“When politicians are out there saying, ‘Let’s get rid of all cars using gasoline,’ do they understand this?” Toyota President Akio Toyoda asked in 2020, referring to the profound consequences of politicians forcing a transition away from conventional vehicles.
It’s a good question, and a proposal in the so-called Inflation Reduction Act being pushed through Congress suggests the answer is “no.”
President Joe Biden has used a variety of policy vehicles to force a transition from the ubiquitous internal combustion engine to electric vehicles. Among them are executive orders, procurement mandates for the military, and regulations to make it almost impossible to manufacture and sell a conventional car or truck.
The Senate is poised to join in. Heaped on top of tens of billions of dollars in grants, taxpayer-backed loans, and investment tax credits for EV manufacturers, the misnamed Inflation Reduction Act negotiated by Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., proposes an extension of EV tax subsidies.
The bill offers up to $7,500 in tax credits for new EV purchases, including bonuses for EVs made by union labor and batteries manufactured or assembled in North America. The legislation also makes the existing EV tax credit even bigger by eliminating caps on sales, adding a new tax credit of $4,000 for used EVs, and extending the credits for the next decade.
While there are some improvements—unlike the existing credit, the credit is not available for Americans earning more than $300,000 jointly or for EVs containing batteries made with critical minerals from “foreign entities of concern”—they don’t address the real problem.
The problem isn’t the size of the credit or even EVs themselves. The real problem is politicians attempting to force a transition to energy sources they prefer, having no inhibitions about the arrogance of such a central planning scheme, the restrictions it imposes on freedom, or the trade-offs, limitations, and collateral damage those policies cause at Americans’ expense.
Trade-offs, Limitations, and Collateral Damage
There’s no perfect vehicle or energy. All involve compromises that individuals, families, and businesses prioritize differently. Yet too many politicians think they know what’s perfect and the right vehicle for everyone else. And as they inappropriately impose their preferences on Americans, they ignore the costs of forcing EVs would impose on the country.
Let’s count some of the ways.
1. The disconnect between reality and political aspirations is wide. A full 90% of Americans’ transportation energy needs are covered by petroleum. EVs make up about 1% of registered vehicles in the U.S., despite years of federal and state subsidies. The International Energy Agency estimates that politicians’ aspirations for EV deployment under the Paris Agreement climate commitments imply a thirtyfold increase in demand for minerals used in EV batteries by 2040. That’s perhaps why the head of EV company Rivian warned that ongoing supply chain problems with “semiconductors are a small appetizer to what we are about to feel on battery cells over the next two decades.”
2. EVs trade fuel dependency for mineral dependency. While conventional cars and trucks rely on global markets for crude oil and refining capacity (both of which the U.S. is a major global supplier of), EVs must rely on global markets for mining and refining of minerals, which account for more than half the cost of an EV battery.
Minerals such as lithium, cobalt, nickel, graphite, and copper are needed to manufacture batteries and other components in EVs. According to the International Energy Agency, EVs use six times more minerals than a conventional car. The agency estimates that it takes more than 16 years on average to get a mine up and running from the moment of discovery of mineral deposits. Yet the Biden administration has done its level best to block new mining capacity in the United States, particularly in Minnesota and Alaska.
American miners are a small player in global markets for the minerals needed for EVs: Chile is the world’s largest mining country for copper; Indonesia for nickel; Australia for lithium, and—far more troublesome when it comes to human rights abuses and environmental stewardship—China for rare earth minerals and the Democratic Republic of Congo for cobalt.
Refining capacity for these minerals is deeply concentrated in China.
In other words, “concerns about price volatility and security of supply do not disappear in an electrified, renewables-rich energy system.”
3. EVs are being used as a pretext for big government favors to labor unions. While there is certainly no reason why policies addressing EVs have to be special favors for labor unions, the Schumer-Manchin bill would give bonus tax subsidies for EVs made with union labor. This is just good, old-fashioned cronyism. Further, these policies would inflate EV costs and penalize most workers who prefer not to join a union. It could even backfire and lead to fewer electric vehicles being produced and sold in the U.S. Only about 14% of autoworkers are unionized in the U.S. Meanwhile, foreign-owned automakers now employ more U.S. workers than domestic automakers.
4. Policies pushing EVs are corporate welfare and special favors for the wealthy. Of the estimated $7.5 billion in existing EV credits to be claimed between 2018 and 2022, corporations will take about half. Of the other half claimed by individual Americans, 78% will go to people making more than $100,000 per year. One state leads the pack: California is home to 39% of registered electric vehicles—perhaps unsurprising inasmuch as the state is banning the sale of gasoline-powered vehicles starting in 2035 as part of its radical climate agenda.
5. There’s no guarantee that EVs reduce greenhouse gas emissions. Regardless of how one views the issue of global warming, EVs are no surefire solution. EVs have to plug in somewhere, and 60% of the electricity consumed in the U.S. is generated from natural gas and coal. Ironically, even as the need for electricity generation would grow, federal regulators and some states are trying to choke off production and use of natural gas as a power source, just as they’ve been trying to do to coal for years. It’s no wonder grid operators have heightened concerns about reliability.
6. EVs come with trade-offs for owners. EVs bring interesting capabilities to the table, but they also have detractors. Currently, many EVs cost more than their conventional counterparts. Refueling takes time. EV batteries lose an average of 2% of their capacity each year (depending on exposure to temperature extremes, how often an owner charges the battery, and other habits that degrade batteries), and replacement is costly. Some parking garages even prohibit drivers from parking in them due to the risks of batteries potentially catching on fire. And the driving range of EVs decreases and heating becomes a costly choice in cold weather, which is probably why very few EVs are registered in cold-weather states that don’t heavily subsidize them or penalize gasoline cars.
It’s one thing for an individual, family, or company to weigh trade-offs and make the decision to purchase an EV. It’s a totally different matter for politicians or bureaucrats to force the decision on Americans.
Competition made America a great country in which to innovate, run a business, and shop for products that meet the diverse needs of Americans. EVs are one of a variety of options out there competing for Americans’ business and should compete on their merits.
Unless Congress comes to its senses, American taxpayers will be covering the costs of big government EV policies, whether they buy an EV or not.
Note: This article has been updated since publication.
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