Expanded electric car subsidies were supposed to be a centerpiece of President Joe Biden’s signature climate law, accelerating emissions reductions by allowing buyers to claim generous tax credits and save thousands of dollars on a plug-in vehicle.
But in reality they’re looking pretty stingy. The Biden administration this week announced vehicle models eligible for federal tax credits, and only 11 of more than 90 electric vehicles on the market today qualify for the full $7,500 tax credit. Of those, two are not fully electric, but plug-in hybrids with a battery-only range of 21 to 32 miles. An additional seven vehicles qualify only for a half-credit of $3,750.
That’s an embarrassingly short list for a law Biden has touted as bold, transformative and “the biggest step forward on climate ever.” And it’s bad news for consumers who might prefer other EV models and for the environment because it only blunts efforts to cut vehicle pollution fast enough to prevent catastrophic climate change.
The paltry selection of eligible vehicles is due to restrictions included in the Inflation Reduction Act to win the support of Sen. Joe Manchin III, D-W.Va., and to encourage domestic manufacturing and reduce reliance on China, which produces most of the world’s EV batteries. To qualify for the tax credit, vehicles must be assembled in North America and built with specific percentages of battery parts and critical minerals from the U.S. or countries with which it has a free trade agreement.
These complex rules have hamstrung implementation of a law that is supposed to give consumers clear incentives to switch to electric vehicles. The Biden administration should act quickly to loosen them so that more zero-emission vehicles, including more affordable models, are eligible for a tax credit. If that cannot be done within the bounds of the law, Congress needs to step in with clarifying legislation.
The list includes few small, affordable cars, which are more environmentally friendly and safer than big, hulking SUVs. One of the only such cars on the list is the Chevrolet Bolt. The $7,500 tax credit gets the lowest-priced version, with a suggested retail price of $26,500, down to $19,000, which is less than the sticker price for some gas-powered compact cars like the Toyota Corolla or Hyundai Elantra. But good luck finding one. Limited inventory, ongoing supply problems and dealer markups have Bolts and other lower-priced models especially hard to find, and being one of only a few on the tax credit list is likely to drive up competition and prices.
It’s possible, as Biden administration officials argue, that in the coming years the manufacturing and battery sourcing rules will push manufacturers to build more EVs in the U.S. and support American jobs. But in the short term, they will hinder EV adoption at a critical moment when, for the sake of our health and our planet, we have no time to waste in racing toward our climate goals.
The transportation sector is the nation’s largest source of pollution, responsible for 28% of U.S. greenhouse gas emissions. Most of that comes from gas-fueled cars and trucks that must be quickly replaced with zero-emission models.
The Biden administration is at last taking good long-term action to transition to electric cars and trucks, with the Environmental Protection Agency last week proposing pollution standards that would require about two-thirds of new passenger vehicles sold by 2032 to be electric (they accounted for only 6% of new sales last year). But those rules aren’t set to take effect until model year 2027, and that’s too long to wait to start getting more zero-emission vehicles on the road.
Tax credits are critical to ramping up EV sales in the near term, but they’ll remain largely ineffective as long as they remain mired in so much red tape.
