Policymakers wanted to encourage people to buy low-emission cars, and the carpool lanes on the state's famously congested highways weren't meeting their full potential. Plus, early electric vehicles usually could drive just 20 miles on a single charge and were made more efficient at faster speeds.
Enter the state's Clean Air Vehicle decal program, which has given low-emission and electric vehicle owners a golden ticket to breeze past traffic for two decades — and driven electric vehicle purchases in the country's largest auto market.
As President Joe Biden's administration looks to incentivize electric vehicle adoption nationwide, industry leaders are recommending that policymakers consider strategies like those in California: give electric vehicle owners a leg up in everything from commuting and parking to entering specific areas of cities. While industry leaders say financial incentives like consumer tax credits or research and development grants over time would aid in speeding a switch in the U.S. vehicle fleet to electric drives from internal-combustion engines, some argue the market will respond to more than just money.
Ford Motor Co. CEO Jim Farley, formerly a senior executive for Toyota Motor Corp. in North America, said that California's carpool lane policy was a game-changer: "The best thing that ever happened to Prius was that HOV sticker."
"We need a clear, longer-term strategy to help customers with the economics of transitioning to (fully electric vehicles)," he said late last month at the Wolfe Auto Conference. "From my experience at Toyota, non-monetary incentives are just, if not more powerful, than incentives — flat-out tax credits or a reduction in the transaction price."
However, electric vehicle incentives raise questions about equity, as electric vehicles remain more expensive and are less likely to be available used. California is grappling with that issue even as its regulators argue the program has succeeded in driving EV adoption.
"We wanted people to get in the vehicles, drive them, see how it fit into their daily driving cycle and really understand what an electric car could be," said John Swanton, an air pollution specialist with the California Air Resources Board.
"You need something to convince people that hey, I'm going to get this benefit to do it. And that helped because people hate traffic and they love getting in the carpool lane."
The program — which first allowed natural gas vehicles and now only accepts fully electric, hydrogen fuel cell and plug-in hybrids — propelled consumer adoption of new technologies, Swanton said.
"Driving new vehicle sales was what was going to get the volumes that were necessary to start making (electric vehicles) commercially viable," he said.
International Leaders
The U.S. cities with the most electric vehicles may be easy to guess: Los Angeles, San Francisco, San Jose and New York, according to recent data from the International Council on Clean Transportation (ICCT), a research group that specializes in sustainable transportation policy.In China and Europe, cities like Beijing, Shanghai, Oslo and London lead the pack as electric vehicle capitals. China and Europe as a whole still beat out the U.S. in EV adoption to date.
But across continents, the cities with the most electric vehicles tend to have something in common, according to the ICCT: In addition to financial incentives offered by state or national governments, most also offer electric vehicle owners some non-financial benefit for choosing an emissions-free ride.
Several cities, such as Paris and San Jose, give electric vehicle owners free parking at thousands of metered spaces. Others bar non-EVs from certain areas of the city or charge a fee, such as London's £12.50 daily fee to drive into the central city.
Wuhan, Oslo and other cities give electric vehicles free passage on highways, bridges and tunnels that would otherwise be tolled. Several large cities in China limit total new car registrations but exempt electric car owners.
"It's always challenging to tie one specific action to EV uptake ballooning in one place," said Dale Hall, an electric vehicle researcher at ICCT. "But we do see that the places with the most incentives — both financial and non-financial incentives — do have higher EV uptake."
Issues with Equity
The push to electrify the U.S. fleet also has raised questions about who benefits from incentive programs like those in electric vehicle capitals. Some argue incentive programs for EV adoption are handouts to the wealthy, who can afford to buy electric vehicles that remain more expensive than those with internal combustion engines.One 2019 working paper from the National Bureau of Economic Research found that 70 percent of people who used tax credits to purchase an EV would have done so even if they didn't get the subsidy, and recommended incentives aimed at lower-income households.
Proponents of such programs argue spurring EV purchases will eventually lower the price for all consumers. But as of last month, the average price of a new electric vehicle is nearly $53,400, according to data provided to The Detroit News by Edmunds, an industry research company. In comparison, the average new vehicle price in the U.S. is just under $40,500.
Electric vehicles made up just 1.6 percent of total vehicle sales and the share in the used market is minuscule: Around 0.1 percent, according to Edmunds.
"It appears that the market is transitioning again to closely align with the body styles that consumers like the most: trucks and SUVs. Although these EVs are still more expensive, it seems as if there will be more EVs for sale that meet consumer needs and budgets in the near future," said Jessica Caldwell, executive director of insights for Edmunds.
"And with the Biden administration already signaling its desire to support this technology, there could be a revamp in the federal tax credit system which would make the price point of EVs more affordable."
The state of California is attempting to address these inequities by allowing those in lower and middle-income brackets to retain access to the carpool lane decal if they buy a qualifying vehicle used.
"There was the thought that people who could only afford a used vehicle were cut out of the ability to have this incentive," said Swanton of CARB, so the state expanded the program to secondhand owners who make less than $69,680 at the beginning of 2020.
However, the policy is really built to drive new vehicle sales, he said. "It's not that we want to make it so that only people are buying new cars. It's just that if you're not driving new vehicle sales, you're selling the same pool of vehicles over and over again, you're not necessarily getting those numbers that you need" to significantly cut into emissions.
The Federal Role
While the federal government can support non-monetary incentives, such programs usually are spearheaded by state and local governments, said Hall of the International Council on Clean Transportation.Federal policymakers can make the biggest difference by investing in charging infrastructure, updating building codes to allow for easier charger installation, or updating emissions standards, he said.
According to research firm LMC Automotive, the share of electric vehicle sales went from 2.5 percent in 2019 to 6.6 percent in 2020. "That was due to new CO2 emissions regulations kicking in. These are a huge policy tool automakers really listen to," Hall said.
Democrats in Congress have proposed funding and policy changes to install thousands of charging stations across the U.S., to change building codes, to increase consumer tax incentives for EV purchases and more. Much of it will be wrapped up in negotiations over a potentially $2 trillion infrastructure spending package that will be the next big legislative hurdle for the Biden administration.
"It doesn't do you any good to dictate to people unless there's a consumer demand," said U.S. Rep. Debbie Dingell, D- Dearborn, who has proposed legislation that would put billions toward electrification projects.
Consumers need to know they can safely and affordably get chargers installed in their homes and buildings and that they can reliably charge their vehicles on long drives, she said: "People need to think of an EV as a practical vehicle. We need to find ways to drive consumer demand for EVs."
As the federal government and other states and cities consider programs to encourage people to buy EVs, California's decal program is starting to wind down.
Electric vehicles have become common enough in the state that driving in the carpool lane has become nearly as slow as any other in certain circumstances, Swanton said, and the program is set to end in 2025.
"We knew going into this, even decades ago, that you need to incentivize these types of vehicles to a point and then ... the market just takes over. And at that point you change from incentivizing to essentially subsidizing what's going to happen anyway," he said.
But "the incentive for the carpool stickers absolutely was the number one thing that drove interest in the vehicles, and I don't think we would have had the launch curve that we did without it," he said.
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