California Goes All-in on Electric Cars

California is America's leader in the clean energy sector, there's no doubt about that.  They are now solidifying that position by designing a new bill that will encourage the sale of electric cars in the state, largely inspired by the successful California Solar Initiative that delivered 2 gigawatts of residential and commercial solar to the state in 9 years.  The point of the bill will be to offer higher tax rebates for those who purchase electric cars, set at offsetting the entire difference between a gas-powered car and an electric car of the same quality.

 

The proposed legislation, known as AB1184, will seek to use up to $3 billion in taxpayer funds to for electric car rebates.  This "Clean Energy Vehicle Initiative" is hoping to bring 1.5 million electric cars to California's roads by 2025 and up to 5 million by 2030.  With only around 300,000 electric cars on California roads today, needless to say this initiative is ambitious.

 

The way the proposed bill will add this many electric cars is by offering more rebates to electric car buyers.  While the Federal government already offers a $7,500 dollar rebate, and California already offers an additional $2,500 on top of that, advocates of the bill claim it's not enough to drive the growth needed.  They contend that the price difference between a gas-powered car and an electric equivalent is around $15,000, a financial gap that the rebate should be designed to fill.

How subsidies are distributed has been a politically sensitive subject with the California Solar Initiative, and will be with AB1184 as well.  With the California Solar Intiative, subsidies were given out liberally at the beginning, but have been scaled back over time as the amount of solar has increased.  The same principal would have to be applied to the Clean Energy Vehicle Initiative, such that consumers can be "weened" off of government help once the market has gained traction.    

 

Where money for the intiative will come from is also of concern.  The California Solar Initiative was able to procure $3 billion in funding via a $.50 raise on electric bills for 10 years.  This didn't sit well with some political parties, so funding for the Clean Vehicle Energy Initiative will have to find a less politically controversial source.

 

One major source is likely to be California's cap-and-trade program although uncertainty remains about where the program will be in existence after 2020.   Bills to extend cap-and-trade have not made much progress, and it was not included in Gov. Jerry Brown's recent budget.  So while the bill wants more money, it is not yet clear how the initiative will be paid for.

 

Hopefully, hammering out the details of this bill will solidify a funding source.  The Senate will be holding hearings on the bill in coming weeks to determine future action.