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The EV transition is facing a reality check. Can the planet afford it?
Once, it seemed like a major coup d’etat in the global war on carbon emissions: The United Kingdom, even under the conservative leadership of Prime Minister Boris Johnson at the time, announced in 2020 that it was 10 years away from banning the sale of new diesel and gasoline cars. In other words, any new cars sold in 2030 and beyond — and 1.6 million of them were purchased last year — would need to be zero-emission vehicles, likely electric cars but also some hydrogen cars as well.
Fast forward a bit to a year that’s seen more uneven EV adoption than many anticipated, a situation exacerbated by a shaky post-pandemic global economy. Now, the British government under Prime Minister Rishi Sunak hits reverse: Did we say 2030? Oh, we mean 2035 instead.
Sunak announced this week that the UK will, in his words, “ease the transition to electric vehicles,” allowing sales of new internal combustion cars until 2035. His decision is a disappointing one for climate reasons and, allegedly, even for some automakers hinging big hopes and potentially trillions of dollars on transitioning to EVs. (More on that later.) But the bigger question is, is this rollback just the start of a bigger trend?
Unfortunately, it probably is. Because what we’re finding with EVs is that saying you’re going to do something is a lot easier than actually doing it.
Sunak’s decision quickly outraged scientists and green groups, especially since it came during Climate Week, a time when leaders from all over the world (including Prince William) gathered in New York to discuss how to mitigate the greatest crisis of our lifetimes. It even angered some drivers in the U.K., according to The Guardian; people who were counting on a more robust used EV market and now worry about a slower rollout for public charging.
Transparently, I’m no expert on the U.K.’s climate politics. My own country gives me plenty of headaches on that front, thanks very much. But Sunak’s points aren’t entirely unreasonable here. He blames the high cost of EVs and fears an effectively all-electric new car market will put an undue financial burden on ordinary people already squeezed by inflation, high energy costs, and an uncertain economy. “We seem to have defaulted to an approach which will impose unacceptable costs on hard-pressed British families,” Sunak said in his speech this week. And he’s not wrong; as is the case in the U.S., EVs are still considerably more expensive than internal combustion cars, and Britain has its challenges with a woefully inadequate and unreliable charging infrastructure.
I’ll also give Sunak, who like Johnson is a conservative, some credit for actually admitting that climate change is an existential problem. “No one can watch the floods in Libya or the extreme heat in Europe this summer, and doubt that it is real and happening,” he said in his remarks this week, while touting Britain’s gains in reducing carbon and fighting pollution. That’s more than we get here in America, where our conservatives can barely admit that human-driven global warming is real — let alone say we need to do anything about it. (The bar is extraordinarily low over here!) Finally, Sunak is also not entirely off-course when he says the 2035 target aligns with what Germany, Canada, Sweden, and U.S. states like New York and California are planning too.
But that’s about as magnanimous as I’m willing to be here with Sunak’s arbitrary-seeming decision. It’s extremely unclear what Sunak expects to happen by giving this an extra five years, except further delay solving some of the very problems he describes here; after all, more EVs on the road and more EV production in Britain (thanks to increased demand) will lower prices the same as any consumer product, and push the charging infrastructure forward, too. Any improvements on those fronts just lost a sense of urgency that could’ve made them happen sooner.
Then there’s the domino effect problem. At worst, this move could provide ammunition for those governments — and car companies, and energy providers, and anyone else crucial to this transition — to slow-walk a move to zero-emission transportation.
If the U.K. can move its target date back, why wouldn’t Germany, which is also fretting about what this shift means for its ultra-important car industry? Why wouldn’t New York or California, which are struggling in similar ways with high costs of living, housing affordability, and the challenge of building out vast and reliable charging networks? (Yes, even California isn’t good enough there yet.)
And is five years “enough” to stave off intense EV competition from China? What does “enough” even mean in that context? Moving the targets, as Sunak has done, feels like a step away from what was once such an ambitious move for the United Kingdom — a country that, in spite of all of these challenges, is seeing fast and record EV growth this year; it could be as high as 23% of the market in 2024, about twice what America’s tracking for. It’s making progress on the electric front, so why kneecap that progress now?
Then there are the automakers themselves; the phrase “trust, but verify” always comes to mind when I hear about their commitments to going all-electric. Not all of them are setting firm dates to swear off internal combustion. But most, if not all, are making aggressive and enormous investments into EVs and battery plants; any delays or uneven regulations could throw a wrench into those plans, leading them to invest a ton of money into cars people may not want to buy.
Some of them even hit back at Sunak’s decision, including officials from Kia and Volkswagen; "Our business needs three things from the U.K. government: ambition, commitment, and consistency. A relaxation of 2030 would undermine all three," Ford U.K. Chair Lisa Brankin said. It could also be equally troublesome for the U.K.’s perpetually beleaguered auto industry. Just last week, Mini’s parent company BMW announced a major investment to make the brand fully electric and keep production British instead of Chinese — all by 2030, too. Mini’s future finally seemed secure after years of uncertainty between Brexit and the decline of small car sales; now it gets hit by a curve ball (or whatever soccer, cricket or rugby equivalent fits best) from its own government that will torpedo demand for all those new EVs for years to come.
At the same time, many automakers are hedging their bets here too, even if they won’t admit it openly. Ultimately, their duty is to shareholders, not the planet. In the U.S., Ford is dialing back some of its aggressive EV targets and focusing a little more on hybrid cars amid uneven electric adoption and production troubles this year. General Motors has committed to going all-electric eventually, but it’s also coming out with a new gasoline V8 to power its next generation of big trucks and SUVs, which drive basically all of its profits. (They’re not even hybrid engines.) And other automakers would rather rely on a network of parts suppliers, factories and dealers they’ve set up over a century to sell gas cars than make an electric pivot they won’t all survive.
In other words, give them an excuse — say, pushing back internal combustion bans — and they may not do it at all. I could easily see a reality where a car company like GM, which has committed to going all-electric by 2035, says it’s going to be 2040 now. And then 2045. And then, “Look at all these efficient gasoline cars we have now!” or “But have you seen the new Escalade? We’re throwing in the air filtration system as standard — massaging seats, too!” Like I said: trust, but verify.
In short, I fear the British government’s decision this week will lead other governments and their leaders to dial back some of their most aggressive climate commitments, even if they take this challenge more seriously than much of America does. It’s like a crack in a dam: It sometimes starts with just a few small ones right before the flood happens. After all, even the ultra-tough European Union left the door open to internal combustion sales past 2035, provided they run on deeply unproven “e-fuels.”
Sunak is right when he says this will be a difficult transition to zero-emission cars — which will almost certainly be EVs and not other types of vehicles in the near term. It’s hard and expensive. The automakers probably also hate it, deep down, because it’s hard and expensive. And no one should believe the world can “fix” climate change with EVs, especially when they’re $60,000 SUVs.
But moving to zero-emission cars is about laying the long-term groundwork for a world where automotive transportation creates vastly less pollution than it does now. For the United Kingdom, that goal just moved five more years down the road. Let’s hope it doesn’t move any further.
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And for his energy czar, Doug Burgum.
When Trump enters the Oval Office again in January, there are some climate change-related programs he could roll back or revise immediately, some that could take years to dismantle, and some that may well be beyond his reach. And then there’s carbon capture and storage.
For all the new regulations and funding the Biden administration issued to reduce emissions and advance the clean energy economy over the past four years, it did little to update the regulatory environment for carbon capture and storage. The Treasury Department never clarified how the changes to the 45Q tax credit for carbon capture under the Inflation Reduction Act affect eligibility. The Department of Transportation has not published its proposal for new safety rules for pipelines that transport carbon dioxide. And the Environmental Protection Agency has yet to determine whether it will give Texas permission to regulate its own carbon dioxide storage wells, a scenario that some of the state’s own representatives advise against.
That means, as the BloombergNEF policy associate Derrick Flakoll put it in an analysis published prior to the election, “the next administration and Congress will encounter a blank canvas of carbon capture infrastructure rules they can shape freely.”
Carbon capture is unique among climate technologies because it is, in most cases, a pure cost with no monetizable benefit. That means the policy environment — that great big blank canvas — is essential to determining which projects actually get built and whether the ones that do are actually useful for fighting climate change.
The next administration may or may not decide to take an interest in carbon capture, of course, but there’s reason to expect it will. Doug Burgum, Trump’s pick for the Department of the Interior who will also head up a new National Energy Council, has been a vocal supporter of carbon capture projects in his home state of North Dakota. Although Trump’s team will be looking for subsidies to cut in order to offset the tax breaks he has promised, his deep-pocketed supporters in the oil and gas industry who have made major investments in carbon capture based, in part, on the 45Q tax credit, will not want to see it on the chopping block. And carbon capture typically enjoys bipartisan support in Congress.
Congress first created the carbon capture tax credit in 2008, under the auspices of cleaning up the image of coal plants. Lawmakers updated the credit in 2018, and then again in 2022 with the Inflation Reduction Act, each iteration increasing the credit amount and expanding the types of projects that are eligible. Companies can now get up to $85 for every ton of CO2 captured from an industrial plant and sequestered underground, and $180 for every ton captured directly from the air. Combined with grants and loans in the 2021 Bipartisan Infrastructure Law, the changes have driven a surge in carbon capture and storage projects in the United States. More than 150 projects have been announced since the start of 2022, according to a database maintained by the International Energy Agency, compared to fewer than 100 over the four years prior.
Many of these projects are notably different from what has been proposed and tried in the past. Historically in the U.S., carbon capture has been used on coal-fired power plants, ethanol refineries, and at natural gas processing facilities, and almost all of the captured gas has been pumped into aging oil fields to help push more fuel out of the ground. But the new policy environment spurred at least some proposals in industries with few other options to decarbonize, including cement, hydrogen, and steel production. It also catalyzed projects that suck carbon directly from the air, versus capturing emissions at the source. Most developers now say they plan to sequester captured carbon underground rather than use it to drill for oil.
Only a handful of projects are actually under construction, however, and the prospects for others reaching that point are far from guaranteed. Inflation has eroded the value of the 45Q tax credit, Madelyn Morrison, the government affairs director for the Carbon Capture Coalition, told me. “Coupled with that, project deployment costs have really skyrocketed over the past several years. Some folks have said that equipment costs have gone up upwards of 50%,” she said.
Others aren’t sure whether they’ll even qualify, Flakoll told me. “There is a sort of shadow struggle going on over how permissive the credit is going to be in practice,” he said. For example, the IRA says that power plants have to capture 75% of their baseline emissions to be eligible, but it doesn’t specify how to calculate those baseline emissions. The Treasury solicited input on these questions and others shortly after the IRA passed. Comments raised concerns about how projects that share pipeline infrastructure should track and report their carbon sequestration claims. Environmental groups sought updates to the reporting and verification requirements to prevent taxpayer money from funding false or inflated claims. A 2020 investigation by the inspector general for tax administration found that during the first decade of the program, nearly $900 billion in tax credits were claimed for projects that did not comply with EPA reporting requirements. But the Treasury never followed up its request for comment with a proposed rule.
Permitting for carbon sequestration sites has also lagged. The Environmental Protection Agency has issued final permits for just one carbon sequestration project over the past four years, with a total of two wells. Fifty-five applications are currently under review.
Carbon dioxide pipeline projects have also faced opposition from local governments and landowners. In California, where lawmakers have generally supported the use of carbon capture for achieving state climate goals, and where more than a dozen projects have been announced, the legislature placed a moratorium on CO2 pipeline development until the federal government updates its safety regulations.
The incoming Congress and presidential administration could clear away some of these hurdles. Congress is already expected to get rid of or rewrite many of the IRA’s tax credit programs when it opens the tax code to address other provisions that expire next year. The Carbon Capture Coalition and other proponents are advocating for another increase to the value of the 45Q tax credit to adjust it for inflation. Trump’s Treasury department will have free rein to issue rules that make the credit as cheap and easy as possible to claim. The EPA, under new leadership, could also speed up carbon storage permitting or, perhaps more likely, grant primacy over permitting to the states.
But other Trump administration priorities could end up hurting carbon capture development. The projects with the surest path forward are the ones with the lowest cost of capture and multiple pathways for revenue generation, Rohan Dighe, a research analyst at Wood Mackenzie told me. For example, ethanol plants emit a relatively pure stream of CO2 that’s easy to capture, and doing so enables producers to access low-carbon fuel markets in California and Washington. Carbon capture at a steel plant or power plant is much more difficult, by contrast, as the flue gas contains a mix of pollutants.
On those facilities, the 45Q tax credit is too low to justify the cost, Dighe said, and other sources of revenue such as price premiums for green products are uncertain. “The Trump administration's been pretty clear in terms of wanting to deregulate, broadly speaking,” Dighe said, pointing to plans to axe the EPA’s power plant rules and the Securities and Exchange Commission’s climate disclosure requirements. “So those sorts of drivers for some of these projects moving forward are going to be removed.”
That means projects will depend more on voluntary corporate sustainability initiatives to justify investment. Does Amazon want to build a data center in West Texas? Is it willing to pay a premium for clean electricity from a natural gas plant that captures and stores its carbon?
But the regulatory environment still matters. Flakoll will be watching to see whether lax monitoring and reporting rules for carbon capture, if enacted, will hurt trust and acceptance of carbon capture projects to the point that companies find it difficult to find buyers for their products or insurance companies to underwrite them.
“There will be a more of a policy push for [CCS] to enter the market,” Flakoll said. “But it takes two to tango, and there's a question of how much the private sector will respond to that.”
What he wants them to do is one thing. What they’ll actually do is far less certain.
Donald Trump believes that tariffs have almost magical power to bring prosperity; as he said last month, “To me, the world’s most beautiful word in the dictionary is tariffs. It’s my favorite word.” In case anyone doubted his sincerity, before Thanksgiving he announced his intention to impose 25% tariffs on everything coming from Canada and Mexico, and an additional 10% tariff on all Chinese goods.
This is just the beginning. If the trade war he launched in his first term was haphazard and accomplished very little except costing Americans money, in his second term he plans to go much further. And the effects of these on clean energy and climate change will be anything but straightforward.
The theory behind tariffs is that by raising the price of an imported good, they give a stronger footing in the market; eventually, the domestic producer may no longer need the tariff to be competitive. Imposing a tariff means we’ve decided that a particular industry is important enough that it needs this kind of support — or as some might call it, protection — even if it means higher prices for a while.
The problem with across-the-board tariffs of the kind Trump proposes is that they create higher prices even for goods that are not being produced domestically and probably never will be. If tariffs raise the price of a six-pack of tube socks at Target from $9.99 to $14.99, it won’t mean we’ll start making tube socks in America again. It just means you’ll pay more. The same is often true for domestic industries that use foreign parts in their manufacturing: If no one is producing those parts domestically, their costs will unavoidably rise.
The U.S. imported over $3 trillion worth of goods in 2023, and $426 billion from China alone, so Trump’s proposed tariffs would represent hundreds of billions of dollars of increased costs. That’s before we account for the inevitable retaliatory tariffs, which is what we saw in Trump’s first term: He imposed tariffs on China, which responded by choking off its imports of American agricultural goods. In the end, the revenue collected from Trump’s tariffs went almost entirely to bailing out farmers whose export income disappeared.
The past almost-four years under Joe Biden have seen a series of back-and-forth moves in which new tariffs were announced, other tariffs were increased, exemptions were removed and reinstated. For instance, this May Biden increased the tariff on Chinese electric vehicles to over 100% while adding tariffs on certain EV batteries. But some of the provisions didn’t take effect right away, and only certain products were affected, so the net economic impact was minimal. And there’s been nothing like an across-the-board tariff.
It’s reasonable to criticize Biden’s tariff policies related to climate. But his administration was trying to navigate a dilemma, serving two goals at once: reducing emissions and promoting the development of domestic clean energy technology. Those goals are not always in alignment, at least in the short run, which we can see in the conflict within the solar industry. Companies that sell and install solar equipment benefit from cheap Chinese imports and therefore oppose tariffs, while domestic manufacturers want the tariffs to continue so they can be more competitive. The administration has attempted to accommodate both interests with a combination of subsidies to manufacturers and tariffs on certain kinds of imports — with exemptions peppered here and there. It’s been a difficult balancing act.
Then there are electric vehicles. The world’s largest EV manufacturer is Chinese company BYD, but if you haven’t seen any of their cars on the road, it’s because existing tariffs make it virtually impossible to import Chinese EVs to the United States. That will continue to be the case under Trump, and it would have been the case if Kamala Harris had been elected.
On one hand, it’s important for America to have the strongest possible green industries to insulate us from future supply shocks and create as many jobs-of-the-future as possible. On the other hand, that isn’t necessarily the fastest route to emissions reductions. In a world where we’ve eliminated all tariffs on EVs, the U.S. market would be flooded with inexpensive, high-quality Chinese EVs. That would dramatically accelerate adoption, which would be good for the climate.
But that would also deal a crushing blow to the American car industry, which is why neither party will allow it. What may happen, though, is that Chinese car companies may build factories in Mexico, or even here in the U.S., just as many European and Japanese companies have, so that their cars wouldn’t be subject to tariffs. That will take time.
Of course, whatever happens will depend on Trump following through with his tariff promise. We’ve seen before how he declares victory even when he only does part of what he promised, which could happen here. Once he begins implementing his tariffs, his administration will be immediately besieged by a thousand industries demanding exemptions, carve-outs, and delays in the tariffs that affect them. Many will have powerful advocates — members of Congress, big donors, and large groups of constituents — behind them. It’s easy to imagine how “across-the-board” tariffs could, in practice, turn into Swiss cheese.
There’s no way to know yet which parts of the energy transition will be in the cheese, and which parts will be in the holes. The manufacturers can say that helping them will stick it to China; the installers may not get as friendly an audience with Trump and his team. And the EV tariffs certainly aren’t going anywhere.
There’s a great deal of uncertainty, but one thing is clear: This is a fight that will continue for the entirety of Trump’s term, and beyond.
Give the people what they want — big, family-friendly EVs.
The star of this year’s Los Angeles Auto Show was the Hyundai Ioniq 9, a rounded-off colossus of an EV that puts Hyundai’s signature EV styling on a three-row SUV cavernous enough to carry seven.
I was reminded of two years ago, when Hyundai stole the L.A. show with a different EV: The reveal of Ioniq 6, its “streamliner” aerodynamic sedan that looked like nothing else on the market. By comparison, Ioniq 9 is a little more banal. It’s a crucial vehicle that will occupy the large end of Hyundai's excellent and growing lineup of electric cars, and one that may sell in impressive numbers to large families that want to go electric. Even with all the sleek touches, though, it’s not quite interesting. But it is big, and at this moment in electric vehicles, big is what’s in.
The L.A. show is one the major events on the yearly circuit of car shows, where the car companies traditionally reveal new models for the media and show off their whole lineups of vehicles for the public. Given that California is the EV capital of America, carmakers like to talk up their electric models here.
Hyundai’s brand partner, Kia, debuted a GT performance version of its EV9, adding more horsepower and flashy racing touches to a giant family SUV. Jeep reminded everyone of its upcoming forays into full-size and premium electric SUVs in the form of the Recon and the Wagoneer S. VW trumpeted the ID.Buzz, the long-promised electrified take on the classic VW Microbus that has finally gone on sale in America. The VW is the quirkiest of the lot, but it’s a design we’ve known about since 2017, when the concept version was revealed.
Boring isn’t the worst thing in the world. It can be a sign of a maturing industry. At auto shows of old, long before this current EV revolution, car companies would bring exotic, sci-fi concept cars to dial up the intrigue compared to the bread-and-butter, conservatively styled vehicles that actually made them gobs of money. During the early EV years, electrics were the shiny thing to show off at the car show. Now, something of the old dynamic has come to the electric sector.
Acura and Chrysler brought wild concepts to Los Angeles that were meant to signify the direction of their EVs to come. But most of the EVs in production looked far more familiar. Beyond the new hulking models from Hyundai and Kia, much of what’s on offer includes long-standing models, but in EV (Chevy Equinox and Blazer) or plug-in hybrid (Jeep Grand Cherokee and Wrangler) configurations. One of the most “interesting” EVs on the show floor was the Cybertruck, which sat quietly in a barely-staffed display of Tesla vehicles. (Elon Musk reveals his projects at separate Tesla events, a strategy more carmakers have begun to steal as a way to avoid sharing the spotlight at a car show.)
The other reason boring isn’t bad: It’s what the people want. The majority of drivers don’t buy an exotic, fun vehicle. They buy a handsome, spacious car they can afford. That last part, of course, is where the problem kicks in.
We don’t yet know the price of the Ioniq 9, but it’s likely to be in the neighborhood of Kia’s three-row electric, the EV9, which starts in the mid-$50,000s and can rise steeply from there. Stellantis’ forthcoming push into the EV market will start with not only pricey premium Jeep SUVs, but also some fun, though relatively expensive, vehicles like the heralded Ramcharger extended-range EV truck and the Dodge Charger Daytona, an attempt to apply machismo-oozing, alpha-male muscle-car marketing to an electric vehicle.
You can see the rationale. It costs a lot to build a battery big enough to power a big EV, so they’re going to be priced higher. Helpfully for the car brands, Americans have proven they will pay a premium for size and power. That’s not to say we’re entering an era of nothing but bloated EV battleships. Models such as the overpowered electric Dodge Charger and Kia EV9 GT will reveal the appetite for performance EVs. Smaller models like the revived Chevy Bolt and Kia’s EV3, already on sale overseas, are coming to America, tax credit or not.
The question for the legacy car companies is where to go from here. It takes years to bring a vehicle from idea to production, so the models on offer today were conceived in a time when big federal support for EVs was in place to buoy the industry through its transition. Now, though, the automakers have some clear uncertainty about what to say.
Chevy, having revealed new electrics like the Equinox EV elsewhere, did not hold a media conference at the L.A. show. Ford, which is having a hellacious time losing money on its EVs, used its time to talk up combustion vehicles including a new version of the palatial Expedition, one of the oversized gas-guzzlers that defined the first SUV craze of the 1990s.
If it’s true that the death of federal subsidies will send EV sales into a slump, we may see messaging from Detroit and elsewhere that feels decidedly retro, with very profitable combustion front-and-center and the all-electric future suddenly less of a talking point. Whatever happens at the federal level, EVs aren’t going away. But as they become a core part of the car business, they are going to get less exciting.