Guest commentary: Inflation Reduction Act is good start, but more federal and state actions needed

Electric vehicle sales in the U.S. surged last year, growing by two-thirds from 2021 to nearly 6 percent of all new-vehicle sales. New analysis from the International Council on Clean Transportation and Energy Innovation Policy & Technology shows automakers can expect sales to shift into high gear thanks to the Inflation Reduction Act. 

The law’s incentives for new and used EVs, charging infrastructure and domestic supply chain are game changers for the U.S. EV market. By 2030, light-duty EVs could make up 48 to 61 percent of all new-vehicle sales, while heavy-duty EVs could reach 39 to 48 percent, putting the U.S. on track to achieve the Biden administration’s goal of 50 percent zero-emission vehicle sales in 2030.

But this accelerated EV sales growth is far from guaranteed, especially once the Inflation Reduction Act’s incentives expire at the end of 2032, or if the administration changes in 2024. Additional federal and state policy actions are needed to fortify the long-term EV market, help consumers adopt EVs to dodge inflated fossil fuel prices and slash harmful transportation pollution.

To better understand how the Inflation Reduction Act will shape the U.S. EV market, ICCT and Energy Innovation modeled the effect of the law’s incentives on the sales shares of light- and heavy-duty EVs. The study’s “Low,” “Moderate” and “High” scenarios compare the potential impacts of its personal and commercial EV tax credits, factoring in supply chain requirements, buyer income caps and price caps on new EVs, combined with estimates of future light-duty and heavy-duty EV cost declines. 

Factoring in the 30D consumer credits and 45X manufacturing production tax credit, the analysis finds the federal incentives will reduce light-duty EV purchase costs by an average of $3,400 to $9,050 between 2023 to 2032. Across all modeled scenarios, new EV sales see a substantial boost. By 2032, EVs could reach 56 to 67 percent of all new light-duty car sales and 44 to 52 percent of all new heavy-duty vehicle sales. 

The modeling also analyzes how increased state adoption of clean vehicle standards will affect sales. Last year, California set a nation-leading ZEV standard. Its Advanced Clean Car II standard requires 100 percent of all new passenger cars and light trucks sold be zero emission by 2035. The state’s clean car policies have made it a global leader in EV sales, with one-fifth of all new cars being zero emission in 2022. Nearly 20 states could adopt the ACC II standard, reducing prices for customers and growing sales for dealers.

For states that already have ZEV standards in place, moving swiftly to adopt the updated ACC II rule would drive significant market growth. When combined with the “Moderate” scenario, new sales of light-duty EVs could reach nearly 60 percent nationwide in 2030. State leadership on clean car and truck standards will also ensure more people have access to the widest range of affordable EVs.

But even as states continue pacing EV sales, the Biden administration must set strong federal vehicle standards to ensure the act’s electrification momentum continues, especially after incentives expire in 2032. This year, the EPA will release proposed rule makings for greenhouse gas emissions standards for light- and heavy-duty vehicles for the 2027 model year and beyond. These standards can build on the act’s momentum. 

To deliver maximum consumer and clean air benefits, the EPA’s new standards will need to advance electrification faster than the Inflation Reducation Act can. Another Energy Innovation analysis points to stronger federal vehicle tailpipe standards as a tool to close the gap between the Inflation Reduction Act and what’s needed to mitigate emissions from road transportation.

Fortunately, the federal incentives mean the EPA can set more stringent standards at lower cost and higher benefit for consumers and manufacturers. Stronger vehicle standards can level the playing field for all auto manufacturers, stimulate competition for a more robust offering of EV models and help overcome extant inertia for electrification. 

A cleaner, more affordable electrified transportation future is on the horizon, we have the keys to get there, and ambitious federal and state actions will get us there faster.