Published October 3, 2012, Los Angeles Daily Journal – In his January 2011 State of the Union address, President Barack Obama announced to the world that the U.S. would lead the charge to replace the internal combustion engine that has been powering cars for the last 100 years. “We can replace our dependence on oil with bio fuels and become the first country to have a million electric vehicles on the road by 2015,” President Obama said. “The future is ours to win.”
To fulfill this mission, President Obama deployed $2.4 billion into electric car technology and revamped the Corporate Average Fuel Economy (CAFE) standards to provide for special credits for manufacturers of electric cars. The CAFE standards, which were established by Congress in 1975 in response to the 1973 Arab Oil Embargo, dictate the average fuel economy that automakers must meet, or face gas-guzzler penalties.
For 2011, the CAFE standard was 30.2 mpg. In July 2011, however, President Obama radically revamped the CAFE standard to reach an average of 54.5 mpg by 2025. To get to that number, President Obama provided an array of special rules that apply only to manufacturers of electric cars.
Electric vehicles will count as having “0 emissions” (even though their use of the electrical grid has an impact on emissions), and each electric vehicle sold in 2017 would count as two vehicles. As a result, the actual real world gains from the new CAFE standards are closer to 40 mpg, not the advertised 54.5 mpg. Nevertheless, the point remains that President Obama has thrown all of his resources behind the electric car industry.
If the story ended there, all would be right in the automotive world – at least in this segment of it. Yet, market forces have proven more dominate than political might, as the electric car industry has stumbled in its infancy phases. CBS News released a report this summer which indicated that the U.S. will fall “well short” of having one million electric vehicles on the road by 2015.
According to CBS News, many of the electric car manufacturers the Obama administration was counting on have either scaled back their estimates or gone out of business altogether. As a result, CBS News believes that the achievable number is closer to 300,000 electric vehicles by 2015 – and that is assuming that companies like Fisker, who is teetering on the brink of insolvency, remain viable. If more companies fail, the actual number could be much lower.
“I think these forecasts were very unrealistic, and history is showing that scaling an automobile company is much more difficult than many of these people thought,” said Craig Carlson, managing director of Carlson Group, Electric Vehicles. And Carlson is not alone.
Last month the National Petroleum Council completed a two year study that was requested by Secretary of Energy Stephen Chu, culminating in the report Advancing Technology for America’s Transportation Future. The study involved more than 300 participants from the private sector, universities and government, and included the likes of Toyota, BMW, Duke, MIT, National Academies and the Department of Transportation.
The study found that “internal combustion engine technologies are likely to be the dominant propulsion systems for decades to come, with liquid fuel blends continuing to play a significant, but reduced role.” Alternatives were possible, but speculative: “Profound changes are possible with disruptive, yet highly uncertain, innovations such as ultra-light-weight vehicle materials; new electric vehicle battery technologies; low-cost, low-pressure storage for natural gas or hydrogen; or breakthroughs yielding lower cost, low carbon transportation fuel.”
Interestingly, the study found that “vehicles fueled with compressed natural gas – not electric batteries – will emerge as the biggest competitor to the combustion engine.”
“There is a great deal of uncertainty regarding which individual fuel-vehicle systems will overcome technology hurdles to become economically and environmentally attractive by 2050. Therefore, government policies should be technology neutral while market dynamics drive commercialization.” Instead of endorsing any particular technology, the report concluded, “the federal government should take a leadership role in convening state, local, private sector, and public interest groups to design and advocate measures to streamline the permitting and regulatory process in order to accelerate deployment of infrastructure.”
Notwithstanding these findings, President Obama has doubled-down on his commitment to the electric vehicle sector, announcing that he will commit an additional $4.7 billion of tax dollars to electric vehicle. Of this, $3.7 billion will be tax credits for buyers of electric vehicles, and $1 billion will be used to bring advanced-technology vehicles to 15 cities.
The deployment of these additional funds brings the president’s electric vehicle tab to $7.1 billion – a steep amount given the uncertainty of the technology. What could $7.1 billion have bought? How about 417 new high schools, 788 new prisons, or the salary of 13,564 elementary school teachers for 10 years.
In truth, President’s Obama’s proclamation to put one million electric vehicles on the road by 2015 was little more than political fodder that had more to do with polling than sound economic policy. Shed of its glitz and fanfare, it was a fallacious statement at the time that has proven itself out in the manner expected.
And for his part, Mitt Romney’s proclamations are no better. At the Republican National Convention last week, Romney promised to make North America “energy independent” by 2020 – as if publicly saying it would somehow make it come true.
On a subject as large as consumer transportation, government policy simply cannot outstrip prevailing market forces, and any attempt to do so will only result in the spoilage of efforts. Perhaps Mark Twain said it best: “Never try to teach a pig to sing. It wastes time and annoys the pig.”