urban planning

MEMORANDUM

TO: Oregon State Legislature

FROM: student name

DATE: May 24th, 2019

SUBJECT: Shifting Heavy-Duty Trucking Towards Electrification in Oregon

INTRODUCTION

Did you know that diesel exhaust causes more fatalities than do traffic crashes in Oregon each year (Oregon Public Health, 2014)? Trucking contributes the majority of this pollution, with over 145,000 vehicles on the road, yet receives little support by the State to upgrade outdated, “dirty” engines (Oregon Environmental Council). Meanwhile, the car market shifts towards electrification with support from federal incentives, like the Electric Vehicle Tax Credit, that in-effect lower emissions and associated health risks of vehicle emissions. Oregon is falling behind states like California and Washington that have begun to use similar approaches towards trucking to accelerate the development and adoption of electric, zero-emission technologies.

While funding for such incentives is limited at the moment in Oregon, the creation of new markets and competitive bidding for funds from the Volkswagen Environmental Mitigation Trust can help to catalyze trucking electrification. Focusing on small businesses and those in disadvantaged communities first will be an advantage for garnering support and efficacy in these efforts. This memorandum describes three incentive alternatives as well as funding and implementation recommendations for how to reach these goals.

INCENTIVE ALTERNATIVES

The first incentive to shifting the diesel trucking market is the cap and trade program proposed in the Oregon’s pending House Bill 2020. This bill aims to restrict carbon emissions over time by setting a restriction of 25,000 metric tons of greenhouse gas emissions per business (Moore, 2019). Those that generate less emissions than this level, or overcomply, earn standardized credits that can be sold to businesses that do not meet this restriction. While the agriculture and forestry sectors are excluded, the transportation sector that provides much of the travel for these industries will fall under regulation. The trucking industry expresses several concerns over this bill, especially in regards to small businesses.

Advantages: Portions of the revenue from HB2020 could support research and development in advancing electric trucking technology, which would bring down the cost and barriers to conversion to zero-emission freight (Jarvis, 2018). The cap and cost of credits would also encourage high emitters to invest in low- or zero-emission technologies like electric trucks.

Disadvantages: Though questioned by ongoing research, there is concern for small businesses in rural areas that must drive long distances between production and market, likely leading to challenge in complying with the capped emissions amount. Smaller businesses would have to pay for credits just to transport their goods to market.

The second incentive is a cash voucher incentive program, much like California’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP). This would be a cash voucher provided to the purchaser of an electric heavy-duty truck at the time of purchase to reduce the cost of the upgrade. Because costs of trucks increase by their gross vehicle weight rating, vouchers would increase in coverage as well (Davis & Xue, 2018). To encourage initial participation by a wide group of fleets, the first three vouchers per fleet are provided at a greater amount. For businesses located in or owned by disadvantaged communities, an increased voucher is available, on the magnitude of $5,000 to $10,000 per truck.

Advantages: Accelerates and encourages conversion to electric trucking vehicles by directly supporting the financial cost, seen as the main barrier to this change.

Disadvantages: Ability to provide this voucher is greatly dependent on funding availability.

The third incentive is a loan guarantee program to support banks and financial institutions to make loans to small businesses to purchase electric trucking equipment or build electric trucking infrastructure like charging stations. Lenders would be reimbursed 100% if loan recipients default, or fail to pay back the loan. The loan for infrastructure development can help with installation, acquisition, design, development, operations, and maintenance (California State Treasurer, 2018). A maximum interest rate is set at 20% (California Pollution Control Financing Authority, 2019). Given adequate funding, this program could be bolstered with rebates of 10 to 15% of the loan at the time of repayment.

Advantages: Little to no risk is posed to lenders. This option gives access to capital for small businesses to accelerate conversion to electric vehicles and building of infrastructure.

Disadvantages: Ability to provide this voucher is dependent on funding availability.

Financing for these alternatives could be provided in part by the Oregon’s apportionment of the Volkswagen Environmental Mitigation Trust. The initial $18 million of the $72.9 million is designated towards upgrading diesel school busses (Oregon Department of Environmental Quality, 2018), though the remaining is available for projects that meet the goals and criteria of the State Department of Environmental Quality’s Mitigation Plan. The Plan aims to spend funds to maximize benefits for vulnerable populations, prioritize reduction in the most polluted areas, and maximize cost effectiveness of efforts.

Oregon Governor Kate Brown’s Executive Order No. 17-21 outlines the goals of reaching 50,000 electric vehicles and using up to 15% of the Environmental Mitigation Fund to support expansion and upgrades of electric vehicle charging infrastructure (ODEQ, 2018). Additional State departments share interest in supporting infrastructure to connect rural and disadvantaged communities. Remaining funding from the fund, about $46.7 million, may be designated to suitable, highly qualified projects through a competitive annual selection process. This process will be open to the public for review and comment, providing an opportunity to advocate for one or more of the incentive alternatives (ODEQ, 2018).

RECOMMENDATIONS

Due to the present high likelihood of funding from the Mitigation Trust being designated to support charging infrastructure per Governor Brown, a loan guarantee program to small business (incentive alternative #3) is highly recommended. This option fits the character of Oregon’s mitigation fund plan, as it aims to advance opportunity for disadvantaged populations. Encouraging small businesses to build charging infrastructure early on the path to trucking electrification is likely to help these businesses to grow as the price of trucking technology drops and the technology become more widespread. Increasing the capacity of charging infrastructure will in-turn reduce the barriers for companies to electrify their fleets.

If HB2020 is approved by the State legislature, the cap and trade credit market (incentive alternative #1) will generate revenue for the State Highway Fund, which may be used to develop further infrastructure for electric trucks. While the Oregon Trucking Associations oppose the bill and others like Senate Bill 1507 for increasing fuel and operational costs to truckers, they also advocate for directing a portion of cap and trade funds to be used for the research and development of emissions-reducing technologies. In the Association’s opinion, “this is the most cost effective way to reduce greenhouse gas emissions” (Jarvis, 2018). Configuring a path for this to happen may be an effective way to appease and support the concerns of the Association, who represent especially vulnerable stakeholders in this market shift.

With the advancement of electric trucking technology and associated infrastructure, costs are expected to lower, providing greater funding opportunities to support a cash voucher program (incentive alternative #2). Lower vehicle and infrastructure costs allows the disbursement more, higher value vouchers with the same funds. This program could also be supported by the Mitigation Trust, and could be considered a competitive selection for its propensity to advance equity with support of businesses in disadvantaged communities. For this and other alternatives, encouraging the stacking of funding sources is highly recommended, as is done in California to support low- and zero-emissions freight transportation technologies (Davis & Xue, 2018).

CONCLUSION

Imagine a future in which the people no longer face a severely higher risk of cancer and lung disease because they live near a highway or major roadway. This is a future with 100% electric vehicles. You, the Oregon State Legislature, hold the power to make this potential a reality and improve the quality of life for all constituents. The transportation sector will not shift towards electrification until there is financial viability for all businesses, large and small. Taking incremental steps now to provide ensured capital and beneficial incentives, as here recommended, are crucial to reaching these goals.

REFERENCES

California Pollution Control Financing Authority. (2019). California Air Resources Board (CARB) Independent Contributor for the Heavy-Duty Vehicle Air Quality Loan Program Retrieved from
https://www.treasurer.ca.gov/cpcfa/calcap/arb/summary.asp

California State Treasurer. (2019). CalCAP/Electric Vehicle Charging Station Financing Program. Retrieved from
https://www.treasurer.ca.gov/cpcfa/calcap/evcs/brochure.pdf

Davis, Stacey and Xue, David. (2018, August). Center for Clean Air Policy. Goldman School of Public Policy. University of California Berkley. Working paper: financing low- and zero-emission freight transportation technologies in California: A review of funding sources and stacking opportunities. Retrieved from
https://gspp.berkeley.edu/assets/uploads/page/Funding_Programs_Summary_final_August_29.pdf

Jarvis, Jana. (2018, February 7). Oregon Trucking Associations, Inc. Before the Senate Committee on Environment and Natural Resources House Committee on Energy and Environment Senate Bill 1507/House Bill 4001. Retrieved from
https://olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/141876

Moore, Kim. (2019, May 23). Cap and Trade: Lawmakers Face Transportation Conundrum. Energy and Environment. Retrieved from
https://www.oregonbusiness.com/article/energy-environment/item/18766-cap-and-trade-lawmakers-face-transportation-conundrum

Oregon Department of Environmental Quality (ODEQ). (2018, March). VW Environmental Mitigation Plan for the State of Oregon. Retrieved from
https://www.oregon.gov/deq/FilterDocs/VWmitigplan.pdf

Oregon Environmental Council. (2016). Dirt on diesel: The true cost to Oregon of delaying action. Retrieved from
https://www.oregonlegislature.gov/dembrow/workgroupitems/5-27%20OEC%20Dirt%20on%20Diesel%20Report%202016.pdf

Oregon Public Health. (2014). Vital Statistics Annual Report.
public.health.oregon.gov/BirthDeathCertificates/VitalStatistics/annualreports/Volume2/Documents/2014/table624.pdf

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