Will new tax rules drive or stall the EV market?

Mar 31, 2023 View in browser   By Debra Kahn, Allison Prang and Jordan Wolman THE WEEK THAT WAS New Treasury rules for electric vehicle tax credits could end up stunting EV sales. | Drew Angerer/Getty Images WAITING FOR THE MAN — By the time you read this, lobbyists for auto manufacturing and mining companies will be furiously combing through a policy document worth billions of dollars. The Treasury Department's tax guidance released today will address one of the fundamental questions underlying President Joe Biden's climate policy — how zealously to enforce Congress’ demand that the Inflation Reduction Act's $7,500 tax credit for electric cars and trucks go to vehicles made with parts and minerals from the United States and its closest trade partners. As James Bikales reports, it’s unclear whether the Treasury rules will prove so restrictive for automakers that it stunts sales of electric vehicles. That would be a major blow to Biden’s goal of having zero-emission vehicles account for half of all new U.S. car and truck sales by 2030. A Treasury official conceded the rules will temporarily reduce the number of vehicles eligible for the full incentives, but said they would lead to a long-term increase "as new investments and American production come online.” The department’s list of eligible vehicles is expected by April 18 and will be updated monthly, officials said. Expect continued uncertainty for a while. For example, carmakers are still researching the origins of their own supply chains, and they may need more time before they can give Treasury a detailed accounting of the provenance of every piece of every vehicle, as Tanya Snyder and Hannah Northey report. MANCHIN MAD — Also expect a strong reaction from Sen. Joe Manchin (D-W.Va.), who's been very worried Biden will favor placating foreign allies over domestic protections. He called the Treasury proposal “a pathetic excuse to spend more tax payer dollars as quickly as possible,” adding that it “further cedes control to the Chinese Communist Party in the process.”   GO INSIDE THE 2023 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is proud to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage, insider nuggets and unparalleled insights from the 2023 Global Conference, which will convene leaders in health, finance, politics, philanthropy and entertainment from April 30-May 3. This year’s theme, Advancing a Thriving World, will challenge and inspire attendees to lean into building an optimistic coalition capable of tackling the issues and inequities we collectively face. Don’t miss a thing — subscribe today for a front row seat.     BUILDING BLOCKS BAD REPUTATION — Meanwhile, public EV charging stations are just not quite up to snuff, David Ferris reports for POLITICO's E&E News. Part of the problem is that the public charging system has too many cooks: a panoply of automakers, charging network operators, route-finding tools and now the government. Unlike, say, Tesla's network, there's no one in charge of ensuring a good experience. The concern for industry is that the swelling ranks of EV drivers will tell their friends that highway charging is a little buggy, a little annoying — just enough of a hindrance that those millions of friends hold off from going electric, while the planet steadily warms. “People feeling that it’s a risk to buy an EV because the fast-charging infrastructure stinks is going to slow down EV adoption," said Bill Ferro, a software expert and founder of EVSession, an analytics firm. CORPORATE PROMISES STAY TUNED — Big corporate carbon-offset buyers are still digesting new standards released Thursday by a group that's trying to shore up the voluntary offset market's reputation, our Allison Prang reports. The Integrity Council for the Voluntary Carbon Market released a long-awaited updated version of its principles after months of reviewing comments from standard-setters and other market players. They set standards for the standard-setters — the idea is that offset standards will apply to get a seal of approval from the ICVCM, theoretically adding a layer of credibility. "Really what we're trying to do is ensure that all standards meet a minimum threshold of quality and transparency," Alexia Kelly, a board representative for the ICVCM, said in an interview. The ICVCM is just one of several nongovernmental bodies working to shape up voluntary carbon markets — and in turn corporate climate policies. Corporate buyers are watching closely to see whether the standards could tear a hole in their climate strategies by setting too-high a bar for offset projects to clear. Many got spooked by an early draft last year — Verra, a project verifier, said it would have decimated the market. (Yes, the same Verra that got slammed by a Guardian article earlier this year for allegedly overstating emissions reductions from rainforest projects.) Some early reaction: Lucy Hargreaves, head of climate policy and corporate affairs at Patch, a carbon credit marketplace, said the standards err on the safe side — a "compromise document” of where the market for offsets already is, as opposed to a “bold articulation” of where it needs to be. “It’s a really tenuous moment right now,” she said of the voluntary carbon market, adding that she hopes the ICVCM follows quickly with “some bold vision around the categories guidance that would help really guide the market on where it needs to go rather than sort of summarize where we’re at already.” Next up is a more granular "assessment framework" that the ICVCM will use to actually evaluate the standard-setters, expected out mid-year. Movers and Shakers POWER PLAY — What landed rapper Bad Bunny a spot on this year's POLITICO's Power List? His use of his platform to call out Puerto Rico's energy grid failures (which we detailed in Tuesday's edition). His Grammy-winning album, “Un Verano Sin Ti," featured the song “El Apagón,” in which he protests the injustice committed against Puerto Ricans who have suffered through frequent power blackouts, sometimes with deadly consequences. Bad Bunny has taken to the stage to criticize LUMA Energy, the private company that manages the territory’s power system, for the repeated grid failures — as well as the public officials who awarded their contract. And the music in the nearly 23-minute video for “El Apagón" stops at the 53-second mark to highlight news footage of an explosion that caused a massive blackout across Puerto Rico. Click here for the full list of powerful people on race and politics, by POLITICO's Recast team. AROUND THE NATION PLASTIC TIME CAPSULE — Illinois lawmakers are considering a bill to ease rules around chemical recycling. The fact they're leaning toward rejecting it shows how far the debate has moved, our Jordan Wolman writes. The bill, which would allow high-temperature plastic-melting facilities to be sited in the Chicago suburbs, would extend an expiring 2019 law that does the same thing. But while the original law passed the state Legislature nearly unanimously, this year’s bill is splitting the state's Democratic caucus. It passed a committee earlier this month but failed to receive a vote off the House floor before a late March deadline. It's a sign of how polarized the debate around the technology has become. Twenty-four states have passed similar bills since 2017, the majority of them Republican strongholds. The Democratic sponsor in Illinois, state Rep. Larry Walsh, Jr., is making a jobs argument, but other Democrats are skeptical about keeping the door open to chemical recycling. “Once you start something, it's hard to reverse,” said Rep. Anna Moeller (D-Ill.), who voted against the bill in a House committee earlier this month. “We need to be very careful before anything is built and up and running, because then we're kind of stuck with it." Environmental groups are pressing their opportunity. “This is absolutely our chance to stop the fast tracking of chemical recycling,” said Jennifer Walling, executive director of the Illinois Environmental Council. Mark Biel, CEO of the Chemical Industry Council of Illinois, said he's still hoping to move the measure before the legislative session ends in mid-May by putting it in another vehicle. Meanwhile, Rhode Island could become the first state to ban chemical recycling facilities altogether, under a bill that had its first hearing Thursday in the state House Environment and Natural Resources Committee. Fifteen companies and industry groups, including the American Chemistry Council and American Fuel and Petrochemical Manufacturers, weighed in Wednesday in opposition. YOU TELL US GAME ON — Happy Friday! Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. We deliver data-driven storytelling, compelling interviews with industry and political leaders, and news Tuesday through Friday to keep you in the loop on sustainability. Team Sustainability is editor Greg Mott, deputy editor Debra Kahn, and reporters Jordan Wolman and Allison Prang. Reach us at gmott@politico.com, dkahn@politico.com, jwolman@politico.com and aprang@politico.com. Want more? You can have it. Sign up for the Long Game. Four days a week and still free. That’s sustainability! WHAT WE'RE CLICKING — Here's yet another analysis questioning the merits of a carbon credit program, this one dealing with Peru's Cordillera Azul National Park. The AP has the story. — The Washington Post takes a look at why the Biden administration's oil policies are angering both big oil and green activists. — Coal prices are plummeting, the Wall Street Journal reports, thanks to relatively warm winter weather that helped rebuild stockpiles.   LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today.       Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Jordan Wolman @jordanwolman Allison Prang @AllisonPrang   Follow us

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