California Rebates with E-bicycle Incentive Project

Electric vehicle sales accounted for 4.6 percent of total vehicle sales worldwide. The range of electric vehicle models has grown. New battery technology initiatives have been launched. And this progress was made amid the Covid-19 pandemic and the resulting economic downturn and lockdowns.

E-bikes have numerous advantages over human-powered bicycles. However, despite their numerous advantages, they are more expensive than traditional pedal bikes. The benefits of e-bicycling have prompted many European cities and countries to incentivize e-bicycling through various intervention programs. As a result, California intends to provide financial incentives, similar to the Clean Vehicle Rebate Project, available for larger electric vehicles. Until recently, similar incentives were scarce in the United States.

California ARB's Electric Bicycle Incentive Project

In July, the California Air Resources Board was given $10 million in the state budget to establish the e-bike rebate program by July 1, 2022. While the ARB intends to implement it by the end of next year, it is still working out the details.

The ARB held its first public workgroup on Monday to obtain feedback on some of its ideas, such as making the incentive accessible only at brick-and-mortar bicycle dealerships in California, establishing income caps for incentive eligibility, and requiring individuals who receive money through the program to take a bicycle safety class.

The existing Clean Vehicle Rebate Project in the state offers rebates ranging from $750 for battery-powered motorcycles and scooters to $2,000 for battery-electric cars and $4,500 for hydrogen fuel cell electric vehicles. The ARB has not yet determined the dollar amount per vehicle for the e-bike rebate, nor has it determined which types of electric bicycles would be eligible.

E-bikes are available in various styles, sizes, and price points. While most are used for recreation, cargo models are becoming a more popular delivery option. There are also different types of e-bikes based on the type of electric assistance they provide and their top speed, which ranges from 20 to 28 miles per hour. With hundreds of models available, prices range from $500 to $8,000.

E-Bike Act 

In addition to the California rebate, the federal government may decide to incentivize e-bike purchases. Earlier this year, a pair of California and Oregon members of Congress introduced the Electric Bicycle Incentive Kickstart for the Environment (E-BIKE) Act, which would provide a 30% tax credit to consumers who purchase an electric bicycle. It was introduced, indicating that interest in incentivizing e-bikes is growing.

At the same time that these state and federal bills were introduced, more local e-bike incentive programs sprung up across the country, most notably three programs launched in California in 2020 and 2021 by Contra Costa County, the Redwood Coast Energy Authority, and Peninsula Clean Energy.

The E-BIKE Act is currently being debated, but if passed, consumers could receive a tax credit of up to $1,500 for purchasing a new e-bike for less than $8,000. The tax credit would be available to an individual once every three years or twice for a married couple filing jointly and purchasing two electric bicycles.

E-Bike Rebates

E-Bikes are rechargeable and battery-powered, allowing riders of all ages and fitness levels to move faster and farther. They are a low-cost, enjoyable, and pollution-free alternative to driving a car that saves money, improves air quality, and reduces traffic congestion. Eligible applicants for the E-Bike Rebate Program will receive a $500 rebate for purchasing a new e-bike.

Eligibility For E-Bike Rebate

ARB has indicated its intention to limit eligibility to low-income households. The income restriction is not required by law, and there are no income requirements in CARB's electric vehicle incentive program.

CalBike and the other more than 50 organizations that supported the program argued that at least 80% of the funds should go to low-income households. To allow for more equitable funding distribution, we wanted to make 20% of the vouchers available to middle-income families. Furthermore, it would have acknowledged that, like EVs, e-bikes are a civic good and that the state wishes to encourage people to use this mode of transportation.

Factors Considered For Rebates

The specifics of the e-bike program will be determined once CARB selects a vendor to administer the grants. CARB will accept applications until May 11, 2022, and select a vendor by June 10, 2022. However, some of the fundamentals that will be considered are as follows:

• Income restrictions: Unlike electric vehicle rebates, e-bike grants will be limited to California residents with qualifying incomes, at least for the first $10 million allocations.

• Bike types include: The purchase incentives apply to a wide range of e-bikes, including those designed for people with disabilities, folding bikes, and utility bikes capable of carrying cargo or passengers. Of course, standard commuter e-bikes are also covered by the program.

Can California Keep Its Promise to Provide E-Bike Rebates?

California has created several programs to encourage zero-emission vehicles (ZEV). To encourage the purchase of these vehicles, California established the Clean Vehicle Rebate Project (CVRP), which offers consumer rebates of $5,000 for fuel cell vehicles, $2,500 for battery electric vehicles, and $1,500 for plug-in hybrid electric vehicles. Currently, the CVRP is funded by revenues from California's Cap-and-Trade Program and motor vehicle fees.

As ZEV sales increase, so will the amount of funding required to provide rebates. One potential mechanism for generating a consistent source of revenue is to charge a fee on non-ZEV/TZEV vehicle sales. A fee structure can be a very effective mechanism. It can cause a long-term revenue stream to support incentives while also directly encouraging consumers to buy ZEVs through market price signals. Fee structures can also be designed to address equity concerns by minimizing the impact on low-income households.

This policy brief summarizes the findings of a study that investigated the equity implications of a fee system in California by creating six different fee structure scenarios, each capable of raising $200 million per year.