BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: AB 904 Hearing Date: 6/30/2015 ----------------------------------------------------------------- |Author: |Perea | |----------+------------------------------------------------------| |Version: |6/23/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Erin Riches | |: | | ----------------------------------------------------------------- SUBJECT: Clean Reused Vehicle Rebate Project DIGEST: This bill establishes a new program to provide incentives for the purchase or lease of used clean vehicles. ANALYSIS: Air Quality Improvement Program (AQIP) Existing law establishes AQIP, which is administered by the state Air Resources Board (ARB) in consultation with local air districts. AQIP is funded through, among other things, surcharges on vehicle registration fees and a portion of the Smog Abatement Fee (paid to register vehicles less than six model years old and therefore exempt from smog check). AQIP also receives a significant amount of Greenhouse Gas Reduction Fund (GGRF) monies. AQIP, which encompasses multiple programs, provides competitive grants to fund projects to improve the air quality impacts of alternative fuels and vehicles, vessels, and equipment technologies. Clean Vehicle Rebate Project (CVRP) CVRP, which is part of AQIP, is administered by ARB's contractor, the California Center for Sustainable Energy. CVRP provides a rebate of up to $5,000 for purchasing or leasing a new zero-emission vehicle or plug-in hybrid electric vehicle. Specifically, a consumer may obtain a $5,000 rebate for a hydrogen fuel-cell vehicle; a $2,500 rebate for a zero-emission, AB 904 (Perea) Page 2 of ? battery electric vehicle; a $1,500 voucher for a plug-in hybrid electric vehicle; or a $900 rebate for a neighborhood electric vehicle. As of June 8, 2015, CVRP had issued 107,885 rebates ($228 million). There is no cap on the number of rebates which may be issued, but rebates are subject to funding availability and the program has more than once been forced to stop issuing rebates and create a waiting list due to funds running out. A consumer can apply for a rebate within 18 months of purchasing or leasing an eligible vehicle. The consumer must retain ownership of the vehicle in California for at least 30 consecutive months after the purchase or lease date or reimburse ARB for part or all of the rebate amount. The consumer must also agree to other conditions, such as not tampering with the emissions control system of the vehicle. Rebates are distributed on a first-come, first-served basis and issued within 90 days of application approval. Enhanced Fleet Modernization Program Existing law also establishes the Enhanced Fleet Modernization Program (EFMP) under ARB. EFMP provides for the voluntary "retirement" (scrappage) of high-polluting passenger vehicles and light- and medium-duty trucks. The vehicle must be currently registered as operable and must have been continuously registered for two years prior to the application, unless the owner can demonstrate that the vehicle has been operated in California during that period. EFMP is funded by an additional $1 surcharge on the vehicle registration fee. EFMP has a statewide component and a local component. Under the statewide component, ARB administers the Consumer Assistance Program (CAP), in consultation with the Bureau of Automotive Repair. This program offers a $1,500 voucher to low-income vehicle owners, or a $1,000 voucher to other owners, to retire a high-polluting vehicle. CAP is funded by $6 of the Smog Abatement Fee, in addition to citation fees imposed by the Bureau of Automotive Repair on smog stations. Under the local component, ARB administers a program, authorized in the San Joaquin Valley and South Coast air districts, to replace high-polluting vehicles. In addition to the "retirement" vouchers described above, the local EFMP program offers a $2,500 "replacement" voucher to low-income vehicle AB 904 (Perea) Page 3 of ? owners to replace a high-polluting vehicle by either purchasing a vehicle eight years old or newer, or using the voucher toward public transit. ARB is also currently implementing the new EFMP Plus-Up Program (Plus-Up) in the San Joaquin and South Coast air districts. Plus-Up provides additional incentives above and beyond EFMP base incentives for individuals in disadvantaged communities who retire high-polluting vehicles and replace them with used or new hybrid, plug-in hybrid, or zero-emission vehicles. Eligible participants can receive additional incentives ranging from $1,500 to $5,000, depending on the vehicle type that is purchased. The EFMP, Plus-Up, and CVRP rebates can be "stacked" for a total of up to $12,000. Charge Ahead Initiative In March 2012, Governor Brown issued an Executive Order setting a goal of 1.5 million zero-emission vehicles on California roads by 2025. SB 1275 (De León, Chapter 530, Statutes of 2014) builds on this goal by establishing the Charge Ahead California Initiative at ARB, which outlines a vision of placing 1 million electric cars, trucks, and buses on California's roads by 2023. SB 1275 directs ARB to provide incentives to increase the availability of zero-emission vehicles and near-zero-emission vehicles, particularly in disadvantaged communities. Pursuant to SB 1275, ARB's FY 2015-16 Funding Plan, which will be voted on by the ARB board on June 25, 2015, includes, among other programs and actions: 1)An income eligibility cap for CVRP that would exclude the higher income consumers most likely to purchase a zero-emission vehicle without a CVRP rebate; 2)Higher rebate levels under CVRP for lower income consumers most in need of financial incentives to purchase a CVRP-eligible vehicle; 3)A new pilot project to create vanpooling for Central Valley agricultural workers; and 4)Expansion of the four existing pilot projects, including increased incentives for public fleets to purchase CVRP-eligible vehicles, advanced technology car-sharing and mobility options, increased EFMP incentives for vehicle replacement, and financing assistance. AB 904 (Perea) Page 4 of ? This bill: 1)Requires ARB to establish a Clean Reused Vehicle Rebate Project (CRVRP) by July 1, 2017, to provide an applicant with any of the following: a. A rebate or other incentive of up to $2,500 for acquisition of an eligible used vehicle from a licensed dealer. b. A rebate or other incentive of an unspecified dollar amount for the replacement or refurbishment of a battery and related components for an eligible used vehicle, for an extended warranty for the battery and related components, or for both. c. A rebate or other incentive of an unspecified dollar amount for an extended service warranty to cover unexpected vehicle repairs not covered by the manufacturer's warranty related to unique problems in eligible used vehicles. 2)Limits rebates or other incentives issued under this program to one per vehicle. 3)Limits rebates or other incentives issued under this program to low- and moderate-income consumers living in disadvantaged communities. 4)Requires ARB to coordinate CRVRP with CVRP, EFMP, and the Charge Ahead Initiative, to, including but not limited to: a. Coordinate CRVRP eligibility with EFMP eligibility. b. Ensure appropriate outreach and targeting to low- and moderate-income communities. c. Expand financing mechanisms, including but not limited to a loan or loan-loss reserve credit enhancement program to increase consumer access to zero-emission and near-zero-emission financing and leasing options, to help increase participation rates among low- and moderate-income consumers. 5)Requires ARB to establish safeguards for CRVRP to prevent fraudulent activity by sellers and acquirers of eligible used vehicles and practices that could prevent intended CRVRP recipients from benefiting from this program. COMMENTS: AB 904 (Perea) Page 5 of ? Purpose. The author states that although Fresno County is one of the most polluted areas in the state, it accounts for less than 1% of CVRP rebates. According to ARB's CalEnviroScreen 2.0 data, Fresno County includes eight of the top 10 most disadvantaged communities in California. In order for a successful deployment of clean cars, more efforts need to be made to target disadvantaged communities. The author states that this bill would create a secondary clean vehicle marketplace that is more affordable than the new clean vehicle market. The new CRVRP would enable low- and middle-income buyers to participate in the clean economy. The author notes that more than 100,000 clean vehicles have been sold or leased in California in the past four years; with clean vehicle leases approaching their expiration date, the time is opportune for more Californians to own a clean vehicle. Should the state provide double vouchers? While this bill provides that CRVRP may only provide one voucher per vehicle, it does not address whether a vehicle may also receive a CVRP voucher. The intent of CVRP is to help put more clean vehicles on the roads; while providing an additional voucher to a vehicle under CRVRP would help low- and moderate-income buyers and leasers obtain a used clean vehicle, it would not actually put an additional clean vehicle on the road. The committee may wish to consider amending this bill to exclude vehicles from CRVRP eligibility that have already received a CVRP voucher. Recent amendments expand incentive options. Author's amendments of June 23, 2015, add battery replacement or refurbishment, an extended warranty for the battery, and an extended service warranty for unexpected vehicle repairs unique to these vehicles. These options could appropriately help encourage consumers to purchase used clean vehicles by providing financial assistance specifically targeted at maintaining the vehicle and/or battery. In addition, these options would likely be less costly than a $2,500 rebate, meaning the program could help more consumers. The committee may wish to consider eliminating the $2,500 rebate option in this bill. Duplicative of other efforts? Pursuant to several legislative directives, ARB is currently in the process of implementing multiple programs aimed at helping to get low- and middle-income consumers into the clean car market. The committee may wish to consider whether it is necessary to add another program to the AB 904 (Perea) Page 6 of ? mix. Where will the money come from? This bill does not specify a funding source for CRVRP. Currently, CVRP is highly subscribed and has more than once run out of funds midyear and been forced to establish a waiting list. It is unclear whether a new funding source will be established for CRVRP or it if it might be part of CVRP. Double-referred. This bill has also been referred to the Environmental Quality Committee. RELATED Legislation: AB 1176 (Perea) - would establish an Advanced Low-Carbon Diesel Fuels Access Program to fund low-carbon diesel fueling infrastructure projects in communities that are disproportionately impacted by environmental hazards and where the greatest air quality impacts can be identified. AB 1176 is also being heard by this committee today. SB 1275 (De León, Chapter 530, Statutes of 2014) - established the Charge Ahead California Initiative under ARB to provide incentives to increase the availability of zero-emission vehicles and near-zero-emission vehicles, particularly in disadvantaged communities. SB 459 (Pavley, Chapter 437, Statutes of 2013) - required ARB, in consultation with the Bureau of Automotive Repair, to update EFMP regulations by June 30, 2015. SB 459 required the guidelines to include a variety of new policies, including allowing for retirement and replacement vouchers of larger amounts, focusing the program more heavily on lower-income owners, and streamlining program requirements to facilitate participation. SB 535 (De León, Chapter 830, Statutes of 2012) - requires the Department of Finance, when developing the three-year investment plan for cap-and-trade monies, to allocate 25% of these funds to projects that provide benefits to disadvantaged communities, and at least 10% to projects located within disadvantaged communities. Assembly Votes: AB 904 (Perea) Page 7 of ? Floor: 58-20 Appr: 12-5 Trans: 14-2 FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, June 24, 2015.) SUPPORT: American Lung Association in California California Environmental Justice Alliance Coalition for Clean Air Environment California Greenlining Institute Latino Coalition for a Healthy California Natural Resources Defense Council San Joaquin Valley Air Pollution Control District Union of Concerned Scientists OPPOSITION: None received -- END --