Shortly after his inauguration in 2021, President Joe Biden issued an executive order committing the United States to achieving net-zero emissions across the economy by 2050. With the transportation sector responsible for the largest share of greenhouse gas emissions in the U.S., tackling gas-powered automobiles would seem like a natural goal for the Biden administration. Indeed, as part of the Inflation Reduction Act of 2022, or IRA, Congress and the administration approved new and continued subsidies for electric vehicles, in the hopes of both keeping production onshore and making EVs more attractive to consumers.

But what seemed like simple solutions may not be, says Ashley Nunes, a senior research associate at Harvard Law School’s Center for Labor and a Just Economy. Nunes, who studies how innovation impacts markets, says that while some government policies have increased adoption of EVs, they aren’t always targeted equitably or effectively. In fact, as his research suggests, they can sometimes make the problem worse.

So how can the administration — and other national leaders — better reduce emissions from transportation? In an interview with Harvard Law Today, Nunes explains the Biden administration’s policies on EVs, what it’s getting right and wrong, and changes he says could lead to an even greater reduction in overall emissions.

Harvard Law Today: How did the Inflation Reduction Act impact the market for new electric vehicles?

Ashley Nunes: In my view, the Inflation Reduction Act changes little for consumers. What we are now calling the Clean Vehicle Motor Credit is still $7,500 — that’s the same amount that has existed for the better part of over 10 years before the bill. The difference is that previously, it was designed as a tax credit, which primarily benefited wealthy people. The Congressional Research Service estimated that nearly 80 percent of the total value of these credits was claimed by households that made over $100,000 a year.

The IRA did a few things, the most beneficial of which for middle- and low-income Americans was to effectively turn the credit into a rebate. It’s still structured as a credit, but what happens now is that when you go in to buy the car, it is turned into a rebate for the consumer at the point of sale. The credit essentially moved from the consumer to the dealership, which can now claim the credit. So as far as the consumer is concerned, if I buy an electric vehicle, I’m getting $7,500 off. That’s the good news, and I’ve been a huge proponent of that change. I think it’s really important to offer point of sale incentives for technology to go mainstream.

HLT: So, what’s the bad news?

Nunes: One problem with IRA, at least for electric cars, is that you now have requirements for the critical minerals needed to produce the cars, and this is a thorn in the side of people trying to spur widespread adoption. There are three main parts stemming from the law. The first is that the vehicle has to be assembled in North America, which is easy enough to meet. The larger problem is that what the bill effectively says is that as time goes on, half the credit, which is about $3,750, can be claimed if at least a certain percentage of the critical minerals that are used in the batteries come from the United States or a country that we are friendly with. The other half of the credit is pegged to the value of the battery components coming from the United States or a friendly country. And this is problematic, at least in the short term, because currently our batteries are constructed, and the minerals are processed, in China in large part. Reading these provisions as they are currently written suggests the intended goal is less about EV adoption and more about lessening our dependence on China. This makes IRA less of a climate bill and more of an energy security bill.

“Reading [the Inflation Reduction Act] provisions as they are currently written suggests the intended goal is less about EV adoption and more about lessening our dependence on China. This makes IRA less of a climate bill and more of an energy security bill.”

HLT: Are there other ways in which the Biden administration is trying to influence the adoption of electric vehicles? How successful do you think those efforts have been?

Nunes: The most recent piece of regulatory policy that we have seen related to EVs is the tailpipe emission standard that was proposed by the Environmental Protection Agency in April. The standard effectively says that the overall fleet produced by each automaker must have an average tailpipe emission of 82 grams of carbon dioxide per mile. An EV counts as zero. So, the more EVs you sell, the lower your average tailpipe emissions will be. This proposal is going to go to court, and will be the subject of many, many court battles. You can bet on it.

That’s because many people rightly argue that it is de facto means of spurring EV adoption. What they are saying – and we’ve done the modeling to show this — is that you need to have 60 to 62% of your fleet of sales be electric cars in order to comply with the standard. If you don’t have that, it’s going to be very difficult to comply with the standard. The administration won’t say the rule is designed to get manufacturers to sell EVs. The president and his allies want to appear to be impartial to specific decarbonization strategies. But widespread EV adoption is really what the president — and this proposal – aims to do.

HLT: In your view, what is the administration doing right? And where is it getting things wrong?

Nunes: It’s refreshing to see an administration that takes the threat posed by climate change seriously. If you look at the Inflation Reduction Act, for example, one of the things I think people should be very heartened by is a $4,000 credit that is available for purchasing secondhand electric cars on the market. We actually published a study about this. I think that’s something the administration and Congress in general should be commended for.

IRA also offers a production credit to manufacturers, though whether this will translate into lower prices for consumers remains unclear. Last year in the United States, we sold over 750,000 electric cars. That’s about a tenfold increase from a decade or so ago. But during that time, the price of EVs has actually gone up. So, I think the administration and Congress need to think more carefully about price points of technology and how these price points change. There is an argument that prices for technology decline over time — and they can, as happened with cell phones — but what’s true of one industry is not necessarily true of all. This is particularly relevant because this administration has set very aggressive targets for emissions reductions. A recent study showed that one out of every two Americans is seriously considering buying an electric car, yet only 750,000 out of close to 17 million cars sold last year were EVs. You can do the math — you’d expect to see 8 million electric cars sold, but something is holding people back. Price is arguably the most important reason why. Legislators need to address that in a way that makes sense. And current subsides aren’t the answer. Knocking $7,500 off a $60,000 car matters little to middle and low income household because $52,500 is far more than these households ever could — or would — spend on a car.

“A recent study showed that one out of every two Americans is seriously considering buying an electric car, yet only 750,000 out of close to 17 million cars sold last year were EVs … Price is arguably [holding people back].”

HLT: What do you make of California’s ban on the sale of gas-powered vehicles beginning in 2035? And what do you think that impact will be?

Nunes: I have two thoughts on it. The first is that it is easier to propose a policy than it is to implement a policy. It’s noteworthy that the policy goes into effect in 2035, because Governor [Gavin] Newsom won’t have to worry about implementing the policy at that time. The second thing is that it’s difficult to see a pathway by which this actually happens without causing statewide political repercussions. Typically, when we see regulations like this — and I should note that I certainly appreciate the spirit of what he’s trying to do — you expect one of two things or both to happen. One possibility is that Californians just go to a different state and buy their gas-powered vehicle there. The second possibility is that if the decision is to purchase a new item that costs a lot more — which electric cars currently do — or continue to use the item you currently have, you may choose to do that.

We think this is one of the reasons why the overall age of cars on America’s roads is going up. The general price of cars is going up, and the price of electric cars in particular is going up. Confronted with these options, people often choose to keep using the vehicles they currently have. This is something I think that the Trump administration did not get enough credit for when they proposed relaxing some of the fuel economy standards. Essentially, they said the minute you have stringent fuel economy standards, you make cars more expensive to purchase, and if something is more expensive to purchase, people will just hold on to what they currently have, leading to an increase in the number of more polluting vehicles you have on the road. I’m not saying I approve or disapprove of California’s policy, but I think it’s important for people to be upfront about what some of the consequences of these policies can be.

HLT: You recently testified before Congress about your work on the cost effectiveness of emissions reduction initiatives. What do you hope members of Congress took away from your testimony?

Nunes: Broadly, there is an interest in trying to understand what the consequences are — for better or worse — of some of these policies from both sides of the aisle. As an example, Representative Debbie Dingell of Michigan, the auto workers’ state, but also the state of the automakers, says that the push towards electrification may not always be a good thing. I hope what came across through my written and oral testimony was that there are some real concerns with the rush to electrification, and if the goal is to decarbonize as quickly as possible, at a price that Americans are willing and able to pay, what we need is a more targeted public policy when it comes to emissions reductions. Not just blanket policy of ‘we’ll subsidize the heck out of everything, and it will work out.’ Because frankly, it’s currently not working out.

“There are some real concerns with the rush to electrification, and if the goal is to decarbonize as quickly as possible, at a price that Americans are willing and able to pay, what we need is a more targeted public policy when it comes to emissions reductions.”

HLT: You said in your testimony that some policies around EV adoption can worsen inequities. How so?

Nunes: When we talk about inequities on the road, the largest one we see is personal vehicle ownership. Typically, middle- and upper-income Americans have higher car ownership rates and new vehicle ownership rates than low-income Americans. And when low-income Americans do own vehicles, the vehicles tend to be older.

When it comes to EV adoption, it’s difficult for low-income Americans to purchase these vehicles outright due to their cost. It’s also hard for them to recharge these vehicles, because they tend to live in very dense urban housing without garages. The administration has tried to address this by promising a huge network of recharging stations across America, but I don’t find that solution to be particularly equitable. What’s equitable about the rich person sitting on their couch while their car charges in their garages, while the poor person is hanging out on the side of I-90?

The other part of this is that even with the current subsidies, electric cars are at a price point that is much higher than what poor people would spend on a vehicle. IRA has tried to address this by saying you get a $4,000 credit if the secondhand electric car costs less than $25,000. Well, firstly, there aren’t that many electric cars that you can buy for less than $25,000, but let’s assume for a second there are. That takes the price down to $21,000. But the average cost of a car purchase by a poor person is a little over $13,000 — that’s a huge differential in terms of what poor people can actually afford.

HLT: Another key point in your testimony is about the problems that arise with the key minerals needed to produce electric vehicles. Could you expand on that?

Nunes: The main difference between an electric car and an internal combustion engine, or a gasoline-powered vehicle, is the powertrain that propels the vehicle. The powertrain for an electric vehicle requires a different kind of battery, and constructing this battery requires a lot of minerals — around six times as many as a traditional internal combustion engine. These batteries need minerals such as lithium, manganese, cobalt, nickel, and graphite. The U.S. currently relies to a large degree on foreign countries for these minerals. We get a large quantity of our nickel, for example, from Indonesia, and much of our cobalt from the Democratic Republic of the Congo. We get a lot of our lithium from Australia and Chile.

What that means is that if you’re trying to electrify the overall fleet rapidly, you need access to those minerals. And it’s not just the United States that has electrification goals. So, now you have competition between many countries to shore up their critical minerals supply.

In the U.S., permitting reform is a is a huge hot topic because getting permits to mine can take a very long time. If you try to reduce that amount of time, many environmental advocates are worried that it will loosen environmental protections. At the same time, when there’s increased demand for a finite resource, and when demand exceeds supply, prices go up. So, our general sense is that the price of many of these commodities is going to go up as time goes on. People will try to open new mines to keep prices low, but in the interim, we would expect to see increased pricing on many of these commodities, which will subsequently translate into higher price points for the vehicles themselves.

HLT: Your testimony also highlighted some policy changes you think could better reduce the transportation sector’s contributions to climate change. What are they?

Nunes: I firmly believe that when it comes to emissions reductions, the role of government should not be to sell us an electric car. The goal of government, to the extent that it cares about improving public health, should be to find the most cost-effective means of reducing emissions. There are ways in which electric cars can do that, but that outcome isn’t necessarily assured. One of the things we can do, for example, is stop subsidizing any and every electric car and instead subsidize the electric vehicles that get the most miles on the road. Think of Uber and Lyft drivers, for example, who will typically put 200 miles or more on their car each day to the average American who drives about 30 miles a day. If you subsidize the taxi and ride hailing industry in the purchase of and operation of electric cars, the emissions reduction for every dollar spent would be much higher, because these cars are just utilized so much more. There’s also a racial equity angle here, because the people who drive for these platforms are more likely to belong to communities of color.

“I firmly believe that when it comes to emissions reductions, the role of government should not be to sell us an electric car.”

The other thing I’ve always been a big proponent of is improving public transportation. I gave up driving in 2012 and sold my car. I only rely on public transportation. I recognize the fact that I’m privileged enough to be able to do that — I’m a knowledge worker; I can work from home when I’m not on campus teaching. But I also know what it’s like to pull out the transit app that shows the bus is right around the corner and it never shows up. Many people don’t have flexibility in their time; blue collar workers need to be on time for their shifts. For those reasons, I think improving the reliability of public transit is incredibly important and doesn’t get enough attention, unfortunately. Ultimately, I think it’s one of the most effective ways in which we can reduce our emissions footprint for every dollar spent on government funding.

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