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Dear Chairman Nichols and Members of the Board,
The Union of Concerned Scientists supports the efforts of the Air
Resources Board to enable investment in technology advancing
projects while also providing immediate emissions reductions
through the Air Quality Improvement Program (AQIP).  The AQIP
program has been successful in stimulating the adoption of low and
zero-tailpipe emission cars and trucks.  The adoption of these
cleaner vehicles provides direct improvements to air quality and
reduces emissions and also increases consumer awareness, provides
market certainty, and complements California’s alternative fueling
infrastructure investments. 
One particularly successful AQIP program is the Clean Vehicle
Rebate Program (CVRP).  This program has provided incentives for
over 22,000 plug-in and hydrogen electric vehicles over the last 3
years.  Because of the CVRP, we now have thousands of drivers that
are producing no tailpipe emissions as they drive their vehicles in
California.  The demand for electric vehicles is also encouraging
manufacturers to increase the number of electrified vehicles
available, and 12 models of plug-in vehicles are now available at
California car dealerships, with more models coming soon.  The
incentives for larger vehicles like medium and heavy-duty trucks
have also been successful, with over 1,500 hybrid and electric
vehicles purchased with the help of the Hybrid and Zero Emission
Truck and Bus Voucher Incentive Project.
Although the AQIP programs have been successful, there is still a
continuing need for incentives at this early stage of the electric
vehicle market.  Ending support prematurely could slow or even
reverse the positive trends in electric vehicle sales and
acceptance.  While state incentives are smaller in magnitude than
the federal tax credit, they play an important role in the
financial attractiveness of an electric vehicle purchase.  A recent
study by the Electric Power Research Institute shows that
California incentives can significantly change the total cost of
vehicle ownership and the payback period for an electric vehicle as
compared to a conventional gasoline car.   Because of the
importance of the AQIP program and the limited funding available,
UCS is making several recommendations to ensure the viability and
success of AQIP.

Multi-year planning for incentive programs such as CVRP is needed

The current planning process for CVRP is on an annual basis and
this process has struggled to keep pace with the rapidly changing
demand for electric vehicles.  ARB staff has identified the need
for a long-term plan for light-duty clean vehicle incentives.  We
agree with this assessment, and urge ARB to develop and adopt a
multi-year plan for AQIP incentive programs.
In order to have a stable CVRP program, the total program cost will
need to match allocated program funding.  The most straightforward
approach would be to have volumetric targets for clean vehicle
sales and incentives that are lowered as the targets are met.  This
approach would help level the costs of the CVRP program, as
increased CVRP demand would lower the rebate amount.  Setting
long-term targets and coordinating reductions in incentive amounts
would give certainty to buyers and sellers of electric vehicles. 
This approach is similar to other successful incentive programs,
such as the California Solar Initiative.
Increasing CVRP funding to support current rebate levels is the
best option

The funding of incentives at the current levels for the next fiscal
year is the best way to ensure continued progress of the EV market
in California.   Additional funding will be required beyond the
CVRP allocation and likely above the total AQIP funding level. 
Incentives are very important to payback period at current vehicle
prices, so every effort should be made to find funding for CVRP at
the current rebate levels of $2500 and $1500 for BEVs and PHEVs
respectively.  Based on current sales rates, this option would
require $40-$60 million dollars for FY13-14, requiring up to $45
million additional funds over the $15 million currently allocated.


If additional funding is not secured, the CVRP rebate amounts
should be reduced in future years.

If additional funding is not identified, UCS recommends decreasing
the rebate amounts to a level that would allow the program to be
functional for the full fiscal year.  By decreasing the amount, the
CVRP program will increase the number of rebates that can be given
out and a larger number of purchasers will receive a clean vehicle
incentive.  Having the CRVP program operational for 12 months will
allow all electric vehicle manufacturers and buyers to receive
assistance, regardless of the time of year when the sale takes
place.  Without this change, new models that are introduced in the
late fall and spring will not be supported by the CVRP incentives.
The CVRP program has used $28M and given over 14,000 rebates during
the 2012-2013 fiscal year (through May), and is currently receiving
rebate applications at a rate of $1 million per week.  If electric
vehicle adoption is assumed to grow in FY13-14, ARB should
conservatively plan for 25,000 CVRP applications during the year. 
At a funding rate of $15M per year, the average rebate would have
to be reduced to an average amount of $600.  If however CVRP was
funded at a rate of $30 million per year, similar to this year, the
average rebate could be set at $1,200.  

Other recommendations for program improvements:

A.	ARB should consider allocating funds for additional outreach in
areas that currently have low existing CVRP participation rates. 
The current CVRP statistics show that there are areas of California
that are underrepresented in the program.  The addition of local
incentives, like the additional credit in the San Joaquin Valley,
is a useful policy.  However, ARB should investigate opportunities
to increase awareness of the CVRP program through outreach efforts,
targeted in areas that have historically low CVRP participation
rates, either by air quality district or by ZIP code.  Outreach
could be directly targeted to consumers or to the automotive
dealerships to publicize CVRP incentive availability.

B.	ARB should consider providing vouchers or pre-purchase
applications, instead of post-purchase rebates.  If program funds
are insufficient and there is not a wait list (as is currently
planned), the current post-purchase rebate program could result in
disappointed consumers and reduce consumer interest and acceptance
of EVs and clean vehicle programs. 
In addition, a pre-purchase application process could allow ARB to
have multiple rebate levels (depending on vehicle model,
applicant’s location, or other factors).  There has been concern
that increasing the number of rebate levels would be confusing to
consumers.  However, a pre-purchase application process would allow
the program administrator to inform the consumer of the actual
rebate amount prior to purchase.

C.	ARB should incorporate a separate class of CVRP support for fuel
cell electric vehicles.  Fuel cell electric vehicles are a critical
part of California’s long-term air quality and emissions goals.
This technology should receive similar support as the initial
plug-in electric vehicles incentives ($5,000).  A higher level of
support is warranted, as the initial fuel cell electric vehicles
will likely have higher purchase prices (as compared to
conventional cars).  Based on manufacturers’ stated production
plans, few fuel cell electric vehicles will apply for FY13-14 CVRP
funds, and so this provision would have minimal impact on the
short-term financial viability of CVRP.  However, setting a higher
rebate amount now will signal ARB’s support for future fuel cell
electric incentives to vehicle manufacturers and early adopters of
fuel cell vehicles.

D.	ARB should evaluate options for increasing electric vehicle
purchases by car sharing and rental car operations in California to
increase consumer access to the technology.  Car sharing programs
can create consumer awareness without a large financial commitment
from the consumer, and increasing the number of drivers who have
experience with an electric vehicle can help build market
acceptance for plug-in vehicles.  Rental and sharing programs can
also help expand the electric vehicle experience beyond new car
buyers.

Conclusion

ARB has developed successful programs that are improving air
quality and reducing emissions through the support of cleaner
vehicles.  Programs like the CVRP are still needed to incentivize
the transition to cleaner transportation options.  In order to
continue the effectiveness of these programs, ARB needs to make
long-term plans for these programs.  A key component of these plans
should include a defined transition to lower incentive levels as
cleaner technologies become less expensive and widely adopted.

 
 

David Reichmuth
Senior Engineer, Clean Vehicles Program
Union of Concerned Scientists	
 
 


Don Anair
Deputy Director, Clean Vehicles Program
Union of Concerned Scientists