- Focus on a specific goal. States should clearly identify program goals and make sure the incentives align with those goals. For example, Arizona’s incentive program encouraged people to buy vehicles capable of running on alternative fuels. Unfortunately, this did not require that the vehicles actually operate on those alternative fuels. Therefore, this incentive did not fully align with the target goal of increasing the use of alternative fuel technologies/vehicles.
- Make sure the incentive amount is large enough but not too large. Incentives should be sufficiently large to offset much or all of the incremental cost of alternative fuel technologies/vehicles. At the same time, avoid offering too large of incentives. Theoretical studies on consumer behavior and survey results of fleet managers support this lesson.
- Consider grant-based incentive programs. The most effective incentives are often grants or rebates. These are also the most commonly employed incentive types, constituting almost 22 percent of all non-federal incentive programs. Consumers take advantage of these types of programs more readily than tax-based incentives, since their worth is clearly known. Additionally, grant-based incentives apply to non-taxable entities, such as municipal governments and nonprofits.
- Ensure grants are easy to apply for and administer. Successful incentives should be simple to apply for and should not require burdensome reporting. Furthermore, a good incentive should have adequate resources dedicated to marking and administering the program.
- Focus on fueling infrastructure too. Consumer opinion studies and fleet manager surveys conclude that the availability of fueling infrastructure significantly impacts decisions to acquire alternative fuel vehicles. A lack of sufficient fueling infrastructure is a critical barrier to alternative fuel vehicles.
- Protect budget constraints by capping or phasing out incentives. Often, achieving the highest benefit-cost ratio is unattainable or impractical given fiscal constraints. Therefore, states should commit and release funding in a way that ensures program continuity for 5 to 10 years. States could also consider establishing a phase-out provision for funding that gradually declines and zeros out after 10 years.
- Monitor, evaluate and revise the program. Good incentive programs should collect data to monitor progress. Additionally, states should not be afraid to make adjustments to program funding and structure.
(Our website has many links to other organizations. While we offer these electronic linkages for your convenience in accessing transportation-related information, please be aware that when you exit our website, the privacy and accessibility policies stated on our website may not be the same as that on other websites.)