There is a lot we don’t know about the future of electric vehicle (EV) policy in 2025. What we do know is that the incoming administration has climate legislation in their crosshairs and is committed to doing everything they can to expand the use of fossil fuels for energy. Today, we break down the primary EV policies passed in the last four years and discuss how they may be impacted under this administration.
Inflation Reduction Act
The Inflation Reduction Act (IRA) is the most significant climate policy in history and appropriated billions of dollars to the private sector and consumers to facilitate the transition to clean energy. An Executive Order signed on January 20th requires federal agencies to immediately pause the disbursement of funds appropriated through the IRA and the Bipartisan Infrastructure Law (BIL). The agencies are required submit a report within 90 days identifying how these policies are consistent with the elimination of the purported EV mandate.
One of the primary mechanisms for this is tax credits for clean energy investments including renewable, advanced manufacturing, and electric vehicles. The law expanded federal tax credits for EVs to include new, used, and commercial EVs, as well as the installation of EV charging for personal use, or for businesses or tax-exempt entities. Since these tax credits are in statute, they require an act of Congress to be repealed. A robust federal rulemaking process has outlined how these tax credits must be implemented.
The rules detailing the implementation of EV tax credits for new and used vehicles were finalized last year. The EV charging and commercial EV tax credits are in the rulemaking process, which means that there are proposed rules in place that a taxpayer can rely on but that haven’t been finalized yet. The U.S. Constitution gives Congress power over spending, and since Congress has decided to spend money on EV infrastructure and EV tax credits, the president cannot unilaterally withhold those funds. Without a new law passed by Congress, the appropriated funding is not under the president’s control.
According to the Impoundment Control Act of 1974, if Congress doesn’t pass a law repealing remaining funding appropriations within 45 days, the president must release the funds.
Congressional Republicans do intend to pass a law that could impact the federal EV tax credits. The 2017 Tax Cuts and Jobs Act, passed during Trump’s first administration, contains provisions that expire this year. To continue these provisions, Congress must pass a law and will be looking for ways to pay for it. Based on what we’ve heard, EV tax credits are on the chopping block.
What does this mean for drivers and consumers?
The disbursement pause does not apply to the tax credits authorized through the IRA. However, we recommend that consumers interested in buying an EV using the tax credit should rely on the point-of-sale tax credit. This transfers the tax credit–and the tax liability–to the dealer. The dealer uses a portal to confirm that the tax credit will go through, providing consumer confidence and a seller report as evidence of the transferred tax credit.
Drivers interested in leasing an EV can still take advantage of the commercial clean vehicle tax credits by checking the manufacturer’s website to see if they are still passing the tax credits through leases. I did a quick check this morning and it does look like popular EV models are still offering the tax credits through leases. Once you sign a lease agreement with a finance company at the dealership, that contract is binding and no changes to the federal tax credits can affect that agreement (i.e. your lease payments).
Unless Congress passes a bill to repeal the tax credits, the president cannot unilaterally repeal the EV tax credits.
The Bipartisan Infrastructure Law
The executive order specifically calls for pausing the disbursement of funds for EV charging stations made available through the National Electric Vehicle Infrastructure (NEVI) Formula Program and the Charging and Fueling Infrastructure (CFI) Discretionary Grant Program. Again, this funding is mandated in statute and cannot be rolled back without an act of Congress.
Plus, of the $5 billion in NEVI funding, about $4 billion has been committed and will likely be legally protected from clawback. The program works on a reimbursement basis meaning that states spend the allocated money on charging installations and are then reimbursed by the federal government. The federal government is legally required to reimburse states for those funds.
Another EV-specific part of the Bipartisan Infrastructure Law (BIL) are CFI grants that are issued competitively for the buildout of community charging. Appropriated at $2.5 billion, about $1.8 billion of these funds have already been committed. Any attacks on committed funds without an act of Congress will likely be subject to lawsuits.
As mentioned earlier, Congress will be looking for funds to cut and anything related to EVs will be at the top of the list. Even if Congress does pass a bill to claw back unspent funds, it will likely take months, if not longer, to pass.
What does this mean for drivers and consumers?
Public charging projects take a long time to build due to contracting, permitting, engineering and design, land acquisition, coordination with electric utlities, and infrastructure upgrades. Since most of this funding is already allocated, there may be lawsuits, but the majority of the funding should continue to be disbursed after the 90-day pause. Continue to check our NEVI map for recently energized charging stations.
Clean Vehicle Regulations
The executive order also calls for the termination of state emissions waivers that function to limit sales of gasoline-powered automobiles. This refers to the Clean Air Act waiver that allows California to set stricter emission standards and allows other states to adopt California’s standards, known as Advanced Clean Cars II and Advanced Clean Trucks. About a quarter of the U.S. auto market is impacted by these higher standards. These regulations seek to improve air quality and reduce negative health and climate impacts of transportation by accelerating EV adoption.
Legal challenges to the Clean Air Act waiver are not new. In December, the U.S. Supreme Court (including three Trump nominees) declined to review the D.C. Circuit Court’s decision earlier in the year to uphold the EPA’s decision to grant the Clean Air Act waiver to California. This executive order may result in additional lawsuits, but again, isn’t something that can be unilaterally reversed through an executive order.
What does this mean for drivers and consumers?
Expect ongoing lawsuits and chaos. But the last Trump administration tried to reverse clean vehicle standards in his last term and was tied up in court until Biden took office. Also, the automakers are the only legitimate plaintiffs in this lawsuit and they understand that EVs are critical to their futures. To be globally competitive, they need to develop EV technology and manufacture EVs. Plus, they have already invested billions in developing and producing EVs for the U.S. and foreign markets.
Key Takeaways
Executive orders often define an administration’s agenda, but they have limited power. In spite of the anti-EV focus of the executive orders around energy and a 90-day review, many of the provisions of the IRA and BIL are set in laws passed by Congress and would require the passage of new laws to unravel. We will keep an eye on Congress since they have messaged that they intend to target EV funding.
We are thinking about our friends and loved ones in Los Angeles impacted by the fires. Reducing fossil fuel use in transportation will prevent climate disasters like the fires in L.A. This is why we continue to work to eliminate fossil fuels in transportation.
