Inflation Reduction Act Passes Senate With Unchanged EV Supply Chain

The climate, healthcare and tax bill called the Inflation Reduction Act did not change the terms of an electric vehicle tax credit, even after fierce lobbying by automakers (see 2208040045).

No auto made today would qualify for the tax credits, half of which depend on North American battery component sourcing, and half of which depend on the sources of critical minerals.

Cars and trucks made in North America would need to have 50% of the value of their batteries come from the USMCA region to qualify for half the credit in 2023; 40% of the critical minerals for those batteries would need to be either mined or processed in the U.S. or in a country that has a free-trade agreement with the U.S. Those numbers would climb each year.

According to an EV battery supply chain tracing company quoted in The Wall Street Journal, just 15% of the minerals for batteries can meet those terms now.

The climate aspects of the bill seek to accelerate electrification not just through demand-side credits but also by offering tax dollars to companies that consume energy, and to utilities that are seeking to produce electricity through clean energy.

The American Association of Port Authorities hailed the Senate vote, which was 51-50, with Vice President Kamala Harris breaking the tie. The House of Representatives is expected to pass the bill Aug. 12.

"The inclusion of electrification in this bill is an enormous win for the American port industry and U.S. supply chains. It provides a brand-new source of funding for ports seeking to purchase electrified or alternative-fueled cargo-handling equipment, shore power systems, microgrids for energy resiliency, electric grid infrastructure, and more. This pivotal investment of Federal capital will make U.S. ports more resilient to extreme weather events like heat waves and storms, including through the construction of microgrids," AAPA said in an email. "The $3 billion will go a long way toward establishing innovative projects at ports to boost resiliency, expand cargo-handling capacity, and reduce emissions, but further investment will still be necessary."