Two-Thirds of Car Sales Could be Electric by 2032 Under New Biden Proposal
On April 19, 2023, the U.S. Environmental Protection Agency (EPA) announced a proposed set of strict tailpipe emissions regulations that, if adopted, would greatly reduce vehicle pollution and accelerate the country's efforts to decarbonize its transportation sector. According to the EPA, transportation accounted for 27% of U.S. carbon dioxide emissions in 2020, with over half of those emissions coming from light-duty vehicles. The proposed regulations would require automakers to produce fleets with much less pollution, including both carbon emissions and ambient air pollution, potentially driving the country toward electric vehicles (EVs).
President Biden previously set a goal for EVs to comprise half of all new car sales by the end of the decade, but the proposed rules go even further, with the EPA stating that electric models could make up two-thirds of new light-duty vehicle sales by 2032. However, the proposed standards, which would apply to light- and medium-duty vehicles for the 2027-2032 model years, are not guaranteed to be approved in their most ambitious form and will likely face legal challenges in court.
Meeting the proposed regulations would depend on how quickly the U.S. can scale up domestic EV manufacturing. The Inflation Reduction Act (IRA) offers up to $7,500 in EV tax credits, but to qualify, vehicles must be partially assembled in North America and made with a certain percentage of materials from the U.S. or its free trade partners. Automakers are investing heavily in EV production, with the Alliance for Automotive Innovation stating that $110 billion has been committed to electrifying their fleets in the U.S. alone. Despite this, charging availability remains one of the biggest concerns for consumers considering buying an EV, even with $7.5 billion in federal funding for public EV charging stations.
The proposed EPA regulations would require auto manufacturers to reduce the average emissions of their vehicles by more than 50% between model years 2026 and 2032. Recently released guidance from the Treasury requires that EVs must be made and sourced in the U.S. or its trading partners to qualify for the $7,500 tax credit in the IRA. The proposed rules aim to electrify two-thirds of new cars, SUVs, and pickups, as well as one-quarter of heavy-duty trucks sold in the U.S. by 2032, reducing carbon pollution from the country's vehicles by 50% within a decade.
While the proposed regulations are an important step towards decarbonization, there are logistical challenges that need to be addressed to meet them. Currently, EVs depend on Chinese manufacturers and tech companies for parts and batteries, and the domestic supply chain is not yet equipped to meet the expected demand. Additionally, there are not enough electric charging stations to handle the surge in EV demand.
The U.S. has taken several steps to make EVs more affordable, including spending $5 billion on highway charging stations and $2.5 billion on community charging stations, setting income and price limits on EV tax credits, providing tax credits for used EV buyers, and offering lucrative tax credits for companies that build EVs and batteries in the U.S. However, rapid acceleration of EV adoption would require constructing millions of new charging stations, overhauling the power grid to accommodate the new charging stations' power needs, and securing supplies of minerals and other materials needed for batteries.
In conclusion, the proposed EPA regulations, alongside other initiatives to make EVs more affordable and to build a robust charging network, are critical steps towards decarbonizing the transportation sector, the largest source of greenhouse gas emissions in the U.S. Although the proposed regulations are likely to face legal challenges, they are an essential part of the country's efforts to reduce carbon emissions and combat climate change.
