Why We Need Electric Car Subsidies

Photo via the Resilient Earth

This year will see the debut of some of the most hotly anticipated electric cars ever designed for the mass market -- notably, the Chevy Volt and the Nisson Leaf. And right on cue, the complaints and criticisms about EVs have begun to fly. The cars, which will at first be produced in smaller quantities and with new technologies, will be relatively expensive -- $41K for the Volt and $33K for the Leaf, though a $7,500 federal tax credit will help lower the prices. So along come the predictable, tired charges that EVs are only for snobs, and the subsidies designed to make them more affordable will only help the rich. Here's why those charges are dead wrong. This piece in Slate by Charles Lane somehow finds a way to wrap all of the cliche arguments about government aid for EVs into one tidy package. Here's the gist of his case against the Chevy Volt:

To be sure, a $7,500 federal tax credit cuts [the price] to $33,500, and electricity is cheaper per mile than gas. But barring some huge oil price spike or stiff new gas tax, it would take more than a decade to offset the higher purchase price. Some will pay a premium for the frisson of going green or being the first "early adopter" on the block. Still, this little runabout is a rich man's ride.

And that's my problem with the Obama administration's energy policy, or at least with his lavish subsidies for the Volt, Nissan's all-electric Leaf (likely sticker price $33,000), and Tesla's $100,000 all-electric Roadster: Where does the federal government get off spending the average person's tax dollars to help better-off-than-average Americans buy expensive new cars?

First, the quibbles, and then to the brunt of it: The Leaf, a car that costs $25,500, is not what I would call a 'rich man's ride'. It is certainly more expensive than many cars, but with the savings on gas taken into account, it is undoubtedly competitively priced. And that's why the subsidy is important in this case -- Lane chose to focus on the Volt for a reason; $33K is still prohibitively expensive, and better suits his argument, but not so with the Leaf -- it will indeed bring the EVs to a wider consumer base. Especially with the additional subsidies in states like California and Georgia that will lower the sticker price by another $5K.

Second, it always irks me when anti-EV folks always assume that people will only pay more to show off how green they are -- it's another tired myth about environmentally conscious consumers. Come on. Do you really not believe that some people are buying cleaner cars because they feel that it's actually better for the environment? Give us a break: Not every consumer concerned about air pollution and climate change fits the smug Hollywood stereotype.

But the real meat of this argument is in the case against subsidies -- how they're morally reprehensible because they only impact wealthier, middle class consumers. In that case I'm sure that Mr. Lane could weed out a number of subsidies and tax breaks that he'd like to see removed too -- how about the tens of billions doled out to oil & gas industry every year? Tax breaks for hedge fund managers? Until these are excised, however, EV subsidies can hardly be considered snobbish: they're designed to jump start the process that will one day -- sooner than folks like Lane think -- bring electric cars with truly affordable pricing to the market.

Bear in mind that the EV tax rebates aren't designed to last forever: The goal is to stimulate competition in the market so that electric cars become less expensive organically, as competing companies develop better technology and cheaper production methods. Just about all technology starts out prohibitively expensive and grows less so as demand grows in the market -- it's ridiculous to assume Chevy could roll out a car that's dependent on an entirely new production infrastructure with still-improving technology and price it as low as a Civic. And it's also ridiculous to assume that it's not worth guiding the market in that direction, which is where Lane is most wrong. He says:

If the federal government wanted to dent carbon emissions and gasoline consumption without subsidizing a handful of rich consumers and client corporations, it would accept that the internal combustion engine is going to be the dominant technology for decades to come--and focus on getting more mileage out of it.
Ridiculous. He sounds like just about every defender of the fossil fuel-powered status quo ever to write a release for a conservative think tank. Just accept that things won't change. But why? Nissan has already been flooded with pre-orders for the Leaf -- more than its production capacity. That kind of interest isn't a fluke -- and it's something that carmakers are bound to take note of. There is real interest in EVs, and not just as some rich man's toy -- they're also hedge against gas prices (which will very plausibly spike over the next decade), and, yes, many folks think they're pretty cool.

And these subsidies help stoke that fire, make it possible -- and it will spread. Once the market is driving innovation, I think Mr. Lane will be surprised how fast EVs become prevalent -- and affordable. Finally, EVs hold the potential for truly massive carbon emissions savings when adopted on a large scale, and could play a central role in mitigating climate change. And that's something that I, as a taxpayer, am willing to help subsidize.

More on Electric Cars and Subsidies
U.S. Gives 2.5x More Subsidies to Fossil Fuels ($72 Billion) Than Renewables ($29 Billion)
Nissan LEAF to have 8-Year/100,000 Miles Battery Warranty
Hidden Oil Subsidies: We Need to END Them
Once Upon a Time, Coal Needed a Big Push ($$) to Become "Base Load" Power

Tags: Barack Obama | Electric Cars | Transportation | United States


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