INSIGHT: Imminent decision by EPA would unleash state EV incentives before Trump takes office

HOUSTON (ICIS)–The US Environmental Protection Agency (EPA) could make a decision any day that would allow California to adopt an aggressive electric vehicle program, triggering similar programs in 12 other states and territories that will likely become the target for repeal under President-Elect Donald Trump.

• During his campaign, Trump has expressed opposition to policies that favor one drive-train technology over another, saying that he would  “cancel the electric vehicle mandate and cut costly and burdensome regulations”.
• California’s EV program is called Advanced Clean Cars II (ACC II), and it works by requiring EVs, fuel cells and plug-in hybrids to make up an ever-increasing share of the state’s auto sales.
• Other programs that encourage the adoption of EVs could be more vulnerable to repeal and rollbacks under Trump

ACC II COULD BOOST EV DEMAND IN 13 STATES
Before California can adopt its ACC II program for EVs, it needs the EPA to grant it a waiver from the US Clean Air Act.  The California Air Resources Board (CARB) said it is expecting a decision from the EPA at any time.

If the EPA receives the waiver, then it will trigger the adoption of similar ACC II programs the following states and territories. The figures in parentheses represent each state’s share of light-vehicle registrations.

California (11.6%)	New York (5.6%)
Colorado (1.8%)	Oregon (1.0%)
Delaware (0.3%)	Rhode Island (0.3%)
Maryland (1.8%)	Vermont (0.3%)
Massachusetts (2.1%)	Washington (1.9%)
New Jersey (3.4%)	Washington DC (not available)
New Mexico (0.5)

Source: CARB

In total, the 13 states and territories represent at least 30.6% of US light-vehicle registrations, according to CARB.

HOW THE ACCII SUPPORTS EV DEMAND
The following chart shows the share of electric-based vehicles that would need to be sold in California by model year under the state’s ACC II regulations. Programs in other states and territories have similar targets.

ZEV stands for zero-emission vehicle and includes EVs and vehicles with fuel cells
Source: California Air Resources Board

REPEALING THE ACC II
The key to California’s ACC II programs is the EPA’s decision to grant it a waiver to the Clean Air Act.

Trump will likely revoke that waiver if it is granted before he takes office, according to the law firm Gibson Dunn. It expects that California will respond by threatening to retroactively enforce the ACC II program once a friendlier president takes office after Trump’s term ends in four years.

Auto makers could choose to take California’s threat seriously and reach an agreement with the state.

A similar scenario unfolded during Trump’s first term of office in 2016-2020 that involved California’s earlier Advanced Clean Cars (ACC) program, according to Gibson Dunn. That program also required a waiver from the EPA, and the dispute was resolved only after Joe Biden restored the waiver after becoming president in 2021.

For the possible dispute over the ACC II program, it could take the courts determine whether California can retroactively enforce the program.

FEDERAL PROGRAMS ARE MORE VULNERABLE TO REPEAL
The following federal programs could be more vulnerable to roll backs under Trump.

• The Environmental Protection Agency’s (EPA) recent tailpipe rule, which gradually restricts emissions of carbon dioxide (CO2) from light vehicles.
• The Department of Transportation’s (DoT) Corporate Average Fuel Economy (CAFE) program, which mandates fuel-efficiency standards. These standards became stricter in 2024.
• A tax credit worth up to $7,500 for buyers of EVs under the Inflation Reduction Act (IRA).

Trade groups have argued that the CAFE standards and the tailpipe rules are so strict, they function as effective EV programs. They allege that automobile producers can only meet them by making more EVs.

The following table shows the current tailpipe rule. Figures are listed in grams of CO2 emitted per mile driven.

	2026	2027	2028	2029	2030	2031	2032
Cars	131	139	125	112	99	86	73
Trucks	184	184	165	146	128	109	90
Total Fleet	168	170	153	136	119	102	85

Source: EPA

The following table shows the fuel efficiency standards under the current CAFE program. Figures are in miles/gallon.

	2022	2027	2028	2029	2030	2031
Passenger cars	44.1	60.0	61.2	62.5	63.7	65.1
Light trucks	32.1	42.6	42.6	43.5	44.3	45.2
Light vehicles	35.8	47.3	47.4	48.4	49.4	50.4

Source: DOT

Gibson Dunn expect Trump’s administration will rescind the tailpipe rule and roll back the CAFE standards to levels for model year 2020 vehicles. That would lower the CAFE standards for light vehicles to 35 miles/gal.

EVS AND CHEMICALS
EVs represent a small but growing market for the chemical industry, because they consume a lot more plastics and chemicals than automobiles powered by ICEs.

A mid-size EV contains 45% more plastics and polymer composites and 52% more synthetic rubber and elastomers, according to a May 2024 report by the American Chemistry Council (ACC).

EVs also contain higher value materials such as carbon fiber composites and semiconductors, making the total value of chemistry in the automobiles up to 85% higher than in a comparable ICE, according to the ACC.

The following chart compares material consumptions in EVs and ICEs.

Source: ACC

EVs have material challenges that go beyond making them lighter and more energy efficient, such as managing heat from their batteries and tolerating high voltages.

Major chemical and material producer are eager to develop materials that can meet these challenges and command the price premiums offered by EVs. Most have EV portfolios and prominently feature them at trade shows

A rollback of US incentives for EVs could slow their adoption and weaken demand for these materials.

Materials most vulnerable to these rollbacks would include heat management fluids and chemicals used to make electrolytes for lithium-ion batteries, such as dimethyl carbonate (DMC) and ethyl methyl carbonate (EMC).

Other materials used in batteries include polyvinylidene fluoride (PVDF) and ultra high molecular weight polyethylene (UHMW-PE).

Insight by Al Greenwood

Thumbnail shows an EV. Image by Michael Nigro/Pacific Press/Shutterstock