How Do Electric Vehicle Incentives Compare To Oil And Gas Subsidies?

More regions have recently reduced government-financed incentive programs for electric vehicles to save money, but many of these same areas are already paying far more to support the oil and gas industry.

As much as $5.3 trillion is spent annually worldwide to subsidize fossil fuels, according to a new report from the International Monetary Fund. Renewable energy subsidies, in comparison, total only $120 billion each year.

Norway was one of the most recent countries to reduce tax benefits, while at the same time announcing earlier this month that electric vehicle (EV) owners will begin paying road use fees in 2018. Legislators in Georgia also ended a $5,000 EV tax incentive last month, replacing the credit with an annual road use fee.

Though the term “electric vehicle” is typically used in connection with these incentives, many subsidies also extended to low emission vehicles, such as hybrids, and other types of zero emission vehicles, including fuel cell cars.

Point-of-sale rebates and tax credits make up some of the more generous EV incentives, but programs such as free parking or access to carpool lanes were also offered to stimulate sales of low emission vehicles.

SEE ALSO: Illinois Halts Its Plug-In Vehicle Rebate Program

Many of these reductions for EV incentives are being implemented in the name of budget shortfalls. In some regions, allocations to build and maintain roads have been especially compromised.

And while austerity measures often lead to a reduction in spending across categories, a recent report noted that similar cuts aren’t posting under the oil and gas industry’s column.

“Fossil fuel companies are benefitting from global subsidies of $5.3 [trillion] a year, equivalent to $10 [million] a minute every day,” reported The Guardian, which sourced a recent study by the International Monetary Fund.

“The IMF calls the revelation ‘shocking’ and says the figure is an ‘extremely robust’ estimate of the true cost of fossil fuels.”

SEE ALSO: Congress-Commissioned Study Recommends PEV Tax Credit Become Point Of Sale Rebate

Much of this money, said The Guardian, pays for problems arising from pollution associated with burning oil, gas and coal.

“This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are,” said Nicholas Stern, professor and chairman of the Grantham Research Institute on Climate Change and the Environment.

“There is no justification for these enormous subsidies for fossil fuels, which distort markets and damages economies, particularly in poorer countries.”

By cutting oil and gas subsidies instead of EV incentives, the IMF said that 1.6 million lives a year worldwide would be saved due to improved air quality.

“Ending subsidies for fossil fuels would cut global carbon emissions by 20 percent,” said The Guardian.

“The need for subsidies for renewable energy – a relatively tiny $120 billion a year – would also disappear, if fossil fuel prices reflected the full cost of their impacts.”

While supporters of low and zero emission vehicles agree that more incentives will help the technology become more accepted and widespread, a consensus on how to create these has not been reached. Some prefer a tax credit, redeemable against taxes owed when filing personal taxes each year. Others say a point-of-sale rebate, which instantly lowers the vehicle price and is applicable to any consumer, is the better route.

But making a case to increase spending on EV programs is proving difficult for some regions.

“Governments may think they can’t afford to shell out cash for this purpose but, as the IMF study showed in grisly detail, there are much worse ways to spend state money,” said The Cheat Sheet. “Gas is just not as cheap as you think.”