The Congressional Budget Office recently released a dour report on the cost of federal policies designed to promote electric vehicles and the role they will play in reducing national gasoline consumption over the next several years. Consumer tax credits for electric vehicles, which can run as high as $7,500, will make up about 25 percent of the $7.5 billion these policies will cost through 2019, the CBO says, and they will have "little or no impact" on overall gasoline consumption.

The CBO looked at tax credits for plug-in hybrid electric vehicles (like the Chevrolet Volt) and fully battery-electric vehicles (i.e., Nissan Leaf), and compared them to similar-sized conventional gasoline-engine vehicles with average fuel economy ratings. These EVs are using little or no gasoline and produce less greenhouse gas emissions, but the cost to the government can be high, the CBO found. For each gallon of gasoline not burned as a result of a consumer driving an EV, it will cost the federal government anywhere between $3 and $7.

The federal tax credit may not be enough to offset the higher price of EVs compared to high-mileage conventional cars. The costs of electric vehicles are much higher than similar-sized gasoline vehicles, and the federal tax credit of $7,500 per vehicle is not enough to bridge the gap, the CBO said. And, the bigger the battery, the greater the cost disadvantage for buyers of plug-in vehicles and conventional vehicles.

Part of the problem in meeting gasoline consumption reduction targets is that upcoming federal fuel standards could cancel out gains made by federal tax credits, the CBO study said. The corporate average fuel economy mandate begins with automakers meeting 35.5 mpg by 2016 and 54.5 mpg by 2025. "Increased sales of electric vehicles allow automakers to sell more low-fuel-economy vehicles and still comply with the federal standards that govern the average fuel economy of the vehicles they sell (known as CAFE standards)," the CBO said.

Beyond consumer tax credits, where will the remaining 75 percent of that $7.5 billion cost to the federal government come from? About $2 billion is going into grants to the battery industry and around $3.1 billion is expected to come from unpaid portions of the $25 billion in loans to manufacturers of advanced vehicles.


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  • 68 Comments
      Ryan
      • 2 Years Ago
      He is pointing out that the government would be better off promoting bicycles and giving people $1,000 if they commute by bike. I would say it would be a good plan, or at least help bicycling along by building more bike trails, bike racks, and subsidize batteries in electric bikes. It might not work in every city or state, but it would have a big impact on the fuel we use if you could get a few million people to bike to work a few days a week.
      Rick
      • 2 Years Ago
      Maybe subsidise LPG the US sleeping giant in Trucks rather than give big subsidies to EV's, with a higher tax on diesel trucks prices and fuels to tip the balance in favour of using cheap US NG Autogas rather than foreign oil would be a good start in fixing the huge US trade deficit.
      Rick
      • 2 Years Ago
      UK Cycle to work scheme has helped "3,700,000" Brits buy a bike last year sales are up +28% last year. It's good for the environment proper zero emission transport, gets you off Arab oil, and makes you healthier & wealthier. In sharp contrast Brits only brought "30" Electric Cars in August 2012. BRITISH CYCLE TO WORK SCHEME. Its very popular. Employees Using the Bike to Work scheme, your employer can help you obtain a brand new bike and safety equipment worth up to £1,000 pounds. You can use a salary sacrifice arrangement to hire for the bike monthly which means you can save up to 42% of the retail price of bike and equipment. Employer Offers employers a totally free service to help you take advantage of the recent Government initiative offering tax free bikes for cycling to work. Using the Bike to Work scheme, your company can purchase a brand new bike and safety equipment worth up to £1,000 pounds tax free, for your employees. http://www.biketowork.co.uk/?gclid=CMToxqOwy7ICFcUPfAod9hsAEQ
        DaveMart
        • 2 Years Ago
        @Rick
        I suggest everyone else who is sick and tired of Rick blathering on about bicycles on an automobile site join me in reporting him for being wildly off-topic. An occasional mention is fine, but not the relentless propaganda barrage that we get from him.
      Mark Schaffer
      • 2 Years Ago
      Either we stop the rise in CO2 emissions to the atmosphere and reverse it or this past summer will seem like a pleasant memory. Your choice.
        2 Wheeled Menace
        • 2 Years Ago
        @Mark Schaffer
        Review the vostok ice core data. We are headed for a heat peak soon, then an ice age for a while. The ice core shows this data as happening every 95,000 years or so. http://en.wikipedia.org/wiki/Ice_core#Ice_core_data Ask yourself how this cycle has been going on before humans were around... :)
      DaveMart
      • 2 Years Ago
      Spec. I have no idea what you are talking about. No one has said a motor is a battery. Since you do not give the basis for your statement that $625/kwh is wrong, it is also impossible to work out why you think so there.
      Spec
      • 2 Years Ago
      DaveMart . . . Try reading what you cut & paste. "Add $4,000 for the battery pack structure, the cooling, the high-voltage wiring, THE MOTOR AND THE POWER ELECTRONICS" A motor is not a battery. A charger and motor controller (power electronics) is not a battery. Duh.
      usbseawolf2000
      • 2 Years Ago
      Bob Lutz said Volt's battery costs $350 per kWh. The current tax credit is $417 per kWh. See the problem there? Still want to double the battery incentive to $834 per kWh?
      jjmcavoy.law
      • 2 Years Ago
      this article is confusing and full of unsupported "factoids". Out of what orfice did "$3 to $7 cost per gallon saved" leak? What time period is used for this calculation? Are US petroleum subsidies considered?
        EZEE
        • 2 Years Ago
        @jjmcavoy.law
        'Oriface' lol
        Marcopolo
        • 2 Years Ago
        @jjmcavoy.law
        @ jjmcavoy.law ''Are US petroleum subsidies considered?" Even at the maximum, such 'subsidies' are really just tax credits, and account for less than 1 cent per gallon of the pump price of gasoline. The Federal government is caught in a catch 22 situation. On the one hand if fuel sales decrease, the US has the potential to avoid imported fuel, on the other hand the government losses tax revenue from the oil industry, motorists, etc.. In addition the states are forced to increase local taxes, and require federal funding. Less oil profits spent in the US means less income for the retirement and superannuation industry, this in turn produces a downturn in government bonds purchases and forces up taxation, which leads to a flight of capital to foreign growth markets. It ain't as easy as it all looked, before getting elected .......!
      Tony Belding
      • 2 Years Ago
      I never thought the tax credit was supposed to directly reduce gas consumption. I thought it was supposed to help boost off (jump-start, even!) the electric car industry. That's all. And with that line of reasoning, the CBO's finding is irrelevant: the tax credit is highly inefficient at doing something it was never meant to do. Big deal? Keep in mind that I'm skeptical of subsidies and "social engineering" through the tax code, and I doubt whether this tax credit ever made a lick of sense to begin with. Ultimately the laws of supply and demand are going to sort out this matter.
        Spec
        • 2 Years Ago
        @Tony Belding
        Exactly. The point is to jump-start the battery biz and EV biz. Once it gets prices down to where they are more competitive with gas cars then people will switch over because electricity is so much cheaper than gas. We'll then drive on much more 100% domestic electricity, emit less local pollution, emit less pollution, import less oil, reduce CO2 emissions, etc.
          Spec
          • 2 Years Ago
          @Spec
          @usbseawolf2000 40% of the EV car buyers have solar PV systems. Most of the EV sales are currently in places like California, Oregon, & Washington where the electricity is much greener than average. But even when you charge up in a coal-heavy electricity state, it is about break even because ICE motors are are very inefficient whereas power plants and EVs are very efficient. So yeah . . . if you are in rural Montana then buy a Prius. But if you are California, Oregon, & Washington then buy an EV or PHEV.
          usbseawolf2000
          • 2 Years Ago
          @Spec
          Prius owner with the same solar panel would be greener simply because Volt emits more greenhouse gas per mile.
          usbseawolf2000
          • 2 Years Ago
          @Spec
          You need to check out EPA Beyond Tailpipe emission site. Leaf and Volt emit more emission than PiP and even a regular no-plug Prius. $7,500 tax credit does not reduce emission. It just shift the fuel source. Remember, a third of gasoline is also domestic.
        Rick
        • 2 Years Ago
        @Tony Belding
        We paying some of the highest motoring taxes in the world in the UK our fuel prices are nearing $10 a gallon, we are paying £1.40 a litre for cheapest unleaded of which is made up of 0.57p for the fuel 0.83p British Government taxes. http://www.petrolprices.com/fuel-tax-calculator.html With nearly $10 gas, according to some folk here on Autoblog, us Brits SHOULD be driving around in 99% Electric Car boom with perfect roads. In reality it has not happened our roads are crumbling pot holes are bodged up by the cheapest bidder if you are lucky most never get repaired, local government budgets have been frozen non of huge amount of money milked out of the poor ole British motorist in sky high taxes gets spent on improving bridges or roads, and to those that think higher taxation $10 gas has created a 99% electric car boom in the UK have got a big electric shock coming, we only brought only 30 Electric Car last month in August in the UK. $10 gas = 1.3 million gave up on the car in the UK, they are starting to become unaffordable to masses. http://www.imncontent.com/13-million-give-driving-cost-motoring-rises $10 gas = 3.7 million new two wheeled iron horse sales as folk get into cycling in the UK. http://www2.lse.ac.uk/newsAndMedia/news/archives/2011/08/cycling.aspx $10 gas = 30 UK Electric Car sales in August 2012 (down -11% from 34 sales August 2011) http://www.smmt.co.uk/2012/09/august-2012-–-ev-and-afv-registrations/ $10 gas = private buyers, police downsize in to Ford Fiesta"s & GM Corsa cars, Ford & GM Opel lose billions of $$$ building small car at huge losses year after year with the world most highly paid German Ford & Opel workforce, that won't ever make much profit from making tiny cars. Ford Focus are cars from the past to big. http://www.clickgreen.org.uk/news/national-news/123046-police-downsize-patrol-car-fleets-to-save-on-cash-and-carbon.html $10 gas = NEW gas guzzling Ford Focus fallen out of Europe's Top 10 for first time ever, as overtaxed folk down local police downsize. http://www.jato.com/PressReleases/Europe’s%20new%20car%20market%20shows%20no%20sign%20of%20recovery%20in%20August.pdf Government high taxation on fuels "the way to go", we have it already in Europe and it is absolutely destroying the auto industry here, its push folk out of cars or into downsizing into smaller cars which are impossible to make a profit on with expensive labour cost & no with $10 gas it has not driven us all into Electric car buyers as only 30 out of 60,000,000 Britis only brought an EV in August.
          EZEE
          • 2 Years Ago
          @Rick
          You mean higher taxes doesn't mean better government services, shiny roads, and a populace that similes and says, 'pip pip' as they walk by? But....but....everything they have ever told us! But....I don't know what to believe anymore! Government isn't efficient? See the shock on my face... :|
          Ford Future
          • 2 Years Ago
          @Rick
          Is it a tax consequence or an over population consequence. How's parking in London?
      Ryan
      • 2 Years Ago
      I would think raising gas taxes would have much more impact on this. Or at least creating a floor that people know that the price will never fall below again. But, those things aren't likely to happen anytime soon, but they should.
        • 2 Years Ago
        @Ryan
        Yes! Absolutely. If we want to reduce fuel consumption because the true cost of a gallon of gas is far more than what consumers pay (it is!), then the way to do it is to raise gas taxes. Then let the market decide. This is from someone who has taken advantage of the $7500 tax credit on a Nissan LEAF, but would much rather see a higher gas tax than direct incentives for EVs.
      EZEE
      • 2 Years Ago
      Shame! :D
      Marcopolo
      • 2 Years Ago
      @ Ryan, I people want to ride to work, that's their choice. As for the government giving people $1000 of taxpayer money to purchase a bicycle, well , not only is that irresponsible, but can you imagine the opportunity for a massive scam ? !
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