Understanding the Clean Miles Standard Regulation for Ridehailing Companies

How CMS, by helping electrify California’s ridehailing, is a recipe for rapid, disruptive change.

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.

Transportation accounts for 28 percent of carbon pollution in the United States, over half of which comes from passenger vehicles. Vehicles serving ridehailing companies (also known as transportation network companies, or TNCs) such as Uber and Lyft are critical early candidates for electrification due to their disproportionate impact on carbon dioxide (CO₂) emissions and urban air quality. At roughly 40,000 miles per year, their high annual mileage means that electrifying one TNC vehicle generates three times the emissions reductions of electrifying an average private passenger vehicle. And because TNC miles generally occur in populated areas, TNC electrification will also benefit public health by displacing toxic tailpipe emissions and improving urban air quality.

The high mileage that TNC vehicles travel also allows drivers to reap the benefits of the typically lower per-mile operational costs of electric vehicles (EVs), which have the potential to lower the total cost of ownership. As RMI’s extensive study of TNC electrification in Los Angeles notes, “It is rare that policy priorities, climate needs, and the needs of lower-income individuals align with industry sustainability commitments and the economics of building and operating infrastructure. However, when they do, it is a recipe for rapid, disruptive change.”

This combination of performance, cost-effectiveness, policy, and market dynamics has led to support for TNC electrification from TNCs themselves, with Uber and Lyft committing to electrifying their US fleets by 2030.

What is the Clean Miles Standard?

The California Air Resources Board (CARB) passed the Clean Miles Standard (CMS) regulation to significantly reduce greenhouse gas (GHG) emissions from transportation by establishing a structured framework that ridehailing companies can use to plan their EV adoption strategies. It will be instrumental in supporting the EV ecosystem by providing financial support to drivers earning low to middle incomes, sending firm demand signals to build out the required EV charging infrastructure, and encouraging partnerships between TNCs and EV charging providers to facilitate adoption.

CMS requires ridehailing service providers adopt zero-emissions vehicles to reduce emissions in California. It stipulates that by 2030:

• Emissions from passenger miles traveled (PMT) must be 0.
• 90 percent of all vehicle miles traveled (VMT) must be powered by EVs.

Together, CARB and the California Public Utility Commission (CPUC) are responsible for CMS implementation and compliance.

Who must comply?

TNCs and autonomous vehicle (AV) providers that offer passenger ridehailing services and have more than 5 million VMTs per year must comply. TNCs with fewer than 5 million VMTs are exempt and do not have to comply with emissions and electric VMT (eVMT) targets. Trips that use wheelchair-accessible vehicles will not be included in fleet emissions calculations.

What is required for compliance?

TNCs and AV providers that offer passenger ridehailing services must develop and file emissions reduction plans and eVMT targets to comply with CMS. TNCs and AV providers must consider how these plans and targets might impact low- to moderate-income (LMI) drivers and ensure that they experience few, if any, negative impacts. TNCs and AV providers will have flexibility to modify their plans and targets.

Low-income and middle-income drivers are defined as people that earn less than 80 percent and 120 percent of the statewide median income, respectively. For 2022, the annual low-income limit for individuals was $56,896; the moderate-income limit was $85,344.

Regulated entities also have to provide funds for the Drivers Assistance Program (DAP), a program proposed by CPUC to provide educational resources to all TNC drivers, and financial assistance to LMI drivers.

TNCs can drive compliance by deactivating the accounts of or de-prioritizing the rides by drivers of gas-powered vehicles. To ensure these measures have a minimal negative impact on LMI drivers, CPUC requires TNCs to track and report drivers' income information and ensure the following:

• LMI drivers spend no more than 15 percent of their annual income on EV leasing, renting, or buying (LMI drivers can get help procuring an EV through DAP).
• LMI drivers who aren’t using EVs are provided with a 120-day notice before their accounts are deactivated or their rides are deprioritized by the TNCs. This measure is expected to encourage drivers to sign up for the DAP. While participating in the program, the 120-day notice period will be paused for the LMI driver.
• TNCs propose an annual cap on the percentage of LMI drivers impacted.
• LMI drivers can receive additional charging incentives for time and cost of charging under the DAP.

CPUC will ensure regulated companies comply with the regulation. Noncompliance includes the following scenarios:

• Failure to meet their emissions and eVMT targets
• Plans are not implemented
• LMI drivers experience more than minimal negative impacts
• Improper use of funds
• Data reporting violations

If TNCs and AV providers don’t comply, it’s expected that TNCs may incur a penalty and pay a fine, the details of which are to be determined by CPUC in the subsequent phase of program implementation (Phase 2).

Timelines for program implementation: CMS implementation begins in 2023 and regulated entities must meet the following deadlines:

2023:

• CARB and CPUC finalize Phase 1 decisions addressing issues necessary to begin CMS implementation, such as GHG emissions reduction plan requirements, guidelines to ensure minimal impact to LMI drivers, outreach and engagement, etc.
• Annual reporting of compliance with emissions and eVMT targets must be submitted to CPUC by regulated parties.
• Regulated parties begin collecting fees for DAP.
• Regulated parties submit partial GHG plans detailing compliance strategy due 90 days after Phase 1 decision, expected in 2023.

2024 (tentative):

• CARB and CPUC finalize Phase 2 decisions on issues regarding enforcement and compliance, sustainable land use, autonomous vehicle (AV) requirements under CMS, etc.
• Regulated parties submit updated full GHG plan detailing compliance strategy covering Phase 2 issues within 90 days of Phase 2 decision, expected in 2024

January 1 of 2026, 2028, and 2030:

• Regulated parties submit subsequent GHG plans

How does CMS benefit communities?

The Union for Concerned Scientists notes that ridehailing trips are 69 percent more polluting than the trips they replace. Therefore, electrifying a single full-time ridehailing vehicle can result in the same emissions impact as electrifying three privately owned vehicles.

By electrifying TNC and AV provider fleets, CMS will reduce emissions, improve health outcomes associated with pollution, and save ridehailing drivers money on fuel and maintenance costs.

How do TNCs and AV providers calculate their emissions and eVMTs?

A ridehail trip can be described in three ways, referred to as “periods” and defined as follows:

• Period 1 (P1): Miles traveled by ridehail vehicle when a driver is logged into the app and waiting for a ride
• Period 2 (P2): Miles traveled by ridehail vehicle when a driver is on their way to pick up a passenger after accepting a request
• Period 3 (P3): Miles traveled by ridehail vehicle from when the passenger(s) is/are picked up until they are dropped off

Miles traveled when there is no passenger in the vehicle (periods 1 and 2) are referred to as “deadheading” miles. Given the high percentage of deadheading miles, emissions calculations for ridehailing trips are focused on reporting emissions in terms of PMTs.

Information related to fleet average emissions, fleet percentage eVMT, overcompliance credits, and optional credits can be found in CARB’s final regulation order.

TNCs and AV provider fleets can calculate their average emissions per PMT (gCO₂/PMT) on the basis of miles traveled, occupancy factor, and CO₂ factor.

• Adopting highly efficient vehicles such as hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), or zero-emissions vehicles will result in lower CO₂. Another important thing to consider is how many passengers are in a vehicle; ridesharing (also known as “pooling”) results in lower emissions per PMT than rides with only one passenger. It also decreases deadheading miles.
• CARB provides guidance on CO₂ factors based on vehicle model year, type of vehicle (e.g., internal combustion engine, EVs, HPEVs, PHEVs), and vehicle category (e.g., passenger cars, light-duty trucks), and the number of passengers in the vehicle when they are en route to their destination.

Fleet percentage eVMT is calculated based on comparing an EV’s VMT during the P3 portion of the trip to the VMT of all vehicles in the fleet.

Over-compliance credits: If a regulated entity’s annual gCO₂/PMT is lower than the CMS requirement, CPUC will issue over-compliance credits that equal the difference. The regulated entity may use these over-compliance credits toward compliance in the subsequent three years; unused credits expire after three years.

Optional credits can be earned by investment in certain infrastructure projects or by demonstrating that the ridehail trip was used to connect to a mass/public transit trip. Optional credits must be used in the same year and cannot be banked for future use. There are two ways to earn optional credits:

1. Invest in sidewalk or bikeway infrastructure improvement projects. If these optional credits are requested for compliance, the regulated entity has to submit details of the investment and a signed letter from California Environmental Quality Act (CEQA) lead agency for the project.
2. Demonstrate that a ridehail trip was used to connect to a mass/public transit trip. If a ridehail trip was used to connect to public transit, associated optional credits can be calculated on the basis of PMT of the ridehail trip connecting passenger(s) to a mass/public transit trip and an emission factor based on California’s fleet-wide average emissions for light-duty vehicles in the 2018 base year.

A purchased mass transit ticket in the TNC app can serve as proof of connection. A TNC or AV provider can submit other proof as long as data related to the trip can be collected and submitted.

If the CEQA requests proof of these optional credits, the TNC or AV provider needs to submit P3 trip details, the mass/public transit agency name, the mass/public transit stop connected to the ridehail trip, and proof of payment.