What do you do with a subsidy program that isn’t needed and not producing anticipated results? If you are the state of Connecticut, you grow the program.
As of June 28, the state has started issuing rebate vouchers — up to $1,500 — to residents for the purchase of electric bicycles through the Connecticut Hydrogen and Electric Automobile Purchase Rebate (CHEAPR) incentive program.
Since 2015, CHEAPR has been granting subsidies to electric vehicles (EVs), resulting in a total payout of $17,574,750 for 10,234 rebates spanning from May 19, 2015, to June 14, 2023. Surprisingly, nearly 20 percent of these rebates were redeemed by the top 25 wealthiest zip codes, while a significant 68 percent of the vouchers were claimed by individuals with an annual household income of $100,000.
Gov. Dannel Malloy created CHEAPR outside the typical legislative process using $1 million paid by Northeast Utilities and NSTAR (now Eversource Energy) as a condition of approving their merger. The rebates, up to $3,000 for vehicles with sticker prices up to $60,000, would “provide an added incentive for consumers to embrace new approaches and help lead the way to a more sustainable future,” Malloy said.
Then, in 2017, Malloy added another $2 million, collected the same way when the state signed off on the merger that formed Avangrid.
In 2019, Gov. Ned Lamont signed a bill giving CHEAPR the first $3 million collected from state drivers paying the Greenhouse Gas Reduction Fee (GHG) added to vehicle registration costs, the remainder going to the General Fund. Since 2020, CHEAPR has been managed by a 12-member board that sets the amount and eligibility rules. The program originally offered rebates up to $3,000 toward buying or leasing a new electric vehicle. The rebates have since been increased to up to $9,500, depending on the vehicle type, for new or used vehicles.
A few years later, in 2022, Gov. Lamont signed the Connecticut Clean Air Act which changed the funding structure and allocated 100 percent of the GHG to the rebate program. Beginning fiscal year 2024, every dollar over $5.2 million collected from the Regional Greenhouse Gas Initiative (RGGI) will be diverted to the CHEAPR account. It also expanded the rebate program to include eBikes.
The bill also eliminated the December 2025 sunset date and increased the MSRP maximum for vehicle eligibility from $42,000 to $50,000. It also gave the administration power to the Department of Energy and Environmental Protection (DEEP) commissioner to allocate, distribute and use CHEAPR funds. The commissioner is required to prioritize granting rebates for $50,000 cars to residents of environmental justice communities and those having household incomes at or below 300 percent of the federal poverty level and who participate in certain welfare programs.
Yet surveys conducted in 2021 and 2022 by DEEP show that more than half would have purchased the vehicle even without a rebate. This raises the question of why Gov. Lamont recently signed legislation eliminating the five-year sunset clause, while increasing funding for the program.
The survey’s were sent to individuals who participated in the state’s CHEAPR program between June 2020-2021 and July 2021- 2022, and covered topics including demographics, motivations, and the importance of the CHEAPR rebate.
Expect to see the same reaction to the bike welfare program. The city of Denver, Colo., recently cut the value of eBike vouchers to expand the amount of vouchers being offered. However, demand was unaffected. Put another way, the subsidy’s impact on consumer demand was rather unresponsive to changes in its value. So, if reducing the subsidy didn’t have the desired cooling effect on purchases, one might wonder whether completely eliminating the voucher would yield a similarly lackluster outcome.
According to a June 28 press release, DEEP Commissioner Katie Dykes said, “As one of the first state-wide eBike incentive programs in the country, we will be providing additional electrified transportation options for those who may not be able to afford a car, let alone an electric vehicle.” (What she fails to explain is if eBikes are a substitute for gas-powered vehicles, there is no need to subsidize them because they are already much cheaper.)
In the same press release, New Haven Mayor Justin Elicker stated, “Electric bikes are a great option for residents who are looking for a fun, efficient, greener and healthier way to get around the city.”
Let us ponder this for a moment, since when does something being fun justify squandering hard-earned taxpayer dollars?
It’s nice the government is saying the quiet part out loud. The real goal is to get as many automobiles off the road as possible and environmentalists agree.
UCONN Assistant Professor-in-Residence Dr. Mary Donegan, at the 2021 Northeast Multimodal Transit Summit, stated that “having hundreds of millions of EV’s on the road is not the goal, and that we want to push folks towards biking, walking, transit and of course with EV’s as a rare but essential aspect of transportation.”
During public comments at the September 2021 CHEAPR board meeting Gannon Long, Policy and Public Affairs Director of Operation Fuel, pointed out “in addition to just replacing the cars on the road [with EV’s], it’s really important that we actually reduce the number of cars on the road. Department of Transportation should be planning on fewer vehicle miles traveled, not more.” She wanted to know “how would emissions change if you actually took cars off the road, not just replacing them with different cars, but taking them off the road.”
The eBike subsidy is essentially a reward for bike consumers who were already planning to make the purchase, and in many cases, could comfortably afford it without the credit.
Additionally, it’s important to highlight that the eBike market is far from struggling and is experiencing rapid growth. Surpassing electric cars and hybrid vehicles, eBikes emerged as the top-selling electric vehicle category in 2021, as reported by the Light Electric Vehicle Association. The US eBike market achieved a remarkable size of $847.5 million last year, with estimations from IMARC Group projecting it to reach a staggering $1.6 billion by 2028, signifying an impressive 12 percent growth rate.