Electric Vehicle Subsidies

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An op-ed in the Wall Street Journal written by the American Council for Capital Formation’s Margo Thorning makes a good case for “pulling the plug” on subsidies for electric vehicles. Subsidies for alternative energy vehicles have been popular with both Democrat and Republican administrations, but the Obama administration has been a particularly enthusiastic supporter of industrial planning.

Thorning begins by pointing out that the idea of an electric-powered is hardly new:

Electric vehicles have been with us for almost 180 years. The first, an electric carriage created by an inventor named Robert Anderson, made its appearance in Scotland in 1832. By 1907 the American company Cutler-Hammer was advertising electric vehicles and the first electric charging station. Since that time Americans have seen tremendous innovations is everything from air travel to microwaves, yet there has been little progress converting consumers from gasoline-powered cars to vehicles powered by rechargeable batteries.  

Today’s entrants aren’t exactly sending consumers rushing to the electric car showroom. There are a couple of obvious reasons why:

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.

Home installation of a recharging unit costs between $900 and $2,100. And don’t forget workplace and retail recharging stations, which will be necessary.

The bottom line: plug-in electric vehicles simply do not make practical or economic sense.

Undeterred, the government is resorting to taxpayer-financed bribes to create a market that otherwise would not exist:

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.

A Cato essay on energy subsidies demonstrates that the federal government has a poor record when it comes to industrial planning:

Policymakers often make grandiose promises, such as proposing to make America “energy independent” or to convert the nation to a “green economy.” Those visions don’t make any sense, but even if they did history shows that the Department of Energy would be incapable of putting them into place with any degree of competence. Federal energy schemes are often poorly managed and generate huge cost overruns, or they aim at objectives that make little economic sense, as the following case studies illustrate.

The Obama administration apparently believes that it possesses the unique foresight to optimally plan the economy. However, history is replete with examples of overly-ambitious government planners playing Nostradamus with less than desirable results. Before anymore taxpayer money is wasted, the plug should be pulled on electric vehicle subsidies as well as the entire Department of Energy