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The federal government’s power of the purse can boost EVs in America

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Upon taking office on January 20 this year, the Biden Administration announced an ambitious agenda signaling that the U.S. is back in the fight against climate change. The President’s declaration that America is rejoining the Paris Climate Agreement, the January 27 executive order putting climate at the center of federal planning and the stated goal of moving the country to net-zero carbon emissions by 2050 all highlight this commitment.

One under-appreciated item on the administration’s climate to-do list is its intention to convert all 645,000 vehicles in the federal fleet to clean and zero-emission vehicles. Together, these cars, trucks, vans, ambulances and limos (including 225,000 Postal Service vehicles) log 4.5 billion miles, use nearly 400 million gallons of gasoline, and belch out over 7 billion pounds of greenhouse gases every year. As of 2019, the fleet only included 3,200 all-electric, zero-emission vehicles and 1,200 gas-electric hybrids (less than 0.7% of the whole fleet).

Making the entire federal fleet all-electric would provide a positive jolt to the American EV market, which, although much larger and more advanced now than it was just a few years ago, still only accounts for 2% of the U.S. vehicle market.

Some automotive analysts have raised concerns that the federal conversion plan will be mostly symbolic, expensive and hard to implement. The way was made more difficult by the semi-independent U.S. Postal Service’s February 23 awarding of a $485 million, 10-year contract to a defense firm to deliver between 50,000 and 165,000 new postal delivery vehicles, only 10% of which will be all-electric. (The administration subsequently announced its intention to appoint three new board members to oversee the USPS, however, which could ultimately see this contracting decision, and others, being revisited.)

The federal conversion plan has real value, but the details will matter. The plan is being developed by the federal climate task force established under the President’s January 27 order, so total cost and timing for the conversion has not yet been determined. In any case, electrifying the federal fleet would do more than just boost U.S. EV numbers. Preventing 7 billion pounds of greenhouse gases being pumped into the atmosphere every year is a big deal – and an important step toward helping the U.S. meet national emissions reductions goals. But more importantly, the conversion would use the massive buying power of the U.S. government to send key market signals – both to the auto industry, to strengthen U.S. EV manufacturing capacity, and to consumers, that EVs are a worthy investment.

Washington’s purchasing power is awesome. The federal government is the largest buyer in the world, purchasing over $550 billion in goods and services in a normal year. Federal contracts in fiscal year 2020 may have totaled as much as $630 billion – an all-time high – even before COVID-related relief spending is included.

Whether it is called industrial policy (a once-derided idea in the U.S.) or not, the government’s ability to direct large streams of money in the form of federal contracts can boost industries critical to U.S. policy goals. China, European Union member states, Japan and other countries have known this for years.

President Biden’s conversion plan will accelerate the U.S. auto market’s transition to a zero-carbon future.

U.S. automakers have already announced plans to shift further toward EVs, but major federal spending on fleet conversion should help convince the companies to speed retooling of their supply chains and investing more in EV technology and production. EV backers say putting more federal EVs on the road will likely give consumers greater confidence about buying them.

The federal conversion plan may pave the way for owners of other fleets to make the transition as well – for example, state and local governments, which own 2.3 million vehicles. States may be able to do this by using federal contracting mechanisms, which the General Services Administration opened to states in March 2020. Private companies, which own 3 million more vehicles, may also follow the federal example in converting. The federal plan could also catalyze national growth in the number of charging stations, which would ease range anxiety, cited by some consumers as an obstacle to EV purchases.

The federal conversion process will take years to complete. Currently, only three automakers – Tesla, Ford and General Motors – make EVs in the country, and none of them yet meet federal program unionization or Buy American requirements.

Nevertheless, launching the conversion plan now will help – in a concrete way – to accelerate the process of electrifying the entire stock of U.S. vehicles. Federal vehicles are almost 15 years old on average, so the time is right to replace them. The U.S. government spent about $4.4 billion on vehicles, fuel and maintenance in 2019. Spending our tax dollars instead on clean, low-maintenance EVs is a great long-term investment for Americans, the country and the global climate.

Photo credit: Sam LaRussa via Unsplash