You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
If the U.S. wants to compete on EVs, it will have to catch up to the rest of the world.
On Wednesday, the Biden administration finalized sweeping new rules that will sharply limit how much carbon pollution new cars and trucks can emit into the atmosphere. The rules — which rank as one of Biden’s most important climate moves — are aimed at accelerating the country’s transition to electric vehicles and plug-in hybrids, requiring most new cars sold in 2032 to burn little gasoline or none at all.
My colleague Emily Pontecorvo has an excellent explainer on how the new rules work. But I want to focus on one more aspect: Why they are able to do so much more than previous tailpipe regulations.
The new rules are not the Environmental Protection Agency’s first foray into regulating climate-warming pollution from vehicle tailpipes. Since 2010, the EPA has periodically tightened new limits on the amount of climate-warming pollution that cars and light-duty trucks can emit. The new rules are in some ways merely the next evolution of that approach.
But they also go much further than the agency ever has before. Where previous regulations essentially required automakers only to sell some conventional hybrids and electric vehicles, by the beginning of next decade, the lion’s share of cars sold in the United States must be electric vehicles or hybrids, the EPA now says.
Why is that ambition possible? One reason is that the United States has a more aggressive climate law on the books now than it has had during past rulemakings. Biden’s climate law, the Inflation Reduction Act, will subsidize the purchase, leasing, and manufacturing of electric vehicles. Because of how the EPA calculates the costs and benefits of its proposals, these subsidies will significantly cut the projected cost of even an ambitious rule — in this case by as much as $65 billion. (The agency calculates that consumers will save even more money — up to a staggering $230 billion — by paying less gasoline tax because they will be buying less fuel.)
Yet the IRA is not the only reason — or even the main reason — these rules can go so much further than what was previously imagined. If the United States can pursue such an ambitious standard now, that’s because it’s following on the heels of electric vehicle policy passed in other jurisdictions: China, California, and the European Union. These state and national policies have set the pace for the EV transition around the world, setting new market expectations or significantly cutting the costs of building an electric car.
They also created a sense of inevitability around electric vehicles. “The future is electric. Automakers are committed to the EV transition,” John Bozella, the president and CEO of the Alliance for Automotive Innovation, a car-industry trade group in Washington, said in a statement Wednesday on the EPA rules.
Corey Cantor, an analyst at the market research firm BNEF, summed it all up. “What is different this time — compared to say, where the world was in 2016 — is that there is now a thriving global EV market, versus a nascent one,” he said. There are also a handful of global companies poised to profit from a global EV transition, regardless of what Ford, Toyota, General Motors, and other legacy auto brands do.
Even before Biden asked the EPA to issue new regulations, in other words, these policies had changed the metaphorical game board — and changed how far the agency could push the rules.
These global policies don’t all take the same form. California and the European Union already require that all new cars sold in 2035 must be electric vehicles or plug-in hybrids, although the EU has carved out an exception for a theoretical zero-carbon gasoline replacement.
Due to a longstanding provision in the Clean Air Act, other U.S. states can opt into California’s stricter air pollution laws. So far, 14 in total — making up more than 40% of America’s light-duty car market — have adopted California’s 2035 zero-emissions vehicle mandate.
China, meanwhile, has not set a requirement that all cars must plug in by a certain year. Instead, it will require that “new energy vehicles” — a category that can include EVs and plug-in hybrids, but also conventional hybrids — must make up half of all car sales by 2035. But Chinese companies have raced ahead of this target. Wang Chuanfu, the CEO of the massive Chinese automaker BYD, estimated this weekend that 50% of China’s car sales could be new energy vehicles as soon as June.
All together, these mandates added up to a strong market signal. By last year, more than half of the global auto market was already covered by some form of clean vehicle rule — even before the EPA did anything final. Now, if the new EPA rules are enforced as written, then more than 60% of the world’s car market will be subject to some kind of emissions mandate.
This reflects, at least in part, a recognition that the global car market is changing beyond the ability of Washington politicians to influence it. “If we’re talking 10 years from now, policy probably won’t be needed, at least in leading markets. EVs will have just naturally taken over the market,” Stephanie Searle, who leads research programs at the International Council on Clean Transportation, told me.
Over the past year, a parade of cheap new EVs from Chinese automakers — including the BYD Seagull, a sub-$10,000 hatchback that gets up to 251 miles of range — have stunned the automotive industry. Jim Farley, the CEO of Ford, told investors last month that the company was reorienting its strategy to combat the rise of Chinese electric-car makers, such as BYD and Geely.
“If you cannot compete fair and square with the Chinese around the world, then 20% to 30% of your revenue is at risk,” Farley said at an industry conference last month. He disclosed that Ford had set up a secret internal “skunkworks” engineering team to make an affordable electric vehicle that could compete head-to-head with Chinese models on cost. The company has delayed the release of a new electric three-row SUV in order to produce three roughly $25,000 models, according to a Bloomberg report last week.
“Automakers see the future is electrified, and they see that Chinese companies will eat their lunch if they don’t get going,” Searle, the clean transportation researcher, said. “There’s no putting the genie back in the bottle.”
But China’s dominance was not inevitable — it was itself the result of ambitious industrial policies. Roughly 15 years ago, China identified the electric vehicle industry as a sector where it could eventually become a global leader in export markets, Benjamin Bradlow, a Princeton professor of sociology and international affairs, told me.
Since then, the country’s leaders have targeted the EV sector with generous subsidies far beyond what Americans lawmakers considered for the IRA, he said. They have also encouraged the EV industry’s geographic spread across China and required automakers to sell a certain percentage of EVs across their vehicle fleet.
“It’s a very different style of policymaking” from what America has done with the IRA, Bradlow said, although like that law it also aimed to lower the cost of technologies. “[China] is targeting a sector and it’s being very specific about being at the technological and price frontier — it’s very export-oriented.”
These policies have succeeded beyond imagining. China is now the world’s largest exporter of cars, and it has become a goliath in the EV industry. The country has achieved what hippies and renegades have long claimed is possible: a thriving and cutthroat electric vehicle industry, where consumers are willing to buy EVs without significant subsidies. (Indeed, China’s electric-car makers have been locked in a price war over the past year, driving even greater adoption as prices fall.)
These Chinese industrial policies — along with American and European-funded R&D — have cut tens of thousands of dollars from EV prices. Over the past three decades, the cost of manufacturing a battery has fallen by 97%, and by 2027 manufacturing a new EV battery is projected to cost less than $100 a kilowatt-hour, a long-theorized benchmark at which an electric vehicle will be competitive with a gasoline vehicle.
In the United States, mandates and subsidies in achieving mass EV adoption have not been quite as enthusiastically received. Some 7% of new cars sold in the United States last year were EVs, an all-time high. Plug-in and conventional hybrids made up an additional 8% of new car sales, according to the U.S. Energy Information Administration.
Those sales shares will need to double repeatedly in the years ahead for American automakers to meet the EPA’s new standards. And they point to at least one form of success that has alluded American policymakers so far: creating a robust, popular EV industry that can win over consumers on its own terms.
“The ultimate success of the policy and transition overall is a mix between policy, consumer adoption, and the automakers themselves,” Cantor, the BNEF analyst, told me.
For the first time ever, in other words, “automakers who fall behind may pay a far higher cost for failure to transition,” Cantor said. And that — above anything else — is what makes these EPA rules different from any that have come before.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
The Senate’s reconciliation bill essentially repeals the Corporate Average Fuel Economy standards, abolishing fines for automakers that sell too many gas guzzlers.
A new provision in the Senate reconciliation bill would neuter the country’s fuel efficiency standards for automakers, gutting one of the federal government’s longest-running programs to manage gasoline prices and air pollution.
The new provision — which was released on Thursday by the Senate Commerce Committee — would essentially strip the government of its ability to enforce the Corporate Average Fuel Economy standards, or CAFE standards.
The CAFE rules are the government’s main program to improve the fuel economy of new cars and light-duty trucks sold in the United States. Over the past 20 years, the rules have helped push the fuel efficiency of new vehicles to record highs even as consumers have adopted crossovers and SUVs en masse.
But the Republican reconciliation bill would essentially end the program as a practical concern for automakers. It would set all fines issued under the program to zero, stripping the government of its ability to punish automakers that sell too many polluting vehicles.
“It would essentially eviscerate the standard without actually doing so directly,” Ann Carlson, a UCLA law professor who led the National Highway Traffic Safety Administration from 2022 to 2023, told me.
“It says that, ‘We have standards here, but we don’t care if you comply or not. If you don’t comply, we’re not going to hold you responsible,’” she said.
Representatives for the Senate Commerce Committee did not respond to an immediate request for comment. A talking points memo released by the committee on Thursday said that the new bill would “[bring] down automobile prices modestly by eliminating CAFE penalties on automakers that design cars to conform to the wishes of D.C. bureaucrats rather than consumers.”
Since 1975, Congress has required the National Highway Traffic Safety Administration (pronounced NIT-suh) to set annual fuel efficiency standards for new cars and light trucks sold in the United States. The rules generally require new vehicles sold nationwide to get a little more fuel efficient, on average, every year.
The rules have remained in effect — with varying levels of stringency — for 50 years, although they have generally encouraged automakers to get more efficient since Congress strengthened the law on a bipartisan basis in 2007.
In model-year 2023, the most recent period for which data is available, new cars and light trucks achieved a real-world fuel economy of 27.1 miles per gallon, an all-time high. The vehicle fleet was set to hit another record high in 2024, according to last year’s report.
Opponents of the fuel economy rules argue that the regulations increase the sticker price of new cars and trucks and push automakers to build less profitable vehicles. The Heritage Foundation, the conservative think tank that published Project 2025, has called the rules a “backdoor EV mandate.”
The rules’ supporters say that the standards are necessary because consumers don’t take fuel costs — or the environmental or public health costs of air pollution — into account when buying a vehicle. They say the rules keep gasoline prices low for all Americans by encouraging fuel efficiency across the board.
The strict Biden-era rules were projected to save consumers $23 billion in gasoline costs, according to an agency analysis. The American Lung Association said that the rules would prevent more than 2 million pediatric asthma attacks and save hundreds of infant lives by 2050.
Secretary of Transportation Sean Duffy has targeted the fuel economy rules as part of a wide-ranging effort to roll back Biden-era energy policy. On January 28, as his first official act, Duffy ordered NHTSA to retroactively weaken the rules for all cars and light trucks sold after model-year 2022.
On Friday, Duffy separately issued a legal opinion that would restrict NHTSA’s ability to include electric vehicles in its real-world estimates of the country’s fuel economy rules. The opinion sets up the next round of CAFE rules to be considerably weaker than existing law.
But the new Republican reconciliation bill, if adopted, would render those rules moot.
Under current law, automakers must pay a fine when the average fuel economy of the vehicles they sell exceeds the fuel economy standard set for that year. Automakers can avoid paying that penalty by buying “credits” from other car companies that have done better than the rules require.
The fine’s size is set by a formula written into the law. That calculation includes the number of cars sold above the fuel-economy threshold, how much those cars exceeded it, and a $5 multiplier. The GOP tax bill rewrites the law to set the multiplier to zero dollars.
In essence, no matter how much an automaker exceeds the fuel economy rules, the GOP reconciliation bill will now multiply their fine by zero.
The original CAFE law contains a second formula allowing the government to set even higher penalties if doing so would achieve “substantial energy conservation.” The new reconciliation bill sets the multiplier in this formula, too, to zero dollars.
The CAFE law’s penalties can be significant. The automaker Stellantis, which owns Fiat and Chrysler, recently paid more than $426 million in penalties for cars sold from model year 2018 to 2020. Last year, General Motors paid a $38 million fine for light trucks sold in model year 2020.
The CAFE provision in the GOP mega-bill seems designed to skirt past the Byrd rule, a Senate rule that policies in reconciliation bills must affect revenue, spending, or generally have more than a “merely incidental” effect on the federal budget.
But Carlson, the former NHTSA acting administrator, doubted whether the provision should really survive a Byrd bath.
Zeroing out the fines is “not really about revenue,” she said, but about compliance with the law. “This is a way to try to couch repeal of CAFE in revenue terms instead of doing it outright.”
And more of the week’s top news about renewable energy conflicts.
1. Nassau County, New York – Opponents of Equinor’s offshore Empire Wind project are now suing to stop construction after the Trump administration quietly lifted its stop-work order.
2. Somerset County, Maryland – A referendum campaign in rural Maryland seeks to restrict solar development on farmland.
3. Tazewell County, Virginia – An Energix solar project is still in the works in this rural county bordering West Virginia, despite a restrictive ordinance.
4. Allan County, Indiana – This county, which includes portions of Fort Wayne, will be holding a hearing next week on changing its current solar zoning rules.
5. Madison County, Indiana – Elsewhere in Indiana, Invenergy has abandoned the Lone Oak solar project amidst fervent opposition and mounting legal hurdles.
6. Adair County, Missouri – This county may soon be home to the largest solar farm in Missouri and is in talks for another project, despite having a high opposition intensity index in the Heatmap Pro database.
7. Newtown County, Arkansas – A fifth county in Arkansas has now banned wind projects.
8. Oklahoma County, Oklahoma – A data center fight is gaining steam as activists on the ground push to block the center on grounds it would result in new renewable energy projects.
9. Bell County, Texas – Fox News is back in our newsletter, this time for platforming the campaign against solar on land suitable for agriculture.
10. Monterey County, California – The Moss Landing battery fire story continues to develop, as PG&E struggles to restart the remaining battery storage facility remaining on site.
A conversation with Biao Gong of Morningstar
This week’s conversation is with Biao Gong, an analyst with Morningstar who this week published an analysis looking at the credit risks associated with offshore wind projects. Obviously I wanted to talk to him about the situation in the U.S., whether it’s still a place investors consider open for business, and if our country’s actions impact the behavior of others.
The following conversation has been lightly edited for clarity.
What led you to write this analysis?
What prompted me was our experience in assigning [private] ratings to offshore wind projects in Europe and wanted to figure out what was different [for rating] with onshore and offshore wind. It was the result of our recent work, which is private, but we’ve seen the trend – a lot of the big players in the offshore wind space are kind of trying to partner up with private equity firms to sell their interests, their operating offshore wind assets. But to raise that they’ll need credit ratings and we’ve seen those transactions. This is a growing area in Europe, because Europe has to rely on offshore wind to achieve its climate goals and secure their energy independence.
The report goes through risks in many ways, including challenging conditions for construction. Tell me about the challenges that offshore wind faces specifically as an investment risk.
The principle behind offshore wind is so different than onshore wind. You’re converting wind energy to electricity but obviously there are a bunch of areas where we believe it is riskier. That doesn’t mean you can’t fund those projects but you need additional mitigants.
This includes construction risk. It can take three to five years to complete an offshore wind project. The marine condition, the climate condition, you can’t do that [work] throughout the year and you need specialized vehicles, helicopters, crews that are so labor intensive. That’s versus onshore, which is pre-fabricated where you have a foundation and assemble it. Once you have an idea of the geotechnical conditions, the risk is just less.
There’s also the permitting process, which can be very challenging. How do you not interrupt the marine ecosystem? That’s something the regulators pay attention to. It’s definitely more than an onshore project, which means you need other mitigants for the lender to feel comfortable.
With respect to the permitting risk, how much of that is the risk of opposition from vacation towns, environmentalists, fisheries?
To be honest, we usually come in after all the critical permitting is in place, before money is given by a lender, but I also think that on the government’s side, in Europe at least, they probably have to encourage the development. And to put out an auction for an area you can build an offshore wind project, they must’ve gone through their own assessment, right? They can’t put out something that they also think may hurt an ecosystem, but that’s my speculation.
A country that did examine the impacts and offer lots of ocean floor for offshore is the U.S. What’s your take on offshore wind development in our country?
Once again, because we’re a rating agency, we don’t have much insight into early stage projects. But with that, our view is pretty gloomy. It’s like, if you haven’t started a project in the U.S., no one is going to buy it. There’s a bunch of projects already under construction, and there was the Empire Wind stop order that was lifted. I think that’s positive, but only to a degree, right? It just means this project under construction can probably go ahead. Those things will go ahead and have really strong developers with strong balance sheets. But they’re going to face additional headwinds, too, because of tariffs – that’s a different story.
We don’t see anything else going ahead.
Does the U.S. behaving this way impact the view you have for offshore wind in other countries, or is this an isolated thing?
It’s very isolated. Europe is just going full-steam ahead because the advantage here is you can build a wind farm that provides 2 or 3 gigawatts – that’s just massive. China, too. The U.S. is very different – and not just offshore. The entire renewables sector. We could revisit the U.S. four or five years from today, but [the U.S.] is going to be pretty difficult for the renewables sector.