Opposing View on Energy: Subsidies? Just Say No

The problem with electric vehicles can be summed up with one word: subsidies. Subsidies are prima facie evidence that consumers would not buy the product at its market price.

Subsidies distort markets, compromising economic growth, and are simply wealth transfers. This particular wealth transfer (up to $8,500 for today's electric cars and home charging equipment) is highly regressive, robbing from the poor to help a few greenies burnish their green credentials.

Deloitte Consulting surveyed potential buyers of electric vehicles, finding that only the young and financially comfortable (household incomes more than $200,000 a year) would consider buying one. And subsidies, once in place, tend to remain in place long after any they are needed to spur the adoption of new technology. Look at corn ethanol, if you have doubts.

Electric-vehicle boosters claim cheaper batteries are right around the corner, so the subsidies won't last. This is a myth they've been propagating since around 1910: The Boston Consulting Group, which actually studies battery technology and markets, predicts prices will drop only modestly in coming years, barring radical breakthroughs that few expect to materialize, and that would take many decades to deploy.

But what about the environmental benefits? You only get those if your electricity is produced with carbon-free or pollution-free fuels such as wind, hydro, nuclear and solar power. But nationally, less than 30% of our electricity is produced by such sources, and most of that is nuclear and hydroelectricity, neither of which are slated for major expansion anytime soon. In fact, studies suggest switching to electric cars from gasoline cars could well increase emissions of greenhouse gases and conventional pollutants.

We're told the demand for advanced batteries induced by the subsidized sales will create green jobs! Yes, in Asia, where 98% of the world's advanced batteries are manufactured. And energy security? The trivial number of electric cars expected in the market will do nothing to reduce America's oil imports from countries that hate us or protect us from oil price shocks.

There are no good arguments for using government coercion to force electric cars into the U.S. fleet. But there are many arguments against this crusade.

Kenneth P. Green is a resident scholar at AEI.

Photo Credit: Photo courtesy Argonne National Laboratory

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