Exposing the Electric Vehicle Fantasy, Part 1 The Real Cost of EV’s
Link to Part 2 – Assessing the Alleged Benefits of EVs
Link to Part 3 – False Expectations – The Electric Vehicle Fantasy
Whatever your position on subsidies in general, it is hard to make the case that taxpayers should foot the bill to produce luxury cars marketed to the wealthiest Americans. -Dan Eberhart, Forbes
The Canadian federal government has set a series of targets for motor vehicle manufacturers to meet in their sales of light duty vehicles (cars, SUVs, and pickup truck). Zero-emission vehicles, including battery-electric, hydrogen fuel-cell and plug-in hybrid vehicles, must constitute at least 10% of sales by 2025, 30% by 2030 and 100% by 2040.
To meet these targets, the government has implemented several tax, subsidy, and regulatory measures. The media offer a seemingly endless series of articles claiming that the costs of electric vehicles are declining and sales rising so fast as to make the government’s targets attainable. Car buyers, when considering whether to buy an electric vehicle, consider the cost of owning and operating one compared to that of a car powered by an internal combustion engine (ICE). What the consumer cannot see is the economic costs to all of society. In fact, in Canada and other countries, there is virtually no aspect of electric vehicle production, purchase and use that does not receive some form of subsidy. In this article, I will demonstrate this using the information available from Canada and the United States.
The notable subsidies include:
• Taxpayer funding of research and development specifically for EV’s: U.S. federal R&D funding for EV’s was U.S. $1.3 billion over the 2016-2019 period.
• The federal and Ontario governments have pledged a grant of $590 million to a Ford plant in Oakville to build EV’s.
• The federal government gives EV manufacturers $30 million per year in tax breaks.
• The Obama Administration gave U.S. $2.4 billion in grants to support the development of electric vehicles and batteries.
• U.S. states also give large subsidies; Nevada provided subsidies totaling U.S. $1.2 billion to Tesla for the “Gigafactory”
• Taxpayers provide very generous subsidies in the form of rebates and tax credits to purchasers of EVs; the Canadian government provides $5,000 per vehicle and the U.S. government provides a tax credit worth U.S. $7,500 per vehicle. Additional subsidies are provided for the installation of recharging stations in homes, apartment buildings and places of work.
• Regulatory programs dictating the emissions-intensity levels that cars must reach provide that companies can avoid paying large fines for non-compliance by buying “credits” from EV manufacturers; The total value of these cross-subsidies in the United States were about U.S. $1.1 billion in 2019 alone.
The actual costs that the car purchaser can see are higher for EVs than for cars with internal combustion engines, mainly because of the large capital cost of the initial purchase. In California, the difference is about U.S. $13,000 for a mid-range Tesla Model 3. The costs of EV batteries are now between U.S. $175 and U.S. $300 per kilowatt-hour. At $175 per kWh, the price of oil would have to triple from today’s levels before the unsubsidized electric vehicle was cheaper to purchase and operate.
Who benefits from the taxpayer subsidies? According to studies in Canada and the United States, between 50% and 75% of the people who buy EVs would have done so without the subsidy. In the U.S., the vast majority of the subsidy provided by the federal Plug-in Electric Drive Motor Vehicle credit goes to the highest income earners, with the top 20% of income earners receiving 90% of the credit.
Proponents of electric vehicles sometimes claim that converting the entire light duty vehicle fleet to run on electricity will not increase the electricity generation and transportation costs to society. In fact, according to a study done by electrical engineer Kent Zehr, to provide the energy for complete conversion of the Canadian vehicle fleet would require more than 10,000 megawatts of additional electrical generation capacity, over five times the capacity that will be added by the Site C dam in British Columbia and the Muskrat Falls hydroelectric in Newfoundland combined. The costs of the additional generation capacity and transmission lines would be in the hundreds of billions of dollars if they could be built by 2040, which they cannot.
In sum, the thesis that electric vehicles are beneficial and affordable is based on misleading Canadians about their real economic costs. The federal government’s 2040 target is neither desirable nor attainable on the grounds of cost alone. The other parts of this series will examine the environmental implications of seeking to electrify all vehicles and the probable trends in Canadian and global EV sales.
About the Author
ROBERT LYMAN is an economist with 27 years’ experience as an analyst, policy advisor and manager in the Canadian federal government, primarily in the areas of energy, transportation, and environmental policy. He was also a diplomat for 10 years. Subsequently he has worked as a private consultant conducting policy research and analysis on energy and transportation issues as a principal for Entrans Policy Research Group. He is a frequent contributor of articles and reports for Friends of Science, a Calgary-based independent organization concerned about climate change-related issues. He resides in Ottawa, Canada. Full bio.