Electric Car Policy — Stop Go Stop

The cleantech industry has been considered both highly promising for investors and a hopeful area of growth to counter the economic contraction of other industries.  But one of the peculiarities of cleantech is the intersection between federal dollars (both stimulus spending and grants) and private investment.  Perhaps no better example of the tangle of incentives and interests exists than the evolution of the electric car.

An series of articles in Slate captures the issues.  First was a column by Charles Lane, which noted that the new Chevy Volt will cost $41,000 – or about the same as a base model BMW 335i — except the former comes with a $7,500 tax credit. The market for electric cars, Lane notes, is dominated by high-income individuals, and the net effect of multiple subsidies are handouts to component corporations and the wealthy.

Perhaps on cue and in recognition of the power of many electric engines, Daniel Gross replied “not so fast.” Pointing out that similar government economic stimulation was critical to railroads and air travel, public money is leveraged by private investment, and many innovations depend on scale to jump the gap from wealthy buyers to the average citizen.  Lane then beeps in with the requisite final word and a discussion about the difference between public and private goods and benefits.  All of which may make you feel better (or worse) the next time Hummer and Prius drivers glare at each other in the soft glow of a red light.