China will consider mandates that carmakers produce more electric vehicles or purchase carbon credits from their peers, potentially emulating California’s system and transitioning from a subsidy-driven approach to catalyzing cleaner cars.

The proposed rules will mandate that certain automakers produce or import new-energy vehicles in proportion to the number of fuel-burning autos they sell, according to a draft document prepared by the National Development and Reform Commission. Companies that fail to achieve carbon dioxide emission reduction targets would be required to buy credits or pay fines of as much as five-times the average price of the credits, the country’s top industry regulator and policymaker said.

China has encouraged consumers to switch from fossil-fuel burning vehicles to electric cars and plug-in hybrids, with the dual aim of reducing pollution and supporting companies in developing what it sees as the dominant auto technology of the future. The latest proposal was prepared after studying California’s zero-emission vehicle mandate, which has gone further than any other U.S. state to promote adoption of electric cars.

“Without question, this will be good for the industry and will promote the development of all types of clean-energy vehicles,” Ye Shengji, deputy secretary general of the China Association of Automobile Manufacturers, said Friday at a press conference in Beijing.

China surpassed the U.S. as the largest market for electric vehicles last year and wants sales new-energy vehicles to exceed 3 million units a year by 2025. To encourage production and sales of such vehicles, central and local governments have spent $2.3 billion on subsidies since 2009, according to state-run China Central Television. The government plans to phase out subsidies after 2020.

“Given that some key automakers lack the motivation to develop new energy vehicles, there is concern that development in the industry will suffer once the fiscal policies are weakened or dropped,” the NDRC’s draft document said. The rules would be mandatory for automakers of a minimum size and voluntary for others, it said.