NCPA - National Center for Policy Analysis

Electric Cars Are a Waste of Money

October 3, 2012

Electric cars are the future of transportation, or so Washington would like to think. The federal government has pumped money into the auto industry with the purpose of incentivizing the production of electric cars, says Business Insider.

  • The government has committed up to $25 billion of soft loans to the auto industry.
  • In the 2009 American Recovery and Reinvestment Act, $2 billion was provided to the Department of Energy (DOE) in grants.
  • Of that $2 billion, $1.5 billion was awarded to battery producers.
  • The DOE's Transportation Electrification Initiative has committed $400 million in grants for the demonstration and deployment of electric vehicles, and education for the public about the cars.

Despite all the subsidies, the Congressional Budget Office (CBO) concluded that electric cars are still not a wise investment for consumers. And with that, the government created more subsidies to entice consumers. It offered a cash incentive for each vehicle sold. But according to the CBO, the incentives would need to be about 50 percent higher to make electric cars cost competitive.

Proponents of electric vehicles argue that it is necessary for the government to invest in these automobiles for the sake of the environment. However, the CBO argues that the tax credits will have little impact on gas consumption or emissions in the short term. The CBO also says it is unknown how cost-effective the tax credits would be in the long-run.

Source: Bruce Krasting, "CBO: Electric Cars Are a Waste of Money," Business Insider, September 24, 2012. "Effects of Federal Tax Credits for the Purchase of Electric Vehicles," Congressional Budget Office, September 20, 2012.


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