Are electric cars worse for the environment? Crunch the numbers, and it looks like all those subsidies might be counterproductive

By Jonathan Lesser

"If you believe the headlines, traditional automobiles are speeding toward a dead end. All those V8s, V6s and turbocharged vehicles we’ve grown to love will soon be replaced by squadrons of clean, whisper-quiet, all-electric vehicles. And if you believe the headlines, the environment will be much better off.

Policymakers at every level have done their part to push electric vehicles by creating a tankful of subsidies. Thanks to laws signed by both George W. Bush and Barack Obama, electric-vehicle buyers can feast on federal tax credits of up to $7,500 that reduce the initial purchase cost of their vehicles. Not to be outdone, many states also dangle their own mix of goodies for electric vehicle buyers, including purchase rebates as large as $5,000, additional rebates for vehicle chargers, and free use of public charging stations—which, of course, are only “free” because they’re subsidized by ratepayers and taxpayers. Some states even give electric vehicles preferential access to carpool lanes.

Then there are the electric vehicle mandates. In January, California Gov. Jerry Brown decreed that 5 million electric vehicles must be on his state’s roads by 2025, along with 250,000 charging stations. Eight other states are following California’s lead. One California lawmaker has even introduced legislation to ban all internal combustion vehicles by 2040.

All of this might make sense if electric vehicles, as their supporters claim, were truly likely to reduce air pollution and tackle climate change. But are they?

To answer that question, I used the U.S. Energy Information Administration’s most recent long-term forecasts for the number of new electric vehicles through 2050, estimated how much electricity they’d use, and then figured out how much pollution that electricity would generate, looking at three key pollutants regulated under the U.S. Clean Air Act—sulfur dioxide (SO₂), oxides of nitrogen (NO_X), and particulates—as well as CO₂ emissions. I compared them to the emissions of new gasoline-powered vehicles, using the EIA’s “real world” miles-per-gallon forecast, rather than the higher CAFE standard values.

What I found is that widespread adoption of electric vehicles nationwide will likely increase air pollution compared with new internal combustion vehicles. You read that right: more electric cars and trucks will mean more pollution.

That might sound counterintuitive: After all, won’t replacing a 30-year old, smoke-belching Oldsmobile with a new electric vehicle reduce air pollution? Yes, of course. But that’s also where many electric vehicle proponents’ arguments run off the road: they fail to consider just how clean and efficient new internal combustion vehicles are. The appropriate comparison for evaluating the benefits of all those electric vehicle subsidies and mandates isn’t the difference between an electric vehicle and an old gas-guzzler; it’s the difference between an electric car and a new gas car. And new internal combustion engines are really clean. Today’s vehicles emit only about 1% of the pollution than they did in the 1960s, and new innovations continue to improve those engines’ efficiency and cleanliness.

And as for that electric car: The energy doesn’t come from nowhere. Cars are charged from the nation’s electrical grid, which means that they’re only as “clean” as America’s mix of power sources. Those are getting cleaner, but we still generate power mainly by burning fossil fuels: natural gas is our biggest source of electricity, and is projected to increase. And coal, while still declining, will remain the second largest source of electricity for some time. (Third is nuclear power, which doesn’t generate emissions but has other byproducts that worry some environmentalists.) Even with large increases in wind and solar generation, the EIA projects that the nation’s electric generating mix will be just 30% renewable by 2030. Based on that forecast, if the EIA’s projected number of electric vehicles were replaced with new internal combustion vehicles, air pollution would actually decrease—and this holds true even if you include the emissions from oil refineries that manufacture gasoline.

As for states like California with stringent mandates to use more renewable energy for their power grid, they also have the highest electric rates in the continental US, 50% higher than the US average. And electric rates in those states just keep increasing. So it’s a cleaner power mix, but makes recharging your car more expensive. The higher the electric rate, the lower the incentive for a new car buyer to purchase an electric vehicle.

As for greenhouse-gas emissions, my analysis shows that electric vehicles will reduce them compared to new internal combustion vehicles. But based on the EIA’s projection of the number of new electric vehicles, the net reduction in CO₂ emissions between 2018 and 2050 would be only about one-half of one percent of total forecast U.S. energy-related carbon emissions. Such a small change will have no impact whatsoever on climate, and thus have no economic benefit.

So, if electric-vehicle subsidies don’t help the environment, what—or who—do they help? Most electric-vehicle buyers are far wealthier than average Americans. A nationwide survey in 2017 found that 56% had household incomes of at least $100,000 and 17% had household incomes of at least $200,000. (In 2016, median household income for the US as a whole was less than $58,000.) So it’s fair to say the subsidies disproportionately benefit the wealthy at the expense of the poor, who cannot afford to buy even subsidized electric vehicles or live in their own homes to take advantage of residential chargers or solar panels.

Not only that, the wires and charging stations needed to charge all those electric vehicles will be paid for by all ratepayers, further raising electric rates. And as more wealthy customers install solar panels to charge their electric vehicles, the costs to provide them back-up power will fall on those who cannot afford to do so. 

In effect, the wealthy owners of electric vehicles will enjoy the benefits of their clean, silent cars, while passing on many of the costs of keeping their vehicles on the road to everyone else, especially the poor. 

To be sure, electric cars are impressive. Some are quicker off the line than a Formula 1 race car. But there is no economic or environmental justification for the many billions of dollars in subsidies that America is already paying to speed their adoption.

So what to do? First, Congress should immediately terminate those electric-vehicle tax credits, which just benefit the wealthy. Congress should also eliminate zero-emissions credits, which electric-vehicle manufacturers have used to boost their bottom line – $860 million for Tesla alone in the last three years. And third, states should eliminate their various subsidies for electric vehicles and charging infrastructure, which are also paid for disproportionately by the poor and are contributing to rising electric rates.

Electric vehicle subsidies and mandates share an unfortunate, and all too common trait with other government policies: They’re based on “conventional wisdom” that turns out to be wrong. Wealthy consumers who have purchased Teslas and Chevy Bolts primarily to signal their green bona fides for their friends and neighbors, and who have socialized many of the costs of their purchases to those who are less well-off, might wish to take a closer look at the numbers. Their hands may not be quite so clean as they believe.

Jonathan Lesser is the President of Continental Economics, an economic and regulatory consulting firm. His new report, “Short Circuit: The High Cost of Electric Vehicle Subsidies” was published by the Manhattan Institute on May 15."