Source: www.nytimes.com : 2022-07-12 17:58:15 : Coral Davenport, Lisa Friedman and Hiroko Tabuchi
WASHINGTON — Senator Joe Manchin III’s opposition to government incentives for electric vehicles is a sticking point in negotiations over President Biden’s tax and spending package — talks that appear to be coming to a head this week after months of fits and starts.
Mr. Biden and most Senate Democrats want billions of dollars in tax credits for consumers who buy electric vehicles, which they see as key to fighting climate change.
The transition away from polluting gas-powered cars and trucks is even more critical to the administration’s climate goals after a recent Supreme Court decision that curtailed the government’s authority to cut pollution from power plants.
Mr. Manchin, a West Virginia Democrat who has taken more campaign contributions from oil, gas and coal companies than any other senator, has assailed the proposed tax credits, which would be worth up to $12,500 per vehicle, as unnecessary and wasteful. He has also expressed skepticism about increased government spending at a time of inflation.
Mr. Manchin’s opposition to tax credits for electric vehicles mirrors that of the oil industry, which would be threatened by a wholesale shift away from gas-powered cars and trucks. The American Petroleum Institute, the fossil fuel industry’s lobbying arm, has warned against a “rushed E.V. transition,” saying government action to support electric vehicles could limit transportation choices for Americans and leave them “high and dry.”
“Bottom line: efforts to subsidize E.V. adoption can be costly for taxpayers and consumers,” Mike Sommers, the group’s president, said last year.
But a fast transition to electric vehicles is exactly what scientists say is needed to quickly and sharply cut the emissions that are dangerously heating the planet. Pollution from transportation is the leading source of greenhouse gas emissions in the United States.
Mr. Manchin has already succeeded in shrinking the proposed tax credits by about a third, deleting a $4,500 incentive for consumers who purchase union-made American cars, a measure opposed by Toyota Motor, which operates a nonunion plant in Mr. Manchin’s home state.
In a statement, Toyota said that while it supported tax credits for consumers to speed the transition to electric cars, awarding a premium for union-made vehicles would be wrongheaded.
A Critical Year for Electric Vehicles
As the overall auto market stagnates, the popularity of battery-powered cars is soaring worldwide.
“What does this say to the American autoworker who has decided not to join a union?” the company said. “It says that their work is worth $4,500 less because they made that choice. What does this say to the American consumer?”
That money was designed in part to win support from American automakers and union voters in industrial areas of the Midwest and Northeast who helped elect Mr. Biden but who are wary of a transition to electric vehicles, which require fewer workers to assemble.
Now Democrats are considering a means test to limit tax credits to consumers below a certain income level as a way of appeasing Mr. Manchin, according to people close to the talks. And he has suggested stripping out the tax credits altogether.
“There’s a waiting list for E.V.s right now with a fuel price at $4, but they still want us to throw $5,000 or $7,000 or a $12,000 credit to buy an electric vehicle,” Mr. Manchin said at a Senate hearing this year.
“It makes no sense to me whatsoever,” Mr. Manchin said, adding, “It’s absolutely ludicrous.”
West Virginia drivers purchase fewer electric vehicles than almost any other state. As of 2020, there were only 600 EVs registered in the state, representing less than 1 percent of all vehicle registrations. Only motorists in Wyoming and South Dakota drive fewer electric vehicles, according to federal data.
“Combine that with the oil and gas focus and I am not sure that there is a public groundswell of support for E.V.s in that state that might compel Manchin to embrace E.V. subsidies for new vehicle purchase,” said Barry Rabe, a professor of public policy at the University of Michigan.
The typical buyer of an electric vehicle earns more than $100,000 annually, is college educated and owns at least one other vehicle, according to a 2021 survey commissioned by the Fuels Institute, an energy research organization.
“These are people who aren’t West Virginians, aren’t people that he represents and he’s raised real questions about why, in his mind, taxpayers should be subsidizing their ability to buy very pricey, new-to-market E.V.s,” said Josh Freed, the senior vice president for climate and energy at Third Way, a moderate think tank.
Mr. Freed described tax credits to purchase electric vehicles as critical to spur the market and encourage carmakers to produce a high volume of automobiles, which would bring down the price per unit. A 2021 study by Cox Automotive found that 51 percent of shoppers said electric vehicles were too expensive to seriously consider.
Mr. Biden wants 50 percent of new vehicles sold by 2030 to be all-electric — up from just 5 percent today. To meet that goal, he wants to pair tax credits with tough new auto fuel economy regulations now being developed by the Environmental Protection Agency.
But the same litigants who won a Supreme Court decision in June that limited the E.P.A.’s authority to regulate greenhouse gas pollution from smokestacks are expected to challenge the rules under development on tailpipe emissions. That makes the tax credits even more important, said Drew Kodjak, executive director of the International Council on Clean Transportation, a research organization.
As the swing vote in an evenly divided Senate, Democrats need Mr. Manchin’s backing in order to push through a budget bill without any Republican support. That has given him unusual sway over the substance of the legislation.
Senator Chuck Schumer of New York, the Democratic majority leader, is making a last-ditch effort to pass a scaled-down domestic policy bill before August. Mr. Schumer has tested positive for Covid but spoke with Mr. Manchin on Monday via a video call, an aide said.
Mr. Manchin has not yet signed off on a top-line figure for the overall bill, but supporters are expecting far less than the $555 billion in climate and clean energy provisions that the House approved when it passed its version of the bill in November. Several people familiar with the negotiations said lawmakers were discussing a $300 billion ceiling for climate and energy measures.
On Monday Mr. Manchin dismissed the notion that lawmakers were anywhere close to a deal.
“There’s a lot of talk and considerations going on and back and forth,” he said, adding that any climate legislation needed to address inflation and should increase the supply of fossil fuels.
Mr. Manchin said he was most concerned about the price at the pump. “How do we bring the price of gasoline?” he said. “From the energy thing, but you can’t do it unless you produce more. If there’s people that don’t want to produce more fossil, then you got a problem. That’s just reality. You got to do it.”
Mr. Manchin’s efforts to whittle down the electric vehicle tax incentives began last fall, as Senate Democrats first sought to reach a deal on a much broader $2 trillion climate change and social policy bill.
In addition to eliminating the union-made tax credit, Mr. Manchin has suggested deleting the core $7,500 credit for purchase of any kind of electric vehicle, according to several people involved in the negotiations. That would leave only a $500 tax credit for electric vehicles with a battery made in America.
That would also put Mr. Manchin at odds with Toyota and the United States’ Big Three automakers. While Toyota opposes the tax credits for union-made electric vehicles, last month the company joined with General Motors, Ford and Stellantis in a letter to congressional leaders asking them to expand number of electric vehicle sales that would be eligible to receive the tax credits. The current proposal would limit the tax credits to the first 200,000 vehicles sold by each individual automaker.
“Eliminating the cap will incentivize consumer adoption of future electrified options and provide much-needed certainty to our customers and domestic work force,” the auto executives wrote.
One possible bargaining chip in the negotiations between Senate Democrats and Mr. Manchin could be the construction of a new hydrogen research and development hub in West Virginia. The bipartisan infrastructure law includes $8 billion to create four such regional “hydrogen hubs.”
Hydrogen can be converted into electricity to power a vehicle, emitting only water vapor. But much of the hydrogen produced today is extracted from natural gas, a process that generates methane and carbon dioxide, both greenhouse gases.
Mr. Manchin and other leaders from West Virginia want the Biden administration to choose their state as a site for one of the hubs, where hydrogen would be produced using natural gas.
“We have not put the money or put the research to hydrogen the way we have on E.V.s,” Mr. Manchin said this year.
One person familiar with Mr. Manchin’s thinking, who asked to speak anonymously because the negotiations were not public, said Mr. Manchin could support some electric vehicle tax credits in exchange for an understanding with the Biden administration that West Virginia would be selected as a hydrogen hub.
Sam Runyon, a spokeswoman for Mr. Manchin, dismissed that suggestion. “There is absolutely no truth to this,” she said.
A hydrogen industry coalition backed by oil companies including Chevron and BP is pushing for federal support for hydrogen infrastructure. Toyota has also staked its future on the development of hydrogen fuel cell vehicles — a costlier alternative that has fallen behind electric battery-powered cars.
John Kilwein, chairman of the political science department at West Virginia University, said Mr. Manchin’s opposition to electric vehicle tax credits, and his effort to make the entire package smaller, plays well at home.
“West Virginia is getting redder, dislikes D.C., dislikes national Dems and dislikes the federal government,” Mr. Kilwein said in an email. “Manchin gets to argue that he’s the common sense West Virginian who keeps them under control Emily Cochrane contributed reporting from Washington.
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