A Self-Financing Clean Vehicle Rebate Fund for Hawai'i

Every state that wants electric vehicles to reach ordinary buyers runs into the same wall: the incentive works, and the incentive costs money the legislature has to find. Hawai'i hit that wall harder than most. Its households are the most exposed in the country to imported fuel prices, its climate obligations are statutory, and its general fund is contested every session by schools, housing and hospitals. A program that has to be re-appropriated is a program that can be quietly not re-appropriated.

So the design constraint came before the design. Whatever the program did, it had to raise its own money, and it had to raise it without landing on the households it was meant to help — the objection that has killed vehicle charges in other states. That makes the important question distributional rather than fiscal: not how much does it raise, but who exactly pays, and does the answer survive being read out loud in a committee room.

The fee is charged once, at purchase, on new internal combustion light-duty vehicles, and it is scaled to fuel economy as a proxy for emissions: 4% of sticker price below 22 combined MPG, 2% between 22 and 30, and 1% above 30. Nothing is charged on a used vehicle, and nothing on an electric or plug-in hybrid. Above that sits a price threshold — no vehicle selling below $32,000 pays anything at all, which exempts about half of new combustion sales outright.

The revenue funds point-of-sale rebates, which matter more than tax credits for the households in question because they arrive at the dealership rather than at the following April's filing. The fund carries a 5% administration cost and is sized each year to what it collects, so the balance closes at zero rather than accumulating a surplus a future session could sweep. The diagram below is the whole mechanism, including the part a proposal like this has to own: every rebate it issues removes one of its own future fee payers.

Three tiers, set on combined MPG and charged as a share of sticker price. The pairing is what makes the structure work: in Hawai'i's 2025 sales the least efficient vehicles are also the most expensive, so a percentage-of-price fee sorts on emissions and on ability to pay at the same time, without needing a separate means test. Over 70% of 2025 new sales were rated below 30 MPG. Average MSRP is across all 2025 sales in each band; the share column counts only vehicles above the $32,000 threshold, which are the only ones charged.

Source: Ramji & Jamhar (2026), Clean Vehicle Rebate Program for Hawai'i, UC Davis ITS; Hawai'i 2025 new light-duty sales.

What the fund buys, at the point of sale. Twenty per cent of funded rebates each year are reserved for low-income households, who receive $3,000 above the base amount whether they are buying new or used — so the largest rebate in the program, $8,000 on a new battery-electric vehicle, is only available to the buyers least able to front the price. SB 2691 SD1 caps eligibility at $60,000 for a new vehicle and between $3,000 and $25,000 for a used one.

Source: Ramji & Jamhar (2026); rebate amounts and price caps as carried in S.B. 2691 S.D. 1 (2026).

1. 01

   Half of new car buyers never see the fee

   The $32,000 threshold exempts 49.9% of new combustion sales before any tier is applied. Among the half that are charged, the average one-time fee runs from $1,690 at the least efficient tier down to $383 at the most efficient. Nothing is charged on a used vehicle, which is where most lower-income purchases happen.

2. 02

   The least efficient tier carries two-thirds of the fund

   Vehicles under 22 MPG are 44.0% of the sales that pay a fee but $74.9M of the $117.4M raised — 64% of the fund. That concentration is not a rate choice; it falls out of the fact that thirstier vehicles in Hawai'i also carry the higher sticker prices, averaging $39,882 against $28,871 above 30 MPG.

3. 03

   The fund is designed to shrink

   Revenue falls from $24.8M in the first year to $21.7M in the fifth as combustion sales give way to electric ones — a 12.6% erosion of the fee base over five years, accelerating afterwards. This is the correct behaviour for a transition instrument and the wrong behaviour for a revenue source, and it is the reason the program is scoped as a bridge to 30% EV sales rather than as permanent policy.

4. 04

   Equity is a budget line, not a preference

   Reserving 20% of rebates for low-income households is written into the fund's sizing rather than left to uptake: 4,504 of the 22,519 rebates, $33.2M of spend, of which $13.5M is the top-up itself. Because the fee exempts the used market and everything under $32,000 entirely, the households receiving that spend are largely not the households funding it.

S.B. 2691 passed Second Reading as amended, S.D. 1, on 12 February 2026 and was referred to Ways and Means, where it stopped. The House companion travelled further: H.B. 2030 crossed over as H.D. 2 carrying the same three-tier structure keyed to fuel economy, with the rates left blank — the placeholder the legislature uses when a number is still being negotiated — and was deferred by the Senate Transportation committee on 24 March 2026. The committee chair's stated reason was that Ways and Means "is not in the mood, at least for now, to do this". Neither measure advanced before the session adjourned, and the Hawai'i Electric Vehicle Association's own wrap-up records that none of the session's EV bills made it through.

What the deferral was not was a finding against the arithmetic. Nothing in the record disputes the fee base, its incidence or the fund's balance; the objection was appetite for a new charge on vehicles. That distinction is what makes the work reusable. The threshold, the tier cutoffs, the three rates, the rebate schedule and the reserved low-income share are all model inputs rather than assumptions welded into the structure, so the same design can be re-run against whatever numbers a later session is willing to carry — including the harder version of the question, which is what the program does after the fee base it depends on has done its job.