Commentary: California’s Clean Cars rule would deliver jobs, household savings in other states

The following commentary was written by research and modeling manager Rachel Goldstein and modeling analyst Daniel O’Brien of Energy Innovation Policy & Technology LLC. See our commentary guidelines for more information.

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California’s new clean-vehicle policy will transform the world’s second largest car market, drive a nationwide electric vehicle (EV) revolution, save consumers money, and clean the air. New Energy Innovation Policy & Technology LLC research shows if the 16 “Section 177” states follow California’s plan to phase out fossil-fueled car sales by 2035, EVs could compose more than 80 percent of all new car sales across the United States in 2050.

This accelerated EV transition could extend this policy’s benefits far beyond California, creating hundreds of thousands of new jobs, preventing thousands of pollution-induced deaths, saving drivers hundreds of dollars every year, and cutting the greenhouse gas equivalent of removing an entire year’s worth of today’s car emissions.

Emissions reductions from California’s Advanced Clean Cars II triple if the 177 States adopt the rule

Section 177 of the U.S. Clean Air Act allows California Air Resources Board (CARB) to enact more stringent emissions standards than those set by the U.S. Environmental Protection Agency. In August 2022, CARB approved the new Advanced Clean Cars II rule (ACC II) requiring all new cars sold in the state be zero-emission vehicles (ZEV) by 2035. California sells more cars and trucks than any other state, driving major implications for nationwide car sales and transportation emissions.

The Clean Air Act also allows other states to “piggyback” off California’s standards, helping cut emissions from vehicles inside their borders — 16 states have opted to follow earlier cleaner car standards. These Section 177 states and California make up 38 percent of the U.S. auto market, meaning ACC II adoption could transform how Americans drive. While some states automatically adopt new CARB rules, others, like Maryland, New Jersey, New Mexico, and New York require proactively adoption via legislation, executive order, or regulatory action.

Energy Innovation modeled the impacts of the new ZEV rule using its free, open-source Energy Policy Simulator model. The results showed that if all 17 states adopt ACC II, annual U.S. transportation emissions could fall 53 percent by 2050 versus today’s levels, equivalent to avoiding the emissions of 13 coal plants operating for the next 30 years.

CARB’s decision followed the 2022 Inflation Reduction Act (IRA), which extended and expanded the federal EV tax credit up to $7,500. The IRA eliminated a restriction that only automakers that have sold less than 200,000 EVs can qualify for the credit and created a separate $4,000 tax credit for used EVs.

These incentives will drive consumer demand in the near term, while spurring domestic battery and EV manufacturing. But overcoming long-term adoption challenges requires ZEV standards. Following the tax credit expiration in 2032, annual EV sales could fall to pre-IRA, business-as-usual levels without ACC II adoption.

States should adopt ACC II to deliver savings and cleaner air benefits to residents

Drivers of fuel-burning cars are handcuffed to volatile gas prices. Gas prices fluctuated as much as 25 percent since 2022, largely due to Russia’s invasion of Ukraine. OPEC and Russia recently announced plans to cut 1.6 million barrels of oil production per day by the end of 2023, aiming to push prices even higher.

EVs are already cheaper to finance and own than gas-powered vehicles the day they are driven off the lot in most states, even if they have a higher sticker price. EVs need less maintenance and charge on the electricity grid, which has greater price stability and lower prices than the oil market. Previous Energy Innovation modeling found EV owners average $6,000 in savings over the vehicle’s lifetime thanks to lower fuel and maintenance costs.

If all 177 States adopt ACC II, U.S. households could save an average of $238 annually, with savings concentrated in states that adopt the standard and offer robust EV incentives. For example, households in in New Jersey, which boasts one of the country’s highest EV tax incentives, could save $682 every year when the state implements ACC II.

ACC II adoption in all 17 states could also create more than 300,000 jobs nationwide through new EV supply chain and domestic manufacturing facilities investments.

National economic changes due to ACC II as compared with an IRA baseline

Shifting away from fuel-burning vehicles will also cut toxic nitrogen oxides, volatile organic compounds, and particulate matter emissions which harm human health. Air quality improvements from ACC II could prevent as many as 160,000 asthma attacks and 5,000 deaths nationwide by 2050.

Improved public health will feed back into the economy. In New York, adopting the ACC II rules could prevent up to 55,000 health-induced lost workdays. These benefits will be particularly prevalent in communities of color, which experience pollution-related health impacts at significantly higher rates than the national average.

State leaders can accelerate the transition to EVs with strong supporting policies

With model ZEV standards ready to adopt, state policymakers can floor it toward an electrified transportation future, delivering considerable benefits for their residents. But complementary policies are critical to ensure rapid EV adoption. Each state can further support EV market growth by developing charging infrastructure, offering state incentives for EVs, and hosting supply chain manufacturing facilities.

EV adoption is still contingent upon the buildout of a widespread, equitable charging network that ensures access to quick charging. Coordination between state and local governments, utilities, and the private sector can help build out charging infrastructure across all neighborhoods and help overcome a major obstacle to EV purchases in rural areas.

State policymakers should pair IRA tax credits with state incentives to make EVs even more price competitive. Means-based rebates and tax credits, like those in California’s Clean Cars 4 All program, should be funded to support EV access for low- and middle-income communities. Policymakers can also support the growth of their EV markets and bring more jobs home by incentivizing EV supply-chain manufacturing to their states. These facilities can bring new jobs and sources of tax revenue to their communities.

Vehicle markets are rapidly moving towards EV adoption, and states with supporting policies will be best positioned to take advantage of the benefits. ACC II will accelerate that transition, driving down carbon emissions and other tailpipe pollution while saving customers money. State lawmakers should move swiftly to adopt the ACC II rules — any delay forgoes jobs, savings, and cleaner air for their residents.