Impact of battery electric vehicle adoption on state tax revenues: scenario-based projections and revenue replacement strategies for Alabama

The increasing adoption of electric vehicles (EVs) is contributing to declining fuel tax revenues, which in many jurisdictions are essential for funding transportation infrastructure. As a result, governments around the world are exploring alternative mechanisms to ensure the long-term sustainability of transportation infrastructure funding. This study evaluates the impact of battery electric vehicle (BEV) adoption on Alabama’s transportation revenues between 2022 and 2041 by comparing the annual per-vehicle transportation tax contributions of BEV and internal combustion engine (ICE) vehicle drivers and estimating statewide transportation revenue impacts over the analysis period. BEV adoption scenarios generated using the EVOLVE correlation-based clustering-assisted sparse learning model are applied to estimate transportation revenue impacts under alternative adoption trajectories. As a case study, the paper contributes to the literature by evaluating the long-term effectiveness of Alabama’s existing EV taxation framework, including EV registration surcharges and indexed fuel taxes, and reviewing transportation revenue replacement mechanisms adopted or proposed across the United States to discuss their applicability to Alabama. The results indicate that Alabama’s current EV registration surcharge offsets forgone fuel tax revenues only during the first half of the analysis period (2022–2031), while model-based net BEV-related revenue shortfalls are projected to range from approximately $359 million under the Conservative BEV adoption scenario to $699 million under the Most Likely scenario over the 2022–2041 period. The nationwide policy review indicates that the suitability of EV registration surcharges, mileage-based user fees, public charging taxes, and congestion pricing depends on state-specific institutional, administrative, and geographic characteristics. Although focused on Alabama, the findings may inform research and policy development in other jurisdictions planning or implementing strategies to address transportation funding gaps associated with growing EV adoption.