A research report submitted to the California Legislature this week by the University of California, Davis’ Institute of Transportation Studies proposes switching EVs to a mileage-based road-funding fee (road user charge, RUC) while continuing to have gasoline-powered cars pay gasoline taxes.

The report, “Assessing Alternatives to California’s Electric Vehicle Registration Fee,” was requested by the California Legislature.

Since electric vehicles use no gasoline, EV drivers pay no gasoline tax. As more people drive EVs, gas-tax revenue for road repairs is dwindling. To address the shortfall, many states, including California, have opted to charge an extra registration fee for electric vehicles.

That approach is not a sustainable or effective solution, according to report author Alan Jenn, a UC Davis research scientist with the Plug-In Hybrid & Electric Vehicle Research Center.

We find that the registration fee is not a sustainable mechanism to provide adequate funding as California transitions towards ZEVs. Additionally, the fee detracts from the market adoption of ZEV technologies by as much as a 20% decrease in new ZEV sales. Lastly, we examine alternative funding mechanisms include a fuel tax for hydrogen and electricity, as well as a road user charge (RUC). We find that a ZEV exclusive RUC is the most promising alternative to the ZEV registration fee.

—“Alternatives to California's Electric Vehicle Registration Fee”

Impact of transportation infrastructure funding mechanisms.

Although a number of other states have also introduced registration fees for EVs, only California’s transportation funding system is significantly affected, due to the relatively high adoption of ZEVs in the state.

The report finds that the annual registration fee for ZEVs suffers from several major drawbacks related to funding and equity:

1. Infrastructure will become drastically underfunded with the current registration fee, given the long-term shift towards ZEVs. Assuming 5 million EVs on the road in 2030, the current registration fee and gasoline tax would together lead to a decrease in infrastructure funding by more than $500 million annually.

2. The fee penalizes plug-in hybrid electric vehicles, which must pay both the registration fee and the current gasoline tax (for any gasoline consumed).

3. Owners of ZEVs would pay more under the registration fee compared to what they would equivalently pay with a gasoline tax (if electricity/hydrogen were converted to gasoline on an energy basis).

4. A flat $100 fee is disconnected from usage and the “user pays” principle; a ZEV owner would pay the same amount no matter how much they drive—directly in contrast with a gasoline tax which is based on usage.

Switching from the gas tax to a mileage fee for all vehicles would be technically and administratively difficult, according to the authors.

A road user charge (RUC) program, the other major alternative funding mechanism, has been investigated in California through SB1077. The California Department of Transportation identified several general challenges, based on the pilot program (California State Transportation Agency, 2017). One challenge is the relatively high administrative cost. This cost burden could be alleviated by imposing the RUC only on ZEVs, with the gasoline tax staying in place with other vehicles. The benefit of this approach is to eliminate the prospect of double tax payments for gasoline (traditional vehicles would pay both the RUC fees and gasoline taxes during the long transition period, requiring a costly fix). Another benefit of imposing the RUC only on ZEVs is that it allows gasoline cars to avoid the extra hardware costs and compatibility issues of pairing telematics (or other advanced technologies) needed to monitor vehicle miles travelled with existing technologies (e.g. on-board diagnostic [OBD] devices). This dual path approach would result in a slow transition to RUCs, but at much less cost.

—“Assessing Alternatives to California’s Electric Vehicle Registration Fee”

The proposed transition is expected to cost less, to be easier to administer and to provide a smooth transition away from gasoline taxes. The report concluded that a mileage-based user charge would be the easiest and least costly way of addressing the long-term decline of gasoline taxes.

With increasing fuel efficiency in gasoline vehicles and increasing sales of zero emission vehicles, funding our transportation infrastructure with gasoline taxes becomes outdated. The annual ZEV registration fee under SB1 seemed like a good fix, but has major shortcomings. Our analysis suggests that the best solution for creating a sustainable, robust funding system is a RUC program applied only to ZEVs (allowing the parallel gasoline tax to gradually atrophy and eventually disappear).

—“Assessing Alternatives to California’s Electric Vehicle Registration Fee”

Resources

• Jenn, Alan (2018) “Assessing Alternatives to California’s Electric Vehicle Registration Fee.” Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-18-27