Study: Clean-Car Subsidies Alone Can’t Meet White House’s Climate Goals

Government subsidies for hybrid and electric cars, while “politically seductive,” will fail to achieve the Obama administration’s national pollution-reduction goals if they are not coupled with a significant increase in fuel prices, according to a new study by Harvard University researchers.

(Photo: Pop and Politics)

The team at Harvard’s Belfer Center for Science and International Affairs used U.S. Department of Energy economic models to evaluate six possible outcomes for Washington’s newly reinvigorated push for a 17-percent cut in U.S. emissions by 2020, in keeping with President Obama’s pledge at the global Copenhagen climate talks.

Five of the Harvard team’s six outcomes assumed a future carbon price of $30 per ton (higher than the price envisioned in the House-passed climate bill) that rises over time, with other tweaks added to the system, including continued government tax credits for hybrid and electric vehicles, an immediate 50-cent hike in the gas tax, and more increases in auto fuel-efficiency standards.

The researchers concluded that taxpayer-funded clean-vehicle credits “are expensive and not particularly effective at reducing CO2 emissions, at least in the near term.” In order to trim transportation’s 30-percent contribution to total U.S. emissions, the Harvard team recommended an all-of-the-above approach:

[O]ptions now being discussed in Congress cannot by themselves achieve the significant reductions in the transportation sector needed to meet the Obama administration’s targets for total U.S. greenhouse gas emissions by 2020. The most effective policy for reducing CO2 emissions and oil imports from transportation is to spur the development and sale of more efficient vehicles with strict efficiency standards while increasing the cost of driving with strong fuel taxes. Without addressing both, CO2 emissions from the U.S. transportation sector will continue to grow.

Of course, higher gas taxes are as anathema to politicians as clean-car subsidies are alluring — which is leaving green groups wary of a bipartisan Senate proposal to include a new motor-fuel fee in climate legislation. The oil industry has said it prefers a new carbon tax on fuel because companies can more easily pass on the costs to consumers, attributing the resulting gas-price hikes to congressional climate action.

From the Harvard researchers’ perspective, however, expensive fuel is merely a means to an end.

“A fundamental insight from this study,” they concluded, “is that if one wishes to reduce U.S. CO2 emissions or net petroleum imports from the transportation sector during 2010-2030, consumers cannot continue to drive more and more each year … in this study, higher fuel prices are the mechanism to reduce vehicle-miles traveled.”