The Unregulated Podcast #170: Frustration. Anxiety. Discouragement.

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna discuss the growing fatigue of the #TeamBiden and highlights from the world of energy.

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Biden Slows, Not Reverses, Unpopular EV Mandates In Election Year Gimmick

In a concession to automakers and labor unions during an election year, the Biden administration plans to relax elements of its regulations to limit tailpipe emissions that are designed to get Americans to switch from gas-powered cars to electric vehicles.  Biden’s EPA is planning to give automakers more time to ramp up sales of electric vehicles. The revised regulations would not require a sharp increase in EV sales until after 2030. The final rule is expected to be published by early spring. The auto industry and unionized auto workers backed Biden in the 2020 election but they now worry that Biden’s abrupt transition to electric vehicles would result in a loss of jobs. Further, consumer demand for electric vehicles has been waning, with potential buyers put off mainly by high vehicle prices and associated costs as well as the lack of charging stations.

Last spring, the Environmental Protection Agency proposed the toughest-ever limits on tailpipe emissions, forcing car makers to sell a huge number of zero-emissions vehicles in a relatively short time frame or pay stiff penalties. The EPA designed the proposed regulations so that 67 percent of sales of new cars and light-duty trucks would be all-electric by 2032, up from 7.6 percent in 2023, a radical remaking of the American automobile market. The regulation was designed to match Biden’s goal that 50 percent of new car sales must to be electric by 2030. EPA’s plan for the final regulations, however, is to have electric vehicle sales increase more gradually through 2030 but then to rise sharply.

The change is to mollify automakers who want more time to build a national network of charging stations and to bring down the cost of electric vehicles, and to labor unions that want more time to try to unionize new electric car plants that are opening around the country, particularly in the South. Biden needs auto union backing for this election, which was threatened last spring, when the Environmental Protection Agency proposed the new limits on tailpipe emissions. Soon after, Shawn Fain, president of the United Auto Workers, wrote that the union was withholding its endorsement of Mr. Biden’s re-election bid over “concerns with the electric vehicle transition.” The union has been wary of electric vehicles since they require fewer workers to assemble and many electric vehicle plants are being built in states with few unions. In public comments it filed regarding the proposed rule, the United Auto Workers pressed the Biden administration to relax the compliance timeline so that it “increases stringency more gradually, and occurs over a greater period of time.” In early January, the EPA sent a revised version of its auto emissions rule with the longer time frame to the White House. After receiving it, the United Auto Workers endorsed Mr. Biden. The EPA’s decision was clearly political, rather than based upon science as it had claimed.

Despite a record 1.2 million electric vehicles that were sold in the United States last year, EV growth is slowing, making the nearly tenfold increase in sales within just eight years that EPA regulations would require infeasible. The slowdown in EV sales is to be expected, as the market for early adopters — typically wealthier, coastal urban residents who have bought an electric vehicle as a second car — is saturated.

While buyers of new electric vehicles are eligible for up to $7,500 in federal tax credits, only 18 models are currently eligible for the full credit, down from about two dozen last year. One of those eligible models, the Ford F-150 Lightning, an all-electric pickup truck that once had a waiting list of 200,000, last year saw sales of 24,000, far short of the 150,000 sales projected by Ford. And while construction of EV chargers is expanding, nearly doubling from about 87,000 in 2019 to more than 172,000 last year, more than two million chargers will be needed by 2030 to support the growth in electric vehicles required by the proposed rules.

Auto companies have invested about $146 billion over the past three years in researching and developing electric vehicles. If the regulations as currently defined were implemented, auto companies would face billions of dollars per year in fines if the emissions associated with their auto sales exceed the limits set by the regulators.  These costs are being covered by price increases for vehicles consumers actually want, driving their prices higher.  This is already happening as new car prices have hit record highs. Even non-EV purchasers are paying the price for Biden’s EV dreams.

Source: Cox Automotive

EPA models show that postponing the sharp increase in electric vehicle sales until after 2030 would eliminate roughly the same amount of auto tailpipe emissions as the original proposal by 2055. According to Ali Zaidi, Biden’s senior climate adviser, Biden’s climate policies, combined with record federal investment in renewable energy, would still reach the president’s goal of cutting the country’s greenhouse gas emissions in half by 2030.

Conclusion

President Biden is reacting to an election year situation when he decided to slow the push for EV sales required by his regulations because he needs the votes of union members to get reelected. Not only does the EPA have a tailpipe emissions regulation that requires two-thirds of new car sales in 2032 to be electric, but the Department of Transportation’s Corporate Average Fuel Economy proposed standards require the same outcome and will need to be changed in concert with the EPA rule. This clearly shows that both science and safety are no longer relevant to either EPA or the NHTSA, and instead, their decisions are purely political.

Car manufacturers recognize that sales growth in electric vehicles is slowing and that more time is needed for consumers to adjust to the EV transition. Further, for more adoption of electric vehicles, prices need to come down, more charging stations need to be built, vehicle range needs to be improved as well as the battery technology that guides it, and insurance costs need to be more commensurate with those of traditional vehicles.


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

Qatar and Mexico Big Winners of Biden’s Attack on American LNG

The $2 billion conversion of Mexico’s Energia Costa Azul gas terminal into an LNG export facility will open a new, faster means for U.S. natural gas producers to access Asian gas markets, circumventing the Panama Canal. Costa Azul’s conversion is the first of several gas export projects proposed in Mexico, but President Joe Biden’s recent pause on LNG export approvals casts uncertainty over their timelines and development, as these ventures need Energy Department authorization to ship U.S. gas abroad.

By next year, American natural gas could start flowing by pipeline from the United States to a major export terminal on the Mexican Pacific coast, be converted to LNG and shipped to Asian markets. The new route could cut travel times to Asian nations roughly in half, bypassing the drought-ridden Panama Canal. The U.S. hydraulic fracturing boom has made the United States the world’s largest natural gas producer and exporter and world demand for U.S. natural gas has risen as the world has begun using more gas in power plants, factories and homes, substituting for coal in some cases. Natural gas demand is growing in China, India and Southeast Asian countries.

Mexico’s Energía Costa Azul, located between Baja California’s agave-covered mountains and the Pacific Ocean, was originally operated  as an import facility to supply gas to California and Arizona for electricity production. It is undergoing a $2 billion conversion into an LNG export facility for U.S.-produced gas to be shipped to Asia. It is the first in a network of gas exporting facilities planned along Mexico’s West coast.

Source: New York Times

Last month, the Biden administration paused the approval process for new export-terminal projects in the United States while its Department of Energy considers the effects of gas on greenhouse gas emissions. The pause affects several proposed Mexican LNG projects because they would be exporting U.S. gas. Costa Azul is not affected as it already has its approvals and is mostly complete, following an agreement between President Trump and Mexico’s president in 2020 under the United States-Mexico-Canada (USMCA) trade agreement. If all five planned terminals in Mexico were eventually built and operated at their proposed volumes, Mexico would become the fourth-largest exporter of gas in the world with each terminal theoretically operating for decades.

Besides being closer to Texan gas fields than states along the U.S. West Coast, Mexico’s less arduous environmental rules and cheaper construction costs are some of the reasons these export terminals are being proposed there rather than along the U.S. West Coast where states have opposed them. Mexico will get the investment and jobs instead. The terminals are essentially American as they are mostly owned, operated and supplied by U.S. gas companies. The United States has seven operating LNG export terminals and five more under construction, and is forecast to double its export volumes within the next four years.

Up until recently, tankers could make it through the Panama Canal relatively quickly, and journey times from U.S. Gulf of Mexico export terminals to Asia were reasonable. But drought in Panama has severely curtailed the number of ships passing through the canal each day.

Despite gas being cleaner to burn than oil or coal, environmentalists note that the emissions from liquefying the gas, which is energy intensive, and shipping it long distances around the globe should be considered. Despite that, state and federal officials in Mexico have touted the proposed export terminals as job creators.

Projected demands for gas in Asia have attracted investors from around the world and proposals for new export terminals have proliferated. Well before construction even begins, gas contracts have been signed for deliveries decades into the future.

According to Muthu Chezhian, the C.E.O. of LNG Alliance, a Singaporean company planning to build an export terminal in the Mexican state of Sonora, Biden’s directive has made potential Asian buyers nervous. Previously they had been excited about this LNG project and had felt assured of ample supplies due to nearly a decade of reliable U.S. gas expansion. Biden’s directive, however, sent shock waves through Asian demand markets. Because Chezhian’s project already has Department of Energy approval, there is a good chance it still will be built as long as its investors do not back out or unless it cannot meet a 2028 deadline to start operation. Missing the deadline would require applying for an extension from the Department of Energy, as extensions are also part of Biden’s pause directive.

The biggest proposed export terminal along the Gulf of California, called Mexico Pacific, faces tough odds. It would be roughly 10 times as large as Costa Azul if all its proposed phases were to be built. But while it also has Department of Energy approval, its deadline to start exporting is next year. Since construction takes years and has not yet begun, the project most likely would need to apply for an extension. If all of Mexico Pacific’s proposed phases were to be built, it would be even larger than the largest proposed project on U.S. soil, Venture Global’s CP2 project that caused environmentalists to push Biden into the pause to LNG approvals.

Since LNG projects are enormously expensive and need investment certainty, delays to construction are major problems and could result in huge cost increases. The ripple effects on the global gas market by President Biden’s directive are still shaking out. And it is unclear how long the pause will remain in effect, though some are speculating it will remain until after the election. Because the LNG industry often sells its product through long-term contracts decades in advance, investors are likely to look toward U.S. competitors in the gas market or to current operators in the United States and Mexico that have room for growth. Biden’s pause will help other big LNG producers like Qatar and Australia, placing the United States last. Within the United States and Mexico, projects that have received approval and do not need an extension will see a rush of interest because the unapproved projects will probably have at least a year of delay.

House Bill on LNG

The House of Representatives has a proposed bill to reverse the pause on LNG export approvals. H.R. 7176, Unlocking our Domestic LNG Potential Act of 2024, would give the Federal Energy Regulatory Commission, an independent agency, exclusive jurisdiction to approve LNG facilities. The bill is up for a floor vote. House law makers argue that the pause could have deleterious effects on national security and the climate. The bill is sponsored by Rep. August Pfluger (R-Texas) and Democrats Henry Cuellar of Texas and Mary Peltola of Alaska, along with 17 other House Republicans.

The White House has expressed strong opposition to the bill, but stopped short of issuing a veto threat. According to European Commission Executive Vice President Maros Sefcovic, U.S. LNG supplies to Europe will be unaffected for the next few years, but emphasized the U.S.’ responsibility for energy security beyond Europe. Sefcovic said the United States is now the “global guarantor of energy security” and its responsibility goes beyond Europe. Southeast Asia, India, Latin America and Africa need gas supplies to phase out reliance on coal. Biden’s pause directive could result in more coal being burned instead of natural gas.

Conclusion

The world is looking to American natural gas as the United States is now the largest producer and exporter of natural gas due to innovations in production through hydraulic fracturing and directional drilling. LNG export terminals are being constructed in the United States and in Mexico to ship LNG abroad. But President Biden has put a pause on approvals from the Department of Energy (DOE) so that that agency can evaluate the climate impacts of approving such projects.

DOE approvals not only affect the United States but also Mexican export terminals as they are fueled by U.S.-produced gas. Biden’s pause has the world worried and exporters troubled by the length of the delay, increases in costs, and prospective buyers going elsewhere for supplies such as to Qatar and Australia. President Biden is clearly not putting U.S. interests first. The House of Representatives has a bill that would put all approvals on the jurisdiction of FERC, which is an independent agency. The White House opposes the bill, but has not yet said that Biden would veto it.


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

The Unregulated Podcast #169: This Is Gratuitous

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna go over the recent shake-ups at FERC brought on, in part, by the FOIA requests made by the Institute for Energy Research, and other energy stories in the headlines. Later, Ryan Walters, the Superintendent of Public Instruction of Oklahoma, joins the show for a discussion on the state of American education.

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House Rightly Reverses President Biden’s Harmful Ban on U.S. LNG Facilities

WASHINGTON DC (02/15/2024) – Today, the U.S. House of Representatives passed H.R. 7176, the Unlocking our Domestic LNG Potential Act of 2024 by a vote of 224 – 200. This bill, introduced by Rep. August Pfluger (R-TX), reverses President Biden’s ban on approvals of exports of liquified natural gas (LNG). Increased U.S. exports reduce global emissions, restore U.S. reliability as an energy supplier to our allies, and lower energy prices for American consumers.

Following passage of this legislation, AEA President Thomas Pyle issued the following statement:

“President Biden’s recent decision to side with his base of out-of-touch environmental activists is yet another attack on American consumers and the energy security of our allies. We applaud this effort to reverse one of the administration’s growing list of more than 175 wrongheaded decisions and unlock the energy potential of the U.S. energy industry.”


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Key Vote YES on H.R. 7176

The American Energy Alliance support H.R. 7176, Unlocking our Domestic LNG Potential Act, which would remove restrictions on approvals of exports of liquified natural gas.

The restrictions targeted for repeal by H.R 7176 are antiquated procedures left over from the days of energy scarcity. Fears that the United States was running out of natural gas prompted special approval requirements for any exports. This is not the world we live in today. Domestic natural gas production has nearly doubled in the last 15 years and the United States has become the world’s leading exporter of LNG. Despite fear-mongering when LNG exports first began a decade an ago, domestic gas prices have not increased as a result of increasing exports, and remain far lower than the highs reached in the 2000’s. Increased export markets have further encouraged investment in domestic production, fueling a virtuous cycle of abundant, affordable energy for Americans, domestic economic growth, and increasing American energy supplies to our friends and allies around the world.

Today these restrictions only serve as political tools. In the early days of LNG exports, the Obama administration used these procedures to unreasonably delay approvals of LNG terminals. Eventually the overwhelming weight of evidence of positive economic, environmental, and national security benefits from LNG exports forced that administration to relent. Recently, the Biden administration has again sought to delay approvals for political reasons.

It is long past time to eliminate these restrictions on LNG exports. Their original justification has long since been superseded by natural gas production growth. The restrictions serve only to increase costs and uncertainty in the LNG industry, undermining domestic economic investment and weakening America’s geopolitical position.

A YES vote on H.R. 7176 is a vote in support of free markets and affordable energy. AEA will include this vote in its American Energy Scorecard.

The Unregulated Podcast #168: You Know Who You Are

On this episode of The Unregulated Podcast Tom Pyle and Mike McKenna provide a rundown of the the latest deals going down in Congress and the state of EV sales in America. The team are joined by Greg Sindelar, the CEO of the Texas Public Policy Foundation (TPPF) for a discussion on what’s happening in the great state of Texas.

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To Keep Roads Safe America’s Guardrails Will Need Replaced Under Biden’s EV Mandate

Electric vehicles typically weigh significantly more than gasoline-powered cars and can easily crash through steel highway guardrails that are not designed to withstand the extra force, raising concerns about roadside safety, according to a crash test by the University of Nebraska. Electric vehicles typically weigh 20 percent to 50 percent more than gas-powered vehicles due to their batteries that can weigh almost as much as a small gas-powered car. For example, Ford’s F-150 Lightning EV pickup is 2,000 to 3,000 pounds heavier than the same model’s combustion version. The Mustang Mach E electric SUV and the Volvo XC40 EV are roughly 33 percent heavier than their gasoline counterparts. Besides the weight factor, electric vehicle batteries are typically installed under the vehicle, giving it a low center of gravity. Because of these differences, guardrails do little to stop electric vehicles from pushing through the barriers typically made of steel. Paradoxically, the Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) is currently proposing a steep hike in fuel economy standards that will result in forcing two-thirds of new auto sales to be electric by 2032.

The U.S. guardrail system was not made to handle vehicles greater than 5,000 pounds and there are a lot of new vehicles in the 7,000-pound range being manufactured. The extra weight of electric vehicles comes from their outsized batteries needed to achieve a travel range of about 300 miles per charge. The extra weight also poses a problem to faster wear and tear to residential streets and driveways, vehicle tires and infrastructure like parking garages. A lot of parking structures were built to hold vehicles that weigh 2,000 to 4,000 pounds and the cities in which they predominate are most likely to attract EV buyers.

Last fall, engineers at Nebraska’s Midwest Roadside Safety Facility watched an electric-powered pickup truck hurtle toward a guardrail installed on the facility’s testing ground on the edge of the local municipal airport. The nearly 4-ton 2022 Rivian R1T tore through the metal guardrail and hardly slowed until hitting a concrete barrier yards away on the other side. Rivian trucks weigh nearly 2,000 pounds more than conventional pickups. Last year, the National Transportation Safety Board expressed concern about the safety risks heavy electric vehicles pose if they collide with lighter vehicles. The Rivian truck tested in Nebraska showed almost no damage to the cab’s interior after slamming into the concrete barrier, which indicates that they offer protection to their occupants if the electric vehicle is big enough and heavy enough.

While heavier vehicles are safer for their own occupants, they are more hazardous for the occupants of other vehicles. In crashes, the “baseline fatality probability” increases 47 percent for every 1,000 additional pounds and the fatality risk is even higher if the striking vehicle is a light truck (SUV, pickup truck, or minivan), according to the National Bureau of Economic Research. The average weight of U.S. vehicles increased from about 3,400 pounds to 4,300 pounds over the last 30 years as Americans switched from passenger cars to pickups and SUVs as Corporate Average Fuel Economy (CAFÉ) standards downsized regular passenger cars.

But the purpose of guardrails, found along tens of thousands of miles of U.S. roadway, is to keep passenger vehicles from leaving the road. Guardrails are intended to keep cars from careening off the road at critical areas, such as over bridges and waterways, near the edges of cliffs and ravines and over rocky terrain, where injury and death in an off-the-road crash is much more likely. Guardrails are generally a safety feature of last resort. 

Electric vehicles also have very high horsepower ratings, allowing them to accelerate quickly even in crowded urban areas, which drivers are typically not trained to handle.  Also, many newer electric SUVs are tall with limited visibility that poses risks to pedestrians or drivers of smaller vehicles.

similar finding to the Nebraska study was from a preliminary crash test sponsored by the U.S. Army Corps of Engineers’ Research and Development Center. A Tesla sedan crashed into a guardrail, lifted it and passed under it. Both tests show the guardrail system is likely to be overmatched by heavier electric vehicles. More testing, involving computer simulations and test crashes of electric vehicles, is planned and needed to determine how to engineer roadside barriers that minimize the effects of crashes. Better collaboration between transportation engineers and vehicle manufacturers is also needed.

Conclusion

While their design makes it more difficult for electric vehicles to roll over due to their low center of gravity, crash tests show that road barriers and guardrails may not be equipped to protect electric vehicle drivers. The University of Nebraska and the U.S. Army Corps of Engineers both conducted EV crash tests with guardrails, finding similar results. The guardrails were not built for the weight of many electric vehicles, nor were U.S. roads, driveways, parking garages and vehicle tires. Despite this safety issue and numerous other issues with electric vehicles, including higher costs, dependency upon China for necessary minerals, higher insurance costs, range anxiety and tires wearing out before 10,000 miles,  President Biden wants 50 percent of new car sales in the United States in 2030 to be electric.


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

Electric School Buses Aren’t Cutting It In Michigan’s Cold Winter

Between the federal government, states and municipalities, billions of taxpayer dollars have been spent adding electric buses to transit fleets across the United States to supposedly reduce carbon dioxide emissions. However, these electric buses are sitting unused as they are broken-down and either cannot be fixed, are too expensive to fix, or have been scrapped altogether.

Officials in Asheville, North Carolina, recently expressed frustration that three of the five e-buses the city purchased for millions in 2018 are now sitting idle due to a combination of software issues, mechanical problems and an inability to obtain replacement parts. The Denver Gazette reported that two of the four e-buses the Mountain Metropolitan Transit in Colorado Springs acquired in 2021 are not running. They cost $1.2 million each, mostly paid for by government grants. A major part of the problem is the manufacturer of the buses, the Biden Administration- backed Proterra, filed for Chapter 11 bankruptcy in August. Founded in 2004, the company became the largest e-bus company in the United States, representing nearly 40 percent of the market prior to filing for bankruptcy. Since the bankruptcy filing, it has been impossible to get parts. Department of Energy Secretary Granholm was one of their celebrity shareholders, while Vice President Harris was an outspoken advocate for EV school buses.

However, cities had problems with the company’s buses long before then. In 2020, The Philadelphia Tribune reported SEPTA’s entire $24 million fleet of 25 buses manufactured by Proterra had been pulled out of commission–the third-largest fleet of all-electric buses in the United States at the time. In September 2021, the Daily Bulletin out of California reported that “As of August, Foothill Transit, based in West Covina and serving the San Gabriel Valley, parts of Los Angeles and Pomona Valley, had 13 idled battery-electric buses out of 32 in its fleet. At one point, the agency indicated up to 67% of its electric buses were not operating during 2019 and 2020.”

Other cities were also struggling with idled electric bus fleets. In November 2022, the entire fleet of Proterra electric buses in Louisville had not operated in two years for which the city had paid $9 million.  In Austin, Texas, the city’s Capital Metro entered into a $46 million deal with Proterra in 2020 for the company to build 40 e-buses. Capital Metro has six of them in operation while they await another 17 that have been built but are sitting in Proterra’s South Carolina factory because chargers for them are not yet available. Broward County, Florida, purchased 42 e-buses from Proterra for $54 million, and the first batch operated for an average of 600 miles before breaking down, while the second batch averaged 1,800. For comparison, the county’s much less expensive diesel buses average 4,500 miles between failures.

The Fiasco Goes On

The U.S. Environmental Protection Agency (EPA)’s Clean School Bus Program is spending $5 billion over five years, 2022 to 2026, underwriting electric buses for schools that could not afford them otherwise. The funding requires low income and rural school districts, school districts in areas most affected by air pollution, and other environmental justice factors to be prioritized in allotting the funds. Priority districts are eligible for funding up to the full cost of 25 buses and the necessary chargers. So far, the EPA has spent $1.84 billion from the fund, on 5,103 electric buses. That averages out to more than $360,000 per bus—3 to 6 times more than diesel buses that cost between $65,000 and $100,000 each.

Michigan Governor Gretchen Whitmer wants Michigan to build the infrastructure for 2 million electric vehicles by 2030. Her plans to overhaul the state’s 8,800-vehicle fleet, however, will not be complete until 2040—a decade later. Portions of Michigan’s 17,000 school buses will transition to electric ahead of the state government fleet. Michigan is getting $125 million from EPA to help school districts buy electric school buses. That means Michigan’s $125 million will buy less than 350 electric buses. To replace all 17,000 school buses in the state, it would take more than $6 billion, leaving school districts with expensive and frequent repairs.

Ann Arbor Public Schools was an early adopter of the electric school bus. Officials have admitted  that the onboarding of just four electric school buses has been a struggle due to cost, downtime and performance issues. The e-buses cost five times what a regular bus would cost, while the charging infrastructure was four times more expensive than estimated. Besides the cost of the e-bus, there is another $1,200 to $12,000 or more for a basic EV charger and infrastructure-related costs.

The EPA identified 297 “priority districts” out of Michigan’s over 800 traditional and charter districts for the grant program, primarily in rural and low-income areas. Non-priority districts are also able to apply for funding, but would only receive $250,000 per bus and $13,000 per charger, which would make the school district’s cost of a new electric bus comparable to the price of a diesel bus.

The Michigan school districts have concerns about battery capacity, charging infrastructure, the state’s brutal winters and ease of maintenance. Different models of electric school buses have a range of 70 to 200 miles on a full battery, while diesel buses can go over 500 miles on a full tank. Unlike diesel-powered vehicles, the range for electric buses drops in the winter. Batteries reduce their range in winter because some of their energy is used to heat up the cabin, a necessity where harsh winters are the norm. The range drops quite a bit when it is very cold so in a rural area one needs to be cautious when traveling long distances characteristic of rural areas. Charging several times a day can help deal with range matters but if the buses need to go to events where there are no charges, the situation becomes difficult and additional costs are required for reliable backup.

Conclusion

The Biden administration is pushing electric buses on cities and schools to further its climate agenda. However, there are problems with the program including initial cost of the e-buses, ability to get parts, and bankruptcy from one of the major manufacturers and suppliers, resulting in many e-buses sitting idle. The school bus program also has issues including cost of the e-bus, which can be 3 to 6 times more than a diesel bus; range, which is just 15 to 40 percent of a diesel bus’s range; availability of charging stations; and weather degrading battery capacity, thereby reducing range. Nevertheless, Biden’s EPA is handing out money and eligible school districts are accepting the funds and purchasing e-buses.


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

European Carbon Prices Elicit Revolts Across The Continent

Farmers in the Netherlands blocked roads with their tractors to revolt against Europe’s increasingly stringent climate policies, and farmers in Germany and France have risen to the fight against rising diesel prices to protect their livelihoods and culture and ensure that Europeans have food on their tables. Demonstrations first broke out in the Netherlands in 2019 over government demands that livestock production be halved in order to reduce nitrogen oxide emissions. In the wake of farmers’ protests, the Farmer-citizen movement (BBB) was set up in 2019. The party stunned Dutch politics last year by winning big in the upper house of parliament after provincial elections. The BBB aims to fight government plans to slash nitrogen emissions by dramatically reducing livestock numbers and buying out thousands of farms. Now, the fight turns to other agricultural countries in Europe.

The German Situation

Farmers clogged Berlin streets with 4000 tractors, honking their horns in protest to a plan to cut tax breaks on diesel, for a demonstration at the landmark Brandenburg Gate. Convoys of tractors and trucks gathered on roads in sub-zero temperatures in nearly all 16 federal states. Farmers blocked highway entrances and slowed traffic across Germany with their protests, intent on pushing Chancellor Olaf Scholz’s government to abandon the planned cuts entirely as they have no alternative to diesel to fuel their tractors. But they are not satisfied with concessions the government announced on January 4, when it watered down its original plan, stating that a car tax exemption for farming vehicles would be retained and the cuts in the diesel tax breaks would be staggered over three years — a 40 percent cut this year, with another 30 percent cut in each of the next two years.

The cuts were part of a package agreed to by leaders of Chancellor Olaf Scholz’s three-party coalition to fill a 17 billion-euro ($18.6 billion) hole in the 2024 budget. The budget was revamped after Germany’s highest court in November annulled an earlier decision to repurpose 60 billion euros (almost $66 billion) originally meant to cushion the fallout from the COVID-19 pandemic for measures to help combat climate change and modernize the country. The measure failed due to Germany’s strict self-imposed limits on running up debt, and occurs when Germany is the worst performing major world economy, in part because of its climate and energy policies.

The farmers say that the two tax breaks currently saves them about 900 million euros ($980 million) per year, and cutting the tax breaks will unfairly burdens them and will drive them out of business. But the farmers want more than just changes to the current plans. They claim that in recent years and decades, they have been beaten endlessly with more and more requirements, tighter rules and restrictions. Further, while they have more and more requirements imposed upon them, more food is coming from abroad that is produced below German standards.

Germany’s budget deal also included an abrupt end to subsidies for buying new electric cars, which originally were due to stay in place until the end of this year. The Economy Ministry announced an end to new EV subsidy applications with less than two days’ notice. Germany also raised its levy on carbon dioxide emissions from fossil fuel by more than previously planned at the start of the year, which is expected to impact prices for gasoline, diesel, natural gas and heating oil. The carbon dioxide price increased to 45 euros (about $49) per metric ton of emissions from the previous 30 euros. The government had planned a smaller increase to 40 euros a metric ton before the budget change.  For comparison, the Biden Administration has proposed a $190 per ton “social cost of carbon” for its decision-making on climate-related programs.

The French Situation

Farmers spent weeks protesting across France with irate farmers recently blocking a major highway out of Paris. French Prime Minister Gabriel Attal announced a series of measures to ease financial and administrative pressure on farmers. The French government dropped plans to gradually reduce state subsidies and tax reductions on agricultural diesel to quell the unrest that had farmers spray manure over a public building and supermarket, dump hay bales in highways and empty the contents of trucks carrying fresh produce from neighboring countries. But angry farmers surrounding Paris still threatened to converge on the capital in their tractors because the new prime minister had not responded to all of their issues.

According to the prime minister, a plan to phase out state support on diesel would be scrapped, a planned trajectory of increasing tax on non-road diesel fuel would be stopped, red tape would be simplified and an appeal would be lodged with the European Union for a waiver on bloc-wide rules to force farmers to leave some of their land fallow. France would remain opposed to signing the Mercosur free-trade deal, which farmers say will flood the country with cheaper Latin American meat and produce. France is the European Union’s biggest agricultural producer.

EU Policies Drive the Discontent

The European Union has set measures to revamp its €55 billion Common Agricultural Policy (CAP) and make it more “ sustainable.” More than 70 percent of that money is spent on direct payments to farmers as a safety net. The revamp includes an obligation to devote at least 4 percent of arable land to non-productive features, as well as a requirement to carry out crop rotations and reduce fertilizer use by at least 20 percent. Farmers argue that these measures will make the European agricultural sector less competitive against imports. They are also worried that inflation has dramatically reduced the value of their direct payments, forcing farmers to do much more with less support.

Ukraine’s War has Made Matters Worse

Russia’s invasion of Ukraine in February 2022 all but blocked off trade routes in the Black Sea through which Ukrainian agricultural products were shipped. The EU temporarily lifted restrictions on imports from Ukraine – allowing its agricultural produce to flood European markets. Ukraine’s agricultural sector is huge: an average Ukrainian farm is about 1,000 hectares (2,471 acres); its European equivalents measure on average only 41 hectares (about 100 acres). Prices in neighboring countries such as Hungary, Poland and Romania suddenly dropped, and local farmers were left unable to sell their crops. By spring 2023, tractors were blocking the Polish roads that had been lined with volunteers welcoming Ukrainians refugees a year before.

The EU imposed trade restrictions on Ukraine’s exports to its neighbors, but only for a limited period. When the ban expired, the governments in Budapest, Warsaw and Bratislava announced their own restrictions. Ukraine filed a lawsuit, relations soured and compassion for Ukraine took a backseat. Now, Eastern European countries are demanding the EU definitively revises its trade liberalization measures with Ukraine. In Poland, farmers kicked off a nationwide protest on January 24 against Ukrainian agricultural imports saying Ukrainian grain should go to the Asian or African markets, not to Europe. Similar sentiments are being echoed in Slovakia and Hungary. Poland’s Prime Minister Donald Tusk has promised to meet Ukrainian representatives in early March to come to a deal to regulate the transit and export of products.

Conclusion

The EU and countries in Europe are making concessions after their farmers protested against EU climate policies and issues relating to agricultural products from Ukraine. But for farmers across Europe who feel forgotten, betrayed or unable to feed their families, it is unlikely to be enough. Opposition parties are gaining in European elections this year as residents feel they have had enough of policies that hurt their livelihood and well-being.


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