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:
New guidance on the Inflation Reduction Act’s “foreign entities of concern” provision didn’t do much to clarify things.
If you’re in the market for a new car and considering cashing in on the $7,500 federal tax credit for an electric vehicle, I have good news. Also bad news.
The good news is, starting January 1, the credit will be a lot easier to claim. You won’t need to meet a certain level of tax liability to qualify or wait for your tax refund. You can transfer the credit to the dealership and take $7,500 off the sticker price right then and there.
The bad news is that suddenly, nobody knows which — if any — EVs will qualify. On Friday, the Biden administration proposed additional guidelines limiting where the components in eligible EVs are allowed to come from. Those guidelines won’t be finalized until early next year. But all signs indicate that the list of qualifying vehicles is set to shrink.
These changes aren’t coming out of nowhere — they’re part of the way the EV tax credit in the Inflation Reduction Act was designed. Over time, the law phases in additional rules that ask more of automakers in terms of onshoring their production and supply chains and minimizing their reliance on China. Beginning in 2024, if a vehicle contains any battery components that were manufactured or assembled by what’s known as a “foreign entity of concern,” it will no longer meet the requirements for the tax credit. Beginning in 2025, the same rule applies to vehicles containing critical minerals that were extracted or processed by a foreign entity of concern.
What, exactly, is a foreign entity of concern? Under U.S. law, the term applies to a company that is “owned by, controlled by, or subject to the jurisdiction or direction of” North Korea, Russia, Iran, or, yes, China. But what constitutes ownership or control is somewhat fuzzy.
“The implications are enormous because right now, it seems as if every battery that's going into an electric vehicle has some material ties to China,” Jay Turner, a professor of environmental studies at Wellesley College and author of a book on the history of batteries, told me.
In the proposal published Friday, the Biden administration recommended three criteria for interpreting the rule that it hopes will further strengthen American manufacturing of EV components and help diversify supply chains:
1. If the company producing the battery component or mineral is headquartered or incorporated in China, or if the relevant production activities occur in China, the vehicle will not qualify for an IRA tax credit.
2. If China has a 25% or more voting interest, board control, or equity interest in the company producing the component or mineral, the vehicle will not qualify.
3. If a company licenses or contracts with a Chinese firm, and the license entitles the Chinese firm to “exercise effective control” over production, the vehicle will not qualify.
This is a strict interpretation that’s likely to knock some vehicles off the eligibility list. But in a series of meetings with reporters on Wednesday, officials from the Department of the Treasury and Department of Energy said they didn’t know which or how many vehicles would be affected. “Part of the goal here is to put out this rule, and then the auto companies are going to come back to us,” said Wally Adeyomo, Deputy Secretary of the Treasury. “And then we will know which cars qualify.”
Automakers and EV experts have been anxiously awaiting guidance on the IRA’s foreign entities of concern provision. Adeyomo stressed that companies have been aware that these new rules would be coming ever since the law passed and have been making investments to ensure “that their cars would be able to qualify for this over the long term.”
Though it’s hard to fact check that claim, according to an EV supply chain database maintained by Turner and his students, at least 19 battery component factories have been announced in the U.S. and Canada since the passage of the IRA; none are yet operating, but automakers also have the option to buy components from U.S. trade partners. A report on the EV supply chain published by the International Energy Agency in 2022 notes that while China dominates cell component production, controlling 70% of capacity for cathodes and 85% of anodes, Japan and South Korea also had “considerable shares of the supply chain.”
Turner said it was conceivable that there will be models that qualify for the first phase of the rule beginning in January, which only applies to these battery components, but he was skeptical automakers would be able to continue qualifying in 2025, when the limits on critical minerals go into effect. “The further you get up the supply chain, the greater the exposure is to China,” he said. “It's not because China's got all of the critical minerals. It's that China has the processing facilities to turn those minerals into highly refined materials that are needed for the batteries.”
John Podesta, senior advisor to the president on clean energy innovation, said that Biden is “rewriting that story.” Officials pointed to a recent report from the Lawrence Berkeley National Laboratory, which found that the Salton Sea region in California has enough mineable lithium to support more than 375 million batteries for EVs. Turner’s database shows at least a dozen projects planned, rumored, or under construction to process minerals including lithium, cobalt, and graphite.
The guidance also raises questions about a $3.5 billion factory that Ford is building in Michigan to bring the production of safer, cheaper EV batteries to the U.S. The company is licensing technology from the Chinese company CATL, the world’s largest battery manufacturer, to produce batteries made of lithium, iron, and phosphate — which are more abundant than the cobalt and nickel used in the dominant batteries on the market. But the deal has come under scrutiny from House Republicans, who accuse CATL of having business ties to mining companies that use forced labor. Ford put construction on hold in September.
When asked about CATL, Deputy Secretary of Energy David Turk said the agency has not evaluated any individual company’s situation, but that they designed the licensing guidance to ”get at who has effective control in these kinds of situations.“
That could mean Ford is off the hook. Months ago, analysts told The Washington Post that the Chinese company will have little control over the Ford plant’s daily operations. “The way they structured this deal, they are keeping CATL at arm’s length as much as possible,” Sam Abuelsamid, head of e-mobility research at Guidehouse Insights, said.
The Biden administration is attempting to race forward on two sets of goals that are somewhat at odds with each other: speeding adoption of EVs while shifting their production away from China, thereby stimulating domestic industry and creating domestic jobs. When I spoke to Jane Nakano, a senior fellow at the Center for Strategic and International Studies, earlier this week, she said that if the Biden administration went with a strict 25% threshold for ownership, it could really accelerate automakers’ efforts to diversify sourcing away from China. “But that will take some time,” she added. “In the immediate future, many of the companies may simply try to compete without being able to access the consumer tax credit.”
Turner said that the question is not whether automakers can compete with low-cost EVs produced in China, but rather whether they can put out EVs that are cheaper than conventional cars on the market here.
“Once you get to the point that EVs are cheaper and we have a robust enough charging network that people aren't worried about running out of juice, I think that'll be the tipping point,” he said.
I should note that if you’re interested in this purely as a prospective consumer of an EV, the only thing you need to know is that your options to take advantage of the tax credit might be more limited come January. However, there is one weird trick to get around this and have a lot more options: Leasing. None of the rules around sourcing, assembly, or ownership apply to leased vehicles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Recovering from the Los Angeles wildfires will be expensive. Really expensive. Insurance analysts and banks have already produced a wide range of estimates of both what insurance companies will pay out and overall economic loss. AccuWeatherhas put out an eye-catching preliminary figure of $52 billion to $57 billion for economic losses, with the service’s chief meteorologist saying that the fires have the potential to “become the worst wildfire in modern California history based on the number of structures burned and economic loss.” On Thursday, J.P. Morgan doubled its previous estimate for insured losses to $20 billion, with an economic loss figure of $50 billion — about the gross domestic product of the country of Jordan.
The startlingly high loss figures from a fire that has only lasted a few days and is (relatively) limited in scope show just how distinctly devastating an urban fire can be. Enormous wildfires thatcover millions of acres like the 2023 Canadian wildfires can spew ash and particulate matter all over the globe and burn for months, darkening skies and clogging airways in other countries. And smaller — and far deadlier fires — than those still do not produce the same financial roll.
It’s in coastal Southern California where you find large population centers areas known by all to be at extreme risk of fire. And so a fire there can destroy a whole neighborhood in a few hours and put the state’s insurance system into jeopardy.
One reason why the projected economic impacts of the fires are so high is that the structures that have burned and the land those structures sit on are very valuable. Pacific Palisades, Malibu, and Santa Monica contain some of the most sought-after real estate on planet earth, with typical home prices over $2 million. Pacific Palisades itself has median home values of around $3 million, according to JPMorgan Chase.
The AccuWeather estimates put the economic damage for the Los Angeles fires at several times previous large, urban fires — the Maui wildfire in 2023 was estimated to cause around $14 billion of economic loss, for example — while the figure would be about a third or a quarter of a large hurricane, which tend to strike areas with millions of people in them across several states.
“The fires have not been contained thus far and continue to spread, implying that estimates of potential economic and insured losses are likely to increase,” the JPMorgan analysts wrote Thursday.
That level of losses would make the fires costlier in economic terms than the 2018 Butte County Camp Fire, whose insured losses of $10 billion made it California’s costliest at the time. That fire was far larger than the Los Angeles fires, spreading over 150,000 acres compared to just over 17,000 acres for the Palisades Fire and over 10,000 acres for the Eaton Fire. It also led to more than 80 deaths in the town of Paradise.
So far, around 2,000 homes have been destroyed,according to the Los Angeles Times,a fraction of the more than 19,000 structures affected by the Camp Fire. The difference in estimated losses comes from the fact that homes in Pacific Palisades weigh in at more than six times those in rural Butte, according to JPMorgan.
While insured losses get the lion’s share of attention when it comes to the cost impacts of a natural disaster, the potential damages go far beyond the balance sheet of insurers.
For one, it’s likely that many affected homeowners did not even carry insurance, either because their insurers failed to renew their existing policies or the homeowners simply chose to go without due to the high cost of what insurance they could find. “A larger than usual portion of the losses caused by the wildfires will be uninsured,” according to Morningstar DBRS, which estimated total insured losses at more than $8 billion. Many homeowners carry insurance from California’s backup FAIR Plan, which may itself come under financial pressure, potentially leading to assessments from the state’s policyholders to bolster its ability to pay claims.
AccuWeather arrived at its economic impact figure by looking not just at losses from property damage but also wages that go unearned due to economic activity slowing down or halting in affected areas, infrastructure that needs to be repaired, supply chain issues, and transportation snarls. Even when homes and businesses aren’t destroyed, people may be unable to work due to evacuations; businesses may close due to the dispersal of their customers or inability of their suppliers to make deliveries. Smoke inhalation can lead to short-, medium-, and long-term health impacts that take a dent out of overall economic activity.
The high level of insured losses, meanwhile, could mean that insurers’ will see less surplus and could have to pay more for reinsurance, Nancy Watkins, an actuary and wildfire expert at Milliman, told me in an email. This may mean that they would have to shed yet more policies “in order to avoid deterioration in their financial strength ratings,” just as California has been trying to lure insurers back with reforms to its dysfunctional insurance market.
The economic costs of the fire will likely be felt for years if not decades. While it would take an act of God far stronger than a fire to keep people from building homes on the slopes of the Santa Monica Mountains or off the Pacific Coast, the city that rebuilds may be smaller, more heavily fortified, and more expensive than the one that existed at the end of last year. And that’s just before the next big fire.
Suburban streets, exploding pipes, and those Santa Ana winds, for starters.
A fire needs three things to burn: heat, fuel, and oxygen. The first is important: At some point this week, for a reason we have yet to discover and may never will, a piece of flammable material in Los Angeles County got hot enough to ignite. The last is essential: The resulting fires, which have now burned nearly 29,000 acres, are fanned by exceptionally powerful and dry Santa Ana winds.
But in the critical days ahead, it is that central ingredient that will preoccupy fire managers, emergency responders, and the public, who are watching their homes — wood-framed containers full of memories, primary documents, material wealth, sentimental heirlooms — transformed into raw fuel. “Grass is one fuel model; timber is another fuel model; brushes are another — there are dozens of fuel models,” Bobbie Scopa, a veteran firefighter and author of the memoir Both Sides of the Fire Line, told me. “But when a fire goes from the wildland into the urban interface, you’re now burning houses.”
This jump from chaparral shrubland into neighborhoods has frustrated firefighters’ efforts to gain an upper hand over the L.A. County fires. In the remote wilderness, firefighters can cut fire lines with axes, pulaskis, and shovels to contain the blaze. (A fire’s “containment” describes how much firefighters have encircled; 25% containment means a quarter of the fire perimeter is prevented from moving forward by manmade or natural fire breaks.)
Once a fire moves into an urban community and starts spreading house to house, however, as has already happened in Santa Monica, Pasadena, and other suburbs of Los Angeles, those strategies go out the window. A fire break starves a fire by introducing a gap in its fuel; it can be a cleared strip of vegetation, a river, or even a freeway. But you can’t just hack a fire break through a neighborhood. “Now you’re having to use big fire engines and spray lots of water,” Scopa said, compared to the wildlands where “we do a lot of firefighting without water.”
Water has already proven to be a significant issue in Los Angeles, where many hydrants near Palisades, the biggest of the five fires, had already gone dry by 3:00 a.m. Wednesday. “We’re fighting a wildfire with urban water systems, and that is really challenging,” Los Angeles Department of Water and Power CEO Janisse Quiñones explained in a news conference later that same day.
LADWP said it had filled its 114 water storage tanks before the fires started, but the city’s water supply was never intended to stop a 17,000-acre fire. The hydrants are “meant to put out a two-house fire, a one-house fire, or something like that,” Faith Kearns, a water and wildfire researcher at Arizona State University, told me. Additionally, homeowners sometimes leave their sprinklers on in the hopes that it will help protect their house, or try to fight fires with their own hoses. At a certain point, the system — just like the city personnel — becomes overwhelmed by the sheer magnitude of the unfolding disaster.
Making matters worse is the wind, which restricted some of the aerial support firefighters typically employ. As gusts slowed on Thursday, retardant and water drops were able to resume, helping firefighters in their efforts. (The Eaton Fire, while still technically 0% contained because there are no established fire lines, has “significantly stopped” growing, The New York Times reports). Still, firefighters don’t typically “paint” neighborhoods; the drops, which don’t put out fires entirely so much as suppress them enough that firefighters can fight them at close range, are a liability. Kearns, however, told me that “the winds were so high, they weren’t able to do the water drops that they normally do and that are an enormous part of all fire operations,” and that “certainly compounded the problems of the fire hydrants running dry.”
Firefighters’ priority isn’t saving structures, though. “Firefighters save lives first before they have to deal with fire,” Alexander Maranghides, a fire protection engineer at the National Institute of Standards and Technology and the author of an ongoing case study of the 2018 Camp fire in Paradise, California, told me. That can be an enormous and time-consuming task in a dense area like suburban Los Angeles, and counterintuitively lead to more areas burning down. Speaking specifically from his conclusions about the Camp fire, which was similarly a wildland-urban interface, or WUI fire, Maranghides added, “It is very, very challenging because as things deteriorate — you’re talking about downed power lines, smoke obstructing visibility, and you end up with burn-overs,” when a fire moves so quickly that it overtakes people or fire crews. “And now you have to go and rescue those civilians who are caught in those burn-overs.” Sometimes, that requires firefighters to do triage — and let blocks burn to save lives.
Perhaps most ominously, the problems don’t end once the fire is out. When a house burns down, it is often the case that its water pipes burst. (This also adds to the water shortage woes during the event.) But when firefighters are simultaneously pumping water out of other parts of the system, air can be sucked down into those open water pipes. And not just any air. “We’re not talking about forest smoke, which is bad; we’re talking about WUI smoke, which is bad plus,” Maranghides said, again referring to his research in Paradise. “It’s not just wood burning; it’s wood, plastics, heavy metals, computers, cars, batteries, everything. You don’t want to be breathing it, and you don’t want it going into your water system.”
Water infrastructure can be damaged in other ways, as well. Because fires are burning “so much hotter now,” Kearns told me, contamination can occur due to melting PVC piping, which releases benzene, a carcinogen. Watersheds and reservoirs are also in danger of extended contamination, particularly once rains finally do come and wash soot, silt, debris, and potentially toxic flame retardant into nearby streams.
But that’s a problem for the future. In the meantime, Los Angeles — and lots of it — continues to burn.
“I don’t care how many resources you have; when the fires are burning like they do when we have Santa Anas, there’s so little you can do,” Scopa said. “All you can do is try to protect the people and get the people out, and try to keep your firefighters safe.”
Plus 3 more outstanding questions about this ongoing emergency.
As Los Angeles continued to battle multiple big blazes ripping through some of the most beloved (and expensive) areas of the city on Thursday, a question lingered in the background: What caused the fires in the first place?
Though fires are less common in California during this time of the year, they aren’t unheard of. In early December 2017, power lines sparked the Thomas Fire near Ventura, California, which burned through to mid-January. At the time it was the largest fire in the state since at least the 1930s. Now it’s the ninth-largest. Although that fire was in a more rural area, it ignited for some of the same reasons we’re seeing fires this week.
Read on for everything we know so far about how the fires started.
Five major fires started during the Santa Ana wind event this week:
Officials have not made any statements about the cause of any of the fires yet.
On Thursday morning, Edward Nordskog, a retired fire investigator from the Los Angeles Sheriff’s Department, told me it was unlikely they had even begun looking into the root of the biggest and most destructive of the fires in the Pacific Palisades. “They don't start an investigation until it's safe to go into the area where the fire started, and it just hasn't been safe until probably today,” he said.
It can take years to determine the cause of a fire. Investigators did not pinpoint the cause of the Thomas Fire until March 2019, more than two years after it started.
But Nordskog doesn’t think it will take very long this time. It’s easier to narrow down the possibilities for an urban fire because there are typically both witnesses and surveillance footage, he told me. He said the most common causes of wildfires in Los Angeles are power lines and those started by unhoused people. They can also be caused by sparks from vehicles or equipment.
At about 27,000 acres burned, these fires are unlikely to make the charts for the largest in California history. But because they are burning in urban, densely populated, and expensive areas, they could be some of the most devastating. With an estimated 2,000 structures damaged so far, the Eaton and Palisades fires are likely to make the list for most destructive wildfire events in the state.
And they will certainly be at the top for costliest. The Palisades Fire has already been declared a likely contender for the most expensive wildfire in U.S. history. It has destroyed more than 1,000 structures in some of the most expensive zip codes in the country. Between that and the Eaton Fire, Accuweather estimates the damages could reach $57 billion.
While we don’t know the root causes of the ignitions, several factors came together to create perfect fire conditions in Southern California this week.
First, there’s the Santa Ana winds, an annual phenomenon in Southern California, when very dry, high-pressure air gets trapped in the Great Basin and begins escaping westward through mountain passes to lower-pressure areas along the coast. Most of the time, the wind in Los Angeles blows eastward from the ocean, but during a Santa Ana event, it changes direction, picking up speed as it rushes toward the sea.
Jon Keeley, a research scientist with the US Geological Survey and an adjunct professor at the University of California, Los Angeles told me that Santa Ana winds typically blow at maybe 30 to 40 miles per hour, while the winds this week hit upwards of 60 to 70 miles per hour. “More severe than is normal, but not unique,” he said. “We had similar severe winds in 2017 with the Thomas Fire.”
Second, Southern California is currently in the midst of extreme drought. Winter is typically a rainier season, but Los Angeles has seen less than half an inch of rain since July. That means that all the shrubland vegetation in the area is bone-dry. Again, Keeley said, this was not usual, but not unique. Some years are drier than others.
These fires were also not a question of fuel management, Keeley told me. “The fuels are not really the issue in these big fires. It's the extreme winds,” he said. “You can do prescription burning in chaparral and have essentially no impact on Santa Ana wind-driven fires.” As far as he can tell, based on information from CalFire, the Eaton Fire started on an urban street.
While it’s likely that climate change played a role in amplifying the drought, it’s hard to say how big a factor it was. Patrick Brown, a climate scientist at the Breakthrough Institute and adjunct professor at Johns Hopkins University, published a long post on X outlining the factors contributing to the fires, including a chart of historic rainfall during the winter in Los Angeles that shows oscillations between very wet and very dry years over the past eight decades. But climate change is expected to make dry years drier in Los Angeles. “The LA area is about 3°C warmer than it would be in preindustrial conditions, which (all else being equal) works to dry fuels and makes fires more intense,” Brown wrote.