The American automotive sector is bracing for a major transformation in the coming years, largely driven by four ambitious clean-car policies to phase out tailpipe emissions. Arthur van Benthem, associate professor of business economics and public policy at the Wharton School, and M. Danial Syed, a research analyst at Wharton, explain what the four cornerstone policies are, and the legal and political threats the policies face.
This year, new regulations issued by the Biden administration are projected to increase the market share of electric vehicles in new-car sales to 56% by 2032, up from about 8% in 2023. An additional 16% of new vehicles are likely to be plug-in hybrid electric vehicles. The projected gasoline equivalent of this new-vehicle fleet in 2032 translates to an average fuel economy of 58 miles per gallon.
The rule is part of a broader policy effort to transition the U.S. auto industry towards zero-emissions vehicles. However, van Benthem and Syed argue, achieving that goal will require a revolution in manufacturing processes and heavy investments in EV production and infrastructure.
Taking aim at another significant source of tailpipe pollutants, the EPA followed up with complementary regulations targeting emissions from heavy-duty vehicles, such as commercial trucks, delivery trucks, and school buses.
At the state level, California is leading another initiative in the clean energy transition with its Advanced Clean Cars II regulation. The rule mandates that all new passenger cars, trucks, and SUVs sold in California be zero emissions by 2035.
And the historic Inflation Reduction Act, signed into law in August 2022, provides up to $7,500 in tax credits for new EVs, making electric cars more affordable for buyers.
These four policies set the stage to transform the U.S. automotive industry, say van Benthem and Syed. But such a fundamental and rapid transition requires careful navigation. The major threats to these policies are legal and political. Fossil-fuel companies and attorneys general from Republican states are widely expected to challenge the rules in court. In addition, they add, Republican politicians have already announced they will roll back the rules if they win the 2024 presidential election.
Read more at Kleinman Center for Energy Policy.
