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Incentives and Taxes
Is it fair to look at the Clinton Administration’s Partnership for a New Generation of Vehicles (PNGV) as a model? [Editor’s note: In the 1990s, $1 billion was spent to produce a vehicle that exceeded 80 mpg. The three Detroit companies each produced a successful hybrid prototype, but did not further develop the models.]
I think looking forward makes more sense.
Are there lessons to learn from the billion dollars that was spent on PNGV?
You know, it’s been a while since I thought about that. I don’t really have a comment about that. It’s a good question. To the extent that we can do this with tax incentives, that’s a helpful way to go. To the extent that we can do this with federal purchases, drawing on the model of World War II and the Apollo Project. I think those are useful approaches. Potentially the government picking up the risk of some battery obsolescence is a useful way to go.
The excitement over this plug-in technology is really strong. This is going to be pulled forward mainly by consumer excitement and interest. The rate of hybrid take-up has been more supply limited than demand limited. That’s a real constraint. It takes a while for suppliers to retool and get ready.
You recommend an $8,000 consumer incentive for the purchase of a plug-in hybrid. Today, the incentive for a Toyota hybrid has been phased out, but the Prius is selling like hotcakes. Is that really a smart use of government money, especially when people want hybrids so badly in an era of $4 gas?
I said up to $8,000. Something in that range. We certainly shouldn’t be providing more of an incentive that is needed to move the market. The plug-ins are going to come at an additional cost beyond the hybrid cost. We could use some type of incentive program to help get the plug-ins out to market. The costs will come down as volume goes up. Sometime federal support in order to get the cost down and volumes up quickly will be helpful.
You wrote that raising gas taxes is simultaneously the most effective thing government can do, and the most unpopular idea. With $4 gas, GM practically overnight said that it would cancel production on a set of factories that produce SUVs. Yet, raising gas taxes, and high gas prices in general, are politically toxic. How do you overcome that?
It’s a reality of our political culture. We live in a democracy. Whatever sensible policy arguments are made, the reality is that you are not going to see big gas tax increases in the United States. If you want to affect change, you have to look at all available policy measures that are achievable in a democracy.
And raising gas taxes is not achievable?
As I note in the book, Ronald Reagan supported a five-cent a gallon gas tax increase, but failed to get it passed. By and large, the resistance is deep and widespread.