Research & Commentary: State Incentives for Electric Vehicles

Published July 5, 2013

According to the National Conference of State Legislatures, 27 states and the District of Columbia have electric vehicle incentives for individuals, and 13 states currently have pending legislation regarding them. These incentives include allowing EVs to use high-occupancy-vehicle (carpool) lanes no matter the number of passengers they’re carrying, plus tax exemptions, registration fee reductions, emission test exemptions, and parking incentives.

Supporters justify the incentives as beneficial to human health and the physical environment and reducing dependence on foreign oil. Although EVs don’t emit carbon dioxide or pollutants into the air directly, the electricity they use is overwhelmingly produced through conventional means. In addition, the manufacturing process for EVs produces 30,000 pounds of carbon emissions versus only 14,000 pounds for conventional automobiles, according to the Journal of Industrial Ecology. This is primarily due to the highly resource-intensive production of lithium batteries; efforts to improve battery production have failed despite decades of government subsidies.

The Nissan Leaf, for example, requires an electric recharge every 55 to 75 miles, and the electricity generation necessary to recharge the Leaf’s battery creates carbon emissions and air pollution. As Bjorn Lomborg noted in his March 11, 2013 op-ed in The Wall Street Journal, an EV driven for 90,000 miles will emit more carbon dioxide than a conventional petroleum-powered car.

Mark J. Perry, an economics professor at the University of Michigan–Flint, says EVs won’t reduce U.S. oil imports, because oil imports already have fallen dramatically and U.S. refineries are currently flush with oil; in fact, the United States recently became a net exporter of petroleum fuels for the first time since 1949.

EV incentives also have had unintended consequences on state gas tax revenues. Legislators in Oregon are currently considering placing a tax on electric and hybrid vehicles to make up for the lost revenue these cars cause through greater fuel-efficiency.

Such government subsidies and incentives make for poor public policy because they encourage rent-seeking, subvert the market’s natural mechanism for matching supply with demand at the correct price, and clash with other government incentives, all of which creates adverse fiscal consequences while providing negligible environmental benefits. 

The following documents provide additional information about electric vehicles and electric vehicle subsidies.


Ten Principles of Energy Policy
Heartland Institute President Joseph Bast outlines the ten most important principles for policymakers confronting energy issues, providing guidance to respond to ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography. 

Lomborg: Electric Cars Get Dumber by the Day
Heartland Institute Science Director Dr. Jay Lehr reviews Bjorn Lomborg’s Wall Street Journal op-ed on electrics cars. Lehr recounts Lomborg’s points about why electric cars are not the least bit environmentally friendly, and he uses these points to criticize President Barack Obama’s misguided ambition to ramp up taxpayer support for electric vehicles. 

State Electric Vehicle Incentives
The National Conference of State Legislatures documents what states are doing to promote the production and use of electric vehicles, including “high-occupancy vehicle lane exemptions for EVs as well as monetary incentives, such as tax exemptions or credits and registration fee reductions, emission test exemptions and parking incentives.” Currently 27 states and the District of Columbia have electric vehicle incentives, the chart notes. 

DOE Admits Electric Vehicles Are Failing to Meet Expectations
Having promised billions of dollars in federal assistance would jumpstart sales of electric vehicles, the U.S. Department of Energy now says the Obama administration is unlikely to meet its goal, as sales are currently on pace to sell less than one-third of what the president said the federal assistance would stimulate. 

Oregon Considers Raising Taxes on Fuel-Efficient Cars
Oregon legislators are expected to consider a bill during the 2013 session to require drivers with a vehicle getting 55 or more miles to the gallon to pay a per-mile tax, starting in 2015. With the advent of electric cars and hybrid vehicles attaining fuel efficiency of 55 miles per gallon or more, states are starting to feel the pinch on infrastructure funding usually obtained through gasoline taxes. Oregon’s experience exemplifies the adverse fiscal consequences of government-created market distortions, which lawmakers then attempt to solve through further government intervention.

Electric Cars Still Show Little Promise
A George C. Marshall Institute paper examining the viability of electric cars concludes, “Without subsidies and political pressure, it is doubtful that there would be much demand, except by the wealthy early adopters who want to make an environmental statement.” 

California Pulls Plug on ‘Clean Air’ Cars
In 1990 the California General Assembly attempted to legislate into existence a new fleet of “clean air cars” by passing a “zero pollution” mandate, requiring that 10 percent of cars sold in the state had to be pollution-free by 2003. On April 24, 2003, the California Air Resources Board voted 8–3 to rescind that 10 percent requirement in response to slow consumer acceptance of zero-emission vehicles and the emergence of low-emission hybrid vehicles. 

Subsidy-Powered Vehicles
Former American Enterprise Institute Scholar Kenneth P. Green notes electric cars are twice as expensive as their gas-powered counterparts and more expensive to insure. The environmental benefits that electric vehicle consumers are paying for are largely illusory, so state and federal subsidies to encourage electric vehicle use cause more harm than good, he writes.

Unplug Electric Car Subsidies
Writing in the Detroit News, economist Mark J. Perry notes prices of electric vehicles have not fallen far enough to make them competitive with gas-powered vehicles, despite lucrative federal subsidies. Perry also points out the environmental benefits of EVs are modest and the vehicles do not curb the nation’s dependence on foreign oil.


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If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Policy Analyst Taylor Smith at [email protected] or 312/377-4000.