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Biden to remake U.S. auto industry with toughest emissions limits ever

ByTeam BB

Apr 13, 2023

The Biden administration announced Wednesday the strictest restrictions on auto emissions ever, in an ambitious and fraught bid to advance the president’s climate agenda by forcing U.S. car companies to rapidly accelerate the transition to electric vehicles.

The Environmental Protection Agency proposals — which would dramatically tighten emissions limits on all vehicles from passenger cars to big trucks — would be President Biden’s most ambitious climate rules yet, speeding up a transformation in the transportation sector, the biggest source of greenhouse gas emissions in the United States. The most aggressive of several EPA options could lead to 67 percent of all new passenger car and light-duty truck sales being electric by 2032.

To work, this shift would demand a greater mix of electric cars and trucks available to consumers, as companies have almost no choice but to manufacture more no-emissions vehicles to comply. That could trigger a battle with the auto industry, which has been working largely in lockstep with the administration as part of an effort to speed the transition to EVs. Likely lawsuits and a change of administration could later upend the strategy.

The proposals are a forceful move after last year’s Inflation Reduction Act, which made hundred of billions of dollars in subsidies available to lower the cost of electric vehicles. But even that initiative will take time to fully take effect as automakers struggle to comply with the law’s sourcing rules, sowing confusion among consumers.

Still, the EPA announcement Wednesday — which comes as the administration prepares to propose new rules on power plants — makes clear that Biden is moving full speed ahead on his climate plans.

“The stakes cannot be higher,” EPA Administrator Michael Regan said. “We must continue to act with haste and ambition to confront the climate crisis and to leave all our children … a healthier and safer world.”

Even before Wednesday’s announcement, Americans were stepping up their EV purchases. As of January, fully electric cars made up 7 percent of new vehicle registrations in the United States, compared with 4.1 percent just a year earlier.

Executives at Rivian Automotive, which makes electric pickups, SUVs and vans, said the industry is already on pace to comply because of the popularity of going electric. “The industry can’t sell them fast enough as far as I can tell,” said Tom Van Heeke, a senior policy adviser at the company.

To avert the worst expected outcomes of climate change, Biden officials — supported by major environmental groups — say the industry can and must move faster.

At Biden’s encouragement, Congress used its climate and infrastructure spending bills of the past two years to boost EVs with more than $31 billion in subsidies. That includes tax credits for EV manufacturers, and separate tax credits to encourage consumers to buy the vehicles. About $7.5 billion of that money is going to construction of EV charging stations.

Biden also used his first year in office to propose ratcheting up new near-term standards for cars, SUVs and pickup trucks through model year 2026. Automakers, being pushed by investors and improving technology, had already been moving toward EVs, and, as part of that 2021 announcement, they agreed with the White House to set voluntary targets so that electric vehicles, hydrogen-fuel cell and plug-in hybrid vehicles would make up 50 percent of U.S. sales by 2030.

The new EPA proposals raise the bar higher, although some experts question if they are unrealistic, and could conflict with a quick and affordable transition to EV purchases.

On Wednesday, at least one automaker said it would need even more help from the government to build electric cars and trucks as cheaply as consumers want them and as fast as the administration is seeking.

“Complementary policies like permitting reform and support for domestic investments in manufacturing, supply chain and charging infrastructure are needed to help accelerate investments and adoption,” General Motors said in a statement.

These debates will play out for months and could drag on for years as legal challenges also emerge. The lobby for oil refiners Wednesday said the EPA’s proposal is “to effectively ban gasoline and diesel vehicles,” and fossil-fuel companies have already teamed up with Texas and several other fossil-fuel producing states to challenge the Biden administration’s last updates to vehicle emissions rules. That case is still pending in federal appeals court nearly two years after the EPA’s initial proposal.

Biden has long made the auto industry central to his plans for a greater, greener U.S. economy, and Wednesday’s proposal represent his first long-term effort to deploy sticks along with carrots. As a candidate, Biden touted a future of electric Corvettes in a campaign ad, and as president had his photo taken in an electrified Hummer and Jeep.

Since transportation is the country’s top source of planet-warming emissions, it was natural for Biden to put himself at the center of an iconic U.S. business such as automobiles, said Jessica Caldwell, lead analyst at Edmunds, a car-shopping support company.

“This seems like a perfect industry to push a lot of change,” she said. “The auto industry is kind of the figurehead of it all. It’s easily relatable to most people and touches the lives of most Americans.”

The proposal Wednesday — for model years 2027 to 2032 — would effectively codify much of the administration’s voluntary agreements with automakers from 2021 into regulatory requirements, with higher standards than previously discussed. Instead of 50 percent of the market being electric by 2030, the new standards would effectively push U.S. automakers to have as much as 60 percent of their sales as EVs by 2030, according to the EPA.

About 50 percent of “vocational vehicles,” which include buses and garbage trucks, could be electric by 2032, as would 35 percent of short-haul freight tractors and 25 percent of long-haulers, the EPA said.

This type of truck pollution is disproportionately near Black, Asian and Latino communities, Liz Hurtado, a field manager from Virginia with the environmental group Moms Clean Air Force, said ahead of Regan at Wednesday’s announcement outside the EPA’s headquarters. She commended the rule for, in addition to addressing climate change, trying to reduce the conventional pollution that often sends people in poor and minority communities to hospitals and causes long-term health risks to their children.

“This is a profound environmental injustice,” she said. “The EPA has made an important and historic step forward toward cleaning up toxic pollution from cars and trucks.”

If enacted, the EPA’s toughest standards would initially surpass those already in place in the European Union. The E.U. law, approved in March, would result in EVs accounting for 58 percent of new vehicles sold in the bloc by 2030, according to an analysis by Transport & Environment, a Brussels-based advocacy group. By 2035, Europe’s standards would be more stringent than those in the United States.

Over many administrations, the federal government has intervened to prop up the U.S. auto industry or bend it to the priorities of the day. But analysts and lobbyists say this level of intervention by Washington goes beyond what has come before, could anger industry partners and possibly backfire.

The transition automakers are perusing requires building totally new factories, assembly lines and supply chains, a years-long process. A major re-engineering of one car model usually takes anywhere from three to five years, and automakers could be overhauling dozens of them, said Larry Burns, a former GM executive and now industry technology adviser.

Such aggressive mandates could prompt automakers to make bigger bets on a narrower set of options for complying, which might limit innovation and progress because technology now is changing so rapidly, analysts said.

“I don’t think we’re ready for it. I think we need one more learning cycle, with the consumer, with the infrastructure, with the technology and the supply base,” Burns said. “Maybe we need to go a little slower now, to go faster later with better technology.”

Regan said the agency won’t mandate any particular technology, and wants to find flexible ways for the industry to comply. These rules are limits on the emissions each auto company’s fleet of sold vehicles will produce. So while the rule changes wouldn’t order or require auto companies to sell a certain number of electric vehicles, it would set emissions limits so tightly that the only way to comply would be to sell large percentages of EVs — or some other type of zero-emissions vehicle.

One of the major dividing lines in the coming months as the EPA analyzes and crafts its final rule will be about how to factor in the influence of all of the subsidies. In 2021, the auto industry’s representatives said the targets set with the White House were only possible if the government came through with help Biden had promised. Now, the Biden administration and climate advocates say the subsidies Congress approved should make it easier for the industry to comply with tougher standards.

White House national climate adviser Ali Zaidi called it an “inevitable” conclusion. “What you see over the last two years … is that President Biden’s leadership has reshaped the trend lines,” he said.

Margo Oge, who directed the EPA’s office of transportation and air quality from 1994 to 2012 and is now an adviser on zero-emissions cars, said it is unfair to say Washington is dictating how the industry should develop. It has provided heavy subsidies to help a transition that was already underway as automakers responded to new technologies and demand from investors, she said.

“The 50 percent the president suggested [in 2021] is old news in my view,” she said. “There is so much innovation across the board and so many investments made.”

But there are strings attached to last year’s climate law. The federal government next week begins enforcing Inflation Reduction Act rules that will require automakers to show that their batteries contain certain levels of materials originating in North America or in countries with which the United States has a free-trade agreement.

Those rules, designed to reduce reliance on materials from China, will lead to a shorter list of EVs qualifying for consumer tax credits of up to $7,500, the Biden administration has acknowledged. That has further irritated industry leaders, who say it limits how quickly they can get consumers to adopt EVs.

The vehicles are still on average more expensive than gas-powered options. And with the United States trying to pull back supply chains from China and other countries since the pandemic, cost has become a bigger concern, said Michelle Krebs, a Detroit-based analyst for Cox Automotive, an industry services and technology provider. A lack of charging infrastructure and the risks of road-testing new technology are further barriers to consumer acceptance.

“Ultimately this has to do with the consumers’ willingness to buy something,” Krebs said. “You can mandate something all day long, but if it’s not accessible to the consumer, it won’t work.”

Administration officials dismissed some of these concerns, saying they have at times proved irrelevant in the past and that positive signs abound. Some recent signs of price-cutting by Tesla and Ford suggest that competition could help bring down EV prices. And charging-station construction is slowly ramping up as federal subsidies are distributed to the states.

Last week, Walmart announced it will add electric-vehicle charging to thousands of its U.S. stores by 2030, on the belief that EV adoption is reaching a tipping point.

Jeanne Whalen contributed to this report.

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