Audit Highlights . . .
Our audit of CARB’s transportation programs for reducing GHG emissions highlighted the following:
- » CARB has not done enough to measure the GHG emissions reductions its incentive programs achieve.
- It does not account for overlap of its incentive programs and regulatory programs.
- It has generally not determined the effects its incentive programs have on consumers’ behavior and thus, has overstated GHG emissions reductions its incentive programs achieve.
- » Although cap-and-trade revenue is substantial, it is finite and can be unpredictable—it experienced a significant drop in 2020.
- » Although CARB is required to use cap‑and-trade funds in a way that maximizes economic benefits and fosters job creation, it has done relatively little to measure specific socioeconomic benefits.
- It has been slow to measure the jobs its programs create or support and the benefits of job training its programs require.
Results in Brief
Fighting climate change is a key public policy concern for California. The State has set ambitious goals for reducing greenhouse gas (GHG) emissions—the primary source of air pollution linked to climate change—over the next decade and beyond. At the forefront of those efforts is the California Air Resources Board (CARB), which state law has given responsibility for controlling emissions from motor vehicles and for designing programs to reduce statewide GHG emissions.
However, California may not successfully meet its upcoming GHG reduction goal, which will require the State to reduce GHG emissions by nearly 40 percent over the next decade. Although other sources of GHG emissions have been declining in recent years, emissions from transportation have increased since 2013, and GHG emissions from transportation accounted for 40 percent of all statewide emissions in 2018. To help CARB fight climate change by reducing GHG emissions, the Legislature has allocated more than $2 billion from the State’s Greenhouse Gas Reduction Fund (cap‑and‑trade fund) to CARB’s transportation programs since fiscal year 2013–14.
The State’s cap‑and‑trade program—one of the key elements of its climate change strategy—raises revenue by setting statewide limits on GHG emissions from major sources. The program allows the entities responsible for those sources to comply with the set limits by reducing their emissions or by paying the State for allowances to emit GHGs. The payments take place during quarterly auctions of GHG allowances, which have generated billions of dollars in annual revenue that the State then deposits in the cap‑and‑trade fund. Although it is substantial, cap‑and‑trade revenue is finite and can be unpredictable. Partly as a result of the ongoing COVID‑19 pandemic, the cap‑and‑trade auction in May 2020 generated quarterly proceeds of only $25 million—compared to an average of more than $700 million for each of the previous 11 quarters. This drop in revenue caused a funding reduction of $81 million to CARB’s programs for the year. Although the auction has rebounded somewhat since then, proceeds remain below the historical average. This uncertainty, together with the short time frame remaining before the 2030 date for achieving the State’s GHG goals, increases the challenge of meeting those GHG goals.
In California’s 2017 Climate Change Scoping Plan, CARB set forth key objectives for reducing GHGs from California’s various transportation sectors, including passenger vehicles, heavy‑duty trucks, buses, and freight. To achieve its objectives, CARB has designed and implemented a range of programs targeted at reducing GHG emissions from specific vehicle types. Many of CARB’s programs fall into two general categories: regulatory programs and incentive programs. CARB establishes its regulatory programs through a formal public rulemaking process, and some of these programs require vehicle manufacturers to produce and sell certain types of vehicles or for their vehicles to meet GHG emissions standards. Incentive programs are voluntary programs that often provide monetary payments to consumers who purchase low‑ and zero‑emission vehicles. CARB implements these programs—sometimes at the direction of the Legislature—and reviews the programs’ funding each year.
Although they are different in how CARB operates them, regulatory and incentive programs may work toward the same objective. For example, CARB operates a regulatory program aimed at increasing the manufacture and sale of zero-emission passenger vehicles (ZEVs). The regulation underlying the program requires that auto manufacturers sell enough ZEVs each year to make up a required proportion of their overall sales. CARB also operates incentive programs that provide rebates or other financial support to consumers who purchase ZEVs. The intent of these rebates is to encourage customers to purchase ZEVs, which tend to be more expensive than gasoline‑powered vehicles. All of these programs work simultaneously toward achieving CARB’s objective of putting five million ZEVs on California roads by 2030. Given the ambitious nature of the State’s GHG goals, it may be reasonable for CARB to operate multiple programs that work toward a shared transportation objective. However, to ensure that it is operating the most effective mix of programs to achieve the State’s goals, it is important for CARB to identify the GHG reductions that each individual program achieves.
Our review determined that although CARB generally approaches the projected GHG reductions from its individual programs in a reasonable way, it has not accounted for overlap between some of its programs. For the eight regulatory programs we reviewed, we found that when proposing the new regulation, CARB generally identified the relationship between the regulation and other existing regulatory programs in order to isolate the expected additional GHG reductions. However, the proposed regulations did not assess how the regulatory programs might overlap with its incentive programs that work toward the same objective. Because CARB does not know whether funds for incentives will be available in the future to help manufacturers and consumers offset vehicle costs, CARB designs certain regulatory programs to achieve their GHG reductions without assistance from the incentive programs. Although reasonable, this approach means that the GHG reductions it claims from its incentive programs should be over and above what the regulatory programs achieve, and CARB must be able to measure those additional GHG reductions.
However, CARB has not done enough to measure the emissions reductions its incentive programs achieve in their own right. CARB generally does not formally acknowledge the potential overlap with regulatory programs or discuss how it accounts for that overlap in its incentive programs’ designs. In addition, CARB does not collect and measure data for passenger and heavy‑duty vehicles in a way that allows it to assess the extent to which clean vehicle manufacturing and sales—and therefore GHG reductions—exceed the reductions that its regulatory programs require. If it did, CARB might be able to assess its incentive programs’ GHG reductions based on any extra reductions that have occurred. For example, manufacturers are currently exceeding requirements in a regulatory program that requires them to sell ZEVs, raising the possibility that CARB’s incentive programs are augmenting the regulatory program’s impact. However, CARB does not know precisely how many additional ZEVs are being sold or how that number compares to the number of vehicles its incentive programs help pay for.
CARB also has generally not determined the effects its incentive programs have on consumers’ behavior. Specifically, it generally does not know how often many of its incentive payments influence consumers to purchase a cleaner (lower-emission) vehicle than they otherwise would have purchased. Having this information is crucial to making accurate calculations of the GHG reductions of those programs because it would indicate whether the incentive caused the vehicle purchase and therefore produced the reductions. However, of the five incentive programs we reviewed where CARB provides a payment or other financial assistance to purchase a cleaner vehicle, CARB collects information about behavioral changes for only one: its Clean Vehicle Rebate Program. Even for that program, CARB has made only limited use of the behavioral data it collects. Finally, CARB may be missing opportunities to use other sources of data, such as federal tax credits for clean vehicles, to learn more about how effective its programs are in changing behavior. Although such analyses may be challenging, they may allow CARB to modify programs to increase their cost‑effectiveness and to have a greater impact on emissions reductions.
CARB’s inability to measure the GHG reductions from its cap‑and‑trade‑funded incentive programs diminishes the usefulness of its annual reports to the Legislature on the GHG reductions from these programs. CARB’s current reporting assumes that the emissions reductions from all of the vehicles funded by an incentive program would not otherwise occur. By not taking into account the effects that regulations and other factors have on emissions, CARB overstates the incentive programs’ GHG reductions, although it is unclear by how much. One effect of this overstatement is to obscure the programs’ cost‑effectiveness in reducing GHG emissions. Without accurate information in the annual reports—which would make these reports a reliable emissions measurement tool—the Legislature’s ability to make decisions about investments towards the State’s GHG goals may be hampered. Specifically, if the annual reports contained accurate information, these reports could better help the Legislature make decisions about whether to continue funding a given program at its current level, decrease the funding and use those resources elsewhere, or significantly increase funding. Further, improved and clear metrics will help CARB to know when its incentive programs have successfully achieved their goals of helping low‑ and zero‑emission vehicle technology become sustainable. As part of strengthening its program measurement overall, CARB must also do more to ensure that the data it collects on those programs are accurate and that the calculations CARB makes from the data are free of errors that can further distort the emissions reductions it reports.
State law directs CARB, to the extent feasible, to use cap‑and‑trade funds in a way that maximizes economic benefits and fosters job creation. More specifically, state law requires CARB to establish programs that increase access and provide benefits to Californians living in environmentally disadvantaged communities as well as low‑ and moderate‑income communities. In part, those requirements specify that minimum proportions of cap‑and‑trade spending must go to geographically defined disadvantaged and low‑income communities.
Although CARB has exceeded these minimum spending requirements in recent years, it has done relatively little to measure the specific socioeconomic benefits of its programs. Some programs that CARB operates focus primarily on producing socioeconomic benefits, as opposed to maximizing GHG reductions. These programs may cost significantly more than other incentive programs because they offer higher incentive payments per vehicle and may require more administrative effort. Partly due to these additional costs, we expected CARB to demonstrate the programs’ value by clearly defining and measuring the specific socioeconomic benefits.
Although CARB has identified benefits that include maximizing economic opportunities for participants, increasing participants’ credit scores, and lowering their driving costs, it does not consistently collect data to determine whether the programs actually provide those benefits. For example, CARB collects information related to the auto loans in its Financing Assistance for Lower-Income Consumers program, but it has not collected information to measure whether participants’ credit scores increased or if they subsequently qualified for housing loans. CARB did make an effort to design participant surveys for a separate program—Clean Cars 4 All—that asked specific questions about changes to participants’ employment opportunities or income. However, even though the surveys could help CARB determine whether the program is providing the intended socioeconomic benefits, CARB does not require the entities that administer the day-to-day operations of the programs to use those specific survey questions, and it does not know whether they do so. CARB has also missed opportunities to use data it has already collected to determine whether participants receive the intended benefits of its programs.
Finally, CARB has been slow to measure the jobs its programs create or support, and it has done little to measure the benefits of the job‑training activities that its own guidelines require. Despite requirements since 2015 in both state law and CARB’s own funding guidelines that cap‑and‑trade programs must encourage job creation, CARB only began formally collecting information related to jobs in 2019. Further, at the time of our review, it had collected this information in its reporting database for just three of the nine programs we reviewed for which it should have done so. Additionally, despite clear language in its funding guidelines that programs should also support on‑the‑job training and requirements for reporting the outcomes of that training, CARB has not always collected detailed information about such training or its participants. As with the need to accurately assess programs’ GHG reductions, knowing whether these important but more expensive socioeconomic benefits are occurring is crucial to providing the State with the information it needs to allocate its limited resources effectively.
Summary of Key Recommendations
To improve its ability to isolate each of its incentive programs’ GHG reductions, by February 2022 CARB should establish a process to formally identify its incentive programs’ overlap with other programs that share the same objectives.
To improve its ability to identify the effectiveness of each of its incentive programs in reducing GHG emissions, by August 2021 CARB should develop a process to define, collect, and evaluate data on the behavioral changes that result from each of its incentive programs.
To better assist the State in achieving its GHG goals, CARB should use the information we describe above to refine its GHG emissions estimates for its incentive programs in its annual reports to the Legislature, the funding plans approved by its board, and any longer‑term planning documents or reports.
To better demonstrate that its incentive programs are as effective as possible in achieving specific socioeconomic benefits, by February 2022 CARB should develop a process to define, collect, and evaluate data that will translate to metrics showing the socioeconomic benefits that result from each of the incentive programs.
To provide transparency to the Legislature and other stakeholders, beginning in 2022 and using the metrics and data described above, CARB should make funding and design recommendations in its funding plans and annual reports based on which programs are effective in producing socioeconomic benefits and at what cost.
CARB agreed with our recommendations and indicated that it is taking steps to implement them.