Fueling the Electric Vehicle Transition

Happy Friday! Congratulations to Michael E., Debra S., Chris T., and Jim B., who miraculously made it through the first day of the NCAA March Madness tournament while missing just one game in their TMD pool brackets. 

[Editor’s Note: If only we could have sent today’s TMD at 6:51 p.m. ET last night, at which point Declan was still tied for first place—globally—after going eight for his first eight picks in the tournament. Unfortunately, his wisdom and foresight will be lost to the sands of time. No one will know that, again, he correctly picked the first eight games of the 2024 men’s March Madness tournament.]

Quick Hits: Today’s Top Stories

• The Biden administration is expected to introduce a draft U.N. Security Council resolution today calling for an “immediate and sustained ceasefire” in Gaza contingent on the release of the remaining hostages held by Hamas. Secretary of State Antony Blinken said the resolution “would send a strong message, a strong signal.” Israeli officials, however, remain steadfast in their intention to launch a ground offensive in Rafah—a city in southern Gaza and Hamas’ last stronghold—despite U.S. opposition. “If you leave four battalions in Rafah, you’ve lost the war, and Israel is not going to lose the war,” Ron Dermer, Israel’s Minister of Strategic Affairs, said Thursday on Dan Senor’s podcast. “With or without the United States, we are not going to do it.”
• Congressional leaders released on Thursday the 1,012-page text of the $1.2 trillion ‘minibus’ package that, if passed, would fund the government through the end of the fiscal year, increasing defense spending and continuing funding at current levels for most of the other agencies included in the package. The deal includes increased funding for border security, and cuts U.S. support to the United Nations Relief Works Agency, the Palestinian aid group discovered last month to have ties to Hamas. The spending package also boosts funding for the childhood education program Head Start and authorizes 12,000 additional visas for Afghans who assisted the U.S. in the war in Afghanistan, among other provisions. The House is expected to vote on the legislation today, and both chambers of Congress will need to pass the package by midnight tonight to stave off a partial government shutdown.
• The European Commission agreed on Thursday to open accession talks with Bosnia-Herzegovina, beginning the process for the Balkan nation to potentially join the European Union. “Today’s decision is a key step forward on your EU path,” European Council President Charles Michel tweeted. “Now the hard work needs to continue so Bosnia and Herzegovina steadily advances, as your people want.”
• The Department of Justice, along with 16 other state and district attorneys general, filed an antitrust lawsuit against Apple yesterday, alleging the company has monopolized the smartphone market. “For years, Apple responded to competitive threats by imposing a series of ‘Whac-A-Mole’ contractual rules and restrictions that have allowed Apple to extract higher prices from consumers, impose higher fees on developers and creators, and to throttle competitive alternatives from rival technologies,” said Assistant Attorney General Jonathan Kanter, the head of the Justice Department’s antitrust division. The complaint—which an Apple spokesperson argued would, if successful, “set a dangerous precedent” and threaten “the principles that set Apple products apart in fiercely competitive markets”—requests the court enjoin such practices, and Justice Department officials have not publicly ruled out other structural changes to Apple, including a break up of the $2.6 trillion company.
• The National Association of Realtors reported Thursday that the median existing-home sales price in the U.S. was $384,500 in February—up 5.7 percent annually, marking the eighth consecutive month of year-over-year increases. Sales of previously owned homes rose 9.5 percent from February, far above economists’ expectations.

Tapping the Brakes

Fresh off a dire warning from former President Donald Trump that reelecting President Joe Biden would lead to a “bloodbath” for Detroit’s automotive industry, the incumbent’s administration announced a new regulation intended to greatly accelerate the nation’s pivot towards electric vehicles. 

The Environmental Protection Agency (EPA) revealed a final rule on Wednesday setting the strictest limits yet on emissions from passenger vehicles model year 2027 to 2032 in an effort to combat climate change. Included in the rule is a delay in the timeline for the auto industry to transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) and hybrids, potentially offering more time to reach government compliance while still meeting emissions standards. But critics of the plan warn that it ignores market demands and imposes significant costs on the industry in exchange for negligible benefits.

The new regulation was proposed nearly a year ago, and originally included a much quicker ramp-up for automakers to come into compliance with aggressive climate goals. The guidance defines an allowed average limit of emissions on a manufacturer’s entire fleet of vehicles, thus setting a proportion of zero-emission vehicles needed to remain in compliance. While the proposed rule required EVs to comprise up to two-thirds of all new car sales in the U.S. by 2032, the final rule cut that proportion to 56 percent of vehicle sales, and includes hybrid vehicles—which utilize both electric and gas power—in the projected transition.

The EPA stressed that, even with the adjusted timeline, the emissions standards would still meet the administration’s climate goals. “The standards will slash over 7 billion tons of climate pollution, improve air quality in overburdened communities, and give drivers more clean vehicle choices while saving them money,” EPA Administrator Michael S. Regan said in a statement on Wednesday.

But Benjamin Zycher, a senior fellow at the American Enterprise Institute focusing on energy and environmental policy, questioned the actual climate benefits of the rule—which, “under the explicit EPA assumptions and estimates, would be about 0.023°C by 2100,” he wrote in a comment submitted to the EPA in July. “Because the standard deviation of the surface temperature record is 0.11°C, that effect would not be detectable.” 

Despite the longer lead time, the rules still pose a significant shift for business as usual for auto manufacturers and consumers. “A better way of putting it is that less than 30 percent of new vehicles sold by 2032 would be internal combustion engine vehicles,” said Daren Bakst, director of the Center for Energy and Environment and a senior fellow at the Competitive Enterprise Institute. “Given that almost all vehicles sold are [internal combustion engine] vehicles, that’s a pretty significant change.” According to Kelley Blue Book, EVs made up just 7.6 percent of all vehicle sales last year—up from 5.8 percent in 2022. Bakst pointed to this baseline and relatively slow growth as a core flaw in the rule governing Americans’ purchasing habits. 

“[It] simply doesn’t reflect that consumer demand for EVs and the technological feasibility,” he told TMD. 

Since the rule’s conception, the auto industry has warned of the difficulty of meeting the new benchmarks. The Alliance for Automotive Innovation—a trade group representing manufacturers—asked the EPA to adjust its timeline to better allow the industry to adjust. A coalition of nearly 4,000 car dealerships warned that a mandated shift to EVs was out of step with market trends. “While the goals of the regulations are admirable, they require consumer acceptance to become a reality,” they wrote in a letter sent last year to Biden. “With each passing day, it becomes more apparent that this attempted electric vehicle mandate is unrealistic based on current and forecasted customer demand.” Though the group praised the newly “softened” regulation on Wednesday, it still warned that the rule required growth “far beyond the consumer interest we are experiencing at our dealerships.”

The nation’s largest auto union—the United Auto Workers (UAW)—also expressed skepticism about the initial rule, as members worried that a quick shift in the industry could result in fewer jobs. UAW President Shawn Fain even said last May that his organization would withhold an endorsement of Biden due to “concerns with the electric vehicle transition,” but the union ultimately announced its endorsement of Biden in January and came out in support of the updated rule.

Zycher warned that, at its current pace, the market does not support such a rapid transition of the auto industry—and that further government intervention might be required to help automobile manufacturers survive. “I don’t see how they stay in business, frankly, trying to adhere to this rule […] without massive subsidies,” he told TMD. “The subsidies have to be so big that it just basically can be described as a government takeover of the domestic auto industry.”

In another dramatic complication for the auto industry, the rule comes during a contentious election cycle where both candidates have made EVs a focus, highlighting the problem producers face moving forward. “If the Biden administration is reelected, then they’re going to be stuck with this for at least another four years, they have to start shifting their investment portfolios,” Zycher said. “If Mr. Trump is elected, then they’re going to repeal this rule and once again, the auto producers aren’t going to know what to do in terms of their investment strategies over the next decade.”

Worth Your Time

• Atlantic writer David Frum’s daughter, Miranda, passed away in February at the age of 32. In a beautiful and moving tribute, Frum honored the last gift Miranda gave him: her dog, Ringo. “When a parent loses a child, the nights are the worst,” he wrote. “Thoughts come crashing into the mind: every missed medical clue, every pleasure needlessly denied, every word of impatience, every failure of insight and understanding. Like seasickness, the grief ebbs and surges, intervals of comparative calm punctuated by spasms of racking pain. I don’t want to wake my wife, who has a grief schedule of her own, so I slip out of our bed and into the one Miranda used when she stayed with us in Washington. When I do that, Ringo will climb up to sleep at my feet, just as he slept on Miranda’s that one last time. Immediately after Miranda died, Ringo did not like anyone else to hold him. At first, I deferred to his resistance. Then I remembered something my sister, Linda, said during the most difficult phase of Miranda’s never-easy adolescence: ‘Sometimes the kid who seems to want the hug the least is the kid who needs the hug the most.’ I experimented with my own version of ‘cuddle jail.’ After a few attempts, Ringo accepted the embrace, then welcomed it. And I think: Over 32 years of life, Miranda gave me many gifts. She gave me joy, and pride, and the wisdom that can be learned only from loving another being more than one loves oneself. Then, at the end, she gave me one last gift, the most immediately necessary of them all. She left me the means to expiate all those sins of omission and commission that crowd my mind at three in the morning. She left me Ringo.”
• Writing for Boston Magazine, Rachel Slade profiled Tufts University professor Eitan Hersh’s class on the American right. “Hersh would have to build the course from whole cloth, because nothing like it existed on college campuses anywhere in the United States,” she wrote. “He did find a few course models that tackled the conservative movement through political history or looked at the foundations of political philosophy going way back to Italy’s Niccolò Machiavelli, but they were largely taught through a liberal lens. Instead, Hersh wanted to present American conservatism as a unique ideology on its own terms. He ultimately organized his course around big, intense political topics such as religion, guns, crime, and affirmative action, using readings pulled from sources as un-Tufts-like as the National Review, the Heritage Foundation, the Claremont Institute, and the Washington Examiner. … Hersh told me after teaching his inaugural conservatism course last spring. His students confided in him that while inside his classroom, they felt freer to talk about contentious issues than anywhere else. By introducing a refreshingly contrary perspective, in this case conservative thought, Hersh believes he is somehow taking a lot of the emotional heft out of America’s most gut-wrenching topics and forcing students to find new intellectual muscles to process the right-leaning take.”

Presented Without Comment

Associated Press: Trump’s Invite to Major Donors Prioritizes the Committee Paying His Legal Bills Over the RNC

Donald Trump’s new joint fundraising agreement with the Republican National Committee directs donations to his campaign and a political action committee that pays the former president’s legal bills before the RNC gets a cut, according to a fundraising invitation obtained by The Associated Press.

The unorthodox diversion of funds to the Save America PAC makes it more likely that Republican donors could see their money go to Trump’s lawyers, who have received at least $76 million over the last two years to defend him against four felony indictments and multiple civil cases. Some Republicans are already troubled that Trump’s takeover of the RNC could shortchange the cash-strapped party.

Also Presented Without Comment

Bloomberg: Yemen’s Houthis Tell China, Russia Their Ships Won’t Be Targeted

Toeing the Company Line

• In the newsletters: Mike and Sarah checked in on the latest in the Fani Willis saga in Georgia, Nick weighed (🔒) the pros and cons of serious Republican politicians joining Trump’s cabinet in a second term, and Will argued that TikTok’s obvious national security risks don’t invalidate free speech concerns.
• On the podcasts: On today’s episode of The Dispatch Podcast, Sarah, Jonah, Steve, and Mike dive into the latest punditry—Ohio’s primary, Trump’s trials, and the Middle East—before veering off into an Abraham Lincoln and 1619 Project cul-de-sac.
• On the site: Charlotte reports on rifts between the Biden administration and Israel over the IDF’s looming ground offensive in Rafah, and Rachel Carver looks into the latest problems plaguing Boeing.

Let Us Know

Do you think there is a way to more organically encourage the market to incentivize the transition to electric vehicles? Should policymakers be incentivizing a transition to electric vehicles at all?