California Democratic Gov. Gavin Newsom is preparing for a potential clash with President-elect Donald Trump over electric vehicle (EV) incentives. Trump has signaled plans to roll back federal tax credits for EVs, a measure established under the Biden administration’s Inflation Reduction Act.
In response, Newsom has pledged to sustain the $7,500 EV incentive in California regardless of federal policy changes. To achieve this, he’s proposing to revive the state’s rebate program for zero-emission vehicles.
“We will intervene if the Trump administration eliminates the federal tax credit, doubling down on our commitment to clean air and green jobs in California,” Newsom said in a statement. “We’re not turning back on a clean transportation future — we’re going to make it more affordable for people to drive vehicles that don’t pollute.”
The rebate program ran from 2010 until 2023 after President Joe Biden’s tax credit took effect. The program initially provided a $5,000 direct-to-consumer rebate for electric vehicles. It later increased to offer up to the federal incentive of $7,500.
The program funded the purchase of more than 594,000 vehicles and saved an estimated 456 million gallons of fuel, according to state officials.
However, reinstating the program presents fiscal challenges. Just this week, California’s nonpartisan financial advisers warned the state’s current budget has limited capacity for new spending initiatives. Newsom may need to utilize funds from California’s cap-and-trade program, which allows industrial polluters to buy and sell emissions credits.
This can generate as much as $5 billion annually for the state. The funds are later used to underwrite various climate programs.
Meanwhile, Trump will need congressional support to amend or replace the Inflation Reduction Act in order to eliminate the federal EV credits. His transition team has indicated this will be a priority for the incoming administration, likely setting the stage for a conflict over EV policy with Newsom.
