Electric Vehicles Could Short Governments $92 Billion in Taxes by 2030

Matt Posky
by Matt Posky

As governments across the globe push for the proliferation of electric vehicles, they’re creating a new problem for themselves. While EVs may be helpful in mitigating pollution in and around city centers, they’re not going to be nearly as friendly on the infrastructure.

A report from the International Energy Agency suggests the ramp-up of battery powered automobiles could result in a $92 billion tax shortfall by 2030, assuming everything goes according to plan. But even if global governments only manage to get halfway to their intended electrification goals, they’re still missing out on an estimated $47 billion in fuel duties.

That translates into the world needing somewhere between 4.8 and 2.6 million fewer barrels of gasoline and diesel per day, according to the Financial Times. Still, as impressive as that sounds, we’re nowhere near that mark just yet. Despite EVs having their best sales year on record in 2017, the vehicles themselves still only accounted for around 1 percent of the total market.

Automakers and enthusiastic governments hope to increase that figure to 30 percent by 2030. Some nations aim to phase out exclusively gas-powered vehicles entirely by 2040. While it remains to be seen if these ambitious goals are feasible, even approaching them will have unintended consequences.

Losing out on fuel taxes will be enough of a blow to governments that most will need to pursue other means of financing infrastructure projects in the coming years. “The major increase in the estimate of foregone revenues for the 2030 timeframe suggest that, for governments to retain sufficient income to invest in and maintain infrastructure, as well as to cover externalities from road transport, alternative taxation systems will be needed,” the the International Energy Agency said, suggesting road tolls and congestion charges as possible alternatives.

Other estimates are less forgiving. The center-right think tank Policy Exchange claims the United Kingdom alone could lose as much as $225 billion in fuel taxes between now and 2030.

There are all kinds of hidden dangers and benefits linked to EV adoption. Replacing oil-based propulsion with energy that could potentially be sourced from renewable resources is good for the environment. But some suggest widespread implementation of electric cars would do a number on most countries’ power grids, and battery construction has a higher environmental cost than one might think. The world is also butting up against a potential shortage on the materials necessary to facilitate expanded battery production, and EVs don’t address the simple fact that there are more miles being driven than ever before.

Even something as seemingly innocuous as online shopping has had a meaningful impact on the environment, as a multitude of delivery vehicles have been added to roadways to cope with deliveries. Meanwhile, people still undertake their daily commutes while ever greater numbers of cars, commercial trucks, ships, and airplanes roll out of factories. Electric or not, it all has to be powered somehow. Most new power plants don’t use renewable energy.

Those are disparate issues, though. Simply finding the money necessary to maintain roads will be a big enough challenge in itself — even if electric vehicles don’t end up being nearly as popular as predicted.

[Image: Electrify America]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Tonyd Tonyd on May 31, 2018

    annual road use tax paid at registration renew. (curb weight X .05) X (miles driven / 15,000) X (30 / epa combined MPG). 3000 lb sedan 20,000 miles with 28 mpg = $215 - DD 6000 lb truck 7000 miles 19mpg = $206 - camper/boat 5000 lb suv 15,000 miles 15mpg = $467 - 100lb wifey shopping. If you don't want no goberment checking your miles driven it defaults to 25,000.

    • See 1 previous
    • TW5 TW5 on May 31, 2018

      I posted a similar formula not long ago, but I omitted curb weight, since it interferes with the mpg part of the equation. SUVs are double punished for weight and mpg, and hybrid fuel economy benefits are clawed back by the additional weight of batteries. Same with EVs. Keep in mind thought, that usage taxes have severe drawbacks. Is the tax revenue apportioned by state depending on where you drive? Gasoline tax does apportionment better.

  • HotPotato HotPotato on Jun 04, 2018

    ZOMG, whatever shall we do! Sheesh. You can charge per mile with a dongle in the OBD port. Or levy an annual registration surcharge on EVs. Or move toward congestion charges and toll roads, where the user pays. Or some combination of the above. All are being done in various places. None are hard.

  • Tsarcasm No, Japan only. Life costs by Rank:#1 - House (150k+)#2 - Education (30k+)#3 - Automobile (30k+) why waste hard earned money in inferior crap => Korean, Chinese, and American cars are trash. a toyota or honda will last twice as long.
  • Tassos In the 90s we hired a former PhD student and friend of mine, who 'worked' at GM "Research" labs, to come work for us as a 'temp' lecturer and get paid extra. He had no objection from GM, came during the day (around 2 PM), two hours drive round trip, plus the 1.5 hour lecture, twice weekly. (basically he goofed off two entire afternoons out of the five) He told me they gave him a different model new car every month, everything (even gas) paid. Instead of him paying parking, I told him to give me the cars and I drove them for those 90 mins, did my shopping etc. Almost ALL sucked, except the Eldo coupe with the Northstar. That was a nice engine with plenty of power (by 90s standards). One time they gave him the accursed Caddy Catera, which was as fun driving as having sex with a fish, AND to make it worse, the driver's door handle broke and my friend told me GM had to pay an arm and a leg to fix it, needed to replace almost the whole damned door!
  • 3-On-The-Tree I only buy Toyota cars. But if the Chinese cars are cheap people will buy them. They don’t care about the above issues that were stated in this forum.
  • Tassos Ford models are like dumb Hollywood movies. The original is far better than their god damned sequels. This was true of the Mustang vs the II, AND the Capri vs its second gen, and their BEV PORKER atrocities many decades later
  • Jeff I would not buy a Chinese car with the current global situation with Taiwan and Ukraine but I believe eventually China will become the number 1 producer of vehicles globally. Lou brought up a valid point that much of the content of new vehicles has components made in China. Even many of the tires that are sold are made in China. Try buying a small appliance or electronics that are not made in China. Many of the electric motors that go in power reclining furniture are made in China. Many auto parts especially replacement parts are made in China.
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