a trio of warning signs rest on a curb, at right: "road construction ahead"; center: "rough road"
Michigan is among several states grappling with ways to capture revenue from drivers as fuel economy and electrification take a bit out of gas tax revenues. Credit: bcgrote / Flickr / Creative Commons

An environmental group is asking state leaders to change how they set annual fees for hybrid and electric vehicle drivers.

Michigan’s fees on hybrid and electric vehicles are up to two-thirds more than drivers would otherwise pay in gasoline taxes for conventional vehicles, according to a recent study by an Ann Arbor-based environmental group.

Road funding has been a contentious policy issue in Michigan. The state is among several grappling with ways to capture revenue from drivers as fuel economy and electrification take a bite out of gas tax revenues.

In 2015, Michigan lawmakers approved a road-funding package that increased registration fees for hybrid ($30) and electric vehicle ($100) drivers. An additional fee is also tied to each 1-cent increase in the state gas tax, which will be adjusted for inflation starting in 2022. Combined with annual registration fees that all drivers pay based on the value of their vehicles, hybrid and electric vehicle drivers pay between $300 and $390 in upfront fees, the report says.

The result of these new fees is that drivers of plug-in hybrid and electric vehicles pay “significantly more in annual transportation-related taxes than comparable gasoline vehicles,” says the report by the Ecology Center. “This disparity will continue to grow if gas taxes are increased beyond current rates.”

As Republican lawmakers and Democratic Gov. Gretchen Whitmer seek a compromise in search of billions of dollars in dedicated road funding, the report’s authors argue that electric vehicle fees should be changed and based on comparable efficient gas-powered vehicles instead of vehicles that average 25 miles per gallon.

“The combination of higher registration fees and the basis for which the fee level is set makes it doubly unfair, in our view,” said Charles Griffith, director of the Ecology Center’s climate and energy program. The structure, he added, makes it more costly to drive an electric vehicle than a full-size pickup truck.

Road funding debate

Advocates drew attention to the fee structure last year when Whitmer, who was newly elected and ran prominently on a campaign to “fix the damn roads,” proposed a 45-cent gas tax increase to repair the state’s roads. Annual fees for electric and hybrid vehicles would have skyrocketed under the state’s formula. The 45-cent increase didn’t gain traction in the Republican-controlled Legislature, but discussions continue around new dedicated revenue for roads.

“We’re looking at whopping potential fees for electric vehicles,” Griffith said. “We certainly can’t let that happen here in Michigan where we produce those vehicles.”

Also, hybrid and electric cars make up just 0.59% of vehicles on Michigan roads. Increasing fees on these drivers isn’t going to raise significant revenue, Griffith said.

“You could make the fees 10 times higher and not do anything to fix the road-funding problem,” he said. “It’s just potentially hurting the market for these much more environmentally friendly and beneficial vehicles that we should be promoting.”

State officials say they recognize the fee issue but are now focused on building out a statewide charging network to encourage electric vehicle adoption.

Nick Assendelft, a spokesperson for the state Department of Environment, Great Lakes and Energy, said the state is “aware of the debate around registration for EVs, but is currently focused on implementing a reliable, easy-to-access electric vehicle charging network around the state that will facilitate adoption of EVs. Staff would willingly participate in any discussions with our state partners surrounding issues that would encourage the use of EVs in Michigan.”

Potential solutions

Griffith and other clean energy advocates agree that electric vehicle drivers should provide road-funding revenue, but it should be based on a fair formula that doesn’t charge them more than drivers of gas-powered vehicles.

“We need to start exploring some of these long-term fixes,” said Charlotte Jameson, program director for legislative affairs, drinking water and energy at the Michigan Environmental Council. “I’m hoping we can do that in the context of the road-funding debate.”

States across the U.S. are dealing with similar debates. New or higher registration fees for electric vehicle drivers kicked in on Jan. 1 in at least eight states, ranging from $50 in Hawaii to $200 in Ohio. The shift marks the first time a majority of states will have specific fees on gas-free cars, the Associated Press reported last month.

“We want sufficient funding for all sorts of transportation needs, and electric vehicles should contribute their fair share,” said Mark LeBel, associate with the Regulatory Assistance Project. “I don’t think any state has taken a really good analytical approach to this so far.”

An ideal formula would examine charging electric vehicle drivers based on electricity usage at charging stations, LeBel said. Some states are also examining charges based on vehicle miles traveled. Both approaches have “administrative hurdles,” LeBel said. Additionally, states could charge fees based on battery size.

But so far, most states simply have varying degrees of annual fees.

“It’s pretty early, but it’s unfortunate that most states are taking the easier options,” he said.

Griffith agreed that long-term solutions should be more sophisticated than an annual fee. The Ecology Center report highlights several options, including an electricity usage fee proposed by the Regulatory Assistance Project.

“The idea that we should have just one uniform fee for all electric vehicles that is not based on actual mileage or use is problematic,” Griffith said. 

It’s unclear how long it would take to charge drivers based on vehicle miles traveled or by electricity usage. But Griffith said he hopes Michigan joins others in taking a closer look.

“We should start to study some of these other options,” he said. “We haven’t even tried to do that in the state — I’m a little bit surprised.”

Andy compiles the Midwest Energy News digest and was a journalism fellow for Midwest Energy News from 2014-2020. He is managing editor of MiBiz in Grand Rapids, Michigan, and was formerly a reporter and editor at City Pulse, Lansing’s alternative newsweekly.