Electric Vehicles—Subsidies for an Environmental Pretender

On May 22, the Edison Electric Institute (EEI), the American Public Power Association (APPA), and two groups representing U.S. and foreign automakers sent a letter to Environmental Protection Agency (EPA) Administrator Scott Pruitt and Transportation Secretary Elaine Chao extolling the benefits of electric vehicles (EVs) and other so-called "zero-emissions" vehicles. The groups also emphasized the benefits of flexible programs to meet various greenhouse gas (GHG) emissions standards and EV requirements, such as mandates in California for five million EVs by 2025.

Conventional wisdom is that, by replacing internal combustion vehicles (ICVs) with EVs, air quality will be improved and climate change will be addressed. To be sure, replacing a 30-year-old, oil-gulping Oldsmobile with a new EV will reduce air pollution. But as my recent report for the Manhattan Institute suggests, this conventional wisdom is disingenuous because it focuses on the wrong comparison.

Comparing EV and ICV Emissions

Today's ICVs are far cleaner than vehicles of old. Tailpipe emissions regulations, along with regulations for low-sulfur gasoline, have reduced tailpipe emissions by 99%. Simply put, new ICVs pollute very little. So, rather than estimating the environmental benefits of replacing old ICVs with new EVs, the correct framework is to evaluate the relative emissions of new EVs versus new ICVs. The reason is that, if EVs are adopted widely, consumers who decide to replace their existing vehicles will shop around and compare new EVs with new ICVs.

Although EVs don't belch any smoke, they are hardly "emissions-free." EVs are only as "clean" as the electricity generated to charge their batteries. And so, using the Energy Information Administration's (EIA's) most recent long-term forecast (Annual Energy Outlook 2018 with projections to 2050), along with its forecasts of the numbers of EVs and ICVs that will be on the road, I compared the emissions from those EVs and an equivalent number of new ICVs. As part of that analysis, I also included emissions from oil refineries that manufacture gasoline, as gasoline is the source of SO2 emissions.

The results of my analysis defy the conventional wisdom that EVs reduce pollution. Despite the EIA's forecasts of large increases in wind and solar generation, and decreasing reliance on coal-fired power plants, my analysis found that the electricity generated to power EVs will emit far more SO2 and NOx than an equivalent number of ICVs.

As for particulates, if all electric generating plants comply with new National Ambient Air Quality Standards, then EVs will be responsible for slightly less particulate emissions. But if not, then particulate emissions from electric generating plants will exceed those from ICVs. So, more SO2, more NOx, and perhaps more particulates. Hardly the "emissions-free" environmental nirvana promised by EV advocates.

Some EV advocates focus on local emissions in vehicle-choked cities, arguing that EVs will provide much greater environmental benefits in such locations, even if total emissions increase from central-station generators. That depends on which way the wind blows, but again, those advocates fail to consider that new ICVs emit almost no pollution.

It is true that EVs will reduce GHG emissions compared with the same number of new ICVs. But the difference will be minimal, about 0.5% of all U.S. energy-related GHG emissions by 2050. Such a small reduction will have no measurable impact on world climate. By comparison, the GHG emissions difference will be far less than the now-moribund Clean Power Plan, which the EPA itself admitted would have no impact on climate.

The Subsidy Boondoggle

Perhaps the most disconcerting aspect of EVs are the subsidies lavished upon EV buyers, most of whom are far wealthier than average citizens. EV owners can obtain the $7,500 federal tax credit, state rebates of up to $5,000, subsidies and rebates for installing chargers at their home or business, and subsidized public charging stations. In some states, including California, EV owners are even allowed to use high-occupancy vehicle lanes when driving alone.

When electric utilities build out new EV charging infrastructure or increase distribution circuit capacities to handle high-voltage fast chargers, EV owners pay little of the cost. Instead, the costs are allocated to all utility customers. In California alone, I estimated the state would spend upward of $100 billion on EV subsidies and charging infrastructure by 2030 to fulfill Gov. Brown's executive order mandating 250,000 charging stations by 2025 to power the five million EVs that he has mandated to cruise California's highways by 2030.

Worse still, some EV advocates claim that residential solar photovoltaic (PV) power and EVs are a "match made in heaven." Whether or not "Thou shalt combine thy EV with thy rooftop solar PV" has been written on a stone tablet, combining subsidized EVs with subsidized solar PV again primarily benefits the wealthy. It's no secret that behind-the-meter solar PV is the most expensive type of solar power, one which non-solar customers also subsidize, along with the backup generation to firm up intermittent solar.

Don't get me wrong, a new EV that can accelerate faster than a Formula 1 race car is a neat technological trick. But taxpayers and lower-income consumers should not be forced to subsidize vehicles that, barring additional breakthroughs, are expensive toys for the well-off, especially when those toys will exacerbate air pollution compared to their internal combustion brethren. a-

-Jonathan A. Lesser, PhDis president of Continental Economics Inc., an economic and regulatory consulting firm. His new report, "Short Circuit: The High Cost of Electric Vehicle Subsidies," was published by the Manhattan Institute on May 15.

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