Despite regulatory efforts often being praised as essential for elevating standards and promoting safety, they’re also an excellent way to funnel money and favors between political and corporate entities in plain sight. This dichotomy is particularly glaring in regard to environmental restrictions, which frequently favor businesses that are wealthy enough to afford to adhere to them and subsidies that effectively reroute tax funding to support various industries.
Considering this, it’s fairly rare to see bigger businesses griping about government assistance. But that’s exactly what’s Honda is doing with a proposal in Congress seeking to provide additional EV subsidies to consumers that buy vehicles manufactured by union-backed plants. The manufacturer has stated it believes the Clean Energy for America Act is discriminatory by favoring specific automakers and will ultimately restrict the choices available to consumers – which is true.
The Biden administration has repeatedly backed legislation providing extra funding for electrification and doesn’t seem shy about spending government funds to ensure EVs gradually become the dominant mode of transportation. For example, the $1 trillion infrastructure bill your author was bemoaning last week passed on Tuesday and sets aside billions for the technology industry while making numerous provisions to regulate everything from how you start your car to establishing new per-mile driving taxations.
But allowing car buyers to receive as much as $12,500 back in taxes if they buy from a unionized factory seems overtly political. Most of us have never seen the UAW back a right-wing candidate in our lifetime. While that’s certainly the organization’s prerogative, having a Democrat-controlled government allocating a bunch of money for companies and organizations that will perpetually support it has ruffled feathers across the aisle. Though Honda’s complaint can basically be boiled down into it realizing that it doesn’t have a glut of union-backed facilities and therefore no way of prospering from the Clean Energy for America Act at the same level as General Motors or Ford Motor Co.
“Our production associates in Alabama, Georgia, Indiana and Ohio deserve fair treatment from Congress and should not be penalized for their choice of a workplace,” Jennifer Thomas, Honda’s vice president and business unit leader of corporate affairs, said in a prepared statement.
“By providing fair and equitable treatment for all American auto workers who build EVs and by equally valuing their contributions, we can accelerate our shared environmental goal of achieving widespread EV deployment.”
But that only makes sense if you’re operating under the assumption that the main point of this was universally promoting electrification or even prioritizing domestic manufacturers. Up until 2021, Tesla was only ever profitable thanks to its ability to sell carbon credits to rivals. Even then, its sales have been propped up by federal EV tax credits for years. However, its non-union (debatably anti-union) preference makes it ineligible for government support under the Clean Energy for America Act, despite it being the only established domestic manufacturer wholly devoted to battery electric vehicles.
Advanced by the Senate Finance Committee in May, the plan is loaded with tax incentives for green tech and attempts to nullify those allocated to the fossil fuel sector. But the union credits are the work of Senator Debbie Stabenow (D-MI) who has been a longtime supporter of the U.S. automotive industry and UAW.
Joe Biden has also repeatedly stated that the White House was interested in working with Congress to create “good paying, union jobs” rather than simply “jobs.” The president reiterated this at the start of the month while discussing how the United States will need to ensure that half of all new vehicles produce no exhaust gasses by 2030.
“That means purchasing incentives for consumers to buy clean vehicles, union-made right here in America, like the ones championed by Debbie Stabenow and Ron Wyden in the Senate, which provides $7,500 basic credit, $2,500 credit for vehicles made in America, and an additional $2,500 credit for union-made vehicles,” Biden said. “That means spurring demand by converting the federal government’s enormous fleet of vehicles — we have over 600,000 vehi- — a lot of vehicles — 600,000, I should say — into an all American-made clean vehicles.”
While your author doesn’t have any qualms with facilities unionizing, enforcing policies that heavily incentivize businesses to embrace one of the largest unions in the country seems counter to the stated objective of promoting electrification in America. I would likewise argue that all of this is wildly anticompetitive and counter to every free-market principle I’m familiar with. But it doesn’t truly prioritize the primary goal of spurring EV adoption when Tesla has been taken out of the mix. Meanwhile, the UAW has a long history of corruption that bleeds over into the automotive industry and required this outlet to spend several years tracking one of the biggest federal cases in memory.
We seem to be looking at the other side of a familiar coin. The previous conservative government did what it could to assist automakers by rolling back rigid fueling regulations imposed by the Obama administration and undoubtedly hoped to make some inroads with the industry in the process. Trump went into office cheering deregulation in general, claiming that it would help both big and small businesses alike. These new EV subsidies seem to be operating in a similar manner but ultimately result in piles of federal funding being poured atop some of the wealthiest and most politically influential businesses currently operating. Honda is simply getting less of that money, along with Nissan, Tesla, Toyota, and anyone else lacking a strong union presence in the United States.
Honda isn’t the only one crying foul, either. Volkswagen Group has similarly expressed concerns about regulatory policies that favor specific automakers. Though we expect it would feel differently if it were benefiting in ways in which its rivals could not. Big H even entered into the voluntary agreement with the state of California (along with Honda, BMW, Ford, Volkswagen, and Volvo) to adhere to stringent emissions quotas and cited that as part of its grievances.
When we entered into that agreement with California, we knew it was a bit of a risk, but for Honda, it was the right thing to do for the environment and also for our customers in all [sic] 50 states – not just those living in California and the other states that have adopted its standards. So, the Administration’s action in getting back on the pathway to strong federal fuel economy and GHG emissions standards represents an important milestone.
Honda already holds the distinction of being America’s most fuel-efficient, low-emissions full-line automaker, according to the January 2021 U.S. EPA Automotive Trends Report. That means our existing vehicle fleet has the lowest CO2 emissions of any full-line automaker. But the future direction of environmental requirements is not low CO2 emissions, it’s zero CO2 emissions.
Honda has made the same claims to carbon neutrality as most other automotive firms. But it’s not selling that many EVs, which have become the focus for legislators. This includes those opposing widespread subsidies, many of whom are upset with the amount of federal money that went toward supporting the purchase of vehicles boasting lofty price tags. On Wednesday, the Senate passed a nonbinding amendment to the $3.5 trillion budget resolution (which sets aside billions for EVs) that would prohibit individuals making over $100,000 per year from claiming EV tax credits. It also seeks to make vehicles costing in excess of $40,000 ineligible. Proposed by Republican Sen. Deb Fischer of Nebraska, the amendment passed by a narrow margin with only three Democrats offering support while just one Republican voted against it.
While it’s good to see someone attempting to wrangle the unfettered government spending, this fails to address the union aspect that has some automakers up in arms and ultimately results in billions of dollars going toward some of the largest and most profitable corporations on the planet. It often seems like lawmakers are either unwittingly funneling money to these businesses or doing so intentionally in the only manner that could be deemed legal. Though I couldn’t say which scenario is more disheartening.
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