Green Subsidies Gone Mad

  • Date: 07/08/10

Imagine this scenario: Politicians at the state and federal levels begin handing out billions of dollars in subsidies so that over the next decade America’s wealthiest people – those with household incomes of $200,000 or more – will be encouraged to buy more vacation homes. Oh, and those homes should be concentrated in the areas around Los Angeles and San Diego.

The outrage at such an eventuality would be obvious and immediate. The Democratic Party and the party’s union-based supporters would, no doubt, be particularly vociferous in their objections. They would waste no time in pointing out that such subsidies are ignoring the needs of working-class voters, particularly at a time when the US economy continues to be in recession, unemployment rates are near 10%, and chronic joblessness could continue for years to come. Or given the California-centric bias of the subsidies, imagine the reaction from a conservative Congressman hailing from Alabama, Mississippi, or Arkansas.

Now toss aside that scenario and consider the real-life subsidies being lavished on the electric car, a vehicle which, if it ever gains traction in the market place — and there’s no indication that it will, given the sector’s century-long history of failure tailgating failure – will largely serve as driveway jewelry for the wealthy.

In March, Der Spiegel estimated that over the next five years, the US will provide about $27 billion in subsidies for electric car development and production. Meanwhile, France will spend $2.7 billion and Germany $720 million.

There’s no outrage at those massive subsidies even though the Americans who are most likely to buy electric cars are — according to a July study done by Deloitte Consulting — those with household incomes “in excess of $200,000” and “who already own one or more vehicles.” Furthermore, Deloitte expects those buyers to be “concentrated around southern California where weather and infrastructure allow for ease of EV ownership.”

Deloitte concluded that the US now has about 1.3 million consumers who “fit the demographic and psychographic profiles” of expected EV buyers. It went on saying that mass adoption of the EV “will be gradual” and that by 2020, perhaps 3% of the US car market could be amenable to EVs. The firm goes on saying that the keys to “mass adoption are 1) a reduction in price; and 2) a driving experience in which the EV is equivalent to the internal combustion engine.”

Think about those numbers. Out of 300 million Americans, perhaps 1.3 million are likely to buy an electric vehicle, and yet, all we hear lately is that electric cars are the way of the future. Indeed, over the past few weeks, we’ve been carpet-bombed with happy talk about the electric car.

In late July, the New York Times published a long profile of Elon Musk, the entrepreneur behind Tesla Motors, the startup that has produced about 1,000 electric sports cars. A few days after that, the news was dominated by the announcement of the sticker price ($41,000) of the new Chevrolet Volt. About that same time, Senate Majority Leader Harry Reid introduced a scaled-back energy bill that promises some $400 million in new subsidies for the electric-car business. The key photo op for the electric car came on July 30, when President Barack Obama visited a GM plant that will assemble the Volt. Obama reportedly pronounced the car as “pretty smooth.”

But amid all of the hype, the essential question is obvious: Why is the government throwing so much money at a technology that shows so little promise?

Ever since we moved from horse-drawn power to automobiles, the electric-car industry has been promising that it was just on the cusp of viability. Today is no different. We are being told that this time things are different, that the technologies are better, the batteries are better, and that consumers are ready to adopt electrics like never before. Perhaps that’s true. But consider this declaration: The electric car “has long been recognized as the ideal solution” because it “is cleaner and quieter” and “much more economical.”

That story was published by The New York Times on November 12, 1911.

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