WASHINGTON — Senator Joe Manchin III’s opposition to government incentives for electric vehicles is a sticking point in negotiations over President Biden’s tax and spending package, talks that appear to be coming to a head this week after months of ups and downs
Biden and most Senate Democrats want billions of dollars in tax credits for consumers who buy electric vehicles, which they see as key to combating climate change.
The transition away from polluting gasoline-powered cars and trucks is even more critical to the administration’s climate goals after a recent Supreme Court decision that curtailed the government’s authority to reduce pollution from power plants.
Mr. Manchin, a Democrat from West Virginia who has received more campaign contributions from oil, gas and coal companies than any other senator, has criticized the proposed tax credits, which would be worth up to $12,500 per vehicle, as unnecessary and wasteful. He has also expressed skepticism about increasing government spending at a time of inflation.
Mr. Manchin’s opposition to tax credits for electric vehicles mirrors that of the oil industry, which would be threatened by a widespread abandonment of gasoline-powered cars and trucks. The American Petroleum Institute, the fossil fuel industry’s lobbying arm, has warned against a “rushed transition to electric vehicles,” saying government action to support electric vehicles could limit transportation options for consumers. Americans and leave them “adrift”.
“Bottom line: Efforts to subsidize EV adoption can be costly for taxpayers and consumers,” Mike Sommers, the group’s president, said last year.
But a quick transition to electric vehicles is exactly what scientists say is needed to quickly and dramatically cut emissions that are dangerously warming the planet. Transportation pollution is the leading source of greenhouse gas emissions in the United States.
Manchin has already succeeded in cutting the proposed tax credits by about a third, eliminating a $4,500 incentive for consumers to buy union-made American cars, a move opposed by Toyota Motor, which operates a non-union plant in the home state of New York. Manchin.
In a statement, Toyota said that while it supported tax credits for consumers to speed up the transition to electric cars, giving a premium to union-made vehicles would be a mistake.
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“What does this say to the American autoworker who has decided not to join a union?” the company said. “He says that his work is worth $4,500 less because they made that decision. What does this say to the American consumer?
That money was designed in part to win support from American automakers and union voters in industrial areas of the Midwest and Northeast who helped elect Biden but are wary of a transition to electric vehicles, which require less workers to assemble.
Now Democrats are considering a means test to limit tax credits to consumers below a certain income level as a way to appease Manchin, according to people close to the talks. And he has suggested doing away with tax credits altogether.
“There’s a waiting list for electric vehicles right now with $4 gas prices, but they still want us to give $5,000 or $7,000 or a $12,000 credit to buy an electric vehicle,” Manchin said at a Senate hearing this year. .
“It doesn’t make any sense to me,” Manchin said, adding, “It’s absolutely ridiculous.”
West Virginia drivers buy fewer electric vehicles than almost any other state. As of 2020, there were only 600 EVs registered in the state, which is less than 1 percent of all vehicle registrations. Only motorists in Wyoming and South Dakota drive fewer electric vehicles, according to federal data.
“Combine that with the oil and gas focus and I’m not sure there’s a public groundswell of support for electric vehicles in that state that could force Manchin to accept electric vehicle subsidies for new vehicle purchases,” he said. Barry Rabe, professor of public policy. at the University of Michigan.
The typical electric vehicle buyer earns more than $100,000 a year, has a college education and owns at least one other vehicle, according to a 2021 survey commissioned by the Fuels Institute, an energy research organization.
“These are people who are not from West Virginia, these are not people he represents and he has raised real questions about why, in his opinion, taxpayers should subsidize his ability to buy new and very expensive electric vehicles,” he said. Josh Freed, senior vice president for climate and energy at Third Way, a moderated think tank.
Mr. Freed described tax credits for purchasing electric vehicles as critical to stimulating the market and encouraging automakers to produce high-volume cars, which would drive down the price per unit. A 2021 study by Cox Automotive found that 51 percent of buyers said electric vehicles were too expensive to seriously consider.
Mr Biden wants 50 per cent of new vehicles sold by 2030 to be fully electric, up from just 5 per cent today. To meet that goal, he wants to combine the tax credits with tough new fuel-economy regulations for cars being developed by the Environmental Protection Agency.
But the same litigants who won a June Supreme Court decision limiting the EPA’s authority to regulate greenhouse gas pollution from smokestacks are expected to challenge the developing rules on tailpipe emissions. That makes the tax credits even more important, said Drew Kodjak, executive director of the International Council on Clean Transportation, a research organization.
As the swing vote in an evenly divided Senate, Democrats need Manchin’s backing to push through a budget bill without Republican support. That has given him unusual influence over the substance of the legislation. Mr. Manchin also has personal financial ties to the coal industry, which has made him a millionaire.
Sen. Chuck Schumer of New York, the Democratic majority leader, is making a last-ditch push to pass a scaled-down domestic policy bill before August. Mr. Schumer tested positive for covid but spoke to Mr. Manchin on Monday via video call, an aide said.
Manchin has yet to sign off on a cap figure for the overall bill, but supporters expect far less than the $555 billion in climate and clean energy provisions the House passed when it passed its version of the bill in November. Several people familiar with the negotiations said lawmakers were discussing a $300 billion cap on climate and energy measures.
On Monday, Manchin dismissed the idea that lawmakers were close to reaching a deal.
“There are a lot of conversations and considerations that go back and forth,” he said, adding that any climate legislation must address inflation and must increase the supply of fossil fuels.
Mr. Manchin said he was more concerned about the price at the pump. “How do we lower the price of gasoline?” he said. “On the energy issue, but you can’t do it unless you produce more. If there are people who don’t want to produce more fossils, then you have a problem. That is just the reality. You have to do it.
Manchin’s efforts to reduce tax incentives for electric vehicles began last fall, when Senate Democrats first sought to reach agreement on a much broader $2 trillion climate change and social policy bill.
In addition to eliminating the tax credit created by the union, Mr. Manchin suggested eliminating the basic credit of $7,500 for the purchase of any type of electric vehicle, according to several people involved in the negotiations. That would leave just a $500 tax credit for electric vehicles with an American-made battery.
That would also put Manchin at odds with Toyota and the Big Three US automakers. While Toyota opposes tax credits for union-made electric vehicles, the company last month joined General Motors, Ford and Stellantis in a letter to congressional leaders calling on them to expand the number of electric vehicle sales. who would be eligible to receive the tax credits. The current proposal would limit tax credits to the first 200,000 vehicles sold by each individual automaker.
“Removing the cap will incentivize consumer adoption of future electrified options and provide much-needed certainty to our customers and domestic workforce,” the auto executives wrote.
One possible bargaining chip in negotiations between Senate Democrats and Manchin could be the construction of a new hydrogen research and development center in West Virginia. The bipartisan infrastructure bill includes $8 billion to create four such regional “hydrogen hubs.”
Hydrogen can be converted into electricity to power a vehicle, emitting only water vapor. But much of the hydrogen produced today is extracted from natural gas, a process that generates methane and carbon dioxide, both greenhouse gases.
Mr. Manchin and other West Virginia leaders want the Biden administration to choose their state as the site for one of the centers, where hydrogen would be produced using natural gas.
“We haven’t put the money or the research into hydrogen like we have into electric vehicles,” Manchin said earlier this year.
A person familiar with Manchin’s thinking, who asked to speak anonymously because the negotiations were not public, said Manchin could support some tax credits for electric vehicles in exchange for a deal with the Biden administration that West Virginia would be selected as a hydrogen city. center.
Sam Runyon, a Manchin spokeswoman, dismissed that suggestion. “There is absolutely no truth to this,” she said.
A coalition of the hydrogen industry backed by oil companies, including Chevron and BP, is pushing for federal support for hydrogen infrastructure. Toyota has also staked its future on developing hydrogen fuel cell vehicles, a more expensive alternative that has lagged behind battery-powered electric cars.
John Kilwein, chairman of the political science department at West Virginia University, said Manchin’s opposition to electric vehicle tax credits and his effort to cut the whole package work well at home.
“West Virginia is getting redder, it doesn’t like DC, it doesn’t like the National Democrats, and it doesn’t like the federal government,” Kilwein said in an email. “Manchin can argue that he is West Virginia common sense keeping them in check.”
Hiroko Tabuchi contributed reporting from New York and emily cochrane from washington