The Biden administration has a plan to remake the US energy sector from a carbon-based economy to one that relies on cleaner and sustainable forms of energy. This push for a greener economy—particularly in transportation—is following a strategic playbook. Whether the White House can achieve its goal for electric vehicles remains to be seen.
Environmental Protection Agency emissions standards released last month are the latest and most aggressive move yet from the Biden playbook. The success of these standards, and of Biden’s plan, will depend on securing key supply chains and updating our nation’s energy grid. These hurdles are high, but a path forward is in sight.
Recognizing that it needed to create a broader market for EVs, the administration and Congress sought to overcome consumer resistance to EV adoption. While the private sector knows how to sell cars, EVs 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 Inflation Reduction Act was to reduce critical barriers—range anxiety, charging time, and cost—by incentivizing rapid development of fast-charging infrastructure and providing EV tax credits for consumers. The administration went further to address investor resistance to EVs through tax credits and grant funding for battery producers.
With its rapid development of charging infrastructure and tens of billions of dollars invested in new EV manufacturing plants, Biden is aggressively deploying carrots—taxpayer money to the industry and consumers.
The next step was to push the automotive industry to hasten its efforts to produce more EVs. The administration sought a different approach, using its regulatory powers as a stick. Biden’s new EPA standards seek to influence the behavior of the automotive industry by changing the types of vehicles that the industry brings to market, while neither the auto industry nor the major auto union fully consented to this regulatory action.
While the administration has deployed major tools and developed a timetable, the transition still faces significant major hurdles. Success or failure will largely depend upon securing supply chains and revamping the energy grid.
The first hurdle is securing supply chains for the most critical EV components—batteries. Battery and battery component manufacturing facilities are coming out of the ground at a rapid pace throughout the Midwest and Southeast. But construction takes time, and the US will likely always need to rely on foreign countries for certain minerals or components for battery production. Biden must secure trade and investment agreements with allies and partners to secure a supply chain that China doesn’t want to share. This will not be easy.
The second hurdle is to ensure the grid can handle EV demand. Consumers will likely continue to warm to EVs as charging stations proliferate along commuter routes. However, behavior takes time to change, and major issues with the grid caused by increasing charging demand threatens consumer backlash. Currently, it takes significant time to secure permits for new power lines, and the EV transition will be hampered if the US doesn’t expand and update its power grid. The administration has called for permitting reform legislation, but this needs the support of Congress to become a reality.
While these two hurdles are not easily overcome, the administration believes that a global EV transition is coming fast, and the US needs aggressive policies to support it. According to the International Energy Agency, the number of electric cars on the roads around the world rose five times from 2018 to 2022, with 14% of new cars sold in 2022 being electric. IEA models show the share of electric car sales increasing to 35% by 2030.
The Biden administration understands that making an energy transition requires a good degree of government intervention, but the grid and supply chains need to be ready, or taxpayer dollars will be viewed as wasted and the newly allocated workforce could be at risk. The administration must closely work with the auto industry, allied nations, and Congress to get this right. While the steps thus far reflect a carefully considered strategy, the administration won’t be able to turn on autopilot to navigate the road 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.
Chris Caputo is an attorney at Baker Donelson. He is vice chair of the construction group and leads the firm’s manufacturing initiative.
Rob Gardner, public policy adviser at Baker Donelson, develops and implements strategies to achieve clients’ legislative and government relations goals.
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