Transportation

What You Need to Know.

  • With a focus on multilevel action, urbanization, and the built environment and transport, the events of Day 7 of COP28 highlighted efforts to transition to low-carbon and resilient infrastructure, particularly in urban areas.  This thematic focus is significant; according to the UN Environmental Programme, cities are responsible for an estimated 75 percent of global CO2 emissions, primarily from transportation and buildings.

Continue Reading COP28 Day 7 Recap: “A Bullet Train to Speed Up Climate Action”

On September 22, the Commerce Department published a final rule implementing the national security-related restrictions and obligations on recipients of incentive funds under the CHIPS and Science Act of 2022 (the “CHIPS Act”).  The final rule clarifies in some respects, and substantially expands in other respects, the definition of “foreign entity of concern” that appeared in Commerce’s proposed rule, issued in March. 

When Commerce issued its proposed rule, the Treasury Department cross-referenced Commerce’s definition of “foreign entity of concern” in Treasury’s concurrently proposed regulations for the CHIPS Act’s tax credit under section 48D of the Internal Revenue Code.  We commented at the time that if Treasury were to adopt that same definition for the section 30D electric vehicle (EV) credit under the Inflation Reduction Act (the “IRA”), there could be a significant reduction in the number of vehicles eligible for such credits relative to market expectations.  Treasury issued proposed regulations for other aspects of the 30D credit one week after the CHIPS Act guidance, but did not include an interpretation of the term “foreign entity of concern,” and to date has yet to do so (though it has signaled an intent to do so later this year).Continue Reading Commerce Final Rule Heightens Uncertainty as to How Treasury Will Interpret “Foreign Entity of Concern” for EV Credits Under Section 30D of the Inflation Reduction Act

Background

Later this week the Department of the Treasury is expected to release guidance on the Inflation Reduction Act (IRA)’s EV tax credit under section 30D of the Internal Revenue Code.  Highly consequential for the guidance and practical availability of the credit will be how Treasury interprets the term “foreign entity of concern.”  This is because Section 30D(d)(7) excludes from credit eligibility vehicles that are:

  • placed in service after December 31, 2024, with respect to which any of the applicable critical minerals contained in the battery of such vehicle . . . were extracted, processed, or recycled by a foreign entity of concern; or
  • placed in service after December 31, 2023, with respect to which any of the components contained in the battery of such vehicle . . . were manufactured or assembled by a foreign entity of concern.

Meanwhile, last week, Treasury and the Commerce Department released proposed regulations (here and here, respectively) that interpret “foreign entity of concern” for purposes of various incentive programs under the CHIPS & Science Act (CHIPS Act).  Because the IRA’s definition of “foreign entity of concern” mirrors the CHIPS Act’s definition of “foreign entity of concern” interpreted by Commerce, and because Treasury cross-referenced Commerce’s interpretation of “foreign entity of concern” in Treasury’s CHIPS Act guidance, it is reasonable to wonder whether Treasury will adopt the same interpretation of “foreign entity of concern” for purposes of the EV credit exclusion in section 30D(d)(7). 

If it does, there could be a dramatic diminution of vehicles eligible for the EV credits.  Under Treasury’s proposed CHIPS Act regulations, a foreign entity of concern would include, inter alia, (i) any entity organized under the laws of China or having its principal place of business in China, and (ii) any entity organized outside of China 25% or more of whose voting interests are owned by the Chinese government (as in the case of foreign subsidiaries of Chinese state-owned entities (SOEs)).  If that interpretation is used for purposes of section 30D, absent a nearly impossibly fast elimination of Chinese critical minerals and battery components from the EV supply chain, the number of vehicles eligible for the 30D EV credit will sharply decrease in 2024 and will be practically eliminated in 2025. 

EV manufacturers and suppliers may wish to flag this concern to Treasury.Continue Reading Will Treasury Adopt the Same Interpretation of “Foreign Entity of Concern” for both the Section 48D Credit under the CHIPS Act and the Section 30D Credit under the Inflation Reduction Act?

As the United Nations Climate Change Conference of the Parties (“COP”) in Glasgow has drawn to a close, with seemingly mixed messages and a somewhat ambiguous conclusion, it is worth reflecting on the overall trajectory of the climate issue, societal expectations, and the accomplishments that — with time — Glasgow is likely to represent.  COP26 highlighted the fragility of the planet, as well as the fragility of the global consensus-based United Nations approach to protecting it.  It highlighted the sweep of global climate-induced challenges and the scale of transformation needed to address them.  With rising temperatures has come a rising global focus on climate and a far greater set of emerging societal expectations for meaningful responses by government and the private sector.  Despite the risk that the global agreement forged in Glasgow is seen by climate activists as all talk and no action — what they referred to as “blah, blah, blah” — I believe that a number of features will endure as important accomplishments.
Continue Reading Report from Glasgow COP26: Assessing the United Nations Climate Conference

This is the twentieth in our series, “The ABCs of the AJP.”

As discussed in an earlier post, the American Jobs Plan adopts an expansive definition of “infrastructure” to address systemic inequities and benefit society as a whole. However, the AJP also addresses what is typically called “core infrastructure” by proposing substantial investments to repair and modernize our nation’s roads, highways, bridges, airports, ports, and railways. As with other aspects of the AJP, the President’s investments seek to address climate and sustainability concerns and the creation of American jobs by, among other things, using sustainable and innovative building materials that are made in America.
Continue Reading Tackling Transportation, Traffic, and Transit Troubles

On June 19th, a group of diverse businesses from a variety of industries announced the formation of the Transportation Electrification Accord (“Accord”). This announcement signaled an increasingly firm consensus around the importance of open, resilient, and cooperative approaches to transportation electrification — and major companies and organizations, some of whom have not previously been active in this realm (such as the Edison Electric Institute, Southern Company, AEP, GM, and Honda) have come together around this effort.
Continue Reading Industry is Leading the Way on Transportation Electrification