New Study Unveils Impact of EV Subsidies on Gas-Powered Car Costs and Utility Rates

FIRST ON FOX: The American Energy Institute has published research highlighting the financial repercussions of government subsidies for electric vehicles and the regulatory credit system for emissions on the costs associated with gas-powered vehicles and utilities.

As government regulations tighten around standards for Corporate Average Fuel Economy and greenhouse gas emissions, gas-powered vehicle manufacturers find themselves compelled to pivot resources toward electric vehicle production. Consequently, this shift results in higher prices for gas-powered cars, as outlined in the report by the American Energy Institute.

If automotive companies fail to meet federal and state electric vehicle production quotas, they often resort to purchasing emissions credits from other manufacturers. This requirement further exacerbates costs, which are inevitably passed on to consumers.

Utilities Face Similar Challenges

The implications extend beyond automobile manufacturing to utility costs as well, according to the report. While state and federal programs aimed at EV charging infrastructure provide profits for utility companies, they also contribute to rising costs for consumers. Currently, around 40 states offer rebates for in-home level two chargers, and federal efforts have invested approximately $7.5 billion in EV charging infrastructure under the previous administration.

Jason Isaac, a co-author of the report and the American Energy Institute’s CEO, articulated the underlying issue succinctly. He noted that federal interventions are shifting the financial burden away from affluent electric vehicle owners onto average Americans, all while placing additional stress on an already strained electrical grid. He criticized the situation as a hindrance to consumer choice and an overreach of federal authority that results in higher costs for transportation and energy.

Reflections from a Former Lawmaker

Isaac, who previously served as a Texas state representative, acknowledged that during his legislative career he initially advocated for an EV subsidy which offered buyers a $2,500 tax credit. Over time, however, he recognized that the majority of electric vehicles were being purchased by wealthier individuals who, according to research from the National Bureau of Economic Research, would likely have made the purchase even without these incentives.

Hunt Allcott, professor of environmental social sciences at Stanford, shared his insights on federal EV tax credits, suggesting that while the Inflation Reduction Act’s tax incentives may have diverted some vehicle production to American manufacturers, they also impose significant costs on taxpayers.

The Weight of Hidden Subsidies

According to the American Energy Institute’s findings, the hidden costs associated with EV purchases range between $94,000 and $153,000 per vehicle over ten years. This figure takes into account expenses linked to meeting government mandates and the adverse effects of reduced production of gas-powered cars, which ultimately inflate prices for consumers.

Additionally, subsidies and rebates aimed at constructing EV charging infrastructures are driving up base utility rates, further affecting consumers. The report estimates that if every electric vehicle sold required a corresponding charging infrastructure, the 1.1 million EVs sold in 2023 would incur over $827 million in tax credits for residential charging.

The Burden on Ratepayers

Isaac pointed out that these subsidies enable utility companies to petition public utility commissions to approve higher base rates, justified by the investment in EV infrastructure. He explained that when consumers purchase gasoline, they cover the costs embedded in the fuel without external subsidies. In stark contrast, the costs associated with charging an electric vehicle only represent a fraction of the true expenses, given the substantial subsidies provided by federal and state governments.

Illustrating this point, the report includes a scenario in which a homeowner installs an EV charger and receives a $500 rebate. The financial impact extends to all residents on that street, effectively redistributing costs among households, thereby amplifying the burden of subsidized electric vehicle initiatives.

Future Perspectives: Evaluating Clean-Air Mandates

The uptick in costs should prompt a reevaluation of existing clean-air mandates, according to Isaac. He advocates for the elimination of these expensive EV mandates, proposing that such actions could invigorate the American automotive sector, reduce vehicle prices, and alleviate strain on the electrical grid. He argues this would lead to diminished energy expenses for all households.

Fox News Digital sought comments from several electric vehicle advocacy groups regarding the report, including Drive Change, Drive Electric, and the Sierra Club, but did not receive a timely response.