Are Electric Car Subsidies Warranted?

March 28, 2011

One hundred years after the American company Cutler-Hammer was advertising electric vehicles and the first electric charging station, today's plug-in electric vehicles (PEVs) still receive failing grades from consumers and consumer advocates, says Margo Thorning, the executive vice president and chief economist at the American Council for Capital Formation.

  • A battery for a small vehicle like the Nissan Leaf can cost about $20,000 and still only put out a range of 80 miles on a good day (range is affected by hot and cold weather) before requiring a recharge that takes eight to 10 hours.
  • Even then, those batteries may only last six to eight years, leaving consumers with a vehicle that has little resale value.
  • Moreover, home installation of a recharging unit costs between $900 and $2,100.

Slick TV ads boast PEVs' supposed environmental benefits, but what they don't tell you is that a substantial increase in the numbers of them on the road will require upgrading the nation's electricity infrastructure.

  • Since half of all U.S. electricity is generated by coal, which produces greenhouse emissions, PEVs may not be any better than hybrid electric vehicles that do not need to be plugged in.
  • Meanwhile, new technology for gasoline-powered vehicles has substantially increased miles per gallon, to as much as 35-50 miles per gallon for several smaller vehicles.

Despite these significant flaws, the government is determined to jump-start sales for plug-ins by putting taxpayers on the hook.  The $7,500 federal tax credit per PEV is nothing more than a federal subsidy that will add to the deficit.  There are also federal tax credits for installing charging stations in homes and businesses and for building battery factories and upgrading the electric grid.  The administration's goal --one million PEVs on the road by 2015 -- could cost taxpayers $7.5 billion.  Outlays for recharging infrastructure will add billions more.

Source: Margo Thorning, "Pull the Plug on Electric Car Subsidies," Wall Street Journal, March 24, 2011.

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