Should Tesla Buyers Receive a $2,500 Rebate from California?

The California Air Resources Board (CARB or ARB) plan doesn't specify Teslas. Rather, it calls for exemping all electric vehicles (EVs) costing over $60,000. A quick perusal of the 30 EV models indicates that only the two Tesla models and the new Cadilac 2014 ELR meet that category.

The vehicle need not be all-electric (zero-emissions vehicle or ZEV) to receive a rebate courtesy of California vehicle and vessel "fee" payers (see new EV legislation), though only ZEVs receive the full $2,500 rebate. It includes plug-in hybrid electric vehices (PHEVs) which receive $1,500; neighborhood electric vehicles (NEVs) which get $900, and zero emission motorcycles (ZEMs), also $900. For definitions, see FAQ.

Note: Fuel Cell Vehicles (FCV) are zero-emissions and considered electric vehicles even though they don't have a plug. A Honda and a Hyundai are listed on the Eligible Electric Vehicle list.

"The plan, proposed by the staff of the Air Resources Board, stems partly from tight funding and partly from an effort to help rebates get into the hands of buyers in disadvantaged communities who live in areas with bad air quality or who can’t afford high-end electric cars such as Tesla, which serves an affluent market," writes John Howard, editor of Capitol Weekly. Details of the proposal are available on this 44-page discussion document [PDF].

As incentive programs go, California's Clean Vehicle Rebate Project, as well as the Federal Tax Credit up to $7,500, are straight-forward, unlike distortionary incentives. While Severin Borenstein, director of the UC Berkeley Energy Institute at the Haas School of Business, does not list them as bad incentives, he doesn't state that they are good ones either.

His preferred incentive is to price carbon emissions or increase fuel taxes, thus awarding zero-emissions vehicles, plug-in hybrid electric vehicles, and neighborhood electric vehicles an inherent price advantage over vehicles that burn gasoline and diesel fuel.

Tesla is fighting the proposed change to the program.