2 Mich. Democrats propose billions more in tax incentives to encourage electric car sales
Wednesday, January 26, 2011; 10:02 PM
The day after President Obama called for popularizing electric cars in his State of the Union address, two Michigan Democrats proposed legislation that would spend billions more on incentives for consumers to buy them.
Rep. Sander M. Levin and Sen. Carl M. Levin are proposing to more than double the scope of a program that gives consumers $7,500 in tax incentives for buying plug-in electric vehicles such as the Chevrolet Volt and Nissan Leaf.
If consumers buy more pure electric cars and more manufacturers produce them, the expanded package of incentives could amount to as much as $19 billion in tax credits for consumers over the next 10 years.
"It is a lot of money," Sander Levin said. But if consumers take up the tax credits, he said, "it means that the program worked."
In his address, Obama said he is aiming to get 1 million electric vehicles on the road by 2015.
Incentives are necessary to reach that goal because electric vehicles are so expensive, largely because of the cost of batteries. The Chevrolet Volt is priced at $41,000 and the Nissan Leaf at $32,780, well above comparably sized cars with gasoline engines that can cost about $20,000. Besides boosting sales at the automakers, the benefit would flow to "early adopters," who generally tend to be affluent.
The legislation is part of a broader political effort to electrify the nation's cars. During a stop by Vice President Biden at a battery plant in Indiana on Wednesday, the administration announced that it is seeking to boost research and development into electric vehicles and create a competitive grant program offering up to $10 million apiece to 30 communities that develop charging stations and other amenities for electric cars.
"With more research and incentives, we can break our dependence on oil with biofuels and become the first country to have a million electric vehicles on the road by 2015," Obama said in his speech Tuesday.
Proponents say that providing incentives to buy electric vehicles would reduce greenhouse gases and other pollution and diminish the nation's dependence on foreign oil.
But skeptics noted that previous energy enthusiasms and government funding for alternative fuels such as hydrogen and biofuels have yet to yield commercially successful automobiles. They say choosing yet another technology, in this case, electricity, could preclude research in potentially more-promising fields.
Critics also question whether electric vehicles offer enough environmental benefit to justify the government spending $7,500 to encourage the purchase of each one.
When running on electricity, the Volt and the Leaf issue no tailpipe pollution. But their rechargeable batteries rely on electricity, and about half of that in the country is produced by coal-burning power plants, which create pollution of their own.
John DeCicco, a faculty fellow at the University of Michigan's Energy Institute, has calculated that a Toyota Prius rivals battery plug-ins such as the Leaf and Volt in terms of greenhouse gas emissions.
"A Prius technology is clearly a more cost-effective way of reducing greenhouse gases than electrification," DeCicco said. "It's difficult to see how these selective subsidies are justified. And when you factor in smog-forming pollutants from power plants on a national level, the Prius is actually cleaner than the Volt and Leaf."
But environmentalists say that over time the nation's electric-generating plants will become cleaner, and as they do, the advantage of electric cars will become clearer.
Moreover, proponents of electric car investments say that in addition to the environmental benefits, electrification will serve the nation's security and economic concerns.
Robbie Diamond, president of the Electrification Coalition, said that with electricity, a wide array of domestic energy sources could power the nation's automobiles: wind, solar, nuclear, natural gas, coal.
"It's all about economic and national security," he said. Electrification would make sure "we're not hostage to one fuel source produced in the world's unstable and often-hostile regions."
The proposed expansion of the tax credit may be one of the most expensive pieces of the electrification efforts. When it was introduced in 2008, the $7,500 tax credit was limited to the first 250,000 vehicles. The stimulus bill expanded that to 200,000 per manufacturer. The new bill would lift that cap to 500,000 per manufacturer.
Sander Levin said that while investments in other fuels are important, the chief executives of the nation's three big automakers are enthusiastic about the possibilities of electric vehicles. He said that General Motors chief executive Daniel F. Akerson is aiming to build 120,000 Volts next year, a significant expansion over this year's goal of 10,000.
"This is not a fad - this is a necessity," the congressman said.
And paraphrasing Obama's speech, he likened the push for electric vehicles to a "Sputnik moment, but on the ground. . . . To mix metaphors a little, I think it could take off."