The United States House of Representatives has voted to pass the Inflation Reduction Act, the massive climate bill passed by the Senate on Sunday, in a party-line vote of 220-207, supported by Democrats and opposed by republicans.
Now it goes on to Biden’s desk – where the President is expected to sign it in the coming days – which will immediately affect the availability of EV tax credits.
Major Update: The bill has been signed. It is now law.
The climate bill includes $369 billion in climate-related funding, the largest climate bill ever passed in the US. It accomplishes most of its goals by offering tax incentives to companies and individuals. These include incentives for domestic green energy production, installation and research, home efficiency credits, and of course, the electric vehicle tax credit.
The bill is expected to contribute to a 40% reduction in US CO2 emissions, from 2005 levels, by 2030. This falls short of Biden’s 50% target, but it’s a start.
The House made no changes to the Senate bill, in order to avoid having to bring it to another Senate vote. If there were changes, the bill would have to go through a conference process between the two houses, and each house would have to vote again. Given how narrow the Senate vote was (51-50) and the fragility of the compromise, Democrats wanted to avoid any chance of the bill failing, so passed the bill as-is.
For EV fans, this means that the current version of the bill remains – complete with its confusing implementation of new EV tax credits. We broke that down in a post earlier this week, which you should read if you are considering buying an EV soon (we tried to include guidance for as many EVs/manufacturers as we could, so click through if you have questions about a specific automaker).
In short, EV buyers should consider signing a “binding purchase agreement” before Biden signs the bill if they want to lock in access to the “old” tax credit; that old credit will no longer be available on cars that were assembled outside North America as soon as the bill is signed. This is not as urgent of an issue for cars from manufacturers that won’t lose access to the “old” tax credit, but it’s still good to be aware of, given the battery sourcing guidelines which will be adopted later this year.
As long as a certain percentage (which raises over time) of a vehicle’s battery parts are sourced responsibly, that vehicle will qualify for credits. Guidelines about that portion of the bill will be developed by the Treasury and put into place some time before the end of this year.
One of President Biden’s priorities has been to revitalize American manufacturing, so the new EV tax credit focuses more on manufacturing than on stimulating EV demand. EV demand is very high right now (and for the foreseeable future), but manufacturing and supply have not been able to keep up with the public’s growing desire to own EVs. So a bill that targets supply, right now, should help the problem, though it will take some time to spin up the supply of minerals and batteries.
The new EV tax credit focuses mostly on onshoring EV manufacturing and diversifying supply chains to countries that the US has free trade agreements with. Currently, a large chunk of EV supply chains are concentrated in China, which the US does not have a free trade agreement with.
Unfortunately, these priorities mean that, despite many tax credit improvements (making it available upfront at the point of sale and on used vehicles, eliminating the 200k cap per manufacturer, etc), in the short term there has been a lot of confusion over which vehicles will qualify now, next week, in the coming months, and in the coming years. Hopefully things will settle down once the ink dries on the paper and the government releases a list of vehicles that qualify, but until then, we’ll try to keep you abreast of developments.
We don’t know yet exactly when Biden plans to sign this bill, but will update when we do.
To reiterate our take from when the Senate passed the bill:
Finally, we’ve seen significant action on the biggest problem humanity has ever caused – and a long-needed reform of the electric car tax credit that solves several of the annoyances we’ve had to deal with for more than a decade (and causes a few more, but hopefully those will be sorted out soon).
For those of us who have our heads deep into the problems of climate change, this has to be just the beginning. There is much more work that needs to be done, and we need an order of magnitude more funding in order to do it.
But overall, we’ve gotten so used to governmental inaction on climate – particularly driven by the minority republican party that increasingly opposes environmental progress that a majority of Americans support – that this step forward represents a huge relief and a shot in the arm for all climate advocates that our work has not been in vain and that something can be done to move the needle and perhaps solve this problem we humans are causing.
What we need to do after this is not sit on our laurels being happy that the bill was passed, but take this as a sign that we can work together on these issues, that we can get things done. And, importantly, as a clear signal of which party is unanimously hostile to solutions to the largest problem humanity has ever caused and to the environment on which you depend for every necessary thing in your life (air, water, food, etc.), and which party can at least be nudged toward some sort of progress toward solving that problem.
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