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Manchin vows to sue Biden administration over EV tax credits

Senator Joe Manchin, a Democrat from West Virginia, speaks during the 2023 CERAWeek by S&P Global conference in Houston, Texas, US, on Friday, March 10, 2023.
Enlarge / US Senator Joe Manchin (D-W.V.) is a millionaire thanks to coal, gas, and oil interests. He was responsible for rewriting the US electric vehicle incentives.

Aaron M. Sprecher/Bloomberg via Getty Images

US Senator Joe Manchin was instrumental in rewriting the nation’s electric vehicle incentives, but now the West Virginia Democrat says he wants to sue the federal government “if I’m allowed to” in order to stop too many EVs from reaching US customers with battery packs that contain materials and components refined, processed, or manufactured abroad. The politician made the remarks during a panel on Wednesday, according to S&P Global.

Originally, the IRS tax credits offered to car buyers to incentivize them to purchase a plug-in electric vehicle were linked to the size of the car’s battery. But as part of the Inflation Reduction Act of 2022, the rules were changed. Now, the $7,500 tax credit is only applicable to “clean vehicles”—either battery EVs or hydrogen fuel cell EVs, not plug-in hybrids.

Where do your minerals come from?

There are several more requirements, including final assembly in North America, but for most new EVs, the stumbling block is a requirement that battery components be domestically sourced.

From this year, $3,750 of the credit is tied to a requirement that at least 40 percent of the battery pack’s critical minerals have to be extracted or processed in the US or a country that has a free trade agreement with the US; each year, the percentage increases by 10 percent until 2027, when 80 percent of the pack’s critical minerals must be domestically sourced.

This was at the behest of Sen. Manchin—a well-known opponent of electric car incentives—and was opposed by the auto industry on the grounds that the US has very little current capacity to mine, refine, or otherwise process the minerals used in lithium-ion batteries.

When the new rules went into effect at the beginning of this year, the US Treasury Department said that it would not enforce the domestic battery content regulations until it had prepared guidance—that document is expected on March 31. In the interim, as long as the other requirements of the clean vehicle credit were met, those vehicles have been eligible for the full $7,500 tax credit.

Sen. Manchin has not been pleased by the IRS’s permissive attitude toward EV adoption. In January, he introduced a bill to force the IRS to implement all the rules immediately, but that proposed legislation only has a single cosponsor and appears unlikely to gather much more support.

Without his fellow legislators on board, the coal millionaire says he will turn to the courts. “I’ll do whatever I can,” said Manchin. “If that means going to court and I can do it, I’ll do it. I don’t know if I can or not, but I’ll do it if I’m allowed to.”

Wafers or raw powder?

Manchin’s issue appears to center on what “processing” means.

“Does it mean basically the processing of the raw product into a form that we can take and put in manufacturing, or is it basically the making the powders and the wafers and everything that we need… and calling that processing?” Manchin said.

“You do that, and we don’t meet our objective of being self-reliant… I’m willing to go to court, I’m willing to stop it all. Because that’s not the intent,” he said.

Manchin’s objections to foreign-sourced battery minerals aren’t absolute, however. “I don’t have a problem opening up to our reliable trading partners,” Manchin said. “France, the UK, the EUI’m fine with processing in those areas. I’m just not fine with [those countries] completing the project and all we’re going to do is end up assembling in the US. That is not the bill, that’s not how we wrote it, and it’s not how it should be implemented,” he said.

The US just signed a free trade agreement with Japan for battery minerals and is in the process of negotiating a similar deal with the European Union.

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