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Post-Stimulus Electric Car Tax Credit Backers Looking to Biden

Dec. 30, 2020, 8:49 PM

A plan to expand federal tax credits for buyers of electric cars didn’t make the cut in the year-end government funding and pandemic relief bill, but financial help for those installing home electric charging stations did.

And next month brings changes to the political landscape that could bolster federal incentives for electric cars after years of opposition from President Donald Trump.

EV backers point to President-elect Joe Biden’s calls for boosting U.S. electric vehicle manufacturing to aid the domestic auto industry and its workers and help Biden meet his top-line climate goal of getting the U.S. to net-zero emissions by 2050.

Throughout its tenure, the Trump administration successfully fought efforts to expand the popular consumer tax credit of up to $7,500 for the purchase of an electric car.

Expanding the credit would require revisiting the cap placed on each electric vehicle manufacturer, which starts phasing out the credit after each automaker sells 200,000 electric vehicles. EV proponents for years have sought in negotiations to either raise or even eliminate the cap.

That cap—established in the Energy Improvement and Extension Act of 2008, the year Tesla released its first car—means the credit has already been exhausted for vehicles made by two domestic manufacturers: Tesla and GM.

“That cap is what we want removed,” said Jay Friedland, Plug In America’s director and senior policy adviser.

‘Fossil Fuel Blockade’

Sen. Sheldon Whitehouse (D-R.I.), a leading Senate proponent of lifting the cap, said, “I hope a new administration can help get this EV credit and an energy storage credit through the fossil fuel blockade.”

Frank Macchiarola, the American Petroleum Institute’s senior vice president of policy, economics and regulatory affairs, said the industry is only seeking to ensure all consumers have access to affordable vehicles.

“We support policies that reduce transportation sector emissions while continuing to provide reliable and affordable energy to get Americans where they need to go,” he said. “Electric vehicles, hybrid vehicles, and high efficiency internal combustion engines are some of the competitive, commercial-scale technologies that should openly compete on a level playing field.”

Biden’s climate plan calls for “accelerating deployment” of EVs but also vows he “will restore the full electric vehicle tax credit to incentivize the purchase of these vehicles” and work to ensure the credit is targeted to benefit middle-class buyers and U.S. electric vehicle manufacturers.

He also has promised 500,000 new electric-vehicle charging stations.

But bipartisan support could be tough to secure, said Alex Flint, who was Republican staff director for the Energy and Natural Resources panel from 2003 to 2006.

“The real challenge is that these clean energy tax incentives are very expensive—and the deficit weighs on these deliberations,” said Flint, now executive director of the Alliance for Market Solutions, which is seeking Republican support for a carbon tax. “So the outlook for clean energy tax incentives is uncertain.”

Sen. Jeff Merkley (D-Ore.) and Rep. Peter Welch (D-Vt.) have led efforts to eliminate the cap and provide a 10-year extension of the EV credit. Their Electric Cars Act, introduced in 2019, failed to move in the current Congress, but its cosponsors included then-Sen. Kamala Harris (D-Calif.), the incoming vice president.

“California has led the way on this issue and should serve as a model for the rest of the country,” Harris said when the legislation was introduced. “We’re facing a climate crisis that must be met with bold action.”

At-Home Car Chargers

While it lacked action on the EV credits, the stimulus package that Trump signed Dec. 27 did extend for one year the 30% credit for installing electric vehicle chargers, capped at $1,000 for home installations and $30,000 for businesses.

Also extended was a 10% credit for two-wheeled plug-in electric vehicles, capped at $2,500 per vehicle.

Electric vehicle manufacturers continue to benefit from declining lithium-ion battery pack prices, which have fallen 89% in real terms since 2010, according to an annual battery price survey released Dec. 16 by BloombergNEF.

By 2023, it said, average battery pack prices will fall to $101 per kilowatt-hour—down from $1,100 per kilowatt-hour in 2010—making electric vehicles competitive, at least in some markets, with comparable cars using internal combustion vehicles.

Biden’s clean energy plan calls for using federal procurement power to purchase clean vehicles for federal, state, tribal, postal, and local government fleets to provide “an immediate, clear, and stable source of demand” for such vehicles.

The Environmental Protection Agency’s renewable fuels standard already includes what Plug In America’s Friedland calls a narrow pathway of credits for electricity used to fuel electric vehicles, and argues the agency should be pushed to expand those efforts significantly under the Biden administration.

Plug In America will advocate for more EV charging infrastructure in some of the big-ticket legislative items in 2021, including a long-delayed infrastructure package, Friedland said.

Cash For Clunkers II?

Marc Geller, a board member and spokesman for the Electric Vehicle Association, said getting the EV cap lifted is likely to be “a heavier lift” than an EV-friendly infrastructure package.

EV advocates also could push to allow consumers to get the tax incentive upfront at the dealer, rather than having to file for the credit in their annual tax returns.

And the government could revive a version of its 2009 “Cash for Clunkers” program, which provided buyers thousands of dollars to ditch old cars for newer more efficient ones—only this time for electric vehicles, Geller said.

The push for more EV-friendly policies got a boost last month with launch of the Zero Emission Transportation Association, backed by Tesla, Uber, Siemens, Rivian, and nearly two dozen other manufacturers building EVs or components.

The group was formed to push for much quicker adoption of electric vehicles, with a goal of making 100% of new vehicles sold by 2030 electric.

To contact the reporter on this story: Dean Scott in Washington at dscott@bloombergindustry.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloombergindustry.com; Gregory Henderson at ghenderson@bloombergindustry.com

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