Electric vehicle purchase subsidies can’t seem to get any love these days. First it was Canada’s Ecofiscal Commission concluding Quebec’s plan is simply a too expensive for reducing greenhouse gas emissions and now the Montreal Economic Institute (MEI) is adding to the literature criticizing these subsidies as not worth the investment.
In an economic note published on June 22, MEI takes a hard line in describing subsidies for EV purchases as nothing close to being effective or efficient at reducing GHGs. Are Electric Vehicle Subsidies Efficient? notes that both Ontario and Quebec are addressing transportation sector emissions through EV purchase subsidies but questions whether “this injection of public funds is the use of our money.”
In a nutshell, MEI says no.
“If the goal is to obtain the greatest emissions reductions for the amounts spent, then subsidies for the purchase of electric vehicles are actually the least efficient, most expensive way to get there. The Quebec and Ontario governments should abolish them,” it concludes.
Ontario offers prospective EV owners up to $14,750 towards the purchase of a vehicle and home charging station ($14,000 for the EV and $750 for the charging station). Quebec’s subsidy isn’t as generous, providing consumers with $8,000 for the EV and $600 for the charging unit.
MEI says there are a number of factors determining the success of an EV purchase subsidy. For example, the greater the distance traveled by an EV translates into lower emissions compared to a gasoline powered car. As well, more emissions will be abated by an EV compared to vehicles with greater fuel consumption.
Based on the Institute’s calculations, an EV in Quebec will emit nearly 30 tonnes of fewer GHGs than a conventional car over 10 years when factoring in both the manufacturing and operation of the vehicle. In Ontario, the figure is slightly greater than 28 tonnes.
Taking the subsidies divided by the projected emissions abated MEI arrives at carbon reduction costs. For Ontario, the cost per tonne of reduced GHGs amounts to $523. Quebec does considerably better at $288. Both figures though are substantially higher than the per tonne abatement costs in either Ontario and Quebec’s cap and trade scheme (around $18) or under the federal carbon tax floor of $10 in 2018 and rising to $50 in 2022.
“By subsidizing the purchase of electric cars, the Ontario government is paying 29 times more than the carbon market price per tonne of GHGs eliminated, and 52 times more than the future federal tax when it comes into effect next year. For Quebec, the corresponding figures are 16 and 29 times more,” states Are Electric Vehicle Subsidies Efficient?
(To illustrate how ineffective EV subsidies are at reducing overall provincial emissions, MEI calculates the amount of emissions abated after factoring in the EV sales targets of both provinces. Neither is pretty, according to the research institute.
Even if the Quebec government were to achieve the goal of having 1 million EVs on the road by 2030, it would only abate 3 million tonnes of GHGs annually, or 3.6% of current emissions. Ontario performs even worse, says the Institute.
“Even if Ontario’s fleet of electric vehicles reached the same size, proportionally, as Quebec is aiming for in 2030 - a much more demanding scenario than their actual plan - Ontario could not hope to eliminate more than 4.1 million tonnes of GHGs per year, or 2.4% of current emissions,” says MEI.
There can be little doubt that EV purchase subsidies are attractive to consumers who are interested in buying such a vehicle. But evidence seems to be mounting that these types of subsidies aren’t a cost-effective approach for reducing emissions.
For additional information on the Ecofiscal Commission’s assessment of Quebec’s EV subsides and policies that could complement carbon pricing, refer to the following Canadian Green Tech articles: