The transportation sector is now the leading emitter of greenhouse gases (“GHGs”) in the United States, emitting more GHGs than the power sector. In order to reach greenhouse gas emission reduction goals to mitigate the effects of climate change, transit authorities must transition to zero-emission vehicle (“ZEV”) bus fleets. The average life span of a diesel bus is twelve years; therefore, it is imperative that transit authorities act quickly and stop buying additional diesel buses. However, one significant barrier to shifting to ZEVs is the upfront cost. Although electric buses have or will soon reach cost parity with their diesel counterparts over time, they are more expensive to purchase. Currently, many states are using limited federal funding and the VW Settlement Fund, but those are finite resources that are already spread
too thin. This Note argues that transit authorities should consider a Pay-As-You Save (“PAYS”) financing structure to cover the initial increased cost. Through PAYS, electric companies bear the additional upfront cost in purchasing electric buses and charge the transit authorities a fixed tariff on their electric bill. Utilities supply the additional electricity to power the buses and PAYS will allow transit authorities to leverage the limited public funds, so they can buy more electric buses. This will allow them to transition to a zero emission fleet faster.

This Note examines the VW Consent Decree, a selection of state VW Mitigation Beneficiary Plans, as well as the Low-No Emissions federal grant, none of which pose a legal barrier for leveraging VW funds through PAYS. Although there is additional coordination to set up PAYS and there is more administration than simply using federal grants or VW funding, PAYS financing will allow transit authorities to scale their bus electrification while we are running out of time to prevent meaningful effects of climate change.

Continue Reading Electric Buses and Clean Energy Financing: How Transit Authorities Can Leverage State and Federal Funds to Buy More Zero-Emission Buses