Federal policies promoting the manufacture and purchase of electric vehicles will cost about $7.5 billion through 2019. And the federal tax credits for electric vehicles will have little to no effect on reducing gasoline use or greenhouse gas emissions in the next several years.
A new report, “Effects of Federal Tax Credits for the Purchase of Electric Vehicles,” from the non-partisan Congressional Budget Office (CBO) examines the issue in great detail. The CBO also published what is essentially an executive summary, “Effects of Federal Tax Credits for the Purchase of Electric Vehicles,” and this even shorter blog story: “CBO Releases a Study on the Effects of Federal Tax Credits for the Purchase of Electric Vehicles.”
The CBO notes that a tax credit for purchasing an electric vehicle (EVs) is the primary federal policy. Encouraging and expanding the adoption of EVs should result in decreasing oil consumption and greenhouse gas emissions.
Some other nuggets from the report:
- at current vehicle and energy prices, the lifetime costs to consumers of an electric vehicle are generally higher than those of a conventional vehicle or traditional hybrid vehicle of similar size and performance, even with the tax credits
- 30 percent of current and future sales of electric vehicles will be attributable to the tax credits, and 70 percent would have occurred even without the credits
- the credits also have the indirect effect of boosting sales of high-fuel economy conventional vehicles and traditional hybrids, by encouraging sellers of such vehicles to lower their prices to better compete with electric vehicles.
The report is full of assumptions, and I’m looking forward to some of the EV industry folks reviewing the report and providing their view. There are some issues that may be judged as important policy goals, such as reducing dependence on foreign oil, which are hard to quantify in dollars.
Federal tax credits help, but it seems pretty clear that the price of EVs will have to drop quite a bit before adoption becomes more widespread. Range anxiety (having the battery die when far from a charging station) is an issue that can be more readily overcome, compared to the cost issue.
The Washington Post’s Brad Plummer has a good analysis.