Why electric car subsidies are a waste of money

Thanks for flagging this; the article references a CBO study, which you can find HERE.

This report came out Sunday. Good counter.

The nonprofit CalETC, based in Sacramento, has been studying the economic effects of EV drivers spending money (less) on electricity as a transportation fuel in CA.
They released their report on National Plug-In Day this past Sunday. Here are their key findings:
• [FONT=Times New Roman,Times New Roman]Electric Vehicles can be a catalyst for economic growth, contributing nearly 100,000 additional jobs by 2030.
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]• On average, a dollar saved at the gas pump and spent on the other household goods and services creates 16 times more jobs than a dollar spent on refined petroleum product.
• Unlike the fossil fuel supply chain, the majority of new demand financed by PEV efficiency savings goes to in-state services, a source of diverse, bedrock jobs.
• Individual Californians gain from electric car deployment whether they buy new cars or not. Average real wages and employment increase across the economy and incomes grow faster for low- and middle- income groups than for high-income groups.
[/FONT][/FONT][/FONT]
For more information, go to www.caletc.com and click Facts under the section describing the report. The full report PDF is available under "Click to Learn More."

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I wouldn't worry about it M...the author (Peter Gorrie) is a dinosaur.

Wheels.ca is generally a very good publication...check out Ian Law's Volt vs Leaf article from Saturday, Sept 15...

Ian's is a hands on guy who, with a great staff, runs a driving school for track, autocross, car control, etc...he is well able to handle a vehicle and write an excellent article about his experiences.

mknox said:

Been seeing more and more articles like this in the popular press. I just hope the Ontario, Canada subsidy stays in place until my order is completed!

http://www.wheels.ca/news/why-electric-car-subsidies-are-a-waste-of-money/

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The CBO study is much more worrisome. It's author, Ron Gecan, used to work with me, and he's a solid economist but he missed the points made by CalETC about the different multiplier effects across the value chains. Big omission. Nonetheless, because CBO is considered a neutral "referee" on policy issues, expect to see this report waved around if Congress considers the EV tax credit.

I agree that rich people like me should not get incentives for buying a car I'd buy anyway. Also, tax breaks are a terrible way to promote policy because it's virtually impossible to assess their cost:benefit. I'd rather see the incentive money used to fund basic research, especially in battery technology, with the resultant patents going into the public domain. I do think the loan to Tesla was a much better use of money than the tax credit. Will Tesla sell more Model S because of the tax credit? Yes. But how many more? That's impossible to know. I'd expect not a lot more. And right now, when it matters most, the bottleneck is production, not demand. And if demand is not an issue, then tax breaks for buyers accomplish nothing at all. We all like to get free money. But for the first critical year of the Model S, the tax break will not increase by even one car the number of cars sold.

mknox said:

I'm not sure I agree with all of what you say.....

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Daniel's comment was not true. It may be true for him that he should not get rebates since he is (admittedly) rich, but the point of rebates are for people exactly like you. Just enough to bring the price of an EV to something closer to the price of a similar ICE and stimulate sales to prices can come down for others. Also rebates are for cheap electric cars and motorcycles too, so less affluent buyers can get Mitsubishis, Leafs, Fits, and Zaps.

We do not have tax breaks for EVs in Norway, but they are exempt from the one-time registration tax and VAT. If they were not, I can assure everyone that Tesla would not sell more than a handful of Model S cars here as the price would be about double. Few people want to spend >200k USD on a car.

As it stands, since we do have the exemption, Tesla have at least 500 S reservations over here.

The Leaf would only increase about 26% in price without the exemptions and thus would not be hit as hard were they to disappear.

Robert.Boston said:

Thanks for flagging this; the article references a CBO study, which you can find HERE.

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Well, that completely missed the point of the battery subsidy in the summary.

Daniel said:

I agree that rich people like me should not get incentives for buying a car I'd buy anyway. Also, tax breaks are a terrible way to promote policy because it's virtually impossible to assess their cost:benefit.

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In this case it's pretty simple. Rich people should buy clean, efficient vehicles. So you simply increase their overall taxes by n * credit so they get the money back if they make the right decision. Voila.

It can also help early development of the market which helps sustain development of the technology.

+1 Eric...well said!

vfx said:

Daniel's comment was not true. It may be true for him that he should not get rebates since he is (admittedly) rich, but the point of rebates are for people exactly like you. Just enough to bring the price of an EV to something closer to the price of a similar ICE and stimulate sales to prices can come down for others. Also rebates are for cheap electric cars and motorcycles too, so less affluent buyers can get Mitsubishis, Leafs, Fits, and Zaps.

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This seems to be a much better way to deal with the issue...scrap the after-tax rebates, exempt all EV's from any import duties, and exempt them from sales tax as well...setting up a rebate program is probably more labour intensive (to manage) than simply exempting EV's from sales tax...we have enough government employees...we don't need any additional ones...

jkirkebo said:

We do not have tax breaks for EVs in Norway, but they are exempt from the one-time registration tax and VAT. If they were not, I can assure everyone that Tesla would not sell more than a handful of Model S cars here as the price would be about double. Few people want to spend >200k USD on a car.

As it stands, since we do have the exemption, Tesla have at least 500 S reservations over here.

The Leaf would only increase about 26% in price without the exemptions and thus would not be hit as hard were they to disappear.

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Yep, that'd be a big +1

Doug_G said:

How about simply stopping the massive subsidies given to oil and gas companies? That'll help level the playing field.

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Jaff said:

+1 Eric...well said!...

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Thanks. I'm going to add one more thing. There are some rich people who are cheap. Incredibly cheap. In many cases, that's how they got rich. Incentives mean a lot to them too.

Taxes are a main source of funding for the government. They are imposed on us, we do not choose to pay. Some of the tax laws do not only serve the purpose of funding government activity, but to nudge our behaviour in a direction considered favourable to / by society.

As far as taxes or subsidies are used to direct our behaviour, there is a cost involved. They are external to a free market system. Taxes can cause inefficiencies in the working of the market system. They can be used to compensate external inefficiencies (use of free clean air is taxed). That is one of the reasons pollutants (gasoline) are taxed so high (0.64 Euro per liter, ca. US$3.21 per gallon) here in Germany.

So by subsidizing EVs the government is telling you: We want you to buy an EV.

This will nudge some people to do just that. But the government will also pay all the others (who yould have bought an EV regardless of the subsidy) the incentive. This makes the incentive costly for the government (inefficient)

It sure would be nice to not have 19% added to the price of my Model S!!!!!!!!!!!

These after tax rebates are silly IMO. Although I suppose I would feel differently if I were buying an iMev or a Leaf...

Jaff said:

+1 Eric...well said!



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This seems to be a much better way to deal with the issue...scrap the after-tax rebates, exempt all EV's from any import duties, and exempt them from sales tax as well...setting up a rebate program is probably more labour intensive (to manage) than simply exempting EV's from sales tax...we have enough government employees...we don't need any additional ones...

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