Summary
- California will offer $7,500 rebates to residents for electric vehicles if federal EV tax credit is eliminated under Trump administration
- The decision to cut federal EV tax credit is viewed as a priority by Trump’s transition team to save costs
- California plans to fund rebates through Clean Vehicle Rebate Project if federal credit is cut
- Rebates could come from Greenhouse Gas Reduction Fund and promote innovation in EV market
- California might consider income and MSRP caps for rebates to limit high-income drivers and expand programs for lower-income drivers
Article
Governor Gavin Newsom of California announced on Monday that the state would offer its residents a $7,500 rebate for electric vehicles if the incoming Trump administration eliminates the federal EV tax credit. Trump’s transition team has indicated that removing the federal EV tax credit is a priority, as it is seen as an easy target in a likely Republican-controlled Congress and could help offset the cost of renewing soon-to-expire tax cuts. If the federal tax credit is eliminated, Newsom plans to revive the state’s Clean Vehicle Rebate Project (CVRP) to provide an equivalent amount to California residents. The CVRP, which was phased out in 2023, has funded over 594,000 vehicles and saved over 456 million gallons of fossil fuels since its launch in 2010.
The proposed rebates in California would aim to promote innovation and competition in the EV market and could be funded through the state’s Greenhouse Gas Reduction Fund, which receives money from the cap-and-trade program. It is currently unclear if income will be a factor in qualifying for the rebates in California. Income and MSRP caps were introduced to the CVRP in its later years to limit the number of rebates going to high-income drivers. In 2023, the California Air Resources Board announced plans to expand the Clean Cars 4 All program for lower-income drivers as a replacement for the CVRP. However, this incentive from California would not be available to other states that have chosen to follow California’s Advanced Clean Cars II framework and mandate for plug-in vehicles.
The federal tax credit, under the Biden administration’s Inflation Reduction Act, implemented income and MSRP caps and also made it an instant dealership rebate. However, sourcing requirements that took effect in 2024 limited the number of EVs that qualified for the tax credit. The Act also maintained the “leasing loophole,” which offers a $7,500 rebate for leased EVs even if they do not meet the criteria for a tax credit. This loophole is not expected to be reinstated by California. The California Air Resources Board oversees the state’s EV incentive programs and may consider changes, including potential income requirements, for the rebates if the federal tax credit is eliminated.
Overall, Governor Newsom’s plan to provide $7,500 rebates for electric vehicles in California is a proactive response to the potential elimination of the federal EV tax credit by the incoming Trump administration. By reviving the state’s Clean Vehicle Rebate Project and funding the rebates through the Greenhouse Gas Reduction Fund, California aims to continue promoting the adoption of electric vehicles in the state. However, the details of the rebate program, including income qualifications and other factors, have yet to be determined. The outcome of this initiative could have significant implications for the EV market in California and potentially other states that have followed the state’s emissions framework.
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