On a quarterly earnings call earlier this week, GM CEO Mary Barra announced the untimely death of the Chevy Bolt, an electric sedan that goes for under $30,000. The Detroit-area factory that makes them is set to be retooled to produce larger and more expensive electric trucks, including the Chevy Silverado. While a 2023 Bolt weighs in at around 3,600 pounds, the roughly $40,000 Silverado EV—due out next year—will be more than 8,000 pounds. As Barra explained later on in the call, the company is “very targeted at having the E.V.s at the right price point.”
This discontinuation makes Tesla’s Model 3—still about $40,000 even after a recent price cut—the only sedan eligible for the electric vehicle tax credits furnished by the Inflation Reduction Act. Fewer than a dozen models currently qualify for the full credit, nearly all of which are hulking trucks and SUVs.
The size and cost of these eligible E.V.s are problems in their own right: for road safety, affordability, and the extravagant volume of minerals they demand. But the Bolt’s demise and the shrinking list of cars that qualify for IRA tax credits also raise bigger questions about the approach the White House is taking to decarbonization.
As State Department national security adviser Jake Sullivan explained in a speech to the Brookings Institution on Thursday, the Biden administration’s foreign and domestic agenda hinges on a new approach to economics. “At the end of the day,” Sullivan said, “what we are trying to do is build the capacity to make things and deploy them and the resilience to be able to withstand the shocks in today’s world, from the climate crisis to a global pandemic to a war.”
As the administration seeks support for its climate goals among policymakers and the public, green industrial policy would seem to be a kind of goldilocks solution to the challenges Sullivan laid out, bolstering supply chains to prevent outsize reliance on any single country and providing well-paid, ideally union jobs as part of a growing and globally competitive clean energy economy. The trouble, however, comes from assuming that a green industrial strategy represents a holistic plan for decarbonization rather than one vitally important component of it.
When it comes to E.V.s, trying to reengineer supply chains, revive manufacturing, and compete with China all at once leaves a frustratingly narrow set of options for drivers looking to go electric. According to the stipulations passed in the IRA, to qualify for a tax credit, new plug-in vehicles must be assembled in the United States. From there a buyer’s ability to reap the full $7,500 depends on both their income, the cost of the car, and where it’s produced. Forty percent of the minerals used in a car’s batteries must come from the U.S. or a country with which it has a free trade agreement. Fifty percent of battery components have to come from the same places. Both of those requirements will scale up by 10 percent each year. By 2027, 80 percent of minerals must meet those criteria; by 2029, 100 percent of battery components will need to be made in the U.S., as well. By 2025, vehicles with any minerals or battery components from a “foreign entity of concern” (namely China) won’t qualify at all.
The New York Times’ Ezra Klein warned recently about the dangers of what he dubs “Everything Bagel Liberalism,” loading up laudable projects with too many other goals, like workplace diversity or child care requirements. However important these other priorities may be, “the result,” he writes, “is that public projects—from affordable housing to semiconductor fabs—aren’t cost competitive, and that makes them vulnerable when a bad economy hits or a new administration takes over and the government cuts its spending.”
When it comes to decarbonization, the problem with the IRA-style approach the administration has adopted is an inverse of that. Decarbonization is a specific goal: getting the economy to net-zero. That will certainly involve some revival of a domestic manufacturing base and ensuing job creation. But decarbonization also requires lots of things that a green industrial strategy like the one Sullivan laid out won’t provide. Klein takes issue with the IRA’s buy-local provisions and exclusion of foreign contractors and components, citing the potential delays they might cause. The tension is a legitimate one. Yet the “everything” part of Klein’s “everything bagel” dilemma isn’t the only problem; everything bagels are great, as he rightly notes. But no one can live on bagels alone.
A balanced diet for decarbonization requires a lot more than a soft little circle of boiled dough. Just as a bagel can’t be breakfast, lunch, and dinner, green industrial strategy can’t simultaneously serve as a national security strategy, jobs plan, and multidecade strategy for reducing emissions.
While the administration has made electric vehicles the centerpiece of its plan to decarbonize the transportation sector—the country’s largest single source of emissions—a recent study in Nature Communications adds to a growing body of research that shows that subbing out every gas guzzler for an American-made E.V. won’t get the job done. Physicist Lisa Winkler and her co-authors conclude that a “rapid and large-scale reduction in car use is necessary to meet stringent carbon budgets and avoid high energy demand.”
These dramatic changes to life as we know it don’t have to be austere sacrifices. In dense urban areas it could mean expanding mass transit use and coverage with cheap or free fares and additional lines. In the suburbs it could mean building more affordable and energy-efficient housing to reduce sprawl and car reliance. That’s not just a matter of figuring out how to build more stuff, either. As those efforts roll out, there will need to be real constraints placed on fossil fuel companies hell bent on growing demand for hydrocarbons.
The Biden administration’s approach of stimulating green industry has other weaknesses too: Basing industrial strategy primarily around de-risking private investment in clean energy still leaves key decisions for what and how much gets built (say, a more affordable, smaller vehicle like the Chevy Bolt) in the hands of companies whose sole desire is to make as much money as possible. Ultimately there will be investments vital to decarbonization that companies won’t be able to find a viable business model for, like storing carbon in the ground indefinitely or making renewable energy accessible to working-class renters. The goals of a green industrial strategy and for rapid decarbonization are overlapping but distinct; trusting the private sector will accomplish either just because we’re throwing money at them is a recipe for failure.
