By Stephanie Kelly and Jarrett Renshaw
NEW YORK (Reuters) -The U.S. government could delay a decision on giving electric vehicle (EV) manufacturers tradable credits under a renewable fuel scheme, due to concern about legal challenges to the plan, two sources familiar with the matter said.
The plan would have given EV automakers such as Tesla (NASDAQ:TSLA) credits for charging vehicles using power generated from renewable natural gas, or methane collected from sources such as cattle or land fills.
The Environmental Protection Agency (EPA) last year recommended adding EVs to the U.S. Renewable Fuel Standard (RFS), which requires oil refiners to blend biofuels into the fuel they produce or buy credits from other refiners that do.
Most credits generated under the RFS are for blending liquid fuels such as ethanol made from corn into gasoline. Adding credits for power generated from renewable gas and then used for charging EVs would take the program in a new direction.
The EPA initially proposed adding EVs to the program when it outlined the mandates for blending biofuels for 2023-2025. The government would now like to split the two things to avoid the possibility that legal challenges to the inclusion of EVs could delay the issue of the next round of RFS quotas on biofuels.
Those quotas need to be finalized in June.
The EPA said it was considering public comments on the proposed change from last year, but could not comment further on whether it would split out EVs from the June mandate.
"EPA staff are currently working to finalize the rule by the June 14 consent decree deadline," EPA spokesperson Timothy Carroll said.
The Republican-run House of Representatives' Energy and Commerce Committee recently week wrote to the EPA to challenge the EV program, arguing that the RFS was intended to center on liquid transportation fuels and not to electrify transportation.
Transforming the nation's car fleet to EVs is a central part of U.S. President Joe Biden's climate change plan. The credits would have added to billions of dollars of incentives under the Inflation Reduction Act to accelerate the transition.
The November proposal foresaw EV manufacturers could generate as many as 600 million credits in 2024 and 1.2 billion of them by 2025. Prices for an equivalent credit were about $2.30 each in March, EPA data showed.
The delay in finalizing the EV credit program may mean more volume is available for other renewable fuel pools under the 2023-2025 mandate, including blending for renewable diesel and sustainable aviation fuel (SAF).
Producers of those fuels have been lobbying the administration for higher volumes for months.