The Biden administration proposed revolutionary new emissions rules for vehicles to speed the “clean energy” transition and increase electric vehicle sales, in the latest example of its authoritarian approach to transforming the U.S. economy to net zero carbon. At the same time, the European Union is stepping back on its ban on petroleum vehicles to allow synthetic fuels (e-fuels) in internal combustion engines (ICE) post-2035 as several countries complained that the ban went too far on banning ICE vehicles. Wisely, Germany noted that to be serious about climate-neutral mobility, all technological options must be kept open and used. Poland’s Prime Minister interjected that Polish families cannot afford these expensive vehicles, and an ICE ban would cause Polish firms producing car components for well-known global brands to suffer irreparable harm. Americans may soon be envious of Polish concern for the lives of their citizens. With this regulation, the freedom that comes with the personal mobility an affordable vehicle affords regular Americans may be coming to an end.
Other reasons to slow down the ban on ICE vehicles include a risk that there will not be enough EV charging stations or battery-making plants to satisfy demand in such a short timeframe, the slow start-up of critical metal mines needed to produce EV batteries, the huge subsidies paid by taxpayers to get EVs off the ground because of their larger price tag compared to ICE vehicles, the rising cost of electricity as subsidized and mandated wind and solar power are added to the grid, the Chinese dominance of the EV and battery market and its critical mineral processing, and the energy security issues that arise from putting the entire U.S. energy system into a single fuel, mostly produced by intermittent renewables. China’s dominance of the supply chains for so-called “clean” technologies is to a much higher degree than OPEC’s control of oil supply.
The EPA Rules
The Biden administration proposed two plans aimed to ensure two-thirds of new passenger cars and pick-up trucks, a quarter of new heavy trucks, including 18-wheeler big rigs, and half of new buses sold in the United States are all-electric by 2032. Additionally, 46 percent of sales of new medium-duty trucks, such as delivery vans, will need to be all-electric or use some other form of zero-emissions technology by the same year. The rules would take effect starting with model year 2027. The proposed rules are much more ambitious than Mr. Biden’s previously announced target of 50 percent all-electric new vehicle sales by 2030, a goal many saw as preposterous.
Last year, all-electric vehicles accounted for 5.8 percent of new cars sold in the United States and all-electric trucks made up fewer than 2 percent of new heavy trucks sold. Even with the tax subsidies from the Inflation Reduction Act, the Energy Information Administration (EIA) forecasts that electric vehicles will make up only 15 percent of sales in 2030 and 19 percent by 2050. While electric vehicles are becoming more popular in the luxury class, they are less competitive in the mass market, according to EIA, which is why the Biden administration is forcing the new EPA rules on U.S. automakers. Luxury vehicles are too expensive for most Americans and may breach the limits for tax credits. Moreover, the credits are income limited, although the Biden Administration has added a “leasing loophole” which may allow the wealthy to receive the benefits of credits via leasing.
The new rules will require a revolution in the U.S. auto industry where U.S. automakers are already losing money on the EV transition. Ford reported that its U.S. EV business had losses totaling $2.1 billion, a figure expected to increase to $3 billion in 2023. Nearly all major automakers have invested billions in producing electric vehicles as they continue to manufacture conventional vehicles powered by gasoline, which produce their profits and underwrite their EV sales. The proposed regulations would require them to invest more heavily and reorient their processes in ways that would essentially spell the end of the internal combustion engine. Tesla is the only American automaker that is poised to emerge as a winner under the new rules because it produces only electric cars. The company accounted for 64 percent of the U.S. electric vehicle market last year.
The Biden administration’s plan to spur electric vehicles is expected to decrease U.S. oil demand by an estimated 17 billion barrels through 2055. The EPA estimated that its proposal to be finalized next year after comments are considered, would curb U.S. oil imports by as much as 16 billion barrels through 2055, which translates to about a 1.6 million barrel per day decline between 2027 and 2055. However, as the United States is no longer dependent on oil imports since our petroleum exports exceed our petroleum imports by about a million barrels per day, this measure has no consequence. Unfortunately, the expected reduction in liquid fuel demand will affect U.S. oil refiners and biodiesel and ethanol producers. After the COVID lockdowns that reduced petroleum demand, many U.S. refineries converted or are converting to biofuels production, reaping generous benefits from state and federal subsidies.
How It Works
The EPA cannot mandate that carmakers sell a certain number of electric vehicles. However, under the Clean Air Act, the agency can limit the emissions coming from the number of cars each manufacturer sells. EPA set the limit in these rules so tightly that the only way manufacturers can comply is to sell a certain percentage of zero-emissions vehicles. Each model year that the rule is in effect, car companies are required to report to the federal government the average greenhouse emissions of all new cars sold. Companies that fall short of the standard can be fined billions of dollars.
If electric vehicles are more efficient and save customers money, as Biden administration officials claim, manufacturers would not have to be compelled and forced into producing them through these EPA rules. While the rules do not dictate the specific cars or models that must be made, the Administration is remaking a major industry in a way that is unprecedented in a free-market economy. This is Chinese-style central planning, as automakers must first answer to government politicians rather than consumers and investors. The automaker lobby indicated, “EPA’s proposed emissions plan is aggressive by any measure. This requires a massive, 100-year change to the U.S. industrial base and the way Americans drive.”
Could this be the end of personal mobility for many Americans? Although it is too early to tell, this regulation alone will price many out of the market, which may explain the Biden administration’s fascination with electric buses. Clearly, the Biden administration does not believe Americans are enlightened enough to make their own choices and is imposing radical changes upon us that will only ruin this country by taking away personal mobility for many.