Closing out the final week of hearings before the August recess, the Senate Committee on the Budget held a hearing on Wednesday, July 31st to discuss the future of electric vehicles (EVs). The hearing kicked off at 10 AM with invited testimony from the five individuals below, including one expert witness with whom our Eno team is quite familiar: 

• Dr. Jesse Jenkins, Assistant Professor and Macro-Scale Energy Systems Engineer, Department of Mechanical and Aerospace Engineering and the Andlinger Center for Energy and Environment, Princeton University 

• Ms. Britta Gross, Director of Transportation, Electric Power Research Institute 

• Ms. Maureen Hinman, Co-Founder and Chairwoman, Silverado Policy Accelerator 

• Mr. Dave Schwietert, Chief Government Affairs and Policy Officer, Alliance for Automotive Innovation 

• Mr. Jeff Davis, Senior Fellow, Eno Center for Transportation  

Before diving into the hearing, it is worth noting that this carried a largely nonpartisan undertone throughout. While typically a committee more prone to partisan hearings, this hearing was requested by Senator Lindsey Graham (R-SC), given the OK by Ranking Member Chuck Grassley (R-IA), and eventually held by Chairman Sheldon Whitehouse (D-RI).  

Sen. Graham’s opening comments reflected as much in noting that there is a clear demand for EVs with or without mandates, but the Administration has set goals for new EV sales without the infrastructure needed for charging or the grid capacity required. Hailing from a state with significant vehicle manufacturing, he was quick to state outright that electrification is coming either way, but posed the simple question: “What should we be doing and when should we do it as a nation?” 

Multiple members repeated similar sentiments and questions on different topics within the EV conversation, but the primary topics included the following:  

• Highway Trust Fund impacts 

• Legislation and federal funding for EVs 

• Increased demand on the electric grid 

• Access to rare earth materials for EV manufacturing 

• Automobile industry impacts and overall EV demand 

• Remaining competitive in the global EV market and decreasing energy dependence 

Highway Trust Fund Impacts 

I will be the first to note that I am extremely biased in how I ordered the topics listed above, but as it happens, this is my article, and I can do what I want (I’m almost certain Lesley Gore said something along those lines). In reality, one of these was not quite like the others in the depth of conversation around the topic. There is a consensus and understanding amongst nearly everyone in transportation (if not everyone) that the transition to EVs diverts funding which would have otherwise flowed into the Highway Trust Fund (HTF). Many states have adapted to this lost revenue by passing legislation requiring an additional registration fee, or something similar, on EVs to fill the gaps from lost revenue. But these new fees have not been adopted in all states. There are still differing philosophies on how to fairly leverage a fee of this nature.  

Expanding upon my bias noted above, the knowledgeable and concise final witness on the panel, Mr. Jeff Davis, provided a very comprehensive overview of the HTF issues related to EVs. 

What is happening with the HTF, and how will increased EV adoption further impact transportation funding? 

1. The The fuel tax has always been a proxy for taxing the act of driving a vehicle, in a true user pay system.  
2. Over time and through various global events such as oil shocks and the COVID-19 pandemic, driving behaviors have changed. Where the U.S. saw driving on pace to double total VMT every 16 years (1950s to end of 1970s), new projections have seen this plummet to needing 140 years to double again. TLDR: The HTF has been in trouble for a minute. 
3. The HTF first became insolvent in 2008 and relies on transfers from the General Fund of the Treasury – totaling $272 billion in transfers since initial insolvency.  
4. Under the most recent Congressional Budget Office forecast released in June 2024, which takes into account EV growth impacts from the EPA’s April 2023 and March 2024 rules, gasoline taxed for the HTF will drop by one-third over the next decade (from 138 billion gallons in 2024 to 89 billion gallons in 2034).  
5. Between changing VMT and EV growth, fuel tax receipts are anticipated to drop more than 5 percent annually starting in 2030. Combined with HTF spending increases, annual deficits could jump to a $51 billion per year deficit by 2034.  

As indicative as these numbers are, the conversation around replacing fuel tax revenue becomes a bit more complex when considering the philosophies for how the U.S. generates HTF revenue. The fuel tax has historically been the most accurate way to charge someone for direct vehicle use, but iif replaced with new blanket fees, like a registration fee, on EVs, the system can charge someone driving 5,000 miles annually the same rate as someone driving five times that distance. While a VMT program would be the most accurate for a direct user-pay model, there are drawbacks to a VMT structure, like the administrative problems of shifting the point of collection from the 1,300 fuel transfer facilities under the current fuel tax system to the 279 million points of collection (number of privately owned vehicles) that a VMT program would require.  

Now that the important stuff is out of the way, let’s get to… the majority of the hearing.  

Legislation and Federal Funding for EVs 

Within the EV conversation, there has been significant back-and-forth on legislative policy related to EVs. Republicans frequently reference the “EV mandate” while democrats quip that there is no “mandate” in response. This occurred a few times throughout this hearing, so here is a breakdown of the major elements within the legislative/federal conversation on EVs most relevant to this conversation.   

Legislation 

Infrastructure Investment and Jobs Act (IIJA): The IIJA contains a significant amount of funding for EV infrastructure, including funding for the National Electric Vehicle Infrastructure (NEVI) Formula Program. The NEVI program doled $5 billion ($7.5 billion total in the program) in funding out to the states to build out an EV charging network – initially along federally designated Alternative Fuel Corridors (Read: highways).  

Why has NEVI taken so long to deploy? 

This is one of the biggest criticisms of NEVI. As I write this, the U.S. has somewhere around eight NEVI charging stations deployed – from this funding. Period. While it is easy to acknowledge that the rollout has been “painfully slow,” there are a variety of reasons as to why this is the case. To put it as simply as possible, the planning was time-consuming.  

When states received money, many had to get legislative approval at the state level to spend this money. Additionally, some had to wade through other barriers in determining how they would spend the money (e.g. a grant program versus a different public private partnership structure). There was also confusion between the states and feds on the need for an initial EV plan and a detailed implementation plan, and final NEVI rules were not even released until early 2023. In all, planning and coordination could have been significantly better, but in doing something at this scale, it is fair to take the time to do it right. NEVI chargers should be popping online with greater frequency from now through the end of the year.  

Inflation Reduction Act (IRA)

Relevant to this hearing, the IRA created the EV tax credits. The most frequently discussed areas were the $7,500 tax credit for new clean vehicle purchases and the $4,000, or 30 percent, tax credit for used EVs. The IRA extended the tax credit for new purchases with several modifications, including an MSRP cap, income cap, and others. During the hearing, Senator Debbie Stabenow (D-MI) commented that the new tax credit is not as helpful as it could be given the increased complexity and added limitations created by these added modifications.  

Federal Rules 

In 2023 and 2024, the Environmental Protection Agency (EPA) issued rules related to emissions standards for light- and medium-duty vehicles for model years 2027 and beyond. These rules are the closest thing to a “mandate” within the EV conversation, as the targets written in the rules would be difficult-to-impossible to achieve without substantial EV market penetration. Some estimates predict that the most recent rules could lead to as many as two-thirds of new vehicle purchases being electric by 2032. It is worth noting a few things in this conversation: 1) President Biden pushed the timeline back slightly after pushback from auto manufacturers and labor unions, 2) stalling EV sales were also a consideration in this conversation, and 3) the recent U.S. Supreme Court ruling related to the Chevron doctrine puts federal agency rules in a very vulnerable place (particularly less popular ones…).  

Administration Goals  

Near the start of his presidency, the Biden Administration did set a goal to reduce greenhouse gas pollution (GHG) by 50 to 52 percent from peak levels (2005) by 2030. While other rules, like those mentioned above, have supported this goal, this was simply that – a goal. There were no requirements directly linked to this.   

Electric Grid Demand 

The proliferation of EV use creates unique demands for the U.S. energy sector and electric grid. Witnesses Britta Gross and Dr. Jesse Jenkins discussed many of these issues throughout their testimony. In his testimony, Dr. Jenkins focused on the passenger vehicle demand questions. To reach President Biden’s pollution goal mentioned above, the U.S. would need to increase new EV sales about five-fold by 2030. But while EV sales have plateaued to an extent, the grid can adjust to this gradual growth in vehicles with proper investment and improvements. Dr. Jenkins flagged that even if 100 percent of new vehicle sales were EVs tomorrow, it would be about 15 years before the entire on-road fleet would be electrified – giving ample time to enhance the grid and grow the energy supply. EVs will be a large driver for electricity demand in the future as a level two charge plug-in is “like flipping the switch on about a dozen or more window mounted air conditioning units.” But proper development and additional charging strategies, like incentivizing charging in non-peak demand hours, will allow the grid to keep pace with EV growth.  

Gross began her testimony pointing out that between 1965 and 2005, the electric grid adapted to a load twice as large as the 1600 TWhs of energy that would be required to fully electrify transportation, but transportation does create unique challenges to which the grid must adjust. For example, vehicles are mobile, meaning that there are differences in the size of the load, the lead times, and the location at which this differing demand can and will show up on the grid. These will be major challenges as the presence of EVs increases, largely related to bigger demand pockets like airport car rental and trucking fleets. Right now, many are in the process of figuring out how to work with the more than 3,000 utilities across the country to get the electricity access and upgrades needed. The Electric Power Research Institute has designed tools like an interactive map that shows energy demand on utilities at the local level and a standardized application template for working with utilities for electricity access (much like the college common application process – should be available by the end of the year).  

Auto Manufacturing Impacts and EV Demand 

Mr. Schwietert provided the automobile industry perspective for this conversation emphasizing the need to balance markets, regulations, and public policy in order for the U.S. and American auto industry to remain competitive globally. Right now, there are 113 electrified vehicle models available in the U.S. In recent years, the auto industry has announced more than $125 billion in EV investments ranging from battery factories to assembly plants. These investments are expected to create more than 100,000 jobs across the country and are a clear indication that automakers are moving in the direction of electrified transportation.  

However, challenges still exist for this industry. Last year, 9.5 percent of all U.S. light-duty sales were electric or zero emission, which was up from 2.4 percent in 2020. But EV sales have stagnated a bit from the recent years of growth. The first two quarters of 2024 have seen EV sales flatten, which is primarily attributable to Tesla, whose sales have contracted by 13 percent. While, according to Jenkins, other manufacturers have continued to see healthy growth numbers around 31 percent, Tesla has been a large driver within the EV conversation. With these numbers in mind, Schwietert still noted that electrification is coming. But the move to electrified transportation needs to allow the industry to keep pace with what consumers actually want. The U.S. must make needed improvements to infrastructure, like the charging network and the grid, and address issues to domestic permitting for mining and processing to allow U.S. automakers to be successful.  

Mining and Minerals  

If you would like to feel unsettled for the rest of your day (and possibly weekend), then the two final sections are for you. Schwietert mentioned the U.S. permitting process and the difficulty in accessing some of the supplies needed for EV manufacturing domestically. EVs are highly reliant on many rare earth materials, including lithium, cobalt, and copper, among others. While the U.S. is looking into innovative technologies to construct vehicles with different materials, or trying to develop capacity domestically like lithium mining efforts in Nevada, right now these are the realities for the industry. The part that is most unsettling is that China controls a vast amount of raw materials, and processing capacity, for the EV production process.  

Ms. Hinman broke this down for the committee and attendees. Right now, China controls 28 percent of lithium mines, 41 percent of cobalt mines, and nearly 20 percent of copper mines. There is a major access question within the EV conversation. Senator Grassley, while clearly maintaining a less rosy outlook, cited a University of Michigan statistic that the world would need to mine 115 percent more copper from 2018 to 2050 for the EV fleet than any time in U.S. history until the 2018 point. There is an environmental give-and-take, and that is without getting into the more nuanced conversation of labor practices for mining these earth materials abroad.  

Competitiveness and Global Positioning 

Witnesses and committee members mentioned energy independence repeatedly throughout the hearing. Jenkins mentioned that right now the U.S. is producing more oil than at any time in the country’s history. Yet there is a continued reliance on Middle Eastern oil production for U.S. energy. He stated that every $10 increase in barrel price is a $210 million per day tax on American consumers and businesses. In opening comments, Senator Graham fairly posed the question that while we are dependent on the Middle East now, would shifting to energy dependence from China be a much better alternative? And aside from the obvious environmental benefits, within the conversation around energy reliance to a foreign nation, that seems to be a fair question.  

China aggressively moved into the EV market more than two decades ago. Schwietert provided a broad outlook in sharing China’s EV production growth. At the turn of the century, China was manufacturing around 2 million EVs. Today they are manufacturing around 30 million and have the capacity for nearly 50 million EVs. Ms. Hinman shared a comprehensive framework for how China has approached EV production relying on an industrial playbook she refers to as “The Successes.”

Essentially, China set goals for this sector, relied on tariff and non-tariff barriers to protect the industry while limiting foreign investment, and dumped tons of government funding into the industry to set the foundation for their market dominance. They rely on other tactics like investing in adjacent industries, undermining market pricing, stealing foreign technologies, and flooding the market with surplus products at below-market cost to drown out others in the market as a part of their overall strategy for dominance. Given China’s multiple decades of EV investment, the U.S. is in a very precarious position for gaining or maintaining any type of control in this arena without very coordinated government and industry strategies. The International Energy Agency has estimated that China’s battery manufacturing capacity will account for 77 percent of world demand by 2030.  

The Future of EVs 

To bring the conversation back around to a more cheerful and optimistic note, the bright side is that EV production and purchasing is increasing in the U.S. Rightfully, many are asking questions about the country’s strategies related to EV subsidies and program rollouts, but it is fair to say that the answers to these many questions are a bit murky within the global conversation. Assuming the U.S. is able to strategically deploy EV and grid infrastructure, while allowing U.S. manufacturing to ramp up at the pace required to maintain competitiveness and viability, the future is certainly looking greener.