Op-Ed: Who is the electric vehicle subsidy for? Is support the best way to encourage the use of electric cars?

Electric vehicles have emerged as a viable alternative to diesel vehicles to reduce greenhouse gas emissions and air pollution (Greene and Plotkin, 2011). The interest and demand for electric cars are rapidly increasing (IEA, 2018), and there is a lot of research and policies related to electric vehicles. Many previous studies have discussed factors that affect people buying electric cars. Most studies have found that the reasons for purchasing an electric vehicle are due to strict emissions regulations, environmental concerns, rising gasoline prices, and financial subsidies (Hidrue et al., 2001, Soltani-Sobh et al., 2017, Li et al., 2017). Not only the environmental concerns but also the financial issues are the significant concerns of choosing the electric vehicle.

In the U.S., the federal provides a tax credit of $2,500 to $7,500 (U.S. Department of Energy). Oregon also offers partial refunds to low-income and mid-income class people who buy new or used electric vehicles through the Oregon Clean Vehicle Rebate Program (Oregon.gov, 2017). However, would low-income people buy electric cars with incentives? Are they really benefiting? I don’t think so.

Although electric vehicles have been getting more attention lately, and some believe they’re the way of the future, adoption is slow. Even if people receive federal incentives, they still have a strong perception that electric vehicles are expensive. Electric cars are still more expensive than comparable gasoline vehicles. Therefore, low-income people usually perceive that electric cars are for the wealthy rather than for themselves. Government rebates are only given to people who buy new cars, even though most of the low-income class are not able to afford to purchase and maintain their own cars. Even if the low-income class purchases their own vehicle, they will buy a gasoline vehicle if it is cheaper than an electric vehicle with subsidies. It is because the total cost that they have to spend is more important to low-income people than the amount of support they received from the government.

According to a study by Winegarden (2018), 46,593 of the reported taxes in 2014, only 0.03%, were eligible for electric vehicle tax credits. In total, $263.3 millions of tax credits were deducted. Of these, 78.7% received households with an annual income greater than $100,000 per year and households with an annual income between $50,000 and $100,000 received tax credits of 20.5%. Significantly, the upper-income taxpayers earned more than 99% of total tax credits for electric vehicles.

Figure 1. Electric Vehicle Plug-in Tax Credit Received by Adjusted Gross Income 2014 Tax Year (Winegarden, 2018)

For these problems, I would like to talk about other policies for low-income and people of color instead of subsidies.

Especially in Oregon, there is a lot of effort from the municipalities to promote electric vehicles. Oregon was the fourth-highest concentration state of electric vehicles relative to population in 2016 (U.S. Department of Energy, 2017). Portland first introduced electric vehicles to solve the mobility problem of low-income people and people of color, and encouraged them to use electric cars while providing them with cheaper options (City of Portland, Oregon., 2016).

In addition, there are many advantages of using electric cars in Oregon since Oregon has a lower electricity price than other states. The average retail price of electricity in Oregon is 11.25cents/kWh, this is 43^rd in the US in July 2018, and its electricity production is 30^th at 5,269thousand MWh. In the case of Texas and Florida, electricity prices are low because of high electricity production. However, Oregon has lower electricity rates than Colorado (23^rd, 12.67cents/kWh), which has similar electricity production (U.S. Energy Information Administration, 2018). According to Energy Trust of Oregon, Oregon supports low-income households through the Low Income Home Energy Assistance Program. Utility Bill Payment Plans also allow people to pay the same electricity bill each month regardless of usage. These programs will support low-income families to purchase and use electric cars. This is because one of the biggest concerns about using electric cars is the surge in electricity bills when they charge the electric vehicle.

Portland is trying to electrify public transportation. Trimet purchased electric buses and chargers with a $3.4 million grant from the Federal Transit Administration (FTA) in August 2016 (Portland General Electric, 2017). Moreover, Portland suggests policies for infrastructure in new buildings, especially apartments and condominiums, to provide the necessary charging infrastructure since low-income and people of color generally live in multi-unit dwellings such as apartments, to encourage the use of electric cars in these communities (City of Portland, Oregon., 2016).

Besides the federal subsidies, the government could make efforts to encourage the use of electric vehicles through lowering the price of electricity, supporting electricity fee policies, electrifying of public transportation, and constructing infrastructure in low-income households. Oregon's policies show that they are really implementing a strategy that can provide substantial benefits to low-income people.

Korea does not have much publicity about electric cars compared to other countries, and there are no concrete policies for electric vehicles. In such an environment, Korea government only tried to commercialize EVs through subsidies to purchase electric cars. However, people are hesitant to buy because of the problem of grant only for purchasing, and the inconvenience from the lack of infrastructure. This is not just a matter of Korea. In order to revitalize electric cars and solve the mobility problems of the underprivileged, we should solve the problem by proposing a policy that has a practical effect instead of a meretricious subsidy policy.

Reference

City of Portland, Oregon., 2016. 2017 City of Portland Electric Vehicle Strategy. http://www.portlandoregon.gov/bps/article/619275

Energy Trust of Oregon, Community Resources. https://www.energytrust.org/residential/income-qualified-services/community-resources/

Greene, D. L., Plotkin, S. E., 2011. Reducing Greenhouse Gas Emissions from U.S. Transportation. Prepared for the Pew Center on Global Climate Change.

Hidrue, M., Parsons, G., Kempton, W., Gardner, M., 2011. Willingness to pay for electric vehicles and their attributes. Resource and Energy Economics, 33, 686-705.

IEA (International Energy Agency), 2018. Global EV Outlook 2018: Towards cross-modal electrification. https://webstore.iea.org/download/direct/1045?fileName=Global_EV_Outlook_2018.pdf

Li, X., Chen, P., Wang, X., 2017. Impacts of renewables and socioeconomic factors on electric vehicle demands – Panel data studies across 14 countries. Energy Policy, 109, 473-478.

Oregon.gov, Department of Environmental Quality, 2017. Oregon Clean Vehicle Rebate Program. https://www.oregon.gov/deq/aq/programs/Pages/ZEV-Rebate.aspx

Portland General Electric, 2017. Transportation Electrification Plan.

Soltani-Sobh, A., Heaslip, K., Stevanovic, A., Bosworth, R., Radivojevic, D., 2017. Analysis of the Electric Vehicles Adoption over the United States. Transportation Research Procedia, 22, 203-212.

U.S. Department of Energy, Office of Energy Efficiency & Renewable Energy, 2017. California Had the Highest Concentration of Plug-in Vehicles Relative to Population in 2016. https://www.energy.gov/eere/vehicles/articles/fotw-1004-november-20-2017-california-had-highest-concentration-plug-vehicles

U.S. Department of Energy, Office of Energy Efficiency & Renewable Energy. Electric Vehicles: Tax Credits and Other Incentives. https://www.energy.gov/eere/electricvehicles/electric-vehicles-tax-credits-and-other-incentives

U.S. Energy Information Administration, 2018. Rankings: Average Retail Price of Electricity to Residential Sector, July 2018 (cents/kWh). https://www.eia.gov/state/rankings/?sid=OR#/series/31

Winegarden, W., 2018. Costly Subsidies for the Rich: Quantifying the Subsidies Offered to Battery Electric Powered Cars. Pacific Research Institution.