BILL ANALYSIS Ó
AB 1851
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Date of Hearing: April 11, 2016
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 1851
(Gray) - As Amended April 4, 2016
SUBJECT: Vehicular air pollution: reduction incentives
SUMMARY: Creates and expands a broad array of incentive
programs to increase the sales and use of certain clean air
vehicles. Specifically, this bill:
1)Makes findings regarding California's climate change goals and
declares the intent of the Legislature to provide more
realistic incentives to move customer demand for
zero-emission-vehicles (ZEV) to meet the state's greenhouse
gas (GHG) emission reduction goals.
2)Requires California Air Resources Board (ARB), beginning on
January 1, 2017, to limit Clean Vehicle Rebate Program (CVRP)
rebates to vehicles with an manufacturer's suggested retail
price (MSRP) of $60,000.
3)Requires the ARB, beginning January 1, 2017, to provide CVRP
rebates in the following amounts:
a) 10% of the MSRP for qualified plug-in hybrid electric
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vehicles;
b) 15% of the MSRP for qualified plug-in battery-electric
vehicles; and,
c) 25% of the MSRP for qualified fuel cell vehicles;
4)Requires ARB, beginning January 1, 2017, to increase CVRP
rebates to provide the following incentive amounts for
residents of a disadvantaged community:
a) 40% of the MSRP for qualified plug-in hybrid electric
vehicles;
b) 45% of the MSRP for qualified plug-in battery-electric
vehicles; and,
c) 55% of the MSRP for qualified fuel cell vehicles.
5)Requires ARB to implement a process to allow eligible CVRP
applicants to obtain prompt pre-approval prior to purchasing
or leasing a qualifying vehicle and to implement a process
that allows new motor vehicle dealers to be refunded any CVRP
incentive amount applied to the applicant's conditional sales
contract or other vehicle purchase or lease agreement in no
fewer than seven days.
6)Authorizes a new car dealer to apply the CVRP incentive amount
to the applicant's conditional sales contract or other vehicle
purchase or lease agreement as a down payment or amount due at
lease sign or delivery.
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7)Requires ARB to suspend the CVRP pre-approval process if there
are insufficient funds available to award CVRP incentives to
provide dealers and consumers with no less than
30-days advanced notice if the pre-approval process is
suspended.
8)Requires ARB to adopt regulations implementing the enhanced
CVRP rebates and related provisions.
9)Requires that GGRF monies, be available upon appropriation by
the Legislature, for the enhanced CVRP rebates.
10)Requires ARB to issue rebates to a property owner or lessee
for the purchase and installation of up to two electric
vehicle (EV) charging stations on residential properties for
residents of disadvantaged communities and up to 10 EV
charging stations on commercial or multifamily properties,
with rebates provided as follows:
a) $2,000 for the first year of installation;
b) $1,500 following the first year of installation; and,
c) $1,000 following the second year of installation.
11)Requires, to qualify for the EV charging station rebate, that
the EV charging station be in service during the calendar year
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in which the rebate is claimed.
12)Requires that the property owner or lessee who receives
rebates for the installation of an EV charging system maintain
the charging station for a minimum of 60 months.
13)Requires ARB to verify that EV charging systems that are
installed using the rebates remain operative for a minimum of
five years. Failure to meet this requirement would result in
the rebate amount being reclaimed by ARB.
14)Requires that the rebate recipient not claim a rebate for the
installation of an EV charging station if an existing EV
charging station has been removed from the property in the
previous 12 months.
15)Provides that ARB shall limit eligible EV charging station
rebates to Level 2 stations
(220 volt chargers) and rapid charging ports.
16)Requires ARB to issue regulations with regard to EV charging
station rebates.
17)Requires that GGRF monies be available, upon appropriation by
the Legislature, for allocation for EV charging system
incentives.
18)Requires, for the purposes of calculating sales and use tax
(SUT) that the value of a trade-in vehicle be deducted from
the sales price of a qualifying clean air vehicle and that
GGRF funds be used, upon appropriation by the Legislature, to
reimburse counties and cities for any revenue losses that may
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result.
19) Removes the cap on the green high-occupancy vehicle (HOV)
lane stickers thereby allowing an unlimited number of
qualifying vehicles (plug-in electric hybrid vehicles) access
to HOVs with single occupants.
20)Makes related, clarifying amendments.
21)Defines a variety of terms.
EXISTING LAW:
1)Requires ARB, pursuant to AB 32 (Núñez), Chapter 488, Statutes
of 2006, to develop a plan to reduce GHG emissions to 1990
levels by 2020. Under AB 32, ARB is authorized to include the
use of market-based mechanisms to comply with these
regulations (cap and trade).
2)Established the GGRF in the State Treasury and requires all
funds collected pursuant to cap and trade, with certain
limited exceptions, be deposited into the fund for
appropriation by the Legislature.
3)Created the Alternative and Renewable Fuel and Vehicle
Technology Program (ARFVTP), pursuant to AB 118 (Núñez),
Chapter 750, Statutes of 2007, and extended by AB 8 (Perea),
Chapter 401, Statutes of 2013, which requires the California
Energy Commission (Commission) to fund projects that develop
and deploy technologies and alternative and renewable fuels in
the marketplace to help meet the state's climate change goal
including, but not necessarily limited to, expanding
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alternative fueling infrastructure such as EV charging
systems.
4)Created the Air Quality Improvement Program (AQIP),
administered by ARB and the Commission, in consultation with
local air districts, to fund specified air quality improvement
projects which includes the CVRP, administered by ARB, to
promote the production and use of ZEVs.
5)Requires, pursuant to SB 535 (de León), Chapter 830, Statutes
of 2013, that a minimum of 25% of the available monies in the
GGRF go to projects that provide benefits to identified
disadvantaged communities and that a minimum of 10% of the
available monies in the fund go to projects located within
identified disadvantaged communities.
6)Established the Charge Ahead California Initiative pursuant to
SB 1275 (de León), Chapter 530, Statutes of 2014, that, among
other things, included the goal of placing into service at
least one million ZEVs and near-zero emission vehicles by
January 1, 2023, and increasing access for disadvantaged,
low-income, and moderate-income communities and consumers to
ZEVs and near-zero-emission vehicles.
7)Authorizes a local jurisdiction to impose SUT on the sale of,
storage, use, or other consumption of tangible personal
property unless specifically exempted.
8)Established, pursuant to Executive Order B-16-2012, the goal
of placing 1.5 million ZEVs on California's roadways by 2025.
9)Adopted, pursuant to ARB's Advanced Clean Cars Program, a
variety of strategies to convert the passenger fleet to zero-
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and near-zero emission vehicles by advancing vehicle emission
standards for vehicles which included the requirement that by
2025, ZEV sales would represent 15% of sales in 2025.
10)Allows certain qualifying ZEVs to utilize HOV lanes
regardless of occupancy level to incentivize the purchase and
use of these clean vehicles.
FISCAL EFFECT: Unknown
COMMENTS: With the passage of AB 32, California committed to
reducing GHG emissions. Given that the transportation sector
contributes nearly 40% of emissions, it makes sense why so many
emissions reduction programs target the transportation sector.
While AB 1851 focuses solely on the light-duty (or passenger)
fleet, it is important to recognize that the light-duty vehicle
sector is only one component of a much larger transportation
system that includes ports, trucking, maritime, and rail
industries, each of which is a significant contributor of
criteria pollutants and GHG emissions. It is also important to
recognize that the freight sector (which includes heavy-duty
trucks, ports, highway infrastructure, and rail) has some of the
greatest adverse effects on disadvantaged communities because
these communities tend to border freight corridors and
associated facilities such as warehouses and freight hubs.
This bill focuses on much-needed state efforts to convert the
existing light-duty or passenger fleet from predominant use of
higher polluting, internal combustion engine (ICE) vehicles to
cleaner cars such as zero- and near-zero-emission vehicles. The
author points out that recent goals and mandates related to
converting the passenger fleet, set forth by the Legislature,
the Governor, and ARB, have put increasing pressure on the auto
industry to produce and sell these vehicles. Specifically, the
author points to ARB's Advanced Clean Cars Program, which
requires manufacturers to sell certain percentages of ZEVs. The
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author contends that while these goals are intended to create
pressure and increase adoption of ZEVs, that the mechanisms
currently available to dealers to get buyers to consider these
vehicles are not working. He specifically points to the current
suite of incentives such as CVRP and HOV access as not providing
enough incentives for consumers to take action. He notes that
market forces outside of a car dealer's control, such as low gas
prices, also has an impact on whether or not buyers opt to
purchase or lease ZEVs. To illustrate this point, he points to
sales data that show in 2015 ZEVs represented 3.1% of new cars
sold in California, far from the 25% goal set by the ZEV Mandate
for sales in 2025.
The author introduced this bill to provide significant financial
incentives to purchase certain clean air vehicles. The author
points out that this method has been successfully implemented in
Norway where incentives were set at nearly 50% of a qualifying
vehicles' price. He notes that these programs have
substantially increased sales and improved market penetration.
It should also be noted, however, that along with substantial
incentives, countries like Norway have also created substantial
"disincentives" for purchasing conventional vehicles including
increased taxes on these vehicles. This, along with the
relatively high cost of fuel and shorter driving distances
create circumstances that are substantially different from those
in California.
The contention that substantially increasing rebates will
automatically spur consumer purchases is likely correct given
that rebates would be increased by several orders of magnitude
over the current program. For example, individuals purchasing
a Chevy Volt currently receive a $1,500 rebate. Under this
bill, the consumer would receive a $3,300 or $13,000 for
disadvantaged community residents. For battery electric
vehicles (such as a Nissan LEAF) for which current rebates are
set at $2,500, this bill would provide rebates of $4,350 or
$13,050 for disadvantaged community residents. For fuel cell
vehicles, where rebates are currently set $5,000, increased
rebates pursuant to AB 1851 would be $14,375 or $31,625 for
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disadvantaged community residents). The important question is
whether or not these purchasing habits will be sustained after
the program ends. In the state of Georgia, when successful
incentive programs were eliminated, electric car sales in the
state plummeted by 90%, leaving it open to question whether
incentives actually create a lasting effect on buyer behavior or
if the incentives only temporarily affect buyer choice
insomuch as decision making is influenced solely by the rebate.
Overall, the California New Car Dealers Association (CNCDA)
estimates that annual expenditures for this program would be in
the vicinity of $750 million to $2 billion annually
Vehicle charging incentives: There is little question that EV
owners need to have the confidence that they will be able to
locate and use EV charging stations so that they can confidently
operate their vehicles. Without this assurance, many will
simply choose not to purchase EVs. To address these concerns,
the author included provisions in this bill that would provide
additional incentives for the installation of EV charging
stations in single family homes, multi-unit dwellings, and
commercial buildings. Specifically, this bill would authorize
up to $4,500 in incentive funding, paid over a period of several
years, for individuals in disadvantaged communities who wish to
install up to two (Level 2 or fast) charging systems. For
commercial developments and multi-unit dwelling, individuals
would be authorized to receive a $4,500 rebate (per charging
system) for the installation of up to ten (Level 2 or fast) EV
charging systems. The funding for these rebates would come from
the GGRF, upon appropriation by the Legislature. To ensure that
the systems are installed and utilized as intended, this bill
would require that ARB ensure that the EV charging systems are
installed maintained for at least 5 years and, if they are not,
ARB would be required to seek reimbursement of the incentive
amount from the incentive program recipient.
While the availability of EV charging systems can be an
impediment to EV adoption, it is unclear whether incentive
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programs for the installation of home, commercial, and
multi-unit dwelling charging systems are needed. For example,
studies show that most EV owners use a standard, 110 outlet to
charge their vehicles at home overnight. Given that the program
only qualifies individuals for Level 2 or fast charging systems,
many may not feel compelled to utilize the incentive funding.
Multi-unit dwellings and commercial buildings present a unique
set of challenging circumstances with respect to EV charging
system installation. For example, retrofitting a building to
accommodate increased loads on the electrical system as can be
very costly. Additionally, unless these systems include a
payment collection system, many landlords or commercial property
owners may pass on installing EV charging systems to avoid these
increased costs.
Manufacturer's suggested retail price cap: In an effort to
limit rebate amounts, the author has included an MSRP "cap" of
$60,000 which would effectively limit buyers who wish to use
incentives to vehicles with an MSRP of $60,000 or less. On one
hand, it is wise to institute a cap as a mechanism to limit
annual program expenditures; however, instituting an MSRP cap
would exclude a number of vehicles that would otherwise
qualifying (namely Tesla and some Cadillac models). With
substantial incentive amounts at stake, it is likely that buyers
would steer away from purchases of these higher-priced vehicles.
While it could be argued that this could further encourage auto
manufactures to lower their price point, it could also be argued
that this could harm California-based companies and the dealers
that sell these high-priced vehicles.
It is important to note that a similar MSRP cap was suggested by
ARB in 2014 as part of proposed CVRP program revisions to
address growing concerns incentives were mostly being used by
the affluent to purchase expensive vehicles. After receiving
numerous complaints about the potential adverse impacts of the
cap on the CVRP program and California's economy, as well as
concerns as about how the proposal could stifle competition and
innovation, ARB ultimately opted not to implement the MSRP cap
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in the CVRP. While this same argument could be made for the
MSRP cap in AB 1851, because incentive amounts are based on a
qualifying vehicle's MSRP, eliminating the MSRP cap in this bill
would serve to further increase incentive amounts for vehicles
and undoubtedly place an increased burden on the GGRF.
Sales tax exemption: The author proposes to increase incentives
for the purchase of certain ZEVs by providing that, for the
purposes of calculating SUT, that the value of a trade-in
vehicle be deducted from the sales price of a qualifying ZEV.
This bill addresses potential loss of revenue to local
jurisdictions by requiring that they be reimbursed using GGRF
revenues. While it is true that ZEVs are comparatively more
costly than traditional vehicles, resulting in an increased tax
burden on the consumer, these vehicles also provide substantial
cost savings to buyers in terms of lower maintenance costs and
reduced fueling costs. It is likely these savings, especially
over time, would far outweigh the amount that would be offset by
the SUT exemption. Additionally, while lowering the tax burden
on the buyer would provide a benefit, the pass-through costs to
the GGRF could prove substantial.
HOV sticker program incentives: Under current law, green HOV
access stickers are available for 85,000 plug-in hybrid electric
vehicles that meet certain requirements. To date, the 85,000
has been met meaning that no new green stickers can be issued.
The white sticker program, which provides HOV access to
battery-electric and fuel cell vehicles, does not have a cap on
the number of stickers that can be issued. The green stickers,
as well as the white stickers, provide plug-in electric hybrid
vehicles with access to HOV lanes and freeway ramps, regardless
of occupancy level, until 2019.
To further incentivize the purchase of ZEVs the author has
included a provision that would lift the cap on green HOV
sticker program, thereby providing that an unlimited number of
vehicles that qualify for the green sticker program can access
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HOV lanes. While it is true that HOV access provides a
low-overhead and popular method by which to incentivize the
purchase of HOVs, providing an unlimited number of qualifying
vehicles access to HOV lanes could result in increased HOV lane
congestion thereby decreasing their utility for ZEV owners and
carpoolers alike. It is also important to point out that this
bill conflicts with AB 1964 (Bloom), that recently passed out of
this committee in that AB 1964 provides plug-in hybrid electric
vehicles access to HOV lanes for only a three year period upon
execution of the existing program in 2019.
Writing in support, CNCDA writes that in 2015, California's new
car dealers sold more than two million new vehicles but of this
number, only 3.1% were ZEV and plug-in hybrid vehicles. CNCDA
states unequivocally that drastic measures need to be taken
immediately to improve ZEV adoption rates if the states goals
and mandates are to be achieved. CDNA notes that while existing
incentive programs have been successful, they clearly are not
creating enough of an incentive to get buyers to purchase these
cars. CNCDA feels strongly that substantially increased
subsidies, such as those provided in countries like Norway, are
needed to get buyers' attention.
Committee concerns: If the state wishes to meet its clean air
and climate goals, it must definitely help complete the
transformation of the passenger fleet from traditional petroleum
fuel vehicles to zero- and near-zero-emission vehicles. Yet
despite spending millions of dollars, lagging sales of ZEVs
leaves one wondering if the efforts have been for not or if
additional effort, and expense, should be imparted. This is a
complex question with even more complex answers and it is
unclear if incentives alone, no matter how much money is spent,
will encourage buyers to adopt ZEVs, particularly when gas
prices are low and the cost of conventional vehicles is
competitive or lower than ZEVs.
Therefore, this bill stands on the premise that increasing
incentives (to up to half the value of a vehicle) is what is
needed to convert the fleet, but given the cost of nearly $2
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billion annually, it is important to evaluate whether or not
other projects, in the transportation sector or otherwise, would
achieve more gains with similar, or fewer, expenditures of
increasingly popular GGRF revenues.
This bill along with AB 1710 (Calderon) would make changes to
the CVRP and other programs to provide additional incentive
funding to encourage ZEV adoption. While this bill is more
prescriptive in that it outlines specific program parameters, AB
1710 aims to achieve similar outcomes by directing ARB to
develop a the program based specified parameters. In addition,
this bill, along with many others would, draw heavily on GGRF
revenues, much of which is already subject to continuous
appropriation by the Legislature.
Suggested amendments: This bill does not currently provide an
"exit strategy" whereby incentive funding could be discontinued
should the program prove too costly or be unsuccessful, nor is
it clear whether this program would supplant existing CVRP
rebates or add to them. Further, as written, AB 1851 would
provide substantially higher rebates for persons who live in a
disadvantaged community, without regard to the individual's
income and could potentially incentivize manufactures to keep
vehicle prices high.
To address these concerns, the author has agreed to take
amendments in the Assembly Transportation Committee that would:
1)Limit incentives to the first $60,000 of a vehicle's MSRP or
the final sales price of the vehicle, whichever is lower;
2)Include a provision to sunset the program on January 1, 2026;
3)Include a provision clarifying that only low- and
moderate-income individuals in disadvantaged communities would
qualify for the enhanced rebates; and,
4)Clarifies that the incentives provided in this bill would
replace, not be added to, existing incentives provided
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pursuant to CVRP.
Double referral: This bill will be referred to the Assembly
Natural Resources Committee should it pass out of this
committee.
Related legislation: AB 1964 (Bloom), creates a new program
(upon expiration of the existing program) to allow plug-in
hybrid electric vehicles access to HOV lanes for a three-year
period, regardless of vehicle occupancy level. AB 1964 passed
out of this committee on April 4, 2016, with a 14 to 2 vote and
is currently awaiting a hearing in the Assembly Appropriations
Committee.
AB 1710 (Calderon), requires ARB, in coordination with the
Commission, on or before January 1, 2019, to develop and
implement a comprehensive program to promote advanced-technology
light-duty vehicle deployment in the state to drastically
increase the use of ZEVs to meet the state's emissions reduction
goals. AB 1710 is scheduled to be heard by this committee on
April 11, 2016.
AB 1965 (Cooper), requires ARB to expand the Enhanced Fleet
Modernization Plus Up Program in disadvantaged communities and
in areas with poor air quality to increase retirement of high
polluting vehicles and replace them with cleaner cars. AB 1965
is scheduled to be heard by this committee on April 11, 2016.
Previous legislation: SB 1275 (de León), Chapter 530, Statutes
of 2014, established the Charge Ahead California Initiative
that, among other things, set the goal of placing one million
zero- and near-zero-emission vehicles into service on
California's roadways by January 1, 2023, and increasing access
to these vehicles for disadvantaged, low-, and moderate-income
communities and consumers.
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AB 8 (Perea), Chapter 401, Statutes of 2013, extended until
January 1, 2024, extra fees on vehicle registrations, boat
registrations, and tire sales in order to fund the programs that
support the production, distribution, and sale of alternative
fuels and vehicle technologies, as well as air emissions
reduction efforts.
SB 535 (de León), Chapter 830, Statutes of 2013, required that a
minimum of 25% of the available moneys in the GGRF go to
projects that provide benefits to identified disadvantaged
communities and that a minimum of 10% of the available moneys in
the fund to projects located within identified disadvantaged
communities.
AB 945 (Ting) of 2015, would have provided a partial SUT
exemption for the purchase and use of a qualified vehicle. AB
945 was held on the Assembly Appropriations Committee suspense
file.
AB 1077 (Ting and Muratsuchi), of the 2013-14 Legislative
Session, provided a partial SUT exemption for QMV, as specified,
and reduced the amount of vehicle license fee imposed on an
owner of a QMV. AB 1077 was held on the Assembly Appropriation
Committee suspense file.
AB 118 (Núñez), Chapter 750, Statutes of 2007, created the
California Alternative and Renewable Fuel, Vehicle Technology,
Clean Air, and Carbon Reduction Act of 2007 that required the
Commission to implement the ARFVTP and provide funding measures
to specified entities to develop and deploy technologies and
alternative and renewable fuels in the marketplace to help
attain the state's climate change policies.
AB 32 (Núñez), Chapter 488, Statutes of 2006, required the ARB
to develop a plan of how to reduce emissions to 1990 levels by
the year 2020 and also required ARB to ensure that, to the
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extent feasible, GHGs reduction requirement and programs direct
public and private investment toward the most disadvantaged
communities.
AB 1007 (Pavley), Chapter 371, Statutes of 2005, required ARB
and the Commission to develop a plan to increase alternative
fuels use in California.
REGISTERED SUPPORT / OPPOSITION:
Support
Alliance of Automobile Manufacturers
California New Car Dealers Association
Opposition
California Taxpayers Association
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Analysis Prepared by:Victoria Alvarez / TRANS. / (916) 319-2093