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If You’re Not Part Of the Solution…

August 10th, 2010

Recently, a friend of mine forwarded me a diatribe written by Robert Bryce of The Manhattan Institute, bellyaching about government funding being used to accelerate the market introduction of electric vehicles.  In his rant, Bryce cites numerous examples of auto makers advertising the benefits of electric transportation and promising affordability for all.  In some cases, these quips are a century old.  Bryce uses these examples as proof that despite the hype, electric-drive vehicles will continue to fail, and that the technology “shows so little promise” and still isn’t ready for prime time.

I think Mr. Bryce’s fallacy here is looking to the past to predict the future.  (Look at the bottom of the prospectus of your favorite mutual fund.  “Past performance is not an indication of future results.”)  Energy storage (read: battery) technology is substantially beyond what it was even a few years ago.  Much of the government funding that Mr. Bryce feels is ill-spent is being used to establish immense battery manufacturing capacity here in the U.S., and will dramatically reduce costs.  He points out that hybrid vehicles currently account for only about 3% of the new car sales, suggesting that’s a sign of the lack of consumer acceptance.  (On the other hand, what percentage of new car models are hybrids?  If it’s  less than 3%, then I’d say this statistic is a sign of robust consumer demand!)

My main problem with Mr. Bryce’s article, however, isn’t his flawed arguments.  It’s the fact that he offers no mention of an alternative solution.  The reader is left to assume that he believes the government should end any and all subsidies to promote electric transportation, and let the market take care of itself.  (After all, one of the tenets of The Manhattan Institute is to “foster greater economic choice.”)  The problem is, the petroleum industry currently enjoys some of the largest subsidies imaginable, many of which are indirect, due to externalities that aren’t included in the price of a gallon of gasoline.  According to the National Defense Council Foundation, our oil dependence costs us around $300 billion each year.  If this cost were internalized (rather than being subsidized), a gallon of gas would cost well over $5.  (Oh, and don’t even get me started on the cost of the cleanup in the Gulf…)  In that respect, the cost of an EV or PHEV may not seem so high.

I’m all for a free market.  The problem is, there are no perfect markets.  Especially when it comes to environmental issues – in the case of transportation that means pollution and greenhouse gas emission, not to mention national security issues associated with our presence in the Middle East – there are externalities that aren’t priced in.  By funding the development and deployment of electric vehicles, the big bad government isn’t picking winners – it’s leveling the playing field.  And, you know, actually doing something to contribute to the solution.

And as the old saying goes:  If you’re not part of the solution, you’re part of the problem.

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