The Cost of a Fee

September 29, 2021

The Cost of a Fee

A quick quiz: Name one state that doesn’t charge an EV fee.

Cal­i­for­nia you say? Wrong. There are 22 states that do not charge any fees cur­rent­ly, but the EV cap­i­tal of the Unit­ed States is not one of them. Cal­i­for­nia charges an annu­al fee of $100 for EVs (tech­ni­cal­ly, the fee is $100 to reg­is­ter and then up to $175 per annum). Cal­i­for­nia intro­duced a fee in 2017 that became oper­a­tional last year. Along­side an EV fee, there was also an increase in the gas tax.

In fact, the states that do not charge a fee are a mixed bag of most­ly blue states and then some low-tax states (Alas­ka, Flori­da, and Texas). As part of the Atlas EV Hub, we track fees across states for EV own­ers. Around the coun­try, fees vary sig­nif­i­cant­ly by state. The aver­age fee for the states that charge fees is $121.

As the coun­try strives to have 50 per­cent of all pas­sen­ger car and light truck sales be EVs by 2030, finan­cial incen­tives and dis­in­cen­tives will play a cru­cial role.

States con­tin­ue to push for EV fees. Flori­da state leg­is­la­tors have tried twice already this year to insti­tute a fee (there is no fee cur­rent­ly) but failed both times – includ­ing one bill to intro­duce a fee of $235. Geor­gia has the high­est fees in the coun­try of $214 a year for Bat­tery Elec­tric Vehi­cles (BEV).

So how much do these fees impact consumers?

Analy­sis out of UC Davis indi­cates that EV fees could reduce sales by 10 to 24 per­cent. Those same researchers also found that EV dri­vers already pay more tax­es than inter­nal com­bus­tion engine (ICE) vehi­cle own­ers, not­ing that, “Stud­ies in Min­neso­ta and Cal­i­for­nia found that elec­tric vehi­cles actu­al­ly gen­er­ate at least as much rev­enue (on a per-vehi­cle basis) for states as gas-pow­ered vehi­cles do.”

What about this idea of EV dri­vers pay­ing their fair share? A paper from Con­sumer Reports from 2019 clas­si­fied fees as puni­tive, or not based on their cost rel­a­tive to the gas tax. Their analy­sis indi­cates that with the declin­ing gas tax (due to more effi­cient vehi­cles and the fact that the tax is not tied to infla­tion) by 2025, many EV dri­vers around the coun­try will pay much more than ICE dri­vers. In fact, their analy­sis point­ed to the fact that more than 10 exist­ing EV fees would be more expen­sive than the gas tax by 2020.

Part of the rea­son giv­en is that trans­porta­tion bud­gets are in a bad way. So how do we make up for the short­fall in rev­enue? Two researchers out of UC Davis argue that we should peg the gas tax to infla­tion and that in the longer term as EV adop­tion goes main­stream, we could then look at usage-based charges for EVs.

The real­i­ty is that EVs make up a tiny pro­por­tion of vehi­cles on the road and so fees attached to EV pur­chas­es will do very lit­tle to raise the rev­enue need­ed to patch up roads but could real­ly dis­in­cen­tivize uptake. You can have a play with Atlas’s Dash­board for Road Net­work­ing Fund­ing – and see that as you move up the Aver­age Fuel Econ­o­my, rev­enue to the state will con­tin­ue to drop.

In the mean­time, with falling trans­porta­tion rev­enue, states will con­tin­ue to try to impose fees on EVs. That is: just as the fed­er­al gov­ern­ment attempts to incen­tivize EV pur­chas­es through rebates – albeit with much larg­er incen­tives – many states are func­tion­al­ly doing the opposite.

Thanks to Atlas Pub­lic Pol­i­cy EV Hub for allow­ing us to repost this article.

Source: EV Hub Road Net­work­ing Fund­ing.

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