BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 904


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          Date of Hearing:  April 27, 2015


                        ASSEMBLY COMMITTEE ON TRANSPORTATION


                                 Jim Frazier, Chair


          AB 904  
          (Perea) - As Introduced February 26, 2015


          SUBJECT:  Air Quality Improvement Program:  Clean Reused Vehicle  
          Rebate Project


          SUMMARY:  Requires the Air Resources Board (ARB) to create a  
          rebate program for used clean air vehicles.  Specifically, this  
          bill:  


          1)Requires ARB to establish, as part of the Air Quality  
            Improvement Program (AQIP), the Clean Reused Vehicle Rebate  
            Project (CRVRP) to provide rebates for the purchase of  
            eligible used clean air vehicles.


          2)Defines "eligible used vehicles" including as battery  
            electric, plug-in hybrid, and fuel cell vehicles.


          3)Defines "used vehicles" as vehicles that have been sold or  
            registered with an appropriate authority and operated upon the  
            highway, as specified.


          EXISTING LAW:  









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          1)Requires ARB, pursuant to AB 32 (Nunez), Chapter 488, Statutes  
            of 2006, to develop a plan of how to reduce statewide  
            greenhouse gas (GHG) emissions to 1990 levels by 2020.  


          2)Creates the AQIP, administered by ARB and the California  
            Energy Commission (Commission), in consultation with local air  
            districts, to fund specified air quality improvement projects.  
             

          3)Creates the Clean Vehicle Rebate Program (CVRP), within the  
            AQIP, to promote accelerated widespread commercialization of  
            zero-emission vehicles (ZEVs) by providing rebates of up to  
            $5,000 for the purchase or lease of per eligible light-duty  
            vehicle.

          4)Creates the Enhanced Fleet Modernization Program (EFMP) in the  
            Bureau of Automotive Repair (BAR), pursuant to AB 118 (Nunez),  
            Chapter 750, Statutes of 2007, to augment BARs vehicle  
            retirement Consumer Assistance Program (CAP).

          5)Creates the Advanced Clean Cars Program (ACCP) administered by  
            ARBs that sets forth air quality and emissions reductions  
            requirements for certain vehicles model and assures the  
            development certain clean air vehicles.

          6)Creates the Charge Ahead Initiative, pursuant to AB 1275 (De  
            Leon) Chapter 530, Statutes of 2014, which outlines the vision  
            of placing one million electric cars, trucks, and buses on  
            California roadways and directs ARB to draft a financial plan  
            to meet that goal and ensure that disadvantaged communities  
            can participate.
          


          FISCAL EFFECT:  Unknown










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          COMMENTS:  According to the author, disadvantaged communities in  
          California are disproportionately burdened by multiple sources  
          of pollution.  However, these same communities are far behind  
          other areas of the state when it comes to receiving clean air  
          vehicle rebates.  To illustrate this point, the author cites  
          data showing that CVRP rebates in Fresno County account for less  
          than 1% of the total rebates issued in the program to date  
          despite the fact that Fresno County ranks 8th out of the 10 most  
          disadvantaged communities and it has some of the poorest air  
          quality in California.  To address this inequity, the author has  
          introduced AB 904 which would create the CRVRP to increase  
          access to clean vehicles in disadvantaged communities by  
          incentivizing the purchase of used clean air vehicles.

          California has gone to great lengths to curb GHG emissions and  
          improve air quality and appears to be on target to meet GHG  
          emissions reduction goals set forth in AB 32.  A much more  
          demanding target looms beyond the AB 32 horizon, however.   
          Executive Order (EO) S-3-05, signed by Governor Schwarzenegger,  
          calls for an 80% reduction of GHG emissions below 1990 levels by  
          2050.  Meeting this 2050 target will involve substantial effort  
          and, given that the transportation sector is responsible for 40%  
          of GHG emissions, much effort has been focused in this sector.

          In March 2012, Governor Brown issued EO B-12-2012 that set the  
          goal of placing 1.5 million clean cars on California's roadways  
          by 2025.  Also in early 2012, ARB approved ACCP that combined  
          the control of smog-causing pollutants and GHG emissions into a  
          single coordinated package of vehicle requirements for model  
          years 2017 through 2025.  The ACCP set lower emissions standards  
          for gasoline- and diesel-powered cars and delivered to the  
          marketplace an increasing number of clean cars with zero- and  
          near-zero-emission technologies, such as full battery electric,  
          plug-in hybrid electric, and hydrogen fuel cell vehicles.

          To encourage the adoption of these new clean cars, ARB also  
          implemented the CVRP, which offers up to $5,000 in rebates  
          toward the purchase or lease of eligible light-duty clean air  
          vehicles.  To obtain a CVRP rebate, an individual is required to  








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          purchase or lease an eligible vehicle and then apply for the  
          rebate.  There is no guarantee that rebates will be issued and  
          participants are encouraged to apply for rebates before the fund  
          is exhausted.  

          To ensure program integrity and prevent fraud, ARB has set  
          certain CVRP requirements including, but not necessarily be  
          limited to, the requirement that eligible vehicle have zero- and  
          near-zero emissions and that only one rebate be issued per  
          vehicle.  Individuals who receive a rebate pursuant to CVRP are  
          required to retain ownership of the vehicle for operation in  
          California for a minimum of 30 consecutive months immediately  
          after purchase or lease and sign documents, under penalty of  
          perjury, with regard to compliance with program requirements.  

          To augment the state's existing vehicle rebate program and to  
          encourage the retirement of older, dirty cars and their  
          replacement with cleaner cars, ARB developed EFMP, which  
          consists of two elements:  the Retirement-Only Program and the  
          Retire-and-Replace Program.  The Retirement-Only Program,  
          implemented by the Bureau of Automotive Repair in conjunction  
          with CAP, provides up to $1,500 for low-income consumers to  
          scrap their vehicles if they meet certain eligibility  
          guidelines.  The Retire-and-Replace Program, on the other hand,  
          provides low-income individuals incentives for scrapping their  
          old, dirty vehicles and provides additional money toward the  
          purchase of a new, clean air vehicle.  The Retire-and-Replace  
          program is available in the areas of the state that have the  
          poorest air quality and is implemented by the South Coast Air  
          Quality Management District (AQMD) and the San Joaquin Valley  
          Air Pollution Control District (APCD).

          In addition to these programs, this year ARB will implement the  
          EFMP Plus-Up Program (Plus Up) to provide additional incentives  
          above and beyond EFMP base incentives for individuals in  
          disadvantaged communities that retire older, dirty vehicles and  
          replace them with used or new hybrid, plug-in hybrid, or ZEV.   
          Plus-Up will be implemented in the San Joaquin Valley APCD and  
          South Coast AQMD, and eligible low-income participants can  








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          receive additional incentives ranging from $1,500 to $5,000  
          depending on the vehicle type that is purchased.  EFMP, Plus-Up,  
          and CVRP rebates can be "stacked" and if all program incentives  
          are used, together they would total $12,000 if an individual  
          opts to retire a vehicle and purchase a new clean air vehicle.

          In addition to these programs, the recently enacted Charge Ahead  
          Imitative has stated the goal of placing at least one million  
          zero-emission and near-zero-emission vehicles into service by  
          January 1, 2023, and requires ARB to develop a funding plan  
          needed to achieve the goal.   The bill also made changes to  
          CVRP, requiring the establishment of programs that further  
          increase access to and direct benefits for disadvantaged,  
          low-income, and moderate-income communities and consumers from  
          electric transportation.  With respect to clean air vehicle  
          funding, the Charge Ahead Initiative modified CVRP to include  
          additional extra credit for low-income drivers who wish to buy  
          or lease an electric car and provides assistance to car-sharing  
          programs in low-income neighborhoods and installing electric  
          vehicle charging stations in apartment buildings in those  
          communities.

          Committee concerns and proposed author's amendments: 

          1)It is laudable that the author wishes to improve air quality  
            by increasing access to clean air vehicles for low- and  
            middle-income individuals in disadvantaged communities and  
            undoubtedly areas with the poorest air quality need increased  
            focus on them to encourage the purchase and use of cleaner  
            vehicles.  It is important to note, however, that there are  
            already a number of programs in existence (CAP, EFMP, and  
            CVRP) and under development  (Plus-Up and the Charge Ahead  
            Initiative)  that are designed to do what the author is  
            seeking to accomplish with AB 904.  For example, once the  
            Plus-Up program is deployed, a low-income individual in a  
            disadvantaged community would be able to take advantage of up  
            to $12,000 in rebates and incentives toward the purchase of a  
            cleaner vehicle not including additional other incentives and  
            programs currently under development.  








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            To address this concern, the author has proposed amendments  
            that would require ARB to coordinate with the CVRP and EFMP  
            programs to enhance outreach to low to moderate income  
            communities.

          2)In addition to being duplicative of existing programs, AB 904  
            fails to address key components of the program it seeks to  
            create - components that clearly distinguish it from existing  
            programs and would help ensure its success.  For example: 

             a)   The bill does not specifically address the date by which  
               ARB would be required to establish the program nor does it  
               speak to the amount that would be allocated to the program  
               or what funding would be used to support the program.   
               These are important factors given the substantial "call"  
               funds in the GGRF and other program dollars.  
               In response to this concern, the author's proposed  
               amendments would require that the CRVRP be implemented and  
               administered by ARB beginning on July 1, 2017.



             b)   The bill does not address parameters of the program  
               which would help to improve successful implementation and  
               minimize fraud - a particularly pertinent issue given that  
               the used car market can include not only dealer  
               transactions but also third party transactions.  This is  
               critical given the potential for unscrupulous individuals  
               to repeatedly buy and resell these clean cars, each time  
               capturing a rebate and all the while depleting program  
               funds while failing to deploy newer, cleaner vehicles.  

             To address this concern, the author has proposed that the  
               CRVRP provide a $2,500 rebate toward the purchase of an  
               eligible used clean air vehicle only when purchased from a  
               licensed dealer.  Only one rebate would be allowed per  








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               vehicle.  The author's suggested amendments also specify  
               that a rebate (unspecified amount) could be applied to the  
               purchase of an electric vehicle battery.



               While limiting rebates to one-time dealership sales may  
               help to eliminate fraud associated with buying and  
               reselling vehicles to obtain multiple rebates on the same  
               vehicle, tracking rebates on a per vehicle bases could  
               present difficulties.  For example, under CVRP, rebates are  
               only issued on new vehicles so there is no need to track  
               the vehicle once the rebate is issued.  For used vehicle  
               rebates, a database would be needed to link the rebate  
               with, assumedly, the vehicle identification number, which  
               would likely involve access Department of Motor Vehicles  
               records and/or information.  Rebate tracking for batteries  
               could be even more difficult and it would be difficult to  
               ascertain whether batteries receiving rebates are being  
               installed in vehicles that also received a rebate which, if  
               not controlled, could result in rapid depletion of program  
               funds and the inability of the program to realize the  
               ultimate objective of placing additional clean air vehicles  
               into service on California's roadways to achieve clean air  
               goals.  





          1)The CRVRP would greatly benefit from providing prospective  
            rebate recipients with clear and accurate information about  
            available used clean air vehicles to ensure that the vehicle  
            they are purchasing adequately meets their needs.  For  
            example, if a buyer wishes to use a rebate to purchase a used  
            EV, particularly one which may have diminished battery  
            capacity, they should be informed that the vehicle may only  
            achieve a 60-70 mile driving range on a single charge.  This  
            would be particularly important for buyers whose driving needs  








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            exceed the vehicle's range as well as for those who may not  
            have ready access to unique fueling infrastructure these  
            vehicles require. 
                        
          All in all, the problem the author is seeking to address is a  
          serious and legitimate problem.  Unfortunately, even with the  
          author's proposed amendments, AB 904 is lacking in pertinent  
          details and, hence, its merits cannot be weighed sufficiently.


          Related legislation:  AB 1074 (C. Garcia) would direct the  
          Commission to develop an alternative refueling infrastructure  
          plan, as part of a broader assessment, that identifies the  
          number of alternative fueling stations that will be needed to  
          fulfill the state's clean transportation goals.  
          AB 1074 passed out of this committee on April 13, 2015, with a  
          16-0 vote and is awaiting hearing in the Assembly Appropriations  
          Committee.


          SB 40 (Gaines), would require incentives for qualifying  
          zero-emission, battery-electric passenger vehicles under the  
          CVRP be limited to vehicles with a manufacturer's suggested  
          retail price of $40,000 or less and that rebates for qualifying  
          vehicles be $3,500.  SB 40 is awaiting hearing in the Senate  
          Transportation and Housing Committee.
          


          Previous legislation:  AB 1275 (De Leon), Chapter 530, Statutes  
          of 2014, created the Charge Ahead Initiative stated the goals of  
          the initiative are to place in service at least 1,000,000  
          zero-emission and near-zero-emission vehicles by January 1,  
          2023, and increasing access for disadvantaged, low-income, and  
          moderate-income communities and consumers to zero-emission and  
          near-zero-emission vehicles by, among other things, establishing  
          programs that further increase access to and direct benefits for  
          disadvantaged, low-income, and moderate-income communities and  
          consumers from electric transportation.








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          AB 118 (Nunez), Chapter 750, Statutes of 2007, established the  
          AQIP, administered by ARB in consultation with local air  
          districts, and funded through surcharges on vehicle and vessel  
          registration fees, smog abatement fees, and identification plate  
          fees.  



          AB 32 (Nunez), Chapter 488, Statutes of 2006, required the ARB  
          to develop a plan of how to reduce emissions to 1990 levels by  
          the year 2020.





          REGISTERED SUPPORT / OPPOSITION:




          Support


          San Joaquin Valley Air Pollution Control District




          Opposition


          None on file











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          Analysis Prepared by:Victoria Alvarez / TRANS. / (916) 319-2093