Designing a self-financing incentive program for zero-emission trucks in California: a market-based, feebate-inspired policy framework

Until the price gap between diesel and zero-emission trucks (ZETs) shrinks significantly, policy intervention is necessary to accelerate the transition to ZETs. California and others have imposed annual sales requirements on truck manufacturers, coupled with purchase incentives with limited state funding. To minimize the fiscal impact of government-funded incentives, we propose a self-financing rebate program for Class 4–8 trucks, using California as a case study. This is the first known study of truck feebates in the U.S. context, and likely globally. Under the scheme, diesel truck purchase or ownership would incur a fee, while ZET purchases would receive rebates. We consider various policy designs premised on revenue-neutrality (no cost to government) and minimizing cost burdens for transitioning fleets. Two design options are explored with multiple scenarios: a one-time upfront fee on diesel trucks at the point of sale or an Annual Fee on all operating diesel trucks, with the revenue used to finance rebates on ZET purchases. As an example, a One-time Fee of 7% of the new diesel truck purchase price (∼$5,100 to $20,400 per truck) or an Annual Fee of $290-$820 per diesel truck, depending on the class, could support rebates for 74,600 ZETs. Rebates decline from up to $277,000 in the first year to up to $40,000 in the last year as ZET sales spur. Any “excess” revenues could support ZET transition by funding charging infrastructure or incentivizing used ZETs. The Annual Fee approach provides the broadest funding base with modest fees.