From 2025 onwards, the regulation will adopt a more rigorous test procedure (WLTP), with even stricter emission limits. Starting in 2025, the limits are set at 93.6 grams for cars and 153.9 grams for vans measured with the stricter WLTP test. By 2030-2034, these targets will be halved, aiming for zero emissions by 2035, signaling a complete shift to non-emitting vehicles. A temporary crediting system will reward ultra-low emission vehicles, while manufacturers not meeting targets will face financial penalties.

**The U.S. Environmental Protection Agency (EPA) has also introduced new, stringent emission standards aimed at reducing tailpipe pollution and GHG emissions, which encourages a transition to EVs.** These standards are expected to result in EVs making up to 56 percent of new passenger vehicle sales by 20302032. The rules cover light- and medium-duty vehicles for model years 2027 to 2032 and are expected to cut CO2 emissions by nearly 50 percent for light-duty vehicles and 44 percent for medium-duty vehicles from 2026 levels. They are not an outright EV mandate, as the rules enforce fleet-wide emissions averaging, permitting a mix of vehicle emissions provided that the overall targets are met.

**Like the US, China has made use of tax exemptions for EVs, but also for plug-in hybrid EVs (PHEVs) and fuel cell vehicles (FCVs).** Since September 2014, China has waived the 10 percent acquisition tax for eligible EVs (Interesse 2023). In contrast to the US IRA, these exemptions apply to both domestically produced and imported EVs. Although the initial tax exemption expired at the end of 2022, a new tax exemption commenced on January 1, 2024, and is effective until 2027. Under this renewed policy, EVs bought in China benefit from a purchase tax exemption of up to approximately $4,170 per vehicle.

**China's fuel efficiency standards, overseen by the Ministry of Industry and Information Technology (MIIT), require new passenger vehicles to meet specific fuel consumption requirements based on vehicle weight and impose Corporate Average Fuel Consumption (CAFC) limits across manufacturers' fleets.** Initiated in 2004 and progressively tightened, the CAFC standards set a fleet average of 5 L/100 km by 2020, with reductions to 4 L/100 km by 2025, and 3.2 L/100 km by 2030. Manufacturers can use New Energy Vehicle (NEV) credits, earned or bought through the production of EVs, to help average their fleet's performance over several years. Additionally, China's tax policy varies by vehicle size to promote fuel efficiency and includes a luxury tax to encourage prudent consumption and energy conservation.

**2.2.3 Local content requirements and supply resilience of raw materials**

**The US IRA provides tax credits to companies involved in clean energy manufacturing, but to qualify, all steel and iron manufacturing processes must occur within the US** . This requirement also applies to facilities, which must be built using domestically produced steel, iron and manufactured products. Additionally, starting in 2023, 40 percent of the value of manufactured products and components must be mined, produced, or manufactured in the US, with this percentage increasing to 55 percent after 2026 (Darboe 2023; US Treasury 2023).

**The IRA also offers tax rebates and credits for EVs, subject to specific eligibility criteria.** The vehicle’s final assembly must take place in North America; at least 50 percent of the battery components must be manufactured or assembled in North America, reaching 100 percent by 2029; and at least 40 percent of the value of the critical minerals in the battery must be extracted or processed in the US or countries with an FTA, or recycled in North America, gradually increasing to 80 percent by 2027. From 2024 onwards, vehicles cannot qualify if their batteries have components manufactured or assembled by a foreign entity of concern. From 2025 onwards, vehicles’ batteries must not contain critical minerals extracted, processed, or recycled by a foreign entity of concern to qualify (US Treasury 2023).

**In response to the IRA, the European Commission introduced a Green Industrial Plan in February 2023** (European Commission 2023a). The plan aims to increase the competitiveness of the European industry

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