Anatomy of an EV Policy Error

"In an observation attributed to many, a recurrent human failing is to forget what we're trying to accomplish. Less than two years have elapsed since the Inflation Reduction Act was passed, as Joe Biden put it, to ward off the "existential risk of climate change."

The policy has already morphed into one of protecting American industry from cheaper green-energy technology available abroad.

You won't find it mentioned in your newspaper or cable news (we'll get to why), but it was never seriously thought that subsidizing green-energy consumption was a way to reduce emissions. Subsidizing green-energy consumption simply subsidizes more energy consumption -- including fossil energy to churn out electric-vehicle batteries, wind turbines, solar panels, etc.

It adds to the unlimited amount of energy humans will consume if the price is right.

Tellingly, Mr. Biden's own White House budget office, in an unsigned, undated "analysis," begs off defending Biden policy by declining to make any emissions-reduction forecast. Instead, it cites "complex economic interactions" while regurgitating what it knows are the flawed estimates of outside groups.

Long-time NASA climate scientist James Hansen, in a recent paper, dismissively points out that "thousands of pages of giveaways to special interests lard . . . the climate bill titled 'Inflation Reduction Act' -- Orwellian double-speak."

From this, you might think no serious policy analysis preceded the Biden program. In fact, a 2013 congressionally sponsored National Research Council study, led by the father of climate economics and future Nobel laureate, Yale's William Nordhaus, concluded that green handouts and tax breaks are "a poor tool for reducing greenhouse gases and achieving climate change objectives."

This became the essence of Biden policy.

In the acreage of coverage since, good luck detecting anything but an unquestioned assumption that this trillion-dollar expenditure of public resources now makes perfect sense. Call it an abdication of the public-interest journalism we used to rely on to help steer the ship of state.

The New York Times this week frames a shibboleth combined with a vague appeal to authority, writing: "President Biden placed electric vehicles at the heart of his climate agenda because scientists say that a rapid switch from gasoline-powered cars to electric versions is one of the most effective ways to slow the carbon dioxide emissions that are dangerously heating the planet."

Economists might be better to consult than scientists, but, in all likelihood, no one was consulted by the Times on the question of whether the policy will be effective.

This sentence, we can safely assume, arose entirely as a backward-reasoned justification of the Biden program, concocted on the spot by a Times editor to fill the place where a reader expects to be assured that the policy has been vetted and found to be sensible.

I won't rehearse the absurdity of focusing on consumer passenger cars, especially when it takes fossil fuels to produce EV batteries and keep them charged. Long before Joe Biden decided U.S. auto makers should be protected from cheap Chinese EVs, the U.S. industry was already founded on the kind of disastrous protectionism that saddles citizens in places like Turkey and Malaysia with low-quality, overpriced cars of domestic manufacture.

Since 1964, a 25% tariff on imported pickups has turned the Big Three domestic auto manufacturers into pickup truck companies that, in an unspoken post-Obama political settlement, use their excess pickup profits to subsidize money-losing electric vehicles.

The EVs the Big Three churn out, as a result, are exactly those that produce more emissions on net than the average gasoline-powered car.

They are the biggest, grandest Hummer- and Escalade-sized EVs, which need an oversized battery just to haul around the weight of their oversized battery.

Barron's elaborates over the weekend on an argument previously made here: Cheap Chinese electric vehicles pose no threat to U.S. manufacturers because they lack the vehicle amenities Americans demand and willingly pay for.

In American driveways, instead, you'd eventually find more and more cheap Chinese EVs for local errands next to bigger, gas-powered vehicles that American households use for other purposes. If the world isn't going to adopt carbon taxes, this -- the natural, market-based search for energy efficiency -- is the only modest success we've seen in reducing the expected path of emissions.

It's why the carbon intensity of global gross domestic product has been steadily falling for two decades at nearly 2% annually, at least until recently. This small favor is a big reason, unheralded, that the U.S. and Europe have likely passed their emissions peak, and why China may see peak emissions soon.

Look for this progress, modest as it is, to come to an abrupt stop under Biden-style competitive subsidization and protection of "green" energy, whose net effect will be to make it harder for consumers to satisfy their energy demand as efficiently as possible in a globally competitive energy marketplace.

Just watch the emissions figures over the next decade to see how anti-climate climate policy can be." [1]

Things are moving faster than it is described here. Germans started already a pilot of production chemicals from oil, using electricity from wind power. Soon everything in the world including cars will be produced sustainably without energy from non-renewables. Things produced using the non-renewables will be taxed heavily during the import. Nobody will buy them. 

America's problem is different than presented here. America blocking Chinese competition risks a complete de-industrialization. As a result, Panama will no longer fear the US because a strong industry is the basis of a strong military force. Only competition makes the capitalist enterprise a winning institution.

1. Anatomy of an EV Policy Error. Jenkins, Holman W; Jr.  Wall Street Journal, Eastern edition; New York, N.Y.. 29 May 2024: A.13.