Equity Impacts of Fee Systems to Support Zero Emission Vehicle Sales in California

To accelerate the market introduction of zero-emission vehicles (ZEVs, including battery electric and fuel cell electric vehicles) and transitional ZEVs (TZEV, including plug-in hybrid vehicles), customer incentives and subsidies may be needed for many years—until the additional cost to manufacture these vehicles decreases considerably. Currently, California provides $5,000 for the purchase of light duty fuel cell vehicles, $2,500 for battery electric vehicles, and $1,500 for plug-in hybrid electric vehicles, as part of its Clean Vehicle Rebate Project (CVRP-2, 2015), currently funded from revenues collected by the carbon cap and trade program, as well as motor vehicle fees. In FY 2015-2016, the state allocated $75 million for rebates under the program, which was not sufficient to cover the CVRP payments. This research examines the potential designs of fee systems for the purchase of new (non-ZEV) vehicles that could help fund California’s CVRP. Six different fee structure policy scenarios were developed that apply various vehicle fees depending on a) the CO2 emissions of individual non-ZEV vehicle models, b) possible adjustments to fees paid by lower income groups, and c) possible adjustment of fees by MSRP. All cases require the same total revenue target raised via these vehicle fees, so they represent six alternative ways to raise a set level of revenues to pay for CVRP rebates. The six fee structure scenarios all appear capable of raising $200 million per year, which is a level that should be sufficient to pay for CVRP rebates for ZEVs, at least through 2018.

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