California Pushes New Incentives for Zero-Emissions Vehicles

California lawmakers are considering $3 billion worth of rebates for buyers of electric cars in an effort to power an industry that relies heavily on public subsidies.

The bill has passed the state Assembly, and is advancing in the state Senate, which is expected to take up the bill once it clears a final committee next month. Gov. Jerry Brown has set ambitious goals for zero-emissions vehicles; he hasn't said whether he would sign this bill.

California has long been a leader on environmental, clean air and climate policies with its large size, geography and heavy reliance on the automobile. The state already has more than 250,000 zero emission vehicles on its roads, including electric cars, accounting for about half the U.S. market, according to the California Air Resources Board.

Similar incentives helped boost electric car sales elsewhere.

A $5,000 tax credit in Georgia helped the state become the second-largest electric vehicles market in the U.S. after California until the state tax credit was eliminated in July 2015, according to Edmunds, a website that tracks automotive sales. After the change, sales in Georgia fell to 2% of all U.S. electric vehicles sold in 2016 from 17% in 2014, according to the site. Georgia sales of Tesla, luxury electric vehicles that typically sell for about $100,000, initially fell but bounced back, according to Edmunds.

Electric cars remain more expensive than those that run on gasoline, making sales challenging when gas prices are low.

Auto executives talk about an impending "tipping point" when the costs of some electric car models are expected to fall below the cost of the conventional version of the same vehicle type. Industry analysts estimate that rising costs of developing combustion engines that meet ever-stricter emissions regulations could make some electric models more affordable as soon as 2025.

In California, electric cars made up just 2.7% of the new car market in the first quarter of 2017, according to a report by the California New Dealers Association. During the first three months of 2017, the Honda Civic was the most popular selling new model in the state.

But to meet aggressive mandates for statewide reductions in greenhouse gas emissions, California aims to build 1.5 million zero-emissions vehicles by 2025 and five million by 2030. The electric car industry needs an "aggressive boost" to get there, said Assemblyman Phil Ting, a San Francisco Democrat who wrote the bill authorizing the rebates.

"We have pushed and adopted very aggressive climate change policies," Mr. Ting said. "There is no way we are going to get there if we don't put more clean vehicles, or clean cars, on the road."

California has had a tax rebate of $2,500 on full electric vehicles since 2010 but the program was scaled back this summer to customers based on income eligibility as the program awaits funding from the state, according to Chuck Colgan, a spokesman at the Center for Sustainable Energy.

Funds for the proposed rebate will come from existing programs, Mr. Ting said, with one source being the state's cap-and-trade program, which requires industry in California to pay for greenhouse gas emissions. That program faces a key test on Monday, with state lawmakers having scheduled a vote on whether to extend the program from 2020 through 2030.

Some cap and trade revenue helps fund the existing, limited electric car rebate program, in which a buyer has to apply for a rebate after purchasing a car. Mr. Ting's bill would create a program that offers buyers rebates at dealerships, and bigger discounts for lower-income buyers.

The rebate bill isn't without critics, who say the program would be a giveaway to an industry that has struggled to survive without public funding.

"The legislature is once again picking winners and losers in what is supposed to be a free-market," said state Senator Andy Vidak, a Republican from Hanford, Calif.

Jessica Caldwell, an auto industry analyst for Edmunds, said a new California program should boost sales, particularly given that new electric car models such as the Chevrolet Bolt and Tesla Model 3 can go further distances, making them accessible for more consumers.

"In major cities like San Francisco and Los Angeles, the infrastructure is growing, which has been a major barrier for widespread adoption," she said. "One can argue whether or not this proposal is an efficient use of state funds but if California politicians decide that, yes, increased EV ownership is a priority for the state, then providing more incentives is surely a way to achieve this goal."

Write to Tim Higgins at Tim.Higgins@WSJ.com

(END) Dow Jones Newswires

July 15, 2017 07:14 ET (11:14 GMT)