For reasons unknown to me, Charles Lane has a bee in his bonnet about electric cars. He hates them. Really passionately. And he doesn’t recognize this hatred of electric cars as a kind of idiosyncracy of his (I hate dill, these things happen) and accept that most people won’t share it. He instead insists that other people’s failure to share his obsessive hatred of electric cars reflects a deep and profound kind of character flaw.
Thus we’ve had “Cold Truths About Electric Cars Cold Weather Shortcomings,” “The Leaf: Electric Except When It’s Diesel?,” “Electric Cars and Liberals’ Refusal to Accept Science,” “The Electric Car Mistake,” and now “Liberals’ Investment Drives Tesla’s Survival” which features a hilarious piece of projection where he asserts that “Tesla’s corporate fate is ultimately less interesting than the fact that so many people, especially progressives, have become so deeply invested in it—politically and psychologically, if not financially.”
In fact, the exact opposite is the case. I’m perfectly prepared to agree with Charles Lane that a federal tax credit of $7,500 per fully electric vehicle is not a particularly cost-effective environmental program (see this CBO presentation for details). But honestly, what is the big deal here? Tesla Motors is on track to sell about 20,000 Model S vehicles in the United States in 2013. The tax credits to subsidize that purchase will cost the federal government about $150 million in 2013. This comes at a time when, due to the combination of high unemployment and low inflation, there would be no benefits whatsoever to a lower federal deficit. Eliminating the tax credit would accomplish nothing, at all, for the public interest.
And the case for subsidies seems reasonably clear to me. If everybody had electric cars and nobody owned gasoline-fired cars, then bringing a new gas-powered car to market would be a huge pain. After all, gasoline cars have incredibly limited range! With your trusty old electric car you just pull in to the charging stations that line the nation’s highways. To take a gasoline car on a long trip you need to sacrifice all your trunk space to holding extra canisters of gasoline, or else spend all your time fussing with smartphone apps that will direct you to the occasional oases where eccentric people have gasoline on hand they’ll sell to you. Which is to say that there are a lot of network effects involved in the automobile fuel industry, so in order to ever produce a structural shift you need some kind of affirmative public policy intervention.
Now, again, if the proposal were to scrap this tax credit and trade it for some other policy (higher gas taxes, rebated on a flat per capita basis) then I would sympathize greatly with that. There are plenty of more cost-effective green initiatives out there than subsidies for Tesla and Leaf buyers. But simply scrapping the credit would accomplish nothing. And the program is much too small to be worth repeatedly ranting and raving against. Did you know that the federal government hands out about $7 billion a year in tax credits for oil production? Everyone is entitled to become obsessed with some random program—my personal favorite is the Exchanges With Historic Whaling and Trading Partners grant program—but that’s on you. Tesla is an interesting company because it’s producing a very well-reviewed and technologically innovative car and lots of people are interested in cars.