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

As part of his fight against climate change, President Biden is attempting to transform the U.S. auto industry from Washington — first with carrots, now with sticks.

On Tuesday, the Environmental Protection Agency proposed two sets of new rules limiting emissions for all vehicles, ranging from passenger cars to tractor-trailers. The most aggressive of several options the EPA will consider could lead to 67 percent of all new passenger car and light-duty truck sales being electric by 2032, the agency said.

Such rules would be the most aggressive emissions restrictions on the auto industry in U.S. history, aimed at helping Biden meet his climate commitments. The EPA estimates the proposals are large enough to avert the equivalent of two full years of nationwide carbon-dioxide emissions. Under the most aggressive proposal, automakers would have to cut emissions for the passenger cars and pickups they sell in model year 2032 by more than half from 2026, the last model year governed under current rules.

“The stakes cannot be higher,” EPA Administrator Michael Regan said ahead of a public announcement coming Wednesday. “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.”

The move comes after Biden has spearheaded major investments in car and truck manufacturing. He came into office pledging to help automakers shift to sell more electric vehicles — which produce no tailpipe emissions — as a way to shrink the industry’s pollution. Congress responded with tens of billions of dollars in subsidies — through grants and tax credits — to help build new factories and charging stations in the coming years, and reduce hefty upfront prices for consumers.

But there are questions about whether Biden’s plans are too ambitious and could conflict with a quick and affordable transition to EV purchases. The cost of rare minerals needed for EV batteries is one factor. The availability of charging stations and affordable car models are others.

Automakers have been selling a lot more EVs — fully electric cars made up 7 percent of new vehicle registrations in the United States in January, compared with 4.1 percent just a year earlier. But Biden officials, supported by major environmental groups, say the industry must move faster still to help avert the worst outcomes of climate change.

Some automakers are already cheerleading the effort. But others that have been slower to move away from conventional, gasoline-burning cars and trucks are expected to be more hesitant.

“America’s transition to an electric and low-carbon transportation future is well underway,” John Bozzella, leader of the Alliance for Automotive Innovation, the largest auto industry trade group in Washington, said in a statement. “It’s also true that EPA’s proposed emissions plan is aggressive by any measure.”

The Biden administration’s announcement is a culmination — the first long-term requirements the president has placed on an industry central to his climate message. As a candidate, Biden promised to dramatically toughen climate rules for cars and trucks, along with power plants and oil and gas operations. He touted a future of electric Corvettes in a campaign ad, and as president had his photo taken in an electrified Hummer and Jeep.

A major goal was to frame his climate message in an economic vision. Biden promised that by cleaning up U.S. industry, he could spur its growth and ensure good-paying, often union jobs for the working class. And transportation is the country’s top source of planet-warming emissions, so it was a natural move 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.”

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 proposal Wednesday — for model years 2027 to 2032 — is seen as a major escalation on top of that. It could, in the months to come, codify many of those voluntary agreements into regulatory requirements, and set standards even higher than what Biden had told the industry to plan for. 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.

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 from 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 reengineering 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.”

EPA officials say their rules won’t mandate any particular technology, with Regan saying he 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 proven 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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