Electric cars don't need subsidies anymore

NEWS that the US$7,500 federal tax credit for electric vehicle purchases would be scrapped under the tax reform bill proposed by House Republicans has inspired no shortage of hand-wringing. From environmental and electric vehicle advocacy groups to the very carmakers who were once accused of dragging their heels on electric car technology, opponents of the proposal are gearing up to fight for the incentive. But with the battle lines being drawn around the partisan divide on global warming policy, nobody seems to be asking if the tax credit is even an effective or equitable tool for accelerating electric vehicle adoption.

There is some strong evidence to suggest that it may not be. When the American Recovery and Reinvestment Act created the plug-in vehicle credit in 2009, then-president Barack Obama declared that its subsidy would help put a million plug-in vehicles on American roads by 2015. By the end of that period, just 400,000 vehicles had been sold cumulatively in the US, raising real questions about the efficacy of the underlying policy. Though the tax credit surely helped sell more electrics than might have been sold otherwise, its impact was blunted by the cheap petrol prices that have made …