Building back better towards an electric drive future

Here in the U.S., transportation contributes more global warming pollution than any other economic sector. The majority of those emissions come from everyday cars and trucks. Not to mention, gas-powered cars emit air pollution that severely harms our health. To clean up vehicle pollution, we need to transition our entire transportation sector to clean-running electric vehicles.

EVs are already gaining speed: since 2011, U.S. electric car sales have grown by 10-fold. This past summer alone, EV sales have more than doubled. But we need to enact policies to keep up that momentum and accelerate the transition to EVs. Three things that needed to happen to support an EV transition: make electric vehicles cheaper and easier for people to buy, strengthen emission standards, and build out infrastructure to support electric cars. By extending and expanding electric vehicle tax credits for the next 10 years, the Build Back Better Act will make electric cars and chargers more affordable.

While the cost of EVs has steadily fallen, and although they save consumers money in the long-run, they remain more expensive to buy than their gas-powered counterparts. High upfront costs present a major barrier for individuals thinking about going electric. To incentivize the purchase of these clean cars, the federal government has provided a tax credit of up to $7,500 for the purchase of a plug-in hybrid or fully electric vehicle for more than 10 years. 

This essential credit was set to expire at the end of 2021, but once the Build Back Better Act passes the Senate, it will be extended for another decade. 

Even better, the credit is now stronger than ever: The maximum credit has been increased, made fully refundable and available at point of sale, applied to used electric vehicles and manufacturing quotas have been lifted.

Let me break down why these advances are so important.

1. Fully refundable credit, available at point of sale: In the past, EV tax credits were limited by tax liability. So, even if you qualified for the full $7,500 credit, the maximum you could receive was what you owed in income taxes. You’d also have to wait around until tax season to actually get your money back. Now, no matter what you owe on your taxes, you are guaranteed to receive the full credit. If it exceeds your liability, you’ll be sent a check to make up the difference. Even better, you can now elect to have the credit applied at the point of sale so you can directly take thousands of dollars off the sticker price of your new electric car. According to Rhodium, the refundable tax credits would make the total cost to own an electric vehicle as much as 16 percent less expensive than the average gas vehicle. These changes will greatly increase the accessibility of EVs for low- and middle-income consumers that previously didn’t have high enough tax liability to qualify or couldn’t afford to wait for their rebate check.

2. Used EV tax credit: Up to $4,000 can now be applied to the purchase of previously owned electric vehicles. As EV adoption has boomed over the past decade, we’re now seeing the emergence of the used EV market. Making these used electric cars easier to buy is essential to expanding access to low- and middle-income consumers and accelerating widespread adoption of these clean vehicles.

3. Increased maximum credit and lifted manufacturing quotas: Before, the maximum EV credit was $7,500. However, if you wanted to buy a Tesla or GM vehicle, that credit was $0. That’s because these manufacturers had exceeded a 200,000 EV sales quota that limited consumers from applying the credit to those purchases. Now, no matter what company you’re buying from, you can receive a base amount of $7,500 for buying a fully electric car. And it doesn’t stop there: The maximum credit is now $12,500, with the extra $5,000 applied if your car is union-made in the U.S. using domestic supplies.

Here’s what else the bill did to promote vehicle electrification:

• Nearly $6 billion to electrify U.S. Postal Service vehicles and install EV charging infrastructure for the postal fleet, plus nearly $3 billion to electrify other government fleets. Fully electrifying the USPS would eliminate the equivalent of 370,000 fossil fuel-powered cars from the road each year; EV funding in Build Back Better nearly gets us there.

• $800 million for EV charging infrastructure.

• $5 billion to electrify medium- and heavy-duty vehicles, such as garbage trucks or school buses.

• Nearly $6 billion in rebates for home energy efficiency and electrification projects including EV charging installations

• An EV charging tax incentive for private and public use

• A credit for electric bikes of up to $3,000

• A credit for two and three wheeled vehicles of up to $7,500

• $29 billion towards a greenhouse gas reduction fund, including $2 billion for local, state, and Tribal governments to build out zero-emission charging and fueling infrastructure 

For nearly a decade, Environment America and our state affiliates have been working to build support for these vehicle electrification measures. This past year alone, our advocates met with more than 80 legislative offices, urging them to support EV and clean energy tax incentives. We’ve run campaigns calling for 100% fully-electric car sales by 2035. We’ve shared our expertise with the media on how transportation electrification is key to cleaning up air pollution. And since this bill was announced, we have been organizing key districts across the country, turning out hundreds of activists and gathering thousands of petition signatures to build public support for the Build Back Better Act.