The Political Push for Plug-in Hybrids

June 10, 2008

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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.

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  • Need2Change

    I hate it when the government has an inventive program to encourage Americans to buy foreign products.

    I hate it when the government gives the oil industry $billlions of tax credits or handouts. Let’s stop all of them.

    I agree with plug-in incentives, but why not only give the incentive to buyers of U.S. automobiles?

    The Japanese government gave Toyota and Honda $billions to develop hybrids and didn’t send money to U.S. automakers. And then the U.S. government gave incentives to buy Japanese hybrids.

  • Matt Miller

    ” I agree with plug-in incentives, but why not only give the incentive to buyers of U.S. automobiles? “

    Because no u.s. auto maker is making plug-in hybrids. They all went the ethanol way… You can see how that turned out…

  • AlexK

    dude – Japanese hybrids are the best, why would honda and toyota send over money to help their competition work out those technologies? but i agree – it is mot fair that only japanese hybrids get incentives.

  • Dom

    The government should just stay out of it, period. At most perhaps some encouragement for more efficient vehicles, but nothing specific to any one technology (and I’m including plug-ins in that statement). And don’t discourage any one technology either. Let the free market decide which technology succeeds, be it plug-ins, biofuels, hybrids, diesels, fuel-cells, or whatever. There are a ton of great fuel efficient cars in other western and Asian nations, but we can buy them because government regulations block them from being sold here. So much for a free country.

  • Jayb

    I would agree somewhat w/ the previous remarks if foreign car companies had thier production lines for plugin or electric vehicles in the U.S. they or the consumer of thier cars should get rebates but lets be careful with calling the Big 3 domestic, some of the assembly lines & parts are made in Canada Mexico and other countries. But really who cares? Lets just promote car companies to get off their buts and turn concepts into production

    Lets focus on increasing CAFE or other measures like the Guzzler Tax to make car companies respond to the demand for more efficent vhiecles including trucks and SUVs Maybe hybrids under 24,000???

    The discussion hosted by Google and others is great but it may only be political theater lets see if real energy solutions can come from a weak congress that wont do anything until the election is over
    it would have been nice if John & Obama would have had the guts to work together and pass a form of the failed cap n trade program but again their is little leadership in helping push real reform to promote hybrids & more efficient technologies

  • sean

    Japanese gov. didn’t give money to T and H.
    Check the facts.
    Even so, u can only blame US car companies for concentrating on monster cars.

  • Anonymous

    i hope to god someone from ford sees this,you guys go to PHOENIX MOTORS and see the FUTURE OF AMERICAN LIGHT TRUCKS. an all electric 4 dr full size piskup this should wake everyone up

  • CLD

    To add to what Sean said, it was the other way around. Toyota and Honda were excluded from PNGV. Toyota responded by launching their own hybrid program because they were afraid of being left behind. Little did they know that the Big-3 had no interest in actually selling their designs (see the GM Precept, Ford Prodigy, and Dodge ESX-3), and once EPA Tier 2 Bin 5 was announced–and Detroit realized they couldn’t use their diesel hybrid designs any more since they would not be able to meet the new air-quality standards imposed by Tier 2 Bin 5–they moved that the Bush administration cancel PNGV entirely in favor of the open-ended FreedomCAR program. Of course, Toyota had already committed to the Prius and Honda never lets Toyota get a step ahead of them. So, voila! We have well-engineered Japanese hybrids selling like hotcakes in the U.S. There is, of course, the Jim Press statement that Toyota did get help in battery development technology from the Japanese government. Toyota has strongly denied this, and Chrysler has tried to downplay the statement somewhat. But it does not change the fact that PNGV was intended to give Detroit a huge head-start and now the Big-3 are scrambling to catch up in their own game.

  • Hal Howell

    The Oil Companies are not the problem, They are the solution if Congress would get its collective head out into the sunlight. Every other nation is doing everything they can to find and produce more oil, coal, etc. We’re the only country in the world that could actually be energy independent if we would encourage our companies to drill in every conceivable place, turn coal into gasoline (the Germans did it), build nuclear power plants and wind and solar.
    By the way, much as a I like renewable energy, wind power isn’t going to help my car (an ’07 Prius) get down the road. It runs on GASOLINE!
    We need to drill and get out of the way of the oil companies as well as work on transitioning to electric cars like the Chevy Volt and other similar solutions. As someone pointed out the change isn’t going to happen over night. I see several cars from the ’70s still on the road.
    One other thing that everyone needs to remember about the oil companies. They are all publicly owned. That means they are owned by people with IRAs, 401Ks, pension plans and other similar investors. So when anyone talks about taking their profits, they are talking about hurting a lot of Americans. They have to buy that expensive oil BECAUSE they are prevented from drilling domestically. A VERY stupid idea held by liberals in Congress who are owned by environmental whacko lobbyists.

  • Jon

    Why must this be made so complicated? The “goal” is to reduce fuel use, yes? So there is ONE simple government option for encouraging this, increase the cost of using fuel, for which there are two simple options.

    1) Raise fuel taxes

    2) Levy feebates (I hate that term) based on gas mileage. This has the advantage of being able to target different vehicle segments differently. Namely higher fees aimed as passenger vehicles than commercial vehicles, if that is what would make sense. It can be applied to either new vehicle sales only, or to all vehicles at the time of vehicle registration.

    Both of these are agnostic to technology and country of manufacture. Getting into technology debates is silly and counter productive. It shouldn’t matter if the vehicle is plug-in, hybrid, electric whatever… nor where it was built. It only matters how fuel and emissions efficient it is.

    I think everyone agrees that what is important and what we need to do is reduce fuel imports into this country.