Congressional Budget OfficeEffects of Tax Creditsfor Electric VehiclesRon Gecan, Ph.D.Microeconomic Studies DivisionJune 1...
C O N G R E S S I O N A L B U D G E T O F F I C ETradeoffs for Electric Vehicles■ Lower operating costs for the driver tha...
C O N G R E S S I O N A L B U D G E T O F F I C EFederal Tax Credits Available on Electric VehiclesBattery Capacity of Ele...
C O N G R E S S I O N A L B U D G E T O F F I C EBasic Questions■ Are the tax credits large enough to make electric vehicl...
C O N G R E S S I O N A L B U D G E T O F F I C EGeneral Findings■ At current vehicle prices, federal tax credits alone ge...
C O N G R E S S I O N A L B U D G E T O F F I C EFederal Tax Credits for Electric Vehicles■ How large do the tax credits n...
C O N G R E S S I O N A L B U D G E T O F F I C ETax Credits Necessary for Electric Vehicles to Be Cost-Competitive at 201...
C O N G R E S S I O N A L B U D G E T O F F I C EGasoline Prices■ How high do gasoline prices need to be to offset the gre...
C O N G R E S S I O N A L B U D G E T O F F I C EGasoline Prices Necessary for Electric Vehicles to Be Cost-Competitive at...
C O N G R E S S I O N A L B U D G E T O F F I C EElectric Vehicle Prices■ How will expected decreases in the relative cost...
C O N G R E S S I O N A L B U D G E T O F F I C ETax Credits Necessary for Electric Vehicles to Be Cost-Competitive at 202...
C O N G R E S S I O N A L B U D G E T O F F I C ECost of Reducing Gasoline Use or Greenhouse GasEmissions■ What is the gov...
C O N G R E S S I O N A L B U D G E T O F F I C ECost of Reducing Gasoline Use or Greenhouse GasEmissions■ Because of CAFE...
C O N G R E S S I O N A L B U D G E T O F F I C EGovernment Cost of Reducing Gasoline Use(Dollars per gallon of gasoline c...
C O N G R E S S I O N A L B U D G E T O F F I C EGovernment Cost of Reducing Greenhouse Gas Emissions(Dollars per metric t...
C O N G R E S S I O N A L B U D G E T O F F I C ECosts When Electricity Is Produced Using Fuels withDifferent Carbon Inten...
C O N G R E S S I O N A L B U D G E T O F F I C EOther Factors Significantly Affecting the Cost-Effectiveness of the Tax C...
C O N G R E S S I O N A L B U D G E T O F F I C ECost of Reducing Gasoline Use or Greenhouse GasEmissions■ How does the go...
C O N G R E S S I O N A L B U D G E T O F F I C ECosts Compared with Those for Other TransportationPoliciesDollars per Gal...
C O N G R E S S I O N A L B U D G E T O F F I C ECosts Compared with Those for Broader Policies■ Gasoline Tax– 30 to 55 ce...
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Effects of Tax Credits for Electric Vehicles

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Presentation to the 2013 EIA Energy Conference U.S. Energy Information Administration, Ron Gecan, Ph.D.
Microeconomic Studies Division

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Effects of Tax Credits for Electric Vehicles

  1. 1. Congressional Budget OfficeEffects of Tax Creditsfor Electric VehiclesRon Gecan, Ph.D.Microeconomic Studies DivisionJune 17, 2013This presentation provides information published in Effects of Federal Tax Credits for the Purchase ofElectric Vehicles (September 2012), www.cbo.gov/publication/43576.Presentation to the 2013 EIA Energy ConferenceU.S. Energy Information Administration
  2. 2. C O N G R E S S I O N A L B U D G E T O F F I C ETradeoffs for Electric Vehicles■ Lower operating costs for the driver than other, comparablevehicles but more costly to purchase.■ Lower gasoline use and fewer greenhouse gas emissions in thetransportation sector but greater emissions in the electricutility sector.
  3. 3. C O N G R E S S I O N A L B U D G E T O F F I C EFederal Tax Credits Available on Electric VehiclesBattery Capacity of Electric Vehicle (kWh)02,5005,0007,50010,0001 4 7 10 13 16 19 22$2,500 at 4 kWh$7,500 at 16 kWhDollars perVehicle
  4. 4. C O N G R E S S I O N A L B U D G E T O F F I C EBasic Questions■ Are the tax credits large enough to make electric vehicles cost-competitive with conventional vehicles and traditionalhybrids?■ How effective are the electric vehicle tax credits at reducinggasoline consumption and emissions of greenhouse gases, andat what cost to the government?
  5. 5. C O N G R E S S I O N A L B U D G E T O F F I C EGeneral Findings■ At current vehicle prices, federal tax credits alone generally donot offset the higher lifetime cost of driving electric vehicles.■ Electric vehicle tax credits probably do not reduce gasoline useand greenhouse gas emissions in the short term but could inthe longer term depending on CAFE standards; the cost ofthose reductions might be higher than those of other policies.
  6. 6. C O N G R E S S I O N A L B U D G E T O F F I C EFederal Tax Credits for Electric Vehicles■ How large do the tax credits need to be to offset the greaterlifetime cost of buying and operating electric vehicles?
  7. 7. C O N G R E S S I O N A L B U D G E T O F F I C ETax Credits Necessary for Electric Vehicles to Be Cost-Competitive at 2011 Vehicle Prices(Dollars)Type of Electric Vehicle and Battery Capacity (kWh)PHEV-4 PHEV-16 PHEV-24 AEV-24-5,00005,00010,00015,00020,00025,000aConventionalVehicle for Which theElectric Vehicle IsSubstitutingCurrentTax CreditAverage-Fuel-Economy VehicleLow-Fuel-EconomyLight-Duty TruckHigh-Fuel-EconomyCompact Car
  8. 8. C O N G R E S S I O N A L B U D G E T O F F I C EGasoline Prices■ How high do gasoline prices need to be to offset the greaterlifetime cost of buying and operating electric vehicles?
  9. 9. C O N G R E S S I O N A L B U D G E T O F F I C EGasoline Prices Necessary for Electric Vehicles to Be Cost-Competitive at 2011 Vehicle Prices(Dollars per gallon)PHEV-4 PHEV-16 PHEV-24 AEV-24024681012Type of Electric Vehicle and Battery Capacity (kWh)ConventionalVehicle for Which theElectric Vehicle IsSubstitutingGasoline PriceAssumed inThis Analysis for2011 Vehicles Average-Fuel-Economy VehicleLow-Fuel-EconomyLight-Duty TruckHigh-Fuel-EconomyCompact Car
  10. 10. C O N G R E S S I O N A L B U D G E T O F F I C EElectric Vehicle Prices■ How will expected decreases in the relative cost of buyingelectric vehicles effect the tax credit necessary for thosevehicles to be cost-competitive with others in the future?
  11. 11. C O N G R E S S I O N A L B U D G E T O F F I C ETax Credits Necessary for Electric Vehicles to Be Cost-Competitive at 2020 Vehicle PricesPHEV-4 PHEV-16 PHEV-24 AEV-24-4,000-2,00002,0004,0006,0008,00010,00012,000Type of Electric Vehicle and Battery Capacity (kWh)2020 Value ofCurrentTax CreditConventionalVehicle for Which theElectric Vehicle IsSubstitutingHigh-Fuel-EconomyCompact CarAverage-Fuel-Economy VehicleLow-Fuel-EconomyLight-Duty Truck(Dollars)
  12. 12. C O N G R E S S I O N A L B U D G E T O F F I C ECost of Reducing Gasoline Use or Greenhouse GasEmissions■ What is the government’s cost of reducing gasoline use orgreenhouse gas emissions using the electric vehicle taxcredits?
  13. 13. C O N G R E S S I O N A L B U D G E T O F F I C ECost of Reducing Gasoline Use or Greenhouse GasEmissions■ Because of CAFE standards, selling more high-fuel-economyvehicles will probably allow more low-fuel-economy vehiclesto be sold.■ Electric vehicles will probably have little effect on gasoline useor greenhouse gas emissions while existing CAFE standards arein place.■ Promoting electric vehicle use might have effects in the futurewhen CAFE standards are revised.
  14. 14. C O N G R E S S I O N A L B U D G E T O F F I C EGovernment Cost of Reducing Gasoline Use(Dollars per gallon of gasoline consumption reduced, direct effect only)PHEV-4 PHEV-16 PHEV-24 AEV-24024681012Type of Electric Vehicle and Battery Capacity (kWh)ConventionalVehicle for Which theElectric Vehicle IsSubstitutingHigh-Fuel-EconomyCompact CarAverage-Fuel-Economy VehicleLow-Fuel-EconomyLight-Duty Truck
  15. 15. C O N G R E S S I O N A L B U D G E T O F F I C EGovernment Cost of Reducing Greenhouse Gas Emissions(Dollars per metric ton of CO2-equivalent emissions reduced, direct effect only)PHEV-4 PHEV-16 PHEV-24 AEV-2404008001,2001,6002,0002,400Type of Electric Vehicle and Battery Capacity (kWh)ConventionalVehicle for Which theElectric Vehicle IsSubstitutingHigh-Fuel-EconomyCompact CarAverage-Fuel-Economy VehicleLow-Fuel-EconomyLight-Duty Truck
  16. 16. C O N G R E S S I O N A L B U D G E T O F F I C ECosts When Electricity Is Produced Using Fuels withDifferent Carbon Intensities(Dollars per metric ton of CO2-equivalent emissions reduced, direct effect only)PHEV-4 PHEV-16 PHEV-24 AEV-2401,0002,0003,0004,0005,000Type of Electric Vehicle and Battery Capacity (kWh)Emissions Level ofFuel Used toProduce ElectricityLowAverageEmissionsHigh
  17. 17. C O N G R E S S I O N A L B U D G E T O F F I C EOther Factors Significantly Affecting the Cost-Effectiveness of the Tax Credits■ Reductions reflect only those over the life of the vehicle;reductions from increased CAFE standards last longer.■ Calculations of the government’s cost consider each reductionin isolation; actual costs are probably lower.■ Additional sales of other high-fuel-economy vehicles willfurther reduce gasoline use and greenhouse gas emissions.■ A key assumption underlying the estimates is that the taxcredits are responsible for an estimated 30 percent of electricvehicle sales.■ CAFE probably prevents the tax credits from having any shortrun impact on gasoline use or greenhouse gas emissions.
  18. 18. C O N G R E S S I O N A L B U D G E T O F F I C ECost of Reducing Gasoline Use or Greenhouse GasEmissions■ How does the government’s cost of the electric vehicle taxcredits compare with the costs of other programs that reducegasoline use or greenhouse gas emissions?
  19. 19. C O N G R E S S I O N A L B U D G E T O F F I C ECosts Compared with Those for Other TransportationPoliciesDollars per Gallon ofGasoline Consumption ReducedDollars per Metric Ton ofCO2-Equivalent Emissions ReducedBiodieselCellulosic ethanolCorn ethanolBiofuel Tax Credits:"Cash for Clunkers" ProgramTax Credits for TraditionalHybrid Electric VehiclesAEV-24PHEV-16High-emissions electricityPHEV-16PHEV-4Low-emissions electricityTax Credits forElectric Vehicles Using:0 1 2 3 4 5 6 7 8 0 1,000 2,000 3,000 4,000 5,000
  20. 20. C O N G R E S S I O N A L B U D G E T O F F I C ECosts Compared with Those for Broader Policies■ Gasoline Tax– 30 to 55 cents per gallon to reduce gasoline use– 20 to 30 cents per gallon to reduce greenhouse gas emissions■ Cap and Trade or Carbon Tax– Broad based; the costs of lowering emissions are not directlycomparable■ Production Tax Credit on Renewable Generation– $8 per MT CO2 (reduced) for geothermal power– $12 per MT (reduced) for wind power

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