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Wednesday, January 19, 2011

SeekingAlpha: "Green Energy" Subsidies and Coal-Powered Cars

Link here.
In addition to traditional subsidies that create productive assets and make the nation richer, we're seeing a proliferation of consumption subsidies that enrich individuals while providing no meaningful benefit to society. The poster child for this unconscionable rape of the treasury is the $7,500 tax credit for buying a plug-in electric vehicle. The government is quite literally taxing Peter to buy Paul's new car.

The credit will be available for the first 200,000 qualifying vehicles sold by a manufacturer at a direct cost of $1.5 billion per automaker. On the positive side of the ledger, Paul's new plug-in will reduce national oil consumption by about 100 barrels over its useful life at a cost of $75 per barrel. On the negative side, Paul's state, city, utility, employer and favored merchants will have to spend their own money adapting to Paul's increased demand for electricity and Paul's desire for a convenient charging infrastructure. I have to wonder if it wouldn't be cheaper to just give Paul a 10-year free gas coupon.
The author could have added that by buying less gasoline, Paul is paying less than his fair share in road taxes than others who cannot afford the expensive coal-powered car. 

And it's worse than that. Paul's new plug-in electric vehicle isn't even cost effective and won't be according to the government's own projection: oil has to get to between $174 and $250 for them to be economical.

The government projects that the price of oil will hold steady through 2035 and may, in fact, decrease in price, never rising above $100. That's the government projections, not mine.

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