Ian Graig takes a deep dive into the outlook for US government policy toward the auto industry in 2022
During his first year as president, Joe Biden proposed or enacted several major policy changes with significant implications for the automotive industry. Many of those policy changes, including expanded support for electric vehicles, (EVs) were driven by Biden’s focus on addressing climate change. Despite increasingly strong political headwinds, the year ahead promises to see further efforts by the Biden administration to enact its climate, energy, and transportation agenda, with continued implications for automakers, components firms, and US car buyers.
A focus on climate change
Early in his presidency, Biden used a series of executive orders to identify climate change as a government-wide priority for his administration. Biden brought the US back into the Paris climate accord and hosted a Global Leaders Climate Summit. He and his administration played a leading role at the COP-26 climate summit in Glasgow, where Biden pledged that the US would reduce greenhouse gas emissions at least 50% below 2005 levels by the end of the decade.
Achieving that goal would require significant cuts in motor vehicle emissions, and Biden sees encouraging the market for EVs as a key element in that effort. Biden signed executive orders last year setting the goal of having zero-emission vehicles account for half of all US light vehicle sales by 2030 and committing the federal government to procuring only zero-emission light vehicles by 2035. Administration officials have strongly embraced the automotive industry’s accelerating move toward vehicle electrification.
During his first year as president, Joe Biden proposed or enacted several major policy changes with significant implications for the automotive industry
The Infrastructure Bill
Joe Biden has called on Congress to pass several pieces of legislation that would advance his climate, energy, and transportation policies. In 2021, he proposed major increases in federal spending on climate change and renewable energy through his budget proposal, his infrastructure proposals, and the broad Build Back Better initiative.
Biden has had mixed success in seeing these legislative proposals enacted into law. One major success was the negotiation and passage of a bipartisan infrastructure bill that Biden signed into law last year. The US$1.2tr infrastructure law is Biden’s biggest legislative accomplishment to date in climate, energy, and transportation policy.
The law includes new funding for climate and clean-energy infrastructure initiatives. Of greatest importance to the auto industry, the law includes US$7.5bn to build out a national network of EV charging infrastructure and US$5bn in grants to states and localities to purchase zero-emission or low-emission school buses. The bill provides funds that states and other entities can use for EV charging infrastructure, vehicle-to-grid infrastructure, truck-stop electrification, and vehicle-to-infrastructure communications. Other provisions provide state and local governments with funds to purchase or lease of zero-emission and low-emission transit buses, while expanding inter-agency coordination of federal EV policy.
The infrastructure law provides only half of the US$15bn Biden had originally sought for EV charging infrastructure, but the administration has not backed away from a commitment to build 500,000 EV charging stations by 2030. The administration says building an EV charging network must involve the public and private sectors, with federal funds most needed for charging stations in rural and underserved areas.
Implementing the infrastructure law will be a major priority of the Biden administration in 2022, and the administration recently announced a new Electric Vehicle Charging Action Plan to take the first steps in distributing funds authorised under the new law. The plan also included the creation of a joint Department of Transportation and Department of Energy office to implement the EV charging plan and a new Advisory Committee on Electric Vehicles.
The US government is offering US$5bn in grants to states and localities to purchase zero-emission or low-emission school buses
The 2022 legislative agenda
Beyond the infrastructure law, the Biden administration has faced difficulty moving legislation through a Congress in which Democrats have the narrowest of majorities in the House and the Senate. As a result, the administration faces several legislative challenges early in 2022.
One of the first challenges will be passing bills to fund federal government programmes during the current fiscal year, which started on 1 October. To avoid a partial government shutdown, Congress must pass spending bills before a short-term funding extension expires on 18 February. The administration has requested increased spending on climate and clean-energy programmes, including Department of Energy advanced vehicle technologies programmes.
While lawmakers will likely reach a deal on the annual spending bills, the outlook is far more uncertain for Biden’s biggest legislative priority for 2022: the Build Back Better (BBB) package of social-policy, climate, and tax legislation. The administration failed last year to get agreement among Senate Democrats on a House-passed BBB bill that includes extensions and expansions of the production and investment tax credits for renewable energy among its many provisions. The nearly US$2tr bill would also extend and expand the EV tax credit, create new credits for zero-emission commercial vehicles and used EVs, and extend and expand tax credits for alternative-fuel vehicle refuelling infrastructure.
The White House hopes to revive efforts to reach a deal among Senate Democrats on a scaled-back Build Back Better bill. It is far from clear if that effort will succeed or what provisions would be included in the final measure, though changes in the House-passed bill are certain. For example, a provision of the House-passed bill that provides larger tax credits for EVs assembled at US plants with unionised workers is almost certain to be changed. Failure to pass the Build Back Better bill would be a major political blow for Biden and Congressional Democrats and their broad climate, energy, and transportation agenda.
The US$1.2tr infrastructure law is Biden’s biggest legislative accomplishment to date in climate, energy, and transportation policy
Executive Action
In light of the difficulty moving legislation through the closely divided Congress, President Biden relied heavily in 2021 on executive actions to advance his policy agenda, particularly in the area of climate change. These actions initially focused on overturning Trump administration policies, many of which had been enacted through executive orders that could quickly be reversed. Overturning or rewriting rules implemented through the regulatory process is far more time-consuming, and the administration will continue to work on this area during 2022.
Late in 2021, the Environmental Protection Agency finalised a key regulatory change for the automotive industry when it published new greenhouse gas emissions standards for passenger cars and light trucks through model year 2026. In doing so, EPA reversed a Trump-era rule, setting more stringent standards that go beyond those set in 2012 by the Obama administration. The Transportation Department later this year will finalise a related rule setting more stringent corporate average fuel economy standards for light vehicles.
The Biden administration in 2021 also acted to restore California’s ability to set tougher vehicle emissions standards and zero-emission vehicle rules (which can be adopted by other states). The Transportation Department rescinded a Trump-era effort to preempt California’s rules, and EPA took initial steps to restore California’s ability to set emissions and ZEV rules. The number of states that have adopted California’s zero-emissions-vehicle rules continues to grow.
Looking to 2022, EPA is expected to propose changes in emissions standards for medium- and heavy-duty trucks and buses that could include provisions aimed at reducing GHG emissions or encouraging a transition to zero-emission technologies. Several states, including California, are moving forward with programmes aimed at boosting zero-emission trucks and buses.
EPA could also begin work on more stringent GHG emissions rules for post-2026 light vehicles. While such rules would aim to build on, and encourage, the automotive industry’s ongoing transition to EVs, the rulemaking process could create tensions between automakers and the Biden administration despite their shared interest in boosting vehicle electrification.
The number of states that have adopted California’s zero-emissions-vehicle rules continues to grow
Outlook for 2022
The year ahead will be challenging for the Biden administration and Congressional Democrats, complicating further progress on Biden’s climate, energy, and transportation policy agenda. The continued impact of the pandemic, rising concerns about inflation, recent setbacks in Congress and the courts, and slumping public approval ratings are all weighing on the White House and its agenda. Moving significant legislation through Congress will grow even more difficult as the November midterm Congressional elections draw near. The outlook for the Build Back Better bill and its provisions expanding EV incentives is very uncertain. The administration may be forced to rely more heavily on executive actions and regulation, though looming court challenges could pose a major risk to climate regulations as well.
Over the longer term, the outlook for climate, energy, and transportation policy depends heavily on the outcome of the 2022 midterm elections. While those elections are still ten months away, the current expectations are that Republicans have a good chance to win the House and could potentially win the Senate as well. If Republicans capture control of one or both chambers of Congress in the midterm elections, the Biden administration will have little hope of passing broad climate and green-energy legislation in 2023 and 2024—adding to pressure on the administration to use this year to advance its agenda on climate change and clean vehicles.
About the author: Ian Graig, Chief Executive of the Washington-based public policy consultancy Global Policy Group, has written for AutomotiveWorld on a wide variety of US public policy trends and their implications for the automotive industry
Keyword: One year in: Biden, climate change, and the auto industry