Electric vehicles make up a tiny fraction of cars in Minnesota. But that is going to change.
Auto manufacturers are increasingly focused on EVs over gas-powered cars, while state and federal lawmakers across the U.S. are promoting EVs as part of a push to reduce carbon emissions from the transportation sector.
In Minnesota, lawmakers are debating a host of changes to state law to prepare for the rise of electric vehicles. But so far in 2021, Republicans who control the Minnesota Senate and Democrats who have a majority in the House have found little common ground on how the state should react to the burgeoning industry.
The GOP has focused on making EV owners pay a substitute fee in place of Minnesota’s gas tax, which pays for road construction; they also want to remove Gov. Tim Walz’s power to set new auto emission standards. DFLers have proposed rebates for electric cars, and hope to prod state government to buy more EVs, fund the purchase of electric buses in the Twin Cities and to put charging stations in state parks.
“I think we all understand that EV transportation is on its way,” said Sen. Dave Senjem, a Rochester Republican who chairs the Senate’s Energy and Utilities Finance and Policy Committee. “It’s the new way, and it will be with us sooner than we think.”
A rising EV industry
There has long been speculation that electric vehicles would eventually compete with gas-fueled counterparts, but those predictions have only lately become closer to a reality in the U.S.
In January, General Motors announced it plans to sell only electric vehicles by 2035. California, the largest auto market, plans to drastically reduce fossil fuel use in transportation by banning the sale of gas-powered cars by 2035.
Minnesota leaders say the state isn’t going to take similar action anytime soon. But Walz is working to implement tougher new auto emission rules that would require manufacturers to provide more cars for sale in the state.
The transportation sector is Minnesota’s largest source of greenhouse gas emissions, outpacing a power grid that has transitioned away from fossil fuels faster than cars and trucks have. In September, there were just 14,484 electric or plug-in hybrid cars in Minnesota and EVs had only a 1.14 percent market share of new sales in 2018 compared to nation-leading California (7.84 percent) and Washington state (4.28 percent), according to the electric car research website EVAdoption.
DFL wants to government to boost EVs
Democrats, who control Minnesota’s House, see electric vehicles as key to slashing carbon emissions and reducing airborne pollutants that cause asthma and other health problems.
DFL leaders hope that encouraging more people — and governments — to buy electric vehicles will speed up a shift away from gas-powered cars. They also hope to spark a more robust market for electric vehicles in Minnesota, which lags behind other states in EV options for sale, particularly outside of the Twin Cities metro area.
“I think government has a role with getting new technology to be adopted and brought down to scale,” said Rep. Jamie Long, a Minneapolis DFLer who chairs the House’s Climate and Energy Finance and Policy Committee. “We’ve seen that work with wind power for instance, where government steps in early and helps with subsidies, bringing the cost down. Right now (wind) can stand on its own, and it’s the cheapest power we have.”
In late February, Long’s committee heard several EV bills. One, sponsored by Rep. Zack Stephenson, DFL-Coon Rapids, would set a new state preference for buying electric vehicles and hybrids. Under current law, state agencies can buy EVs or cleaner-burning vehicles if the cost of the vehicle over its entire life is less or comparable to more traditional cars. Stephenson’s bill says an agency could only reject a cleaner car if it’s incapable of doing the job (like a snow plow) or if its life-cycle cost is more than 10 percent higher than a vehicle with more pollution.
In 2020, the 23 cabinet-level Minnesota agencies and the Met Council owned 37 electric vehicles, 116 plug-in hybrids and 1,148 hybrids in its light vehicle fleet, according to the Minnesota Department of Administration. That’s up from 13 EVs, 18 plug-in hybrids and 491 hybrids in 2017. The light fleet has 5,402 vehicles, most of which are hybrids or run on E85.
Stephenson’s bill would also require car dealerships selling EVs to have one employee who has completed a training course on selling electric vehicles. It would also create a grant program to help the dealers pay for the training. The Minnesota Automobile Dealers Association, which has opposed Walz’s auto emissions rules, supports this measure.
The bill would also make utility companies serving large cities promote electric vehicles and help residents adopt them.
Perhaps most controversially, Stephenson’s bill would spend $20 million on rebates for people who buy EVs. Under the measure, someone who buys or leases a new EV that costs $60,000 or less would get a $2,500 rebate, while someone who buys or leases a used EV would get a $500 rebate. If the person buying or leasing an EV has household income less than 150 percent of the federal poverty line, they can get an extra $500 rebate on a new EV or $100 on a used one.
In the House committee hearing, Republicans argued the rebates would amount to a tax break for wealthy people who can more easily afford to buy electric vehicles, which tend to cost more than gas cars, at least initially. (Electric vehicles have fewer maintenance and fuel costs over the life of the car.) Democrats said the income-related rebates, used-car rebates and vehicle price limits make the program fairer, while also incentivizing people to buy EVs.
Dean Taylor, who is on an advisory council for the EV advocacy group Plug In America, testified during a separate hearing in the House Transportation Finance and Policy Committee that Minnesota ranks No. 19 on his organization’s list of states that best support EVs through public policy. Legislation such as Stephenson’s could help the state jump higher on the list, Taylor said, though Minnesota has more EV-friendly policy than its neighboring states.
Long’s climate committee also heard legislation sponsored by Rep. Fue Lee, DFL-Minneapolis, that would spend $4.1 million to help Metro Transit buy electric buses, as well as a bill from Rep. Robert Bierman, DFL-Apple Valley, to spend $4.1 million on putting electric vehicle charging stations in state parks. The money for Lee and Bierman’s bills would come from fees paid by Xcel Energy for storing nuclear waste in Minnesota. Rep. Athena Hollins, DFL-St. Paul, proposed a bill that would allow utility companies to help school districts buy and deploy electric school buses and pass on the costs on customer power bills.
Lee testified that his bill would not only cut carbon emissions, it would reduce airborne pollution, often concentrated where people of color live, that leads to public health problems such as asthma (though the Star Tribune reported Wednesday Metro Transit has had some logistical challenges using electric buses and has proposed buying 143 new biodiesel buses).
An effort to replace lost gas tax revenue
Many Republicans expect electric vehicles to become far more common in Minnesota, too, though they often say the industry can be fostered the same as any other in a competitive market and shouldn’t be boosted through government mandates.
The Senate GOP has advanced a bill to remove the Minnesota Pollution Control Agency’s power to enact Walz’s auto emissions rules unless they get approval from the Legislature, arguing it will effectively make auto dealers sell, and customers buy, electric cars instead of more popular, and cheaper, gas vehicles. (Though the rules do not require anyone to buy or sell an EV.) Electric vehicle range, particularly in cold weather and rural areas, is also a concern.
Besides the effort to strip Walz’s power to regulate emissions, Republican Sen. Mark Johnson of East Grand Forks has proposed making people pay for electricity used to charge their electric vehicles at stations on the state Capitol campus in St. Paul.
Sen. Jeff Howe, R-Rockville, also proposed a bill that would make owners of electric vehicles pay a higher yearly fee to replace the state’s motor fuel tax, which is included in the price of gasoline. The state’s Highway User Tax Distribution Fund, which pays to build and maintain roads, is funded in part by the gas tax.
In a late February hearing in the Senate’s Transportation Policy and Finance Committee, Howe said he’d prefer to tax users directly based on how much electricity they use at charging stations, but if that technology isn’t widely available yet, a flat fee is the best way to recoup lost revenue. (On Monday, Howe also introduced a new bill to tax drivers based on electricity used at public and private charging stations.)
Bentley Graves, director of health care and transportation policy at the Minnesota Chamber of Commerce, testified at the committee that it’s important to find a way to replace lost gas tax money while there are few electric vehicles on the road so it’s not a bigger change for drivers down the road.
Owners of all-electric vehicles currently pay a $75 surcharge in place of a gas tax. Under Howe’s bill, all-electric vehicles would have an annual fee of $229, while plug-in hybrid vehicles, which don’t pay a surcharge now, would have a $114.50 tax. Electric and plug-in hybrid motorcycles would pay a $46 and $23 fee, respectively.
Howe said he calculated the fees on electric vehicles by doing a rough estimate on how much money the average driver of a gas car pays in the fuel tax per year. As of 2019, 28 other states had a registration fee surcharge on electric vehicles, and 14 also have a fee for plug-in hybrids, according to the National Conference of State Legislatures. Most of those states have higher surcharges than Minnesota does. Republicans presented Howe’s bill as not just a way to raise money, but also a way to level the playing field for drivers of gas cars who pay a tax EV drivers do not.
Democrats on the Transportation committee argued a flat fee would single out electric vehicle drivers regardless of how far they drive, and said such drivers should be rewarded for causing fewer carbon emissions and reducing public health costs associated with pollution.
A letter sent to the committee by the Minnesota Center for Environmental Advocacy, says EV drivers pay more money into the highway fund in sales tax and registration fees because they are more expensive to buy than comparable gas-powered cars.
Sen. Ann Johnson Stewart, DFL-Wayzata, tried to amend Howe’s bill to have the annual EV fee pay for charging stations. But Howe said “this money needs to go to roads and bridges to maintain the roads they’re on.”
“Changing that is a mistake,” Howe said.
Negotiations to come
For now, House and Senate leaders are busy passing their own priorities. But Minnesota’s politically divided Legislature means lawmakers will have to negotiate a compromise for anything to actually become law. That means sweeping legislation on the topic is unlikely.
Long, the House DFLer, said there may be some areas legislators can strike an agreement around. He said he’s not interested in raising fees on electric vehicles, and implored Republicans to give up their quest to strip Walz of his power to implement new auto emissions standards.
But Long said Senjem, his counterpart in the Republican Senate, supported EV charging infrastructure in the last bonding bill, a package of publicly financed construction projects. Stephenson’s bill also includes a measure to make drivers pay to charge EVs at the Capitol, which is a GOP priority. “I’m really optimistic that we can make some progress on EV policy this session,” Long said.
On Thursday, Senjem actually introduced a copy of Stephenson’s bill in the Senate. But in an interview, he said it was to spark conversation and debate, rather than a full endorsement of the policy. He said there could be a hearing on the measures, but it might come after the legislative session, or after Republicans have passed bills they are more united on, such as Howe’s gas tax replacement bill. Hashing out legislation on complicated subjects has been difficult during the pandemic as lawmakers operate remotely, he noted.
Senjem said the renewable development account funded by Xcel nuclear fees could be used to boost EVs in some way. But he also said Republicans have their own coming proposal for that money, which he said has some parallels to a Minnesota tax credit for investors in high-tech startups.
Still, Senjem also said he wants to have a broader conversation about the government’s role in EV policy to root out the best ideas. “No great big urgency, but in my opinion at least I think we need to certainly more seriously begin this conversation,” Senjem said.