How will EV requirements affect New Mexico's economy?

ACC2 highlights NM's need for EV incentives, mass transportation infrastructure, and a plan to protect workers

Source: New Mexico True

New Mexico’s proposal to adopt the Advanced Clean Cars 2 (ACC2) regulation has put the media in a frenzy over the past month. Some New Mexicans don’t think it’s a right fit for a poorer, rural state like NM to adopt such a rule. The Albuquerque Journal was quick to point out that Governor MLG doesn’t yet ride in an electric vehicle, and many more have been quick to point out our lack of charging infrastructure in New Mexico. While these things may be partially true and/or irrelevant, nothing should distract from the fact that ACC2 would decrease greenhouse gas emissions in New Mexico.

Despite the political hooplah and a few hurdles yet to jump, ACC2 is, overall, an impactful rule that would make improvements in urban air quality, greenhouse gas emissions, and more. If the New Mexico and Albuquerque/Bernalillo County air quality boards vote to pass ACC2, it would be a big step in New Mexico’s fight against climate change. That being said, transitioning an entire state over to relying on electric vehicles comes with big economic shifts that need to be prepared for.

In today’s post I will explain the proposed regulation and the hurdles that we must be aware of as we venture down this path of decarbonization.

What is Advanced Clean Cars 2?

ACC2 is a proposed air quality rule that would gradually increase the percentage of new vehicles sold that are electric, ultimately reaching 100% in 2035:

ACC2 ZEV and PHEV % of New Vehicle Sales by Model Year - Source: CARB

For historical context, New Mexico has already passed Advanced Clean Cars 1 (ACC1) - a rule mandating EV sales to be 82% of all new car sales by 2032. The state originally passed ACC1 in 2006 during the Richardson administration. It was a forward-thinking move to make at that time and I don’t think Gov. Richardson gets enough credit for that. Anyways, the Martinez Administration reversed the rule, and the Lujan-Grisham environmental team got it passed again in 2022.

MLG, now in her second term as Governor, looks to build upon ACC1 with the more aggressive Advanced Clean Cars rule, ACC2.

ACC2 has been passed by five states at this point in time. Colorado should be passing ACC2 this year and many more have expressed their interest in passing it soon. There have also been moves at the federal level to enact similar rules.

On that note, one might think, “why enact ACC2 in New Mexico if the US government plans to enact something similar federally anyways?” Well, the federal rule I’m talking about would lower the allowed nation-wide emissions averages - meaning richer states could disproportionately buy, and benefit from, more electric vehicles. Passing ACC2, regardless of what the federal regulations are, ensures that New Mexico gets a higher share of the EV market, and therefor wins all the benefits - cleaner air, better health, a quicker transition to net zero, etc.

Now, the economic implications of policies like this are big, not necessarily bad, though. ACC2 would help a lot in reducing greenhouse gas (GHG) emissions and would offer cleaner urban environments, but what does ACC do to the economy?

As we aim to adopt EVs as quickly as possible, we should think about some of the intricacies of ACC2 that I find to be the most important. The first being…

There are winners, losers, and opportunities in the ACC2 economy

Restored gas station on Route 66 in Tucumcari, NM - Source: iStock

EV adoption will shift consumer behavior and shift the economic tides for some industries. Let me explain with a few examples:

• Gas stations will need to evolve. Charging an EV can take upwards of 30-60 minutes, whereas it takes 2 minutes to fill up a gas tank at the gas station. If people are charging their cars away from their home, they will probably want to charge somewhere they are spending time anyways - grocery stores, restaurants, work, food halls, theaters, etc. - they’re not going to want to hang out at a Circle K on Central for an hour. Gas stations as we know them today may operate few and far between by 2050, and we will be charging our cars at home, work, and wherever else people hang out.

• Car mechanics and auto parts stores will be needed less as more people drive EVs. Unlike their internal combustion engine (ICE) counterparts, EVs don’t have many mechanical issues. An EV needs no oil or brake pads, and the cost to operate one is much less than an ICE car. If there are less mechanical issues out there, there is less income to support mechanics and auto-part stores.

• Tire shops and road builders may see more business because of ACC2. EVs are about 30% heavier than ICE vehicles and will wear down roads and tires quicker.

The climate transition is creating economic shifts that are hard to imagine, but recent investments are starting to bring it more into focus. New Mexico has been the beneficiary of some big investments in the Inflation Reduction Act and CHIPS Act as President Biden addressed in Belen last week.

Biden noted that the policies he’s passed have created 90,000 jobs in New Mexico. I’m not sure exactly how he came to that number, but considering the wind and solar energy projects, chip manufacturer, solar manufacturer, etc., we may be able to replace all of the lost auto industry jobs and then some.

We also need to think about proactively protecting future displaced workers through proper retraining programs and unions - another talking point of Biden’s. Big investments are better if the economically displaced have access to them. From what I have seen, regional trade and higher-ed schools in New Mexico are collaborating to solve this exact issue by offering training programs in disadvantaged communities.

Infrastructure upgrades, high salary jobs, and climate policies are all part of Bidenomics and the data is showing that it works. We should keep the ball rolling on the green industrial policy, because it may be our best lifeline for workers in the auto industry.

Advanced Clean Cars should be balanced with progressive policies.

ACC1 and ACC2 are both regressive transportation policies. If the price of EVs continue to increase, individuals who are lower on the economic ladder will have a harder time gaining access to transportation. While the day-to-day usage of EVs is cheaper than a typical gas-guzzler, the upfront cost is higher and provides more of a barrier. If ACC2 is passed, 100% of new cars sold in 2035 could be EVs and more low-middle class families may get priced out of participating in a car-dependent society.

Those EV tax credits that Governor MLG vetoed would have made sense here to decrease the burden of this rule on lower income families. Maybe we’ll get that tax incentive next year. Either way, there should be more incentive out there than the “Made in America” EV tax incentives that the IRA offers.

There are many other sort of “mainstream” rules and policies that NM should adopt (see my chart of common state policies here), but local leaders should look at broader EV tax incentives, E-bike rebates, and active and public transportation infrastructure.

Building public and active transit infrastructure in New Mexico, and the US, can save us from a lot of costs and environmental damage:

Efforts to replace fuel-powered cars with electrified versions, without reimagining public and active transport infrastructure programs, however, would require three times the current global production of lithium for the U.S. alone,

This was said by Thea Riofrancos in an interview about their transportation decarbonization analysis that calls for more mobility and less mining. Public transit is a more sustainable, economical, and equitable form of transportation than electric cars ever will be.

Furthermore, ACC2 is only a rule, meaning it won’t be in the state constitution. Like ACC1, ACC2 could be easily reversed if New Mexico ever votes in a conservative Governor. It takes a lot of time and resources in public, nonprofit, and private arenas to get a rule like ACC2 changed, so we shouldn’t make a habit of re-doing rulemakings every time the political wind shifts.

It’s important to make lasting legislative changes and infrastructure investments on top of rules like ACC2 to make it a more equitable and successful program. The fact that it isn’t all encompassing, perfectly progressive, or immune to political risk doesn’t mean ACC2 is bad, it just means that it’s not meant to fix everything. It’s a single, jagged piece of the climate-policy-puzzle we’re trying to put together.

New Mexico’s charging infrastructure and grid will need investment

While we do need more EV chargers in New Mexico, the average American EV owner does 80% of their charging at home - another one of the many behavioral differences EVs impose on the economy. Local governments have made investments into charging stations around New Mexico and federal funding like the Inflation Reduction Act (IRA) will continue to increase the amount of chargers for several years.

Here’s a map of New Mexico’s public EV chargers today according to New Mexico True:

The bigger problem will be updating the electrical grid and surrounding infrastructure to support higher demand for electricity. The average electric vehicle uses almost half the amount of electricity that an average house uses per month - which New Mexico’s grid is not ready to handle. It will require big investments in our grid, energy storage, renewable power, and more. (cough...we need a green bank to finance all of these things…cough)

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Now, Governor Lujan-Grisham should probably be using an EV by now, but even if she did, I’m sure the Journal would just call it elitist or something. Don’t fall for the political antics that you will see from both sides as to what this rule will and won’t do.

Hopefully this article gave you more insight into the economic complexities of ACC2 so you can see past all of the political blight to come. There will be some growing pains, but ACC2 offers New Mexico health and climate benefits, opportunities that the economy is ready for, and challenges like climate change that we must level with.