The American Jobs Plan is not your daily infrastructure bill. In addition to investing in traditional road and bridge projects, President Biden is also boldly trying to invest important federal funds in green infrastructure – including to drive the transition to electric vehicles.
Details of the plan include investing $ 174 billion in electric vehicles with funds to create a national network of 500,000 charging stations by 2030; Replacing the federal fleet with electric vehicles as well as 50,000 diesel transit vehicles and 10% of the school buses; and offer discounts and tax incentives to consumers of electric vehicles.
This is great stuff. While Tesla may be a household name, electric vehicles currently make up less than 2% of US new vehicle sales. Global adoption rates are only slightly higher. Electric vehicles accounted for only 2.5% of light vehicle sales in 2019.
An EV in every garage
However, Biden’s vision of an electric vehicle in every garage is not a piece of cake. The transition from gas to electric vehicles accelerates in the early days. By the end of 2021, more than a dozen new all-electric offerings are expected to be available in the US market, including SUVs and trucks that go online at various price levels. This can help combat the public perception of electric vehicles as a luxury item.
And it is becoming increasingly difficult to reject electric vehicles as a niche product after GM recently made a commitment to an “all-electric” future with a goal of having 30 new electric vehicles by 2025. Other automakers, including Volvo and Ford, have made similar commitments. While many of the big brands currently only have an electric vehicle or two for sale in the U.S., that is about to change.
However, in order to get more midsize car buyers from Central America to seriously consider electric vehicles as an option, there needs to be an extensive nationwide network of charging stations. Americans need to know that they can tune in anywhere they go. This is not currently the case in much of the country, and this is one of the key points where the infrastructure bill can make a difference.
Carrots and whips
The bill also aims to stimulate consumer demand through financial incentives. Currently, the federal tax credit on EV purchases expires once a retailer sells 200,000 EVs – a threshold GM and Tesla hit years ago. The infrastructure bill would put those dollars back on the table.
These are carrots for EV manufacturers and consumers – but they’re likely to soon be bolstered by adherence to stricter federal fuel efficiency standards. The regulations enacted during the Obama administration would have required average fuel efficiency of 54 mpg by 2026 for passenger cars and light trucks, but the Trump administration has revised that down to 40 mpg.
The Trump administration’s Safer Affordable Fuel-Efficient Vehicles (SAFE) rule is currently under review, and there is no doubt that the Biden administration will replace it with stricter standards, forcing manufacturers to reduce fleet-wide performance in the to improve in the next few years – what they can by increasing EV offerings.
The Biden administration is also likely to reintroduce the California waiver. Section 209 of the Clean Air Act allows California to obtain an exemption that allows it to set stricter emissions standards for motor vehicles than the federal government when imperative and exceptional circumstances need to be met (e.g., a unique vulnerability to the effects of climate change). Other states can then choose to adopt the California standards.
The Trump administration has withdrawn the federal waiver of California’s greenhouse gas emission standards, but the Biden Environmental Protection Agency will likely reintroduce it. This would put California back in the driver’s seat on fuel efficiency standards, forcing manufacturers to get even more EVs into the hands of consumers to meet both state and federal requirements.
The challenge ahead
Each of these mechanisms for reducing greenhouse gas emissions from vehicles poses major challenges. Biden needs the support of almost all Democrats in Congress to pass the infrastructure bill, as there has been little Republican support so far. And even if the “carrots” of the bill become a reality for manufacturers and consumers of electric vehicles, the “stock” of stricter federal or state fuel efficiency standards may not materialize.
A new federal emissions rule or a California waiver is certain to be challenged and could land in the US Supreme Court, which is skeptical of aggressive environmental regulation. Some judges have expressed doubts whether the EPA should address climate change through regulation (whether for vehicles or power plants) without an explicit mandate from Congress.
The Obama administration’s CO2 standards for automobiles have started fewer fires than other GHG regulations, and they have not been taken up by the Supreme Court. While the court has leaned further to the right since then, fuel efficiency standards are still possibly the most judicially tasteful of the GHG regulations that apply on the turnpike.
To make short-term but permanent changes in what Americans drive – and the greenhouse gas emissions that result from it – Biden must win both the immediate battle over infrastructure bills and the upcoming battle over fuel efficiency standards for automobiles.
Being successful in one arena but not the other would slow down the transition to an EV future. But if Biden builds the electric vehicle infrastructure and tightens fuel efficiency standards, and then manufacturers build more electric vehicles, car buyers may come along.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.
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Amanda Shafer Berman is a partner in the Environment & Natural Resources and Litigation groups in the Crowell & Moring Washington, DC office. She litigates and advises on a wide range of environmental issues, including climate regulation. She previously worked as a senior lawyer in the Ministry of Justice.