Understanding California’s Advanced Clean Cars II Regulation

What is ACC II, who must comply, and what is required for compliance?

This article is part of a series designed to explain in simple terms the definition of zero-emissions transportation regulations, who must comply, what is required for compliance, and more. This article will not discuss low-emissions vehicle standards in detail; for more information on these standards, visit the California Air Resources Board’s (CARB) ACC II page on the subject.

Under Section 117 of the Clean Air Act, California was awarded a waiver enabling the state to set vehicle emissions standards that are more stringent than federal standards. This waiver resulted in the adoption of the Advanced Clean Cars II (ACC II) regulation. Five states including New York, Vermont, Massachusetts, Washington, and Oregon have adopted these standards and more are expected to follow in the coming years. Learn more about the benefits of ACC II in “Advanced Clean Cars II: Cutting Pollution while Strengthening Local Economies.”

What is ACC II?

The Advanced Clean Cars II (ACC II) regulation builds on the Advanced Clean Cars (ACC) rule passed in 2012. ACC II decreases emissions by increasing electric vehicle (EV) sales via two programs:

• The Zero-Emission Vehicle (ZEV) program stipulates that ZEVs, defined as battery-electric vehicles (BEVs) or fuel-cell-electric vehicles (FCEVs), must make up an increasing portion of annual vehicle sales. The program has two requirements that apply to the sales of passenger cars and light-duty trucks:
1. Original equipment manufacturers (OEMs) must increase sales of ZEV vehicles. Plug-in hybrid electric vehicles (PHEVs) are not considered ZEVs but can be counted as ZEVs in the accounting process.
2. BEVs and PHEVs must have a minimum onboard battery size and be able to use both Level 1 and Level 2 chargers. The vehicles must also meet range requirements and adhere to minimum performance and warranty criteria.
• The Low-Emission Vehicle (LEV) program regulates vehicle emissions by strengthening pollutant emissions standards and modifying the emissions test procedures required for compliance. Its requirements apply to light- and medium-duty vehicles:
  • OEMs must certify that their vehicles’ tailpipe emissions meet emission standards. ACC II provides more stringent emissions standards lowering the maximum level of criteria pollutants for non-methane organic gas and oxides of nitrogen, carbon monoxide, formaldehyde, and particulate matter starting with model year 2025.
  • OEMs must pass updated vehicle testing procedures to verify vehicle exhaust emissions.

How does ACC II relate to ACC?

Both ACC and ACC II build on California’s Zero-Emission Vehicle (ZEV) regulation, which the state passed in 1990 as part of the Low-Emission Vehicle regulation. The ZEV regulation was designed to reduce the state’s emissions by requiring manufacturers to offer for sale a specific number of clean cars, which include full battery-electric, hydrogen fuel cell, and plug-in hybrid electric vehicles. ACC and ACC II modified the ZEV regulation to better leverage advancements in battery technology. CARB managed compliance with ACC and ACC II through a tracking mechanism based on credits and deficits: ZEV sales generate credits, and OEMs that exceed ZEV sales requirements receive surplus credits; OEMs that fall short generate deficits. Deficits can be made up by buying surplus credits.

Below, you’ll find how the mechanics of the ZEV credit program differ under ACC and ACC II:

ACC (enforceable between 2012 and 2025) stipulates that OEMs must reach percentage targets based on the number of credits they earn based on their total sales. The major distinction between ACC and ACC II is that under ACC, the percentage of eligible credits does not necessarily equate to the percentage of ZEV sales out of total vehicles sold. A single ZEV may receive up to four credits, depending on the vehicle’s electric range. ACC sets a credit percentage requirement for 2025 at 22 percent, which equates to roughly 8 percent of ZEV and PHEV total sales share, as each vehicle sold is worth multiple credits.

ACC II (enforceable between 2026 and 2035) uses a vehicle “value” accounting system that awards roughly one value for the sale of a ZEV and a portion of a value for the sale of a PHEV. A value is closely correlated to the sale of actual vehicles and so the vehicle value percentage targets outlined in ACC II can reasonably be considered a representation of ZEV sale share percentage.

Who must comply?

OEMs that sell more than 4,500 light- and medium-duty vehicles per year must comply with ACC II. Small-volume OEMs that sell fewer than 4,500 light- and medium-duty vehicles annually in California are exempt until 2035, when the state’s 100 percent ZEV mandate comes into effect.

What is required for compliance?

To comply with ACC II, OEMs must submit an annual compliance report from 2026 onward. A manufacturer is in compliance when it can show that their sale of ZEVs and PHEVs resulted in enough total vehicle value to meet their ACC II ZEV and PHEV target for a given model year. The Total ZEV fleet milestone is calculated by taking the ZEV percentage target and multiplying that by the number of vehicles sold. The result is the number of ZEV values that an OEM obtains to comply with ACC II.

Understanding how values are defined and accounted for can help OEMs comply with ACC II requirements. This information will also help OEMs estimate how ACC II will impact ZEV sales, the retirement of internal combustion engine vehicles, and transportation-related emissions reductions.

ACC II provides OEMs with the flexibility to accrue vehicle value in four ways:

1. The sale of PHEVs: The value of a PHEV sale is less than one vehicle value, dependent on vehicle range.
   • Value stipulations: PHEVs must meet minimum range criteria: 43 miles through 2028; after 2028 the minimum range requirement increases to 70 miles. The partial vehicle value credit ranging from 0.63 to 1 is based on vehicle range.
   • Compliance cap: OEMs are permitted to count PHEV sales and values for up to 20 percent of their annual value requirements.
2. The sale of ZEVs: The value of a ZEV sale is equal to one vehicle value.
   • Value stipulations: BEVs must be all-electric and have a range of at least 200 miles. FCEVs can also count toward ZEV value requirements through 2031 but are subject to proportional value requirements based on the FCEV sales percentage share.
   • Compliance cap: No cap; OEMs can earn values for 100 percent of their ZEV sales.

Note: By 2035, ACC II requires that 100 percent of sales must be either ZEVs or PHEVs; however, between 2026 and 2031, ZEV and PHEV sales share values can be met through flexibility measures and by meeting environmental justice value criteria, thus during this period, actual sales share of ZEVs and PHEVs can be slightly lower than the target value.

3. Environmental justice credits: OEMs are awarded environmental justice (EJ) credits when they ensure that all communities can benefit from ZEVs and PHEVs by providing minimum warranty and durability requirements and increased serviceability, and by facilitating charging and battery labeling. These measures will help ensure that all consumers can replace their gas-powered vehicles with ZEVs and PHEVs to further California’s environmental justice goals. OEMs can also gain credits by participating in community mobility programs that provide reduced-priced ZEVs, re-selling affordable ZEVs, and using used vehicles to support the state’s complementary policies and incentives. EJ credits cannot transfer between states.
   • Value stipulations: An OEM may be awarded additional value in one of three ways:
     1. ZEVs and PHEVs sold under a manufacturer's suggested retail price (MSRP) for use in community-based clean mobility programs will receive an additional value of 0.5 for ZEVs and 0.4 for PHEVs.
     2. An OEM that leases a ZEV and then sells it when its lease has ended can earn up to 0.25 additional vehicle values (the vehicle must be sold for less than $40,000 and sold at a dealership participating in a financial assistance program).
     3. New ZEVs and PHEVs below a MSRP threshold are also eligible for a 0.1 vehicle value.
   • Compliance cap: EJ credits can only be used for up to 5 percent of an OEM’s required annual vehicle values.
4. Trading, banking, pooling, and rolling over vehicle values: OEMs are awarded additional flexibility to purchase, trade, and roll over values.
   1. Trading: OEMs may trade ZEV and PHEV values through model year 2030, enabling them to purchase values from other parties that have additional values above the compliance requirements. Trading can occur between states.
   2. Banking: OEMs can save values from early compliance prior to model year 2025 or in a model year in which they have excess values.
   3. Pooling: OEMs can move excess ZEV and PHEV values they have earned in one state to another state. From 2026 to 2030, pooling is allowed. An OEM may satisfy up to 20 percent of its annual value target with pooled values. The amount of allowable pooled credits decreases by 5 percent each year.
   4. Rolling over ACC values: OEMs can roll over their ACC credits and use them to meet compliance requirements through model year 2030. The sum of roll-over ZEV and PHEV credits from ACC will be divided by 2.1.

Note: OEMs have three model years to equalize their deficits through the accrual of vehicle values. If they fail to adhere to the ACC II percentage targets, OEMs will invoke a civil penalty resulting in a fine.

How does ACC II benefit communities?

ACC II benefits Californian communities by reducing emissions from light-duty vehicles by 50 percent by 2040. This reduction in emissions will result in improved air quality and health — the American Lung Association estimates that from 2020 to 2050, a zero-emissions transportation sector would help avoid 110,000 premature deaths, 2.78 million asthma attacks, and 13.4 million lost workdays.

ACC II is a powerful market signal providing clear indication that governments are committed to scaling EV adoption. OEMs who comply with the rule early stand to gain additional vehicle values above required compliance; they will be able to sell these values for additional revenue or roll them over for compliance in later years.

While ACC II’s focus is on passenger vehicles, the standards will also impact vehicle owners, utilities, and charging infrastructure providers. Vehicle owners will be able to save money thanks to EVs’ lower cost of ownership and take advantage of tax credits (like those provided in the Inflation Reduction Act) and other legislation. Utilities will benefit because increased EV sales will drive charging demand, and charging infrastructure providers will gain new business opportunities to meet this charging demand.