Members of the House of Representatives are set to return to Washington on Friday to vote on Democrats' sweeping climate, tax and health care bill, the Inflation Reduction Act. The measure includes $369 billion to fight climate change, the largest such investment in U.S. history.
But one key part of the bill – tax credits for electric vehicles – is drawing concern from an expert who fears it won’t be effective.
Tax credits for EVs are a crucial piece of the bill intended to get more people to give up their gas-powered cars and switch to cleaner vehicles. The bill offers a tax credit of up to $7500 for new EVs under a certain price tag and up to $4000 for used electric vehicles through 2032.
The credits will be available to couples with incomes up to $300,000 and for single people with an income of $150,000 or less. Owners of trucks or SUVs who paid more than $80,000 for cars above $55,000 would not qualify for the tax credit.
But an industry expert says that under this plan a majority of EVs won’t be eligible for the credits, mainly because of a requirement that mandates where pieces of the car must be made. The bill requires EVs to contain a battery built in North America with minerals mined or recycled on the continent as well.
“The $7,500 credit might exist on paper, but no vehicles will qualify for this purchase over the next few years,” John Bozzella, CEO of the Alliance of Automotive Innovation, a key industry trade group, said in a statement to The Associated Press.
The majority of EV makers don’t currently have the production capacity or resources to mine minerals. China, which the U.S. and surrounding nations view as a geopolitical threat, currently dominates global supply chains in that sector. The bill excludes tax credits from new cars whose battery materials or other components have production ties to a "foreign entity" of concern, including China
Jay Turner, an environmental studies professor at Wellesley University, warns that "in the short term, many of these vehicles won’t likely be eligible for the credit."
"What difference this is going to make is that it's going to hinge on how quickly auto manufacturers can pivot their supply chains – and there’s good reason to think they might not – there might not be such a massive subsidy," he told Spectrum News.
Turner added that if they delayed the timeline for making these changes, it would create a better situation.
The goal of the restriction, the White House says, is to boost domestic manufacturing and reduce reliance on outside supply chains.
"This is an opportunity to make sure companies turn to U.S. workers," White House National Climate Advisor Gina McCarthy told Spectrum News.
"There are lots of gives and takes in this bill but there are tremendous opportunities. And I’m sure the electric vehicle community will be able to capture this," McCarthy added.
The Associated Press contributed to this report.