum standards for a ZEV.
  • A manufacturer can earn more than one vehicle credit for sales in certain environmental justice (EJ) communities.
  • Manufacturers can earn early compliance vehicle values, which are capped.

Environmental Justice Incentives in the Proposed Rule

Regarding the EJ incentives, the Proposed Rule provides additional vehicle values for certain sales of ZEVs in an EJ community. Most significantly, the Proposed Rule establishes a community-based clean mobility program, which allows manufacturers to take an additional 0.5 vehicle credit for a PHEV sold to a qualifying community-based clean mobility program, which applies to programs that:

  1. provide access to clean mobility (other than vehicle ownership) solutions such as ZEV ridesharing, van pools, etc.;
  2. serve a community where at least 75% of the census tracts in the project area are a defined as an overburdened community subject to adverse cumulative stressors, as determined under NJDEP’s recently enacted EJ Rule; and
  3. are implemented by a community-based organization, Native America Tribal government regardless of Federal recognition, or a public agency or nonprofit organization that has a received a letter of support from a project-related community-based organization or local community group that represents community members that will be impacted by the project or has a service background related to the type of project.

Public Hearing and Opportunity to Comment on the Proposed Rule

NJDEP will be conducting a public hearing on the Proposed Rule (as well as the attendant notice to revise New Jersey’s Federal Clean Air Act State Implementation Plan) on Thursday, September 21, 2023, at 9:30 a.m. The public hearing will be conducted virtually via Microsoft Teams and can be access using the link to the public hearing and telephone option.

Comments should be addressed to the NJDEP by October 20, 2023, using this link or via paper filings at:

Alice A. Previte, Esq.
Attn.: DEP Docket No. 01-23-07
Office of Legal Affairs
Department of Environmental Protection
401 East State Street, 7th Floor
Mail Code 401-04L
PO Box 402
Trenton, New Jersey 08625-0402

Conclusion

It is clear that the implementation of Federal and State clean air programs over the last 50 years has significantly reduced air pollution in New Jersey, particularly from major emitting sources such as power plants and other industry. Today, one of the largest contributors to air pollution continues to be the transportation sector. As summarized by the New Jersey Clean Air Council in 2018, it is estimated that transportation, including both on-road and offroad vehicles, contributes 50% of New Jersey’s ozone and 30% of New Jersey’s fine particular matter.1 ZEVs, including electric vehicles, are expected to be a significant part of New Jersey’s solution to air pollution.    The question will be how the Proposed Rule, which is designed to accelerate the sale of ZEVs, will impact affordability and availability of ZEVs to the New Jersey public.

The success of the Proposed Rule will also be dependent upon other factors which were not addressed by the rule, but which are a predicate to the success of the transition to ZEVs, particularly electric vehicles. The State will need to focus on upgrading the grid both to make electricity available to electric vehicles, and to ensure that the grid remains stable with the increase in electric usage. Another significant impediment to electric vehicles is the availability and cost of charging infrastructure, particularly to address certain consumers’ “range anxiety.” The success of other Federal and State programs designed to address these issues will be critical in the success of the transition to electric vehicle usage in New Jersey.


1 See Zero Emission Vehicles: Clearing the Air – Report of the New Jersey Clean Air Council on April 12, 2018 (It should be noted that CSG Environmental Practice Group Leader John Valeri is a member of the New Jersey Clean Air Council and served as the council’s vice-chairman during 2018).

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