EVs Should Be Subsidized

A blog about business and economics.
May 23 2013 4:35 PM

Government Support For Electric Vehicles Is Totally Appropriate

The Tesla Model X is introduced at the 2013 North American International Auto Show in Detroit, Michigan, January 15, 2013.

Photo by STAN HONDA/AFP/Getty Images

Peter Eavis' rundown of Tesla paying off its Energy Department loan early and successfully includes the to-be-sure phrase that "Tesla has not fully weaned itself from government support" because electric vehicle purchasers are eligible for some pretty generous tax credits.

This is true, but it's also entirely appropriate for the government to offer subsidies to early adopting EV buyers. As I wrote earlier if you believe in the future success of the Model S it probably makes more sense to buy Tesla stock than to buy a Tesla. That's because there are major network effects here. Gasoline-fueled cars are practical because America is full of gasoline stations and has lots of infrastructure to refine oil and ship it to those stations. If you owned the only gasoline-powered car in North America, the technology would strike everyone else as slightly absurd. The range of the car would be severely limited, and importing the refined petroleum products you need in small volumes from across the ocean would be laughably expensive. It's early-adopting EV buyers who are laying the groundwork for the infrastructure that makes electric vehicles practical technology. If you think that the drastically cleaner air that would result from a large-scale switch away from internal combustion engines is valuable, then subsidies of various kinds are a completely reasonable way of dealing with the network effects issue.


Now it's quite right to say that current policy is not exactly optimal. A $20 per ton carbon tax with the funds used to lower other taxes would be much better nudge than a regressive tax credit initiative. But you rarely get optimal policy, and the course we're taking is a reasonable and practical one.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


War Stories

The Right Target

Why Obama’s airstrikes against ISIS may be more effective than people expect.

The One National Holiday Republicans Hope You Forget

It’s Legal for Obama to Bomb Syria Because He Says It Is

I Stand With Emma Watson on Women’s Rights

Even though I know I’m going to get flak for it.

Should You Recline Your Seat? Two Economists Weigh In.


It Is Very, Very Stupid to Compare Hope Solo to Ray Rice

Or, why it is very, very stupid to compare Hope Solo to Ray Rice.

Building a Better Workplace

In Defense of HR

Startups and small businesses shouldn’t skip over a human resources department.

Why Is This Mother in Prison for Helping Her Daughter Get an Abortion?

Politico Wonders Why Gabby Giffords Is So “Ruthless” on Gun Control

Sept. 23 2014 4:45 PM An Up-Close Look at the U.S.–Mexico Border
  News & Politics
Sept. 23 2014 6:40 PM Coalition of the Presentable Don’t believe the official version. Meet America’s real allies in the fight against ISIS.
Sept. 23 2014 2:08 PM Home Depot’s Former Lead Security Engineer Had a Legacy of Sabotage
Sept. 23 2014 1:57 PM Would a Second Sarkozy Presidency End Marriage Equality in France?
  Double X
The XX Factor
Sept. 23 2014 2:32 PM Politico Asks: Why Is Gabby Giffords So “Ruthless” on Gun Control?
  Slate Plus
Political Gabfest
Sept. 23 2014 3:04 PM Chicago Gabfest How to get your tickets before anyone else.
Brow Beat
Sept. 23 2014 8:38 PM “No One in This World” Is One of Kutiman’s Best, Most Impressive Songs
Future Tense
Sept. 23 2014 5:36 PM This Climate Change Poem Moved World Leaders to Tears Today
  Health & Science
Sept. 23 2014 4:33 PM Who Deserves Those 4 Inches of Airplane Seat Space? An investigation into the economics of reclining.
Sports Nut
Sept. 23 2014 7:27 PM You’re Fired, Roger Goodell If the commissioner gets the ax, the NFL would still need a better justice system. What would that look like?