Daily on Energy: Takeaways from the EV credit rules

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NEW RULES FOR ELECTRIC VEHICLE TAX CREDITS: The Treasury Department’s new proposed guidance for the revised electric vehicle tax credit represents a paradigm shift for the program, and officials said they expect it to knock down the number of models eligible for the full $7,500 subsidy in the near term.

The guidance’s battery component and critical mineral requirements don’t go into effect until April 18, so any vehicle that doesn’t meet them could still be eligible for the credit until then, so long as it meets the North American assembly requirements and other requirements on price and so forth.

Treasury guidance does seek to widen the net, though, to ultimately allow for products from more countries to have access to the credit than initially thought when the Inflation Reduction Act was passed and everyone read the law’s language limiting activities to North America and free trade agreement countries.

Flexibility in words, not numbers: The guidance keeps to the schedule provided in the IRA: Starting this year, 50% of battery components the value of the battery components must be manufactured or assembled in North America

For critical minerals, it’s 40% and limited to those extracted or processed in the United States or a country with which the United States has a free trade agreement, or recycled in North America.

Treasury proposed a broad definition, however, for a “country with which the United States has a free trade agreement” to include those beyond the 20 countries who maintain a comprehensive FTA agreement with the U.S (List here).

That list of 20 excludes European partners and Japan, who called foul when the IRA was passed, but new agreements on minerals, such as the one announced between the U.S. and Japan earlier this week, count under the proposed guidance’s definition.

One other thing: Sen. Joe Manchin expressed anger at the outcome this morning, saying the guidance would aid China. His statement didn’t chart out which items in particular he took issue with, but Manchin spoke earlier this week about where he suspected Treasury to stray from his intent with the IRA.

Here were some of Manchin’s musings on the direction of the guidance on Wednesday, particularly the meaning of “processing”: “Does it mean basically the process of the raw product into a form that we can take it and put it in a manufacturing form? Or is it basically the making the powders and the wafers and everything that we need, and foils, and calling that processing? Well, you do that and we don't, we don't meet our objective of being self-reliant.”

The guidance proposes to define processing as “the non-physical processes involved in refining of non-recycled substances or materials, including the treating, baking, and coating processes used to convert such substances and materials into constituent materials.”

The guidance also proposes to exclude "constituent materials" from the definition of "battery components," the latter of which must be manufactured in North America.

The constituent materials that would then apparently be protected from that manufacturing requirement include powders of cathode active materials, powders of anode active materials, foils, metals for solid electrodes, binders, electrolyte salts, and electrolyte additives.

This could be what is setting Manchin off, although we don’t know for certain.

Not over yet: Beginning next year, eligible vehicles may not contain any battery components that are manufactured by a “foreign entity of concern.” Beginning in 2025, vehicles may not contain any critical minerals extracted, processed, or recycled by a foreign entity of concern.

Treasury said it would issue further guidance on this component of the rule, but it’s expected that suppliers tied to China and Russia will be at the top of that list.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email jbeaman@washingtonexaminer.com or bdeppisch@washingtonexaminer.com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

INTERIOR PROPOSES MAJOR SHIFT IN PUBLIC LANDS PLAN: The Bureau of Land Management introduced a sweeping new draft rule yesterday that would allow it to apply “land-health" standards on all public lands it manages, and lease public acres for conservation purposes in the same way it does for drilling, grazing, and public recreation.

The proposed changes would be a dramatic shift in the Interior Department’s management of some 245 million acres of public lands it oversees, which are primarily located in the West.

Interior said the effort would help protect land at risk of climate change-induced threats, such as wildfire and drought, as well as areas in need of habitat restoration. It would allow Interior to issue 10-year conservation leases for these lands. It stressed that conservation would not be put above other land uses––but simply on par with the other considerations within its multiple-use framework.

"As the nation continues to face unprecedented drought, increasing wildfires and the declining health of our landscapes, our public lands are under growing pressure," Interior Secretary Deb Haaland said in a statement. "It is our responsibility to use the best tools available to restore wildlife habitat, plan for smart development, and conserve the most important places for the benefit of the generations to come."

The proposed rule will be published Monday in the Federal Register, kicking off a 75-day public comment period.

BIPARTISAN VOTE ON WHALE DEATHS: In case you missed it, one notable amendment vote in yesterday’s passage of H.R. 1 was the bipartisan approval of a measure introduced by Republican Rep. Chris Smith of New Jersey calling for an independent investigation into the environmental review processes for offshore wind development along the Atlantic Coast amid a concerning uptick in whale and dolphin deaths.

The amendment stops short of issuing a moratorium on offshore wind projects, but would require the GAO to investigate the environmental review processes for such projects carried out by BOEM, NOAA, and all relevant federal agencies involved in the process. It would also require the GAO to investigate the impacts that offshore wind development might have on whales or other marine life on the East Coast.

Notably, 29 Democrats voted in favor of the amendment––compared to just four Democrats who voted for the broader H.R. 1 energy package.

Bigger picture: Since December, at least 30 whales have washed up on the shores of the Atlantic Coast, including humpback whales and the endangered North American right whales––and the concerns appear to be moving beyond party lines.

…Earlier this week, a group of five Senate Democrats, including Sens. Cory Booker and Bob Menendez of New Jersey, called on the NOAA to release more information about the “concerning” uptick in humpback and North Atlantic right whale deaths. “If the death trajectory continues, particularly amongst juvenile individuals, species will begin to disappear,” they said in a letter. Read more from Breanne here. 

JUSTICE DEPT SUES NORFOLK SOUTHERN OVER EAST PALESTINE DERAILMENT: The Department of Justice filed a lawsuit against Norfolk Southern over the East Palestine train derailment, seeking injunctive relief and civil penalties payments for the pollution caused by the Feb. 3 derailment.

The lawsuit, filed in the U.S. District Court for the Eastern District of Ohio on behalf of the EPA, claims that Norfolk Southern unlawfully polluted waterways in the area via the discharge of the hazardous material that were on the train, violating the Clean Waters Act and the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA. It comes after the state’s attorney general, Dave Yost, filed a separate lawsuit earlier this month accusing the rail operator of violating various state and federal laws.

The Justice Department is calling for Norfolk to pay penalties of $64,618 per for each day it violated the Clean Water Act, and to pay an additional $55,808 per day – or $2,232 per barrel or unit– of hazardous substances spilled in the derailment.

The Ohio train derailment “released toxins into the air, soil, and water, endangering the health and safety of people in surrounding communities,” Attorney General Merrick Garland said today in a statement. “With this complaint, the Justice Department and the EPA are acting to ensure that Norfolk Southern is held accountable for the harm it has caused and continues to inflict on the residents of East Palestine.” Read the lawsuit here. 

E.U. STRIKES DEAL ON HIGHER RENEWABLE ENERGY TARGET: European Union leaders reached a provisional deal yesterday to raise their renewable energy targets by 2030, with negotiators agreeing to source between 42.5% and 45% of their energy from renewable sources by the end of the decade, compared to the previous target of just 32%.

That roughly means doubling the EU’s renewable energy mix, which currently stands at roughly 22%. Renewable energy generation also varies wildly within the bloc: Sweden, for example, gets 63% of its energy from renewable sources, followed by Finland, at 43%––but other countries have much lower shares – Luxembourg, Ireland, and the Netherlands, for example, all receive less than 13% of their energy mix from renewables.

The directive also calls for the bloc to raise to 29% the share of renewable energy used by its transportation sector. And it adds additional targets for buildings, and seeks to accelerate the permitting process for renewable energy facilities, such as wind and solar projects.

The deal brings to a close the protracted, 18-month negotiation over the bloc’s “Fit for 55” climate package, which seeks to slash the EU’s greenhouse gas emissions by 55% by 2030.

MARKEY-TLAIB BILL WOULD END FOSSIL FUEL FINANCING: New legislation from Sen. Edward Markey of Massachusetts and Rep. Rashida Tlaib of Michigan would have the Federal Reserve restrict big banks from financing fossil fuel projects and production.

The bill would require the banks to reduce financed emissions by 50% by 2030 and 100% by 2050, and discontinue financing new fossil fuel projects immediately and then altogether by 2030.

It has the backing of a wide range of environmental groups and also left-of-center financial reform groups.

Emission reductions through the financial system: Markey and other liberals are also pushing the Biden administration to follow through on pledges to end support for fossil fuel projects abroad through U.S. agencies and international groups. They are also lobbying the SEC for a tough rule on emissions disclosures.

They have a ways to go. Of particular note, it was negative comments about the oil and gas industry that doomed Saule Omarova’s nomination to run the Office of the Comptroller of the Currency, thanks to opposition from centrist Democrats.

JPMorgan Chase head Jamie Dimon told Tlaib in congressional testimony in September that ending financing for oil and gas projects would be the “road to hell for America.”

The Rundown

Wall Street Journal Green energy is stuck at a financial red light

Bloomberg Giant roofs on big-box stores, warehouses still have unmet solar potential

GAO Utility-scale energy storage: Technologies and challenges for an evolving grid

Calendar

MONDAY | APRIL 17

3:30 p.m. The Institute of World Politics will host a panel on the current energy supply crisis and Canada’s role in helping supply alternative energy sources. Panelists will include James Rajotte, Alberta’s senior representative to the U.S., SVB Energy founder and president Dr. Sara Vakhshouri, and others. Learn more and register to attend here.

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Tags: Energy and Environment, Daily on Energy

Original Author: Jeremy Beaman, Breanne Deppisch

Original Location: Daily on Energy: Takeaways from the EV credit rules