The green car myth

28 06 2017

How government subsidies make the white elephant on your driveway look sustainable

And this comes on top of this article that describes how just making electric cars’ battery packs is equivalent to eight years worth of driving conventional happy motoring.

I have written before about the problems with bright green environmentalism. Bright greens suggest that various technological innovations will serve to reduce carbon dioxide emissions enough to avoid catastrophic global warming and other environmental problems. There are a variety of practical problems that I outlined there, including the fact that most of our economic activities are hitting physical limits to energy efficiency.

The solution lies in accepting that we can not continue to expand our economies indefinitely, without catastrophic consequences. In fact, catastrophic consequences are in all likelihood already unavoidable, if we believe the warnings of prominent climatologists who claim that a two degree temperature increase is sufficient to cause significant global problems.

It’s easy to be deceived however and assume that we are in the process of a transition towards sustainable green technologies. The problem with most green technologies is that although their implementation on a limited scale is affordable, they have insufficient scalability to enable a transition away from fossil fuels.

Part of the reason for this limited scalability is because users of “green” technology receive subsidies and do not pay certain costs which users of “grey” technology have to shoulder as a result. As an example, the Netherlands, Norway and many other nations waive a variety of taxes for green cars, taxes that are used to maintain the network of roads that these cars use. As the share of green cars rises, grey cars will be forced to shoulder increasingly higher costs to pay for the maintenance of road networks.

It’s inevitable that these subsidies will be phased out. The idea of course is that after providing an initial gentle push, the transition towards more green driving will have reached critical mass and prove itself sustainable without any further government subsidies. Unfortunately, that’s unlikely to occur. We’ve seen a case study of what happens when subsidies for green technologies are phased out in Germany. After 2011, the exponential growth in solar capacity rapidly came to a stop, as new installs started to drop. By 2014, solar capacity in Germany had effectively stabilized.1 Peak capacity of solar is now impressively high, but the amount of solar energy produced varies significantly from day to day. On bad days, solar and wind hardly contribute anything to the electricity grid.

Which brings us to the subject of today’s essay: The green car. The green car has managed to hide its enormous price tag behind a variety of subsidies, dodged taxes and externalities it has imposed upon the rest of society. Let us start with the externalities. Plug-in cars put significant strain on the electrical grid. These are costs that owners of such cars don’t pay themselves. Rather, power companies become forced to make costs to improve their grid, to avoid the risk of blackouts, costs that are then passed on to all of us.

When it comes to the subsidies that companies receive to develop green cars, it’s important not just to look at the companies that are around today. This is what is called survivorship bias. We focus on people who have succeeded and decide that their actions were a good decision to take. Everyone knows about the man who became a billionare by developing Minecraft. As a result, there are droves of indie developers out there hoping to produce the next big game. In reality, most of them earn less than $500 a year from sales.2

Everyone has heard of Tesla or of Toyota’s Prius. Nobody hears of the manufacturers who failed and went bankrupt. They had to make costs too, costs that were often passed on to investors or to governments. Who remembers Vehicle Production Group, or Fisker automotive? These are companies that were handed 193 million and 50 million dollar in loans respectively by the US Federal government, money the government won’t see again because the companies went bankrupt.3 This brings the total of surviving car manufacturers who received loans from the government to three.

To make matters worse, we don’t just subsidize green car manufacturers. We subsidize just about the entire production chain that ultimately leads to a green car on your driveway. Part of the reason Fisker automotive got in trouble was because its battery manufacturer, A123 Systems, declared bankruptcy. A123 Systems went bankrupt in 2012, but not before raising 380 million dollar from investors in 2009 and receiving a 249 million dollar grant from the U. S. department of energy back in 2010.

Which brings us to a de facto subsidy that affects not just green cars, but other unsustainable projects as well: Central bank policies. When interest rates are low, investors have to start searching for yield. They tend to find themselves investing in risky ventures, that may or may not pay off. Examples are the many shale companies that are on the edge of bankruptcy today. This could have been anticipated, but the current financial climate leaves investors with little choice but to invest in such risky ventures. This doesn’t just enable the growth of a phenomenon like the shale oil industry affects green car companies as well. Would investors have poured their money into A123 Systems, if it weren’t for central bank policies? Many might have looked at safer alternatives.

One company that has benefited enormously from these policies is Tesla. In 2008, Tesla applied for a 465 million dollar loan from the Federal government. This allowed Tesla to produce its car, which then allows Tesla to raise 226 million in an IPO in June 2010, where Tesla receives cash from investors willing to invest in risky ventures as a result of central bank policies. A $7,500 tax credit then encourages sales of Tesla’s Model S, which in combination with the money raised from the IPO allows Tesla to pay off its loan early.

In 2013, Tesla then announces that it has made an 11 million dollar profit. Stock prices go through the roof, as apparently they have succeeded at the task of the daunting task of making green cars economically viable. In reality, Tesla made 68 million dollar that year selling its emission credits to other car companies, without which, Tesla would have made a loss.

Tesla in fact receives $35,000 dollar in clean air credits for every Model S that it sells to customers, which in total was estimated to amount to 250 million dollar in 2013.4 To put these numbers in perspective, buying a Model S can cost anywhere around $70,000, so if the 35,000 dollar cost was passed on to the customer, prices would rise by about 50%, not including whatever sales tax applies when purchasing a car.

We can add to all of this the 1.2 billion of subsidy in the form of tax exemptions and reduced electricity rates that Tesla receives for its battery factory in Nevada.5 The story gets even better when we arrive at green cars sold to Europe, where we find the practice of “subsidy stacking”. The Netherlands exempts green cars from a variety of taxes normally paid upon purchase. These cars are then exported to countries like Norway, where green cars don’t have to pay toll and are allowed to drive on bus lanes.6

For freelancers in the Netherlands, subsidies for electrical cars have reached an extraordinarily high level. Without the various subsidies the Dutch government created to increase the incentive to drive an electrical car, a Tesla S would cost 94.010 Euro. This is a figure that would be even higher of course, if Dutch consumers had to pay for the various subsidies that Tesla receives in the United States. After the various subsidies provided by the Dutch government for freelance workers, Dutch consumers can acquire a Tesla S at a price of just 25,059 Euro.7

The various subsidies our governments provide are subsidies we all end up paying for in one form or another. What’s clear from all these numbers however is that an electric car is currently nowhere near a state where it could compete with a gasoline powered car in a free unregulated market, on the basis of its own merit.

The image that emerges here is not one of a technology that receives a gentle nudge to help it replace the outdated but culturally entrenched technology we currently use, but rather, of a number of private companies that compete for a variety of subsidies handed out by governments who seek to plan in advance how future technology will have to look, willfully ignorant of whatever effect physical limits might have on determining which technologies are economically viable to sustain and which aren’t.

After all, if government were willing to throw enough subsidies at it, we could see NGO’s attempt to solve world hunger using caviar and truffles. It wouldn’t be sustainable in the long run, but in the short term, it would prove to be a viable solution to hunger for a significant minority of the world’s poorest. There are no physical laws that render such a solution impossible on a small scale, rather, there are economic laws related to scalability that render it impossible.

Similarly, inventing an electrical car was never the problem. In 1900, 38% of American cars ran on electricity. The reason the electrical car died out back then was because it could not compete with gasoline. Today the problem consists of how to render it economically viable and able to replace our fossil fuel based transportation system, without detrimentally affecting our standard of living.

This brings us to the other elephant, the one in our room rather than our driveway. The real problem here is that we wish to sustain a standard of living that was built with cheap natural resources that are no longer here today. Coping with looming oil shortages will mean having to take a step back. The era where every middle class family could afford to have a car is over. Governments would be better off investing in public transport and safe bicycle lanes.

The problem America faces however, is that there are cultural factors that prohibit such a transition. Ownership of a car is seen as a marker of adulthood and the type of car tells us something about a man’s social status. This is an image car manufacturers are of course all too happy to reinforce through advertising. Hence, we find a tragic example of a society that wastes its remaining resources on false solutions to the crisis it faces.

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14 responses

28 06 2017
david higham

‘Governments would be better off investing in public transport and safe bicycle lanes.’
Thanks for the laugh. As if that would solve the predicaments we are facing.
Cities,particularly the enormous mega-cities of todays world,are themselves
unsustainable. They are gigantic energy and resource sinks,and convert
cyclic nutrient systems into linear systems. .

28 06 2017
Dennis Mitchell

I hate to see the electric car being forced into the gas car mold. Tesla is just a rich mans toy. The original electric car replaced the horse and buggy. Maybe if we built an ultralight weight electric vehicle it would be practical. Use established bike technology. Top speed fourty mph. Shoot for interchangeable batteries with a sixty mile range. That covers ninety five percent of my travel needs and I live ten miles from the nearest town. The local speed limit is fifty, so I’m not really losing so much time. The green car might be a myth, but green transportation could be a reality. Unfortunately we are wasting the last of our energy inheritance and will crash and burn before we try something rational.

29 06 2017
Jonathan Maddox

Tesla is a rich man’s toy because that’s where the money is and that’s how to influence the market — and because the people burning the petrol don’t buy ultralight vehicles, though they are available. Many people buy five-year-old cars, very few buy new ones. The vast majority of new cars are bought by rich people or by businesses run by rich people. Tesla started at the top and is working its way down.

28 06 2017
Chris Harries

New trends are coming and going so fast now that electric cars are passé. The technophile mob is now dreaming and writing (and wetting themselves) over autonomous cars. Well, they can be both autonomous and electric of course, but the important thing (if we follow the enthusiasts’ rhetoric) is that any car that’s not autonomous will become a stranded asset before their life span is up. And this will include EVs such as Teslas and the like.

As for me, I’m looking forward to autonomous motor bikes, not because I’m a bikie, but can’t help surmising that autonomous bikie gangs may just spring up and start roaming our streets. If anyone thinks that’s absurd, did anyone ever predict that ransomware viruses would attack big corporations and shut them down and extort money from them?

29 06 2017
Jonathan Maddox

Regarding that eight-year equivalence thing: false accounting. Try about 27 months when comparing like with like. Watt exactly do you expect from wattsupwiththat? It’s a propaganda site.

29 06 2017

AND Popular Mechanics is more rliable…?

I remember referencing a German study some time ago (can’t find it unfortunately) that found that EVs generate 60% of an ICE car before i’s even driven out the showroom….. so there must, surely, be some truth to this..?

29 06 2017
Jonathan Maddox

It appears a 2013 study of emissions from lithium ion battery pack manufacture is the only reference the Swedes used. Could this be the study you recall?

In other words they’re recycling information whose numbers assume fossil energy is used to manufacture the batteries (decreasingly the case, and not at all the case for Tesla today) and that there are no recycled materials in new batteries.

However this is right there in the abstract: “Sensitivity analysis indicated that the most effective approach to reducing climate change emissions would be to produce the battery cells with electricity from a cleaner energy mix.” — which Tesla is most explicitly doing.

29 06 2017

When you start looking………..

Electric vehicles tend to produce more pollutants from tire and brake wear, due in large part to their batteries, as well as the other parts needed to propel them, making them heavier.

These pollutants are emitted when electric vehicle tires and brakes deteriorate as they accelerate or slow down while driving. Timmers and Achten’s research suggests exhaust from traditional vehicles is only about one-third of the total emissions.

In other words, while people understandably focus on what’s released from exhaust pipes, the research indicates that two-thirds of total emissions come from other sources. And these particulates may be especially problematic. As the Caller further relates:

“We found that non-exhaust emissions, from brakes, tires and the road, are far larger than exhaust emissions in all modern cars,” Achten wrote in the study.

He continued: “These are more toxic than emissions from modern engines so they are likely to be key factors in the extra heart attacks, strokes and asthma attacks seen when air pollution levels surge.”


29 06 2017

“Cars produce 56 percent of all the pollution they will ever produce before they ever hit the road. …”

I think the more relevant quote from the original German Environment and Forecasting Institute report is, in relation to CO2 emissions:

68% of all of a car’s emissions comes from processing and transporting the raw materials;10% is emitted as a result of manufacturing, scrapping, and constructing roads and garage facilities; and only 22% of CO2 emissions comes from the actual operation of the car.

30 06 2017
Jonathan Maddox

While it’s true that tyre wear is higher in electric vehicles than in comparable ICE vehicles, as it’s proportional not to the vehicle weight but to the fourth power of vehicle weight (reduced again by choice of tyres and tyre pressure appropriate to that weight), I’m astonished by the claim that *brake* wear is higher than in comparable ICE vehicles.

Once again, the authors of your links are cherry-picking. The study they cite (well, the study cited by their citation which is none other than that other US right-wing favourite of yours, the Daily Caller) *excludes* energy emissions and looks only at non-exhaust particulates.

Here’s the original (abstract, at least, I haven’t bothered tracking down the full text):

Now … your link itself is The New American, a publication of the John Birch Society, the old-school paranoid hard-right political organisation intimately associated with the Koch family since its inception and with climate change denialism since that was first a thing. What is it with you trawling these propaganda sites for talking points, Mike? Whose side are you on exactly ‽‽‽‽‽

30 06 2017
Jonathan Maddox

You have misread the German study, which is talking about sources of emissions within Germany, not about an individual vehicle’s contribution of carbon emissions. What it says is this:

68% is the fraction of Germany’s CO₂ emissions which are NOT car-related: heating, “production” (other than car manufacturing. To reach 68% “Produktion” would have to include electricity generation which is “Stromproduktion”), rail, shipping, aircraft.

10% is the percentage of Germany’s gross CO₂ emissions from German car manufacturing (which would include for export, Germany is a big net exporter of cars), and scrapping, roadmaking and garages.

22% is the percentage of Germany’s CO₂ emissions arising directly from operation of cars. In the paragraph above it says the percentage of Germany’s emissions from vehicle traffic is 36.1%, which would include refinery and fuel shipping emissions, and of course would also include vehicles other than cars.

29 06 2017
Jonathan Maddox

Wattsupwiththat is a propaganda site, and the study it crowingly links is false accounting: an expensive “rich man’s toy” performance vehicle compared with figures for petrol cars that reflect either the driving habits of someone who walks to work, or a very small underpowered car.

I posted a comment with a link to the Popular Mechanics takedown of the study, it doesn’t show here, I guess the link caused it to have to wait for moderation but nothing told me so.

4 08 2017
Chris Harries

Here’s an amazingly comprehensive analysis on batteries written by a brilliant Bolivian:

4 08 2017

EXCELLENT stuff, thanks Chris……..

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