One of the most direct methods of promoting ZECVs is creating a financial incentive that makes manufacturing, owning, or fueling less expensive. Reducing the up-front cost of a ZECV, which typically costs more than a petroleum-powered vehicle, has been used in some of the regions with the highest rates of ZECV adoption. In addition to reducing the cost of a vehicle, financial incentives may include differentiated fee structures for accessing roadways or regions, improved prices for fuels and infrastructure, and large-scale investments in battery production or purchases. Vouchers and direct subsidies allow fleet operators to earn point-of-purchase savings on ZECVs.
Voucher Purchase Incentives or Direct Subsidies
- The Chinese government has provided direct subsidies to electric transit bus manufacturers, which has allowed the manufacturers to sell their buses to transit fleets with price reductions up to $150,000 (academic link) (academic link).
- California’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) is funded by the state’s Air Resource Board to help reduce the purchase price of low- and zero-emission commercial vehicles through an innovative voucher system; the program has allocated more than $400 million to deploy low-carbon vehicles on California’s roads (source link). The Air Resources Board has also launched an Clean Off-Road Equipment (CORE) program with a separate funding stream and approved vehicle database (source link).
- The New York Truck Voucher Incentive Program applies the innovative voucher system developed for HVIP to provide point-of-purchase price reductions for vehicles that reduce GHGs and improve air quality; the program will be recapitalized and accepting voucher applications in summer 2019 (source link).
- The United Kingdom’s Plug-In Van Grant program provides a grant that reduces the purchase price of eligible plug-in medium-duty trucks and vans (source link).
Tax Purchase Incentives
Tax incentives for the purchase of a new zero-emission vehicle are generally considered to be effective in the light-duty market, but in the medium- and heavy-duty commercial vehicle segment, tax credits have not been as successful in promoting uptake of clean vehicles for many reasons, but primarily because the credit is not applied at the point of purchase, failing to immediately reduce the ZECVs’ higher up-front costs. Nevertheless, vehicle purchase incentives offered through tax credits do reduce the total lifetime cost of the vehicles.
- Utah offers tax credits worth up to $25,000 for qualified heavy-duty EVs purchased through 2020 (academic link).
Cities that choose to reduce the number of vehicles and their associated tailpipe and greenhouse gas emissions may require payment for vehicles to enter a restricted zone. Reducing or eliminating payment for ZECVs to enter a congestion zone creates a financial reward for adopting ZECVs, as the cost of doing business in congestion zones has been lessened relative to operating gasoline- or diesel-powered trucks or buses.
- London’s Ultra Low Emission Zone requires payment for vehicles that do not meet emissions standards to drive into the boundaries of the central city; as emissions standards for commercial vehicles increase through 2020, ZECV operators will save on paying to access central London (source link).
- New York City’s Mayor de Blasio has collaborated the governor and legislators to explore a congestion pricing plan for downtown Manhattan. The program would reduce pollution, benefit pedestrian safety, and raise funding for the mass transit system (news link).
The Tri-State Transportation Campaign, based in the New York City metropolitan region, developed a comparison of three current examples of congestion pricing or street access fees in London, Stockholm, and Singapore. The researchers synthesize lessons for New York City’s congestion price developers: Road Pricing in London, Stockholm, and Singapore: A Way Forward for New York City
Similar to congestion pricing that requires a fee for entry into a defined area with exceptions for near- or zero-emission vehicles, access fees place a price on diesel-powered vehicles doing business within a particular area. Access fees are differentiated from congestion pricing because these fees are explicitly levied to encourage improvements in local air quality and GHG emissions, not to reduce congestion.
- Congestion pricing programs in Swedish cities Stockholm and Gothenburg are levied to reduce GHG and air quality emissions, though ZECVs are no longer exempt from paying fees (source link).
- The ports of Los Angeles and Long Beach have developed a joint Clean Truck Plan that will collectively require vehicles that enter the ports to become cleaner or to pay higher fees. In 2020, the ports implemented an access fee that exempts zero-emission drayage trucks (source link) (news link).
Favorable Electricity Rates
Refueling ZECVs is typically less expensive than refueling vehicles powered by petroleum, which reduces a fleets’ operating costs and makes ZECV ownership more attractive. However, electric rates have not been designed for transportation uses, and situational charging can be more expensive than fueling a traditionally-powered vehicle with gasoline or petroleum. Utility rate design, including time-of-use charging and strategies to reduce demand charges, are valuable to fleet operators managing their ZECV charging.
- Northern California utility Pacific Gas & Electric has developed a subscription fee that will allow customers in its service territory to pay a flat monthly fee instead of prohibitively expensive demand charges (news link).
The Natural Resources Defense Council has developed a report on how utilities can support reducing fleet owners’ costs for heavy-duty vehicle and fast-charging: Reforming Rates for Electric Trucks, Buses & Fast Chargers
Battery Production / Purchase Incentives
Batteries are typically the most expensive component of a ZECV and represent the highest cost of adopting the new technologies. Governments can reduce the costs of battery production, thereby reducing the costs to fleets of purchasing ZECVs and their batteries, by providing incentives for the production of batteries or the purchase of vehicles with domestically produced batteries.
- The state of Nevada provided EV startup company Tesla a $1.3 tax break to open its battery “Gigafactory” in the state; these same batteries will be used in the company’s Semi long-haul all-electric truck under development (news link).
- Chinese firms produce more than half of the world’s EV batteries, due in large part to government subsidies made available solely to vehicles purchased with domestically produced batteries (news link).
- The French and German governments will jointly invest 5-6 billion euros in a battery production plant that will help build a local clean transportation economy (news link).
- The U.S. House of Representatives is considering a bill that would create a pathway for standalone energy storage production to be eligible for the federal production tax credit (news link).