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Report on the Impact of Electric Vehicles on the Road Use Tax Fund

This report evaluates the impacts of electric vehicles on the Road Use Tax Fund in Iowa, including estimated impacts, mitigation alternatives, and recommendations. The report also provides an overview of the electric vehicle market conditions in Iowa.

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Report on the Impact of Electric Vehicles on the Road Use Tax Fund

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  1. Report on the Impact of Electric Vehicles on the Road Use Tax Fund March 8, 2019 Iowa Freight Advisory Council Meeting

  2. Background • Iowa DOT required to develop report estimating impacts to Road Use Tax Fund due to high efficiency vehicles • Report included estimated impacts, evaluation of mitigation alternatives, and mitigation recommendations • Iowa DOT provided report to the Iowa Legislature on December 31, 2018 • Study evaluated electric, hybrid, and hydrogen fuel cell vehicles

  3. Background Cont. • Iowa fuel taxes make up approximately 45 percent of state RUTF • Fuel tax is declining due to increases in fuel efficiency and growth in electric vehicle market • Electric vehicle (EV) marketplace includes: • Hybrid electric vehicles (HEV) such as the Toyota Prius • Limited ability to travel under electric power • No ability to charge from outside sources • Battery electric vehicles (BEV) such as Nissan Leaf and Tesla Model 3 • No internal combustion drivetrain components • Charged from external sources

  4. Background Cont. • Electric vehicle (EV) marketplace also includes: • Plug-in hybrid electric vehicles (PHEV) such as Chevrolet Volt • Both internal combustion and electrical drivetrain components • Can be propelled by electric drivetrain only • Charged from external sources • Hydrogen fuel cell electric vehicles • Utilize on board hydrogen to generate electricity

  5. Electric Vehicle Market Conditions - Iowa • As of July 1, 2018 Iowa EV registrations totaled: • BEV – approximately 700 • PHEV – approximately 1,750 • As of December 30, 2018 Iowa EV registrations totaled: • BEV – approximately 1,050 • PHEV – approximately 2,000 • Growth of approximately 25 percent in 6 months • Likely factors impacting growth: • Increased model availability (Tesla Model 3) • Availability of charging infrastructure

  6. Iowa RUTF Impact • Revenue impacts were forecasted for passenger and commercial vehicles • Low, medium, and high forecasts were produced • Passenger vehicle EV growth assumptions were based on national level forecasts • Adjusted to account for Iowa’s current EV fleet and EV market conditions • Assumed a gradual transition from PHEV to BEV • Likely underestimated the transition to BEV • Forecast of passenger EVs ranged from approximately 10 to 33 percent of the passenger vehicle fleet by 2040

  7. Iowa RUTF Impact – Cont. • Commercial fleet EV growth assumptions accounted for: • Later availability of commercial EVs • Quicker fleet turnover than passenger fleet • Forecast of commercial EVs ranged from approximately 5 to 50 percent of the commercial vehicle fleet mileage by 2040

  8. Iowa RUTF Impact Cont.

  9. Evaluation of Mitigation Strategies • Goals for mitigation: • Low administrative costs • Equitable • No net change in RUTF • Captures all users • Passenger vehicles • Commercial vehicles • Out-of-state vehicles

  10. Mitigation Alternatives • Index fuel tax rates • Multiple states have implemented • Inflation rate • Wholesale price of fuel • Fuel efficiency • Easily implemented • Would impact all users of liquid motor fuel • Constitutionally protected for transportation use • Would not capture BEV or PHEV driving under electric power

  11. Mitigation Alternatives Cont. • Add a per Kilowatt Hour (kWh) excise tax • One state has implemented • Consistent with idea of collecting excise tax on motor fuels • Based on vehicle use • Captures passenger and commercial vehicles • Captures in and out of state vehicles • Difficult to implement on residential charging

  12. Mitigation Alternatives Cont. • Add a mileage based user fee • No states have implemented on a statewide basis • Not subject to fuel type and vehicle efficiency • Based on vehicle use • No national system in place • Privacy concerns with technologically based GPS solutions • Non GPS solutions require additional administrative effort to implement

  13. Mitigation Alternatives Cont. • Add Supplemental registration fee • 19 states have implemented • Annual rates vary from $50 to $200 • Applied to BEV and/or PHEV • Easily administered through existing registration system • Constitutionally protected for transportation • Would not address out of state passenger vehicles • Not directly based on system usage

  14. Mitigation Alternatives Cont. • Add a hydrogen fuel excise tax • Six states have implemented • Consistent with idea of collecting excise tax on motor fuels • Based on vehicle use • Captures passenger and commercial vehicles • Captures in and out of state vehicles

  15. Study Recommendations • Best long term solution is implementation of national level mileage based user fee • Iowa DOT did not recommend implementation of mileage based user fee as a single state solution • Recommendation 1 – Add a per kWh fee excise tax • Recommended rate of $0.026 per kWh • Based on efficiency of BEV class 8 trucks (33,001 pounds and heavier) • Results in paying tax roughly equivalent to average diesel class 8 truck • Rate would be higher if based on efficiency of passenger BEV • Would apply only at non residential charging locations • Burdensome to meter and collect revenue from all potential residential charging locations • Utilize taxing system similar to existing LNG and LPG (point of sale collections)

  16. Study Recommendations Cont. • Recommendation 2 – Add a supplemental registration fee for passenger EV • Intended to mitigate user fees lost due to home charging • Would apply to electric passenger vehicles weighing less than 10,000 pounds • This is consistent with the weight/value methodology used for collecting annual registration fees • Rate based on liquid fuel tax collected from average passenger vehicle in Iowa • Adjusted downward by ~15 percent to account for non residential charging • BEV - $130 per year • PHEV - $65 per year • Electric motorcycle - $9 per year • Recommendation 3 – Add a hydrogen fuel excise tax • Recommended rate is $0.65 per diesel gallon equivalent (2.49 pounds of hydrogen) • Based on efficiency of hydrogen fuel cell class 8 trucks • Assumed to achieve ~13 miles per diesel gallon equivalent • Utilize taxing system similar to existing LNG and LPG (point of sale collections)

  17. Legislative Action • Bills implementing the study recommendations have been submitted in the Iowa House (HSB197) and Senate (SSB1208) • House and Senate subcommittees have recommended passage • House bill has been amended to phase in supplemental registration fees over three years • Should current bill be passed this session implementation would begin: • Supplemental registration fee – January 1, 2020 • Hydrogen fuel excise tax – January 1, 2020 • Per kWh fee excise tax – July 1, 2020

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