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No Californian should be left behind in the push to a cleaner transportation future

In our March report, No Californian Left Behind, we argued that existing clean-transportation incentives and programs in California are out of reach for the subset of Californians stuck driving the state’s oldest, dirtiest, and least safe cars and trucks, often for long distances and at high monthly costs. Our report pointed towards the California Air Resources Board’s (ARB) redesign of the state’s Enhanced Fleet Modernization program as an opportunity to help some of these households transition into newer, cleaner, and safer cars that would improve air quality, reduce monthly fuel costs and cut greenhouse gas emissions.

ARB staff’s recently proposed revisions to the EFMP, released in early May, are a major step toward realizing these goals. The draft regulations include provisions that would significantly increase both the efficiency of replacement vehicles and program participation among low-income households.  We applaud ARB for the hard work that went into developing these much-improved regulations.

That said, we’re committed to seeing the EFMP provide the greatest possible benefits to the Californians that need the program most. There are two key points remaining which policymakers and regulators must address to ensure that the EFMP reaches its maximum potential, and we’re releasing a follow-up to our No Californian Left Behind report with analysis supporting the following recommendations: 

The EFMP should include increased fuel efficiency standards for low-income households

ARB’s new regulations exempt low-income households from all but the most minimal fuel efficiency standards. As the proposed guidelines currently stand, affordable replacement vehicles for low-income households aren’t required to be much more efficient than the vehicles they are replacing. The guidelines would allow state vouchers to go towards the purchase of vehicles with efficiencies as low as 20 MPG – the same level federal CAFE standards required new cars to meet on average in 1980. As a result, many of the replacement vehicles would not generate fuel savings for program participants or greenhouse gas emissions reductions for the state – important co-benefits we should be seizing.

Our initial report recommended that the revamped EFMP include more aggressive baseline efficiency requirements for all replacement vehicles, suggesting a minimum of 27mpg for cars and 23mpg for trucks and SUVs. This follow-on report re-emphasizes the importance of that recommendation, and demonstrates that more efficient vehicles are both available on the California auto market and priced within reach of low-income EFMP participants.

As shown below, state incentives to replace older, dirty, inefficient vehicles with newer, more efficient cars have the potential to save households hundreds of dollars a month on fuel and repair costs.

Critically, however, households can only realize the bulk of these savings with a replacement vehicle that is substantially more efficient than the car they’re retiring. Fortunately, as our analysis shows, there are substantial numbers of 27+ MPG gas-powered vehicles and hybrids on California’s auto market available at little to no cost premium over their less efficient counterparts. These vehicles are readily available and their benefits are clear.  

Low-cost vehicle financing will be critical in providing benefits to low-income households

In order to produce the deepest cost-saving replacement scenarios, low-income EFMP program participants must have access to low-cost capital, as asking a low-income household to front $4,000 to $6,000 for a replacement car even after applying a voucher is typically unfeasible. Unfortunately, low-income households in California don’t generally have access to affordable auto financing. Current subprime rates in the 6–7 percent range are available in some cases, but low-income households frequently face predatory subprime lending, with lenders requiring large down payments and charging interest rates of 20–30 percent. These high rates quickly erode the cost savings generated by switching to a more efficient vehicle. 

Encouragingly, ARB’s most recent staff report emphasizes the importance of low-income financing in reducing barriers to low-income participation. However, the proposed regulations leave most of the concrete details of actually implementing a financing assistance program to local air district pilot programs and to other ARB initiatives that are under development. While this is understandable given the complexity of implementing such a program, we cannot overemphasize the importance of continued focus on low-income vehicle financing assistance, both in ongoing EFMP implementation and in the state’s broader transportation vision. Our analysis suggests the EFMP will not be successful in reaching low-income households without a robust method of extending financing assistance.

Our message

Requiring increased efficiency standards for all replacement vehicles and implementing robust low-income financing solutions are critical to maximizing the impact of the revised EFMP program, especially as the state begins to consider where best to spend transportation-specific cap and trade proceeds in disadvantaged communities throughout the state. No Californian should be left behind in the state’s push toward a cleaner transportation future.

The full report is available for download here

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