Posts Tagged ‘pollution’

A knock I hear frequently about electric vehicles (EVs) is that they require government subsidies to sell well rather than letting the “free market” decide. I’m assuming “free market” refers to dealer network and government collusion and externality benefits of petrol fueled vehicles. However, I usually have to distinguish between a tax credit (which is NOT a subsidy) and a tax rebate (which is a subsidy). The federal tax credit afforded to EV owners is often (incorrectly) labeled a “subsidy” by anti-EV folks. However, the federal tax credit for an EV purchase is limited to the buyer’s federal tax burden.

If you have no federal taxes, Uncle Sam does not cut you a check for $7,500. If you only have $5,000 federal taxes owed at the end of the year, you also don’t get a $2,500; you just don’t have to pay the $5,000 in federal taxes. In short, it’s you keeping more of your own money (which is why it’s called a tax incentive) rather than you getting someone else’s money (which is why it’s NOT a subsidy).

State issued tax rebates are subsidies. Not having to pay for the health problems caused by driving a petrol powered car is a subsidy.

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Anyone following the rise of electric car transportation has often heard gripes from anti-EV folks about a “dirty grid”, “subsidies”, or even how EVs allegedly produce more pollution during their manufacturing than what is produced for the entire life of an internal combustion engine. Wired magazine even go into the mix with their (bunk) article talking about how EVs aren’t as green as you think they are. I’m not going to link to any of these “articles” because they are, quite frankly, gibberish. They often make claims such as lithium being a rare earth material (it’s not) or that Tesla uses permanent magnets in their motors (they’re AC induction, so they don’t; and Tesla gets all of it’s cobalt in North America).

Instead, I’m going to link to articles that provide insight into an often overlooked topic of internal combustion engines (ICE): externality economic benefits afforded to ICE manufacturers. As is turns out, driving in rush hour traffic is potentially twice as hazardous to your health than currently believed. This externality benefit is afforded to car manufacturers who are making ICE. They incur relatively zero cost for developing a product that produces emissions that the manufacturer has zero responsibility for. This is a tremendous economic benefit afforded to ICE manufacturers. While they are responsible for containing the pollution produced during the manufacturing of their product, they have zero responsibility for the pollution created during the usage of their production AND there is no way to use their product without producing pollution (unless you put the car in a museum).

One might argue that the driver should be responsible for that pollution or that the driver is responsible for the pollution because of paying taxes on gas. Let’s not pretend that the taxes on gasoline are even used for their intended purpose of rebuilding roads let alone healthcare costs incurred from the pollution caused by refining and burning gasoline. Also, the manufacturers of ICE don’t provide (or even have) the ability to collect pollution, so we’re stuck with tailpipe emissions spread to someone else’s property and effecting their lives. These effects are very costly, and the burden (as detailed in the RAND report I’ve linked to) is on health insurance companies, or government, and individuals deprived of their health liberty due to no action of their own! Certainly, one’s own rush hour car pollution is enough to kill them dozens of times over, but I digress… Perhaps the health insurance companies could lobby to get their money back?

The solution is fairly simple. Place a health insurance tax on the manufacturer of ICE vehicles that cannot be passed along to the consumer unless that consumer is a government agency. This tax would be paid to companies and individuals paying for health insurance to help offset their increased medical costs due to the products developed and sold by ICE manufacturers. The tax would be based upon the pollution (we’re not just talking about CO2 but ALL air pollution) produced by a vehicle from driving it 10K miles per year with the average life being 10 years for the vehicle and adjusted annually for the increased pollution that an ICE produces as it ages (which is the opposite of what happens with EV since grids are becoming cleaner each year).

The results from this would be reduced out of pocket medical costs for individuals since they are no longer subsidizing ICE manufacturers, a likely bankrupt automobile industry as electric cars would suddenly become significantly less expensive than ICE, and we can finally get rid of those tax incentives for electric vehicles that anti-EV folks love to complain about! Joking aside, there are considerable health costs that ICE manufacturers are causing by continuing to manufacture products that have no method to avoid. Taxing the manufacturers for their externality benefit they receive at our expense is a potential way to provide those manufacturers with incentives to make better products that are less detrimental to our health and puts the financial burden on the industry directly responsible for substantial increase in healthcare costs over the last half century.