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Federal EV tax credit: unnecessary, inefficient, unpopular, costly, and unfair

October 9, 2019 by 19 Comments

In April, Senator Debbie Stabenow (D-MI) introduced the Drive America Forward Act, a bill that would expand the tax credit for new plug-in electric vehicles (EVs) by allowing an additional 400,000 vehicles per manufacturer to be eligible for a credit of up to $7,000. Currently, the tax credit is worth up to$7,500 until a manufacturer sells more than 200,000 vehicles. In late September, groups that stand to benefit from the extension of the federal tax credits wrote to Senator McConnell and other leaders in Congress, encouraging them to support on the Drive America Forward Act. As IER has documented in the past, lawmakers should not extend the EV tax credit as the policy is unnecessary, inefficient, unpopular, costly, and unfair.

Unnecessary and inefficient

The EV tax credit is not necessary to support an electric vehicle market in the U.S. as one group estimates that 70 percent of EV owners would have purchased their vehicle without receiving a subsidy, which is reasonable seeing as 78 percent of credits go to households making more than $100,000 a year.  Furthermore, the federal tax credit overlaps with a number of other government privileges for EVs, including:

  • State rebates and/or other favors (reduced registration fees, carpool-lane access, etc.) in California, as well as in 44 other states and the District of Columbia.
  • Tax credits for infrastructure investment, a federal program that began in 2005 and, after six extensions, expired in 2017.
  • Federal R&D for “sustainable transportation,” mainly to reduce battery costs, averaging almost $700 million per year.
  • Credit for EV sales for automakers to meet their corporate fuel economy (CAFE) obligations.
  • Mandates in California and a dozen other states for automakers to sell Zero-Emission Vehicles—a quota in addition to subsidies.

Even if the federal tax credits were needed to support demand for EVs, the extension of the tax credit would be an absurdly inefficient means of achieving the stated goal of the policy, which is ostensibly to lower carbon emissions. The Manhattan Institute found that electric vehicles will reduce energy-related U.S. carbon dioxide emissions by less than 1 percent by 2050.

Unpopular

Lawmakers should be aware that the vast majority of people do not support subsidizing electric vehicle purchases. The American Energy Alliance recently released the results of surveys that examine the sentiments of likely voters about tax credits for electric vehicles. The surveys were administered to 800 likely voters statewide in each of three states (ME, MI and ND). The margin of error for the results in each state is 3.5 percent.

The findings include:

  • Voters don’t think they should pay for other people’s car purchases. In every state, overwhelming majorities (70 percent or more) said that while electric cars might be a good choice for some, those purchases should not be paid for by other consumers.
  • As always, few voters (less than 1/5 in all three states) trust the federal government to make decisions about what kinds of cars should be subsidized or mandated.
  • Voters’ sentiments about paying for others’ electric vehicles are especially sharp when they learn that those who purchase electric vehicles are, for the most part, wealthy and/or from California.
  • There is almost no willingness to pay for electric vehicle car purchases. When asked how much they would be willing to pay each year to support the purchase of electric vehicles by other consumers, the most popular answer in each state (by 70 percent or more) was “nothing.”

The full details of the survey can be found here.

Costly and unfair

Most importantly, an extension of the federal EV tax credit is unfair as the policy concentrates and directs benefits to wealthy individuals that are predominantly located in one geographic area, namely California. A breakdown of each state’s share of the EV tax credit is displayed in the map below:

In 2018, over 46 percent of new electric vehicle sales were made in California alone. Given that California represents only about 12 percent of the U.S. car market, this disparity means that the other 49 states are subsidizing expensive cars for Californians.  However, in order to understand the full extent of the benefits that people in California are receiving, some further explanation is in order.

When governments enact tax credit programs that favor special businesses without reducing spending, the overall impact is parallel to a direct subsidy as the costs of covering the tax liability shift to the American taxpayer or are subsumed in the national debt (future taxpayers). California offers a number of additional incentives on top of the federal tax credit for electric vehicles that are also driving demand for EVs in the state. These incentives include an additional purchase rebate of up to $7,000 through the Clean Vehicle Rebate Project, privileged access to high-occupancy vehicle lanes, and significant public spending on the infrastructure needed to support EVs. Therefore, the additional incentives that California (and other states) offer to promote EVs have broader impacts as these policies incentivize more people to make use of the federal tax credit, passing their costs on to American taxpayers. In other words, you’re not avoiding the costs of California’s EV policies by not living in California.

This problem is made even worse when we consider the impact of zero-emission vehicle (ZEV) regulations, which require manufacturers to offer for sale specific numbers of zero-emission vehicles. As recently as 2017, auto producers have been producing EVs at a loss in order to meet these standards, and they have been passing the costs on to their other consumers. This was made apparent in 2015 by Bob Lutz, the former Executive Vice President of Chrysler and former Vice-Chairman of GM, said:

“I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65,000 now. Yukons are in the $70,000. The Escalade comfortably hits $100,000. Three or four years ago they were about $60,000. What this is, is companies trying to recover what they’re losing at the other end with what I call compliance vehicles, which are Chevy Volts, Bolts, plug-in Cadillacs and fuel cell vehicles.”

Fiat Chrysler paid $600 million for ZEV compliance credits in 2015 (plus an unknown amount of losses on their EV sales), and sold 2.2 million vehicles, indicating Fiat Chrysler internal combustion engine (ICE) buyers paid a hidden tax of approximately $272 per vehicle to subsidize wealthy EV byers. ICE buyers were 99.3 percent of U.S. vehicle purchases in 2015. So, even if half the credits purchased were for hybrids, each EV sold in 2015 was subsidized by more than $13,000 in ZEV credit sales, in addition to all of the other federal, state, and local subsidies.

As is typical with most policies that benefit a politically privileged group, the plan to extend the federal tax credit program comes with tremendous costs, which are likely being compounded by people abusing the policy.  One estimate found that the overall costs of the Drive America Forward Act would be roughly $15.7 billion over 10 years and would range from $23,000 to $33,900 for each additional EV purchase under the expanded tax credit. Seeing as the costs of monitoring and enforcing the eligibility requirements of the EV tax credit program are not zero, it should surprise no one that the program has been abused as it has recently come to light that thousands of auto buyers may have improperly claimed more than $70 million in tax credits for purchases of new plug-in EVs. Finally, additional concerns arise over the equity of the federal EV tax credit due to the fact that half of EV tax credits are claimed by corporations, not individuals. 

End this charade

When the tax credit was first adopted, politicians assured us that the purpose of the program was to help launch the EV market in the U.S. and that the tax credit would remain capped at the current limit of 200,000 vehicles. At that time, we warned that once this program was in place, politicians would continue to extend the cap in order to appease the demands of manufacturers and other political constituencies that were created by the program. A decade later, we find ourselves in that exact situation. At this point, it should be clear that Congress should not expand the federal EV tax credit as the program is nothing more than an extension of special privileges to wealthy individuals and corporations that are mostly located in California. If Congress can’t find the courage to put an end to such an unfair and inefficient policy, President Trump should not hesitate to veto any legislation that extends the federal EV tax credit, as doing so would be consistent with his approach to other energy issues such as CAFE reform.

Filed Under: Blog, Electric Vehicles Tagged With: , , , , , , , ,

AEA to Senate: Highway Bill is Highway Robbery

July 30, 2019 by Leave a Comment

WASHINGTON DC (July 30, 2019) – Today, Thomas Pyle, President of the American Energy Alliance, issued a letter to Senate Environment and Public Works Committee Chairman John Barrasso highlighting concerns about the recently introduced America’s Transportation Infrastructure Act. Included in the legislation is an unjustified, $1 billion handout to special interests in the form of charging stations for electric vehicles.  AEA maintains that provisions like this are nearly impossible to reverse in the future and create a regressive, unnecessary, and duplicative giveaway program to the wealthiest vehicle owners in the United States. 
 
Read the text of the letter below:
 

Chairman Barrasso,

The Senate Committee on Environment and Public Works is scheduled to consider the reauthorization of the highway bill and the Highway Trust Fund today.  At least some part of this consideration will include provisions that provide for $1 billion in federal grants for electric vehicle charging infrastructure.  This is among $10 billion in new spending included in a “climate change” subtitle.  All of this new spending is to be siphoned away from the Highway Trust Fund (HTF), meant to provide funding for the construction and maintenance of our nation’s roads and bridges.  The HTF already consistently runs out of money, a situation that will only be exacerbated by these new spending programs.

We oppose this new federal program for EV infrastructure for a number of reasons, including, but not limited to the following:

  • The grant program, once established in the HTF, will never be removed.  Our experience with other, non-highway spending in the trust fund (transit, bicycles, etc.) is that once it is given access to the trust fund, the access is never revoked.  Our nation’s highway infrastructure already rates poorly in significant part due to the diversion of highway funds to non-highway spending.
  • As we have noted elsewhere, federal support for electric vehicles provides economic advantages to upper income individuals at the expense of those in middle and lower income quintiles.  This grant program would exacerbate that problem.
  • This program will result in taxpayers in States with few electric vehicles or little desire for electric vehicles having their tax dollars redirected from the roads they actually use to subsidize electric vehicle owners in States like California and New York.
  • This program is duplicative.  There is already a loan program within DOE that allows companies and States to get taxpayer dollars to subsidize wealthy electric vehicle owners.

For these and other reasons, we oppose the provisions that would create a regressive, unnecessary, and duplicative giveaway program to wealthy, mostly coastal electric vehicle owners.  This giveaway not only redirects taxpayer money from the many States to the few, in looting the Highway Trust Fund it also leaves those many States, including Wyoming, with less money to maintain their own extensive road networks.


Sincerely,

Thomas J. Pyle

Filed Under: Press Releases Tagged With: , , , , , , ,

The Unregulated Podcast #178: Fossil Fools

April 19, 2024 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna check in on presidential polling, explain “how it all ends” for climate targets, and weigh in on the legality of Team Biden’s “Climate Emergency” potential proclamation.

Links:

Stay Connected With The Show

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Biden Blocks American Mines Needed For Mandated “Energy Transition”

April 18, 2024 by Leave a Comment

The Biden administration is expected to block an agency of the State of Alaska’s application to build a 211-mile road through northwestern Alaska to reach an area long known for its mineral richness. The road-building project is proposed by the Alaska Industrial Development and Export Authority (AIDEA) and is needed to access major copper and zinc deposits needed for Biden’s “clean energy” transition, including transmission lines, wind turbines and photovoltaic cells. Biden’s failure to permit the road blocks access to over 600,000 acres of land owned by Alaska that is rich in copper, zinc, lead, silver and cobalt deposits. The proposed 211-mile-long Ambler Road was initially approved under the Trump administration, which issued a 50-year right-of-way permit to build the road just days before President Trump left office. AIDEA, the state’s economic development agency, argues that the action will break commitments made at statehood in 1959 by denying Alaskans access to their resources.

The Biden administration is expected to explain its decision that is based on presumed negative impact on tribal communities that claim that the project poses a threat to local wildlife and fisheries. The decision is due 90 days after the publication of the environmental impact statement to be released this week. The Biden administration has handed the environmentalist movement major victories in Alaska, including the cancellation of previously-awarded oil and gas lease sales, major restrictions on drilling activity in the Arctic National Wildlife Refuge and a proposal to remove lands from oil and development in the National Petroleum Reserve-Alaska.

Biden’s decision on the Ambler Access project, however, ignores the support of local communities for the project, denies jobs for Alaskans and critical revenues for a region where the young are being forced to leave because of a lack of opportunity. The project is backed by the state’s two Republican senators, Senators Lisa Murkowski and Dan Sullivan, as well as its congressional representative, Representative Mary Peltola (D). The decision is likely to be challenged by the state agency overseeing the project and its rejection will infuriate Alaska lawmakers who lobbied the administration to allow the road to be built.

Background

The Tanana Chiefs Conference, which represents 42 villages in interior Alaska, some of which are near the road, sued the Interior Department in 2020 over the Trump administration environmental analysis, arguing that it did not adequately address impacts to their way of life. Since the lawsuit was filed, however, three of the villages are now supporting the road because of its economic benefits. According to the Tanana Chiefs Conference, the road would cause harmful impacts along 125 miles and 200,000 acres of public lands managed by the State in trust for its people. The gravel access road would cross hundreds of rivers and streams, 26 miles of Gates of the Arctic National Park and Preserve, and the tribal lands of several Alaska Native communities. The area south of the Brooks Range—a patchwork of wetlands and densely forested wilderness—is one of the largest roadless areas in North America, but most of Alaska is roadless and in order to promote economic development roads are necessary.  With oil revenues declining, Alaska is looking for ways to generate jobs and opportunity for people in its far-flung reaches for whom there is little but government programs.

The environmental impact statement produced under the Trump administration was determined to be “flawed” by the Biden administration and was scheduled to be reworked. As the Interior Department pursued that course of action, the Alaska Industrial Development and Export Authority (AIEDA) was denied a right of way permit to continue with the project. Without the road, the copper and zinc assets in the Ambler Mining district in the northwestern part of the state remained effectively stranded. AIDEA has spent tens of millions of dollars on the Ambler Road project; it will be forced to file a legal challenge if the administration decides to reject the project or go back to the drawing board.

Ambler Metals, a joint venture between developers Trilogy Metals and South32, has been engaged in exploratory work in the region for several years and had requested the Interior department approve the road, spending $370,000 in the last two years. The Alaska Native corporation in the region, known as NANA Corporation, also owns some of the subsurface rights in the mining district and has a longstanding partnership with Ambler Metals to develop the deposit.  NANA has a history of mining projects, and operates the Red Dog Mine in Northwest Alaska, hiring and training local indigenous people who benefit from the mineral wealth on their own Native lands.  In Alaska, Native Corporations are chartered owners of their indigenous lands for the benefit of their people.

Conclusion

A right of way permit is needed for the Ambler Road project in northwestern Alaska to reach copper and zinc mines needed to produce critical minerals for Biden’s energy transition. However, the Biden administration is denying the permit as it believes that putting the road in Alaska will cause harm to tribal communities who are located near the road and who hunt and fish there. This decision will benefit China, who dominates the global supply chain and refining capacity for many of the key minerals necessary to build the “green” infrastructure pushed by the Biden administration. As the United States has no apparent strategy to ensure a stable domestic supply of these commodities, the Ambler Access Project would provide strategic infrastructure that can be safely built and boost Alaska’s economy, strengthening U.S. national security.

*This article was adapted from content originally published by the Institute for Energy Research.

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Rising Electricity Prices Creating Electoral Headache For Biden

April 17, 2024 by Leave a Comment

President Biden’s administration worries about gas prices reaching or exceeding $4 a gallon—a price where the electorate looks for an alternative to the incumbency in a Presidential election. Last time, gas prices were that high was before the 2022 mid-term elections when President Biden released billions of barrels of oil from the Strategic Petroleum Reserve, leaving it at its lowest level in 40 years. Since that alternative has largely been diminished with few barrels bought back to restock it, gas prices could again be a concern as they are escalating due to a number of factors including growth in global demand, geopolitical unrest and anti-oil policies by the Biden administration.

But electric rates may soon give the Biden administration another energy sector to worry about. Residential electricity prices have increased an average of 27 percent across the nation since President Biden has taken office due to his climate agenda, including increasing weather-driven wind and solar power on the grid and forced electrification of the transportation, heating and cooking industries through standards and regulations. So far, the percentage increase in electricity prices is about half the percentage increase in gasoline prices (52 percent) since Biden has taken office, but it is growing. EPA regulations are forcing existing coal and natural gas generators to retire and be replaced by heavily taxpayer-subsidized wind and solar units that require very expensive battery back-up. Biden also wants expensive offshore wind along the Atlantic, Pacific and Gulf coasts that will also escalate electric prices as offshore wind is over 3 times as expensive as onshore wind and more than double the cost of natural gas combined cycle technology.

Electricity prices may not have surfaced yet to be an election concern as they vary widely across the nation with blue states having the highest prices—states that are more in tune with Biden’s climate agenda. For instance, California has the third highest electricity prices in the nation at 29.11 cents per kilowatt hour—almost double the national average price. On a percentage basis, they have risen more than any other state due to the anti-fossil fuel policies in the state. In 2022, the California Public Utilities Commission unanimously approved a project to add more than 25 gigawatts of renewables and 15 gigawatts of batteries to the state’s electric grid by 2032 at an estimated cost of $49.3 billion. Also in 2022, the California Independent System Operator released a plan to upgrade the state’s transmission grid at a cost of some $30.5 billion. The combined cost of those two plans is about $80 billion and could be an underestimate with inflation under Biden continuing. The state’s biggest electricity provider, PG&E Corp., raised bills for residential customers 13 percent in January, and expects more increases may be coming this year.

Source: Grid Brief

Nationwide, residential electricity inflation is outpacing the wider consumer price index. Prices were up 3.6 percent in February from a year earlier, compared with declines for staples such as eggs and milk, according to the U.S. Bureau of Labor Statistics. More than three out of every four major metropolitan areas the Labor Department tracks in the continental United States saw power prices rise in the latest month of data—which voters may factor into their assessment of President Joe Biden’s performance when they head to the polls in November.

Source: Bloomberg

Behind the price increase are several massive expenditures that utilities are having to fund at the same time. Grids coast to coast were already undergoing a multibillion-dollar transition to replace fossil fuel plants with “green” technologies. Now grids also need to increase generation capacity to accommodate a surge in demand that the utilities themselves were not forecasting a year or two ago, fueled by artificial intelligence, data centers, federally subsidized manufacturing plants and Biden’s forced electrification program.

Electricity Demand Is Expected to Soar

Electric demand by 2028 is expected by some to be almost 5 percent more than 2023 consumption levels, nearly double the increase companies were expecting a year ago, surprising companies that saw 20 to 25 years of flat power demand. Funding that tremendous expansion on top of the transition to renewable energy, including burying power lines underground, fireproofing poles and replacing fossil fuel plants with solar panels and wind turbines, will ultimately be paid for by electricity ratepayers, who will be asked to foot the bill for new infrastructure.

Georgia Power recently increased 17-fold its winter power demand forecast by 2031, citing growth in new industries such as EV and battery factories. According to AEP Ohio, new data centers and Intel’s $20 billion planned chip plant will increase strain on the grid. PJM Interconnection, which operates the wholesale power market across 13 Midwest and Northeast states, this year doubled its 15-year annual forecast for demand growth. Its projected power demand in the region for 2029 has increased by about 10 gigawatts—about twice as much as New York City uses on a typical day.

Data centers—like manufacturing plants—require reliable power around the clock year-round, which wind and solar do not provide. Businesses cannot afford to wait for batteries to become cost-effective. Building transmission lines to connect distant renewables to the grid typically takes 10 to 12 years. For these reasons, China is building coal plants and is becoming the world’s dominate provider of the technologies needed for the West’s energy transition.

About 20 gigawatts of fossil-fuel power are scheduled to retire over the next two years, including a large natural-gas plant in Massachusetts that provides electricity during extreme cold when demand increases and renewables falter. PJM’s external market monitor recently warned that up to 30 percent of the region’s installed capacity is at risk of retiring by 2030. An onslaught of costly regulation is making the situation worse as a soon-to-be-finalized Environmental Protection Agency rule (the power plant rule) would require all coal plants and most new natural-gas plants to install expensive and unproven carbon capture technology or convert to hydrogen. New natural gas plants are needed to provide reliable power to back-up wind and solar and replace retiring coal plants.

The Inflation Reduction Act’s hefty renewable subsidies make it harder for fossil-fuel and nuclear plants to compete in wholesale power markets as they can offset up to 50 percent of the cost of solar and wind power. Baseload coal, gas and nuclear plants cannot turn a profit operating only when needed to back up renewables, so they are closing. The United States has already seen the ramifications in Texas’s week-long power outage in February 2021 and the eastern U.S.’s rolling blackouts during Christmas 2022. Biden’s energy transition, forced electrification, and onerous regulations will result in huge electricity prices and an unreliable grid.

Conclusion

Electricity prices are escalating and electricity demand is soaring due to the addition of data centers, AI, heavily subsidized manufacturing, and Biden’s forced electrification and energy transition to wind and solar power. Along with the higher prices, Americans will also face an unreliable grid as onerous regulations are keeping reliable and affordable baseload power from being built to replace forced retirements of existing fossil fuel plants. Electric prices may become the new gas prices when it comes to American elections if Biden’s anti-fossil fuel policies continue and Americans begin to pay more for less reliable electricity.

*This article was adapted from content originally published by the Institute for Energy Research.

Filed Under: Blog Tagged With: , , ,

Biden Axes Auctions For Oil & Gas Development

April 16, 2024 by Leave a Comment

The Biden administration has been active over the past month in producing policies to put future domestic oil and gas production on public lands in jeopardy. Specifically, he has proposed removal of 13 million acres from the National Petroleum Reserve—Alaska, finalized policies that increase the cost of producing oil and gas on federal land, and cut the amount of land to be leased for oil and gas development in a New Mexico auction by over 3000 acres. These are on top of holding the fewest OCS sales in the history of the program and leasing fewer acres than any President since WWII. These actions harm national security, reduce jobs, and raise prices for oil and gasoline for American consumers. With global oil demand increasing, global oil production slowing, and geopolitical tensions high, it is a dangerously vulnerable time to put further restrictions on domestic oil and gas production, but Biden is working to gain votes from people unfamiliar with energy facts for this November and doing what he can to demonstrate he is serious about his campaign pledge to end oil and gas production.

Biden Blocks Oil Development in the National Petroleum Reserve—Alaska

The Biden administration is preparing to finalize a rule to restrict future oil and natural gas development across approximately 13 million acres of the National Petroleum Reserve-Alaska and increase requirements for future drilling in the rest of the reserve. The U.S. government set aside 23 million acres of Alaska’s North Slope to serve as an emergency oil supply a century ago, but Biden wants to block production on half of it, most likely to gain the votes of environmentalists during an election year. According to Biden’s Interior Department, the rule would not affect existing leases, so it would not affect ConocoPhillips’s 600-million-barrel Willow oil project in the reserve. But oil companies and Alaska lawmakers believe the regulation could hamper investment and infrastructure development. There have been mammoth discoveries in the reserve, which means decades of potential production needed to sustain the Trans-Alaska Pipeline. As such, Biden’s actions would harm America’s energy security, defy federal law, and ignore rising energy prices and growing global volatility.

Source: BNN Bloomberg

The proposed regulation would limit future oil development in around 13 million acres or 20,000 square miles of designated “special areas” within the reserve, including territory currently under lease. There would be an outright prohibition on new leasing in 10.6 million acres. Biden’s proposal would create a formal program for expanding protected areas at least once every five years and make it difficult to undo those designations. It would also raise the bar for future development elsewhere in the reserve.

While the Interior Department said the regulation would not affect existing leases, the proposed rule text does not explicitly offer that assurance. Instead, it gives the government broad authority to limit or bar access to existing leases, “regardless of any existing authorization.” Oil leasing and infrastructure development would be presumed not to be permitted unless specific information clearly demonstrates the work can be done with “no or minimal adverse effects” on the habitat.

According to the Interior Department, the proposal would not have a significant effect on the nation’s current energy supply as it takes years to develop a new drilling site. But the reserve would be a notable source of future fuel, holding an estimated 8.7 billion barrels of recoverable oil, according to the U.S. Geological Survey. New discoveries have been made in the Nanushuk field, and the state of Alaska expects oil production from the reserve to increase from 15,800 barrels per day in fiscal 2023 to 139,600 barrels per day in fiscal 2033—almost 9 times more.

According to the Biden Administration, the proposal is necessary to balance oil development with the protection of sensitive landscapes that provide habitat for polar bears, migratory birds and the 61,500-strong Teshekpuk caribou herd. Biden’s proposal would shift the role of the reserve to conservation instead of oil development, which is contrary to congressional intent as the current statute indicates that the primary purpose of the reserve is to increase domestic oil supply as expeditiously as possible.

ConocoPhillips, which has 156 leases in the reserve, warned the regulation would violate its contracts and “drive investment away from the NPR-A.” Santos Ltd., which leases more than a million acres within the reserve and is developing the nearby Pikka Unit joint venture with Repsol SA, indicated that the proposal would infringe on its holdings, with impacts “as extensive as whole projects being denied.” And Armstrong Oil & Gas Inc., whose leases in the reserve span 1.1 million gross acres, said the measure could block it from building the infrastructure needed to access those tracts. The proposed rule would effectively nationalize the company’s leases, the company told the White House.

Biden Finalizes Reforms Against Oil and Gas Drilling on Public Lands

On April 12, the Biden administration finalized a range of changes to government policies pertaining to oil and gas drilling on public lands and the returns the government receives from oil and gas companies pursuing that development, incorporating provisions contained in Biden’s 2022 Inflation Reduction Act (IRA). The rule also incorporates provisions in the 2021 infrastructure law and recommendations from an Interior Department report on oil and gas leasing issued in 2021 that recommended an overhaul of the oil and gas program to limit areas available for energy development and raise costs for oil and gas companies to drill on public lands and waters. The report came after the Department of Interior issued Secretarial Order 3398, which among other things, repealed “American Energy Independence” as a goal of the Department.

Under the new policy, oil and gas companies will pay higher bonding rates to cover the cost of plugging abandoned oil and gas wells, as well as increased lease rents, minimum auction bids and royalty rates for the fuels they extract. The rules also limit drilling in certain wildlife and cultural areas. Higher costs to extract fuels from federal lands are likely to raise oil prices for consumers and increase U.S. reliance on foreign supplies at a time when global supplies are tight, global oil demand is rising and geopolitical factors are volatile. About 10 percent of the nation’s oil and gas comes from drilling on federally owned land.

Minimum lease bonds will increase to $150,000 under the new rules from $10,000—a factor of 15. Drillers are required to pay upfront bonds to cover future cleanups should they fail. Royalty rates will increase by a third to 16.67 percent from 12.5 percent, and the minimum amount companies can bid at oil and gas auctions will increase to $10 an acre from $2—a factor increase of 5. The rental rate for a 10-year lease will double to $3 an acre for the first two years, eventually rising to $15 per acre in the final years. The fees can be adjusted for inflation after 10 years.

The new royalty rate codified by the IRA is expected to remain in place until August 2032, after which it can be increased. The new rate would increase costs for oil and gas companies by an estimated $1.8 billion over that period, according to the Interior Department.

Unfortunately, the rule changes will result in less drilling, fewer jobs and more dependence on oil from the Middle East at a time when oil markets are extremely tight. As energy demand continues to grow, oil and natural gas development on federal lands is needed for maintaining energy security and powering the U.S. economy. Overly burdensome land management regulations will put oil and gas supply at risk when no alternative exists, despite Biden’s energy transition plans, which are not working to the extent needed to put an end to oil and gas consumption that is continuing to rise around the world.  Biden threatened to end oil and natural gas production on federal lands during his last campaign and he is demonstrating to his constituents that he will continue to make it economically impossible to produce energy on federal lands, in hopes of gaining votes in November.

Interior Cuts Federal Land for Lease in New Mexico Auction Sale

Federal officials cut a proposed public land auction for the oil and gas industry by over 3,000 acres in southeast New Mexico. The Bureau of Land Management (BLM) initially proposed to lease 18 parcels in New Mexico but removed seven, cutting the sale by 3,152 acres. BLM proposed leasing four parcels of land in Eddy, five parcels in Lea and two in Chaves counties in the southeast Permian Basin region, combining the New Mexico sale with eight parcels of land in Kansas. The sale offered 760 acres in Eddy County, 480 in Lea County and 359 acres in Chaves County for a total of 1599 acres.

The decision was made in response to an instructional memorandum issued by the Department of the Interior in November 2022 which stipulated new guidelines for evaluating lands nominated by the oil and gas companies for lease. Criteria included the lands’ proximity to existing oil and gas operations, giving preference to those that expanded ongoing operations. The Agency also sought preference for lands that would not impact fish and wildlife habitats, cultural resources, or outdoor recreation. The reduction was also in response to several public comments the BLM received on the nominated parcels, calling for leases to be deferred if they did not appear likely to produce oil and gas, could impact wildlife and cultural resources or contribute to greenhouse gas emissions. The smaller lease sale is to be conducted on June 13, 2024.

Conclusion

The Biden administration has undertaken several proposed and finalized policies over the past month to make it more difficult to produce oil and gas in the United States, despite U.S. needs and the needs of our allies. Despite the U.S. government setting aside 23 million acres of Alaska’s North Slope to serve as an emergency oil supply a century ago, the Biden administration is ignoring the intent of Congress by moving to block oil and gas development across more than half of it. President Biden has also finalized rules to increase the cost of producing oil and gas on public lands, which will likely increase the price of oil and gasoline for American consumers. His Interior Department has also cut over 3000 acres from a lease sale in New Mexico. These actions will hurt national security, reduce jobs, increase costs for consumers, tighten an already tight oil market with a volatile Middle East, and drive investment offshore, where Biden is ignoring sanctions against Iranian and Venezuelan oil production. Biden is looking for votes this November and he is continuing his anti-oil and gas policies to gain that support.

*This article was adapted from content originally published by the Institute for Energy Research.

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Biden’s Ridiculous Electric Vehicle “Transition” Doesn’t Add Up

April 11, 2024 by Leave a Comment

According to the Environmental Protection Agency (EPA), its emissions tailpipe rule will reduce total greenhouse gas emissions over 2027 to 2055 by 7.2 billion metric tons. Applying EPA’s climate model, the rule would reduce global temperatures in 2100 by 0.0068 degrees Celsius — an effect far too small to be detectable, which is why EPA admits it “did not…specifically quantify changes in climate impacts resulting from this rule in terms of avoided temperature change or sea-level rise.” The media, however, continues to claim it is climate related, however, as NPR did in its reporting: “The regulations are a cornerstone of the Biden Administration’s efforts to fight climate change.”

Further, EPA’s climate model exaggerates the climate effects of reductions in greenhouse gas emissions, which means the temperature reduction would actually be less. For very little alleged or real impact, the Biden administration is pushing the U.S. auto industry into potential bankruptcy, which is why automakers like Ford, GM, and Stellantis are delaying their EV goals and scaling back on EV-related investments, a move that began during the 4th quarter of 2023 as faltering demand for electric vehicles set in and China’s BYD outsold Tesla in EV sales.

Ford Motor Company announced it would delay introduction of new all-electric SUV and pickup models, and turn its focus instead to development of hybrid vehicles that American consumers might want to purchase. Its launch of three-row electric vehicles has been delayed from 2025 to 2027 and it is also delaying its EV truck deliveries until 2026, which was initially slated to begin in 2025. The additional time will allow for the consumer market for three-row electric vehicles to further develop and enable Ford to take advantage of emerging battery technology, with the goal to provide customers increased durability and better value. Ford is still continuing preparations, albeit more slowly, for the market launch of its all-new three-row electric vehicles at its assembly complex in Oakville, Ontario, for 2027.

Ford ranked second in EV sales during the first quarter of this year behind Tesla, but in overall sales ranked third. Despite that EV ranking, Ford expects that its EV division will continue to lose money—up to $5.5 billion in 2024, although that is more than offset by the money it expects to make selling commercial vehicles and gasoline-powered vehicles. Ford had to drop prices on its electric F-150 pickups — by $10,000 — in the hopes of finding buyers.

Even Tesla is making changes as the global EV market develops. Despite being the largest EV brand in the United States, it saw an 8.5 percent decline in deliveries in the first quarter 2024 and a massive overproduction glut that has led to another round of price cuts for vehicles in its inventory. It has also apparently canceled its long-promised inexpensive car that was to hit the assembly line in the second half of next year. Model 2 was expected to start at about $25,000, but global competition from Chinese electric-vehicle makers flooding the market with cars priced as low as $10,000 made the Tesla inexpensive electric car an unworthy goal. Instead, Tesla will continue developing self-driving robotaxis on the same small-vehicle platform in Texas.

GM lost $1.7 billion in the fourth quarter last year on electric vehicles, while Toyota announced $30 billion in annual profits and credited it to the company’s decision to avoid pursuing fully electric vehicles.

Despite the losses on EV sales, EV sales in the United States grew in quarter 1, but only by 3.3 percent compared to a total growth in car sales of 5.1 percent. That compares to a 47 percent increase in U.S. EV sales in 2023. Taxpayers are buying a lot of electric vehicles for government use, which may affect the numbers.

EPA’s False Accounting

EPA’s new federal legislation requires automakers to reduce the tailpipe emissions of new vehicles by around 50 percent from model year 2026 to 2032. In order to achieve this, EPA is targeting 35 percent to 56 percent of vehicles needing to be electric vehicles by 2032, and 13 percent to 36 percent needing to be plug-in hybrids by that date. EPA claims that the rule will yield “climate benefits” of $1.6 trillion, despite a near-zero effect on temperatures. To get to this value, EPA multiplies its estimated reductions in greenhouse gas emissions by the “social cost of carbon,” a fabricated number that supposedly measures damage caused by the emissions that is derived from an assumed extreme future emissions scenario. The social cost of carbon number is then used in EPA’s climate models that overstate the actual satellite temperature measurements by a factor of about 2.5.

EPA also claims fuel savings of about $30 billion annually as a benefit of the regulation. It does this so that it can ignore the flaws electric vehicles have in range, refueling time, resilience in the face of temperature and weather fluctuations, et cetera. Because of the projected fuel savings, EPA speculates people will drive more, thus receiving “drive value benefits” of an additional $2 billion per year.

EPA’s analysis also claims that if EV owners charge their vehicles when electricity demand is low, recharging costs for electric vehicles will be reduced even more, and “the overall costs of electricity generation and delivery to all electricity rate payers, not just those charging electric vehicles” will be reduced. EPA ignores the massive additional costs of the Biden administration’s electricity transition to wind and solar technologies and its electrification of everything, as well as rapidly increasing electricity prices.

Further, EPA evaluates future benefits and costs relative to those that would occur soon by using discount rates of 2 or 3 percent rather than an annual rate of about 7 percent, which was the normal rate that federal agencies had applied for decades. As Ben Zycher notes in his article, “The Biden administration has mandated the use of an artificially low discount rate across all agencies, introducing a huge bias in favor of government regulation, distorting the allocation of capital between private investment and that driven by regulatory requirements.”

Conclusion

EPA’s emission tailpipe rule will only reduce global temperatures in 2100 by 0.0068 degrees Celsius, but the agency refrains from reporting this figure in its public analysis as Americans would question the cost and the inconvenience of the transition to drivers and taxpayers if it were reported. Further, EPA’s analysis is filled with assumptions and dishonesty about the benefits electric vehicles will achieve.  It uses a fabricated social cost of carbon figure to arrive at its results, assumes low recharging costs, ignores the costs of Biden’s energy transition and electrification of everything and uses low discount rates for evaluating future benefits and costs. Americans should not be fooled by Biden’s push to electric vehicles. If Americans found them beneficial for their lifestyle, they would be buying them rather than gas-fueled vehicles. Yet, sales of gas fueled vehicles still dominate the market and traditional automakers are delaying their forays into the all-electric world.

billions.

*This article was adapted from content originally published by the Institute for Energy Research.

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Biden’s Inflation Act Sending Endless Subsidies to Dem’s Favorite “Green” Companies

April 11, 2024 by Leave a Comment

A major flaw in the Inflation Reduction Act (IRA) is that there is effectively no cap on the tax subsidies that President Biden provides to his favorite “green” technologies. Despite more than four decades of subsidies for wind and solar technologies, the IRA continues to subsidize these technologies as if they were still emerging, which they are not. As Biden continues handing out taxpayer funds that promote these technologies, their intermittent production is causing instability to the electric grid and retirements of reliable coal, natural gas and nuclear generators as their reduced generation time no longer allows them to recover their costs. Further, with the radical push for wind and solar deployment, the United States is pouring money into China, who dominates the global market of solar panel exports and the critical minerals needed for wind and solar technology production.

Further, the taxpayer-funded tax incentives for Biden’s green technologies could increase even more as his Environmental Protection Agency (EPA) introduces regulations that push for even more wind and solar deployment and electric vehicle sales. The recently finalized tailpipe emissions rule and proposed power plant rule force greater adoption of these tax credit‐​eligible technologies. And these regulations keep coming with the latest rule dealing with forced sales of electric delivery trucks and semis. The Biden Administration is breaking its promise that the bill would cost $369 billion by expanding its application in ways estimated by some to now exceed $1 trillion.

Massive IRA Subsidies for “Green” Technologies

Since IRA’s passage, the estimated cost of its energy tax credits has increased dramatically. At the time of passage, CBO and the Joint Committee on Taxation (JCT) estimated the IRA’s energy and climate spending and tax breaks would cost about $400 billion through Fiscal Year 2031 and would be more than fully offset by other parts of the law. Estimates now show that due to higher projected deployment, the cost of the IRA tax credits would be greater and could be three times larger than initially projected. An April 26, 2023 estimate by the Joint Committee on Taxation (JCT) indicated the cost of the IRA tax credits would be $515 billion from 2023 through 2033. The Committee for a Responsible Federal Budget estimates that energy-related provisions from the IRA will cost almost $870 billion through 2031, more than double the original $400 billion estimate or $1.1 trillion through 2033. An April 2023 Goldman Sachs report estimated that the IRA “will provide an estimated $1.2 trillion of incentives by 2032.”

The FY 2024 budget, which did not incorporate the IRA, projected energy tax credits would cost $145 billion between 2023 and 2032. The FY 2025 budget projects a cost of almost $1.1 trillion over the same period, implying the IRA energy tax credits will cost $907 billion over that time. The figure below shows the energy tax expenditure cost estimates by year from each budget.

Source: Cato Institute

The decreasing cost of the credits beyond 2030 is due to expiring provisions between 2027 and 2032 that Congress could extend and, in many cases, has historically done so. Other tax credits, such as the energy production tax credit, phases down based on a greenhouse gas emissions target which is unlikely to be hit in the next several decades, meaning the tax credits could be uncapped indefinitely.

At peak cost, the energy credits cumulatively reduce revenue by $185 billion a year, implying a ten‐​year cost of more than $1.8 trillion. The table below summarizes the major energy tax credits and their costs at various points in time.

Source: Cato Institute

Conclusion

The value of the energy tax credits in the IRA is growing as Biden’s favorite “green” technologies are forced into the market by more and more regulations and the massive incentives provided by the IRA and other Biden legislation are encouraging companies to invest. For example, Warren Buffet has acknowledged that wind energy projects are not economically viable without government tax credits. He stated, “…on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”  Despite Buffet making that statement a decade ago and wind production now capturing a 10-percent share of electricity generation, the federal subsidies persist, the U.S. grid becomes more unreliable, and electricity is more expensive for Americans, with residential rates increasing 28 percent since 2014. The worse absurdity is that the total cost of energy credits in the IRA is an unstable amount costing taxpayers trillions with effectively no cap, persisting for decades unless the legislation is repealed.  It now looks as though the Inflation Reduction Act was sold to Congress under a false premise about its limited costs and those costs are now multiplying because of deliberate actions of the Biden Administration.

*This article was adapted from content originally published by the Institute for Energy Research.

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The Unregulated Podcast #177: Money Out The Door

April 11, 2024 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss what spiraling inflation means for the upcoming election, recent happenings on Capitol Hill, and some not-so-good news on the future of Biden’s all EV dream.

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Biden Blocking Mines Needed For His Green Dream

April 9, 2024 by Leave a Comment

The United States could be a major global lithium producer if it were not for policies and regulations by the federal and state governments, which are hampering efforts to break China’s control of the critical minerals sector. Global lithium demand is expected to outpace supply by 500,000 metric tons annually by 2030 due to the push for a “clean” energy transition. Unless the United States can increase its lithium production, the country’s manufacturers will be reliant on China and others for supply as the end of the decade approaches. According to the U.S. Geologic Survey, identified lithium resources in the United States—from continental brines, claystone, geothermal brines, hectorite, oilfield brines, and pegmatites—total 12 million tons, out of 98 million tons worldwide, but the United States is still dependent on imports for over 25 percent of its needs. This number will grow as battery use grows to meet the Biden Administration’s drive for electric vehicles and the conversion of the U.S. electrical grid to one dependent upon intermittent and weather-driven renewable generation requiring backup.

Biden Administration Interferes with Critical Mineral Production

President Biden talks about wanting domestic production of critical minerals, but his administration has focused on making it more difficult to mine in the United States. It has revoked federal leases; used regulatory action to delay or revoke mining, air pollution, and water quality permits; and labeled a flowering plant “endangered” as ways to delay or cancel metal mines in the United States. Further, a study by finance company MSCI estimates that the majority of U.S. reserves for cobalt, lithium, and nickel are located within 35 miles of Native American reservations, causing a potential conflict with President Biden’s stated commitment to racial equity and “environmental justice.” In April 2022, the Department of Interior reversed a Trump administration decision that limited the scope of compensatory mitigation the Department could force upon projects on federal land as a condition of receiving a permit. Under the new guidance, opponents in the federal government could assess mitigation located far from the project, giving bureaucrats a blank check to request whatever they wish of a permit seeker with little controls or relationship to the project. Rather than rule on merits and science of a project, government agents are allowed to essentially require permit applicants to do “whatever the market will bear.” Details on two lithium mines pursuing development are below.

Ioneer Ltd.’s lithium mine in Nevada, which could supply 22,000 metric tons of lithium annually (enough for 370,000 electric cars), has seen increased costs as environmentalists claim the mine threatens Tiehm’s buckwheat, a rare flowering plant. While the Trump administration’s Interior Department refuted that claim, finding that it was actually squirrels who were threatening the buckwheat, environmentalists asked the Biden administration to list the buckwheat as an endangered species. Interior regulators subsequently proposed a listing to that effect. Ioneer changed its mine plan to avoid the buckwheat and has spent more than $1 million on botanists, greenhouses and related studies.

The Thacker Pass Lithium mine in Nevada could produce a quarter of today’s global lithium demand and support the production of batteries for up to 800,000 electric vehicles annually. It may be on track now that a judge dismissed challenges by a coalition of nearby indigenous communities, environmental groups, and a local rancher who argued Interior’s environmental review downplayed the likely effects on groundwater, streams, and a threatened species of trout and because of the mine’s location, which reportedly borders the sacred site of a massacre of more than two dozen Native Americans in 1865. The latest estimated total cost of phase one construction for the mine has been revised upward to $2.93 billion based on several factors, including the use of union labor for construction, updated equipment pricing and development of an all-inclusive housing facility for construction workers because of its remoteness. The company already spent $193.7 million on the project during the year that ended December 31 due to legal delays and environmental reviews. Mechanical completion of phase one is targeted for 2027 with full production anticipated sometime in 2028.

State Laws and Regulations Affecting Lithium Production

Across Texas, Louisiana and other mineral-rich states, developers are looking to mine lithium from salty brines in underground mines.  But, in many cases, it is unclear who owns the lithium in the brines, how the battery metal should be valued by regulators and who ultimately should pay to process it into a form usable by manufacturers.

For example, last year, the Texas legislature approved a law that instructed the state’s oilfield regulator to develop regulations for lithium extraction from brines. But the regulator, the Railroad Commission of Texas, has no timeline for when it will finish that task. The Commission plans to release its rules for public comment once they are formulated, after which the three commissioners will vote on them.

While the 1972 U.S. Clean Water Act gives Washington regulatory power over water extraction and reinjection across the country, state officials have autonomy to govern other parts of the process. Tetra has tested more than 200 brine samples from Texas, but so far has opted not to do business in the Lone Star State due to legal uncertainty.  Standard Lithium had drilled a Texas brine well with lithium concentrations nearly as high as those found in parts of Chile, which has the world’s largest lithium reserves, but Standard cannot produce the lithium until regulations are set.

In Oklahoma, which has several brine deposits, it is unclear who sets regulations dealing with lithium production. The Oklahoma Corporation Commission – which oversees oil and gas development – has no jurisdiction over lithium production and royalties, nor does the state’s Department of Mines.

In Utah, the state legislature and governor approved a bill last year to prevent water levels from dropping in the lithium-rich Great Salt Lake, which led Compass Minerals to abandon plans to produce lithium from the lake for Ford and disband its entire lithium team, as the regulatory risks had increased significantly.

In Louisiana, the lack of state guidelines is causing concerns that producers could trespass on neighboring land when they reinject brine after filtering out lithium. Reinjection is a key step to preserving underground water table levels. The Louisiana Department of Energy and Natural Resources does not have existing statutes related to lithium.

Water that is extracted alongside oil can contain lithium and can be sold for a profit. Oil companies for decades have paid to dispose of that water. With lithium demand increasing, landowners, oil producers, and companies that oversee water disposal are fighting over ownership. Last year, a Texas state appeals court ruled that COG Operating controls the water that it extracts alongside oil, but the ruling only applied to that specific case. Oilfield leases do not necessarily include clauses for who owns other minerals extracted alongside oil, generating questions as to whether lithium is covered by existing leases or if companies need to negotiate new contracts with landowners.

It is also unclear how lithium will be valued for royalty payouts given the cost for equipment to filter the battery metal from brine, which typically has no market value. In Arkansas, where Tetra, Exxon, Albemarle and Standard Lithium hope to produce the battery metal within a few years, state officials have been debating a royalty structure to compensate landowners since 2018. The state could charge different rates depending how much lithium is in a brine deposit. Albemarle, the world’s largest lithium producer with operations in the United States, Chile, Australia, China and elsewhere, plans to open a pilot facility in Arkansas by the end of the year, but is waiting to see how the Arkansas royalty situation evolves. Exxon also has not submitted a royalty proposal despite spending more than $100 million in Arkansas and on a Houston test facility as part of its attempt to produce lithium, but hopes the state’s royalty will be uniform across the state.

California, which has giant lithium reserves in its Salton Sea region east of Los Angeles, last year imposed a flat-rate tax for each metric ton of lithium, which has pushed back development of projects slated to supply General Motors and Stellantis. California’s governor and legislators have defended the tax as a necessary way to ensure all residents benefit from the energy transition, even though the tax goes to the government.

Nevada, which has the only commercial U.S. lithium operation – a small mine operated by Albemarle – has taxed minerals for more than 100 years, at a rate based on each facility’s revenue.

Conclusion

Federal and state laws and regulations, or lack thereof, are hampering lithium production in the United States, which is needed for Biden’s energy transition. Biden’s environmental reviews and permit approvals have delayed the development of lithium mines and caused their costs to increase. Mineral-rich states have not provided laws and regulations regarding lithium ownership, valuation, processing and royalties, delaying the development and production of lithium in their states. Industry analysts expect regulations to be eventually set in those states, but it is unclear when that might occur. In the meantime, U.S. manufacturers will be dependent on imports from China and elsewhere, to meet their lithium needs.

*This article was adapted from content originally published by the Institute for Energy Research.

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The Unregulated Podcast #176: Biden’s Bugaboo Boogaloo

April 4, 2024 by Leave a Comment

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna cover a busy week of energy headlines and check in on the 2024 race for the White House.

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Biden Announces Diesel Truck Ban On Good Friday

April 2, 2024 by Leave a Comment

On March 29, 2024, Good Friday, Biden’s Environmental Protection Agency (EPA) rolled out its new electric truck mandate, which will require that electric semi-trucks make up an increasing share of manufacturer sales from 2027 through 2032, similar to its recent rule for passenger cars. EPA’s rule would effectively require electric models to account for 60 percent of new urban delivery trucks and 25 percent of long-haul tractor sales by 2032. The electric truck mandate is even more costly than Biden’s electric car mandate. The cost of electric trucks are typically two to three times more expensive than diesel trucks. Truckers will also have to invest $620 billion for charging infrastructure and it will likely cost utilities $370 billion to upgrade their networks. Replacing diesel trucks with electric will cost the trucking industry tens of billion dollars each year and truckers will need to pass these costs on to the customers–manufacturers and retailers, who will pass the higher costs on to Americans in higher prices for merchandise. Trucking is about to become much more expensive.

About 1.4 million chargers will have to be installed by 2032 to achieve the EPA’s mandate, about 15,000 a month. This will require major grid upgrades when there are shortages of critical components such as transformers. It could take three to eight years to develop transmission and substations in many places to support truck chargers. Despite Biden’s bill on infrastructure providing $7.5 billion for 500,000 chargers, only 7 have been installed in two years. Power generation and transmission will have to massively expand to support millions of new electric trucks. An electric semi consumes about seven times as much electricity on a single charge as a typical home does in a day. Truck charging depots can draw as much power from the grid as small cities.

According to EPA, its big-rig quotas are feasible because the Inflation Reduction Act (IRA) and 2021 infrastructure law include hundreds of billions of dollars in subsidies for electric vehicles. The subsidies include a 30 percent tax credit for charging stations, $40,000 tax credit for commercial electric vehicles, and a tax credit for battery manufacturing that can offset more than a third of the cost. Because IRA tax credits for electric trucks are not conditioned on the source of battery material, U.S. manufacturers will be dependent on China, the world’s dominant battery producer. China’s BYD, which overtook Tesla for the most electric vehicles sold, was California’s top-selling electric truck maker in 2022. Chinese green-technology manufacturers are flooding the U.S. market because of Biden’s mandates and subsidies, which are enticements for rapid deployment of electric vehicles and trucks.

U.S. truck manufacturers are pleading for more handouts, noting that the rule is challenging and will require more “incentives and public investment.” (Sounds like the offshore wind industry and solar power manufacturers.) Biden is using subsidies to justify a ridiculous mandate, which then causes companies to need and lobby for more subsidies, which come from taxpayers.

There Is a Long Way to Go to Reach the Mandates

Electric trucks make up less than 1 percent of U.S. heavy-duty truck sales, and nearly all those sales are in California, which heavily subsidizes and mandates their purchase. There are no electric long-haul tractors currently in mass production. Most electric trucks cannot go more than 170 miles on a charge. Electric semis require bigger and heavier batteries, which means they must carry lighter loads to avoid damaging roads. Fleet operators will have to use more trucks to transport the same amount of goods, which will increase vehicle congestion, especially around ports and distribution centers. EPA justifies its rule as reducing emissions in “environmental justice” communities near major truck freight routes, but electric trucks also produce more soot from their wear and tear on roads and vehicle braking.

By 2030 electric trucks are projected to consume about 11 percent of California’s electricity. Most trucks will recharge at night when solar power is not available since drivers want daylight hours for driving. Fossil fuels will either be needed to produce the electricity or trucks will be stranded.

Conclusion

Biden’s EPA is mandating emissions reductions from heavy trucks that is in essence a ban on new diesel trucks. It would dramatically accelerate the adoption of electric and other zero-emission heavy vehicles, from school buses to cement mixers. The rule covers over 100 vehicle types including tractor-trailers, ambulances, and garbage trucks. It progressively tightens emission limits across manufacturers’ product lines from the 2027 model year through 2032, leaving it to the manufacturers to decide their path to compliance, using hybrids, hydrogen fuel cells, electric or enhanced fuel efficiency for conventional trucks. For example, the rule would effectively require 60 percent of urban delivery trucks to be “zero-emission” by 2032. The transition to electric trucks has considerable challenges, including their high costs and the need for extensive charging infrastructure. The mandate is impractical as it is likely to strain small businesses, disrupt existing operations, and require massive additional subsidies from taxpayers.

EPA projects its rule will “avoid” one billion metric tons in carbon dioxide emissions from 2027 through 2055—about as much as the carbon dioxide emissions from China and India increased just in 2023. As such, the truck mandate will do nothing to reduce global temperatures, but will cost American consumers and taxpayers billions.

*This article was adapted from content originally published by the Institute for Energy Research.

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