(The Center Square) – Makers of electric vehicles, such as Rivian and Tesla, are taking a central role in the $162 billion fuel cost hike being voted on in California in Friday, which will largely be paid for by poorer drivers who tend to live farther from work due to the state’s high cost of housing.
The Low Carbon Fuel Standard program provides credits to EV makers when drivers use the makers’ home charging systems and agree to let the manufacturer take the credit, or when drivers use the makers’ public charging networks. When refineries make gasoline or other carbon intensive fuels for California, they must purchase credits, the cost of which is passed on to consumers. The average EV financing cost is $783 per month, which means government and utility rebates in the thousands of dollars for chargers or vehicle financing still keep EVs out of working families’ reach.
“Millionaires like Newsom and his CARB leaders might save money when they’re priced out of gas cars, but working Californians don’t have the luxury of just switching over to a Rivian,” said California Assembly Minority Leader James Gallagher, R-Yuba City, to The Center Square over the new provisions. “The people who can least afford it will pay the price for Newsom’s extreme agenda.
The California Air Resources Board, the appointed regulatory body that created and is voting on the proposal, estimates its new LCFS regulations would increase fuel costs by $162 billion through 2046. This money is not a tax, as the state is not collecting the funds as it does from the cap-and-trade system, but is a transfer of wealth from producers of transportation energy that is more carbon-intensive than state goals, to producers of transportation energy that exceeds state carbon goals.
Current CARB standards require the state to cut the carbon intensity of transportation by 20% by 2030 compared to the 2010 baseline. The proposed rules would require a 90% cut by 2046, necessitating faster carbon cuts than before, and thus would result in a low-end estimate of 47 cents per gallon of gasoline in pass-through costs to consumers next year.
With California energy costs soaring due to renewable energy mandates, electricity costs twice the national average, and CARB says rate increases are approaching the break even point at which it costs less to drive a car on gasoline than to fill up on electrons. EV market share growth has slowed down significantly, with the market share of new vehicles in California growing from 21.5% in 2023 to 22.2% thus far in 2024, compared to the explosive growth from 9.1% in 2021. A major price increase in gasoline from the new LCFS requirements could be a painful, albeit effective, tool to stimulate EV sales growth.
Rivian and Tesla, which each operate large-scale public EV charging networks, collect LCFS credits whenever their public chargers are used, and when users of their home chargers — who generally sign agreements upon the installation of the chargers to allow the companies to claim LCFS credits for the energy paid for by homeowners used to charge the vehicles. Because LCFS credits represent a long-term revenue source for EV manufacturers and charging network operators, they often give out chargers for free — while collecting charger subsidies from taxpayers and utility ratepayers.
Rivian’s own charger purchase documents, reviewed by The Center Square, reveal how these arrangements work: users must sign away all environmental credits to the company “in perpetuity,” while Rivian maintains exclusive ownership of charging data and explicitly bans users from accessing information about their own charging sessions — data Rivian uses to collect the credits.
Rivian Chief Policy Officer Alan Hoffman recently explained how Rivian benefits from LCFS in Capitol Weekly.
“In Rivian’s case, our Rivian Adventure Network fast chargers generate credits when they charge EVs on the road,” wrote Hoffman. “Newly updated program rules, if finalized, would also support more early investments in public chargers … Our state’s leaders should take this opportunity to make strategic updates to the policy, setting robust targets, preserving and improving program rules that support charging infrastructure.”
California taxpayers are now on the hook for $1.9 billion in additional subsidies for private companies to build 30,000 more public chargers that provide dual sources of income for charger operators — income from customers purchasing energy, and from selling the LCFS credits.
Ford recently joined the bandwagon by launching a program at the start of October to provide “free” home chargers to buyers of new EVs, reflecting how credit revenue makes it profitable to give away chargers that taxpayers and ratepayers often subsidize with rebates, while the homeowner pays for the electricity.
Homeowners are three times more likely than renters to be EV owners, who are also much wealthier, which makes sense given that in California buying a home costs triple the median household income to afford.
In Los Angeles, drivers in census tracts with incomes less than $50,000 — the lowest income category — have the highest percentage of “hyper commuters” who drive more than 90 minutes each way to work. Because EVs are so expensive, these individuals are unlikely to be able to afford an EV, and are likely to have older, less efficient vehicles, meaning low-income drivers are likely to bear a disproportionate share of LCFS costs that wealthy homeowners and EV makers benefit from.
Tesla was among the automakers and charging operators who signed on to a recent letter to California’s Senate Majority Leader and Assembly Speaker urging the passing of the new LCFS standards.
On the evenings of November 4, 5, and 6, the Alliance for Low Carbon Fuels, a coalition which includes letter signatory the Alliance for Automotive Innovation, sponsored the Politico California Climate Newsletter, which is read by legislators, staffers, and regulators and offers the ability for groups or individuals to “sponsor” the newsletter with their messaging.
One of the other letter signatories was the California Electric Transportation Coalition, which recently posted an opinion column in the Sacramento Bee.
CARB finally published the finalized LCFS resolution for tomorrow, which says the board “recognizes that compliance costs of this program can be passed onto consumers,” and that if “the specific changes adopted under this resolution ultimately accelerate cost burdens on California consumers” it may amend CARB again.
However, as noted by CARB and its insistence on a vote before the shot clock on the proposed standards expires and the body is forced to undergo another multiyear regulatory process for new LCFS amendments, this process could take years leaving higher prices in place.
