California fights back against Trump with $US200 million EV tax credit

California’s governor Gavin Newsom has proposed the introduction of a $US200 million zero-emission vehicle (ZEV) incentive program designed to partially offset the federal government’s attack on clean energy and electric vehicles.

Revealed as part of Governor Newsom’s 2026-27 budget proposal, the incentives would take the form of a new light-duty ZEV incentive program backed by $US200 million (which converts to somewhere around $A300 million).

The $US200 million would only require around $US34 million of new funds, with $US166 million to be moved around from funding already assigned in the 2025 budget.

The new incentive program is being framed as part of California’s ongoing efforts to lead the nation’s uptake of clean transportation as well as a response to the Trump administration’s ongoing war on support for clean energy technologies.

Specifically, the new ZEV incentive program will aim to take the sting out of the rollback of federal clean energy tax incentives, including the $US7,500 federal tax credit for new electric vehicles (EVs) which was scrapped by Congress last year.

Governor Newsom claimed in the official budget proposal that the federal government’s “efforts to revoke California’s Clean Air Act waivers and roll back federal clean energy tax incentives” are “creating uncertainty for consumers and manufacturers”, adding that “incentives are a critical part of the Administration’s strategy to keep ZEVs affordable and accessible for all.”

As it stands, little else is known about the proposed incentive scheme other than its existence and the funds which would back it.

USA Today, which first reported the proposal, claims that the program would be available as an “on the hood” tax credit providing immediate discounts on EV purchases.

The proposal would see California join other states such as Colorado, Massachusetts, and Oregon in offering a state-level EV incentive programme. It would also be implemented as a separate policy mechanism to California’s ‘Advanced Clean Cars II’ (ACC II) regulation, which outlines the path for an eventual ban on internal combustion engine (ICE) vehicles by 2035.

However, California’s (ACC II) has itself come under federal fire following Donald Trump’s day-one executive order calling for the elimination of the so-called “electric vehicle (EV) mandate” and the termination of any state waivers “that function to limit sales of gasoline-powered automobiles.”

The US Senate subsequently approved a review that sought to overturn the ACC II in May, a decision which is itself being contested.

Dan Lashof, a senior fellow at the World Resources Institute, explained last May that the Senate’s decision goes against “nearly 50 years of precedent” and that California and other states have long had “the authority to adopt vehicle emissions standards that exceed those at the federal level – and for good reason.

“These standards are vital in protecting people from the vehicle pollution which causes asthma attacks and other serious health problems.

“Moreover, the U.S. auto industry’s competitiveness in the global market depends on innovation which has historically been and continues to be driven by California standards.”