CBO: Electric car subsidies ineffectual on fuel efficiency

A new report by the US Congressional Budget Office found that tax credits and other initiatives will not significantly impact the overall fuel-efficiency of cars on American roads, according to Consumer Energy Report.

Rick Bowmer/AP/File
A Nissan Leaf charges at a electric vehicle charging station in Portland, Ore., in this August 2011 file photo. A new report by the US Congressional Budget Office found that tax credits for electric vehicles will not significantly reduce gas consumption in the US.

Despite the federal government pumping $7.5 billion into the electric vehicle industry in the United States through 2019, overall national gasoline consumption is unlikely to be significantly affected, according to a report released by the Congressional Budget Office (CBO).

Developed by the Bush administration in 2007 and initiated by the Obama administration in 2009, the program delivering the influx of cash is intended to help speed the growth of the fuel-efficient vehicle industry. The funds in question are made up largely by consumer tax credits that offer as much as $7,500 to consumers purchasing electric vehicles, followed by $2.4 billion in grants to electric battery manufacturers and $3.1 billion in loans intended to encourage automotive companies to increase production of electric vehicles. (See also: Will Range Anxiety Impact Electric Car Sales?)

Despite the good intentions behind the funds, the CBO report makes it clear that tax credits and other initiatives will not significantly affect the overall fuel-efficiency of cars on American roads.

“The more electric and other high-fuel-economy vehicles that are sold because of the tax credits, the more low-fuel-economy vehicles that automakers can sell and still meet the standards,” says the report, adding that the funds will have “little or no impact on the total gasoline use and greenhouse gas emissions of the nation’s vehicle fleet over the next several years.”

The report does have its critics, with many members of the electric vehicle sector coming forward with a view focused more on the report’s findings concerning the environmental benefits of pushing the industry towards faster growth. (See also: GM Losing Nearly $50,000 on Each Chevy Volt)

“While we do not agree with all of the assumptions made and relied on in the report, (the) CBO’s illustrations do show that tax incentives can help move electric drivers into the mainstream and reduce gasoline use and emissions, while growing the industry,” said a statement issued by Brian Wynne, president of the Electric Drive Transportation Association.

Source: CBO: Electric Cars Will Flop, Despite $7.5 Billion in Subsidies

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