A final deal on the GOP-led tax overhaul is nearing completion, and one report indicates that the electric vehicle tax credit has survived the chopping block. The level of saber rattling around the tax credit was minimal, but the debate that materialized felt lacking in substantive questions of the future of federal involvement in encouraging the next stage of this technology.
The credit — up to $7,500 for a plug-in electric, designed to encourage initial sales of these vehicles — has long generated strong feelings on the left and right. Critics, exemplified in this Wall Street Journal op-ed, contend it’s a giveaway to wealthy Tesla owners. That’s a useful framing that combines environmentalists, Democrats and the Hollywood elite in a cocktail of conservative rage. In response, advocates highlight the important public policy goal of reducing our reliance on fossil fuels and cast sideways glances at preferential regulatory treatment that the oil and gas industry receives.
What is lost in this perpetual back-and-forth is acknowledgment of an awkward reality: While the tax credit spurred initial interest in green vehicles, it will become less influential as this technology matures, becomes more cost-effective, and vehicle sales rise. And as the credits lose their power, they become harder to defend against future attacks.
Just take a look at Norway, whose green car incentive was wildly successful: Zero-emission vehicles make up nearly 30 percent of the country’s car market. But now, the country is reconsidering its subsidies as it looks at lost revenue.
If anything, this is the dream for policy wonks — a market distortion that accomplishes its goals so well it can be retired. But as the U.S. eyes an influx of green vehicles, proponents should begin to consider what a post-tax credit world looks like and what new federal mechanisms can be utilized to encourage drivers to go green. The critics may have been beaten back for now, but they will come again, and supporters of the powertrain revolution will need new arguments in order to succeed.
— Shiraz Ahmed