Study: Electric-Vehicle Tax Incentives Are Inefficient

A Nissan Leaf taxi charging at a Petrobras station in Rio de Janeiro, Brazil
A Nissan Leaf taxi charging at a Petrobras charging station in Rio de Janeiro, Brazil. (Credit: Flickr @ mariordo59 http://www.flickr.com/photos/30998987@N03/)

New research published in Energy Policy (see footnote) suggests that electric-vehicle proponents and policymakers have missed the mark when it comes to targeting mainstream consumers, arguing that electric-vehicle tax incentives for mainstream buyers are “wasteful, inefficient and ineffective.”

James Winebrake, dean of Rochester Institute of Technology’s College of Liberal Arts and an expert in energy technology, global warming, transportation and energy and environmental policy, is one of the co-authors who question the wisdom of the electric-vehicle (EV) tax credit which provides up to $7,500 to people who purchased an EV in 2013. President Obama has proposed increasing the tax credit to $10,000 in coming years.

“The U.S. electric vehicle tax credit ultimately turns out to be a large transfer of wealth from public coffers to individuals—many of whom are quite wealthy—who would have likely bought electric vehicles even without the credit,” said Winebrake. “The tax credit has been shown to have little impact on increasing market penetration of electric vehicles in any meaningful way.”

In addition to highlighting the ineffectiveness of the electric-vehicle tax incentives, the authors argue that the government’s EV research and development expenditures, and its focus on expanding public EV recharging stations, are misallocated.

The government, the study authors argue, should shift efforts to focus investment in niche market development such as “car-sharing” programs—where members share amongst a pool of vehicles, and fleets.

“Why not bring the technology to applications where it fits best, rather than seeking to meet the stringent performance standards of the highest common denominator? ” said Erin Green, lead author, RIT alumna and president of Green Energy Consulting in Rochester, N.Y. “Instead of exclusively reaching to grasp an ever-rising bar of ambitious technology goals, we see niche markets as an appropriate place to concentrate federal incentives for electric vehicle development and use. For example, supporting the use of electric vehicles in car-sharing programs in urban areas can result in greater energy and air quality benefits, cost-effectively.” Green also suggests focusing EV investment strategically in fleets such as the U.S. Postal Service (USPS), where centralized on-site charging facilities are available and range concerns are minimized—the average USPS vehicle route is only 17 miles, she noted.

According to Green, another problem with seeking to meet ambitious performance expectations of mainstream consumers is that achievement of EV performance goals tend to remain years in the future, and may increase EV costs, thus keeping EVs out of financial reach to most consumers. The authors believe that policymakers should aim research efforts at early adopters such as ‘green’ consumers, who have demonstrated willingness to accept tradeoffs in EV performance and features in exchange for achieving environmental benefits and fuel savings.

Ultimately, Winebrake says that it remains to be seen whether policies should remain focused on niche markets indefinitely, and eventually these markets will need to establish themselves into self-sustaining markets if there is to be a promising future for electric vehicles.

Green, E., Skerlos, S., & Winebrake, J. (2014). Increasing electric vehicle policy efficiency and effectiveness by reducing mainstream market bias Energy Policy, 65, 562-566 DOI: 10.1016/j.enpol.2013.10.024

The above story is based on or reprinted from materials provided by Rochester Institute of Technology.

Note: Materials may be edited for accuracy, neutrality, length, clarity and style. For further information, please contact the source cited above.

  • Hank Gagnon

    Who wrote this article? I a sure they are on the Koch Brothers Payroll or A former Bush/Reagan/Cheney Traitor Hack, or Rupert Murdock lackey. Anything to keep people from buying Electric Vehicles because they know people like them when they get a chance to own and drive one.

  • Hank Gagnon

    The costs are irrelevant. Big Oil has gotten and continues to get Trillions more in Tax breaks, Tax Incentives, and tax subsidies than the tiny amount renewable energy and Electric vehicles get. It’s called an investment so we can RID our country from the environmentally destructive, over burden costly and monopolistic Oil Industry.

  • Carl Anton Stenling

    The Norwegian “experiment” shows that equalising the pricing between petrol cars and EVs is an important factor to increase EV sales. The article conclusion is against empirical evidence.

  • Peter Mortensen

    The best evidence for how tax policies can help change the transition to greener cars can be found in Norway where Tesla Model S has sold more than any other car and even sold more than all Ford cars combined in the last few months.