The NBER Digest summarizes a paper by Stephen Holland and others.
Using data from the U.S. Environmental Protection Agency, the Energy Information Administration, the Federal Energy Regulatory Commission, and other sources, the authors analyze energy use and emissions over a three-year period, from 2007 through 2009. They track energy production and consumption by the hour of the day within different regions. They conclude that on net, in the western United States and in Texas, driving PEVs would result in lower carbon-dioxide emissions than driving fuel-efficient hybrid cars. But in other regions, such as the upper Midwest, where the fuel mix for electricity generation is more heavily tilted toward coal, the charging of PEV batteries during the recommended hours of midnight to 4 AM could result in more emissions than those associated with the average car now on the road. “Underlying this result is a fundamental tension between load management of electricity and achieving environmental goals,” the authors conclude. “The hours when electricity is the least expensive to produce tend to be the hours with the greatest emissions.”
In addition, the fact that electric cars are subsidized suggests to me that their production uses more resources than that of ordinary cars. That probably includes more energy.
Do markets price cars efficiently, given that emissions are an externality? Of course not. But that does not mean the regulators and subsidizers know enough to make matters better.
If the goal is to strictly to reduce CO2 emissions directly, then this observation is technically correct. These subsidies are a minor waste of taxpayer money, and don’t really accomplish anything. But I don’t think that is the case. A more sensible view of these subsidies is that they are intended to influence markets to accelerate development of technologies that will be needed to make a real difference down the road.
Have they chosen the wrong tech to push here? I doubt it.
even if they get the “right” technology the odds that they get the time frame correct as well as the company are almost none. Pushing a technology to early risks a lot of different inefficiencies.
Re: right or wrong technology. Think about how many of the early auto makers, or aircraft designers, failed during the development of modern transportation technology. Which one of those would you (or a government subsidy) have picked to be successful? (And remember, no one anticipated the 3M engineer’s accidental yet serendipitous discovery of the Post-It product, for another example.)
From a Boudreaux 2006 post, linked by him in today’s post at cafehayek.com:
“Saying “Let the market handle it” is to reject a one-size-fits-all, centralized rule of experts. It is to endorse an unfathomably complex arrangement for dealing with the issue at hand. Recommending the market over government intervention is to recognize that neither he who recommends the market nor anyone else possesses sufficient information and knowledge to determine, or even to foresee, what particular methods are best for dealing with the problem.
To recommend the market, in fact, is to recommend letting millions of creative people, each with different perspectives and different bits of knowledge and insights, each voluntarily contribute his own ideas and efforts toward dealing with the problem. It is to recommend not a single solution but, instead, a decentralized process that calls forth many competing experiments and, then, discovers the solutions that work best under the circumstances.”
http://cafehayek.com/2006/03/a_simple_rule_f.html
The limiting factor and the only technology that really matters with electric cars is the batteries. But there were already tremendous market pressures for reducing the cost and increasing the performance of rechargeable batteries, so there’s no particular reason to expect battery breakthroughs from electric car subsidies that wouldn’t have happened anyway due to normal market incentives created by portable electronics.
You’re shifting the argument to a much weaker one.
A major flaw of CO2 controls is that all of the real-world policies are not really reducing CO2 significantly. This study shows that for electric cars, they don’t reliably improve CO2 even if you ignore the resources used in building the car. That means that electric cars are not a stepping stone toward an effective CO2 policy. It’s not merely a weak policy. Even if it were ramped up to the maximum, and all Americans switched to driving electric cars, it wouldn’t help CO2 at all.
Now yes, maybe things will change in the future. How do we know, though? What’s to stop gas cars from also getting better? Who in Washington really knows which way will work better in the long run, and if they care so much and no so much, why are they wasting time in Washington?
baconbacon and ColoComment – you are both shifting the argument from Prof Kling’s specific point to the wisdom of subsidies for particular companies or any particular tech.
I agree the approach to subsidies is probably poorly conceived. However, the idea that government should just stay out of energy is hard to understand. It is inevitable that society has to pick a path for energy. What we have now requires massive social accommodations that crowd out any legitimate competition, and any possible developments forward will likely require broad social consent and huge network commitments.
“Do markets price cars efficiently, given that emissions are an externality? Of course not. But that does not mean the regulators and subsidizers know enough to make matters better.” I thought that was the main point: that not only do they not know enough to make matters better, but that they may do more harm than good.
These subsidies may be a “minor waste of taxpayer money” (I don’t agree that they’re minor), but in any case they ARE a diversion of scarce financial and material and scientific and engineering resources toward a technology that may not be, and given the slim progress so far over decades of R&D, is not likely to be, the ultimate energy solution. While people are encouraged by these misdirected subsidies to concentrate on a government-favored technology, what other lines of scientific discovery are NOT being explored? (Not to mention the near-fraudulent solicitation and use of government’s blessing: remember Energy Sec. Chu’s loans and loan guarantees to alternative energy companies that built plants, hired employees, and paid [insider] executives high salaries, only to then fall into bankruptcy court?
http://www.washingtonpost.com/business/economy/energy-secretary-steven-chu-resigns/2013/02/01/f6253df6-6cb4-11e2-ada0-5ca5fa7ebe79_story.html
The original post cited the failure of subsidies to make a positive impact on CO2 emissions. That probably shouldn’t be the objective of such subsidies in the short term.
If we strip away the clumsy subsidies, we are still left with an energy infrastructure that commands vast accommodations from the public sectors. Energy providers need us to allow them to do things that aren’t trivial, that fundamentally change the places they operate in. We could pass on any or all of those decisions, but they are quite big, even in a stripped down, libertarian ideal. It’s hard to see how the public avoids choosing winners and losers here.
Gas cars have won based on their merits, not because the government chose them. In fact, Henry Ford initially wanted to make electric cars; he switched to gas cars because they take fewer resources to get the same class of car.
As things stand today, the big problems with electric cars are (a) they take much more resources to build, (b) they are much more complicated to manufacture, and (c) they consume comparable resources on an ongoing basis, if you include resources used at the central power plant.
These aren’t problems that are due to government assistence to gas cars. These are problems due to electric cars having fundamental problems. They cause the price tag of electric cars to be high, which leads to seeing not that many of them on the road.
This happens all the time with markets that are left alone. There is constant migration between individual compute power (PCs, smartphones, laptops) and shared compute resources (clouds) as the technology changes. Milk used to be delivered but is now picked up at the store. Movies used to be picked up at the store but were later delivered, and are now delivered over the Internet. Electronics used to be bought at the store, but are now ordered from Amazon. None of these things were picked by the government; they were chosen by markets, in response to changing conditions.
Yes, gas cars won based on their merits. However, to make gas work as an energy platform, our society consented to the buildout of an enormous infrastructure to support it. Many competitive technologies will need a similar long term public commitment to infrastructure buildout in order to fulfill their market potential. With energy, the infrastructure and public accommodations matter far more than the inherent market benefits of the technology. The idea that energy platforms can emerge through competition alone is a myth.
Yes, allowing private markets to work is always better, but some markets only work as a hybrid of private markets and public accommodation. Take the public out of it, and the markets don’t work. Energy is one of those markets, at least so far.
It wouldn’t be too hard to place an excise or ‘sin’ tax on the carbon content of domestic-consumption fossil fuel (as one could tax the partial quantity of ethanol in different alcoholic beverages) at whatever the ‘efficient’ externality-mitigating level would be. Then everyone else in the economy just responds to the new price structure.
Without subsidies, the total carbon impact incurred by producing and using any equipment would just be integrated into those prices, and people could try to save the environment by trying to save money. If you can’t encourage people to be thrifty for prudential reasons, maybe you can do so if you make it equivalent to supporting a holy cause. “Gaia helps those who help themselves.”
And to the extent that such a tax is revenue-neutral (say, exactly offset by means of an equivalent decline in payroll taxes), it might be an improvement.
The trouble comes at the border, though carbon-intensive imports that would go untaxed and without hard-to-implement ‘carbon-tariffs’. The worst of all possible worlds would be to make a law that simply distorts the geographic location of the economic production activities that caused the emissions (and adds on transport emissions to boot) and unilaterally sacrifices domestic jobs for zero (or even detrimental) impact on emissions.
By the way, that’s pretty much the main story of how the developed world has ‘reduced’ its emissions recently. It outsourced them to cheap-and-dirty coal-rich places like China, and re-imported the final products.
The solution is more renewable energy to generate more electricity when and where needed, circumventing the need for batteries. What this shows is when that is done, batteries become a better choice for transportation, so even if they may be less effective some places currently, their effectiveness will climb over time. They may be subsidized, but so are fossil fuels, and it isn’t apparent the latter is less, but refusal to reduce fossil fuel subsidies calls for other subsidies as a second best option.
I suspect battery technology is not a way to reduce the global emission of carbon. Gasoline is (according to Wikipedia) about fifty times more energy dense than the most efficient current rechargeable batteries despite over a century of work on making better batteries. Batteries will improve, but will never come close to gasoline as an energy source for propelling vehicles – indeed, if fossil fuels run out we will turn to synthesizing petroleum. Because of this, the level of carbon taxation needed to squash gasoline use would be murderous, and is unlikely therefore to be imposed. I think climate change will have to be addressed in some other way.