What happens when California progressives have to choose between using the heavy hand of government to subsidize electric vehicles and using the heavy hand of government to boost labor unions?
We found out on Saturday, when Gov. Jerry Brown signed two bills that set spending priorities for the $1.5 billion generated by the state's recently renewed cap-and-trade system. The package includes $140 million in subsidies for electric vehicle purchases made through the California's Clean Vehicle Rebate Project (CVRP). That's a slight boost from the $133 million appropriated last year—a win for the program's environmentalist backers.
But that win came at a cost. Thanks to a pressure campaign by the California Federation of Labor, language was inserted into the bill specifying that any manufacturer participating in the program must be "fair and responsible in the treatment of their workers." California's labor secretary would be empowered to exclude manufacturers who violate these yet-to-be-established "fair and responsible" criteria.
That could spell big trouble for Nissan and Tesla. Both are major beneficiaries of the CVRP, and both have been tussling recently with the United Auto Workers. The union is currently trying to organize workers at Tesla's plant in Fremont, California, and the union recently failed in a high-profile effort to do the same at a Nissan plant in Canton, Mississippi. Complaints have been filed against both companies for unfair and anti-union practices.
Given that some 48 percent of last year's CVRP rebates for all-battery electric vehicles went to purchasers of Nissan and Tesla products, excluding those companies would be a major loss for the program and for California's dream of 1.5 million zero emission vehicles by 2025.
The bill's ambiguous language could also be used as a cudgel to get other manufacturers to fall in line with union demands, given how dependent the electric vehicle market is on the rebate program. According to the state's Air Resources Board, upwards of 81 percent of California's all-battery electric vehicle purchasers got a CVRP rebate. And almost half of America's electric vehicle sales take place in California.
State Sen. Scott Wiener (D–San Francisco), one of the legislature's leading environmentalists, has told the Los Angeles Times that these rules could be "undermining our own goals" of fighting climate change. In a letter to legislators, Global Automakers, a trade group representing Nissan, called the labor provisions in the CVRP program an "unpredictable standard that would be impossible to adhere to while creating uncertainty in an already challenging market."
The letter isn't wrong: Those regulations are broad, unspecific, and entirely discretionary. That isn't how legislation should be written. Still, no one should shed a tear for the plight of these automakers.
Thanks to CVRP, Tesla, Nissan, and other manufacturers have been making out like bandits on a rebate system that effectively taxes poor people's energy consumption to pay for rich people's trendy vehicles. A 2016 Berkeley study found that 83 percent of CVRP recipients had incomes over $100,000.
As one California senator has said of the CVRP program, "The state appears to be in the business of subsidizing a billionaire's company and millionaires who want buy these boutique electric cars." Now unions are looking to get in on this action, and lawmakers are evidently willing to deal them in.