Bloomberg has an article on electric cars, illustrating some of the benefits of carbon taxes over regulation:
New breed of EV promises 700 miles per charge (just add gas)
It runs on batteries 95% of the time, but a petrol engine can charge them for longer journeys, reducing range anxiety.
Electric vehicle sales growth has slowed in recent months, partly because consumers worry they won’t be able to find a place to charge their cars. This new type of EV would greatly reduce that problem. Currently, these cars are available in China, but not in the US:
It’s unlikely that American car buyers will see something like this on American roads anytime soon, as President Joe Biden is looking for it 100% tariffs on Chinese cars and former President Donald Trump is threatening even tougher protectionist measures to keep Chinese-made electric cars out. So if American consumers want to gain access to technology that could provide a transition to the electric future, it will be up to US automakers – and their regulators – to pave the way.
What about the production of these types of cars in the US? Here’s one problem:
Because a gas engine is used to extend an EREV’s range, it is considered a hybrid, which the Sierra Club has said is no longer considered green technology. “EREVs could be a harmful distraction that could slow momentum in the crucial transition to zero-emission vehicles,” says Katherine Garcíadirector of clean transportation for the Sierra Club.
It’s unclear how U.S. regulators will classify EREVs, but it seems unlikely they’ll be lumped in with pure EVs, which, if made in North America, would be eligible for government incentives aimed at boosting the sale, like a tax credit of as much as $7,500.
The “big decision for us as an industry and for regulators: ‘Is that an EV or not?’” Farley said about EREVs at the Bernstein Strategic Decisions Conference in New York in late May. “Customers vote; they like these workarounds. We still have a lot of work to do with the regulators because they are not there.”
What is better for the environment, selling a few cars that are 100% emission-free, or selling a lot of cars that are 95% emission-free?
Governments are generally not very good at making these kinds of calculations; hence ‘command and control’ regulations are often relatively inefficient. In contrast, a carbon tax encourages consumers to make the decision that is best for the economy. including the external costs of emissions. Done right, carbon taxes can also make the overall tax system more efficient by reducing other, more distortive taxes. Cynics will rightly note that other taxes are unlikely to be cut by a similar amount. But unless we cut government spending, we will need sharp increases in other taxes, and a carbon tax would allow those increases to be smaller. So the point still applies.
This reminds me of the debate over safer versions of cigarettes. Think back to the time when regulators were hesitant to adopt a cigarette substitute that was much safer than regular cigarettes, because it was not 100% safe. There is an old saying: never let the perfect be the enemy of the good.