The advanced battery industry in the United States woke this morning to a new and unsettling reality. After a decade or more of federal support for electric drive and advanced battery technology, it is unclear to what extent, if any, the next Administration and Congress will support efforts to break the U.S. vehicle fleet’s dependence on petroleum fuels.
There are reasons for pessimism: The petroleum industry strongly backed the Trump campaign. Donald Trump once famously called climate change a Chinese hoax. And the Republican Congress genuinely seems interested in rolling back environmental regulations and subsidies, which might well include the CAFE standards and xEV subsidies.
There is a natural tendency to overestimate the impact of a political shock, whether that shock is a Brexit or the election of a President Trump. While it is unlikely that last night’s election results will be good for advanced battery technology and vehicle electrification, there are reasons to believe that it might not be dramatically bad:
Federal Purchase Incentive. The federal income tax credit of up to $7,500 per qualified plug-in electric vehicle (IRC 30D) is an important driver of xEV sales in the United States. However, the credit phases out by its own terms once a manufacturer reaches 200,000 in unit sales. As of September 2016, 105,076 Chevy Volts, 98,829 Nissan Leafs and 84,017 Tesla Model S’s had been sold. It is quite possible that by the time the new Congress gets around to revising the tax code, the tax credit for qualified plug-in electric vehicles will have already phased out for many manufacturers.
CAFE Standards. The need for automakers to comply with CAFE standards is arguably the most important driver of xEV sales in the United States. Individual states such as California can, and probably will, impose additional emissions regulations above and beyond federal rules. While it is tempting to think of CAFE standards as being an early target for a regulation-adverse Trump Administration, CAFE standards may already be too hard baked into the planning of major automotive OEM’s and into the minds of consumers to make their repeal an easy task. It is important to remember that President-Elect Trump is a populist, not a traditional anti-government conservative. The majority of the American public believes that climate change is a concern and that greater fuel economy in automobiles is an effective way to address it. It is difficult to see President Trump making an unpopular fight against vehicle fuel economy a priority in his Administration anytime soon.
Department of Energy Programs. Most programs supporting vehicle electrification funded by the Department of Energy’s Office of Energy Efficiency and Renewable Energy and Office of Electricity Delivery and Energy Reliability are probably at risk. These programs have been critically helpful to the industry. They have helped a large number of energy technologies, including battery technologies, move into commerce much more quickly than would have been the case without such funding. Like the xEV purchase incentives, however, it is important to remember that this type of support was always supposed to be temporary–to support battery and energy storage technology only until it can stand on its own feet. If DOE support goes away, we will just have to stand it up a little faster. Given the enormous progress the industry has made over the last decade with the support of DOE programs, we may just be able to do that.
Trump’s Energy People. It is far from clear who is going to be running energy policy in the Trump Administration. But there are a couple Trump insiders whose involvement in the new Administration may give solace to vehicle electrification advocates. The first is James Woolsey. Mr. Woolsey joined the Trump campaign as a national security adviser and member of the transition team on September 12. He served as CIA director under Bill Clinton and was, at the end of the last decade, one of the leading advocates of vehicle electrification in the United States. Mr. Woolsey’s interest in vehicle electrification grew from his view that diversifying the U.S.’s fuel supplies was an important national security concern. He is a well-regarded expert in energy and national security issues. If Mr. Woolsey becomes influential in the Trump Administration, we may start talking about vehicle electrification differently than we have over the last eight years. But it will not be off the agenda.
The second Trump adviser to watch is Congressman Kevin Cramer of North Dakota. Although Rep. Cramer is an ardent oil and gas drilling advocate (he is from North Dakota, after all) and climate change skeptic, it is important to remember that Rep. Cramer was one of the few Republicans to back the idea of a carbon tax. Rep. Cramer proposed using revenue from a “modest carbon tax on all emitters” to finance research and development of energy technology (albeit coal and petroleum-related technologies). The idea of using a tax on carbon in place of more complicated greenhouse gas regulations to allow the market more efficiently to allocate emissions has long been regarded as too ambitious an idea by Democrats. But if Rep. Cramer, who is in the rumored to be in the running for the Secretary of Energy post, is truly interested in replacing regulation with market-based solutions, there could be some interesting proposals coming out of the Trump Administration that might benefit vehicle electrification and renewable energy.
It is still too early to discern what the energy policy of the Trump Administration will be, and President-Elect Trump is notoriously unpredictable. But it is also too early for vehicle electrification advocates to retreat into wholesale doom and gloom. As the old Chinese curse goes, may you live in interesting times.