Written by Nitya Wanchoo
In the transition from fuel powered cars to electric vehicles in the name of sustainability, we see how essential battery technology is to a future powered by clean energy. The United States has been investing heavily in batteries, such as electric vehicles (EVs) and renewable energy storage. Since the Biden administration passed the Inflation Reduction Act (IRA) in 2022, a misnomer because it has less to do with inflation and more to do with offering funding, programs, and incentives to accelerate the transition to a clean energy economy, the sector has seen an enormous boost. But, with Trump getting ready to enter the White House once more, the future of battery investment seems unclear.
So what is the IRA? The IRA was originally proposed as a budget reconciliation Build Back Better Act, an expansive climate and tax plan in tandem with an infrastructure bill. But, Senator Joe Machin rejected it due to notable doubts about inflation rising as a casualty of investing in EV technology (Cochrane & Friedman, 2022). Following some negotiation with Senator Chuck Schumer, two were able to find common ground and create and sponsor the IRA instead (Everett & Levine, 2022). They focused the bill on three main areas: taxes, health care, and climate (Zhou, 2022). Finally, President Biden signed the IRA into law on August 16, 2022, and it is now widely regarded as one of the greatest successes of his term (U.S. Department of the treasury, 2024).
As a product of climate-friendly investment, funding for the production of EV batteries in particular soared. The Electrification Coalition suggests that “the Inflation Reduction Act of 2022 is perhaps the most significant legislation to accelerate transportation electrification in U.S. history.” (Electrification Coalition, 2023). By offering tax credits as incentive for EV production, battery manufacturing and critical mineral processing in the United States skyrocketed for the first time. In fact, “47% of all EV manufacturing investment announced since the IRA” (Latham, 2023). The Center for American Progress calculated that post IRA “private and public investment in the manufacturing of batteries and EV chargers has totaled more than $45 billion” (Smith & Friedman, 2024).
There is also an international component to this. “As the US transitions to clean energy sources, building an end-to-end domestic battery supply chain has become critical. Increasing domestic production helps minimize reliance on foreign suppliers, especially China, which currently dominates global battery material markets” (Rudge, 2024).
As of 2024, investments are still booming but the challenges in creating a domestic EV battery are becoming increasingly clear. The industry worries about critical mineral supply and the environmental concerns of mining for such minerals. One source says that “the world has enough lithium for our electric vehicles, decades into the future. But, the world is currently not producing enough of it to keep up with demand. This could be a major bottleneck this decade” (Ritchie, 2023). And, in the case of lithium, its “extraction can take 18 months through an evaporation process that uses enormous amounts of water. Each ton of refined lithium uses up to half a million gallons of water. The results deplete the water table and cause soil contamination” (Nichols, 2024). Cobalt undergoes a similar process for extraction and “prolonged exposure and inhalation of cobalt dust can lead to health issues related to the skin, eyes, and lungs” (Nichols, 2024). Minerals like lithium, nickel, and cobalt raised costs and even slowed down some projects.
But, the 2024 election results leave the future of EV battery investment up in the air. Currently, the Department of Energy is rushing to spend the remaining IRA funds before the term ends. “In the last week alone, the Department of Energy (DOE) announced over $3 billion in clean energy development and climate resilience funding” (Garden, 2024).
Donald Trump had originally promised to gut the IRA should he be elected President (Tamborrino, 2024). Now though, there is speculation on whether he actually will. This is due to two main reasons.
The first reason is Elon Musk, the founder and CEO of Tesla, who spent an estimated $200 million through his PAC to support Trump’s campaign. (Merica, 2024) Trump is to reward Musk’s loyalty and generosity by making him head of the department of government efficiency. By offering Musk a Cabinet position and giving him the opportunity to weigh into important decisions, Trump gives Musk the opportunity to advocate on behalf of EV manufacturers against actions that would discourage EV investment. Many democrats are hoping that Trump listens to Musk on issues of climate change and investing in green technology.
However, that is unlikely because Tesla was established well before the other EV manufacturers. They have a competitive edge that Musk intends to keep. It is in his best interest to let Trump defund the IRA because that would keep these legacy carmakers out of the EV industry. The irony in this is that Tesla makes a significant amount of money from selling government tax credits. “These are credits that EV makers can sell to combustion-engine carmakers to offset the latter’s carbon emissions — the slower legacy automakers are to get into the EV game, the more Tesla can sell. And sell they are: Tesla made a life-saving $890 million in these credits last quarter, doubling its haul from the quarter before” (Lopez, 2024).
The second reason that Trump defunding the IRA is under speculation is economic stimulation in Republican states. EV investment and planned plants and factories are predominantly located in rural areas, benefitting southern and traditionally conservative states the most. Despite no Republican voting for the passage of the IRA, about 60% of announced projects are based in Republican districts. “Of all new projects, those in Republican districts represent 85% of the investments and 68% of jobs. Of the top 20 congressional districts for clean energy investments, 19 are held by Republicans.” (Shaw, 2024) Lots of likely Trump voters are being hired to work on EV battery manufacturing. And so, these same people may take issue with Trump shutting down the IRA.
Ultimately, EV battery investment has become a rapidly growing sector following Biden’s passage of the IRA. It has the potential to pave way for a domestic EV supply chain in the near future. But, as Trump gets ready to take office again, Americans do not know what to expect with the EV industry. This uncertainty poses a significant risk not only to the progress made in clean energy but also to economic opportunities created in rural and Republican-leaning areas where many of these investments have taken root. But, regardless of political shifts, sustained investment in EV batteries is essential for long-term energy security, economic growth, and addressing environmental challenges.
References
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Cochrane, E., & Friedman, L. (2022, July 15). Manchin Pulls Plug on Climate and Tax Talks, Shrinking Domestic Plan. The New York Times. https://www.nytimes.com/2022/07/14/us/politics/manchin-climate-taxes.html
Electrification Coalition. (2023). Electrification Coalition – Inflation Reduction Act Impacts on Electric Vehicles. Electrification Coalition. https://electrificationcoalition.org/work/federal-ev-policy/inflation-reduction-act/
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Latham, S. (2023, November 20). 47 percent of all EV manufacturing investment announced since IRA. Atlas EV Hub. https://www.atlasevhub.com/weekly-digest/47-percent-of-all-ev-manufacturing-investment-announced-since-ira/
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