Guest post by Susan Rusinowski with contributions from Eric Paul Dennis, PE
In a nutshell:
- The MI Healthy Climate Plan outlines an approach to achieving a carbon-neutral statewide economy by 2050. A key element of the Plan is decarbonization of the transportation sector, which currently accounts for about 28 percent of Michigan’s greenhouse gas emissions.
- The Plan emphasizes reducing GHG emissions from the transportation sector by subsidizing the transition to electric vehicles. However, this approach alone cannot achieve deep GHG reductions, and imposes potential environmental justice issues.
- To ensure that transportation policy supports GHG reduction goals, Michigan should adopt a statewide transportation GHG budget. The net impact of transportation investments would be required to remain within budget, thus promoting increased investments in public transit and non-motorized transportation.
In February 2022, the Intergovernmental Panel on Climate Change (IPCC) called for the world to curb greenhouse gas (GHG) emissions in order to limit global warming to 1.5°C (2.7°F). In April, Michigan’s Department of Environment, Great Lakes, and Energy (EGLE) released the MI Healthy Climate Plan to put Michigan “on a path towards becoming fully carbon-neutral by 2050.” While this plan describes many carbon-reducing policy recommendations, it is short on solutions that are viable for economically depressed parts of the state.
The original draft of the plan received heavy criticism from environmental justice (EJ) advocates, claiming that the plan largely ignored EJ issues. The final draft of the plan incorporated much of this feedback, including:
- Commitments to energy affordability by establishing an energy burden limit of six percent of annual household income for low-income households
- Further commitments to reduce the negative health impacts of power generation by accelerating Michigan’s transition away from coal-fired power plants
- Climate and water infrastructure investment with at least 40 percent of state funding for these initiatives benefiting disadvantaged communities.
However, some still claim that the plan doesn’t focus enough on EJ – particularly around the Plan’s strategies for transportation. The automotive industry is core to Michigan’s economy, workforce, and identity, and transportation is one of the plan’s major areas for targeting carbon reductions. As of 2019, Michigan’s transportation sector accounted for almost 28 percent of the state’s total greenhouse gas (GHG) emissions.
Michigan’s Electric Vehicle Transition
To reduce GHG emissions from transportation, the plan emphasizes a transition to electric vehicles (EVs). Consumer adoption of EVs will be an important element of transportation sector decarbonization, especially in the short-term. However, an emphasis on encouraging consumer adoption of EVs imposes concerns about social and environmental justice.
With the recent passage of the federal Inflation Reduction Act (IRA), new EVs will be eligible for up to a $7,500 federal tax rebate through 2032. However, it’s not clear if any EVs will be eligible for the full credit, as it is contingent upon final assembly of vehicles in North America, with battery components being sourced and/or manufactured in the U.S. or countries with which the U.S. has a free trade agreement. (The law was written this way because otherwise U.S. tax dollars would be subsidizing Chinese battery manufacturers.) Many EVs with batteries manufactured in the U.S. should be eligible for at least half the credit ($3,750). In January, Governor Whitmer proposed a state EV rebate of $2,000 for the purchase of a new EV that would be in addition to any federal incentives.
An electric car charging in a public parking lot. Photo: Michael Flippo
In subsidizing consumer purchases of EVs, the MI Healthy Climate Plan risks overlooking low-income and EJ communities. The average annual household income of an EV buyer is over $100,000, while the median household income in Michigan is $59,234. Most low-income households buy their vehicles in the used car market. The federal IRA includes up to a $4,000 rebate for used EVs, but Governor Whitmer’s proposal does not include any tax credits for the purchase of used vehicles.
To further address equity concerns, some approaches restrict incentives based on income and/or vehicle price. For the new vehicle rebate provided in the federal IRA, only EVs with a manufacturer’s suggested retail price (MSRP) under $80,000 for trucks, SUVs, and vans, or under $55,000 for smaller vehicles would be eligible. For used EVs, there isn’t a price cap, but only filers with an AGI of under $75,000 single or $150,000 joint would be eligible.
EV advocates have recommended designing incentive programs that reduce the purchase cost of an EV with a “cash on the hood” program, providing the rebate to the purchaser at the point of sale. The federal rebate for new EVs allows this option, though buyers of used EVs would have to receive the rebate through their tax return and would not be eligible if they did not have a tax burden.
Another purchase incentive policy option to consider is guaranteed loans, or loan-loss reserves, targeted towards lower-income EV buyers. The Department of Energy’s Office of Energy Efficiency and Renewable Energy recommends this strategy for funding other clean energy investments, and this type of financing has been used for real estate development, affordable housing, and small business loans. Multibank community development corporations (MBCDCs) can pool funding and provide lending across multiple lenders, reducing their individual risk. The state could fund a portion of the defaulted loans and promote this financing option widely. This multibank structure would also benefit banks in meeting their regulatory requirements for servicing low-income communities, which were recently reaffirmed by the Biden Administration.
EV charging infrastructure must also be addressed, as public charging infrastructure is unavailable or unreliable in many areas, especially minority and low income neighborhoods. Public chargers are often poorly maintained. Policymakers should work to assure that chargers are provided in all areas where there is demand and maintained in operable condition. Recent federal and state efforts have allocated significant funding to building-out public and private EV charging infrastructure. As these programs proceed, planners should prioritize installing and maintaining charging infrastructure that is aligned with user needs.
This just scratches the surface of issues that remain to be addressed by policymakers to ensure the EV transition happens equitably and prioritizes EJ communities in Michigan. Furthermore, a transition to EVs cannot achieve deep cuts to GHG emissions unless combined with a variety of other policies, as described below.
Additional Policies to Support Transportation Decarbonization
The life-cycle GHG emissions for EVs are notably lower than fossil fuel powered vehicles, but are still substantial. Significant energy is required to mine, transport, and process raw materials into batteries and vehicles, and the majority of these activities remain powered by fossil fuels (as is much of our electric grid that charges the batteries). Subsidizing electric vehicles is as much of a benefit for the automotive industry as for the climate.
According to the IPCC report, mode shift away from private vehicles is necessary to achieve deep cuts in GHG emissions from transportation. Public transit provides the lowest emissions per trip (outside of walking or biking), and has consistently been shown to be the most safe, affordable, and sustainable option for transportation. A functional public transit system is also critical for people who do not own cars, and is key to equitable transportation policy.
A MoGo bike share station in downtown Detroit. Photo: Flickr
Michigan, like most of the U.S., has an existing transportation system and built environment that prioritizes private vehicles. Transitioning to EVs is a short-term strategy. Transitioning away from private vehicles to an low-carbon transportation system will require decades of strategic planning and investment. To achieve deep GHG reductions in Michigan’s transportation sector, we should not only support public transit, but also incentivize residents to live car-free. One possible option has been introduced in California; while California has long offered generous EV purchase incentives, Governor Newsom has proposed a tax incentive for California residents to forego vehicle ownership.
Any serious strategy to decarbonize the transportation sector should at least measure GHG emissions from the transportation system and estimate impacts from future investment decisions. Otherwise, any GHG reductions obtained through vehicle efficiency could be counteracted by road widenings and other capacity-expanding projects. The Transportation and Mobility Workgroup of the Michigan Council on Climate Solutions suggested implementing a GHG emission budget for road agencies. This strategy was recently implemented by Colorado DOT; it estimates that by doing so, Colorado will avoid 1.5 million tons of GHG emissions by 2030. Under this policy, transportation agencies would be accountable to ensure that the net impact of transportation investments meet statewide goals for system-wide GHG emissions.
The MI Healthy Climate Plan lays out a vision for fulfilling Governor Whitmer’s commitment to achieving 100 percent economy-wide carbon neutrality by 2050. This benchmark is globally recognized as the standard for reducing greenhouse gas emissions to avoid devastating climate change.
As the history of the environmental justice movement has shown, progress can be made with persistent community advocacy, which is exactly what Michigan EJ advocates proved after the draft plan was released. As a result of their advocacy, some of their concerns were addressed, but not all. It is now up to the Michigan legislature to continue showing their commitment to supporting Michigan’s low and middle income families by promoting equitable strategies for decarbonizing the transportation sector.
Transportation will be a crucial part of meeting Michigan’s carbon neutrality goals and goals to uplift EJ communities. Policymakers can consider strategies to ensure the alignment of both of these commitments and make Michigan a leader on these fronts.
This post was edited August 22, 2022. A detail regarding EV tax subsidies in IRA was added to note that only vehicles with final assembly in North America qualify.