General Assembly approves electric vehicle rebate program but leaves it unfunded

While Virginia’s General Assembly has committed to adopt stricter transportation emissions standards by 2025 that will encourage more widespread use of electric vehicles, lawmakers’ final budget includes no funding for a rebate program intended to bring down the vehicles’ cost for consumers. 

“We were hoping to get money in there now,” said Del. David Reid, D-Loudoun, who served as patron of the bill creating the rebate program and had sought $5 million in funding for its first year. However, he said that from the beginning of the legislative process, he had “been trying to set the right expectations that in the current fiscal climate we might be able to get the bill through, but there might not be funding right away.” 

Reid’s proposal to create the rebate program passed both the House of Delegates and the Senate on the last day of the legislative session after lengthy negotiations. 

In its final form, the program, which would begin Jan. 1, 2022,  would offer buyers a $2,500 rebate for the purchase of a new or used electric vehicle. An “enhanced rebate” of $2,000 would also be available to buyers whose household income is less than 300 percent of current poverty guidelines. 

An earlier version of the budget passed by the House of Delegates included Reid’s requested $5 million in funds for the program, although the Senate’s version did not. The final budget that emerged from negotiations between the two chambers last week eliminated rebate funding altogether. 

The decision met with consternation from the Virginia Automobile Dealers Association, which had provided critical support earlier in the session for the passage of the bill by Del. Lamont Bagby, D-Henrico, establishing stricter transportation emissions standards, often referred to as the clean car or California standards. 

“You have to put your money where the mandate is. We are greatly frustrated that the very body that voted to support House Bill 1965, which is a mandate and represents a sea change for Virginia, has now said they are not interested in funding it or any of the related legislation,” said Don Hall, president and CEO of the Auto Dealers Association. 

“If Virginia isn’t interested in making a real commitment to electric vehicles and a cleaner future, then it has a responsibility to pull out of” the California standards, he added. 

Harry Godfrey, executive director of Virginia Advanced Energy Economy, a business group that advocates for renewables development, called the lack of funding “a surprising disappointment.” 

“We’re not going to electrify Virginia’s transportation system overnight, but rebates are an important part of achieving that,” he said. 

But Del. Sally Hudson, D-Charlottesville, described the delay in funding as offering a chance to further refine program design. An economist at the University of Virginia, Hudson has been the most outspoken skeptic among Democratic lawmakers this session of the effectiveness of publicly funded rebates as a policy tool. 

“I think the extra year will give people time to take stock of what came out of this session and to fine-tune the details,” she said. “I think some of the advocates were so wedded to passing a rebate that they lost sight of the central question, which is, How do we invest public funds to induce the most new purchases of clean cars?” 

With a budget constrained by the ongoing COVID-19 pandemic, Virginia lawmakers faced a dilemma this session when it came to funding transportation-related emissions reductions, seen by many as the next step in the state’s efforts to combat climate change by reducing greenhouse gas emissions. 

Republicans unanimously voted against the rebate program as it moved through the legislature, frequently criticizing it as providing financial benefits to Northern Virginia, which has the highest concentration of electric cars in the state, at the expense of other regions with less robust charging infrastructure. 

“The rest of Virginia is going to have a hard time — I know my area is going to have a hard time — participating in this program,” Del. Rob Bloxom, R-Accomack, said Saturday. 

The state budget is only one possible source of funds for the program. A report by a Department of Mines, Minerals and Energy-led work group from 2020 identified a range of possible funding sources, including new transportation-related taxes and fees and the controversial cap-and-invest Transportation and Climate Initiative Program. 

How the cost of setting up the unfunded program will be borne remains unclear. Reid estimated during hearings that the cost for DMME to create the program could be as much as $1 million. 

“There will need to be either some in-house cost that’s incurred, or there will need to be some additional funding to stand it up,” he told the Mercury. 

What effect new federal commitments from President Joe Biden’s administration to lowering greenhouse gas emissions will have on electric vehicle prices also is an open question. In the wake of Biden taking office, automakers have announced sweeping new goals for electric vehicle production, a move that is likely to bring electric vehicles closer to price parity with conventional vehicles that rely on internal combustion engines. 

“Clean car standards are the foundation of this transition. The infrastructure is an essential companion, and the rebates are a strategy that can help grease the wheels a little, but I do think some advocates have been overstating how important they are, particularly in this environment,” said Hudson. “We have just entered a fundamentally different era.”