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Short Circuit: The High Cost of Electric Vehicle Subsidies

report

Short Circuit: The High Cost of Electric Vehicle Subsidies

May 15, 2018
Energy & EnvironmentTechnology / InfrastructureClimateRegulations

Abstract

Many claim that “zero-emissions vehicles” (ZEVs), especially battery-powered electric vehicles, should replace most, if not all, cars and trucks powered by gasoline-burning internal combustion engines. The primary rationale is to reduce air pollution and carbon dioxide (CO2) emissions.

To effect this change, governments are spending billions of dollars to subsidize electric vehicles. These subsidies include state and federal tax credits for purchasing ZEVs and programs to subsidize the installation of vehicle-charging infrastructure in businesses, households, and along highways. Several states also have mandated the sale of ZEVs. For example, an executive order signed by California governor Jerry Brown in January requires 5 million ZEVs to be on the state’s roads and highways by 2030.

Will these subsidies and programs accomplish their objectives? And at what cost? A review of the literature finds few cost-benefit studies on these key questions.

Editor’s note: A corrected version of this report has been posted. Changes can be found here.

Key Findings

  1. Broad-based adoption of ZEVs will increase overall emissions of sulfur dioxide, oxides of nitrogen, and particulates, compared with the same number of new internal combustion engines. The simple fact is that, because of stringent emissions standards and low-sulfur gasoline, new gasoline-powered cars and trucks today emit very little pollution, and they will emit even less in the future.
  2. While new ZEVs will reduce CO2 emissions compared with new internal combustion vehicles, the overall reduction will be less than 1% of total forecast energy-related U.S. CO2 emissions through 2050. That reduction will have no measurable impact on world climate—and thus the economic value of CO2 emissions reductions associated with ZEVs is effectively zero.
  3. Subsidies for ZEVs and the required infrastructure to support them benefit the higher-income consumers who can afford to purchase them at the expense of lower-income consumers who cannot. In California alone, the total cost of ZEV subsidies, including federal tax credits and state rebates for ZEV purchases, as well as subsidies for private and public charging infrastructure, is likely to exceed $100 billion.

READ FULL REPORT

 

______________________

Jonathan A. Lesser, PhD, is the president of Continental Economics, an economic litigation and consulting firm. He is the author of the new report, Short Circuit: The High Cost of Electric Vehicle Subsidies.

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