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Analysis: A Larger Vision Emerges from the U.S. Climate Law

The Inflation Reduction Act of 2022 that was recently signed into law includes incentives to help consumers buy electric vehicles — as long as they meet strict criteria — but that’s not necessarily the ultimate goal.

Disassembling an electric vehicle battery.
Electric car buyers hoping the newly passed federal legislation aimed at addressing climate change will give them a fresh round of financial incentives may want to read the fine print.

Yes, the bill — quizzically called the Inflation Reduction Act of 2022 — signed by President Joe Biden Jr. reinstates the federal $7,500 electric vehicle tax credit, which may have expired for some models. But to qualify, the legislation places special provisions around ensuring the car’s battery or components within the battery — the heavy metals like lithium and cobalt — do not come from a “foreign entity of concern,” which translates to China. These provisions only increase with each model year.

The aim, say industry watchers, is to grow battery production and manufacturing in the U.S. This provision was pushed strongly by Sen. Joe Manchin III, D-W.Va., whose support was crucial to getting the bill passed. But it also squared well with Biden’s larger goal of giving fresh breath to U.S. manufacturing.

“When you pass a bill like this, obviously, there’s a tremendous amount of compromise,” said Gabe Klein, co-founder of Cityfi and the former transportation director for Chicago and Washington, D.C., as well as co-author of the book Start-Up City. Klein was also part of the Biden-Harris transition team.

“I think Manchin and others were very focused on the U.S. mineral production, the U.S. battery production. I know President Biden is also big on this,” he added.

The earlier-passed Infrastructure Investment and Jobs Act and the new climate and health-care law serve together as bookends, cradling the president’s domestic agenda. The two laws have immediate aims: rebuild infrastructure, make prescription drugs more affordable, combat climate change. But within these laws, there is also a larger vision to reimagine the country and right some past wrongs — whether those are decades of transportation inequity or rebuilding the nation’s manufacturing economy for a new era.

“I actually, personally believe that one of the problems we have in this country, whether you look at it politically or economically, is that we have a lot of haves and have-nots,” Klein told me. “We don’t produce as much in this country as we used to. And Americans, fundamentally, unlike some other cultures, they define themselves by their work. And I think for people that used to work making something with their hands, and making a good, living wage … I think there’s something bigger there, and more important about pulling the production back to the United States.”

Sure, the car companies will grumble about the U.S.-made battery requirement. It means buyers eyeing their EV models may look to another company qualifying for the tax credit. But the requirement also serves the purpose of nudging companies toward the direction of onshoring battery production, building supply chains, manufacturing facilities and hiring U.S. workers.

“And, I will say that nobody moves faster than big business when you put big incentives on the table,” Klein remarked.

Other observers of the electric vehicle landscape had a similar take on the legislation. Brian Willis, a spokesman for the Zero Emission Transportation Association (ZETA), said the legislation helps to put “the train on the right track that’s heading toward North America, that’s headed toward our allies, and heading toward the full economic benefit of onshoring this particular industry.”

Most automakers will not likely meet the U.S. battery production requirements by 2023 to qualify for the tax credit, said Willis, adding, “Will it take them five or six years to meet? I highly doubt it.”

“It will more likely take one to two years to meet this requirement,” he continued.

Simply electrifying transportation doesn’t have to be — and shouldn’t be — the only goal when consequential and monumental public policy like the infrastructure law or climate legislation is drafted. In the case of both of these, the country should harness a larger vision, experts say, toward reducing car trips or creating more livable cities.

“How do we make sure that mobility needs are being met in an equitable fashion? What infrastructure do we need? What’s the role of micromobility?” were some of the questions raised by Andre Dua, a senior partner at McKinsey and Company, in some of his comments at the CoMotion Miami conference in April. “In other words, a much more comprehensive view than an electrification view. Because that might lead us down the path of some unintended consequences.”

The next wave of innovation possibilities the new legislation can inspire may come in the form of curbside charging, shared mobility, bi-directional charging and other developments which will only advance the desirability, sustainability and equity reaches of EVs, said Klein.

“People need to share in a dense, urban environment. And we need to figure out ways to make that work,” he added.
Skip Descant writes about smart cities, the Internet of Things, transportation and other areas. He spent more than 12 years reporting for daily newspapers in Mississippi, Arkansas, Louisiana and California. He lives in downtown Yreka, Calif.