IRA will accelerate the electrification of all on-road vehicles but falls short of NDCs
January 31 (Washington, D.C.) – Today, the International Council on Clean Transportation, in partnership with Energy Innovation Policy & Technology LLC, released an analysis showing that the Inflation Reduction Act (IRA) of 2022 will significantly accelerate the electrification of all on-road vehicles in the United States, but still misses the U.S. nationally determined contribution (NDC) target. To reach electrification rates that align with the Paris Agreement—and lock in progress—the EPA will need to step up this year when finalizing new standards for light- and heavy-duty vehicles.
The new analysis shows that the EV sales share in the light-duty sector will reach 56%–67% and 44%–52% in the heavy-duty sector by 2032, the final year of the IRA tax credits. The $370 billion allocated to climate and clean energy investments dramatically expands incentives to deploy more clean vehicles while supporting a domestic EV supply chain and charging infrastructure buildout. State-level policies and market momentum will further bolster progress.
The EPA is now well-positioned to lock in and build upon this progress by setting more stringent standards in 2023. Based on previous analyses from ICCT, higher rates of electrification are needed to align with the Paris Climate Agreement. Although the IRA will not get us to the U.S. NDC target, the EPA can put the United States on a better path through the upcoming rulemaking on GHG emissions for light- and heavy-duty vehicles.
“As the IRA is implemented, we expect a catalytic effect on electrification rates. But there is still a gap between the best-case scenario and the 1.5-degree target. The EPA has an opportunity to close this gap and be a backstop when IRA incentives sunset in 2033,” said Stephanie Searle, United States Director at ICCT.
This study assesses the future impact of the IRA on electrification rates for LDV and HDV sales in the United States through 2035 using methodologies from the Energy Policy Simulator model, it projects how changing costs and incentives over time will affect the LDV and HDV markets in the United States.
“The U.S. EV market is on the cusp of a new era that will build on the momentum generated by OEM investments, state policies, and consumer interest,” said Sara Baldwin, Director, Electrification at Energy Innovation. “IRA incentives will put EV sales in the fast lane, but strong national and state vehicle standards are needed to overcome inertia and transform this market. EPA is in the driver’s seat and holds the keys to reach an electrified transportation future, and ambitious new regulations can get us there faster.”
About the International Council on Clean Transportation
The International Council on Clean Transportation (ICCT) is an independent research organization providing first-rate, unbiased research and technical and scientific analysis to environmental regulators. Our mission is to improve the environmental performance and energy efficiency of road, marine, and air transportation, in order to benefit public health and mitigate climate change.
About Energy Innovation Policy & Technology
Energy Innovation Policy & Technology LLC® is a nonpartisan energy and environmental policy firm. We deliver high-quality research and original analysis to policymakers to help them make informed choices on energy policy. We focus on what matters and what works.