Rebates are key to Democrats’ transportation electrification package. Paying for them is a harder nut to crack. 

Democrats pushing to create incentives for drivers to buy electric vehicles as part of a broader goal of weaning Virginia’s transportation sector off fossil fuels are running into a roadblock: too little state money in a budget constrained by the COVID-19 pandemic. 

“We have more priorities now than we do funding,” said Del. David Reid, D-Loudoun, who this session is carrying a bill to create an electric vehicle rebate program. “This would be a really tough priority to be able to fund right now.” 

Slowing climate change through decarbonization has been a major priority of Virginia Democrats since they won majorities in both chambers of the legislature in 2019, handing them control of state government. Last year they passed the Virginia Clean Economy Act, a marquee environmental law that committed the state’s electric grid to being carbon-free by 2050. This year they are focusing on transportation, which according to federal calculations is responsible for nearly half of Virginia’s carbon emissions.  

Toward that end, Democrats in the House of Delegates have looked to electric vehicles as an immediate solution and put forward a package of legislation that takes a three-pronged approach to the issue. 

To spur dealers to sell electric cars, they are pushing a bill that would adopt California’s clean car standards imposing emissions limits more stringent than federal ones and mandating that a certain percentage of all cars sold by manufacturers in the state be electric. To spur people to buy them, they are advocating the creation of a rebate program. And to ensure that people can keep driving them, they are supporting bills that would examine the state’s existing charging infrastructure and identify gaps. 

Of all those goals, the rebate program has been the most complicated. A study led by Virginia’s Department of Mines, Minerals and Energy found that one comprehensive proposal would cost the state $43 million; Reid estimated an early version of his bill would need $20 million in its first year if fully rolled out.

In any year, that price tag would have been a heavy lift. In a pandemic year, with lawmakers weighing every penny, it was prohibitive.

“The patron understands that other resources outside of taxpayer dollars will have to support this initiative,” said House Appropriations Chair Del. Luke Torian, D-Prince William, in a hearing Wednesday. 

As a result Democrats have scaled down their goals — or, in Reid’s words, “redefine(d) success.” Instead of seeking full funding, he is asking for $5 million this year, with roughly $1 million to go toward setting up the program under DMME and the remainder available for rebates. 

“It will hopefully be enough to kind of bridge through the caboose budget when we get through the 2022 session, and hopefully then whoever is the governor will have looked at other funding sources,” he said. 

‘Maximizing the value of the public money’

Many electric vehicle advocates and auto dealerships see rebates as a critical tool in the transition away from traditional cars. While EVs are moving toward price parity with internal combustion engine cars, they aren’t there yet. 

“At the moment, EVs are more expensive vehicles, and rebates help them sell. As we have seen in other states such as Georgia, when rebates disappear, EVs stop selling,” Don Hall, president and CEO of the Virginia Automobile Dealers Association, wrote in an email. 

The “higher upfront cost remains a barrier to widespread adoption,” Blair St. Ledger-Olson, of clean energy nonprofit Generation 180, told a House panel last week. “Financial incentives can help bridge the gap to price parity.” 

But what those incentives should look like is debated. Del. Sally Hudson, D-Charlottesville, an economist with the University of Virginia, said the priority should be “to maximize the value of the public money invested in this program for the sake of both carbon emissions and also economic equity.” She criticized a provision in an earlier version of the rebate bill that would have offered a larger rebate for new purchases than used ones. 

“For a lot of middle and lower-income families, the primary car, electric vehicle that they might consider purchasing is not a new one that got a little bit cheaper, but a used one that is already a lot cheaper and then got somewhat cheaper because of the rebate,” she said. “We’re going to do more to get middle-income families into electric vehicles if we invest that money into used car rebates dollar for dollar.” 

The final House version of the bill that has emerged equalizes the rebates across new and used vehicles, offering $2,500 back to purchasers, with additional “enhanced” rebates available to those whose annual household income doesn’t exceed 300 percent of current poverty guidelines. An initial incentive payment to dealers of $50 per rebate was also stripped out, a move to which the dealers association offered no objection, and caps of $55,000 for eligible new vehicle prices and $25,000 for used ones were also inserted. 

Taken together, the changes “make this a much more equitable solution for doing rebates,” Reid told the House Appropriations Committee. 

Republicans, however, have remained skeptical, with some casting the issue as an elitist concern mainly benefiting the wealthier Northern Virginia region, where most of the state’s electric vehicles are sold. 

“Sorry kids, your schools will still suck, even if you can go back. We need to help struggling families in NoVa buy a Model S,” Garren Shipley, a House Republican spokesman, tweeted earlier this week, alluding to a Tesla model that costs roughly $70,000. 

As the bill has moved toward the House floor, Republicans have unanimously voted against it. 

Del. Lee Ware, R-Powhatan, told a Finance subcommittee that he disagreed with the “underlying premise” of the legislation “that we ought to incentivize these purchases at the levels in the millions of dollars that are contained in the bill.” And in an Appropriations Committee debate, Del. Terry Austin, R-Botetourt, said he thought the bill was “somewhat unfair.” 

“I drive quite a bit of distance to get here to the capital, and I don’t have time to stop and charge my vehicle, so I have to buy a combustible engine vehicle,” he said. “I think we’re going down a path that’s not equitable or not fair to people who cannot buy or cannot use electric vehicles.” 

Looking for funding sources

But while amendments to Reid’s bill have helped ease its passage through the House, left unresolved is where the rebate program’s money will come from in the long term. 

Reid has touted federal funds as one possibility in hearings. No specific proposals for funneling money to the states for transportation electrification have been made, but advocates see President Joe Biden’s embrace of decarbonization as a sign funds might become available, particularly for charging infrastructure. 

“There is nothing specific at the moment but with the Biden administration committed to EV, we want to be sure Virginia is ready to put federal and state money on the hood of every electric vehicle to spur consumer demand,” said Hall.

DMME in its 2020 report offered a number of potential funding sources, including new transportation-related taxes and fees and congestion pricing. But the most fleshed-out proposal remains the Transportation and Climate Initiative Program, a cap-and-invest carbon market that would require all fuel suppliers to purchase emissions allowances at auction, with the proceeds serving as a pool of funds for state transportation goals. 

Joining TCI-P, however, will require legislation, and many Republicans have openly opposed the idea as an unnecessary and burdensome tax on consumers. With no legislative proposal for membership up this session, Democrats will need to keep majorities in both chambers in 2022 to push the proposal forward. 

“There’s the future possibility of funding from TCI-P, but the commonwealth hasn’t decided to join that just yet,” said Reid. 

This story has been corrected to reflect Del. David Reid is from Loudoun, not Fairfax.