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Con: Long-term benefits far outweigh cost of current federal subsidies

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Nicholas L. Cain
May 24, 2012
EDITOR’S NOTE: The writer is addressing the question, “Should Congress pull the plug on electric car subsidies?”

Oil prices in the United States have fallen over the last few months, and tensions have eased a bit in the Middle East.


But despite these hopeful signs, the price of oil on international markets remains at record highs—and the IMF warns that oil prices could double by 2022. The good news is that carmakers have continued to innovate.


Ford is introducing an electric version of its Focus. Mitsubishi, BMW, Tesla and other carmakers are also introducing new electric vehicles (EVs). And, after a slow start, GM is on track to sell between 15,000 and 20,000 of its award-winning Volts this year. But this technology, like any infant industry, needs our support. Given this, it would be folly for Congress to slash the existing tax credit.


If we cast a cold eye on the economics of EVs, the credit is a bargain. Research shows that air pollution causes asthma, heart attacks, strokes and lung cancer—and costs taxpayers billions.


A 2010 study by the American Public Health Association estimates that air pollution from vehicles causes $50 billion to $80 billion per year in health care costs and premature deaths.


A 2009 study by the Center for Entrepreneurship and Technology at UC Berkeley estimates that over 20 years, EVs and plug-in hybrids could reduce health costs by $4.5 billion to $11.2 billion.


If we combine support for EVs with more renewable electricity generation, we could save $209 billion over that time. Estimates always contain uncertainty, but it’s clear that cleaner vehicles will save billions of dollars and reduce the terrible human toll caused by air pollution.


On top of money and lives saved, we have another clear reason to support EVs: energy security. Yes, gas prices have fallen a bit in the U.S., but the IMF and many independent researchers believe this is just a temporary reprieve. EVs not only save consumers money at the pump, they make our economy more resilient to price shocks and reduce the money flowing to hostile nations.


At $4 a gallon, the average U.S. driver will spend $240 per month on gas—but utilities such as New Jersey’s NRG are offering a month’s worth of EV-power for only $50 to $90. More broadly, the U.S. holds less than 3 percent of the world’s oil reserves—while consuming 22 percent of all the oil produced in the world. We need, more than ever, alternatives to fossil fuels.


EVs provide a bulwark against rising prices because our electricity grid is powered by a diverse array of sources that include coal, natural gas, nuclear and, increasingly, renewables such as wind and solar.


Because oil is a minuscule source of electrical power, EVs provide security. And, except in states heavily dependent on coal, EVs will reduce greenhouse gases.


A huge increase in EVs might require grid upgrades, but according to a 2007 study by the NRDC and the Electric Power Research Institute, we have enough capacity to meet expected demand.


Although total sales of EVs have been small, they are growing rapidly and researchers forecast that millions of vehicles will be sold globally within five years. Given that air pollution and oil security are huge problems around the world, and that American carmakers are innovators in creating electric vehicles, we should do everything we can to support the industry—especially because it has the potential to create jobs as carmakers search for suppliers of batteries, drive-trains and other technologies.


In an age of budget challenges, we must scrutinize all government spending—but considering the billions we spend dealing with the health impacts of air pollution, the limits of domestic oil and the security risk of importing it, our support for clean vehicles makes economic sense.


The EV tax credit will phase out as sales increase, so if we want to cut wasteful subsidies, we should reduce outdated subsidies to the fossil fuel industry and redouble our support for clean and green approaches.


Nicholas L. Cain is a researcher and doctoral student in environmental public policy at Claremont Graduate University. Readers may write him at CGU, 150 E. 10th St., Claremont, Calif. 91711.

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