BILL ANALYSIS Ó AB 2564 Page 1 Date of Hearing: April 18, 2016 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Das Williams, Chair AB 2564 (Cooper) - As Amended April 12, 2016 SUBJECT: Clean Vehicle Rebate Project: income eligibility SUMMARY: Reforms the Clean Vehicle Rebate Project (CVRP) by increasing outreach and rebate levels for low-income Californians. Lowers income limits for CVRP. EXISTING LAW: 1)Establishes the California Alternative and Renewable Fuel, Vehicle Technology, Clean Air, and Carbon Reduction Act of 2007 [AB 118 (Nunez), Chapter 750, Statutes of 2007]. AB 118 is funded through temporary increases in vehicle registration fees ($3), smog abatement fees ($8), boat registration fees ($10/20), and special identification plate fees ($5). Collection of these fees is authorized until 2024 pursuant to AB 8 (Perea), Chapter 401, Statutes of 2013. The fees support three major programs: a) The Air Quality Improvement Program (AQIP), administered by the Air Resources Board (ARB) in consultation with local air districts, funds projects that reduce criteria air pollutants, improve air quality, and provide research for alternative fuels and vehicles, vessels, and equipment AB 2564 Page 2 technologies. The two primary programs adopted by ARB pursuant to AQIP are the CVRP and the Hybrid and Zero Emissions Truck and Bus Voucher Incentive Program (HVIP). AQIP is funded by smog abatement fees, boat registration fees, and special identification plate fees and receives between $30-36 million per year from these sources. b) The Enhanced Fleet Modernization Program (EFMP), under which ARB, in consultation with the Bureau of Automotive Repair (BAR), pays to permanently remove cars and small trucks from operation through voluntary retirement by their owners. EFMP is funded by $1 of the vehicle registration fee and receives approximately $30 million per year. c) The Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP), administered by California Energy Commission (CEC), provides grants and other financial incentives to accelerate the development and deployment of clean, efficient, low carbon alternative fuels and technologies. ARFVTP is funded by $2 of the vehicle registration fee and receives approximately $100 million per year. 2)Requires ARB, pursuant to California Global Warming Solutions Act of 2006 [AB 32 (Nunez), Chapter 488, Statutes of 2006], to adopt a statewide Greenhouse Gas (GHG) emissions limit equivalent to 1990 levels by 2020 and adopt regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. AB 32 authorizes ARB to permit the use of market-based compliance mechanisms to comply with GHG reduction regulations. 3)Establishes the Greenhouse Gas Reduction Fund (GGRF) and requires all moneys, except for fines and penalties, collected by ARB from the auction or sale of allowances pursuant to a market-based compliance mechanism (i.e., the cap-and-trade program adopted by ARB under AB 32) to be deposited in the GGRF and available for appropriation by the Legislature. AB 2564 Page 3 4)Establishes the GGRF Investment Plan and Communities Revitalization Act [AB 1532 (John A. Pérez), Chapter 807, Statutes of 2012] to set procedures for the investment of GHG allowance auction revenues. AB 1532 authorizes a range of GHG reduction investments and establishes several additional policy objectives. 5)Requires the investment plan to allocate (1) a minimum of 25% of the available moneys in the GHGRF to projects that provide benefits to identified disadvantaged communities, and (2) a minimum of 10% of the available moneys in the GGRF to projects located within identified disadvantaged communities [SB 535 (de León), Chapter 830, Statutes of 2012]. 6)Establishes 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 zero emissions vehicles (ZEV) and near-zero emission vehicles (NZEV) by January 1, 2023, and increasing access for disadvantaged, low-income, and moderate-income communities and consumers to ZEVs and NZEV vehicles. THIS BILL: 1)Requires outreach to disadvantaged communities to increase consumer awareness about CVRP. Prioritizes rebates payments for low-income consumers. 2)Increases rebate amounts by $500 per rebate for consumers with household incomes less than or equal to 300% of the federal poverty level. Increased rebate amounts are available for fuel-cell electric vehicles, battery electric vehicles, and plug-in hybrid electric vehicles. 3)Lowers CVRP income limits to $125,000 single filer, $170,000 AB 2564 Page 4 for head of household, and $250,000 for joint filers. Excludes fuel cell electric vehicles from the income limit. FISCAL EFFECT: Unknown COMMENTS: 1)Background. In 2007, AB 118 established three new programs intended to promote vehicle and fuel technology that reduces air pollution and GHG emissions statewide. These programs are AQIP, EFMP, and ARFVTP. AQIP provides financial incentives for public and private groups and individuals to adopt smog and diesel particulate pollution reducing technology that concurrently reduces GHG emissions. Two of AQIP's flagship projects, CVRP and HVIP, represent the program's largest funding commitments. AQIP has also provided incentives for biofuels research, hybrid truck testing, lawn and garden equipment replacement, zero-emission all-terrain agricultural work vehicle rebates, advanced technology demonstration, and hybrid off-road equipment pilot projects. CVRP provides rebates for ZEV and NZEV, including plug-in hybrid vehicles, battery electric vehicles, fuel cell electric vehicles, and neighborhood electric vehicles. The demand for CVRP has steadily increased over time and surpassed funding available through AB 118. Originally the funding gap was covered with loans from various funds. In the 2014-15 Budget Act, $200 million was appropriated to AQIP from the GGRF. Last year, CVRP was one of the few non-continuously appropriated programs to receive an appropriation from GGRF. Despite that, CVRP may still run out of funding prior to the enactment of this year's budget, and the administrator may need to establish a wait list. To date, CVRP has spent over $300 million ($160 million from GGRF) to provide over 142,000 AB 2564 Page 5 rebates. ARB proposes to spend an additional $230 million on CVRP from the $500 million requested appropriation for low carbon transportation and fuels in the Governor's 2016-17 fiscal year budget. 2)Money for nothing. As CVRP expenditures have grown, there have been concerns about the equity of the program and its cost effectiveness. Some the statistics that demonstrate the equity issues with CVRP include: a) Over 50% of rebate recipients' household incomes are over $150,000 a year; b) Over 20% of rebate recipients' household incomes are over $250,000 a year; c) 88% of recipients are Caucasian; d) 75% of recipients are male; e) 83% are college graduates; f) Approximately 22,000 rebates ($56 million) were used on vehicles whose prices range from $70,000 to over $100,000; and, g) One assembly district (28) had 7,881 rebates costing over $17 million while another assembly district (32) had 85 rebates costing approximately $180,000. These equity issues were recognized when the Legislature passed SB 1275 (de León), Chapter 530, Statutes of 2014, which established the Charge Ahead California Initiative to increase access to ZEVs and NZEVs for lower income Californians and disadvantaged communities. SB 1275 also required eligibility to be limited based on income. In response to SB 1275, ARB, on March 28, 2016, set an income cap of: AB 2564 Page 6 a) $250,000 for single filers; b) $340,000 for head-of-household filers; and, c) $500,000 for joint filers. In addition, rebate amounts will be increased by $1,500 per rebate for consumers with household incomes less than or equal to 300% of the federal poverty level. CVRP raises questions of cost effectiveness because it is unclear how many additional ZEV and NZEVs are on the road because of CVRP. According to UCLA Luskin Center, many new car buyers would purchase plug-in hybrids without a rebate. In fact, 33% of plug-in hybrids are purchased without a rebate. Research has also shown that CVRP induced a 7% increase in sales and California spends $30,000 for each additional ZEV and NZEV sold. The UCLA Luskin Center recommends targeting rebates for lower income Californians to make CVRP more cost effective. Another issue is only 18% of car-owning households in California even are aware that CVRP exists. Rebates could be more cost effective if more Californians knew about them. In addition, for those who did know about the rebates and did purchase a vehicle, the top two motivations were 1) saving money on fuel costs, and 2) reducing environmental impacts. Therefore, the price of gas and the environmental benefits of the vehicles may have more impact on purchasing decisions than CVRP. 1)This bill. This bill attempts to improve equity and cost effectiveness of CVRP by implementing two recommendations from an ARB discussion document. The bill also goes further on actions ARB has already taken to address equity and cost effectiveness. These recommendations include increasing awareness about CVRP by requiring outreach in disadvantaged communities and prioritizing rebates payments for low-income consumers. This bill also increases rebate amounts by $500 AB 2564 Page 7 per rebate for consumers with household incomes less than or equal to 300% of the federal poverty level. ARB's current income limits would not affect many rebate recipients and still include very high-income Californians. This bill lowers the CVRP income limits to $125,000 single filer, $170,000 for head of household, and $250,000 for joint filers. 2)Amendment. The author and committee may wish to consider amendments to expand the outreach component of the bill to all consumers with household incomes less than or equal to 300% of the federal poverty level. 3)Related Legislation. AB 1851 (Gray) creates and expands a broad array of incentive programs to increase the sales and use of certain clean air vehicles. The bill is awaiting hearing in the Assembly Revenue and Taxation 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. The bill is awaiting hearing in the Assembly Revenue and Taxation Committee. REGISTERED SUPPORT / OPPOSITION: AB 2564 Page 8 Support None on file Opposition None on file Analysis Prepared by:Michael Jarred / NAT. RES. / (916) 319-2092