An Estimate of Revenue Requirements to Support California’sMedium and Heavy-Duty Zero-Emission Deployment Targets

The California medium- and heavy-duty zero emission vehicle (ZEV) market is poised for growth despite challenges to regulatory authority at the federal level. To ensure market momentum, long-term funding certainty is needed for the medium- and heavy-duty ZEV incentive program, called HVIP. In 2024, the CARB board voted to redirect the Clean Fuel Reward (CFR) program from light-duty ZEVs to medium- and heavy-duty zero-emission truck (ZET) incentives. While this provides a foundation for revenue for ZET incentives, ITS-Davis analysis finds that it will likely fall far short of long-term HVIP revenue needs. We estimate the total HVIP funding gap (including both ZETs and ZEBs) after CFR revenues are considered for the 9-year period from 2027-2035 to be between $4.2 billion and $26 billion, with a mid-case scenario funding gap of $8.5 billion. The wide range is due to uncertainties in ZEV market growth rates and CFR revenues. The funding gap necessitates new approaches to address, such as lowering the incentive levels per vehicle, implementing new funding sources, and adopting innovative financing mechanisms. For example, we estimate that reducing the average incentive by 50% starting in 2031 and assessing a $1,400 registration fee on Class 4-8 diesel trucks starting in 2027 could support the achievement of annul ACT target volumes in the post-2030 timeframe.