Putting more electric trucks and buses on California roads will improve air quality and grow local jobs. But for many fleets, the transition to electric will require innovative policy and finance solutions to get the job done on pace with climate targets.
By Andrew Darrell, Special to Cal Matters
Andrew Darrell is senior advisor of global finance for the Environmental Defense Fund.
Fully funding Senate Bill 372 will enable California to clean up our roads and communities and fight climate change, all while delivering the right kind of help to each fleet.
The Legislature voted last year to accelerate the transition of medium- and heavy-duty vehicles to zero-emission by establishing the bipartisan SB 372, a public financing program specifically designed to overcome barriers to scale. Now, the legislature needs to take one more step: It must earmark $60 million in the state budget to launch the bill.
Putting more electric trucks and buses on California roads will improve air quality and grow local jobs. For many fleets, however, the transition to electric will require innovative policy and finance solutions to get the job done on pace with climate targets.
There is a gap between the fleets prepared to deploy electric vehicles and the capital needed to finance the transition, because the first is outgrowing the second. Fleets and financiers still face considerations such as higher upfront vehicle costs (generally offset by lower operating costs over time), the need to make one-time investments in charging infrastructure, and uncertainties about residual value (which will begin to resolve as the market grows ). These barriers can seem especially daunting for operators of smaller fleets without ready access to capital or expertise to manage the transition. By addressing these barriers, the state can resolve them more quickly.
Deploying more electric trucks and buses in communities across California will directly address air pollution. Diesel-fueled trucks make up just 6% of vehicles on the road, but produce 72% of the state’s health-harming nitrogen oxide emissions and 21% of all transportation climate emissions. Low-income communities and communities of color often bear the biggest health burden from this pollution. SB 372 has established a target to deploy three quarters of its financial mechanisms in these priority communities.
If implemented well, SB 372 can spark significant private-sector investment in fleet deployment. The key is for public programs to be designed specifically to overcome local market issues in ways that give fleets the confidence to say “yes” to an electric future, and the finance community the confidence to invest in the fleets, infrastructure and business models that most effectively support deployment.
SB 372 is a framework designed to use public money efficiently in ways that will help close the gap.
The pace of truck and bus electrification nationwide is accelerating. To meet climate and air quality goals, however, it must go faster — financed not only with public subsidies, but through programs such as those envisioned by SB 372 that will attract private capital, too. Electric trucks — from semis and delivery vans to tractor-trailers and garbage trucks — could spark a $47 billion global industry.
The idea that public dollars can be used to remove barriers to private investment is not new. The markets for both solar and wind, especially in their earlier days, achieved a larger scale through various financial incentives established by federal and state governments. And green banks in Connecticut, New York and other states have a track record of sparking private investment through targeted use of public investment.
For example, in 2020-21, the New York Green Bank committed about $350 million of its own capital in ways that mobilized about $1 billion in investment into clean energy projects in that state. SB 372 would bring an approach like this to California’s transportation sector, the state’s single largest source of greenhouse gases.
Working together, public and private finance can play a huge role in accelerating the climate and clean air benefits of electric vehicles.