Study: Electric Vehicle Subsidies Carry High Costs with Questionable Results

Published July 9, 2018

Billions of taxpayer dollars in the United States are being spent subsidizing so-called zero-emissions vehicles (ZEVs), primarily battery-powered cars, and the electric infrastructure needed to support them.

A recent report by the Manhattan Institute concludes the environmental benefits produced by these highly subsidized vehicles are largely illusory.

Drawing on data from the U.S. Energy Information Administration (EIA) and other research, the study found electric cars create more air pollution than new gasoline-powered vehicles, making the subsidies counterproductive in environmental terms.

The report, “Short Circuit: The High Cost of Electric Vehicle Subsidies,” by Jonathan Lesser, Ph.D., president of Continental Economics, found government sponsors of these subsidies have not required hard-nosed cost-benefit analyses be conducted to justify the myriad federal and state subsidies directed to boost the electric vehicle industry.

Subsidies and Mandates

As detailed by Lesser, laws signed by Presidents George W. Bush and Barack Obama allocated up to $7,500 in federal tax credits per electric vehicle purchased, which buyers can claim on their federal taxes.

In addition, many states offer further support for electric vehicle purchasers, including rebates of up to $5,000 per vehicle, additional rebates for vehicle chargers, and free use of public charging stations paid for by ratepayers and taxpayers.

Lesser also documents state mandates aimed at promoting electric vehicle adoption and phasing out vehicles powered by internal combustion engines. On January 26, 2018, Lesser notes, California Gov. Jerry Brown signed an executive order requiring automakers to put five million electric vehicles on the state’s roads by 2025. The order also increases state subsidies to build 250,000 charging stations. Eight other states are adopting California’s “zero emission vehicle” standards as well.

Electric Vehicles and Air Pollution

Lesser’s report used EIA’s most recent long-term forecasts for the number of new electric vehicles through 2050 to estimate how much electricity they would use and calculate how much pollution the electricity production would generate. The report focused on three key pollutants regulated under the Clean Air Act—sulfur dioxide, oxides of nitrogen, and particulates—as well as carbon dioxide emissions.

Comparing these with emissions of new gasoline-powered vehicles, using EIA’s “real world” miles-per-gallon forecasts rather than the higher Corporate Average Fuel Economy standards, Lesser found “widespread adoption of electric vehicles nationwide will likely increase air pollution compared with new internal combustion vehicles” (emphasis in original).

Although this conclusion may seem counterintuitive, proponents of electric vehicles “fail to consider just how clean and efficient new internal combustion vehicles are,” Lesser writes.

According to Lesser, today’s internal combustion engines emit only about 1 percent of the pollution cars emitted in the 1960s, and new innovations continue to improve engines’ efficiency and cleanliness. In addition, the electricity powering ZEV cars such as the Tesla, Chevy Volt, and Ford Fusion is and will continue to be overwhelmingly derived from fossil fuels. Despite the growth of wind and solar power, renewables are projected by the EIA to account for only 30 percent of the nation’s power by 2030.

No ‘Environmental Panacea’

Jordan McGillis, a policy analyst at the Institute for Energy Research, says ZEVs are not more environmentally friendly than other forms of transportation.

“Lesser’s paper highlights the fact ZEVs aren’t the environmental panacea their enthusiasts make them out to be,” McGillis said. “Each form of transportation requires energy and, ergo, has some attendant form of byproduct, whether it be tailpipe emissions, toxic used batteries, or spent fuel rods.”

Subsidizing the Wealthy

Most electric vehicle buyers are wealthier than the average U.S. household, and thus the wealthy are the chief beneficiaries of ZEV subsidies, the report states.

The study reports the average income of a Tesla buyer was $293,200, citing a 2013 analysis. A 2015 study cited by the report found the average household income of a buyer of the much-less-expensive electric Ford Focus was $199,000. The median household income in the United States that year was $56,516.

“So it’s fair to say the subsidies benefit the wealthy at the expense of the poor, who cannot afford to buy even subsidized electric vehicles or live in their own homes to take advantage of residential chargers of solar panels.” Lesser writes.

Jay Lehr, science director at the Heartland Institute, which publishes Environment & Climate News, says electric vehicles are not a cutting-edge, more efficient technology as commonly believed.

 “Henry Ford tried to develop an electric vehicle more than 100 years ago with no success,” Lehr said. “Electric vehicles gained no traction then because they made no economic sense, and they still don’t.

“President Trump’s new tax law is clearly helping the middle class, and it’s about time, as the middle class has been subsidizing the rich purchasers of exorbitantly expensive electric vehicles for years.”

‘Playthings for the Rich’

McGillis says ZEVs benefit the rich at the public’s expense.

“Buying patterns show ZEVs are playthings for the rich paid for out of the public purse,” said McGillis.

Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.


Jonathan Lesser, “Short Circuit: The High Cost of Electric Vehicle Subsidies,” The Manhattan Institute, May 2018: