Since 2010, California has allocated more than $1.84 billion to a hodgepodge of three programs: the Clean Cars 4 All Program, the Clean Vehicle Rebate Project and the Clean Vehicle Assistance Program, according to Air Resources Board data. In exchange, over those 12 years, about half a million Californians have received grants or rebates for buying cleaner cars or replacing older cars.
The Clean Vehicle Rebate Project, which receives the bulk of the state’s funding, has distributed 478,364 rebates since its launch in 2010, while the Clean Vehicle Assistance program has assisted buyers in purchasing 4,438 clean vehicles since 2018. Clean Cars 4 All, which only serves residents in the state’s most polluted regions, have taken 12,800 pre-2007 model year cars off the road since its launch in 2015.
All of the programs, which award up to $7,000 or $9,500 toward the purchase of an electric car, have income limits. The rebate project is for residents with incomes up to $135,000. Clean Vehicle Assistance and most Clean Cars 4 All programs accept applications from residents with incomes at or below 400% of the federal poverty level — equivalent to $54,360 for an individual. (The US Senate also appears poised to enact a $7,500 federal tax credit for individuals with incomes less than $150,000.)
“Before the pandemic and the rise in prices, we do have evidence that these (state) programs were sort of effective and encouraged people to buy electric vehicles,” said Erich Muelegger, an associate professor of economics at University of California, Davis. “But the challenge right now is that these programs are facing really, really strong headwinds because of the high prices of electric vehicles.”
Muehlegger said supply chain delays and high demand have triggered a widespread shortage of new and used cars.
While pandemic-induced price hikes have hit both gas-powered and electric cars, he said the sticker shock is likely most extreme in the electric vehicle market due to higher demand and shortages of components, like microchips. Fewer electric cars are in supply, straining the market, creating long wait lists for new models and driving up prices for the new and used vehicles that remain on dealers’ lots.
“We have to make sure there’s a whole range of vehicles that are zero emission, and we’ve essentially got just a little over a decade to try to get there,” said Ethan Elkind, an attorney who directs the climate program at the Center for Law, Energy and the Environment at UC Berkeley Law.
The lack of inventory and high prices have forced some program participants like Nelms to give up the state money they qualified for. Nelms is no longer planning to buy a car anytime soon; he will keep using his 2016 Honda Civic for now — which means California lost the opportunity to replace a higher-polluting car with a zero-emission one.
“This program is what I was hoping to count on, but once all the prices were going up, that hope just kind of disappeared,” Nelms said. “Right now I’m not able to do anything, so I just had to let the grant go.”
In addition to the $9,500 in state money that would have gone to a dealer, Nelms knew he needed to scrape together other funds to afford the roughly $800 in monthly payments for a Mach-E. He was approved for a loan and planned on applying for another federal rebate program. His 20-year old son also picked up a part-time job to help with the payments.
But the dealership markups quickly changed Nelms’ mind. He didn’t want to risk having negative equity – when the amount of money owed on a car is more than the amount that it’s worth.
Though he had to forfeit the grant, he said he’d consider applying to the Clean Vehicle Assistance program again when the car market stabilizes.
For now, he said, he’ll have to pay high gas prices.
“Inflation, it’s never been this bad,” Nelms said. “There’s always things that happen in life that can hold you back, but that’s what growth is, having to work harder and push yourself and get through these tough things.”
Programs run out of funding
Following a 2020 executive order from Newsom, the Air Resources Board has drafted a proposed regulation that would phase out gas cars, beginning with 35% of 2026 models. The aim is to put 5 million zero-emission cars on California’s roads by 2030 and slash tailpipe emissions, California’s largest source of planet-warming pollutants.
But one of the biggest challenges with the transition to electrification is the financial obstacles faced by lower-income households.
The state’s programs designed to help them have been plagued with inconsistent and inadequate funding ever since they were launched years ago.
Most of the funding — $1.27 billion of the total $1.84 billion over the past decade — has come from the state’s cap-and-trade program, a market for buying and selling greenhouse gas credits that fluctuates in quarterly earnings. The rest is supplied in the state budget, which is approved by the Legislature and governor.
Lisa Macumber, an Air Resources Board official who oversees vehicle incentive programs, said insufficient funding has shut down the programs several times throughout the years. Some years, there are so many applicants that there’s barely enough money to keep the programs open for six months, let alone an entire year, she said.
While applications for the Clean Vehicle Rebate Project, the biggest of the programs, are still being accepted, the volumes are high and the delays substantial: People must wait on average more than two months to be notified if they’re selected or rejected, and then they must wait longer to receive the money.
Last fall and winter, it was even worse because of the pandemic. People were waiting an average of eight months before their requests were processed, Macumber said.
Another program, Clean Vehicle Assistance, closed in April because funds ran out; the waitlist is closed to new applicants due to backlogs. The San Joaquin Valley’s and San Diego’s Clean Cars 4 All programs also are shut down due to depleted funds, although those programs in the Los Angeles basin, Bay Area and Sacramento recently reopened for applications.
Macumber said more funding from a $10 billion zero-emission vehicle investment in the state budget is on the way, but it’s unclear when that money will come through.
“It’s a very challenging landscape,” Macumber said. “Our programs have to be able to adjust based on the funding we receive each year.” That leads to confusion for residents, she said.
Californians who need the funds the most — those with incomes below 225% of the federal poverty level — are not accessing the program as quickly as other income groups. (The federal poverty level is $13,590 for an individual.)
“Higher income groups were able to go through the process and purchase new zero emission vehicles faster, resulting in depleting funds quickly,” Macumber said. “The majority of very low-income consumers need help through the application process and need more time to find proper, mostly used, vehicles. By the time they’re at the point to purchase their vehicles, funds were not available.”
Efforts to streamline subsidies
Some lawmakers worry that these problems are standing in the way of making cars accessible to those who would benefit the most because they live in regions with some of the poorest air quality.
State Sen. Monique Limón, a Democrat from Santa Barbara, said a bureaucratic application process is creating obstacles for the state’s neediest residents.
This year, Limón introduced a bill, SB 1230, that would streamline the application process and expand Clean Cars 4 All to residents who don’t live in the participating regional air districts. An online portal would allow people to submit one application for all of the programs.
The bill will be heard by the Assembly Appropriations Committee on Aug. 3.
“Often people will have an urgent need for a new vehicle and it can take up to several weeks to months to get approved through some of these programs,” Limón said. “We are trying to speed up that application process. Getting more zero emission vehicles on the road will help us equitably reach our climate goals while also correcting systemic problems that have allowed communities of color to bear the brunt of the climate crisis.”
The air board is also working on combining the Clean Vehicle Assistance and Clean Cars 4 All programs and expanding them statewide to provide access to 4 million more residents in or near low-income communities outside of the regions that already participate.
Eligibility criteria will also change. They currently operate on a first-come, first-served basis for income-eligible residents in ZIP codes considered disadvantaged. The board plans to change to a “needs-based” approach that also prioritizes applicants who qualify for public assistance programs, such as Medicaid, Supplemental Security Income, CalWorks or Section 8 housing.
“There are so many low-income consumers that don’t reside in a disadvantaged community,” Macumber said. “If you live in a disadvantaged community, you’re immediately prioritized. It’s also important to ensure that low-income consumers that reside right outside still have opportunities to access these funds.”
The statewide program will not replace the regional Clean Cars 4 All programs and instead work in tandem with them, she said.