Last week, I promised alternatives to electric-vehicle incentives.
But, while it’s easy to criticize the payments:
-They don’t cover the extra total ownership cost of most EVs.
-They don’t overcome concerns about reliability and, in the case of pure EVs, range.
-They’ll generate only small cuts in fossil-fuel consumption and greenhouse-gas emissions.
-They transfer tax money to affluent buyers.
Coming up with better ways to support battery power — if that’s what we want — is much harder.
It’s now clear the incentives — up to $8,500 here and $7,500 in most of the United States — won’t propel the current generation of EVs into the mainstream. At best, they’ll keep the industry on life support until battery power’s killer weakness — the battery — is overcome.
“You need to continue subsidizing EVs if you want to keep them on the road,” says Xavier Mosquet, a senior researcher at the Boston Consulting Group. “The question is: how much subsidy is needed to keep the market alive?”
A recent report from the U.S. Congressional Budget Office says 70 per cent of plug-in purchases would happen without the current incentives.
Mosquet has a more nuanced view: Research suggests 5 per cent of car buyers are “green;” that is, they say they’d spend more for a clean car even if the cost isn’t recouped in fuel savings. Most, though, won’t pay more than a $5,000 premium.
“This is not sufficient to cover the price difference between a Volt or a Leaf and the comparable gasoline car,” Mosquet says. “Therefore it is fair to think that the (current) incentives play a role for the majority of EV buyers. Without incentives, the market would drop. It would also undermine the credibility of the technology.”
There is, however, a hitch. Mosquet says carmakers must sell about 100,000 EVs annually to keep the technology’s heart beating. The present incentives are moving only a small fraction of that number. That suggests even though they’re already more generous than buyers say they require, they’re not nearly big enough.
So, how big?
Governments could cover all the added costs of EVs?
The Budget Office says the burden increases with battery-pack size, up to about $12,000. But since the bigger packs are found in larger, more expensive cars, such a policy would tend to give the largest payments to the wealthiest buyers.
The current incentives already skew this way. We could reverse that approach and offer more support for smaller, cheaper EVs. But unless it makes these vehicles almost freebies, there’s no guarantee it would overcome buyers’ resistance.
And no matter the details, should any commercial technology get such support?
The Budget Office examined other attempts to cut fuel consumption, including tax credits for conventional, non-plug-in, hybrid vehicles and “Cash for Clunkers” programs, which reward drivers who trade in old, inefficient cars. But, it says, they’ve made little long-term difference.
More subsidies for biofuel could boost that industry. But using a food crop for fuel borders on criminal, and, anyway, the energy consumption required to grow corn makes this a false solution.
Why not encourage fuel-efficient internal combustion with incentives on cheap gas-sippers? To have any impact, that must be a widespread incentive. As Mosquet says, “If you want to influence 100 per cent of the market, you don’t want to subsidize it … that’s too expensive.”
For now, the best route to reduce gasoline consumption is ever-tougher fuel-efficiency standards and higher prices — through taxes that cover their environmental costs and elimination of oil industry subsidies.
If the aim is to eventually go electric, we should heavily back battery research and worry less about EV sales until the technology is truly ready.
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