One hundred days into the Biden presidency, the administration made one thing abundantly clear: if the American population was serious about stopping climate change, gas-powered cars would soon need to be on the chopping block. But even Biden surprised his doubters by instituting aggressive reform to motivate the electric vehicle industry.
This shift in policy from the Trump administration was expected amidst Biden’s desire to bring about broad climate reform. Still, given his moderate record, Biden’s aggressive attempts to motivate the electric vehicle industry surprised many.
Electric Vehicle Standards Under Biden
President Biden’s change in policy was motivated by a desire to meet the ambitious standards set by California and, later, the Environmental Protection Agency. In 2012, California passed the California Electric Vehicle Mandate and renewed the legislation with the Advanced Clean Cars II regulations, which were announced in September 2020. The two standards aimed to phase out gasoline powered vehicles by mandating that EVs constitute a percentage of new car sales, and set more stringent industry-wide regulations on car manufacturing. By 2035, California plans to phase out all gas-powered vehicle car sales. Then, at the start of Biden’s presidency, the EPA set out standards to project that, by 2032, 67% of new passenger cars and light trucks sold in the U.S. would be electric.
In an interview with the HPR, University of California Davis professor Dan Sperling noted that these environmental standards were even more important than any economic incentives advocated for by the administration. The standards set clear benchmarks for where the U.S. wanted to be and signaled to the auto industry how the administration wished to see car manufacturing change. “The EPA is adopting new standards which strengthen greenhouse gas standards … They will have the effect of leading the auto industry to sell more electric vehicles. That’s far more important [than any consequences] stemming from those regulations.” In Sperling’s opinion, benchmarking plays a critical role in getting the auto industry on track and in line with the Biden administration’s vision for the future.
Still, these standards set a high bar, even for an administration that has demonstrated how seriously it takes the threat of climate change. Kenneth Gillingham, who serves as the Senior Associate Dean of Academic Affairs at the Yale School of the Environment, told the HPR these goals were justified. “The Biden administration truly believes that electric vehicles are necessary to achieving a zero-emission future,” Gillingham explained.
Gillingham is correct that gas-powered cars are a serious contributor to carbon emissions and that electric vehicles could be a climate-friendly replacement. While experts debate over the environmental harms of the manufacturing and power-generation processes, electric vehicles are undoubtedly better for the environment than their gas-powered counterparts. Over its lifetime, the average new EV produces about half the greenhouse gas emissions of an equivalent vehicle burning gasoline or diesel.
EVs are also critical in the country’s mission to achieve cleaner air — a key component of other climate-related standards set by the EPA. A study by Harvard found a “striking association between long-term exposure to harmful fine particulate matter and mortality in the United States.” One of the primary causes of fine particulate matter pollution is combustion from gasoline and diesel car engines, demonstrating an additional health and environmental benefit of a national shift to electric.
EV Sales Benchmarks Are Not Being Met
However, as the Biden administration draws to a close, most environmental policy experts and economists can agree that we will fall well short of these environmental standards. MIT professor Catharine Wolfram told the HPR that it appeared the forecasts were “doable” when the EPA aimed to have EVs make up 50% of new car sales by 2032, but it seems like standards have tightened while sales numbers have not shown improvements.
If there’s reason for their hope, though, it’s the Inflation Reduction Act, which has been the administration’s ultimate environmental legislative success. Of course, electric vehicles were a significant part of this vision. The IRA didn’t do enough for consumers, argued Harvard associate professor of economics Ashley Nunes in an interview with the HPR, but it certainly has some areas of promise. Most critically, the IRA took the preexisting $7,500 Clean Vehicle Motor Credit — a tax incentive for the purchase of EVs — and turned it into a rebate for the customer at the point of sale. This shift, Nunes argues, will benefit lower and middle-income families more. Outside of tax credits, the IRA increased funding for charging network expansion and approved funding for renewable energy projects that could help power EVs.
Despite the current bleak short-term projections for EV sales, economists remain confident the IRA will give a necessary boost to the industry as the funding is rolled out over the next decade. A study by the Brookings Institution concluded that the IRA will allow the U.S. to make up significant ground by lowering the costs of adopting clean technologies and accelerating the deployment of clean electricity generation, electric vehicles, and several emerging technologies, including carbon capture and hydrogen. The same study found that the law will help the US reduce emissions to 6-11 percentage points lower than if the IRA had not been passed. The bill has been crucial in signaling to investors and other politicians that climate reform is a top priority.
The positivity surrounding the IRA also stems from its public support. The legislation is fairly popular among the American people — 65% of Americans support the Inflation Reduction Act. But the opposing school of thought — that undeniable obstacles remain to reach EV adoption standards — could force environmental policymakers to make concessions to China or even reevaluate electric vehicles’ role in a net zero future.
The Consequences of EV Policy
Nunes argues that a key fact undermines the present optimism on electric vehicles: in the past decade, prices of electric vehicles have not decreased. In fact, they’ve generally increased. Nunes explains, “There’s no evidence to show that electric vehicles are going to get cheaper … It’s simply math. If you take the MSRPs of electric vehicles that have been sold in the last few years and draw a line through the data, you will see that that line is not going down.” Nunes’ analysis presents a fundamental challenge to the Biden green agenda.
The error of current EV policies is the outsized focus on incentivizing consumer purchases. One particular example of this mistaken idea is in the Clean Vehicle Motor Credit, which had been around long before the IRA. The credit showed no signs of energizing consumers to buy more EVs. In fact, consumers are actually becoming less willing to purchase EVs, citing expensive battery replacements and a lack of chargers. Instead, the cost of some electric vehicles, like the Chevrolet Bolt, have increased year over year.
While economists argue that the IRA will bring delayed benefits, there is a cost-benefit analysis policymakers must ask themselves as the government continues to offer credits on EVs even as they see few indications of success in the data.
Spending on electric vehicles is far more complicated than meets the eye. First of all, the U.S. is significantly behind on infrastructure for EVs, such as charging stations and battery production. According to the Washington Post, EV registrations in the United States grew almost three times faster than the United States’ public charging infrastructure in the last 10 years. The lack of infrastructure has serious ramifications on how effective tax credit policies can be in incentivizing electric vehicle sales. Economists argue that it doesn’t matter what EVs cost if people don’t have a place to charge them.
The U.S. also needs to make significant progress on modernizing and improving power grids to be more adaptable to EVs. Domestic electricity demand is expected to increase up to 18% by 2030 and 38% by 2035, according to an analysis by Princeton’s Rapid Energy Policy Evaluation and Analysis Toolkit. According to CNBC, the expanded reliance on domestic electricity means greater changes to the energy grid, whether it be transmission lines, transformers, or general hardware. In California alone, such renovations would require the government to spend $50 billion by 2035. From the viewpoint of Nunes, the significant government spending required to catch up on infrastructure might not outweigh the benefits of electric vehicles, which, as established previously, only make up around 2% of U.S. emissions.
The last criticism EV policy skeptics point to regards the critical mineral requirements embedded in the IRA, which offers credits for building EVs with a certain percentage of minerals from the U.S. or other countries the U.S. approves as “friendly.” The issue with this requirement is that most of the minerals we currently use for EVs are processed in China. Thus, the incentives within the IRA also act as a method to lessen dependence on China.
For environmental activists, the political decision to not work with China considerably impacts the ease with which EVs can be produced, and the choices available to consumers. Electric vehicles manufactured by BYD, the largest Chinese automaker, sell for $10,000, which pales in comparison to American-made EVs which can cost three times as much. But a 27.5% tariff imposed on BYD cars by the Biden administration makes these cars nonexistent in the US. Worldwide, however, BYD surpassed Tesla as the leading electric car manufacturer. So while the Biden administration cares greatly about the environment, there’s clearly a line it will not cross when dealing with Chinese companies.
But from a policy standpoint, warming up to Chinese automakers could be the perfect solution. First, opening up American markets to Chinese vehicles would reduce the need for substantial tax credits due to the affordability of alternatives. In fact, the money saved from those rebates could be used to assuage range anxiety by rebuilding our power grids and working with private companies to install charging stations across the country.
Room for Compromise
Opening U.S. markets to China is a political risk that might not be worth taking. Not only would such a decision threaten U.S. jobs, but there are national security concerns embedded in working with Chinese companies as well.
In the meantime, there are simple ways to get more electric vehicles onto the street without recklessly spending. If the goal is to reduce emissions, Nunes argues that we should focus on public vehicles first because they transport more people per trip. Shifting taxis and buses to electric would not force the government to rely on the public to ease up on purchasing EVs, and it would also give policymakers the time to agree upon ways to expand long-distance charging infrastructure since buses and taxis stick to similar routes or regions every day.
The IRA has already started providing funds for the electrification of school buses, with the new program, including $1 billion for medium and heavy duty commercial electric vehicles, charging infrastructure, and related workforce training. The path to sustainable public transit is a ways away, but it could be the most fiscally responsible option for the U.S. government.
If policymakers are serious about reaching emissions goals, there must be sensible spending and visible communication with the American people on where the government is, and is not, willing to compromise to make our green future a possibility. It’s time for the public to understand that electric vehicle policy is far more complicated than meets the eye, and until our infrastructure can meet the needs of a society powered by individually owned electric vehicles, it might be smart to find alternative ways to reduce emissions from transportation.
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