Undeserved (and Useless) Rebates I Got

I just qualified for over $6000 of rebates which didn’t change my behavior in any way. You are paying me to do what I would’ve done anyway.

My old car had over 100,000 miles and was beginning to require frequent expensive repairs. Time for new wheels.

I decided to look at plug-in electric hybrids (PHEVs), which can run on gas or electricity, for a few reasons:

1. future cars are going to be almost all electric for automatic driving as much as emission reasons and I like to be an early adopter.
2. many years ago, I installed lots of solar panels to power a ground-source heat pump; the heat-pump caught fire and burned up and I’m not replacing it because it seems to be a technology dead-end. Now we generate a lot more electricity than we use. Plugging in a car is a good use for the extra kilowatt-hours.
3. I have too much range-anxiety to go all-electric at the current state of battery technology.

Chose a BMW 530xe with lots of safety gadgets like heads-up display, adaptive cruise control, lane-keeping, blind-spot radar, and night vision which I both like and find I need more as I age. While we haggled over discounts, floor mats, and trade-ins, the sales lady said: “Don’t forget the rebate.”

“What rebate?” I asked. I knew there is a rebate for pure electric cars; didn’t know that there are also federal, state, and utility rebates for plug-in hybrids. But there are; they are smaller than the rebates for pure electrics but lots of dollars. An all-electric BMW qualifies for a $7500 rebate; my PHEV qualifies for $5836. Frankly, even if the $7500 were appropriate, the amount for my car is ludicrous. If I’m lucky, I’ll use 25% less gas because of my partial use of electricity; but I get almost all the rebate.

The amount of the federal rebate is based on the price of the car; the more luxurious the model, the bigger the rebate I get. That’s backwards, too. The more expensive the car I choose, the less I should be subsidized since I obviously “need” less subsidy to buy a car.

This is a subsidy to the manufacturer, however, since it makes it easier for them to charge a differential for electric cars. Note that Tesla, which has exhausted the federal subsidy available to its buyers, is now actually building a cheaper electric car in order to appeal to a larger market. I would argue that the subsidy may actually be counter-productive because it is a disincentive to the manufacturer to quickly enter the mass-market with an affordable electric car.

There is an income test for the Vermont state rebate and I don’t qualify. Good. If there is a subsidy, it should go those who need it and whose behavior is most likely to be changed by it.

Stowe Electric will rebate $450 ($850 for an all-electric) plus a $250 kicker for moderate income. Don’t blame the utility for this policy; they must satisfy the PUC which has to follow Vermont’s climate goals.

The subsidies don’t end here. To the extent that I buy less gas, I’ll pay less than my share of highway tax to keep the roads usable. I’m also subsidized for the power my solar panels generate even though I’m putting it into my own car.

The more you think it is important to change behavior to avoid human-caused climate change, the more vigilant you should be about inefficient subsidies presenting themselves as a just-do-something panacea. Every proposed subsidy needs to be examined to see who really benefits. Is it mainly the affluent? Is it mainly a manufacturer of a particular product? A project promoter? The early winners in the US from climate-change concerns include ethanol producers (a whole food chain), electric luxury car producers, and utilities which get to increase their rate bases (and therefore their income) by adding expensive power sources and even home appliances to their asset base. Existing subsidies need to be re-examined to see if they are effectively serving their stated purposes.

“OK, Tom,” you say; “enough whining about the fact that federal taxpayers and your fellow Stowe Electric customers are subsidizing your car. You didn’t have to apply for the subsidies if you think they’re wrong!”

Good point. The practical side of me says my taxes are helping to pay for everybody else’s subsidies so I should take my share. In this case, though, we’ll give the subsidies to charity   because I know I would’ve bought the same car regardless and I want to be able to complain with a clear conscience about what I think is a poor use of the people’s money.

[later note: decided to give the money to the Salk Institute for its work in developing plants which sequester CO2 in the soil]

Happy New Year.

See also:

The Ideal Green Solution

What Should We Do About the Threat of Climate Change?