Can California Sustain Its Commitment to Providing Zero-Emission Vehicle Rebates?

The State of California has developed a range of programs to accelerate the adoption of zero-emission vehicles (ZEV). To incentivize the purchase of these vehicles, California established the Clean Vehicle Rebate Project (CVRP), which provides consumer rebates of $5,000 for fuel cell vehicles, $2,500 for battery electric vehicles, and $1,500 for plug-in hybrid electric vehicles. Currently, revenues collected from California’s Cap-and-Trade Program and motor vehicle fees fund the CVRP.

As ZEV sales increase, the amount of funding needed to provide rebates will likely increase as well. One potential mechanism for providing a stable source of revenue is applying a fee to non-ZEV/TZEV vehicle sales. A fee structure can be a powerful mechanism since it can generate a sustainable revenue stream to support incentives while also directly encouraging consumers to buy ZEVs via price signals in the marketplace. Additionally, fee structures can be developed to address equity concerns by minimizing impacts on low-income households.

This policy brief summarizes findings from a study that developed six alternative fee structure scenarios, each capable of raising $200 million per year, to explore equity implications of a fee system in California.