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The research instead suggests the opposite is true.
When former President Donald Trump was campaigning in Michigan last week, he warned autoworkers that President Biden’s electric vehicle policies would “put an end” to their “way of life.”
“Hundreds of thousands of American jobs, your jobs, will be gone forever,” he said. “By most estimates, under Biden’s electric vehicle mandate, 40% of all U.S. auto jobs will disappear.”
Trump may be exaggerating, but the underlying idea, that electric vehicles require less labor to manufacture than internal combustion engine cars, is the conventional wisdom. It has been circulated for years by automakers, autoworkers, politicians, and journalists. EVs contain fewer parts, the thinking goes, so naturally they will require fewer workers.
That logic seems obvious, which might be why it hasn’t received much scrutiny. But when I tried to find any research supporting it, what I found instead suggested the opposite. A number of analyses showed that electric vehicles could actually require more labor to build than gas-powered cars in the U.S., at least for the foreseeable future.
There are countless news articles and studies that reiterate the point that electric vehicles “have fewer moving parts” or are “less complex” and therefore pose a threat to autoworkers’ jobs. Many cite a 2017 Ford presentation that mentioned a “30% reduction in hours per unit” as a benefit of producing EVs, or former Volkswagen CEO Herbert Diess, who said in 2019 the company would need to make job cuts due to its switch to EVs, which “involve some 30% less effort.” More recently, as the United Auto Workers strike has ramped up, a 2022 quote from Ford’s CEO Jim Farley that “it takes 40% less labor to make an electric car,” has been circulating.
But I couldn’t find any data, research, or even further explanation backing up these figures. Part of the challenge of digging into these claims is that it’s not clear what they even refer to. Are the CEOs talking about the labor required for final assembly, like dropping in the motor and putting on the doors? Are they taking into account the production of components, like the EV battery? Where do they draw the line on what constitutes EV manufacturing?
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Ford didn’t respond directly to my request for more information about its public estimates. Instead, spokesperson Dan Barbossa replied that if I was going to quote Farley, I needed to include his entire quote. After dropping the “40% less labor” statistic, Farley had continued, “So as a family company, we have to insource so that everyone has a role in this world. We have a whole new supply chain to fill out, in batteries and motors and electronics.”
There may be more to Farley’s words than a bit of public relations fluff. His suggestion that building out new supply chains will help people find “a role” aligns with the conclusions of a study that Volkswagen’s independent Sustainability Council commissioned in 2020. It was conducted by the Fraunhofer Institute for Industrial Engineering, a German research group, using Volkswagen company data, and found only minor impacts on employment due to the transition. Losses can be mitigated by “shifting to the production of new components,” it said, like the individual battery cells that make up the battery packs.
One of the findings was that “employment intensity” for the final manufacturing of Volkswagen’s electric ID.3 is only 3% lower than that of the conventional Golf Mk8. The bigger gap is in the labor required to produce the individual components of each car’s drivetrain. The employment intensity of the battery system and electric motor, combined, was about 40% lower than that of the combustion engine and transmission system.
Notably, the study did not include the jobs required to produce the individual battery cells which make up the battery system, because Volkswagen wasn’t producing them at the time. But a more recent analysis of the U.S. manufacturing landscape found that cell production holds the most potential for job creation, and concluded that if you account for this, the transition to EVs could actually result in significantly more jobs.
Turner Cotterman, a McKinsey consultant, led the research as part of his Ph.D. in public policy and engineering at Carnegie Mellon under Associate Professor Kate Whitefoot. He sought out partnerships with U.S.-based automakers and electric vehicle component manufacturers and collected original data from nine companies on the number of hours it takes to complete more than 250 process steps. In some cases he visited the shop floors and personally gathered the data himself. In his final analysis, he also incorporated public data for an additional 78 production process steps. He used the data to model three scenarios where EV and combustion engine powertrains are produced at the average efficiency, as well as a “most efficient” case and a “least efficient” case.
In every case, EV manufacturing required more hours. The conventional powertrains took 4 to 11 worker hours, while the EV powertrains took 15 to 24. “A lot of the confusion sits around, what parts are you counting in this evaluation?” Cotterman told me. “We’re saying that if you were to produce every single component in an EV in the U.S., that the total sum of those powertrain components will be higher than the equivalent ICE components.”
Cotterman, Turner and Fuchs, Erica Renee and Whitefoot, Kate, The transition to electrified vehicles: Evaluating the labor demand of manufacturing conventional versus battery electric vehicle powertrains (June 4, 2022)
There are a few important caveats to the research. For one, Cotterman stressed that these are present-day numbers, and they might change as EV plants scale up and learn to be more efficient. When he looked at data from Chinese manufacturing plants, they were a lot more efficient than what he saw in the U.S. And that relates to his other point. Currently, most battery components are not made in the U.S.
“With so many battery components made in China and South Korea, a lot of those potential labor hours are being captured by other countries,” he said. “So it's a question of the future American manufacturing workforce — how do we value them? How many opportunities do we want to extend to them?”
Another report published in 2021 by the Economic Policy Institute, a nonpartisan think tank, reached a similar conclusion. It found that the stakes for workers in the EV transition depend largely on public policy efforts to shore up U.S. manufacturing and enhance job quality. “The real challenge is making sure U.S.-based producers can invest enough to become competitive in battery production, and claw back some of the overall sales market share they lost since the Great Recession,” Josh Bivens, chief economist at the institute, told me in an email. “These are much bigger deals than anything about the inherent production process of EVs — and they’re very amenable to policy.”
Automakers have claimed that paying workers more would put them at a disadvantage and hinder their ability to invest in the EV transition. But in a recent blog post, the Economic Policy Institute argued that with the help of subsidies from President Biden’s signature climate law, the Inflation Reduction Act, automakers have “more than enough money” to invest in EVs, pay workers a fair share, and maintain healthy profits.
The IRA created a domestic manufacturing tax credit that subsidizes the production of battery cells to the tune of $35 per kilowatt-hour of capacity. It offers an additional $10 per kilowatt-hour tax credit for the domestic production of battery modules, or the process of assembling the cells into arrays that later get put into battery packs. And there’s another incentive for automakers to onshore battery production — it will help their vehicles qualify for the IRA’s consumer tax credit.
According to a database maintained by the advocacy group Climate Power, there have been about 10 EV battery manufacturing plant projects announced in the U.S. since the IRA was passed, at least some of which will produce cells.
So is the crux of the matter that EV job losses or gains all come down to batteries? Not necessarily.
Whether or not the U.S. is able to build up domestic battery production, early evidence of the EV transition in the United States shows that EVs may require more labor, even in the final assembly stages.
Anna Stefanopoulou, a professor of mechanical engineering at the University of Michigan, has been investigating three manufacturing sites that used to produce conventional cars and are now producing EVs: A Tesla factory in California that used to be a jointly-owned facility between GM and Toyota that produced Pontiacs and Corollas; a Rivian plant in Illinois that previously produced Mitsubishis; and the Orion Assembly plant in Michigan, where GM transitioned from producing Chevy Sonics and Buick Veranos to electric Chevy Bolts.
Her research has not been peer reviewed or published yet, but Stefanopoulou told me that after analyzing publicly available data sources for employment and output at each plant, she found that productivity had gone down in all three cases. Each one is producing fewer vehicles per worker than they were before, meaning it’s taking more people per vehicle to produce electric cars. The California site, which has been producing EVs for the longest out of the three, showed the most dramatic change. At its peak, the GM/Toyota plant produced 80 vehicles per person per year. The Tesla plant averages 30.
Stefanopoulou believes the data reflects the nascent state of U.S. electric vehicle manufacturing. She predicts that after a decade or so, as processes become more streamlined, the commonly-held belief that EV assembly requires less labor will turn out to be correct. However, she also said that if she were to consider battery cell production, as Cotterman did, EV production on the whole could require more people.
She also stressed that her data is not conclusive, and poses many more questions. For example, she found that overall production per worker in the U.S. is falling. So does the labor intensity at the EV plants reflect something specific about those factories, or a bigger issue in U.S. manufacturing productivity?
It’s also been hard for her team to identify what was actually being produced at each plant at any given time. For example, the previous owners of the California plant did not assemble engines there, but the Tesla factory is assembling battery packs. So that might explain why productivity is so much lower now. But there are a lot of unknowns. “Over the years, they changed their patterns,” she told me. “They take the cells and assemble the pack, or occasionally they manufacture cells. So we don’t know exactly what kind of work the plants include. We know the outputs are vehicles, but what does assembly include?”
In any case, Stefanopoulou is torn about what conclusion to draw from her findings on productivity. “Sometimes I don’t know if what I will present in my paper will be good news or bad news,” she told me. “Maybe it’s good news for our people that are involved, but at the end, you know, we need to be productive also, so that we can actually lower the costs so people can afford buying electric vehicles.”
What seems clear is that whether the transition results in more jobs or fewer depends a lot on which processes you’re including, how many of them will ultimately be done domestically, and how much will get streamlined through automation and other efficiency measures.
At the same time, topline job numbers aren’t the full story. The jobs created in the EV transition will certainly not all resemble the jobs that are lost. They may not be located in the same places, or require the same set of skills. Workers are right to be worried about upheaval.
But these are things that can be managed, if automakers are willing to come to the table with workers, and vice versa. For example, when Ford negotiated the closure of its Romeo Engine Plant at the end of last year, every employee was offered either a buyout or a transfer to another facility. Barbossa, the Ford spokesperson, told me many are now working about 20 minutes away, at the Van Dyke Electric Powertrain Center, building EV power units for the F-150 Lightning and hybrid powertrains for the Maverick and F-150.
I reached out to the United Autoworkers to get their thoughts on these studies, but the union did not respond to my questions. The UAW does appear to have a good handle on the stakes of battery manufacturing, however. Last week, Jim Farley of Ford provided an update on the negotiations, and said that “the UAW is holding the deal hostage over the battery plants.”
Farley vowed that none of its workers will lose their jobs due to battery plants during the next contract period. “In fact, for the foreseeable future we will have to hire more workers as some workers retire, in order to keep up with demand,” he said. “We are open to working with the union on a fair deal for battery plants, but these are multi-billion investments and they have to make business sense.”
Read more about electric vehicles and labor:
What the UAW Wants Exactly — and What It Means for Electric Cars
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On the Senate Finance Committee’s budget proposal, the NRC, and fossil-fuel financing
Current conditions: A brush fire that prompted evacuations in Maui on Sunday and Monday is now 93% contained • The Des Moines metro area issued its first-ever ban on watering lawns due to record nitrate concentrations in nearby rivers • For only the fourth time since 1937, Vancouver, British Columbia got no rain at all in the first half of June. The dry streak may finally break tonight.
The Senate Finance Committee published its portion of the budget reconciliation bill on Monday night, including details of its highly anticipated plan to revise the nation’s clean energy tax credits. Though the Senate version slightly softens the House’s proposed phase out of tax credits, “the text would still slash many of the signature programs of the Inflation Reduction Act,” my colleagues Emily Pontecorvo and Robinson Meyer write in their breakdown of the bill. Other changes to be aware of include:
There’s more, too, which you can read here.
President Trump fired Chris Hanson, a Democrat and his first-term appointee to the U.S. Nuclear Regulatory Commission, on Friday. Trump “terminated my position … without cause, contrary to existing law and longstanding precedent regarding removal of independent agency appointees,” Hanson said in his announcement, published Monday. Since the creation of the NRC, which regulates nuclear power, no commissioner has ever been fired from the body.
After being appointed by Trump in 2020, Hanson was promoted to chair the commission by President Biden in 2021. His term ended in January, after which he returned to serving on the board, Notus reports. Trump’s decision to fire Hanson comes on the heels of his recent flurry of executive orders aimed at quadrupling U.S. nuclear capacity, including a measure seeking to “simplify and accelerate the NRC’s licensing procedure, giving the body 18 months to issue new rules and guidance designed to shorten the timeline for processing new applications to 18 months at the longest,” as my colleagues Matthew Zeitlin and Katie Brigham explained last month. News of Hanson’s firing was met with “serious dismay” by attendees of the American Nuclear Society conference underway in Chicago, per Katy Huff, an assistant professor at the University of Illinois at Urbana-Champaign. In a statement, ANS argued that a “competent, effective, and fully staffed [NRC] is essential to the rapid deployment of new reactors and advanced technologies.”
Banks increased fossil fuel financing by more than one-fifth in 2024, marking the first time that fossil fuel financing has failed to decline since 2021, a new report by the Rainforest Action Network and other environmental groups found. Among the world’s top 65 largest banks, coal, oil, and gas assets rose by $162 billion, to $869 billion, with JPMorgan Chase seeing the biggest increase of more than a third to $53.5 billion, followed by Citigroup, Bank of America, and Barclays. In a statement to the Financial Times, JPMorgan said it believed its own data “reflects our activities more comprehensively,” and said it provided $1.29 in clean-energy financing for every dollar financing fossil fuels. However, as the report argues, “Banks are abandoning their previously announced emissions reduction targets in favor of temperature trajectories that allow for more fossil fuel finance. Though they may also increase financing of renewable energy, banks’ continued fossil fuel finance entrenches climate chaos and undercuts clean energy development.” Read the full findings here.
Drivers in Europe are becoming more unwilling to consider switching to an electric vehicle, outpacing even the growing reluctance seen in the United States, according to a new survey published by Shell on Tuesday. In Europe, 41% of respondents said they’d consider switching to an EV, down from 48% last year, while in the U.S., the number fell only 3 percentage points, to 31%. “Europe surprised us,” David Bunch, Shell’s chief for mobility and convenience, said, per Reuters. “The single biggest barrier to entry is the cost of the vehicle.”
While Shell — the world’s second-biggest fossil fuel company by revenue and profit — might seem an unlikely source for an electric vehicle survey, the company also has the most extensive EV charging network in the UK. Its findings weren’t all negative, either: in China, interest in buying an electric vehicle was as high as 89%. Additionally, Shell found that nine in 10 EV drivers would consider purchasing an electric vehicle again, and 60% said they worry less about running out of charge than they did a year ago, Bloomberg reports. Separately, International Energy Agency data shows that electric vehicle adoption continues at a healthy pace worldwide, exceeding 17 million sales globally in 2024, or a share of more than 20%.
Global electric car sales, 2014-2024
IEA
The United Kingdom on Tuesday announced its commitment of £7.9 billion, or more than $10 billion, to the nation’s most extensive flood defense infrastructure program in its history. The program will not only include traditional construction, such as flood barriers, but also nature-based solutions like reforestation and wetland restoration, according to Business Green. In its announcement, the government said that for every £1 invested, it expected to prevent £8 in economic damage. “Protecting citizens is the first duty of any government,” Environment Secretary Steve Reed said in a statement, adding, “As our changing climate continues to bring more extreme weather to the nation, it's never been more vital to invest in new flood defences and repair our existing assets.” Separately, the U.K. Treasury also announced Tuesday a plan to spend £1 billion, or about $1.3 billion, on “funding to repair bridges, tunnels, and flyovers that are facing increased impacts from extreme weather and heavier vehicles,” Business Green adds.
Republicans in Los Angeles who don’t have air conditioning are “more likely to consider climate change a human-caused threat and more likely to support individual and government action to address climate change” than Republicans who have central air, a recent study published by the American Meteorological Society found. There was no similar divide among Democrats.
Wind and solar are out. Clean, firm power is in.
The Senate Finance committee published its highly anticipated tax proposal for Trump’s One Big, Beautiful Bill on Monday night, including a new plan to revise the nation’s clean energy tax credits.
Senate Republicans widened the aperture slightly compared to the House version of the bill, extending tax credits for geothermal energy, batteries, and hydropower, and preserving “transferability” — a crucial rule that allows companies to sell their tax credits for cash — for years to come.
But the text would still slash many of the signature programs of the Inflation Reduction Act. It would be particularly damaging for Republicans’ goals of creating a domestic mining industry, because it kills incentives for refining critical minerals while yanking away subsidies for the electric cars and wind turbines that might use those minerals.
Consumer tax credits for energy efficiency upgrades, including heat pumps, would still be terminated, as would credits for homeowners to lease or purchase rooftop solar. The Senate bill also cuts a tax deduction for energy efficiency upgrades in commercial buildings one year after the bill’s passage, which was not in the House version.
There was no mercy for the IRA’s tax credit to produce clean hydrogen, despite a last-minute appeal from more than 250 organizations in early June. That policy would still be terminated this year.
Here’s a rundown of the rest of the major changes.
Like the House bill, the Senate’s proposal would terminate tax credits for new, used, and leased electric vehicles. But while the House had extended the program by one year for automakers that had yet to sell 200,000 eligible vehicles, the Senate version would simply end the program in 180 days — or roughly six months — after the bill’s passage.
Depending on when the bill is passed, the Senate version could work out better for some experienced EV automakers, such as Tesla and General Motors. These automakers are set to lose their eligibility for tax credits on December 31 under the House text. But the Senate bill’s 180-day period could allow them to eke out another month or so of eligibility — especially if congressional negotiations over the One Big, Beautiful Bill Act go late into the summer.
Newer EV automakers, such as Rivian or Lucid, come out worse under the Senate text as compared to the House bill since they haven’t sold as many vehicles.
Homeowners interested in electric vehicle chargers would get a longer runway than the House had proposed — but a much shorter one than is on the books right now. Under current law, homeowners can claim the charger tax credit through 2032. The Senate version would terminate the 30% tax credit for installing a home charger one year after the bill is enacted.
The Inflation Reduction Act achieved massive greenhouse gas reductions by including a set of new “technology-neutral” tax credits that subsidized any new power plant as long as it didn’t emit carbon dioxide. Under current law, these new tax credits will remain effective and on the books for decades to come — expiring only when emissions from the country’s power sector fall about 95% below their all-time high.
The Republican reconciliation bills have dismantled these provisions. The House text proposed immediately winding down tax credits for all clean energy sources — except nuclear — and allowed just a 60-day “grace period” for new projects to start construction to claim the credits. Even then, new power plants would have to enter service by 2028 to qualify.
Senate Republicans have countered with a plan that is designed to maintain support for every electricity source that isn’t wind and solar. The GOP Senate caucus favors technologies that can provide power on demand around the clock — such as geothermal, nuclear, hydropower, and batteries — but technically the Senate text allows any zero-carbon, non-solar, non-wind source to qualify for the clean electricity tax credits for the next decade.
The Senate draft erases the provision in the Inflation Reduction Act that would have kept these tax credits in place until the entire United States power sector reduces its emissions. Instead, it adopts the IRA’s alternate phase-out period, with the tax credits beginning to wind down for projects that start construction in 2034.
Tax credits for wind and solar, however, would begin to phase down for projects that start construction next year, and terminate after 2027, with one big exception.
An odd addendum to the wind and solar phase-out would exempt projects that are at least 1 gigawatt, are at least partially on federal land, and have already received a “right-of-way grant or lease” from the Bureau of Land Management as of June 16. It’s unclear which, if any, projects would be helped by this provision. According to the BLM website, it has not granted a right-of-way to any projects that are 1 gigawatt or larger except for the Lava Ridge wind farm, which has been canceled. If the Senate changes the date, however, the Esmeralda 7 solar farm in Nevada may benefit, as the project is more than 6 gigawatts, and is in the final stages of its environmental review.
The Senate text would not do anything to change the eligibility timeline for existing nuclear plants to claim a tax credit, called 45U, designed to keep them solvent. It would keep the schedule written into the Inflation Reduction Act, which has the credit terminating at the end of 2031. It would, however, impose new foreign sourcing restrictions on nuclear fuel, forbidding existing power plants from claiming the tax credit if their fuel comes from Russia, China, Iran, or North Korea. (It makes an exception for power companies that signed a long-term contract to buy foreign fuel before 2023.) The United States formally banned the import of nuclear fuel from Russia last year.
The Inflation Reduction Act subsidized the production of certain clean energy equipment — including solar panels, wind turbines, inverters, and batteries — as well as some of their subcomponents. Under current law, those tax credits will begin to phase out by 25% increments in 2030, so companies can claim 75% of the credit in 2030, 50% in 2031, and zero in 2033.
The IRA also created a new permanent tax credit that covered 10% of the cost of refining or recycling critical minerals.
The new Senate text changes these phase-out deadlines, often for the worse. First, as in the House bill, wind turbines and their subcomponents would no longer qualify for the tax credit starting in 2028. Second, the tax credit for critical minerals would start phasing out in 2031. Under the new calendar, companies would be able to claim 75% of this credit in 2031, 50% in 2032, and zero in 2034.
In practice, this means that the Senate GOP text would end the IRA’s permanent tax credit for producing many critical minerals, which would damage the financial projects of many mineral processing and refining projects. Other types of equipment remain on the Inflation Reduction Act’s original phase-out schedule.
The new Senate text also slightly expands the type of battery components that qualify for the credit. And — in a potentially significant change for some companies — it forbids companies from stacking tax credits for their vertically integrated production process starting in 2027.
While the House did not touch the tax credit for carbon sequestration, the Senate has put forward a key change favored by many proponents of the technology. Under current law, project operators get the highest-value credit if they simply inject captured carbon underground for no other purpose than to keep it out of the atmosphere. Smaller amounts are available for projects that use captured CO2 to nudge more oil out of the ground, also known as “enhanced oil recovery,” or if they use the CO2 in products like cement.
Under the Senate proposal, all carbon sequestration projects, no matter the nature of the carbon storage, would qualify for the same amount.
The biggest clean energy killer in the House-passed bill was a strict sourcing rule for the tax credits that would disqualify projects that use any component, subcomponent or mineral from China. As Heatmap’s Matthew Zeitlin wrote last week, the rules appeared “unworkable” to many companies because they seemingly disqualified projects even if they used a relatively small amount of an otherwise irrelevant Chinese-sourced material — such as a spare bolt or a gram of steel.
Under the House bill, manufacturers would also not be allowed to license a Chinese company’s technology. This measure appeared to directly target Ford, which has proposed manufacturing electric vehicle batteries using technology licensed from the Chinese firm CATL, one of the world’s best producers of EV batteries.
The Senate proposal changes the House provision by adding a complicated new set of definitions about what might qualify as a federal entity of concern. It also introduces a new “safe harbor” formula describing the amount of Chinese-sourced material that can keep a project from receiving a tax credit. We’re still figuring out how these new rules work together, and we’ll update this article as we understand them better.
The House bill also would have severely curtailed a crucial component of the tax credit program called transferability, which allowed developers that couldn’t take full advantage of the subsidies to sell their credits for cash to other companies. The text stripped this option from the tax credits for clean manufacturing (45X), carbon sequestration (45Q), and clean fuels (45Z) beginning in 2028. Without transferability, most carbon sequestration projects will struggle to pencil out, my colleague Katie Brigham reported.
The Senate proposal would restore transferability for the duration of all remaining tax credits.
But it throws another wrench in plans to scale up nuclear, geothermal, and other large capital-intensive projects, because it restricts zero-carbon power plants’ ability to use modified accelerated cost recovery to fund their projects.
The Inflation Reduction Act created a technology-neutral tax credit for low-carbon transportation fuels, like sustainable aviation fuel and biodiesel (45Z). This was the only tax credit that the House GOP had proposed extending, giving projects four more years to qualify. The House bill also said that producers did not have to account for indirect land-use changes as a result of turning crops into fuel — a provision that would enable the corn ethanol industry to claim the credit.
The Senate proposal retains both of those provisions, but reduces the credit amount by 20% for fuels produced from feedstocks sourced from outside the United States. It also introduces a new rule that would prohibit companies from claiming their fuel has a “negative emissions” rate — which some environmental groups warn would subsidize established technologies and distort the market. Proponents of several forms of biomethane have tried to claim they are net-negative because they prevent methane emissions that would have otherwise happened — like when methane is captured from landfills or manure pools.
Confusingly, though, the text makes an exception, allowing negative emissions rates for fuels made from manure — which is the feedstock environmental groups are most concerned about.
This article was updated on June 17 to include the breakdown of 45Z.
Trump just quasi-nationalized U.S. Steel. That could help climate policy later.
The government is getting into the steel business. The deal between Japan’s Nippon Steel and U.S. Steel, long held off by the Biden administration due to national security and economic concerns, may finally happen, and the government will have a seat at the table. And some progressives are smarting over the fact that a Republican did it first.
On Friday, Nippon Steel and U.S. Steel announced “that President Trump has approved the Companies’ historic partnership,” which would include $11 billion in new investments and “a Golden Share to be issued to the U.S. Government” as well as “commitments” that include “domestic production” and “trade matters.”
The New York Times reported that this “Golden Share” would give the president, including Trump’s successors, the ability to appoint or veto some of the company’s directors, and require the government to sign off on a wide range of corporate decisions, like moving production overseas or idling or closing plants or the procurement of raw materials.
The Trump administration will likely use its oversight to encourage domestic production of steel, in tandem with its tariffs on steel imports. The unique arrangement “will massively expand access to domestically produced steel,” Secretary of Commerce Howard Lutnick wrote on X.
While neither the administration nor the two companies involved in the deal have mentioned decarbonizing steel — and in fact existing steel decarbonization programs have floundered in the first months of the Trump’s second term — it is this government oversight of steel production that could, with a different administration, help steer the steel industry into greener pastures.
A future president could wield a golden share to encourage or require the significant capital investments necessary to decarbonize some of U.S. Steel’s production, investments that the Biden administration had trouble catalyzing even with direct government financial support.
And considering that steel makes up for some 7% of global emissions, decarbonization is a necessary — if costly — step to substantially reducing global emissions.
“It’s honestly embarrassing that Republicans beat us to actually implementing a golden share or something like it,” Alex Jacquez, who worked on industrial policy for the National Economic Council in the Biden White House, told me.
When the steel giant Cleveland Cliffs first hinted that it would not go forward with $500 million worth of federal grants to help build a hydrogen-powered mill, it cited “fears that there won’t be buyers for the lower-carbon product,” thanks to a 40% price gap with traditional steel, Ilmi Granoff wrote for Heatmap., This tracked what steel producers and buyers were telling the Biden administration as it tried to convene the industry to see what it needed to go green.
“The largest issue by far in advancing green steel production in the U.S. is demand. It’s still not price competitive and not worth capital investment upgrades, given where the market is right now and without stable demand from customers who are going to pay a premium for the product,” Jacquez said. “There’s no case to make to shareholders for why you’re investing.”
When the Roosevelt Institute looked at barriers to transition to clean steel, specifically a Cleveland-Cliffs project, among familiar community concerns like what it would mean for steel employment, there was “corporate inertia and focus on short-term shareholder value over long-term public value and competitiveness.”
While the Trump administration sees shareholder demands leading to insufficient domestic production of any steel, a future administration could be a counterweight to investors not wanting to make green steel investments.
Shareholder reticence is a “huge obstacle,” one of the report’s authors Isabel Estevez, co-executive director of the industrial policy think tank I3T, told me.
“Of course investors are not going to green light investments that don’t produce the same returns as doing nothing or doing something else would do,” Jacquez said.
And when green steel projects have gotten canceled, in the U.S. and abroad, it’s been dismal shareholder returns that are often the explicit or implicit justification, as well as the high cost of producing green hydrogen necessary to fuel green steel operations. “We are not only pushing the boundaries of what is technologically feasible with this project. We are also currently pushing the boundaries of economic viability. Or, as it stands today: beyond it,” the chief executive of ThyssenKrupp told the North Rhine-Westphalia parliament, according to Hydrogen Insight.
And the resulting Trump administration retrenchment from the Biden administration’s climate policy has made the environment even less friendly for green steel.
Earlier this month Cleveland-Cliffs scrapped the hydrogen-fuel steel project and said instead it would try to extend its existing coal-fueled blast furnace. And the Swedish company SSAB earlier this year withdrew from a prospective project in Mississippi.
Would these outcomes be any different with a “golden share”? When the Roosevelt Institute looked at steel decarbonization even full-on nationalization was considered as one of the “sticks” that could push along decarbonization (many steel companies globally are either state-owned or have some state investment). The golden share, at least as reported, will seem to put the government in the driver’s seat of a major player of the steel industry, while still maintaining its private ownership structure.
“Assuming the nature of the golden share allows the public sector to make certain requirements about the way that profits are used, it could be very valuable for encouraging U.S. Steel to use their profits to make important investments,” Estevez told me.