ARTICLE

The Electric Car Seduction

Subsidies and Mandates for Alternative Fuels Are Yet Another Public Folly

NOVEMBER 01, 1996 by LAWRENCE W. REED

Should government enact laws to subsidize alternative fuels so that people will use less gasoline? Should government mandate the use of electric cars or other vehicles that don’t use gasoline at all?

Even without expert knowledge of the issues involved, anyone who values liberty will be inclined to answer both questions in the negative. Subsidies are a forcible transfer of wealth from those who have earned it to those who didn’t. Likewise, mandates are edicts that carry penalties for noncompliance. Use of gasoline for transportation purposes would not seem to be the sort of offense that anyone ought to be behind bars for. Both subsidies and mandates are government’s way of declaring, We’re smarter than the market, so we’re going to have to force the market to change. How many times have we heard that one—and later lamented the results?

As it turns out, the skeptics are right once again. Subsidies and mandates on behalf of alternative fuels are yet another public folly, motivated perhaps by good intentions but fraught with inherent contradictions. Not only do they whittle away at personal liberty, they flout economics and science as well.

Subsidies and mandates for alternative fuels are being discussed in many state legislatures now. A law passed by Congress four years ago mandated that 75 percent of the half-million vehicles the federal government maintains be fueled by something other than gasoline by 1999; it also required state governments to start changing the composition of their own fleets to favor more alternative-fuel vehicles (AFVs).

A California law would have forced automakers to begin selling thousands of electric cars to the general public there in 1988, even though in 1995 there were fewer than 1,000 such vehicles on the road in the entire country. By 2003, electric cars were to comprise 10 percent of all cars sold in California—at least 200,000 vehicles. In the wake of withering criticism from scientists, engineers, and economists, the state has backed off somewhat, and the 10 percent mandate will now take effect in 2005. General Motors, Chrysler, and Ford, as well as the big automakers of Japan, will face fines of $5,000 for each car under the required threshold.

Electricity from batteries is one of several alternative fuels that some legislators want to force-feed the marketplace. Others include methanol, ethanol, and other alcohols, hydrogen, compressed natural gas, coal-derived liquid fuels, and liquefied petroleum gas. All of them are championed as fuels that will reduce oil imports, give the economy a boost, and cut pollution.

Skepticism is countered with a line of reasoning that goes something like this: Good intentions plus the force of law equals positive results. If the market won’t do it voluntarily, something must be wrong with the market. Government says AFVs are a good thing and must order the marketplace to comply. We’re all better off as a result of such wise intervention because governments are especially good at foreseeing both the future and the policies needed to make it better. What could possibly be wrong with this picture?

The truth is, skepticism about a product is warranted any time it takes special favors or penalties against the competition to gain acceptance for that product. The questions people need to ask are these: If alternative fuels are all that they are cracked up to be, why do politicians have to get involved? Why can’t AFVs succeed on their own?

The case for electric cars, it turns out, is more hype than substance. They are extremely expensive—costing between $28,000 and $48,000 to make. The batteries, which start at $1,500, must be recharged for at least five hours after driving less than 150 miles. And while the cars themselves are nonpolluting, the General Accounting Office in Washington says the plants that make the power to recharge them may put more pollutants in the air than gasoline-powered vehicles.

Meanwhile, the cleaner fuels used in today’s more efficient cars emit a small fraction of the pollution cars did 30 years ago. Even without any conversion to AFVs, the new cars coming off assembly lines by the end of this decade will simply not pose a pollution problem worth worrying about. Analysts at the Reason Foundation in California argue that alternative-fuel mandates would price new cars out of the reach of many Americans, who would then keep their older, more polluting cars longer.

Furthermore, according to Charles Oliver of Investor’s Business Daily, a University of Denver chemist found that the dirtiest 10 percent of all cars produce half of all airborne emissions. Relatively inexpensive, low-tech, voluntary approaches could take care of most of that without the intrusive, high-cost problems of electric-car mandates.

The other alternative fuels in use or on the drawing boards share at least some of the same problems. They require huge subsidies to hide their real costs and make them seem affordable, or they have limited application, or they cause substantial consumer inconvenience, or they generate unintended, harmful side-effects. Time and technology may work the bugs out and make them feasible, but that process will be stymied or misdirected if the nearsighted bias of politicians overrules the marketplace.

When it comes to the government planning of the nation’s technological future, we should learn from past mistakes. Washington is no more capable of forcing industry to develop viable and environmentally-friendly technologies, says James Sheehan of the Competitive Enterprise Institute, than it is capable of centrally planning the economy. Federal technology programs like the breeder nuclear reactor, the supercollider, and the synthetic fuels program wasted billions of dollars and produced few, if any, tangible benefits.

Patrick Bedard put it well in a December 1993 article in Car and Driver magazine entitled Why Alternative Fuels Make No Sense. He stated, The promises made for the alternatives to gasoline are very seductive. And you know how seductions turn out.

If politicians continue to micromanage the marketplace to artificially benefit alternative fuels, you may want to reach for both your wallet and your oxygen mask.