Electric vehicles are negative externalities

Econ 101 says you tax, not subsidize, negative externalities.

A negative externality being charged, parked next to dozens of slightly bigger negative externalities.

A trendy take among politicians and policy wonks these days is to advocate for (further) subsidizing electric vehicles (EVs). Joe Biden’s agenda calls to expand access to the $7,500 federal EV tax credit and build 500,000 new public charging outlets by 2030. Senator Chuck Schumer is proposing a “Cash for Clunkers”-type program in which internal combustion engine (ICE) vehicle owners can trade in their ICE cars for EVs at a generous subsidized discount. Meanwhile, commentators like Noah Smith are singing the praises of EVs and cheering on government subsidies for their expanded use.

However, subsidizing EVs is an odd policy stance, since negative externalities (which EVs most certainly produce in enormous quantities) should be taxed, not subsidized.

“Oh, EVs don’t have negative externalities; they produce no emissions,” you say? Below is the “negative externalities” section of the Wikipedia article Externalities of automobiles. I’ve crossed out the sections that do not apply to EVs.

Traffic congestion and scarcity

Increased reliance on the automobile leads to increased road congestion. While expansions in road capacity are often touted as relieving congestion, induced demand often means that any reductions in congestion are temporary.

[Author’s note: EVs’ role in traffic congestion causes more driving time for ICE vehicles that EVs share the road with, which indirectly causes a lot of pollution externalities from the ICE vehicles that EVs slow down. Nonetheless, I’ve generously fully crossed out some of these externalities below for EVs.]


Cars are the leading cause of fatal traffic accidents in many countries, cars are the leading cause of death of youth and children. In 2010, car crashes in the United States resulted in 32,999 deaths and a projected $871 billion cost to society, around 6% of the United States 2010 GDP.[3] Road traffic accidents cause social costs including material damages, administrative costs, medical costs, production losses and immaterial costs. Immaterial costs are lifetime shortening, suffering as well as for example pain or sorrow, which can arise from death injuries. Material costs are often covered by insurance and also market price of these costs are available. However this does not hold for any immaterial costs and proxy cost factors because these costs are not sufficiently covered by private insurance systems. [4]

Air pollution

C̶a̶r̶s̶ ̶p̶r̶o̶d̶u̶c̶e̶ ̶n̶u̶m̶e̶r̶o̶u̶s̶ ̶h̶a̶r̶m̶f̶u̶l̶ ̶a̶i̶r̶ ̶p̶o̶l̶l̶u̶t̶a̶n̶t̶s̶ ̶i̶n̶ ̶t̶h̶e̶i̶r̶ ̶e̶x̶h̶a̶u̶s̶t̶ ̶s̶u̶c̶h̶ ̶a̶s̶ ̶N̶i̶t̶r̶o̶g̶e̶n̶ ̶o̶x̶i̶d̶e̶s̶,̶ ̶p̶a̶r̶t̶i̶c̶u̶l̶a̶t̶e̶ ̶m̶a̶t̶t̶e̶r̶,̶ ̶l̶o̶w̶ ̶a̶t̶m̶o̶s̶p̶h̶e̶r̶i̶c̶ ̶o̶z̶o̶n̶e̶ ̶(̶i̶n̶d̶i̶r̶e̶c̶t̶l̶y̶)̶ ̶a̶n̶d̶ ̶i̶n̶ ̶t̶h̶e̶ ̶c̶a̶s̶e̶ ̶o̶f̶ ̶l̶e̶a̶d̶e̶d̶ ̶f̶u̶e̶l̶,̶ ̶l̶e̶a̶d̶.̶ ̶T̶h̶o̶s̶e̶ ̶p̶o̶l̶l̶u̶t̶a̶n̶t̶s̶ ̶a̶r̶e̶ ̶k̶n̶o̶w̶n̶ ̶t̶o̶ ̶c̶a̶u̶s̶e̶ ̶v̶a̶r̶i̶o̶u̶s̶ ̶r̶e̶s̶p̶i̶r̶a̶t̶o̶r̶y̶ ̶a̶n̶d̶ ̶o̶t̶h̶e̶r̶ ̶h̶e̶a̶l̶t̶h̶ ̶i̶s̶s̶u̶e̶s̶ ̶a̶n̶d̶ ̶c̶a̶r̶s̶ ̶a̶r̶e̶ ̶a̶m̶o̶n̶g̶ ̶t̶h̶e̶ ̶l̶e̶a̶d̶i̶n̶g̶ ̶c̶a̶u̶s̶e̶ ̶o̶f̶ ̶s̶m̶o̶g̶ ̶i̶n̶ ̶m̶o̶d̶e̶r̶n̶ ̶d̶e̶v̶e̶l̶o̶p̶e̶d̶ ̶w̶o̶r̶l̶d̶ ̶c̶i̶t̶i̶e̶s̶.̶ ̶E̶x̶t̶e̶r̶n̶a̶l̶ ̶c̶o̶s̶t̶s̶ ̶w̶h̶i̶c̶h̶ ̶c̶a̶n̶ ̶a̶r̶i̶s̶e̶ ̶f̶r̶o̶m̶ ̶u̶s̶i̶n̶g̶ ̶c̶a̶r̶s̶ ̶a̶n̶d̶ ̶t̶r̶u̶c̶k̶s̶ ̶i̶n̶ ̶e̶v̶e̶r̶y̶d̶a̶y̶ ̶l̶i̶f̶e̶ ̶a̶r̶e̶ ̶o̶f̶ ̶d̶i̶f̶f̶e̶r̶e̶n̶t̶ ̶k̶i̶n̶d̶s̶ ̶(̶c̶o̶v̶e̶r̶i̶n̶g̶ ̶a̶l̶s̶o̶ ̶m̶a̶t̶e̶r̶i̶a̶l̶ ̶c̶o̶s̶t̶s̶ ̶s̶u̶c̶h̶ ̶a̶s̶ ̶d̶a̶m̶a̶g̶e̶s̶ ̶t̶o̶ ̶b̶u̶i̶l̶d̶i̶n̶g̶s̶ ̶a̶n̶d̶ ̶m̶a̶t̶e̶r̶i̶a̶l̶s̶)̶,̶ ̶b̶u̶t̶ ̶h̶e̶a̶l̶t̶h̶ ̶c̶o̶s̶t̶s̶ ̶a̶r̶e̶ ̶t̶h̶e̶ ̶m̶o̶s̶t̶ ̶c̶o̶m̶m̶o̶n̶.̶ ̶I̶n̶ ̶t̶h̶i̶s̶ ̶c̶a̶s̶e̶ ̶c̶a̶r̶s̶ ̶m̶i̶g̶h̶t̶ ̶c̶a̶u̶s̶e̶ ̶c̶a̶r̶d̶i̶o̶v̶a̶s̶c̶u̶l̶a̶r̶ ̶a̶n̶d̶ ̶r̶e̶s̶p̶i̶r̶a̶t̶o̶r̶y̶ ̶d̶i̶s̶e̶a̶s̶e̶s̶.̶ ̶S̶u̶c̶h̶ ̶c̶o̶s̶t̶s̶ ̶h̶a̶v̶e̶ ̶t̶o̶ ̶b̶e̶ ̶p̶a̶i̶d̶ ̶b̶y̶ ̶t̶h̶e̶ ̶s̶o̶c̶i̶e̶t̶y̶ ̶a̶s̶ ̶a̶ ̶w̶h̶o̶l̶e̶.̶ ̶[̶5̶]̶
̶T̶h̶e̶r̶e̶ ̶i̶s̶ ̶q̶u̶i̶t̶e̶ ̶a̶ ̶h̶i̶g̶h̶ ̶n̶u̶m̶b̶e̶r̶ ̶o̶f̶ ̶a̶v̶a̶i̶l̶a̶b̶l̶e̶ ̶s̶t̶u̶d̶i̶e̶s̶ ̶o̶n̶ ̶t̶h̶e̶ ̶m̶e̶t̶h̶o̶d̶o̶l̶o̶g̶y̶ ̶o̶f̶ ̶a̶i̶r̶ ̶p̶o̶l̶l̶u̶t̶i̶o̶n̶ ̶c̶o̶s̶t̶s̶ ̶a̶s̶ ̶w̶e̶l̶l̶ ̶a̶s̶ ̶a̶p̶p̶l̶i̶c̶a̶t̶i̶o̶n̶s̶ ̶o̶f̶ ̶t̶h̶e̶s̶e̶ ̶m̶e̶t̶h̶o̶d̶s̶.̶ ̶T̶h̶e̶ ̶C̶E̶ ̶D̶e̶l̶f̶t̶ ̶s̶t̶u̶d̶y̶ ̶(̶C̶E̶ ̶D̶e̶l̶f̶t̶;̶ ̶I̶n̶f̶r̶a̶s̶;̶ ̶F̶r̶a̶u̶n̶h̶o̶f̶e̶r̶ ̶I̶S̶I̶,̶ ̶2̶0̶1̶1̶)̶ ̶c̶o̶n̶s̶i̶d̶e̶r̶s̶ ̶t̶h̶e̶ ̶f̶o̶l̶l̶o̶w̶i̶n̶g̶ ̶c̶o̶s̶t̶ ̶e̶l̶e̶m̶e̶n̶t̶s̶:̶[̶6̶]̶ ̶•̶ ̶H̶e̶a̶l̶t̶h̶ ̶e̶f̶f̶e̶c̶t̶s̶:̶ ̶T̶h̶e̶ ̶a̶s̶p̶i̶r̶a̶t̶i̶o̶n̶ ̶o̶f̶ ̶a̶i̶r̶ ̶t̶r̶a̶n̶s̶p̶o̶r̶t̶ ̶e̶m̶i̶s̶s̶i̶o̶n̶s̶ ̶i̶n̶c̶r̶e̶a̶s̶e̶s̶ ̶t̶h̶e̶ ̶r̶i̶s̶k̶ ̶o̶f̶ ̶r̶e̶s̶p̶i̶r̶a̶t̶o̶r̶y̶ ̶a̶n̶d̶ ̶c̶a̶r̶d̶i̶o̶v̶a̶s̶c̶u̶l̶a̶r̶ ̶d̶i̶s̶e̶a̶s̶e̶s̶ ̶(̶c̶a̶u̶s̶e̶d̶ ̶m̶a̶i̶n̶l̶y̶ ̶b̶y̶ ̶c̶a̶r̶b̶o̶n̶ ̶m̶o̶n̶o̶x̶i̶d̶e̶,̶ ̶n̶i̶t̶r̶o̶g̶e̶n̶ ̶o̶x̶i̶d̶e̶s̶ ̶a̶n̶d̶ ̶h̶y̶d̶r̶o̶c̶a̶r̶b̶o̶n̶s̶)̶.̶ ̶I̶n̶ ̶m̶o̶r̶e̶ ̶d̶e̶t̶a̶i̶l̶ ̶C̶O̶ ̶r̶e̶d̶u̶c̶e̶s̶ ̶o̶x̶y̶g̶e̶n̶ ̶i̶n̶ ̶t̶h̶e̶ ̶b̶l̶o̶o̶d̶s̶t̶r̶e̶a̶m̶ ̶c̶a̶u̶s̶i̶n̶g̶ ̶b̶r̶e̶a̶t̶h̶i̶n̶g̶ ̶d̶i̶f̶f̶i̶c̶u̶l̶t̶y̶,̶ ̶N̶O̶x̶ ̶(̶t̶h̶a̶t̶ ̶r̶e̶a̶c̶t̶s̶ ̶w̶i̶t̶h̶ ̶f̶o̶r̶m̶ ̶o̶z̶o̶n̶e̶)̶ ̶a̶f̶f̶e̶c̶t̶s̶ ̶a̶s̶t̶h̶m̶a̶t̶i̶c̶s̶ ̶a̶n̶d̶ ̶v̶i̶s̶i̶b̶i̶l̶i̶t̶y̶.̶ ̶[̶7̶]̶ ̶•̶ ̶B̶u̶i̶l̶d̶i̶n̶g̶ ̶a̶n̶d̶ ̶m̶a̶t̶e̶r̶i̶a̶l̶ ̶d̶a̶m̶a̶g̶e̶s̶:̶ ̶s̶o̶i̶l̶i̶n̶g̶ ̶o̶f̶ ̶b̶u̶i̶l̶d̶i̶n̶g̶ ̶a̶n̶d̶ ̶c̶o̶r̶r̶o̶s̶i̶v̶e̶ ̶p̶r̶o̶c̶e̶s̶s̶e̶s̶ ̶c̶a̶u̶s̶e̶d̶ ̶b̶y̶ ̶a̶c̶i̶d̶i̶f̶y̶i̶n̶g̶ ̶p̶o̶l̶l̶u̶t̶a̶n̶t̶s̶ ̶•̶ ̶C̶r̶o̶p̶ ̶l̶o̶s̶s̶e̶s̶ ̶•̶ ̶a̶c̶i̶d̶i̶f̶i̶c̶a̶t̶i̶o̶n̶ ̶a̶n̶d̶ ̶e̶u̶t̶r̶o̶p̶h̶i̶c̶a̶t̶i̶o̶n̶.̶

[Author’s note: The US electric grid, where American EVs would get their power from, is still powered by 60% fossil fuels, so many of these air pollution externalities still exist. However, they are smaller in magnitude and also occurring at the site of the power plant, which for many of these toxins, is less of an issue than if they were emitted in more densely populated areas, so I’ll generously fully cross these out.]


Cars significantly contribute to noise pollution. W̶h̶i̶l̶e̶ ̶o̶n̶ ̶c̶o̶m̶m̶o̶n̶ ̶p̶e̶r̶c̶e̶p̶t̶i̶o̶n̶ ̶t̶h̶e̶ ̶e̶n̶g̶i̶n̶e̶ ̶i̶s̶ ̶t̶h̶e̶ ̶m̶a̶i̶n̶ ̶c̶a̶u̶s̶e̶ ̶f̶o̶r̶ ̶n̶o̶i̶s̶e̶, at city speeds the noise produced by wheel and asphalt is commonly the dominant factor while at highway speeds air friction noises become a major factor.

According to available literature there are two types of negative impacts: • Costs of annoyance: Meaning disturbances that can change into social as well as economic costs. • Health costs: Health problems can arise from noise which level is higher than 55 dBA. Especially stress reactions are the most common. Such a reaction can result in increasing heartbeat or blood pressure

Climate change

Climate change is significantly caused by human activity, particularly the production of greenhouse gasses and their release into the atmosphere. Cars produce more Carbon dioxide per passenger kilometer than any other form of land transport. In addition to that Nitrogen oxides are also greenhouse gasses. Transportation is considered as large contributor to global climate change and especially in the US 80 percent of carbon dioxide emissions arise from moving cars and trucks moving goods. Many people understand that what contributes to greenhouse gas emissions is style of driving and length of a trip. Less known fact when considering measurement of emissions is how it changes with changing speed of vehicle. Traffic congestion is dangerous because of its effects on society. Besides increasing risk of injuries arising primarily from high-grade roads together with the high noise, the main consequence of traffic congestion is increasing level of emissions of greenhouse gases.

In a research made by Matthew Barth and Kanok Boriboonsomsin from the University of California, they have developed a way how to measure the relationship between driving and carbon emissions. More specifically, they have estimated how to reduce those emissions through three improvements in managing traffic operations • Congestion mitigation strategies that reduce severe congestion and increase traffic speeds (e.g. ramp metering, incident management, and congestion pricing) • Speed management strategies that bring down excessive speeds to more moderate speeds of approximately 55 mph (e.g. enforcement and ISA) • Traffic smoothing strategies that reduce the number and intensity of acceleration and deceleration events (e.g. variable speed limits and ISA).[8]

[Author’s note: The US electricity grid is still 60% fossil fuels (though it is getting greener). In Europe, the estimates range from EVs producing 22–81% fewer emissions than ICE vehicles. It’s a big range, but it’s certainly not a 100% reduction, so the climate change negative externalites definitely still exist.]

Costs for nature and landscape

Roads, parking spaces but also suburban sprawl caused by cars need significant amount of space. Typically, once agricultural or uncultivated land is turned over into ever wider motorways and ever larger parking lots to accommodate the automobile but induced demand means any relief is temporary and more and more surfaces are sealed in the process.

Costs for water pollution

L̶u̶b̶r̶i̶c̶a̶n̶t̶s̶ ̶a̶n̶d̶ ̶f̶u̶e̶l̶s̶ ̶u̶s̶e̶d̶ ̶b̶y̶ ̶a̶u̶t̶o̶m̶o̶b̶i̶l̶e̶s̶ ̶a̶r̶e̶ ̶h̶a̶r̶m̶f̶u̶l̶ ̶w̶h̶e̶n̶ ̶t̶h̶e̶y̶ ̶l̶e̶a̶k̶ ̶i̶n̶t̶o̶ ̶t̶h̶e̶ ̶g̶r̶o̶u̶n̶d̶w̶a̶t̶e̶r̶. Oil refineries and particularly the mining of unconventional oil like oil shales and oil sands can be extremely harmful for the surrounding water resources and bodies of water.

I̶n̶ ̶a̶d̶d̶i̶t̶i̶o̶n̶ ̶t̶o̶ ̶t̶h̶a̶t̶ ̶r̶u̶n̶o̶f̶f̶ ̶o̶f̶ ̶i̶m̶p̶e̶r̶v̶i̶o̶u̶s̶ ̶s̶u̶r̶f̶a̶c̶e̶s̶ ̶l̶i̶k̶e̶ ̶r̶o̶a̶d̶s̶ ̶o̶r̶ ̶p̶a̶r̶k̶i̶n̶g̶ ̶l̶o̶t̶s̶ ̶c̶a̶n̶ ̶b̶e̶ ̶c̶o̶n̶t̶a̶m̶i̶n̶a̶t̶e̶d̶ ̶w̶i̶t̶h̶ ̶a̶l̶l̶ ̶s̶o̶r̶t̶s̶ ̶o̶f̶ ̶p̶o̶l̶l̶u̶t̶a̶n̶t̶s̶.̶

[Author’s note: The US electrical grid doesn’t use much petroleum, but petroleum is still used in the manufacture of tires.]

Costs for soil pollution

In addition to the fertile topsoil often “buried” under freeways and parking spaces, cars directly or indirectly release pollutants into the soil. O̶i̶l̶ ̶m̶a̶y̶ ̶l̶e̶a̶k̶ ̶i̶n̶t̶o̶ ̶t̶h̶e̶ ̶g̶r̶o̶u̶n̶d̶w̶a̶t̶e̶r̶ and the common practice to clean cars in the front yard causes surfactants and other products in the cleaning products to pollute the ground. Similarly, salt is often used to keep roads and highways free of snow and ice and chlorides cause major damage to vegetation as well as being an aggressive substance linked to rust and corrosion.

C̶o̶s̶t̶s̶ ̶o̶f̶ ̶e̶n̶e̶r̶g̶y̶ ̶d̶e̶p̶e̶n̶d̶e̶n̶c̶y̶

W̶h̶i̶l̶e̶ ̶t̶r̶a̶i̶n̶s̶ ̶a̶n̶d̶ ̶t̶r̶a̶m̶w̶a̶y̶ ̶o̶f̶t̶e̶n̶ ̶r̶u̶n̶ ̶o̶n̶ ̶e̶l̶e̶c̶t̶r̶i̶c̶i̶t̶y̶ ̶w̶h̶i̶c̶h̶ ̶c̶a̶n̶ ̶b̶e̶ ̶g̶e̶n̶e̶r̶a̶t̶e̶d̶ ̶t̶h̶r̶o̶u̶g̶h̶ ̶r̶e̶n̶e̶w̶a̶b̶l̶e̶ ̶s̶o̶u̶r̶c̶e̶s̶ ̶o̶r̶ ̶l̶o̶c̶a̶l̶l̶y̶ ̶a̶v̶a̶i̶l̶a̶b̶l̶e̶ ̶f̶u̶e̶l̶,̶ ̶c̶a̶r̶s̶ ̶b̶y̶ ̶a̶n̶d̶ ̶l̶a̶r̶g̶e̶ ̶r̶u̶n̶ ̶o̶n̶ ̶p̶e̶t̶r̶o̶l̶e̶u̶m̶ ̶d̶e̶r̶i̶v̶e̶d̶ ̶f̶u̶e̶l̶s̶.̶ ̶O̶n̶l̶y̶ ̶a̶ ̶h̶a̶n̶d̶f̶u̶l̶ ̶o̶f̶ ̶c̶o̶u̶n̶t̶r̶i̶e̶s̶ ̶a̶r̶e̶ ̶n̶e̶t̶ ̶e̶x̶p̶o̶r̶t̶e̶r̶s̶ ̶o̶f̶ ̶p̶e̶t̶r̶o̶l̶e̶u̶m̶.̶ ̶F̶o̶r̶ ̶d̶e̶v̶e̶l̶o̶p̶e̶d̶ ̶c̶o̶u̶n̶t̶r̶i̶e̶s̶ ̶t̶h̶i̶s̶ ̶c̶a̶u̶s̶e̶s̶ ̶a̶ ̶p̶o̶l̶i̶t̶i̶c̶a̶l̶ ̶d̶e̶p̶e̶n̶d̶e̶n̶c̶e̶ ̶o̶n̶ ̶a̶ ̶r̶e̶l̶i̶a̶b̶l̶e̶ ̶p̶e̶t̶r̶o̶l̶e̶u̶m̶ ̶s̶u̶p̶p̶l̶y̶ ̶a̶n̶d̶ ̶h̶a̶s̶ ̶b̶e̶e̶n̶ ̶c̶i̶t̶e̶d̶ ̶a̶s̶ ̶t̶h̶e̶ ̶r̶e̶a̶s̶o̶n̶ ̶f̶o̶r̶ ̶f̶o̶r̶e̶i̶g̶n̶ ̶p̶o̶l̶i̶c̶y̶ ̶d̶e̶c̶i̶s̶i̶o̶n̶s̶ ̶o̶f̶ ̶t̶h̶e̶ ̶U̶n̶i̶t̶e̶d̶ ̶S̶t̶a̶t̶e̶s̶ ̶a̶m̶o̶n̶g̶ ̶o̶t̶h̶e̶r̶s̶.̶ ̶F̶o̶r̶ ̶d̶e̶v̶e̶l̶o̶p̶i̶n̶g̶ ̶c̶o̶u̶n̶t̶r̶i̶e̶s̶,̶ ̶p̶e̶t̶r̶o̶l̶e̶u̶m̶ ̶p̶r̶o̶d̶u̶c̶t̶s̶ ̶c̶a̶n̶ ̶b̶e̶ ̶a̶m̶o̶n̶g̶ ̶t̶h̶e̶ ̶c̶h̶i̶e̶f̶ ̶i̶m̶p̶o̶r̶t̶s̶ ̶a̶n̶d̶ ̶r̶e̶l̶i̶a̶n̶c̶e̶ ̶o̶n̶ ̶a̶u̶t̶o̶m̶o̶b̶i̶l̶e̶s̶ ̶c̶a̶n̶ ̶s̶i̶g̶n̶i̶f̶i̶c̶a̶n̶t̶l̶y̶ ̶i̶m̶p̶a̶c̶t̶ ̶t̶h̶e̶ ̶t̶r̶a̶d̶e̶ ̶d̶e̶f̶i̶c̶i̶t̶ ̶a̶n̶d̶ ̶p̶u̶b̶l̶i̶c̶ ̶d̶e̶b̶t̶ ̶o̶f̶ ̶s̶u̶c̶h̶ ̶n̶a̶t̶i̶o̶n̶s̶.̶

[Author’s note: Petroleum is still used in EV components like tires, but we can let that slide here.]


Some research indicates a correlation between urban sprawl and obesity. Car centric development and lack of walkability lead to less use of active modes of transportation such as utility cycling and walking which is linked to various health issues caused by a lack of exercise.

Let me note some more negative externalities not mentioned on Wikipedia:

  1. Brake pad and tire particle and microplastics emissions. According to one estimate, 28% of all microplastics in the ocean originate from tires, which EVs of course have. (And the true portion of car-originating microplastics seems to be substantially higher.)
  2. Making streets more hostile to cyclists and pedestrians. Each additional car exacerbates this issue.
  3. Increasing voter demand for more future public spending on automobile infrastructure and further entrenching automobile-oriented lifestyles. It will be much harder to implement truly efficient transportation solutions (e.g. legalizing dense cities, efficient public transit, congestion pricing) in the future once tens of millions of Americans have just purchased their own shiny new EVs. If you think reducing car subsidies is politically difficult now, imagine the government telling tens of millions of Americans in 2030, “Hey, we appreciate that a few years ago, you spent $35,000 of your own money (plus $7,500 subsidized by us) on a new Tesla we induced you to buy, but now we need to reduce some of the subsidies on it by, you know, actually charging some money for street parking and driving on public roads.” EV subsidies are doubling down on and entrenching a highly inefficient transportation mode.

Subsidies for each transit mode

Given all these negative externalities, it’s a shame that EVs are not only mostly spared from taxation, but are heavily subsidized (with aforementioned pushes to subsidize them even further).

Here are some of the subsidies that EVs enjoy in the US:

  • Hundreds of billions in annual public infrastructure maintenance (estimated $416 billion in 2014)
  • An estimated $3.4 trillion value of existing public road infrastructure
  • Tens of millions of unpriced public parking spots
  • Off-street parking mandates on private property
  • Draconian regulatory taxes on bikeable and walkable communities, which thus subsidize car use
  • $7,500 federal tax credit for new EV purchases (currently discussed expanding to more companies). In California, state supplements drive this credit up to as high as $13,500.
  • (Proposed by Biden) 500,000 new public charging outlets
  • (Proposed by Schumer) Cash for Clunkers-style program to subsidize purchasing EVs
  • Untaxed fringe benefits from employers of unpriced parking at job locations

Now here are some of the subsidies that cyclists and pedestrians (who produce dramatically fewer negative externalities than EV drivers) benefit from:

  • $0 tax credit for walking
  • $0 tax credit for bikes
  • Some relatively paltry amount of public infrastructure for biking and walking, which is a rounding error compared to the cost of public automobile infrastructure
  • $30 billion in federal and state public transit funding

The perfect substitution fallacy

One widespread fallacy is that each EV trip 1-for-1 replaces what would have been an ICE vehicle trip. However, this is not necessarily the case. Indeed, it is certain that many new EV trips would replace a trip that otherwise would have been taken by public transit, bike, scooter, or walk, or wouldn’t have occurred at all. In each of these cases, EVs cause carbon emissions to increase (along with most of the aforementioned negative externalities).

Let’s make this more concrete: A subway rider gets his $7,500 EV tax credit and, due to that subsidy (along with all the other aforementioned subsidies), is spurred to purchase his first vehicle. He then drives the EV to work every day, replacing his subway commute. Explain where the positive externality is here?

Subsidizing EVs under the notion that they’re some positive externality because they might replace some ICE trips is like subsidizing marijuana because it might reduce cocaine use (in a world where cocaine use is heavily subsidized).

I suppose one could claim that some very high percentage of EV trips would be ICE trip-replacing and thus, for those replacement trips, have the positive effect of eliminating the scratched-out externalities in the list above relative to what their ICE trip would have incurred*. But is it really fair or sensible public policy to tax non-polluters like cyclists, pedestrians, and transit-riders (who also skew much lower income than automobile drivers) to subsidize the lifestyle choices of people who are in the 80th percentile of polluters? (And then in turn to call that policy a “climate plan”?)

And even if it were true that some very high percentage of EV trips were ICE-replacing, is it worth the $7,500 per vehicle in government subsidies (plus thousands more in charging stations) to get a reduction in solely the crossed-out externalities for ICE-replacing trips (while adding all the uncrossed-out externalities for new EV trips that aren’t ICE-replacing)? While at the same time also producing the new externality of further entrenching an extremely inefficient auto-centric status quo? Especially when you consider the opportunity costs of what else could be done with all that public money?

*Indeed, this would somewhat be the case in the (extremely expensive and inefficient) Cash for Clunkers-type proposal.

Actual solutions

The obvious efficient solution is to just the tax negative externalities of EVs and ICE vehicles. We’re talking carbon taxes and congestion pricing. Plus some vehicle miles traveled (VMT) tax for things like brake pad and tire microplastics and noise pollution. At the very least, government should merely reduce some of the enormous subsidies cars currently enjoy.

Plus, the tax route is a 100% free lunch and more. When you tax automobiles (including EVs), the government spends $0 and gets revenue, which it can use that to fund public goods, redistribution, or lower taxes. Meanwhile, with the subsidy plan, the government spends a lot, gets no revenue, and thus has to either cut funding elsewhere or raise taxes.

Pigouvian taxes don’t require anything draconian or command-and-control. In Noah Smith’s post, he writes, “we’re not going to ban cars or rip up the suburbs anytime soon,” but this last part especially is a strawman argument. Nobody is proposing sending in public armies to march in and coercively destroy private property. Just impose some Pigouvian taxes (or merely reduce some subsidies) and let markets sort out if people want to continue living their auto-oriented lifestyles with the new prices. The solution isn’t to subsidize EVs, but to tax them at a bit lower rate than even more negative externality-producing ICE vehicles.

You might be inclined to say, “Sure, carbon taxes, VMT taxes, and congestion pricing are great, but they aren’t politically feasible, so this is a next-best solution,” but the point of this post is that subsidizing EVs isn’t even a next-best solution, or much of a solution of any kind. It’s akin to saying, “Sure, we can’t prevent shooting ourselves in the foot, but let’s at least also shoot ourselves in the toes.”

Jim Pagels (@jimpagels) is an economics PhD student at the University of Michigan.

Economics PhD student at the University of Michigan.