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June 24, 2023

Don’t Outlaw Private Cars, Target EV Subsidies Better

The idea we should outlaw the ownership of private vehicles and only depend on vehicle-use services has resurfaced recently. The World Economic Forum idea was promoted last year as part of a push to create a circular economy that would reduce the need for hundreds of new critical mineral mines to supply them for the green energy transition. Recently, two studies emerged suggesting that our government’s electric vehicle subsidies and tax credits could be used more effectively to reduce carbon emissions and at a lower cost for taxpayers. We examine these analyses that focus on vehicle miles driven, household ownership of EVs, and alternative powertrains. One-size fits all government emissions policies will not work and may worsen the problem. It is time to reassess these policies. READ MORE

Don’t Outlaw Private Cars, Target EV Subsidies Better

We are in the Fourth Industrial Revolution claims Klaus Scwab, founder of the World Economic Forum (WEF). Therefore, we should “take dramatic technological change as an invitation to reflect about who we are and how we see the world.” Such a guiding principle is driving the green revolution, including banning internal combustion engine (ICE) vehicles because they dump tailpipe emissions into the atmosphere. We should only drive electric vehicles (EV), and they should be powered by the grid of the future fueled only by wind and solar.

A year ago, the WEF produced a paper about building a circular economy to reduce the need for a 500% increase in critical minerals to support the green energy revolution. Buried in the paper was the idea that people should cease owning vehicles and switch to vehicle-use services. Fewer vehicles being driven more miles might help speed up the emissions reduction effort. Some commentators jumped on the WEF’s idea as a justification for banning the private ownership of vehicles, a heavy-handed government intrusion into people’s lives, as if telling the people what kind of car they may buy isn’t. Support for this idea has split along political lines.

Subsidies Drive The EV Market

To promote the EV-only policy, governments are slathering subsidies across the automobile industry – from tax credits and point-of-sale benefits to cash for new manufacturing and battery plants. The problem is governments seem to have overlooked the scale of the critical minerals supply chains necessary for this redo of the automobile industry, and thus how quickly such supply chains can be built. If this redo aims to cut transportation emissions, could there be a better way?

The misnamed U.S. Inflation Reduction Act, signed into law in August 2022, created a plethora of subsidies and tax credits for individuals, states, and companies to foster renewable energy growth. The Congressional Budget Office’s initial estimate is that the bill would cost $391 billion from 2022 to 2031. Analyses by Goldman Sachs, Credit Suisse, the Mercatus Center, Americans for Tax Reform, and others have suggested that the cost will be more like $1.2-$1.4 billion over the decade, or more than three times the CBO estimate.

The tax credits for battery production for EVs were estimated by the CBO to cost $30.6 billion. The analyses project the subsidy will cost $196.5 billion, a 540% miss! Every subsidy and tax credit estimate is too low because the CBO underestimated the volume of projects that will be eligible. In some subsidies, the projects are eligible for 10 years of payments if the projects meet construction thresholds before 2031, thus ensuring subsidy money will be flowing until possibly 2041. Can we do better with the taxpayer’s money?

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