Project Background for Clean Vehicle Rebate Project (CVRP)

Project Goals

The primary goal of CVRP has been to support mass deployment of ZEVs to help build a sustainable EV market. This is accomplished by providing consumer rebates to partially offset the higher initial cost of these advanced technologies. Over the years, CVRP has appropriately transitioned from a broad market incentive to an income-based incentive to ensure consumers that are not traditionally the first to buy newer technologies have ample support to make the transition. The program continues to see increasing demand from applicants in both middle- and lower-income levels.

Guiding Legislation/Policy Drivers

In 2007, Governor Schwarzenegger signed into law the California Alternative and Renewable Fuel, Vehicle Technology, Clean Air, and Carbon Reduction Act of 2007 (AB 118, Statutes of 2007, Chapter 750). AB 118 created the Air Quality Improvement Program (AQIP), a voluntary incentive program administered by the California Air Resources Board (CARB or Board), to fund clean vehicle and equipment projects, air quality research, and workforce training.

As required in Health and Safety Code (HSC) Section 44274(a), the Board adopted regulatory guidelines in 2009 for AQIP. The Guidelines for the AB 118 Air Quality Improvement Program (Guidelines) define the overall administrative requirements and policies and procedures for program implementation based on the framework established in statute. Central to the Guidelines is the requirement for a Board-approved annual funding plan developed with public input. The funding plan is each year’s blueprint for expending AQIP funds appropriated to the CARB in the annual State Budget. The funding plan focuses AQIP on supporting development and deployment of the advanced technologies needed to meet California’s longer-term, post 2020 air quality goals.

In 2012, the legislature passed and Governor Brown signed into law three bills – AB 1532 (Pérez, Chapter 807), Senate Bill (SB) 535 (de León, Chapter 830), and SB 1018 (Budget and Fiscal Review Committee, Chapter 39) – that established the Greenhouse Gas Reduction Fund (GGRF) to receive Cap-and-Trade auction proceeds and to provide the framework for how the auction proceeds will be administered to further the purposes of Assembly Bill 32 (AB 32; Nunez, Chapter 488, Statutes of 2006). Cap-and-Trade auction proceeds have been appropriated to CARB for Low Carbon Transportation projects that reduce greenhouse gas (GHG) emissions, with an emphasis on investments that benefit the State’s disadvantaged communities. Per statute, these funds must be used to further the purposes of AB 32. The Low Carbon Transportation investments build upon and greatly expand existing advanced technology, clean transportation programs, which provide mobile source incentives to reduce criteria pollutant, air toxic, and GHG emissions.

In 2014, SB 1275 5 (De León, Chapter 530, Statutes of 2014) established the Charge Ahead California Initiative with the goals of placing one million zero-emission and near zero-emission vehicles in California by 2023 and increasing access to these vehicles for lower-income consumers and consumers in disadvantaged communities. It also identifies the Cap-and-Trade auction proceeds as a funding source that could be utilized to meet the provisions established in the Charge Ahead California Initiative.

SB 1275 directs ARB to make a number of changes to CVRP including limiting consumer eligibility based on income and considering incorporating pre-qualification and point-of-sale mechanisms in CVRP. The Board approved an income cap and higher CVRP rebate amounts for lower-income consumers as part of the FY 2015-16 Funding Plan, and these changes went into effect in spring 2016.

In 2016, the Legislature passed SB 859 (Committee on Budget and Fiscal Review, Chapter 368, Statutes of 2015), which mandated a number of changes to CVRP, including:

Increasing rebate amounts for low-income applicants with household incomes less than or equal to 300 percent of the federal poverty level.
Set the income cap.
Limiting PHEV eligibility to vehicles with at least 20 miles of electric range.
Requiring outreach to low-income consumers.
Requiring prioritized rebate payments for low-income consumers.

SB 615 (Cooper, Chapter 631, Statutes of 2017) extended these provisions through December 31, 2018. In addition, AB 2885 (Rodriguez, Chapter 366, Statutes of 2018) extended the requirements for CARB to continue providing outreach to low-income households and low-income communities and prioritize rebate payments to low-income applicants until January 1, 2022.

Though these legislative requirements were scheduled to sunset, staff maintained the following provisions:

Limit participant eligibility based on income.
Provide rebates for applicants who report gross annual income.
Provide increased rebates to eligible low-income applicants

Project Funding/Allocations/History

Table: Allocated Dollars Since FY 2009-10 Program Launch

CVRP Funding Source	Dollars Allocated
Low Carbon Transportation	$1,049M
General Fund	$415M
AQIP	$146M
Total	$1,610M

Funding Breakdown

Total Funds Allocated

Total Spent on Administration

to-date

Total Spent on Outreach

to-date

Total Spent on Incentives

to-date

$1,603,214,512.65

$83,527,626.81

$36,076,894.02

$1,241,485,238.12

Recent Project/Policy Changes

Removal of PHEVs from CVRP eligibility by January 1, 2025: As directed by the Legislature in the Budget Act of 2022, staff plans to remove PHEVs as an eligible vehicle type in CVRP by January 1, 2025. While this was initially part of staff’s proposal for phase out in 2023, the Legislature expressed support in the 2022 Budget Act for PHEVs to remain eligible until January 1, 2025. As this change is now planned for a later date, staff will provide updates on the anticipated impact this change will have on CVRP in future Funding Plans.

Reconsidering implementation of a second decrease to the income cap for standard rebate eligibility and a modest decrease in rebate amounts planned for implementation in February 2023: In the Fiscal Year 2021/22 approved plan, a second set of phased-in changes for CVRP was tentatively slated to go into effect in February 2023. This second set of changes included a second decrease to the income cap for standard rebate eligibility and a modest decrease in rebate amounts across the board. Over the past eight months, staff has continued analyzing program and ZEV market data and met with stakeholders to determine if these changes were still needed to keep the program open through FY 2023-24. As updated projections indicate, there is an expected surplus of funding at the end of FY 2023-24 given current program design and the ineligibility of Tesla Model 3 and Model Y vehicles. As such, staff does not believe these changes, which were proposed in FY 2021-22, are warranted in the program at this time and is proposing to defer implementation.

Including a $2,000 pre-paid charge card with every low- and moderate-income increased rebate issued: Currently, charging incentives are offered through Clean Cars 4 All and Financing Assistance but have yet to be introduced into CVRP. These charging incentives are in place to help address the barrier of electric vehicle charging access experienced by many low- and moderate-income program participants. Recent survey data indicates that the availability of charging infrastructure is still a top barrier to EV adoption for many individuals. In an effort to continue addressing this barrier and aligning with both Financing Assistance and Clean Cars 4 All, staff is proposing to include charging incentives for low- and moderate-income participants in CVRP. Staff analyzed what the average cost to charge an EV is annually and the results of the analysis indicated an average cost of about $2,000. By July 2023, CVRP would include a $2,000 pre-paid charge card with every Increased Rebate issued that will be valid at public charging stations or alternative charge card options. Increased Rebate applicants would be able to stack this charging incentive with any other charging incentives they are eligible for. This change is expected to have a low impact on funding demand, however, as this is a new addition to CVRP, it is unknown how providing charging incentives to increased rebate participants will impact program participation. Currently, Financing Assistance provides up to $2,000 for the installation of a Level 2 charging station or a $1,000 prepaid charge card plus a portable charger, however, staff is proposing to increase the prepaid charge card amount to $2,000 in this funding plan to align with all programs. CC4A offers up to $2,000 for the installation of a Level 2 charger or up to $2,000 in prepaid charging credit. With this proposal, consumers can stack CVRP charging incentives and Financing Assistance charging incentives for a total of up to $4,000 in charging incentives if they are purchasing a new EV without scrapping an older vehicle. Additionally, consumers can also stack CVRP charging incentives with CC4A charging incentives for a total of up to $4,000 in charging incentives if purchasing a new EV and scrapping an older vehicle. This would help support charging at public stations for the first 2 years of EV ownership given CARB vehicle mileage assumptions of 14,885 miles for PHEVs and 14,400 miles for BEVs. This support could last beyond 2 years if the consumer drives less miles annually or has access to free charging through other means.

Increasing the rebate amount for low- and moderate-income consumers by $3,000: To help bridge the gap between a new EV and new ICEV and to continue encouraging EV adoption by all Californians, staff is proposing an increase of $3,000 to CVRP increased rebate amounts for PHEVs and BEVs and an increase of $500 for FCEVs. The proposed change would go into effect in February 2023 and would raise the PHEV rebate from $3,500 to $6,500 and the BEV rebate amount from $4,500 to $7,500. The FCEV rebate amount would increase slightly from $7,000 to $7,500 and would bring incentive amounts for BEVs and FCEVs in alignment similar to the structure seen in Financing Assistance and Clean Cars 4 All. The effect of this program change would have a moderate impact on program funding and participation since estimates are based on current low- to moderate-income rebate levels, which are atypically low due to Tesla’s program ineligibility. Further, the proposed increase for CVRP increased rebates may be underestimated as the new amounts may pass a tipping point leading to a higher demand than originally anticipated. CVRP increased rebates would continue to stack with other CARB vehicle purchase incentives in addition to other available EV incentives.

Expanding CVRP Rebate Now, the pre-qualification pilot, statewide for low- and moderate-income consumers: Currently, Rebate Now is available in participating San Diego and San Joaquin Valley dealerships, but the proposal would open Rebate Now to all of California starting in July 2023. A later implementation date is proposed for CVRP Rebate Now statewide expansion in order to ensure a sufficient number of participating dealers are enrolled, to refine and improve the CVRP Rebate Now process, and to provide additional outreach prior to launch. Staff will provide updates on this expansion through the public process and will work with stakeholders to improve implementation before launching statewide. While not directly adjusting the rebate amount, the impact of this change would allow applicants to receive their rebate amount directly and apply it towards the purchase price of their vehicles. For those who are financing their vehicle, the direct rebate may lower the principal on their loan which would allow them to pay a lower price for an EV. Staff believes that this policy would allow for more increased rebate applicants without increasing the direct rebate amount.

California Air Resources Board