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MANCHIN EYES CRA AGAINST BIDEN ELECTRIC VEHICLE CREDIT IMPLEMENTATION: Energy and Natural Resources Committee Chairman Joe Manchin is sharpening his efforts to reverse the Biden administration’s implementation of an electric vehicle tax credit – and is now requesting the Government Accountability Office’s legal opinion on whether the guidance is subject to review under the Congressional Review Act. If it is, it’s likely that lawmakers could go on record on a tough vote to undo the enactment of that part of the Inflation Reduction Act.
In a letter sent out Monday afternoon, the West Virginia Democrat railed against the Treasury Department’s guidance on the tax credit, otherwise known as 30D, which issues subsidies for consumer electric vehicles. How the proposed guidance is written, according to Manchin, would make it easier for “foreign entities of concern” – countries such as China – to take advantage of the tax credit and increase U.S. reliance on other nations to build out the cars.
“Unfortunately, the Secretary’s ‘proposed regulations’ do not ‘carry out the purposes of’ section 30D adopted by Congress,” Manchin writes. “They pursue, instead, the Administration’s own unenacted policy preferences.”
Not a new rallying cry: Manchin has pressed the Treasury since last year to publish strict guidelines on which EVs qualify for the tax credit under the IRA, and to pause implementation until the guidance was issued. But after the Biden administration issued proposed guidance earlier this month clarifying when these requirements would go into effect under the “foreign entities of concern” deadlines, Manchin blasted the guidance, and vowed to pursue “every avenue and opportunity” to undo the provisions.
The nitty gritty: Manchin’s issue with the proposed regulations issued throughout the year is that it adds a “50% value added test” to the critical minerals requirements for batteries, which he argues would “loosen the limits” set by Congress. In order to qualify for the tax credit, the critical minerals in the battery would have to pass this test, which requires that 50% or more of the materials’ extraction or processing activity be conducted in the U.S. or in a country that the U.S. has a free trade agreement with.
The senator also has issue with the addition of the definition of “constituent materials,” which he argues waters down the battery component requirements of the tax credit. The guidance issued by the Treasury Department defines “constituent materials” as “critical minerals” for the sake of credit calculations, and establishes that the constituent materials are the final products of extraction or processing that will later be used in batteries.
The West Virginia Democrat highlighted concerns with the broadening of the law’s language regarding near-shoring to include Japan and other countries that do not have explicit free-trade agreements with the U.S. He also expressed frustration with the Treasury pushing back until January 2027 the limitation on credits for vehicles that contain materials made by “foreign entities of concern.”
In a nutshell: “Suffice it to say, the Treasury Department’s proposals breach the guardrails that Congress erected in section 30D to promote the production of critical minerals and battery components in this country. It translates ‘any’ vehicle into only a percentage of vehicles, and ‘any applicable critical minerals’ and ‘any battery components’ into only those critical minerals and battery components selected by the Department. It waives deadlines. It reduces minimum percentages. It treats battery manufacturing processes as critical minerals mining and processing.”
The significance: The Congressional Review Act has only been applied to final “rules” – and the main question remains if the proposed “guidance” can be subject to review under the CRA.
If the GAO issues a legal opinion that the guidance is subject to review, that could allow Manchin to force a disapproval resolution onto the Senate floor – and could force lawmakers to take a tough vote on overturning the Biden administration’s implementation of the IRA. Read the letter here.
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HYBRIDS ON TRACK TO MAKE UP MAJORITY OF NEW CAR SALES IN JAPAN: Hybrid vehicle sales in Japan are slated to make up more than 50% of new domestic passenger vehicle sales in the country in 2024, according to a new report from Bloomberg Intelligence —a trend that comes as Japanese consumers opt for the more affordable hybrid vehicles made domestically rather than imported, battery-only models.
New passenger-car sales in Japan were 51% gasoline and 43% hybrid in 2022, while diesel and battery-electric vehicles (BEVs) made up a much lower share of car sales, at 4% and 2%, respectively.
Tatsuo Yoshida, Bloomberg Intelligence’s senior auto analyst, said the hybrid enthusiasm is expected to increase further in Japan, projecting that up to two-thirds of all new car sales will be hybrid by the end of the decade.
Japanese manufacturers have been slow to pivot to battery-only vehicle production, though they are planning a broader roll-out within the next several years. And consumers have also cited concerns about battery-only EVs, including the much higher price point and a lack of charging infrastructure in the country. Read more here.
EQUINOR AND GERMAN LINK LONG-TERM GAS DEAL: Norway energy giant Equinor signed a $54 billion long-term gas deal with Germany’s state-owned energy group, SEFE, today—closing a contract that is Equnior’s biggest in nearly four decades and designed to give Munich more stability as it looks to a future devoid of Russian fossil fuels.
Equinor CEO Anders Opedal told the Financial Times that under the terms of the deal, they will supply Germany with some 129 billion cubic meters of gas through 2039–or enough gas to cover one-third of the country’s industrial demand. It also includes a non-binding letter of intent for Germany’s SEFE to purchase hydrogen produced by Equinor “starting in 2029 and continuing towards 2060.”
EU countries have scrambled to secure new gas suppliers following Russia’s February 2022 invasion of Ukraine and its throttling of gas deliveries to the bloc sent on its Nord Stream 1 pipeline linking Russia to Germany. Read more from FT here.
JOINT RED SEA TASK FORCE FORMED TO PROTECT SHIPS IN RED SEA: The U.S. and more than half a dozen NATO and regional allies have thrown their weight behind “Operation Prosperity Guardian,” a multinational naval task force in the Red Sea aimed at protecting commercial shipping vessels from attacks from Iranian-backed Houthi militants.
The task force will include the U.K., France, Italy, and Canada, as well as regional allies including Bahrain, U.S. Defense Secretary Lloyd Austin said yesterday. The rebels have targeted commercial vessels with missiles and drones to disrupt the busy shipping route and have issued a new statement today saying they have no intention of stopping.
Austin announced the task force shortly after oil major BP and Norway’s Equinor announced they were halting shipments or rerouting them around Africa, citing the “deteriorating security situation” for commercial vessels heading toward the Suez Canal.
The Suez is responsible for 12% of global seaborne trade, including a large portion of oil and LNG shipments, meaning that any prolonged disturbance could have a profound impact on prices and supplies.
Members of the joint naval task force are gathering today for a virtual call to discuss the escalation. Read more from Breanne here.
ICELAND VOLCANO ERUPTS NEAR GRINDAVIK AFTER WEEKS OF SPECULATION: A volcano in southwestern Iceland began erupting last night on the Reykjanes peninsula after weeks of seismic activity, spewing lava fountains high into the air and prompting renewed concern about a nearby geothermal power plant.
The 2.5-mile fissure, which began forming in November, was located just miles from the Svartsengi Power Plant, as well as the 3,000-person town of Grindavik, which had been evacuated in anticipation of the eruption weeks earlier. The risk to nearby energy infrastructure “is currently being assessed,” officials said.
The Icelandic Meteorological Office said it is monitoring the eruption, and it remains unclear how long it will last. It is the fourth volcanic eruption in Iceland since 2021, according to a government statement, and the largest so far.
BIPARTISAN BID TO BREAK SEA-MINING IMPASSE STRUGGLES IN SENATE: A bipartisan group of senators led by Lisa Murkowski of Alaska is hoping to break a decades-long congressional stalemate to ratify the U.N. Law of the Sea, the international agreement that governs the use of the world’s waters and deep-sea mining activity.
Murkowski is asking the Senate Foreign Relations Committee to consider a resolution supporting ratification of the treaty, an effort co-sponsored by Sens. Angus King, Jacky Rosen, Bill Cassidy, Chris Van Hollen, and Sheldon Whitehouse, but its path forward remains unclear, E&E News reports.
Republicans in the Senate, who objected to the measure when it came for a vote in 2012, remain divided on the issue more than a decade later—with some arguing that signing the multinational treaty would limit U.S. power.
Why it matters: The U.S. is looking to compete with China on clean energy and battery production, which proponents argue makes U.S. access to deep-sea materials even more critical.
UNCLOS, as the treaty is known, has already been approved by 168 nations and the EU. And China already holds five of 31 exploration licenses granted by the International Seabed Authority, or ISA—adding what Murkowski hopes will be a new urgency to the effort, since the U.S. is unable to sponsor deep-sea mining in international waters or seek its own licenses without ratification.
“The case is made even more pronounced given the interest that we see from China — everything from their interest in the Arctic to what they are doing [under the sea],” Murkowski said earlier this month. “Ten years ago, nobody was talking about the Arctic being wide open.”
Read more from E&E News here.
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