Should Electric Vehicles Be Taxed or Subsidized?

The answer depends on location, according to previous studies on EVs. The study from NBER evaluated both gas and electric-powered vehicles to determine their effect on the environment. A surprising recommendation is a new road funding option.
July 1, 2015, 8am PDT | Irvin Dawid
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The June "working paper" by the National Bureau of Economic Research, "a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works" according to its website, is similar to earlier studies that compare tailpipe emissions from gasoline-powered vehicles with emissions from power plant smokestacks required to generate the electricity to power electric vehicles (EVs).

As other studies have found, the most important factor in the comparison is the power source for the power plants. If it's coal, the pollutants associated with are greatly increased. But the paper by Stephen P. Holland, Erin T. Mansur, Nicholas Z. Muller, and Andrew J. Yates goes an important step further - it rates the environment benefit of EVs with the federal subsidy, technically a tax credit of $7,500 received by those who purchase these zero emission vehicles.

"The researchers focused on five major pollutants: carbon (CO2), sulfur dioxide (SO2), nitrogen (NOx), particulate matter (PM 2.5), and volatile organic compounds (VOCs)," writes Eric Jaffesenior associate editor at CityLab

Jaffe goes into the details of how emissions were measured and the damage they cause. Two maps illustrate the varying degrees of environmental harm associated with each vehicle, though it's obvious that more damage is associated with EVs.

That said, EVs make sense in specific areas. "Some places, like Los Angeles, are big EV winners," writes Jaffe. "The city’s air shed traps pollutants from gas cars, leading to local smog; meanwhile, electricity is drawn from a clean grid in places like Nevada, so the environmental damage is both remote and minimal."

On the flipside you have a typical county in South Dakota, where gas cars are relatively cleaner. There the damage done by pollutants on the sparse local population is minimal; electricity, drawn from coal-fired plants in denser places like Illinois, is dirty by comparison.

Study findings:

  • “So even in the most extreme areas, the existing subsidy—let alone the additional state incentives—are not justified by the environmental benefits to air pollution,” says Holland. The subsidy the Los Angeles EV should receive is less than $5,000, they determined.
  • "EVs actually produced more environmental damage than gas cars: Atlanta (-$314), Chicago (-$900) and D.C. (-$1,077), among them," writes Jaffe. "Those negative figures indicate that EVs should be taxed, rather than subsidized. [Italics added]. In non-urban counties that tax rose to an average of $2,200, and in parts of the Midwest it neared $5,000 per car."

Jaffe advises readers to look past the obvious 'are EVs good or bad' question but to recognize that "it’s a reminder that there’s a high social cost of driving everywhere—especially in cities." So we have another, surprising conclusion:

  • Endorsement of vehicle-miles-traveled fee applied to all vehicles with an environmental component, which coincidentally, also polls well, as Planetizen indicated when describing a shortcoming in Oregon's new Road Usage Charge program. The VMT fee would reflect the environmental costs associated for both types of vehicles and the region where it is driven.

"The study’s biggest caveat, acknowledged by the researchers, is that they don’t consider a full 'lifecycle' analysis of emissions—so things like making the car, drilling for oil, or transporting coal aren’t included in the environmental costs," adds Jaffe.

Hat tip to Akshai Singh of Sierra Club Transportation listserv.

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Published on Monday, June 29, 2015 in CityLab
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