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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (862321)

6/4/2015 9:33:50 AM

From: Brumar89

Read Replies (1) | Respond to of 1576725

Electric Cars Aren’t Green; But Subsidies are Greening Someone’s Pocket

Posted by Jeff Carter

on June 3rd, 2015

Who doesn’t love Tesla ($TSLA)? I test drove one once. They are totally cool cars. Fast. Responsive. I love the innovation. I love the innovation in their sales model as well. I love the fact they are disrupting the car industry. But, don’t confuse yourself. Their cars aren’t green.

Neither are the cars that are being built by traditional automakers that run on batteries. The Nissan Leaf nor the Chevy Volt are environmentally friendly.

Why?

Where do they get their energy from? The electrical grid and the electrical grid is powered by nuclear, water, or fossil fuel. Not only that, but battery disposal is incredibly toxic to the environment. Totus Power is trying to remedy that but they are a small startup here in the Midwest. Tesla cars are cool and fast, but extremely limited in how far they can drive. Here is a Tesla diesel recharging station in California.

[iframe width="560" height="315" src="https://www.youtube.com/embed/LU4z1Jeyq2g" frameborder="0" allowfullscreen="allowfullscreen"][/iframe]

What’s really important to note is that Tesla, and all “green energy” is heavily subsidized. I haven’t looked at one single green energy company that can make a profit without government subsidies. That means every single taxpayer is on the hook. Your money is being redistributed to Tesla and other companies in the green space.

People might argue that Elon Musk is a good guy, he’s innovative. They are probably right. I can’t say because I don’t know him. It’s cool that he opened up his patents and let everyone see what he is doing. But, that was not him being a good guy. It was a business decision. He is trying to create positive externalities for his business. If every single car company uses the same battery with the same standards, it makes innovation easier and cheaper. The same goes for the network of solar powered charging stations they are trying to establish.

I’d love to see a full blown political debate on all subsidies. There are thousands of them in all government budgets and they cost taxpayers billions. We’d see where the bodies are buried and who is buttering who’s toast. Green energy advocates argue that fossil fuel companies are subsidized too. They are. It doesn’t make it the correct policy.

Subsidies are the wrong policy because they are top down. It’s a centralized authority that establishes them, and then picks winners and losers. It’s also bad policy to use subsidies to create competition. In most cases, they create stronger monopolies. It’s better to deregulate, and get rid of government sponsored monopolies.

The other phenomena that government subsidies spawn is lobbying, money in politics and crony capitalism. As subsidies and government budgets grow, so do the “people industries” around them. You can have a nice career getting elected to public office, serving a few terms and then make millions as a professional lobbyist. I love Instapundit Glenn Reynolds idea of a special tax on their salaries.

There certainly are negative externalities that occur in society. All kinds of industries pollute. Different products make noise. Some people might think that it’s a negative externality to have so much light in cities and suburbs so we don’t see the stars. Chicago taxes Blommer Chocolate for spewing a chocolatey smell from their cocoa production!

Subsidies usually are started to address a “negative externality”. But, this is the wrong way to combat negative externalities. Coase Theorem shows us the correct path. Instead of subsidizing a competitor they should tax the negative externality. This raises the cost, and forces the entity to change behavior or pay. Taxing the negative externality also raises the price of the good that is produced, allowing supply and demand to work to reduce consumption. Unfortunately, subsidies are started by top down authorities to get things to happen that they want to happen.

There are four general problems with subsidies. First, it’s not the efficient response if the problem is a negative externality caused by something else. Instead, tax the thing that creates the costs and let the market sort it out. Second, subsidies require governments to pick winners and losers. Government has a poor history of picking. In the picking government reduces competition and individual freedom ( See Solyndra). Third, subsidies get politicized and crony capitalism ensues. Fourth, the subsidized industry is now inefficient. That industry becomes too large with too much investment. Prices for subsidized goods and services are too low, and the market won’t allocate assets correctly. Subsidies create losses for everyone.

http://pointsandfigures.com/2015/06/03/electric-cars-arent-green-but-subsidies-are-greening-someones-pocket/#.VW7htSN_clg.twitter