Bloomberg has an article on electric vehicles, showing some of the benefits of carbon taxes over regulation:
New Breed of EV Promises 700 Miles per Charge (Just Add Gas)
It uses batteries 95% of the time, but the petrol engine can be recharged for longer hauls, easing range concerns.
EV sales growth has slowed in recent months, partly due to consumers worried about not being able to find a place to recharge their vehicles. This new type of EV can greatly reduce that problem. Currently, these cars are available in China, but not in the US:
It’s unlikely that American car buyers will see anything like that on American roads anytime soon because President Joe Biden wants a 100% tariff on Chinese cars and former President Donald Trump is even threatening tougher protection measures to keep EVs made in China. So if American consumers are going to gain access to the technology that could provide the transition to an electric future, it will be up to US automakers—and their regulators—to pave the way.
What about manufacturing this type of car in the US? Here is one problem:
Because the gas engine used to extend the EREV’s driving range is considered a hybrid, the Sierra Club said it no longer considers the technology green. “EREVs can be a dangerous distraction that can stop momentum in the transition to zero-emission vehicles,” said Katherine Garcia, director of clean transportation at the Sierra Club.
It’s unclear how US regulators will classify EREVs, but it seems unlikely that they will be lumped in with pure EVs, which, if made in North America, are eligible for government incentives aimed at encouraging sales, such as a tax credit of up to $7,500.
“The big decision for us as an industry and for regulators: ‘Is that an EV or not?'” Farley said of EREVs at the Bernstein Decisions Conference in New York in late May. “Customers vote; they like these intermediate solutions. We still have a lot of work to do with the regulators because they are not there.”
What is better for the environment, selling a few 100% zero-emission cars, or selling more 95% zero-emission cars?
Governments are generally not very good at doing this kind of calculation; therefore “command and control” rules often end up ineffective. Conversely, a carbon tax encourages consumers to make a more economic decision, including external costs of carbon emissions. If done right, carbon taxes can also make the tax system more efficient, by reducing other distortionary taxes. Critics will be well aware that it is unlikely that other taxes will be reduced by the same amount. But unless we cut government spending, we will need sharp increases in other taxes, and the carbon tax will allow those increases to be small. So the point still holds.
This reminds me of the debate about safer types of cigarettes. Remember when administrators are reluctant to approve a instead of cigarettes that was much safer than regular cigarettes, because it wasn’t 100% safe. There is an old saying: Never let the perfect be the enemy of the good.
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