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Capitol Hill Update – From EMA

 

This week, the Senate passed the $1.2 trillion bipartisan infrastructure package, the Infrastructure Investment and Jobs Act, by a vote of 69-30, with several senior Republican Senators voting in favor - notably Senate Minority Leader Mitch McConnell (R-KY). The bill was a product of bipartisan negotiations between ten Senators, and includes historic spending on roads, bridges, rail, and airports, along with electric vehicle and other clean energy investments. The bill will now go to the House where it faces potential challenges from liberal Democrats and timing is uncertain.

The BIB would provide $7.5 billion in grant funding for states to partner with the private sector to build out EV charging, in which $2.5 billion is set aside for alternative fuel corridors for EV charging, hydrogen, natural gas and propane infrastructure. The bill also appropriates $7.5 billion for clean energy transportation. This $15 billion for clean transportation is significantly less than the $174 billion President Biden requested specifically for EV charging. The BIB does not include a gas tax increase or allow EV charging at rest areas. It also does not include EV user fees or additional tax credits to purchase EVs. Furthermore, the BIB does not include retrofit requirements to install automatic emergency braking systems or require rear underride protection. Most of the bill is paid for through repurposing unspent pandemic relief funds and unspent unemployment benefits.

Immediately after approving the bipartisan package, Senate Democrats approved a budget resolution by a simple majority vote. This maneuver formally begins the reconciliation process, which Democrats can approve on party-line vote in the House and Senate. The budget resolution outlines “instructions” to set initial funding allocations for a $3.5 trillion spending package. Details in the budget resolution are sparse, which is especially the case for most clean energy incentives, which are largely funded through tax revision. At a high-level, the resolution and the accompanying detailed memorandum, focus on key Biden Administration priorities, including clean energy technology, electric vehicle investments, and the establishment of a methane polluter fee. The resolution authorizes $1.75 trillion in new borrowing, meaning a minimum of $1.75 trillion in new revenue largely funded by several proposed tax increases, including:

  • Increased tax rates on corporations and the wealthiest Americans.
  • Increased IRS tax enforcement; and
  • A carbon import fee, which would essentially put tariffs on imported goods produced with high carbon-emissions (or from high carbon-emitting countries).

 

The rate of the proposed tax increases should be viewed as aspirational as many moderate Democrats are unlikely to support such progressive tax policies. Before passing the resolution, the Senate adopted several non-binding amendments, including:

  • Amendment from Senator Deb Fischer (R-NE) that would limit eligibility for EV tax credits to individuals making less than $100,000 per year and setting maximum eligible car prices at $40,000.
  • Amendment from Senator John Thune (R-SD) to preserve step-up in basis, which is designed to prevent large capital gains taxes.

 

With passage of the budget resolution, each Senate Committee received instructions to implement their budget timelines and prepare legislative text by September 15. While all Senate Democrats voted in favor of the resolution, Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have expressed concern at the $3.5 trillion price tag, and Senator Manchin in particular is concerned with some of the climate provisions.

House Speaker Nancy Pelosi (D-CA) has said she will not allow a vote on the Senate-passed infrastructure package until the Senate has passed a reconciliation package. The House will return early from August recess to pass a budget resolution (similar to what the Senate just passed). Then, the Senate will begin formally constructing a reconciliation package this fall. The political dynamics of the infrastructure package and reconciliation package are tricky, as Congressional Democrats have limited vote margins and must satisfy the moderate and progressive wings of the Caucus. While moderate House Democrats would prefer an immediate vote on the Senate-passed infrastructure package, progressive House Democrats have refused to consider the package until the Senate passes a reconciliation package, which will not occur until the fall.

Also, this week, EV industry stakeholders formed a new trade association to mobilize private capital and forge public-private partnerships to accelerate EV charging infrastructure. The National EV Charging Initiative includes a variety electrical utilities, environmental groups, and automobile industry members, including:

  • Alliance for Automotive Innovation (which includes BMW, Ford, Toyota, Uber, and Lyft
  • Alliance for Transportation Electrification (which includes GM, Ford, and Honda)
  • Sierra Club
  • International Brotherhood of Electrical Workers
  • Environmental Defense Fund







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