We recently saw that Canoo had been issued their EPA Certificate of Conformity with the Clean Air Act as of 2/28/2024 for both the LDV 130 & LDV 190.
What is a Certificate of Conformity?
A Certificate of Conformity is an official document issued by the Environmental Protection Agency. It serves as proof that a vehicle or engine meets the emissions and compliance standards set forth by the Clean Air Act. It's like a seal of approval from the EPA, indicating that the vehicle or engine is environmentally friendly and safe to operate.
While it might seem counterintuitive since electric vehicles don't produce tailpipe emissions like traditional internal combustion engine vehicles, they still require a Certificate of Conformity within certain circumstances.
Here's why:
Component Compliance: While EVs themselves don't emit pollutants during operation, they still contain various components and systems that must comply with emissions standards. For example, the batteries, electrical systems, and other components in EVs could potentially emit electromagnetic interference or other pollutants during manufacturing or operation. Ensuring that these components meet regulatory standards is crucial for overall environmental and safety compliance.
Auxiliary Systems: EVs often include auxiliary systems such as heating, ventilation, and air conditioning (HVAC) units, which can have emissions implications. While these emissions may not come from the vehicle's propulsion system, they are still subject to regulatory scrutiny and must meet emissions standards to ensure they do not contribute to air pollution.
Manufacturing Processes: The production of EVs involves various manufacturing processes that may have environmental impacts. From the extraction of raw materials for batteries to the assembly of components, there are opportunities for emissions and other pollutants to be generated. Ensuring that these processes meet environmental standards is essential for overall compliance with the Clean Air Act.
Lifecycle Analysis: The COC process may also involve considerations beyond just tailpipe emissions. Life cycle assessments of EVs take into account factors such as energy consumption during production, the source of electricity used for charging, and end-of-life disposal or recycling. Compliance with the Clean Air Act may encompass these broader environmental considerations to ensure that EVs contribute positively to overall air quality and environmental sustainability.
Another point of interest concerns the fact that the certificate also influences the allocation of Zero Emission Vehicle (ZEV) credits. ZEV credits are part of regulatory programs implemented by various states to promote the adoption of electric vehicles (EVs) and other zero-emission vehicles to reduce greenhouse gas emissions and improve air quality.
In states with ZEV credit programs, automakers are required to earn a certain number of credits based on the sales of zero-emission vehicles or the production of vehicles with low or zero tailpipe emissions. These credits are used to demonstrate compliance with state regulations, and they can be traded or sold among automakers to meet their individual compliance targets.
There isn't a clear answer on how much each credit worth, but analysts have estimated Tesla having sold their credits at an average of $3,500 USD.
The LDV 130 is worth 3.86 credits and the LDV 190 is worth 3.51. If we assume Canoo can sell their credits for the same amount, this means every 100 LDVs could result in an additional 1.3M in revenue. Of course, what each credit is actually worth will behave like any other commodity and fluctuate in price dictated by supply and demand.
The United Kingdom just passed their own ZEV mandate into law this past January. Under this mandate, 70% of new vans sold in Great Britain must be zero emission by 2030. This percentage will increase to 100% by 2035.
Starting this year in 2024, each qualifying brand must ensure that 22% of their new car sales are zero-emissions vehicles. Failure to meet this target will result in a penalty of £15,000 per non-compliant car. Perhaps this new mandate is partly the reason Canoo has been in the UK this month on tour drumming up interest and showing off their RHD capabilities and American Bulldog.
It seems if Canoo does enter the U.K. market they will have the opportunity to sell credits there as well.
