EV Deployment, Automotive Manufacturing, & Supply Chain

In the United States, the transportation sector represents the single largest source of climate-warming greenhouse gas emissions—surpassing industrial emissions and emissions from energy generation, residential and commercial buildings, and the agricultural sector. While reducing emissions from vehicles must not be the only strategy we pursue in our efforts to decarbonize our mobility systems, we cannot meet our climate goals without a significant transition to cleaner cars and trucks.  The Inflation Reduction Act applies a whole-of-government approach to addressing this source of greenhouse gas and health-harming emissions, while also creating and preserving good union jobs; supporting and growing a domestic supply chain for vehicle components and technologies; and improving mobility and air quality in our neighborhoods.

The Inflation Reduction Act contains clean vehicle tax credits for new and used car buyers—as well as commercial fleets—and puts ambitious-but-achievable requirements on qualifying vehicles’ critical mineral and battery supply chains. It brings those supply chain requirements within reach for car and truck manufacturers—who have already made significant commitments to onshoring their battery supply chains—through major investments in the domestic auto manufacturing supply chain. Finally, it provides direct grants to a range of heavy-duty fleets to replace their existing vehicles—including transit and school buses, logistics trucks, drayage vehicles, and U.S. Postal Service (USPS) delivery vans—with zero emission alternatives.

The clean vehicle provisions in the Inflation Reduction Act can be divided into three main categories: tax credits, grants and loans for clean vehicle manufacturers, and grants for heavy-duty fleet electrification.

• Clean Vehicle Related Tax Credits: The updated Clean Vehicle Tax Credit will shape the future of the global auto manufacturing sector. The credit brings down the cost of buying battery and fuel cell EVs by up to $7,500, while incentivizing the establishment of a complete and resilient supply chain for essential battery components in North America. It also ensures that the critical minerals that comprise these batteries are not sourced from countries relying on child and forced labor, and with whom ongoing political tensions risk significant clean vehicle and battery supply chain bottlenecks (see sidebar). The Commercial Clean Vehicle Credit aids fleets to purchase clean light- and heavy-duty vehicles by defraying the incremental upfront cost of purchasing a clean vehicle versus an internal combustion engine (ICE) alternative—an essential provision for communities disproportionately impacted by the local air pollutants emitted by diesel-fueled trucks, delivery vans, and work trucks. Finally, the Alternative Fueling Property Credit helps individuals and businesses install EV charging and alternative fueling equipment to supplement the significant investments made by the BIL in a nationwide EV charging network.
• Clean Vehicle Manufacturing Investments: The Advanced Technology Vehicle Manufacturing (ATVM) Loan Program received an additional $3 billion, which will unlock billions of dollars in private capital for manufacturing facilities building the technology we need to achieve climate goals and reduce emissions from all transportation sectors—from light-duty cars to airplanes. The Domestic Manufacturing Conversion Grants Program also supports the auto manufacturing sector, but is targeted to provide direct grants to recently closed or at-risk facilities. The Inflation Reduction Act provides $2 billion for this program—which will fund the retooling efforts needed to transform production lines that were building ICE vehicles and their parts into production lines building the clean vehicles of the future.
• Medium & Heavy Duty Fleet Electrification: The Inflation Reduction Act allocates a total of $7 billion through several programs to reduce local air pollutants and climate-warming greenhouse gas emissions from heavy-duty vehicles. It takes an expansive approach to heavy-duty vehicle decarbonization and  $1 billion in grants to the U.S. Environmental Protection Agency (EPA) to encourage the private sector to electrify Class 6 and 7 trucks, and $3 billion to EPA to reduce emissions from ports, including through the purchase and deployment of zero emission drayage vehicles. The law also allocates $3 billion to electrify the USPS delivery fleet.