This post is the third and final in a series. Click to read Part I and Part II.
Undermining Essential Investments in EVs
President Donald Trump seeks to halt Congress’ support for tax credits, grants, and loans that are supporting a transition to clean transportation, a transition necessary to achieving public health standards and reducing the transportation sector’s substantial contribution to increasingly catastrophic climate change. It will be up to Congress to stand up to the president’s pressure and preserve its support for critical environmental and economic investments.
Section 2(e) of Trump’s executive order on “Unleashing American Energy” calls for “considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs .…” In addition, the order requires agencies to pause implementation of the Biden administration’s two signature climate and energy investment laws, the Inflation Reduction Act (IRA) and the Infrastructure Investment & Jobs Act (IIJA), until the administration has determined that the policies and programs for issuing financial support are consistent with the President’s agenda.
Legislation Investing in a Clean Transportation Future
The Trump administration is seeking to undermine the government support necessary to achieve a clean energy transition. Transitioning is not only about regulatory limits, like emission standards, but about affirmative funding as well. Recognizing this, the IIJA and IRA authorized a series of interrelated investments to help the nation transition to clean transportation. Among other things, the laws provide incentives for EV and battery manufacturing, EV purchase incentives, and considerable funding for a national charging network.
To help automakers invest in new facilities, Atlas Public Policy states that, as of their August 2024 report, using funding provided by the IIJA and the IRA, the Department of Energy had provided $19 billion in loans for 16 facilities (out of a total loan authority of $55 billion) and $2.5 billion in loans for battery materials processing and recycling to 18 facilities (out of a total loan authority of $6 billion). The department had also allocated $1.7 billion to help 11 automakers convert their existing manufacturing capacity to EV production. In addition, the Inflation Reduction Act extended tax credits for EV vehicle and battery manufacturers; eight facilities have reportedly claimed over $500 million in tax credits to date.
The IRA supports increasing EV demand as well as supply. The IRA provided up to a $7,500 tax credit to help all but the richest consumers purchase EVs. Beginning in January 2024, recipients could receive the credit upon purchase. Between January 2024 and June 2024, 150,000 people received the benefit.
Recognizing that people would not purchase EVs without easy access to charging, the IIJA authorized $7.5 billion for a national network of EV charging stations. The National Electric Vehicle Infrastructure program designated $5 billion of the funds for states, which can access the funds once they have developed plans and the Federal Highway Administration has approved them. Fifty-two states (including DC and Puerto Rico) have submitted approved plans and, according to the National Association of State Energy Officials’ EV States Clearinghouse, $3.3 billion has been allocated so far. The remaining $2.5 billion is handled by the Charging and Fueling Infrastructure program, a competitive grant program for communities and tribes, “particularly in underserved and disadvantaged communities.” Almost $2 billion has been allocated to date.
Support for Heavy-Duty Vehicle Manufacturing and Purchasing
As explained in Part I of this series, toxic particulate emissions from diesel fuels for heavy-duty vehicles like trucks and buses pose significant health threats. The IIJA and IRA created programs to help transition this sector, often focused on protecting the most vulnerable. To reduce children’s exposure to diesel in school buses, the IIJA expanded the reach of EPA’s school bus rebate program with an additional $5 billion over several years, of which $2.8 billion has been allocated. The IRA allocated $3 billion to replace diesel equipment with zero-emission equipment at ports, most of which has been awarded. In addition, the IRA allocated an additional $60 million to EPA’s Diesel Emissions Reduction Act Program for grants to help transition diesel on- and off-road vehicles to EVs or other less polluting fuels.
The Fate of Clean Transportation Investments
Although Trump’s executive orders call for terminating and pausing these investments, the investments were established by Congress, not the executive. They cannot be changed by executive fiat. The degree of risk depends upon the type of funding and its stage in the disbursement process.
Grant and loan funds that have already been awarded are the most secure; neither the executive nor Congress can “claw back” funds that have already been disbursed pursuant to legally binding agreements. Some grant funds may be at an in-between stage: they could be “obligated” — that is, awarded and subject to a contract requiring payment — but not yet disbursed. Although the executive order’s pause on funding may delay disbursement, obligated funds should be relatively secure from executive or congressional repudiation.
Grant and loan funds that have been allocated by Congress, awarded to grantees, but not yet obligated could face some risk that Congress will reverse the law that initially supplied the funding in question. And because many IIJA and IRA provisions allocated money to cover several years, some programs have not yet awarded, obligated, or disbursed all of the funds Congress appropriated. These allocations face the greatest risk of congressional reversal.
It is worth noting that a considerable portion of the funds allocated in the IIJA and IRA have already been obligated, if not disbursed. According to one source, the Biden administration, anticipating a potential Trump presidency, had already obligated about 84 percent of the Inflation Reduction Act’s grant funding before January 20.
Turning to tax credits, even though Congress created long-term tax credits to encourage investments, it has the power to change its mind and eliminate the tax credits it established for vehicle and battery manufacturing and for consumer vehicle purchases.
However, notwithstanding the shift to Republican control, it is unclear whether and to what extent Congress would zero out on-going grant programs or eliminate clean vehicle tax credits. At least some automakers have indicated that they intend to continue to produce EVs given existing investments, as well as consumer demand in the U.S. and abroad. Although initial support for the IIJA and IRA fell largely along party lines, many of the manufacturing investments have occurred in red states. Industry incentives that support economic growth and jobs, and are supported by auto companies, may be in the strongest position. Consumer tax credits could be at greater risk because they do not provide the kind of concentrated benefits that could move specific congressional members.
The Risk of Executive Impoundment
It is possible that, if Congress does not roll back its grants, loans, and tax credits, the administration would “impound” (refuse to spend) the funds, notwithstanding IIJA and IRA provisions allocating the funds. For example, the “Unleashing” executive order specifically calls for pausing spending on electric charging stations. § 7.
The Impoundment Control Act of 1974 (the Act) explicitly prohibits the executive branch from holding back funds that Congress has allocated. The statute conforms to constitutional expectations, since the Constitution gives Congress the budget-setting power and it is the executive’s responsibility to implement the programs that Congress has funded.
While a short pause to assess conformity with administration policies might not violate the Act, a longer-term refusal to spend would. This has not deterred Trump, who has indicated that he would seek to “impound” funds appropriated by Congress and that he does not have to abide by the Act because it is unconstitutional. The president may intentionally violate the law to create a test case. Impoundment of congressionally earmarked funds concentrates power in the executive branch at the expense of Congress and creates serious separation of powers concerns.
Conclusion
Federal support has been critical to the transition to clean vehicles. The combination of regulatory requirements and subsidies in the U.S. and competition abroad has generated auto industry investments that may prove “sticky” – that may outlast the current administration’s hostility to EVs. Nonetheless, the president is attempting to unglue the EV architecture of regulations, discussed in Part II of this series, as well as crucial investments in manufacturing, consumer incentives, and charging infrastructure.
We can only hope that existing momentum will help achieve the clean transportation transition that is essential to protecting public health and reducing the profound risks posed by climate change.
