Institutions and Governance for a ZEV Transition

While international cooperation is key to addressing transport decarbonization including electrification, it will require strong domestic action, especially at the sub-national level. In addition to India’s national policy framework, state level policies can also play a very important role in guiding India to high ZEV adoption. State level efforts must be accounted for, with the understanding that a bottom-up approach with coordinated goals and commitments will help streamline key sub-national actions.

While the national EV policy framework in India aims to provide demand incentives and encourage manufacturing for cells and electric vehicles, the state policies can provide an important market signal for demand creation and enable a strong environment for capital flow towards the EV ecosystem including both manufacturing and charging infrastructure. About 25 States and Union Territories (from a total of 36) in India have either a draft or notified State EV Policy, that focus on both demand side incentives including vehicle purchase subsidies, tax benefits and incentives for charging infrastructure, as well as supply side incentives that promote investments in EV Manufacturing.

While India has set a net zero target for 2070, states are being tasked with creating their own net zero roadmaps as well, and various states have already set targets with varying ambitions. Of 25 states that have either a draft or notified EV policy, 21 states have specified some target for electrification. A bottom-up view of states’ EV ambitions and their role in defining potential electrification scenarios (including target setting and other supporting regulations) for India will be invaluable to understanding how the ZEV transition can be realized at the ground level.

As per ITS analysis (Ramji & Kankaria, 2022), if the targets of only those states that have a notified EV policy are accounted for, India can achieve about 18% electrification of new two-wheeler sales in 2030, about 58% of new three-wheeler sales, 66% of PV sales and 20% of LCV sales. A higher ambition scenario which includes the EV targets of states with draft policies leads to a 20% electric share in two-wheelers, 78% in three-wheelers, 79% in PV and 26% in LCV. The total cumulative incentives being allocated by states totals about USD 1.1 billion by 2030. Along with the FAME-II incentives, this amounts to over USD 2.4 billion proposed in demand incentives for EV purchases across India.

The lessons from states like California that have emerged as ZEV Champion states in the US, can be replicated in India as well. The role of state action in driving ZEV adoption should not be understated – for example, California’s leadership in introducing more stringent air quality regulations as compared to those of the US EPA has played an integral role in bringing California’s EV share far above the national average. Alongside the ZEV mandates and credit mechanisms applicable to California, the state now boasts a 12% EV share, the highest across any state in the US and significantly higher than the US average of 5%. As the largest automotive market among states in the US, California’s ability to bring stakeholders together and build consensus helped

accelerate this transition, solidifying the state’s role as a leader for the US’s ZEV transition. Similarly, China’s New Energy Vehicle (NEV) mandate, drawing from the California experience, also applies credit mechanisms that promote ZEV adoption at the nationwide level. At more local scales, larger Chinese cities like Beijing, Guangzhou and Tianjin use license plate quotas, which restrict new license plate allocations to combat congestion. Earlier this year, Beijing increased its NEV quota from 60,000 to 70,000 of the allocated 100,000 new license plates for 2022. These policy actions taken by sub-national ZEV Champions create the framework and environment which encourage consumer uptake of ZEVs, resulting in increased ZEV adoption across the nation.

States that have relatively large shares of automotive sales and a manufacturing base can benefit significantly by strengthening regulations within their jurisdiction. Moving towards these ZEV targets at the state and city level will create strong market signals, promote value-add in terms of additional jobs, and create opportunities for investments in manufacturing, research and development, and many other critical sectors that are integral to India’s zero emission future.

In addition to state actors, various cities have also set policies to promote vehicle electrification, especially across public transport as well as introducing low emission zones. These include coalitions such as the C40 Cities network which works with the mayors of member cities to further climate action. The network includes cities from the US, India, South America, Europe, Africa and South Asia.

Research Objectives

  • Identify needed institutional and governance structures to implement specific types of EV policies at the national and state level
  • Review of current governance structure for road transport at national and state level
    • Can current institutions deliver the intended ZEV mandates?
  • Identify needed innovations in governance structure
  • Identify and support State ZEV Champions in India
    • Understand the role of states in leading the ZEV transition, and how states can build on their existing EV policies to create a policy package that is oriented towards a clear decarbonization pathway