The Electric Vehicle Policy to increase EV adoption are an important component of a broad agenda to increase access to all modes of clean personal mobility and goods movement. Providing more households with access to electric vehicles is critical to addressing climate change and reducing the health risks of air pollution, but systemic barriers related to housing, income, and finance are stalling progress. Smart policy design can help overcome these barriers, accelerate EV adoption, and more equitably realize the benefits of vehicle electrification.
Federal policies should break down barriers to installing charging infrastructure at homes. Charging infrastructure policies should be designed to fill information gaps, assist drivers and locations hosting charging stations in paying for the upfront costs of charging, and align the interests of drivers and the charging station hosts. Those policies should emphasize increasing access to EV charging for renters, residents of multiunit dwellings, and drivers who cannot install charging at home.
A shift to electric transportation will reduce the economic, national security, and emissions impacts that stem from America’s dependence on oil. Widespread adoption of electric vehicles will create new jobs, reap financial savings for consumers and fleet operators, improve air quality, and reduce greenhouse gas emissions.
Federal Legislation: We can’t afford to wait
The Biden-Harris Administration and 117th Congress have a critical opportunity to establish U.S. leadership in electric transportation and to maintain our global competitiveness in the automotive industry by enacting key policies that will accelerate EV manufacturing and sales. The Infrastructure Investment and Jobs Act (already signed by the president) and the Build Back Better Act (awaiting approval in the U.S. Senate) both contain provisions that are essential to a successful transition to EVs.
The Electrification Coalition supports the enactment of critical federal policies supported by four core pillars:
- Purchase incentives
- Charging infrastructure fundinge
- Federal fleet electrification funding
- EV manufacturing tax credits
Purchase Incentives
Tax credits for all vehicle types (light-, medium-, and heavy duty) will continue to spur market growth by reducing the early higher upfront costs of EVs and providing important signals to manufacturers, consumers, and fleet operators that the United States is prioritizing an electric transportation future.
Lift Section 30D Cap
Lift the cap of the Section 30D federal EV tax credit to work for more consumers, public- and private-sector fleet operators, and all manufacturers.
- The credit should be increased for vehicles manufactured in the United States to ensure a strong U.S. auto industry that is competitive globally.
- The credit should be modified to be fully transferable, enabling a point-of-sale incentive and providing important clarity for consumers and sales staff.
- All battery-electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) with a minimum battery capacity of 20 kWh should be eligible for the credit.
Medium- and Heavy-Duty Vehicle Incentives
Medium- and heavy-duty (MHD) vehicles, such as trucks and buses, make up a quarter of all transportation emissions. This leads to poor air quality, especially in low-income communities and communities of color. EVs, which have zero tailpipe emissions, will reduce these negative impacts, drastically cut oil consumption, and can support U.S. manufacturing.
- An MHD tax credit should be established for medium- and heavy-duty electric vehicles (MHDEVs). The tax credit should cover up to 30% of the vehicle cost.
- The credit should be available for both individuals and businesses and including a mechanism for not-for-profit credit.
- The credit applies to vehicle Classes 3 or higher
- Expand the Diesel Emissions Reduction (DERA) program and the Congestion Mitigation and Air Quality (CMAQ) programs, prioritizing 80% of in years 2022-2025) and 100% of funding for electric vehicles beginning in 2025.
- Excise tax: Suspending the 12% federal excise tax on zero-emission trucks will set a clear market signal and incentivize public interest. This also acts as a purchase incentive.
Used EV Credit
Create a new credit for buyers of used EVs, providing more options to low- and middle-income consumers.
- The credit should apply only to electric cars at least two years old that cost less than $25,000.
- The credit should apply only to buyers whose adjusted gross income is less than $75,000 for individuals and $150,000 for joint filers.
Charging Infrastructure Funding
Consumers and fleet operators need adequate access to EV charging infrastructure, lack of which is currently a barrier to greater EV adoption.
Section 30C Extension
Extend the Section 30C Alternative Fuel Vehicle Refueling Property Credit out to 2025, increase the cap of $30,000 allowed per project, and allow the credit to be applicable to each station, not the “project,” which could include multiple stations.
- The EC supports the Senate Clean Energy for America Act, and the House GREEN Act.
Rest Stop Electrification
Enable commercialization of rest stops along interstate highways: Allow for EV charging stations to be defined as allowable commercial activity at rest stops.
Funding for Federal Fleet Electrification
The United States government can lead by example by electrifying the federal fleet, including the U.S. Postal Service vehicles. The EC supports a bold allocation of funding for federal fleet electrification, including USPS fleet electrification.
EV Manufacturing Tax Credit
The 48C Advanced Energy Manufacturing Tax Credit should be updated to help manufacturers and other industrial users to retool, expand, or build new facilities.
- The credit should include a carve-out for use in communities where coal mines have closed or coal power plants have retired.
- The credit should provide new guidelines and technical assistance for new applicants in states that have not accessed the Section 48C manufacturing tax credit in the past.
- The credit should support domestic job creation specifically for workers dislocated from manufacturing, coal mining, or retired coal power plants.
- The credit should prioritize reinvestment in communities with high unemployment.
Main policy drivers of EV adoption to date
Significant fiscal incentives spurred the initial uptake of electric light-duty vehicles (LDVs) and underpinned the scale up in EV manufacturing and battery industries. The measures – primarily purchase subsidies, and/or vehicle purchase and registration tax rebates – were designed to reduce the price gap with conventional vehicles. Such measures were implemented as early as the 1990s in Norway in the United States in 2008 and in China in 2014.
Gradual tightening of fuel economy and tailpipe CO2 standards has augmented the role of EVs to meet the standards. Today, over 85% of car sales worldwide are subject to such standards. CO2 emissions standards in the European Union played a significant role in promoting electric car sales, which in 2020 had the largest annual increase to reach 2.1 million. Some jurisdictions are employing mandatory targets for EV sales, for example for decades in California and in China since 2017.
Convenient and affordable publicly accessible chargers will be increasingly important as EVs scale up. To help address this, governments have provided support for EV charging infrastructure through measures such as direct investment to install publicly accessible chargers or incentives for EV owners to install charging points at home. In some places building codes may require new construction or substantial remodels to include charging points, for example in apartment blocks and retail establishments.
Efforts by cities to offer enhanced value for EVs has encouraged sales even outside of urban areas. Such measures include strategic deployment of charging infrastructure, and putting in place preferential/prohibited circulation or access schemes such as low- and zero-emission zones or differentiated circulation fees. Such measures have had a major impact on EV sales in Oslo and a number of cities in China.
Broader and more ambitious policy portfolios to accelerate the transition
Making the 2020s the decade of transition to EVs requires more ambition and action among both market leaders and followers. In markets that demonstrated significant progress in the 2010s, a primary direction in 2021 and beyond should be to continue to implement and tighten, as well as to broaden, regulatory instruments.
Examples include the European Union CO2 emissions regulation for cars and vans, China’s New Energy Vehicles (NEV) mandate or California’s Zero-Emission Vehicle (ZEV) mandate.
Near-term efforts must focus on continuing to make EVs competitive and gradually phasing out purchase subsidies as sales expand. This can be done via differentiated taxation of vehicles and fuels, based on their environmental performance, and by reinforcing regulatory measures that will enable the clean vehicle industry to thrive.
In the long term, realising the full potential for EVs to contribute to cut vehicle emissions requires integration of EVs in power systems, decarbonisation of electricity generation, deployment of recharging infrastructure and manufacturing of sustainable batteries.
Countries that currently deploy limited numbers of electric cars can profit from the lessons learned and advances already made in automotive and battery technology to support the production and uptake of EVs. Product innovation and the expertise developed in the charging services industry will also be beneficial for emerging economies.
But they will also need to significantly tighten fuel economy and emissions standards. Emerging economies with large markets for second-hand imported cars can use policy levers to take advantage of electric car models at attractive prices, though they will need to place particular emphasis on implications for electricity grids.
To date, more than 20 countries have announced the full phase-out of internal combustion engine (ICE) car sales over the next 10‑30 years, including emerging economies such as Cabo Verde, Costa Rica and Sri Lanka. Moreover, more than 120 countries (accounting for around 85% of the global road vehicle fleet, excluding two/three-wheelers) have announced economy-wide net-zero emissions pledges that aim to reach net zero in the coming few decades.
Policy attention and actions need to broaden to other transport modes, in particular commercial vehicles – light-commercial vehicles, medium- and heavy-duty trucks, and buses – as they have an increasing and disproportionate impact on energy use, air pollution and CO2 emissions. Medium- and heavy‑duty vehicles represent 5% of all four-wheeled road vehicles in circulation but almost 30% of CO2 emissions.
Progress in batteries has led to rapid commercialisation in the past few years of more and more models in ever heavier weight segments and with increasing ranges.
In 2020, California was the first to propose a ZEV sales requirement for heavy-duty trucks. The Advanced Clean Truck Regulation is due to take effect from 2024. The Netherlands and a number of other countries are implementing zero-emission commercial vehicle zones and pioneering deployment efforts.
EV Maintenance Cost: Everything You Want to know in 2022
Although this is a “hard-to-abate” sector and there are competing decarbonisation pathways (including hydrogen and biofuels), the electrification of medium- and heavy-duty vehicles is increasingly recognised as a promising pathway to reduce both local pollutant and CO2 emissions. Electrification of HDVs requires policy support and commercial deployment similar to that which passenger cars enjoyed in the 2010s.
Electric buses are already making a dent in key cities around the world, supported by national and local policies that target air pollution. Policy measures to promote electric buses are diverse; they may include competitive tenders, green public procurement programmes, purchase subsidies and direct support to charging infrastructure deployment, as well as effective pollutant emissions standards.
Given their enormous number and populartity, electrifying two/three-wheelers in emerging economies is central to decarbonising transport in the near term. China is taking a lead with a ban of ICE versions of two/three-wheelers in a number of cities.