Rise of Electric Vehicles Presents Questions About Transportation Funding

EV charging
Dania Maxwell/Bloomberg News

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While electric vehicles and alternative fuels contribute to reducing greenhouse gas emissions, their continued adoption forces states to rethink transportation funding sources that currently come from taxes on diesel and gasoline.

States already charging fees on alternative fuels and vehicles are concerned the amounts do not bolster their coffers since it hardly replaces what’s lost from fuel tax revenue. So they are grappling with how to close that gap — and surpass it — amid new federal energy initiatives.

President Joe Biden’s budget proposal, unveiled May 28, includes provisions related to electric vehicles.

Some $600 million was requested for electric vehicles and charging infrastructure in the individual budgets of 18 federal agencies, including dedicated funds at the General Services Administration and for the United States Postal Service’s charging infrastructure.

“The federal fleet is probably a somewhat easier task to do,” Robert Poole, director of transportation policy at Reason Foundation, told Transport Topics. “Those are not longhaul vehicles like Class 8 trucks. They’re mostly delivery vehicles that can run 100 miles in a day on battery charge and be recharged at night. That’s not a very adequate test of national conversion of personal vehicles and commercial vehicles.”

At the state level, however, government agencies vary in their efforts to make money from electric and alternative fuel vehicles.

For instance, Texas consumed 5.41 billion gallons of special fuels (diesel and alternative) last year, according to the Federal Highway Administration, but did not charge fees on electric vehicles.

The state reported collecting $913 million in diesel fuel tax revenue for fiscal 2020.

Kevin Lyons, spokesman for the Texas Comptroller of Public Accounts, said the Texas Legislature is working on funding. Senate Bill 1728, which has passed the Senate and moved to the House of Representatives, would impose a fee on alternative-fueled vehicles at the time of their registration or registration renewal.

California, the next biggest guzzler at 3.16 billion gallons last year, has measures to raise money from alternative vehicles. On July 1, 2020, an annual road improvement fee of $100 was collected at the time of renewed registration for each zero-emission vehicle for model year 2020 or newer. This fee will be adjusted for inflation each year.

Owners of electric vehicles also pay an annual transportation improvement fee (as do those of internal combustion engine vehicles) based on the market value of the vehicle. It is a tiered fee determined by the California Department of Motor Vehicles and adjusted for inflation each year. This year the fee is between $27 and $192.

California Department of Transportation spokesman Christopher Clark said diesel excise tax revenue was $1.25 billion for the fiscal year ended June 30, 2020.

Keith Duncan, chief of the office of capital and finance within Caltrans’ Division of Budgets, said the fees geared toward alternative-fuel vehicles offer some financial recovery, but not to the fullest extent that would be lost from fuel tax revenue.

“We can see an average vehicle paying anywhere from $300 to $400 a year when it comes to excise taxes as compared to a zero-emissions vehicle paying a $100 fee as part of registration,” Duncan told Transport Topics. “Not being able to backfill dollar-for-dollar is definitely a concern moving forward.”

For heavy trucks, Don MacKenzie, associate professor of civil and environmental engineering at the University of Washington, suggested an axle load-indexed vehicle-miles-traveled fee.

Kara Kockelman, a transportation engineering professor at the University of Texas at Austin, said departments of transportation need some sort of distance-based pricing on top of heavier fuel taxes. However, she said road-usage charges are more expensive to administer than fuel taxes.

“The nice thing is there’s only, like, 200 refineries across the U.S., and so we charge there,” Kockelman told TT. “We should really, dramatically increase the gas tax. We pay less for hazardous material than we do for bottled water.”

MacKenzie identified increasing performance range and improving charging time as major challenges that exist as charging stations still lack the widespread presence of gas stations. “Until you have that level of ubiquity, you’re not at the same level of convenience.”

Biden’s American Jobs Plan proposes $15 billion to build a national electric vehicle charging network with 500,000 ports by 2030.

Poole said the investment in charging ports represents a difficult coordination problem. He said if all $15 billion is spent for this purpose, it will probably make charging stations crop up faster — but it’s unclear whether those will be good investments. There may be more chargers put in place before there is demand to use them, or there may be more vehicles than chargers.

“The federal government in Washington has regulatory levers to pull, but it can’t control the decisions made by consumers,” said Poole. “There’s a lot of moving parts here. It’s difficult to have this master plan to have it all happen on a certain schedule.”

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