Economic Tidbits

California Ban of Gas-Powered Vehicles

The California Air Resources Board approved California’s Advanced Clean Cars 2 regulation, which bans the sale of gasoline and diesel-fueled cars and trucks by 2035. Because California is the largest fuel consuming state in the U.S., the ban will affect the nation’s fuel markets. For Nebraska, the country’s second-largest ethanol producer, the ban could be especially problematic.  

California’s regulations will take effect starting in 2026 when 35 percent of all car sales in the state must be from zero-emission vehicles. The requirement scales up over following years until reaching 100 percent in 2035. The American Fuel & Petrochemical Manufacturers (AFPM) says California will need to apply to the EPA for a waiver from the Clean Air Act to move forward. If it receives EPA approval, expect other states to join in.  EPA has already approved an allowance for any state to adopt policies identical to California’s providing California is given a waiver. Fifteen states including Virginia, Washington, Oregon, Massachusetts, and New York have also agreed to phase out fossil-fuel powered cars.

Much of the ethanol produced in Nebraska goes to California. In 2019, the last full year before COVID, California consumed 1.59 billion gallons of ethanol representing just over 10 percent of national consumption according to the Renewable Fuels Association. According to the Nebraska Corn Board, Nebraska’s ethanol plants use more than 750 million bushels of corn each year, over 40 percent of the state’s production. A recent report on the economic impact of ethanol production in the state said it accounted for 6,226 jobs and $4.5 billion in total output.

Nebraska’s ethanol producers already go to great efforts to reduce the carbon intensity of their product for California’s market. Through these efforts, Nebraska ethanol is poised to compete well in the California market in the near term. Clearly though, the actions of California and other states to transition to electric vehicles will have implications for Nebraska, forcing Nebraska producers to develop alternative uses for ethanol or alternative markets for the fuel.

You may also like