Image Source: PexelsBloomberg has an article on electric cars, which illustrates some of the advantages of carbon taxes over regulation:
New Breed of EV Promises 700 Miles per Charge (Just Add Gas)
It runs on batteries 95% of the time, but a gasoline engine can recharge them for longer hauls, easing range anxiety.
EV sales growth has slowed in recent months, partly due to consumers having anxiety about being unable to find a place to recharge their cars. This new type of EV would greatly reduce that problem. At the moment, these cars are available in China, but not the US:
It’s unlikely US car buyers will see anything like that on American roads anytime soon because President Joe Biden is seeking 100% tariffs on Chinese cars and former President Donald Trump is threatening even tougher protectionist measures to keep Chinese-made EVs out. So if American consumers are to gain access to technology that might provide a transition to the electric future, it will be up to the automakers in the US—and their regulators—to pave the way.
What about producing this sort of car within the US? Here’s one issue:
Because a gas-fueled engine is used to extend the driving range of an EREV, it’s considered a hybrid, which the Sierra Club has said it no longer considers green technology. “EREVs could be a harmful distraction that could stall momentum in the crucial transition to zero-emission vehicles,” says Katherine Garcia, the Sierra Club’s director of clean transportation.
It’s unclear how US regulators will classify EREVs, but it seems unlikely they’ll be lumped with pure EVs, which, if made in North America, qualify for government incentives aimed at stimulating sales, such as a tax credit of as much as $7,500.
The “big decision for us as an industry and for regulators: ‘Is that an EV or isn’t it?’” Farley said of EREVs at the Bernstein Strategic Decisions Conference in New York in late May. “Customers are voting; they like these in-between solutions. We still have a lot of work to do with regulators because they’re not there.”
What is better for the environment, selling a few cars that are 100% emission free, or selling a lot of cars that are 95% emission free?Governments are generally not very good at making this sort of calculation; hence “command and control” regulations often end up being relatively inefficient. In contrast, a carbon tax encourages consumers to make the decision that is best for the economy, including the external costs of emissions. If done right, carbon taxes can also make the overall tax system more efficient, by reducing other more distortionary taxes. Cynics will correctly note that it’s unlikely that other taxes will be reduced by an equal amount. But unless we slash government spending, we’ll need sharp increases in other taxes, and a carbon tax would allow those increases to be smaller. So the point still holds.This reminds me of the debate about safer versions of cigarettes. Recall when regulators were reluctant to approve a cigarette substitute that was far safer than ordinary cigarettes, because it was not 100% safe. There’s an old saying: Never let the perfect be the enemy of the good.More By This Author:Are Low Wages A Competitive Advantage In Trade? Are we moving toward fiscal dominance? An American Economic Miracle?
