Is US EV Tax Credit Limit Of 200,000 Per Company Un-American?
Originally published on Sustainnovate.
The current federal electric vehicle (EV) tax credit program in operation in the US stipulates that once a car manufacturer hits the 200,000 plug-in vehicles sold milestone that the incentives are slowly phased out over the next year and a half or so.
Is this approach to incentives un-American? Would it have been “more American” to incentivize EVs through a free-for-all approach with only a certain number of incentives available in total (first come, first served)? Or perhaps simply through the provision of an unlimited (or perhaps capped) number of incentives by a certain date (eg 2020)?
With the current approach, it does seem to be the case that companies that have taken the EV sector very seriously (Tesla, etc) seem to be getting a bad deal. Shouldn’t the company that’s truly pushing for a faster EV adoption be the one receiving the financial support? That is the purpose the program to begin with, isn’t it?
These questions were kicked off in my head as a result of a recent discussion thread on the GM Volt forum started by “MarcDan.” Here’s his original comment:
It is generally a (very positive I must say) trait of the American culture ( I am a Canadian) to reward risk taking which favors innovation and progress.
The current set-up of this law certainly does NOT achieve that goal in any way, rewarding the laggards, most of which are foreign companies by the way (Volks, Audi, Mercedes-Benz, Toyota, Mazda, Honda, etc..) and ‘constraining’ the leaders (TESLA, GM and Nissan), two of the three being American companies by the way.
Is this another case of American self-flogging?
How about amending the law for a ‘play-off’ type of scheme where the first three to reach that limit would automatically see it ‘doubled’; the winners would probably be GM, Tesla and Nissan which is ABSOLUTELY in line with their respective (financial and technical) efforts and risk-taking?
Pretty simple, nothing else to change in the law, the other car-makers would have nothing to complain about since they would not lose their own limit, but at least there would be a semblance of justice in this process…
Are US congressmen and senators afraid of supporting American companies even when it is perfectly right to do so?
An interesting perspective. It does seem strange to seemingly reward the “laggards” rather than the pioneers. Any opinions?
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Current US policy revolves solely on protecting billionaire fortunes and entrenched monopolies.
Congress wants us to go back to the 19th century.
We’re just about there. Apparently the last half of the 20th Century was just an anomaly.
Sales incentives are not about risk-taking. They are an alternative to government mandates for positive and strategic societal change. EV subsidies are unquestionably good for the economy and for the environment.
We shouldn’t be arguing about the best ways to cap these subsidies. We should be questioning why there are any caps in the first place.
Coal has had a secret subsidy to pollute for 100 years.
The quicker these subsidies are removed and electric vehicles stand on their own feet the better in my opinion. People are not buying Tesla cars because of the incentive, they are buying them because they are better cars than anything else on the market!
There are two different rationales for the tax credit. One is the “infant industries” rationale. Under that rationale, a cap makes sense; without it the infant would continue to receive a subsidy well into maturity and even dotage. The other is that it is a second (or third or fourth or . . .) best alternative to a carbon tax set equal to the social cost of carbon. That rationale has no cap The question is whether the level of the existing credit is appropriate. That could be calculated without resort to higher math if one had the relevant inputs at hand (which I do not): the social cost of carbon (for which plausible estimates vary over a wide range) and a comparison of the lifetime emissions of an EV and an ICE vehicle (including emissions associated with their manufacture).
be careful, you may have just stimulated a commenter armed with spreadsheet love to give us the answer!
(in all honestly, would be fun to see someone run some numbers.)
There is a need to run numbers?? Seriously? I don’t mean to be nasty, but I would say that if one has to ask this question, one has not done their due diligence.
What is the downside of subsidies? That they supposedly cost more than the carbon they saved during a very short analysis timespan? (Goodness, that would mean a net short-term expense!) And do you really think the true cost/benefit of atmospheric CO2 reduction can be accurately stated?
Atmospheric CO2 lasts for millennia. There are already studies which estimate the cost of adaptation to AGW. The low end estimates ~ $500 trillion by 2100 alone. The higher end estimates AGW adaptation will cost the world $1,240 trillion dollars by year 2100. The higher estimate is likely more accurate:
This a study led by a former head of the IPCC. Read it…. and weep. [http://pubs.iied.org/pdfs/11501IIED.pdf]
That’s 84 years from now. Only about 2000 – 4000 years more of [CO2] calculation to account for – exactly when positive feedbacks really begin to take off. These studies do not even dare to look beyond 2100.
And these studies are not even attempting to put a monetary value on some rather important things: millions if not billions of people who will die from AGW. Millions of species and trillions of creatures who will disappear from AGW. The end of civilization as we know it.
Every single penny we spend right now to reduce atmospheric CO2 is money very well spent. It redounds as ROI a thousand, ten thousand, a hundred thousand fold. It is the best ROI in the history of mankind.
The idea of reducing subsidies which will help transform the transportation sector to a carbon-free future is one of the most ill-considered ideas in the history of ill-considered ideas.
I entirely agree with your description of the seriousness of the GW problem (although not necessarily with your ROI). However, the problem with subsidies is that they cost money that could be used for other things. Some of those things are frivolous (and I probably would be prepared to impose my views of what is frivolous if I could), but some are alternative ways of fighting GW (such as R&D) and others are non-GW but still serious (fighting Zika). The actual allocation of funds among these will be determined largely by politics, but if one is constructing a rationale one needs a metric — a common denominator –for comparing these. Dollars are used, not because dollars are all that matters,. but because no one (as far as I know) has come up with a practical alternative. The social cost of carbon translate the harm caused by SCC into dollars, and your views would lead to a very high SCC. At some level — I have no idea what it would be — a continuation of the subsidy would be justified.
We leave out the air pollution problem in much of our EV discussion. Air pollution creates major health costs.
Burning coal for electricity costs the US between $140 billion and $242 billion annually. It makes economic sense to spend many billions a year to replace coal plants with clean generation. Those hundreds of billions annual savings, once created, carry on for years and years.
We should expect that continuing to subsidize EVs would be paid for with health care savings.
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I’d like to see an “EV Subsidies II” program that was focused on bringing down the cost of EVs and putting EVs into the hands of people with lower incomes. Make EVs affordable for working people and let people who can afford a luxury car pay the full price.
I’ve got an idea, we repeal the EV tax credit when we repeal the tax advantages given to the oil industry.
Oh, no, we can’t do that.
Oil and coal are special snowflakes….
I would be fine with an industry-wide cap based on the total number of electric cars sold in the US. The perverse situation where the laggards get rewarded is messed up.
A change to this now would whip up an anti-Tesla storm. If Tesla is in a no-fail position, and I think they are, better not to stir the hornets nest.
The Tesla 3 without federal subsidies competes with other cars priced in the upper $20k range when one looks at out of pocket costs for monthly payment + electricity/gasoline. Cars like the Acura ILX, and VW Jetta which has MSRPs starting around $28k. Cheaper than the Audi A3, Buicks, Bemmers, Lexus, ….
(13,000 miles. 72 month financing at 4.5%. $3/gallon. 12c/kWh)
If demand for the Mod 3 were to slow down it would likely be after the Gigafactory is running smoothly and battery (cell) prices had fallen to $100/kWh. At that point Tesla could probably shave a little off the basic model price and compete further down the food chain.
At $27,000 (Mod 3 including fed subsidy) the Mod 3 competes with a stripped down Camry.
This is another great idea. I like the idea of giving the first 3 OEMs to reach 200k an automatic bonus of additional EV credits.
Instead of putting a cap on the number of cars being sold per company for the credit, they should do it per model.
That would keep the credit alive for everyone and would stimulate companies to improve their technology sooner.
Better for progress I think, look at cellphones and how much the technology has changed in 10 years, because the companies all have new models all most every year, what if that happened with EVs where would the technology be in 10 years?