Municipal Vehicle Electrification

 Issue Briefing 

The federal government is offering major tax benefits to local governments that could reduce the cost of procuring electric vehicles.

Clear Policy Ask

Cities and counties should electrify their light-duty and medium-duty municipal vehicle fleets using newly available tax incentives.

New tax credits could help speed up decarbonizing transportation.

Despite the well-documented financial, health, and environmental benefits of electric vehicles, municipalities have lagged in making the switch from conventional to electric fleets. Think maintenance trucks, police cars, snow plows, and shuttle buses. This is largely due to high upfront costs related to vehicle procurement and charging infrastructure. 

Prior to the passage of the Inflation Reduction Act (IRA), claiming tax credits was an enormously complex process for local governments. Because cities and counties are not tax-liable entities, big banks would claim tax credits on behalf of local governments, and then pay them less than the value of the credits. Through the IRA, new “direct pay” allows the federal government to give money directly to municipalities for doing something it deems a public good (like decarbonization efforts) instead of making it a tax credit. This makes local decarbonization projects much more affordable and feasible. 

Constituents have a role to play in communicating with local elected officials. We can inform policymakers of the eligibility change with direct pay tax credits and urge them to invest early in electric municipal fleets. We can also connect policymakers with helpful resources as they evaluate which vehicles to electrify and how to reduce costs.

Quick Frames

We (and the decision-makers we want to persuade) are each approaching the climate crisis through different lenses. Facts are facts, but it can be helpful to frame them differently to match those individual lenses.

Here are some common frames that speak to different perspectives:

  • 💡RAPID DECARBONIZATION: Transportation is the biggest source of air pollution in the U.S., and EVs emit more than 60% fewer greenhouse gas emissions than conventional vehicles do, even when accounting for battery manufacturing.

  • ♥️ HUMAN HEALTH: Reliance on fossil fuels may cause in excess of 350,000 premature deaths in the U.S. per year. Fossil fuel pollution is linked to heart attacks, stroke, asthma, Alzheimer’s disease, and respiratory disorders.

  • ✊ EQUITY AND JUSTICE: Electrifying municipal fleets can help reduce pollution in underserved communities often disproportionately affected by vehicle emissions.

  • 💰 COST SAVINGS: Transitioning to electric municipal vehicles reduces long-term operational and maintenance costs, making it a financially prudent choice for local governments. Fuel costs are also much lower—electricity is almost always cheaper than gasoline.

  • 🌲 ENVIRONMENTAL PROTECTION: Adopting electric municipal fleets helps protect local ecosystems and wildlife habitats from the detrimental effects of transportation-sector air and water pollution.

STOP! You now know enough about municipal vehicle electrification to take action.

Recommended Actions

Want more information?
⬇️ Keep reading below.

What is “direct pay”?  

For the first time, municipalities can take advantage of clean energy tax credits using “direct pay.” 

Pretend you’re 10 years old and you’ve just done a significant chore, like cleaning the garage, and your parents want to give you a reward. Normally, they might give you a $10 allowance. But what if instead of giving you $10 directly, they gave you a $10 off coupon on what you owe them for something else? That is the equivalent of a tax credit. But chances are, a kid probably doesn’t owe their parents money, so this kind of reward isn't too helpful.

"Direct pay" is like your parents just giving you the $10 right away for the chore you did. It's a way for the federal government to give money directly to non-taxable entities for doing something it deems a public good (like decarbonization efforts) instead of making it a tax credit. 

Now, imagine you have a friend who does owe their parents money because they borrowed money from them to buy a bike. Your friend needs to pay back their parents, and your coupon that takes $10 off what they owe would be really useful to them. So, you make a deal: you give your friend the $10-off coupon, and in return, your friend gives you something else you value, like a toy or a smaller amount of cash. This way, you get something more useful to you than the coupon, and your friend saves money. In the world of federal incentives, this is the tax-equity market. Governments and organizations with little or no tax liability make a deal with larger entities (typically financial institutions) to trade their tax credits for cash. But in this trade, the financial institutions have the upper hand, so governments get less value than the tax credit is worth. Not only is this a bad deal for the non-taxable entities; it’s an incredibly complicated system to navigate.  

Using direct pay to electrify municipal fleets

Two of the Inflation Reduction Act’s 12 direct pay-eligible tax credits can significantly offset the upfront capital costs of electrifying light-duty and medium-duty municipal fleets.

  1. The more widely applicable incentive is the Qualified Commercial Clean Vehicle Credit, which can directly offset the upfront costs associated with fleet replacement.

  2. An additional incentive for clean vehicle refueling, the Commercial Clean Vehicle Credit, can be stacked for charging infrastructure in economically disadvantaged communities.

Procurement, the acquisition of new equipment (like vehicles) for public use, is one of the most direct and immediate ways governments can begin to decarbonize. A lower upfront cost means an earlier breakeven point over the lifespan of the vehicle. So the newly accessible tax credits present a strong economic argument for making the switch; the sooner municipalities break even on their purchases, the sooner they can start reaping the longer-term benefits of their EVs’ lower-cost maintenance and fuel.

Prioritizing which vehicles to electrify

Some fleets are easier to electrify than others. An obvious constraint is the size of the vehicle, which correlates with energy requirements. Electrification of certain light-duty and medium-sized fleet vehicles is low-hanging fruit for municipalities given the ease of procurement and charging station installation relative to heavy-duty vehicles. But there are other factors that cities will consider when prioritizing fleet electrification: 

  • Operational range: Vehicles with shorter, predictable routes are easier to electrify.

  • Duty cycle: Vehicles used in shifts with ample downtime for charging are more suitable for electrification.

  • Charging infrastructure: The availability of existing charging stations or the ability to install them at depots and other central locations.

The relative weight of these factors might vary by geography, and they may lead to counterintuitive conclusions.

For example: compared to a police cruiser, snow plows and sweepers have a huge per-vehicle load on the electric grid while charging. However, it might make more sense to electrify a medium-duty street sweeping or snowplow fleet rather than a fleet of police cruiser sedans. This is because police cruisers are constantly in use and don’t follow predictable deployment patterns or routes. So with current EV technology, a city would need widespread charging infrastructure to electrify its police cruiser fleet. By contrast, the street sweeping and snowplow fleets spend ample, predictable periods of time parked in a depot and EV charging infrastructure could be focused there. 

Frequently Asked Questions

Frequently Asked Questions

  • The letter templates are designed to be politically neutral. That said, we always recommend adding your own twist to the templates, which may mean replacing some of the arguments with some that are better suited to your area’s demographics. In general, use a word like “pollution” rather than “climate change” or “decarbonization,” and focus on economic benefits. Every Issue Briefing has a “Quick Frames” section that can help you focus your argument through the most appropriate lens. For conservatives, those will often be “cost savings” or “job creation.” Some conservative policymakers also respond well to arguments about environmental conservation (as distinct from anything related to greenhouse gas emissions).

  • There are layers to this answer, but we’ll focus on the basics. Experts say that EVs are not likely to overwhelm the grid for a few reasons:

    1. EV uptake will be gradual, even with consumer incentives and even in areas with significant EV adoption. In California, where the number of EVs will likely surpass 5 million by 2030, EV charging is only projected to make up 5 percent of additional grid demand.

    2. Blackouts are typically the result of inadequate load management, not a lack of total grid capacity. Believe it or not, electricity load is managed in real time by human grid operators, who are adding new generation to the grid whenever they anticipate higher demand. An unanticipated weather event can cause them to miscalculate demand, but the rates of EV charging are predictable. Besides, there’s lots of cool new technology linked to EVs that will help grid operators balance supply and demand, like bidirectional charging. EVs are miniature distributed energy resources!

    3. Utilities are in the process of adding capacity during the energy transition with or without EVs. As we electrify almost every sector of our economy, utilities will need to balance generation with anticipated load. They can do this by deploying new grid-enhancing technologies like battery storage and by allowing electricity to be transported more easily with new transmission lines. Utilities are incentivized to add capacity—more electrons, more profit!

  • What a wonderful problem to have! Kudos to your city and county. Try reframing your message with specific reference to the progress they’re making and share this resource from the U.S. Conference of Mayors, which has a list of other city decarbonization categories eligible for direct pay (page 7). I'd mention you know about the electric fleets and thank them for it, then ask if they are considering other direct pay-eligible projects and if there's anything you can do as a constituent to help get them underway. And if any of the other potential initiatives speak you personally, that's also a great opportunity to make the ask even more specific: "I applaud you for electrifying so much of our city's fleet — does the city have any plans to claim other clean energy tax credits, such as those available for clean electricity generation?"

    Separately from your message to policymakers, you can also spend your valuable action-taking time recruiting friends in other cities and counties that may not have made as much progress as your own. You can even edit the template on their behalf and then send it to them to transmit. See the steps labeled “Invite others to take action” in the playbooks for tips on how to do this!

Sample Social Post

⬇️ Tailor this message for your favorite
social media platform:

Thanks to Congress, cities can now take advantage of tax credits to help electrify municipal vehicle fleets. It’s an unprecedented opportunity to cut emissions, save costs, and advance public health. This is a pivotal moment to lead our community towards a sustainable future. [@ YOUR LOCAL OFFICIALS], act now and leverage these new benefits for our city.

Shareable Resources

We’ve compiled guidebooks, FAQs, and case studies for your outreach to policymakers. Feel free to dive in for a closer look at municipal fleet electrification.

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