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Mars

Mars

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Published by Jeffrey Dunetz
Government subsidies of electric cars
Government subsidies of electric cars

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Published by: Jeffrey Dunetz on Dec 20, 2010
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The Marshall Institute
Science for Better Public Policy
1601 North Kent Street, Suite 802 Arlington, VA 22209
 Phone (571) 970-3180
Fax (571) 970
-
3192 • Email: info@marshall.org • Website:
www.marshall.org 
Electric Cars:Not Ready for Prime Time
William O’Keefe,
 CEO, The George C. Marshall Institute
President Obama, environmentalists, some members of Congress, General Motors,Nissan, and some Silicon Valley venture capitalists are aggressively promoting electriccars (plug-in hybrids and all electrics) to solve alleged problems involving the use of oil, namely gasoline. Their motivation is the claimed need to address climate change,reduce dependence on oil imports, strengthen national security, and promote
“green”
  jobs for the 21
st
century. And all seek to achieve these objectives by having thegovernment subsidize the transition to electrics.While these are worthy national objectives, there are reasons to question whether theelectric cars being so heavily promoted and subsidized represent a cost-effectivepolicy option. Like many of the solutions to national problems that are invented inWashington DC, there is less to the electric car movement than the public has beenled to b
elieve. The image created for electric cars does not match today’s reality.
Before getting into specifics about electric cars, it is useful to briefly review theadvocacy that has been used to justify pushing them to market before they arecommercially viable, which means without government subsidies.
 
December 2010
 
Electric CarsGeorge C. Marshall Institute
– 
December 2010
www.marshall.org
2
OVERVIEW
Although the debate over the role of human activities in causing climate change is nowherenear being resolved, there should be little debate over some very important facts. First,greenhouse gas emissions (GHGs) will continue to grow as developing countries pursue higherstandards of living and the benefits of prosperity.
1
Second, drastic reductions in U.S. GHGs,along the lines of proposed cap and trade legislation, would have only a minor impact on globalemissions, but would impose a very high cost on our economy.
2
That economic cost is themajor reason why cap and trade proposals never gained much traction, publicly or politically.Third, the technology needed to stabilize global emissions and eventually reduce them does notexist and probably will not exist on a commercial basis until the second half of this century.
3
 Finally, limiting the growth of domestic emissions should be pursued in a cost-effective manner.Electric cars do not now meet that standard.The potential contribution of electric cars to reducing carbon dioxide emissions is trivial, butnot cheap. According to the Congressional Research Service (CRS), cars and other light dutyvehicles accounted for 17% of U.S. emissions in 2007,
4
which translates into about 4% of globalemissions. Since electric vehicles will account for only a small percentage of the U.S. fleetanytime soon, under 5% until after 2020 or beyond, their impact on global emissions will beswamped by developing country emissions.Some cite continuing concerns about the security implications of U.S. dependence on importedoil as a justification for expanded use of electric vehicles. While the notion of 
“energyindependence,” is an illusion
,
5
because the negative economic impact of a serious effort wouldbe disastrous, the U.S. can do a better job of controlling the level of imports, but not bymaintaining a self-imposed embargo on oil and gas exploration, as has been announced by theObama Administration. Concerns about dependence on oil imports from the Persian Gulf are
1
 
The International Energy Agency’s 2010 projections show global carbon dioxide emissions rising 21% between2008 and 2035. Their projection assessment asserts: “Non
-OECD countries account for all of the projected growthin energy-related CO2 emissions to
2035 … By 2035, non
-OECD energy-related emissions of CO2 are nearly two-and-a-
half times those of the OECD.” Emissions in non
-OECD nations will grow from 15.7 gigatons in 2008 to 20.8gigatons by 2020 and 24 gigatons by 2035, according to the IEA. See International Energy Agency,
World Energy Outlook 2010
, (Paris: OECD, 2010): 95-96.
2
Bryan Buckley and Sergey Mityakov.
The Cost of Climate Regulation for American Households
(Washington, D.C.:George C. Marshall Institute, 2009).
3
See, for example, Martin Hoffert
et al 
, “Advanced Technology Paths to Global Climate Stability: Energy for aGreenhouse Planet.”
Science
(November 2002): 981-987.
4
James McCarthy.
Cars, Trucks, and Climate: EPA Regulation of Greenhouse Gases from Mobile Sources
 (Washington, D.C.: Congressional Research Service, May 2010): 16.
5
 
For discussion of the illusory nature of energy independence claims, see William O’Keefe and Jeff Kueter,
TheIllusion of Energy Independence: An Assessment of the Current State of Energy Use
(Washington, D.C.: George C.Marshall Institute, 2006).
 
Electric CarsGeorge C. Marshall Institute
– 
December 2010
www.marshall.org
3
addressed more directly by a vigorous effort to produce domestic oil resources and pursuit of additional efficiency gains in the internal combustion engine (ICE).Further, the arguments about the economic and security implications of import dependenceare hard to square with the fact that nations such as Germany and Japan are almost totallydependent on oil imports. The U.S. is not unique in being dependent on imports. Steps canand have been taken to manage the risks associated with imports, such as the StrategicPetroleum Reserve. Currently, the U.S. imports about 1.6 million barrels of oil daily from thePersian Gulf, which is down from 2.4 million before the recession.
6
The major sources of U.S.imports are Canada and Mexico, which are hardly considered national security risks.Some anti-oil proponents try to tie money paid for imports to funding terrorists. While thatprobably has some validity, the amount of money funding terrorists, according to the CIA and 9-11 Commission, is a small fraction of the global costs of imported oil. Terrorism is a low budgetform of warfare.U.S. interest in the Middle East predates the growth in oil imports over the past 30 some yearsand would exist even if we imported no Persian Gulf oil. Treaty commitments tie the UnitedStates to that region and since 9-11 so does the war on terrorism. Since we live in a globaleconomy, what takes place in other parts of the world affects our economic well being. Othernations will continue to import Persian Gulf oil even if the United States does not. Any upsetthere which would roil oil markets would also impact the U.S. Moving to electric cars would notbe an adequate buffer.The Energy Information Administration (EIA) projects that oil import dependence will decline6% by 2035. EIA projects that consumption is expected to remain relatively
flat
7
and arguesthat
meanwhile, the increase in U.S. crude oil production in the Gulf of Mexico and elsewhere,combined with increasing biofuel and coal-to-liquids (CTL) production and decreasingpetroleum-derived fuel demand, is expected to reduce the need for imports over the longerterm
.”
8
EIA concludes its most recent projection of petroleum import trends with the followingobservation:
U.S. dependence on imported liquid fuels measured as a share of total U.S. liquidfuel use, which reached 60 percent in 2005 and 2006 before falling to 52 percent in 2009, isexpected to continue declining over the projection period, to 42 percent in 2035.
9
 
6
7
Energy Information Administration,
 Annual Energy Outlook 2010,
(Washington, D.C.: U.S. Government PrintingOffice, 2010): 3.
8
 
Energy Information Administration, “How Dependent Are We on Foreign Oil?”, Updated November 29, 2010,
9
Energy Information Administration,
 Annual Energy Outlook 2011 Early Release Overview 

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