The Biden administration has a plan to remake the U.S. energy sector from a carbon-based economy to one that relies on cleaner, more sustainable forms of energy. This push for a greener economy, especially in transport, follows a strategic manual. Whether the White House can reach its goal for electric vehicles remains to be seen.
The Environmental Protection Agency’s emissions rules released last month are the latest and most aggressive measure yet in Biden’s playbook. The success of these standards, and of Biden’s plan, will depend on securing key supply chains and upgrading our nation’s energy grid. These obstacles are high, but there is a way in sight.
Recognizing the need to create a broader market for electric vehicles, the administration and Congress sought to overcome consumer resistance to electric vehicle adoption. Although the private sector knows how to sell cars, electric vehicles are not just new models, they are a new product with barriers to market entry. Biden’s first step through the Infrastructure Investment and Jobs Act and the Inflation Reduction Act was to reduce critical barriers (anxiety of scope, load time and cost) by incentivizing the rapid development of fast charging infrastructure and providing tax credits for electric vehicles to consumers. The administration went further to address investor resistance to electric vehicles through tax credits and subsidies for battery producers.
With his rapid development of charging infrastructure and tens of billions of dollars invested in new electric vehicle manufacturing plants, Biden is aggressively dangling carrots, taxpayer dollars, to industry and consumers.
The next step was to push the auto industry to accelerate its efforts to produce more electric vehicles. The administration sought a different approach, using its regulatory powers as a stick. Biden’s new EPA standards seek to influence auto industry behavior by changing the types of vehicles the industry brings to market, while neither the auto industry nor the main auto union they fully consented to this regulatory action.
While the administration has deployed important tools and developed a timetable, the transition still faces significant hurdles. Success or failure will largely depend on the security of supply chains and the renewal of the energy grid.
The first hurdle is securing supply chains for the most critical electric vehicle components: batteries. Battery and battery component manufacturing facilities are coming off the ground at a rapid pace in the Midwest and Southeast. But construction takes time, and the US will likely always have to rely on foreign countries for certain minerals or components for battery production. Biden must secure trade and investment deals with allies and partners to secure a supply chain that China does not want to share. This will not be easy.
The second hurdle is ensuring that the grid can handle the demand for electric vehicles. Consumers will likely continue to warm to electric vehicles as charging stations proliferate along commuter routes. However, behavior takes time to change, and significant grid problems caused by increased load demand threaten consumer backlash. Currently, it takes a significant amount of time to obtain permits for new power lines, and the transition to electric vehicles will be hindered if the US does not expand and upgrade its power grid. The administration has called for legislative reform to be allowed, but it needs the support of Congress to make it happen.
While these two hurdles are not easily overcome, the administration believes a global transition to electric vehicles is fast approaching and the US needs aggressive policies to support it. According to the International Energy Agency, the number of electric cars on the world’s roads increased fivefold between 2018 and 2022, with 14% of new cars sold in 2022 being electric. IEA models show that the share of electric car sales will increase to 35% by 2030.
The Biden administration understands that making an energy transition requires a fair degree of government intervention, but the grid and supply chains must be ready, or taxpayer dollars will be wasted and labor recently assigned could be at risk. The administration must work closely with the auto industry, allied nations, and Congress to get this right. While the steps so far reflect a carefully considered strategy, the administration will not be able to turn on autopilot to navigate the path to a greener transportation economy.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author information
Chris Caputo is an attorney at Baker Donelson. He is vice president of the construction group and leads the company’s manufacturing initiative.
Rob Gardner, Public Policy Advisor at Baker Donelson, develops and implements strategies to achieve clients’ legislative and government relations objectives.
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