News Column

Federal Report Questions Value of Tax Credits for Electric Vehicles

Sept. 20, 2012

Todd Spangler

Electric Vehicles

Federal budget analysts expect policies and tax breaks encouraging the purchase and manufacture of electric vehicles to cost about $7.5 billion over the next seven years but say they are unlikely to have much effect on gasoline use or greenhouse gas emissions in the near future.

The nonpartisan Congressional Budget Office on Thursday released a report on the effects of federal tax credits on the purchase of electric vehicles, which include a maximum $7,500 credit for the average plug-in hybrid.

In the report, analysts said the lifetime costs of owning a electric vehicle are still "generally higher than those of a conventional vehicle or traditional hybrid of similar size and performance," estimating a purchase cost of about $16,000 to $19,000 more per vehicle, depending on whether it is an all-electric or plug-in hybrid.

They said that overall, an electric or plug-in hybrid would "require a tax credit of more than $12,000 to have roughly the same lifetime costs as a comparable conventional or traditional hybrid vehicle."

Lower electricity prices or higher gas prices could reduce the future cost of owning electric or plug-in hybrids, the analysts noted in the report.

The report said while gasoline use by consumers who purchase electric vehicles is reduced, the tax credits may have the indirect effect of allowing automakers to sell more low-fuel economy vehicles -- those that get fewer miles to the gallon -- and still comply with federal fuel standards for the overall fleet of the nation's vehicles.

"Consequently," CBO said in a release on the report, "the tax credits will have little or no impact on the total gasoline use and greenhouse gas emissions of the nation's vehicle fleet over the next several years."

The report noted that if tax credits for electric and plug-in vehicles cause regulators to set higher fuel-economy standards it could ultimately result in reductions in gasoline consumption and greenhouse gas emissions but that depends on the long-term effectiveness of the tax credits and whether incentives are altered to spur more electric vehicle sales.

Source: (c)2012 the Detroit Free Press. Distributed by MCT Information Services.

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