* Tax credits account for a fourth of $7.5 billion cost
* Electric vehicle sales slow so far
By Bernie Woodall and Deepa Seetharaman
Sept 20 U.S. federal policies to promote
electric vehicles will cost $7.5 billion through 2019 and have
"little to no impact" on overall national gasoline consumption
over the next several years, the Congressional Budget Office
said in a report issued on Thursday.
Consumer tax credits for buying electric vehicles, which can
run as high as $7,500 per vehicle, will account for about 25
percent of the $7.5 billion cost, the CBO said.
The rest of the cost comprises of $2.4 billion in grants to
battery makers and projects to promote electric vehicles as well
as $3.1 billion in loans to auto companies designed to spur
production of fuel-efficient vehicles.
Many of these initiatives were initiated in 2009 under
President Barack Obama, but the loan program was authorized in
2007 under the Bush administration.
Producing all-electric cars and plug-in hybrids is part of
the auto industry's solution to reach increasingly stringent
fuel economy standards designed to cut emissions and lessen the
United States' dependence on oil.
U.S. government standards mandate that by 2025, automakers
to show corporate average fuel economy (CAFE) of 54.5 miles per
gallon or about 39 miles per gallon in real world driving.
The tax credits will increase sales of EVs, hybrids and more
fuel-efficient gas-powered models and help boost the average
fuel economy of automakers' fleets, the CBO said. The federal
tax credits apply to the first 200,000 electric vehicles sold by
But these sales will leave room for automakers to continue
to sell models with low fuel economy, the CBO said.
"The more electric and other high-fuel-economy vehicles that
are sold because of the tax credits, the more low-fuel-economy
vehicles that automakers can sell and still meet the standards,"
according to the report.
As a result, tax credits will have "little or no impact on
the total gasoline use and greenhouse gas emissions of the
nation's vehicle fleet over the next several years."
In the study, the CBO looked at the tax credits and other
federal policies for plug-in hybrid vehicles like the General
Motors Co Chevrolet Volt and fully battery-electric
vehicles like the Nissan Motor Co Leaf.
The CBO said it compared similar-sized electric and
gas-powered vehicles with average fuel economy ratings.
"General Motors is committed to technological innovations
like the Chevy Volt and to help our customers use little or no
gas and save money and the pump," said Heather Rosenker, GM
spokeswoman in Washington.
"We'll keep our eyes on designing and building cars and
defer the policy debate to the policy makers," she said.
CREDITS CAN'T RECOUP EV COSTS
While drivers of these electric vehicles use less gasoline
and emit less greenhouse gas such as carbon dioxide, the cost to
the government can be high, the CBO found. The U.S. government
will spend anywhere from $3 to $7 for each gallon of gasoline
saved by consumers driving electric vehicles.
Proponents of government spending on advanced vehicles say
the start-up costs will be high, but U.S. consumers could still
recoup much of that investment over time.
"The people the report often know the cost of everything and
the value of nothing," said Dan Weiss, a senior fellow at the
Center for American Progress. "They are overestimating the costs
of these programs and undervaluing the benefits."
Sales of plug-in hybrid electric vehicles and vehicles that
have no gasoline engines at all are so far low. In 2012, through
August, 13,497 Chevrolet Volt have been sold, and Nissan has
sold only 4,228 Leaf.
By 2016, each auto manufacturer is to meet a CAFE standard
of 35.5 miles per gallon, up from the current average of 29.7
mpg. By 2025, the CAFE standard is to be 54.5 mpg.
CAFE is the corporate average fuel economy, the theoretical
standard used to determine if each auto manufacturer is meeting
fuel efficiency requirements.
However, that is not the "real world" fuel economy ratings
as measured by the U.S. Environmental Protection Agency. This
"real world" EPA rating is what is shown on the window sticker
for new cars at U.S. dealerships.
The costs of electric vehicles -- fully electric and plug-in
hybrid electric -- are much higher than similar-sized gasoline
vehicles, and the federal tax credit of $7,500 per vehicle is
not enough to bridge the gap, the CBO said.
The CBO said an average plug-in hybrid vehicle with a
battery capacity of 16 kilowatt-hours is eligible for the
maximum tax credit of $7,500.
"However, that vehicle would require a tax credit of more
than $12,000 to have roughly the same lifetime costs as a
comparable conventional or traditional hybrid vehicle," the CBO
And, the bigger the battery the greater the cost
disadvantage for buyers of plug-in vehicles and conventional
vehicles, the CBO said.