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What the EPA’s New Tailpipe Rules Mean for US Manufacturing

What the EPA’s New Tailpipe Rules Mean for US Manufacturing

The Environmental Protection Agency (EPA) has proposed new federal vehicle emissions standards to accelerate the nation’s transition to clean transportation and combat climate change. The stricter regulations aim to improve air quality, reduce carbon emissions by 2055, and decrease premature deaths and health issues caused by pollutants.

To achieve these ambitious goals, American manufacturing will need new investments in infrastructure, battery materials, and alternative battery technologies. The Buy America initiative will play a crucial role in promoting domestic production, but stakeholders should evaluate supply chain issues, especially for materials like lithium-ion batteries. Despite the new EPA standards pushing a transition to clean transportation, convincing more Americans to adopt electric vehicles (EVs) may remain a challenge if the battery industry cannot find more affordable means of production.

Potential Benefits of the New EPA Rules

Light-duty vehicles — the cars driven by most Americans — account for a hefty 58% of the United States’ man-made carbon emissions on their own. Reducing emissions from these automobiles is a direct way to improve public health.

According to the EPA, fine particulate matter from gas-powered vehicles can cause heart attacks, respiratory and cardiovascular illnesses, aggravated asthma, and decreased lung function. Economically and socially disadvantaged communities, especially in densely populated areas or near ports and transit hubs, are disproportionately affected by high emissions and stand to benefit from stricter tailpipe rules. A large-scale transition to EVs could mitigate these public health problems and reduce global carbon emissions significantly.

Why Consumers Might Not Switch to EVs

While the new EPA standards aim to benefit the public by reducing emissions, implementing these rules may increase car prices and limit cost savings for consumers, primarily due to battery costs. Lithium-ion battery technology has experienced price fluctuations and uncertainty, making it challenging to predict future trends. Relying on overseas battery sourcing to meet goals could further drive car prices up, exacerbating affordability challenges in the automotive market.

With the average new car price in America already high, battery-centric approaches may yield minimal cost savings, potentially leading to a market dynamic where fewer people choose EVs and thereby ultimately undermining the EPA’s climate objectives.

Affordability is critical for the clean transportation movement, as price deters many consumers considering EVs. Advances in battery technology should focus on cost reduction to address these challenges. Further, increasing the production of plug-in hybrids with extended battery range and onboard generators or small engines could lower battery costs, alleviate range anxiety, and reduce emissions. This approach may attract a broader consumer base than relying solely on pure EVs.

Gaps in Battery Manufacturing

To scale up automobile sales such that 67% are electric vehicles by 2032, the US needs a robust domestic battery manufacturing base. Currently, global lithium-ion battery production relies on Asian companies, which control both the raw materials supply chain and components manufacturing.

The volatile costs associated with this long-distance lithium-ion battery supply chain could hinder the economic viability of EVs, impeding their widespread adoption. With siloes existing between battery manufacturing facilities and automobile assembly plants, the battery delivery takes longer, delaying production and impacting overall efficiency. Moreover, transporting batteries long distances involves higher energy consumption and emissions, which undermine the environmental benefits of EVs.

Currently, domestic lithium-ion battery production only fulfills around 3% of total EV battery demand. To meet the anticipated rise in demand resulting from the EPA’s new regulations, the United States would need to develop hundreds of new mines and refining facilities — but these manufacturing developments would raise environmental concerns of their own. Alternative technologies can utilize existing mining and refining infrastructure, minimizing the need for extensive expansions and reducing environmental damage. This approach maximizes the potential of current resources while addressing environmental concerns.

Developing domestic mining and refining capabilities for lithium-ion batteries would take years, longer than the 2032 goal allows for. It is more feasible for public- and private-sector investors to advance the search for new, cost-effective battery technologies, which can eliminate supply chain vulnerabilities plus establish a sustainable and independent battery manufacturing ecosystem. In the short term, sourcing materials from US and EU free trade zone countries can help accelerate progress and work toward electrification goals.

Domestic Goals Require Domestic Solutions

The Buy America initiative will be crucial for the United States’ zero-carbon electrified future, ensuring national security, self-sufficiency, and job retention. By electrifying various sectors and reducing dependence on other countries, we create jobs domestically and avoid sending wealth generation overseas.

A domestic battery manufacturing base also enables greater control over quality standards and technological advancements. By having local production capabilities, the United States can actively participate in research and development, innovation, and the implementation of new battery technologies. This control over the supply chain fosters competition, drives advancements in battery performance and longevity, and ultimately benefits the overall EV industry.

Considering the simplified mechanical structure of EVs compared to gas-powered vehicles, the automotive industry can also pivot skilled labor to focus on battery technology and related areas. Developing a robust domestic industry fosters long-term sustainability, economic growth, and expertise retention within the United States.

How the US Can Rise to the Occasion

As the Environmental Protection Agency’s new tailpipe regulations create new manufacturing pressures for the automotive industry, they also present an opportunity for innovation and sustainable development. The switch to EVs is crucial for addressing climate change and improving public health, but for this transition to be successful, American manufacturing must overcome challenges to affordability and supply chain stability.

Working out the many kinks for lithium-ion batteries is one of the automotive industry’s biggest stumbling blocks. Instead, automakers should turn their focus towards alternative, domestically produced battery technologies that are not lithium-dependent. This path not only stimulates the American economy but also aligns with the carbon emissions issue at the heart of the EPA’s new rules.

The Buy America initiative, along with other government policies supporting research and development of battery technologies, has started paving the way towards this future. However, supporting early-stage alternative battery companies and pushing for innovative technological solutions should be priorities moving forward. With the right investments and innovations in battery technology, achieving the EPA’s new tailpipe rules is not only possible but also holds the promise of a cleaner, healthier future.