McCain energy gimmick, Part 2 — The ill-defined, impractical “Clean Car Challenge”

gimmick.jpgPart 1 discussed the pointless and hopelessly impractical $300 million battery prize proposed by the presumptive the GOP nominee. McCain also offered another hot gimmick this week:

My administration will issue a Clean Car Challenge to the automakers of America, in the form of a single and substantial tax credit based on the reduction of carbon emissions. For every automaker who can sell a zero-emissions car, we will commit a 5,000 dollar tax credit for each and every customer who buys that car. For other vehicles, whatever type they may be, the lower the carbon emissions, the higher the tax credit. And these large tax credits will be available to everyone — not just to those who have an accountant to explain it to them.

Now that is both silly and unmanageable. First off, a zero-emissions car would either be a pure electric vehicle or a hydrogen fuel cell car. Neither of those are the kind of near-term or even medium-term solution that we need, that we should encourage, or that we are likely to get (and whether they were actually zero-emissions would depend on how the hydrogen or electricity is made, as discussed below). The serious players are all pursuing plug-in hybrids, as they should be (see “This just in: Hydrogen fuel cell cars are still dead“). Those are not zero-emissions.

Second, “the lower the carbon emissions, the higher the tax credit” is absurd. Once again, Senator McCain and his energy advisers betray how little they understand the issues involved. Let’s look at the two most plausible reduced-emissions fuels: biofuels and electricity. Each of them would be both a bureaucrat’s and an accountant’s nightmare.

Consider a flexible-fuel vehicle running on a gasoline-biofuels mixture. Biofuels have roughly the same carbon “emissions” as gasoline. Oops! It is only when you do the life-cycle analysis, and subtract the carbon that the biomass removed from the air in the first place, that you get a carbon savings over gasoline. But there’s the rub. The calculation of the life-cycle emissions of biofuels is perhaps the most hotly-debated subject in the entire energy/climate arena (see, for instance, “About those two studies dissing biofuels“). And that’s assuming anybody can even prove they are always purchasing the same, consistent mixture of gasoline and biofuels. You’ll need more than an accountant to figure out the carbon savings here.

Then consider a plug-in hybrid. Here the carbon emissions depend critically on how you use the car (short-distance driving versus long-distance driving) and where you get your electricity (which varies from utility to utility). So let me ask the IRS, the new bureaucracy that the Senator will set up for this gimmick, and my accountant (because I’ll need a good one) the $5000 questions:

If I purchase 100% renewable energy, how much of the $5,000 tax credit am I entitled to? What if I charge the car up one third of the time at work, which purchases regular grid power? What if I go on a long trip and use gasoline almost exclusively — do I need to rebate part of my credit? What if I drive on vacation to a national park for two weeks and use their electricity?

Yes, we need to put out a subsidy for plug-in hybrids — but that subsidy won’t be based on some bizarre calculation of what carbon emissions are. It will be based on a (hopefully simple) formula based on the range of the vehicle in all-electric mode and the fuel efficiency of the vehicle running on gasoline. A guess will have to be made on the percentage of travel done on electricity versus gasoline, but that isn’t much different than the EPA’s guess on city versus highway driving for determining the overall mileage of your car.

Given that the per mile cost of driving on electricity is perhaps a factor of five lower than the per mile cost of driving on gasoline, however, we can be reasonably confident that people will keep the vehicle charged up and drive on electricity as much as possible.

Political aside: I know McCain likes to use the word of “America” a lot [Note to McCain campaign — we get it, you’re an American and who really knows what that other guy is?], but what precisely does he mean by “issue a Clean Car Challenge to the automakers of America”? Is he talking about the big Three (well, biggish Two) American automakers? Or all companies who make cars in America? In any case, it would be hard not to allow any company who sold cars in the country to get the tax credit applied to its cars.

One final point — this part of McCain’s speech is also muddled:

Ninety-seven percent of transportation in America runs on oil. And of all that oil, about 60 percent is used in cars and trucks. Yet the CAFE standards we apply to automakers — to increase the fuel efficiency of their cars — are lightly enforced by a small fine. The result is that some companies don’t even bother to observe CAFE standards. Instead they just write a check to the government and pass the cost along to you. Higher end auto companies like BMW, Porsche, and Mercedes employ some of the best engineering talent in the world. But that talent isn’t put to the job of fuel efficiency, when the penalties are too small to encourage innovation. CAFE standards should serve large national goals in energy independence, not the purpose of small-time revenue collection.

Okay, so are you proposing much more onerous government penalties for noncompliance? Or do you think losing your little $5,000 tax credit is going to mean anything to Porsche and its buyers?

This paragraph is like some old guy complaining about kids running in his yard and ruining his garden. [Note: It is purely coincidental that I used this analogy. I am not implying that McCain is too old to be a good President. I am implying that he should stick to gardening.] Yes, Porsche sells a small number of high-end, gas guzzling cars. How exactly do you propose to stop them? We could slap an enormous fine on them. Or just ban cars that don’t meet a certain threshold of efficiency. Or maybe this isn’t really a big deal in the grand scheme of things, Senator.

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9 Responses to McCain energy gimmick, Part 2 — The ill-defined, impractical “Clean Car Challenge”

  1. Ronald says:

    Good article and it makes the point.

    I have a close relative who drives a small car and since 1996 has only driven 19 000 miles (literally to church and stores.) That person is now looking at buying a new small car, but what good is the 5 000 dollar tax break going to mean to that person. The demand for higher mileage vehicles is already being signaled by the market. All this incentive will do is add to an already mismatched fuel efficient/non-fuel efficent vehicle market. And most of the incentives will be going to vehicle manufactorers who already have fuel efficient vehicles and they are mostly foreign manufactorers. Maybe the help should at least go to domestic companies.

  2. Greg N says:

    Why mess around with tax credits? High taxes on gas accomplish the same thing – a SUV pays high taxes per thousand miles, Prius pay low taxes per thousand miles.

    In the UK, with petrol at $8 a gallon, it costs £1,000 ($2,000) in extra tax every year to drive a fairly inefficient car compared to a reasonably efficient car, assuming 10,000 miles p.a. This tax differential is even higher for a SUV compared to a Prius, or for higher annual mileage.

    And in the UK, there’s a showroom tax from 2009 – new cars pay a first year road tax depending on CO2. For a Prius it’s zero. For a SUV (emissions > 255 g/km) it’s £950. Simple to administer, very visible to a guy in a showroom choosing a new car, no messing around with accountants.

    $5,000 might seem like a high headline figure, but it’s actually rather small compared to the benefits/penalties in the UK! If we choose a new Prius we pay $4,000 less in tax in the first year, then $2,000 less each and every subsequent year.

  3. bored says:

    Good point. Your plan, as well as the other presidential candidates plans are much more comprehensive and helpful. Oh – neither exist. Your post is so partisan that it offers no value as an objective contribution to the conversation surrounding the issue. This is not a post about how to solve the issue as much as a political rant. I wish I could find more people willing to leave old school, single-minded, partisan rallying to support and bring about real change.

  4. I am a little surprised to read that you don’t regard a pure electric vehicle to be the kind of near-term or even medium-term solution that we need, or that we should encourage. Especially in light of the relative success that the first electric vehicle (EV1) had in California back in the nineties. Now that car was perhaps far from perfect, but I’ve understood that current possibilities already offer a much larger driving range, for example. So even without a major technological breakthrough pure electric vehicles seem to be a good near-term possibility. The major obstacle that I see is that it requires a change in refueling grid, which would need massive government support and investment. Another obstacle is probably vested interests that have a stake in maintaining the current gasoline dependency. Not incidentally, these obstacles probably played a part in “killing the electric car” in the nineties. But should they withhold us from promoting this option, when it’s in fact the best solution to curbing transport emissions?

  5. Joe says:

    Bart — A pure EV isn’t really a practical primary vehicle for most people. I have doubts it could meet cost and performance goals in the near term, at least for this country. EVs make a lot of sense for many other countries that don’t drive as much, and I expect in the longer term they will be an attractive option here. But plug ins come first.

  6. David B. Benson says:

    Somebody around here commutes to work in his Zapcar.

    Great turning radius and it sure is cute.

  7. Hmm, not much performance loss for this beauty:

  8. Jay Alt says:

    Too bored to follow the candidates positions? We aren’t.
    Obama –
    Obama will invest $150 billion over 10 years to advance the next generation of biofuels and fuel infrastructure, accelerate the commercialization of plug-in hybrids,
    Clinton –
    as well as new investment in plug-in hybrid vehicle technologies;
    Edwards –
    $1B/year for hybrids . .

  9. Earl Killian says:

    Joe, the question isn’t whether a pure EV is a practical primary vehicle for most people. A lot of EV families own a pure EV as their commuter car, with a second gasoline vehicle (along with a lot tussle over who gets to drive the EV on any given day). Most of the 2002 Toyota RAV4-EVs now have 70-100K miles on them. They have been workhorses, as those numbers indicate. One recently went on sale on eBay with 127,000 miles on the odometer. So I don’t agree that they don’t work in this country, even with as much as we drive. Some households have two RAV4-EVs, and for those rare occasions where the range is inadequate, they rent a gasoline vehicle. Also remember that there is a wide distribution of miles driven, and pure EVs will work as the only vehicle for many. Also remember that in May 2007, an EV company demonstrated a 10-minute recharge of a 150-mile EV to CARB. Fast recharge times make EVs capable of long highway trips.

    Sure, PHEVs are likely to be embraced in America in a way that pure EVs are not at first, but that does not mean there is no place for pure EVs.