Beyond lawsuits, CA may weaponize electric car rebates in its emissions battle against Trump

In Summary

With California enmeshed in a bare-knuckled battle over clean air with the Trump administration, carmakers could soon have to sign onto the state's pact to cut air pollution if they want to offer customers the state's EV rebate.  

California is considering a plan that would reward automakers that have signed onto a pact with the state to cut pollution — and punish those that haven’t — by restricting which companies’ clean cars are eligible for millions of dollars in government rebates to the consumers who purchase them.

The plan is still in formation and has not been formally announced. But there are signs it’s emerging as California’s next salvo in an ongoing feud with the Trump administration over greenhouse gas and fuel efficiency standards that, on Friday, prompted yet another sweeping legal action filed by the state against President Donald Trump. 

Legislation written last week would direct clean vehicle rebates only to cars made by companies that have entered an agreement with the state to abide by emissions standards that are stricter than the federal government seeks. Democratic Gov. Gavin Newsom declined to comment on the proposal but indicated an announcement is coming soon.

The plan has not been formally announced. But there are signs it’s emerging as California’s next salvo in an ongoing feud with Trump over clean air standards.

“Stay tuned,” he said Monday when asked whether he thinks the state’s clean vehicle rebates should be restricted to car manufacturers that have entered California’s pact. 

“Give me a few days. And you’ll get a very specific answer to that question.” 

On Friday, Newsom signed an executive order directing state officials to develop new grant criteria for clean car programs and propose new strategies to boost demand for zero-emission vehicles.

It’s all fallout from Trump administration plans to repeal emissions standards that began in California decades ago and were adopted nationwide during Obama’s presidency. Those standards call for carmakers to cut tailpipe emissions and increase the fuel efficiency of their fleets to an average of about 54.5 miles per gallon by 2025

The Trump administration wants to cap fuel economy standards at an average of 37 miles per gallon starting with model year 2021 — and yank a waiver that lets California make its own clean air rules. On Wednesday, the president tweeted that he was, indeed, rescinding the waiver, prompting California, along with nearly two dozen other states, to lash back two days later with a lawsuit.

Part of that fight includes an unusual pact that California reached with four major automakers in July.  Under the agreement with Honda, Ford, Volkswagen and BMW, the state will give the companies an extra year and more flexibility to reduce greenhouse gases in vehicle exhaust, and the car companies agreed to recognize California’s authority to make the rules and follow California’s standards across the country. The federal government has called the deal “unlawful and invalid” and opened an antitrust investigation

“California should not incentivize the purchase of vehicles manufactured by companies that are not helping to achieve the state’s public health and climate goals by refusing to join the state’s framework,” says the bill proposing to limit which companies can receive the rebates. 

Among the currently eligible electric car makers who would be excluded if they don’t play ball: Chevrolet (manufacturer of the Chevy Bolt EV), Fiat (the Fiat 500e) and Hyundai (the and Hyundai Ioniq Electric). The bill, as currently drafted, would also exclude plug-in hybrids (which would mean two strikes against Toyota, which manufactures the popular Prius). A Toyota spokesperson declined a request for comment. Other car makers did not respond. 

The bill’s author, Democratic Assemblyman Phil Ting of San Francisco, declined to be interviewed but said in a prepared statement that he’s “always looking for ways to spur greater adoption of clean cars in California.”

trump newsom clean air emissions electric vehicles
President Donald Trump is seeking to repeal a longstanding waiver that lets California set extra-strict clean air standards.

The state’s Air Resources Board, which is part of Newsom’s administration, provided some input in drafting the bill, which air board spokesperson Melanie Turner described as “impartial technical assistance” on only some aspects.

The Legislature has adjourned for the year, so action on the bill couldn’t come until at least January 2020. If it advances, it wouldn’t be the first time lawmakers used the clean vehicle program to exert political pressure on carmakers. 

Two years ago, they passed a law saying car companies can only get clean vehicle rebates if they have “fair and responsible” labor practices. It was broadly seen as an act of retribution against Tesla, the electric car maker where workers were trying to form a union.   

California has paid out $720.3 million in clean vehicle rebates since the program began nine years ago, according to data from the state’s Clean Vehicle Rebate Project. Rebates in 2018 amounted to about $171 million. 

For consumers, rebates range between $900 and $9,000 depending on the type of car and the buyer’s income.

The proposal to direct rebates to automakers that cut a deal with California would give those companies a leg up in doing business in the state, according to Colin Murphy, deputy director of the UC Davis Policy Institute for Energy, Environment, and the Economy. 

“I don’t think it’s bribery. I think it’s giving an incentive to do something that’s enormously important,” Chemerinsky said.

“It is too early to say what the long-term impact of the change would be,” Murphy said, “but it’s certainly something that the manufacturers would have to consider.”

The proposal could also entice car companies that haven’t yet agreed to California’s greenhouse gas reduction plan to join the agreement. That’s probably the point, according to Daniel Sperling, director of the Institute of Transportation Studies at UC Davis and a member of California’s air board: 

“One can speculate — which is not a good thing to do usually — the motivation is to reward companies that are committed to reducing the carbon footprints of their vehicles,” Sperling said.  

The proposal is likely to raise constitutional and political questions: Would the targeted incentives interfere with interstate commerce by providing a benefit to one car company over another? And would the plan backfire and anger those Californians who won’t qualify for rebates for their desired cars?

Erwin Chemerinksy, a constitutional law expert and dean of the UC Berkeley law school, said the proposal does not violate interstate commerce doctrines because it doesn’t favor businesses based on which state they’re in. Instead, he said, it favors businesses that are adhering to the state’s legitimate goals to improve air quality and slow climate change. 

“I don’t think it’s bribery. I think it’s giving an incentive to do something that’s enormously important,” Chemerinsky said.

Rebates go to car buyers, not sellers. So the most immediate losers if a car maker chooses not to play ball with California would be the middle class consumers who don’t purchase the excluded manufacturers’ cars.

But it’s not much different from other ways the government uses taxpayer money to, for example, offer tax breaks to companies that film in California, said Jessica Levinson, a professor at Loyola Law School in Los Angeles.

“It feels like this is largely what we do with the public purse,” she said. “We say we like your behavior, we don’t like your behavior, we want to change your behavior.”

Update: This story was updated on Friday Sept. 20, 2019 with information about Newsom’s executive order.

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