The passage of the Inflation Reduction Act and Infrastructure Investment and Jobs Act marked two of the most profound pieces of climate legislation in U.S. history. With approximately $370 billion available for climate and clean energy investments and $50 billion in electric vehicle (EV) funding, they represent the largest climate commitments by the federal government yet.
The Inflation Reduction Act is estimated to shift the U.S. emissions trajectory to an estimated 40% reduction in 2005 levels of carbon emissions by 2030 compared to a 24-35% reduction in a business-as-usual scenario. The bill includes new EV tax credits for individuals interested in purchasing new and used EVs, as well as both a commercial EV and EV infrastructure tax credit. But vehicle fleets, like municipal buses and government vehicles, are also a critical category that comes with their own unique set of challenges and opportunities.
State and local governments face many challenges to meet their fleet EV goals, such as lack of access to funding or necessary technologies for their application. The sheer amount of federal funding opportunities available to state and local governments in the United States should, in theory, incentivize new commitments to fleet electrification and pilot programs. However, continued education and assistance in this transition is crucial to achieve the full benefits possible, as well as increased exposure to EV funding and financing mechanisms.
Vehicle Fleets in the United States
In the United States, fleet vehicles account for approximately 3% of total registered vehicles (8.1 million automobiles as of January 2021), with approximately 1.1 million of those vehicles owned by government bodies such as the military and federal, state, county and local government. “Fleet vehicle” can refer to light-duty vehicles such as police cruisers or city park security vehicles, as well as to heavy-duty vehicles such as sanitation trucks and bus fleets, or off-road or utility vehicles.
When municipalities or local governments commit to electrification and invest in new fleet technology, they can directly impact the EV market by boosting demand for vehicles and demonstrating the benefits of EV ownership to residents. Often supported by state- or city-level commitments, many municipalities across the United States are committing to EV fleet procurement goals and leading the way on electrification.
In Hawai`i, the state government requires that 30% of light-duty fleet vehicles be powered by renewable energy sources by 2025, scaling to a 100% renewable energy goal by 2035. New York State recently committed at least $500 million to support new, zero-emission school buses with the aim for all new school bus purchases being zero-emission by 2027 and all buses in operation be electric by 2035. This legislation complements a 2021 commitment by New York City to operate an all-electric school bus fleet by 2035. Additionally, New York City Mayor Bill de Blasio signed an executive order to fully electrify the city’s municipal fleet by 2035. Vehicle commitments lead to EV charging equipment installations, which in some cases can be open to both fleets and the public, further encouraging residents to go electric.
With the support of the UPS Foundation, WRI has directly engaged municipal fleet owners and local government staff to provide educational opportunities and peer-to-peer knowledge exchange on municipal transportation electrification topics such as accessing funding opportunities, installing electric vehicle supply equipment and infrastructure, and accessing innovative business models and financing solutions.
Funding the Transition
Funding for municipal fleet vehicles currently comes from a few main sources: public funding, electric utilities, Volkswagen Settlement funds, the Infrastructure Investment and Jobs Act (IIJA) and most recently the Inflation Reduction Act (IRA). When planning for electrification, municipalities can seek to cover partial costs for charging infrastructure, light-duty EVs, or medium- and heavy-duty EVs through these supplemental funding sources. However, it can be challenging for municipalities to identify and apply for the correct type of funding when considering the number of opportunities available, the time required to complete applications and the specific requirements of each program.
There are several tools available to state and local governments to help identify funding sources based on their needs. For example, the Federal Funding Opportunities for Local Decarbonization (FFOLD) Tool developed by RMI and WRI is a one-stop shop for federal funding opportunities, while the Atlas EV Hub provides additional insight into local, state and utility funding opportunities. The Clearinghouse of Electric School Bus Funding and Financing Opportunities database provides information about funding specific to electric school buses. There are also several repositories with state-specific resources, like the Funder Finding Tool in California. These public tools can be a good first step for local governments looking to electrify, as well as connecting with non-profit and educational institutions.
In some cases, municipal and regional utilities provide direct technical guidance and assistance for funding applications. For example, East Bay Community Energy (EBCE), a clean choice power supplier and community choice aggregation entity, is providing direct technical assistance to cities with light-duty fleets in Northern California to prepare for electrification. Similarly, in Pittsburgh, Pennsylvania, regional utility Duquesne Light Company is providing educational resources and access to information for their customers, in particular fleet customers, to resolve technical questions, site infrastructure and align city fleet EV adoption with the Commonwealth of Pennsylvania’s electric vehicle roadmap.
On-the-ground coalitions help bridge the gap between federal opportunities and municipal staff by providing access to reliable fuel and technology-related information and funding. The Clean Cities Coalition Network is a national, U.S. Department of Energy-funded program that helps provide direct technical assistance to city-level transportation stakeholders. With over 90 coalitions across the country, these groups work with fleets, businesses, municipalities and utilities to help transition their operations to zero- and low-emission technologies. Clean Cities Coalitions work with public and private local stakeholders to provide the most up-to-date information regarding funding opportunities, technologies and data availability.
Piloting Technological and Procurement Innovations
Some state and local governments are taking unique steps to achieve their electrification goals, particularly when it comes to financing and new business models. The “as-a-service” model (AaS) that allows fleet owners to separate the cost of ownership of the vehicle and its associated services, such as charging infrastructure, is growing in popularity. As part of its technical assistance in California, EBCE has set-up a charging AaS model for participating cities where EBCE funds the upfront cost of purchasing and installing recommended charging infrastructure as well as the operation and maintenance costs of the equipment for a defined period. In this model, EBCE owns the equipment and ultimately recuperates the capital via an annual charging fee that the participating city then pays to EBCE over the period.
Municipalities are also working with each other and manufacturers through collaborative purchasing agreements and aggregating demand to support greater vehicle availability by sending market signals to vehicle manufacturers. The U.S. Climate Mayors’ EV Purchasing Collaborative is working to increase demand for light- and heavy-duty vehicles and charging infrastructure. The collective is following a similar model to India’s Grand Challenge, which is working to enable vehicle manufacturers to mass-produce transit buses with similar characteristics for any eligible operator within the nation. The Grand Challenge has enabled procurements of 5,000 electric transit buses for Indian cities, helping reduce production costs through economies of scale and building momentum for even larger orders of e-buses.
Innovations from U.S. cities in fleet electrification do not stop at the initial funding or financing level. Many are leading unique technology pilots, such as curbside EV chargers in New York; pole-mounted charging in Los Angeles, Melrose and Portland; and vehicle-to-building charging demonstrations in Boulder.
These innovations address real-world barriers to EV adoption, such as access to public charging infrastructure in dense urban settings and high installation costs for new charging infrastructure at the curb. Vehicle-to-building, vehicle-to-grid and other V2X (vehicle-to-anything) applications help improve grid resiliency and enable cost-savings for implementing partners. Early commercial EV adopters can help provide invaluable insight to peer fleet operators in the challenges and opportunities that lay ahead for EV implementation.
Prioritizing Equity and Access
Transportation electrification is at a critical juncture in the United States and worldwide. Across the United States, greenhouse gas emissions in the transportation sector account for approximately 30% of all emissions and over 55% of NOx emissions – one of the most prevalent and toxic air pollutants from combusting fuel. Transportation infrastructure, namely highways, fueling sites and vehicle depots, that give off toxic emissions are often located in close proximity to historically marginalized communities, contributing to underlying health conditions and exacerbating economic inopportunity.
Even though passenger and light-duty vehicles make up the bulk of traffic, other on-road vehicles that are typically heavier and drive more miles each day also contribute to transportation sector emissions and the inequitable burden of these systems on vulnerable communities. Freight vehicles like delivery vans and trucks are some of the offenders of harmful emissions from diesel exhaust. For example, the Ports of Los Angeles and Long Beach in California account for 37% of national imports by volume and 22% of national exports by volume, making the environmental and health burden of this area remarkably disproportionate to other cities in California. While cities have little jurisdiction over freight facilities and technologies, policy tools at both state and national levels and availability of funding work hand-in-hand for stakeholders, such as the adoption of clean trucks and clean fleet regulations at the state level and the availability of regional policies and incentives. Efforts to electrify freight infrastructure at ports such as the Ports of Los Angeles and Long Beach can demonstrate the urgency to address vulnerable communities when accessing funding for EV pilots or adoption.
National momentum behind the transition to electric school buses also provides an example of how prioritizing equity when implementing funding for clean and electric vehicles can play out. School buses in the U.S. are typically fueled by diesel, with more than 90% of the domestic school bus fleet running on fossil fuels. The U.S. Environmental Protection Agency (EPA) addressed this reliance on a polluting fuel in children’s transportation in October 2022 by announcing nearly $1 billion of funding towards the purchase of new school buses for 400 school districts, where 95% of the new buses selected by school districts will be electric. WRI’s Electric School Bus Initiative (ESBI) and partners are among the organizations working to prioritize outreach regarding available funding to school districts servicing underserved communities. Additionally, funding from the IIJA to replace existing buses is designated as part of President Biden’s Justice40 Initiative, ensuring that benefits from the IIJA’s climate programs go to underserved communities. Municipalities can put equity first in their jurisdictions when seeking funding for EV projects and implementing EV or charging pilots to strengthen the social and health impacts of their projects.
With the passage of both the IIJA and IRA, and several additional funding programs for electric vehicle adoption from state and utility partners, there is immense opportunity to accelerate the electrification of both personal use vehicles and commercial and fleet vehicles in the United States. State, municipal and local governments can lead the way by transitioning municipal fleets to cleaner, more advanced technologies and benefiting residents directly and equitably.
Lidia Henderson is a Research Associate, eMobility with WRI Ross Center for Sustainable Cities.
