Kenzie: McGuinty's electric car subsidy a dead end

Even by the standards of politically skewed decisions, the $10,000 subsidy for electric cars proposed recently by Premier Dalton McGuinty is preposterous.

It is just so wrong on so many levels, it is hard to know where to begin.

Okay, I'll start with this: all subsidies distort the market, and if you believe that the way to economic progress is Adam Smith's Invisible Hand of the Marketplace (to paraphrase Winston Churchill, it is the worst system ever devised except for all the others), then all subsidies are wrong.

I understand that it is within the purview of a government's responsibility to nudge society's citizens in directions it thinks is good for them. As examples, the government encourages the use of seatbelts and discourages the use of tobacco, not only for the good of the individual, but for the good of us all – scarce and publicly funded medical services are involved.

I also understand the difference between strategy and tactics. You may have a longer-term goal in mind, namely the strategy, and tactically you employ a variety of interventions which, with some luck and forethought, might even be efficient ways to achieve that goal.

This one fails on all counts.

Let's assume that McGuinty's goal is to reduce CO2 (the greenhouse gas) emissions, on the theory that they cause global warming. Never mind that last winter's and this summer's weather suggests that if this theory is true, we should all buy huge SUVs and leave them idling 24/7.

But you should never etch in granite a subsidy for a specific technology, because it inevitably works against someone coming up with something that might be even better.

It follows, then, that you should never reward a particular piece of hardware; you should instead reward the performance you want, and let the ingenuity of private enterprise and the economic discipline of the marketplace decide the most efficient way to deliver the desired performance.

If the goal is to reduce burning of fossil fuels, then the most efficient and effective way to do that is: raise the price of fossil fuels.

Hate to say it folks, but it's true. Anything else is a waste of time and money.

That's what the government would do if it were serious, because that is the only action that has been proven to work.

It works to encourage people to trade in old pollution-spewers; it works to encourage people to choose more fuel-efficient cars when they do decide to buy; it even works to encourage people to drive less.

Oh, and to discourage people from letting their SUVs idle 24/7.

But the government is not serious about this issue, because that would mean making a tough decision, and that's something governments just don't do.

Certainly, not this one. And not even U.S. President Barack Obama.

Exactly a year ago, market forces shoved gasoline prices in the U.S. to approximately what we pay all the time – about $4 (U.S.) a U.S. gallon, or $1.10 a litre.

It was enough to make the Honda Civic the best-selling car down there. For about a month.

Then, gasoline went back to being free, and they went back to buying pickup trucks.

Obama is now forcing carmakers to build ever more fuel-efficient cars, without giving the buying public any incentive to buy them.

Make gasoline $4 a gallon again, keep it there, and all the car companies, domestic and foreign, will build all the fuel-efficient cars he could handle.

But like McGuinty, he won't make the tough, if correct, choice.

And another thing: What role in reducing CO2 emissions could the mere handful of electric cars achieve?

Rounded to the nearest thousandth of 1 per cent, approximately zero.

Twenty per cent of the Ontario Government's fleet by 2020? A drop in the tailings sludge pond.

Also, where is the electricity to charge these things going to come from? McGuinty is shuttering nuclear options at every turn; we're left with burning coal, natural gas or oil.

Lovely.

McGuinty's proposed subsidy is wrong on a taxation philosophy basis as well. Rightly or wrongly (pace, flat-taxers), the taxation policy in most of the developed world is what economists call "progressive" – those who earn more, or have more, pay more.

Yet McGuinty's electric car give-away puts 10 grand of taxpayer money – your money, you're-lucky-if-you-still-have-a-job money – into the Gucci jeans of those who can afford a car whose price tag, while not yet formalized for Canada, will be about $45,000.

If that doesn't cause rioting in the streets, I don't know what will.

There's also the issue of conflict of interest. This has been the nub of the argument made by Honda and Toyota against this proposal, because their hybrids apparently will not qualify – only the Chevrolet Volt.

Which – surprise, surprise – is made by a company now partially owned by the Ontario government.

So McGuinty will be taking your money from one of his full pockets, and sticking it into another.

Now, Honda and Toyota's hands aren't entirely clean here, because they don't complain about other government incentives which do apply to their hybrids, and which make no more sense than this one.

Those subsidies just aren't as large, or quite as egregiously wrong.

Is there any chance at all that these people will come to their senses?

I'm not holding my breath.

And not because of all the CO2 in the air either.

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