By on May 30, 2018

electrify-america-ev-charging-station, Electrify America

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]

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43 Comments on “Electric Vehicles Could Short Governments $92 Billion in Taxes by 2030...”


  • avatar
    Sub-600

    The return of Mr. Salmon Pants.

  • avatar
    SCE to AUX

    Rising CAFE requirements have had a similar effect.

    This is why I keep saying that gas taxes need to be replaced with an annual usage tax:

    Tax = Annual miles x GVWR

    This way, all vehicles – cars, trucks, EVs, motorcycles, etc – pay their ‘fair share’ to support the road infrastructure. Gas taxes are popular because they’re invisible, but they are at odds with the goal of reducing fuel consumption.

    • 0 avatar
      sportyaccordy

      I was going to suggest this. It’s by far the fairest way.

    • 0 avatar
      TwoBelugas

      Since vehicle registration is paid to the state, mileage based taxes will require location monitoring of each mile driven else you would have to pay your car’s state of registration for miles put on out of state or off highway use.

      Full time tracking of each vehicle on the road sounds rather 1984-like to me, maybe it’s acceptable to you, I don’t know.

      A less intrusive way could be a surcharge for high MPG vehicles that don’t pay as much or even any fuel taxes like how California is doing with electric cars.

      • 0 avatar
        Malforus

        Or bear with me.

        Its self reported and crosschecked using the mileage databases by third party bounty based private NARCs.

        If the government “trusts” me to accurately report my untracable income they should trust me to report accurate mileage. With a very heavy handed enforcement penalty if I am lying outside of band.

        Course that would mean that the hamfisted cretin who punches in Odometer readings at Valvoline Rapid Change would have power over the people they serve.

      • 0 avatar
        SCE to AUX

        @TwoBelugas:

        I’m not recommending real-time tracking (or full-time). But if you live in a state with annual vehicle safety inspections, or annual mileage reporting to your insurance company, this information is already available.

        Surcharging for EVs makes no sense. Why should a 100 MPGe EV pay a surcharge while a 60 MPG hybrid does not? The road doesn’t know the difference.

        • 0 avatar
          TwoBelugas

          What about people living on borders of states or travel frequently out of state? Should they pay California level taxes for the miles they drive in Nevada?

          Surcharges on electric cars actually makes sense, a 60mpg hybrid is not going to be a heavy boat that tears up the road, but a model S that weighs 5000 lbs(as much as an F150) pays no fuel taxes whatsoever. It’s not a perfect scheme but neither is everything else.

    • 0 avatar
      TW5

      Usage taxes make people pay their fair share, assuming that all of the economic benefit is from direct usage. It’s not. In fact, businesses benefit from their workforce commuting everyday, yet they don’t pay a dime for the economic benefit.

      Paying for roads out of the general fund, which rely primarily on income taxes and payroll taxes, is a much better way of making people pay their fair share.

      • 0 avatar
        SCE to AUX

        You’re putting roads and public schools on the same footing.

        My argument is that roads are clearly wear items whose maintenance is tied closely (but not 100%) to usage, and that the users should pay. For example, the PA Turnpike is paid for solely by tolls.

        • 0 avatar
          TW5

          Maintenance expense is tied closely to usage. Economic benefit is not. Shifting all of the cost to people who use roads is disadvantageous especially considering the example I just gave. The economic benefit of commuting is multiples higher for businesses than for workers, yet the incidence of tax is on the worker.

          Plus, income and payroll taxes don’t have a reprehensible design flaw wherein government is defunded when people pursue better fuel economy or alternative fuels.

          Our taxation capabilities are far more sophisticated than the were when road fuels excise tax was introduced. We have better options.

      • 0 avatar
        sportyaccordy

        Businesses benefit from people commuting, but so do the people they employ. This logic has no end. Businesses also benefit from property their employees own, purchases they make etc… should they be taxed on that too?

        IMO business taxes are silly; ultimately businesses are made of people. Without people to cash in on business income businesses wouldn’t exist, so taxing at the people level makes way more sense. Especially considering a business can lobby far more effectively for lower taxes than individuals, as the plummeting effective corporate tax rate demonstrates.

        • 0 avatar
          DeadWeight

          You’re clueless.

          The current global, economic system is a black hole of inefficiency, sucking trillions of unnecessary wealth down its gullet every year.

          Think of the incredible, massive inefficiencies with EITHER ICE or EV vehicles stuck in traffic, burning energy, wasting peoples time (literally many hours per day in many places, stuck in a vehicle that’s stuck in traffic not moving or barely moving), as just one of MANY examples of how incredibly inefficient the modern economy is, in terms of structure, infrastructure, time, outlay costs; it’s an incredibly outdated, hopelessly inefficient destroyer of wealth, health (mental and physical), family and leisure time, etc.

          • 0 avatar
            DeadWeight

            If I restructured the world, only those who wanted a motor vehicle, electric, gasoline/diesel, hybrid, or otherwise, would own them.

            No one would need them.

            Our cities are a total mess, as is our infrastructure, and concept of urban and suburban planning.

            Screwed up, illogical transportation networks, city/suburban planning, the absence of walkable cities (not just big ones, but midsize and small ones) and the absence of ultra efficient, ultra fast, ultra modern, ultra clean, ultra safe, ultra inexpensive mass transit on city, state and federal levels means that just in the U.S., many trillions of dollars of monies are completely eviscerated on an annual basis, not to mention the creation of avoidable, massive stress, wasted hours (billions), pollution, decrease in sleep and leisure time and more productive work, etc.

            Our current system of living and transportation, and the ways our cities and roadways are laid out, is so shockingly bad, that it defies logic.

            My system would increase incomes, increase GDP, increase Gross National Happiness, reduce pollution, massively decrease both the cost and time of commuting to work, school and other places, and lead to a much more pleasant, sustainable, healthy lifestyle.

          • 0 avatar
            dal20402

            DeadWeight, there is often strange conspiracy material in what you say, but your 6:40 p.m. comment is right on the money.

          • 0 avatar
            sportyaccordy

            DW, please don’t pretend like public transportation doesn’t have its own issues. It’s infeasible in much of the US, and as a native NYer I can tell you the country’s best public transportation system is far from perfect. When possible I either rode my motorcycle or bicycle from my Manhattan apartment to Manhattan job to avoid the “perfection” of public transportation.

            The real salvation will come for much of the country with autonomous ride hailing. As is, centralized, human operated, fixed route public transportation makes zero sense anywhere outside of the densest US cities. And even there public transportation only has so much reach. The LIRR still has commuter lots.

          • 0 avatar
            DeadWeight

            New York City is a bad example of a city/state having a rapid, clean, inexpensive, modern, safe, efficient mass transit, as is Chicago, BART, MARTA, or almost any other system in the U.S.

            The U.S. is light years behind some Asian and European nations when it comes to having rapid, clean, inexpensive, modern, safe, efficient mass transit at the city/state/national levels.

            The model of living and working and commuting in the U.S. is azz backwards, and still predicated on forever cheap energy and the interstate highway system born in the 1950s that led to rapid suburban growth and vast commutes, and hostile-to-pedestrians cities/townships/villages that are disconnected desert islands.

            Cities should be built in a manner whereby no residential unit is NOT within walking distance of all businesses and institutions necessary for life, work, leisure, learning, medical services, nourishment, socializing, etc.

            The efficient and inexoensive mass transit should be there for everyone who, for whatever reason, has to travel greater distances regularly (e.g. work in further area, e.g. visiting relatives or friends in different area), allowing for many millions more people to avoid the headaches, expense and congestion-inducing byproduct of too many people owning too many such vehicles (as is the case by necessity, now, given lack of proper planning).

            Give me 10% to 14% of the real, full, overall portion spent on defense annually (much of which is a huge, incontrovertible waste, and mere welfare and subsidization of defense contractors), and I can reduce vehicle pollution by 40%+, traffic and traffic congestion induced lost hours (to commuting) by 40%+, and improve physical and mental health scores significantly, while boosting the fortunes of locally owned businesses providing high quality services, food, health care, and all things in between, while improving access to high quality housing at lower costs, while reducing the cost of transportation by 90% or more for the overwhelming majority of Americans.

          • 0 avatar
            brandloyalty

            “Think of the incredible, massive inefficiencies with EITHER ICE or EV vehicles stuck in traffic, burning energy…”

            Except that ev’s, and to a lesser degree hybrids, waste almost no energy when not moving.

          • 0 avatar
            DeadWeight

            “Except that ev’s, and to a lesser degree hybrids, waste almost no energy when not moving…”

            Yes they do, as they were charged with electricity that has a 80%+ chance that was produced by non-renewable (likely coal) source, and moreover, sitting in gridlock traffic is a massive waste of productivity, hours (many weekly; hundreds yearly) that can’t be utilized for work, leisure/family time, pursuits of passion or other productive, higher quality purposes – time stuck slowly in gridlock traffic, moving slowly or not at all, is time lost.

            There are many other negative consequences and externalities associated with such congestion/gridlock whether in an EV, hybrid, or ICE vehicle, also, both economic and non’economic.

    • 0 avatar
      wsn

      –“This is why I keep saying that gas taxes need to be replaced with an annual usage tax:

      Tax = Annual miles x GVWR”

      That sound really dumb.
      1) How do you track the actual usage? By installing a spy software? And you ask people to pay for the continuous use and update of a software that spy on them?
      2) There are other factors at play. For example, driving behaviours.
      3) Cost of collecting such tax. You are probably spending $1 to collect $5.

      Why not just shift the tax to tires? Tire type and spec reflect usage, GVWR, and driving behaviour and cost almost nothing to collect.

      • 0 avatar
        Luke42

        You just report the mileage at tax time, the same way you report your income.

        Don’t worry about out-of-state driving for most private vehicles, because it’s not a big proportion of driving and it’ll mostly average out between states. Save the tracking tech that Two Belugas is worried about for those who would see a significant tax savings by proving they drive out-of-state most of the time (commercial truckers?). Most of us just write down the mileage on the odometer every year and pay the fee.

        No big deal, assuming we get value for our tax money. I value pothole-free roads, bridges which don’t collapse, and smart/efficient solutions to traffic problems. If all of have to pay to make that happen is a few hundred dollars a year in road taxes, that’s a pretty good deal.

    • 0 avatar
      Guitar man

      Electricity in the UK has 25% VAT. Then add all the other taxes for the infrastructure like the poles and wires such as council rates, land tax and all the income tax paid by employees and contractors.

      It is by no means tax free.

  • avatar
    mcs

    The electric utilities are lobbying for more EVs. I guess the capacity issues don’t worry them and they are more interested in cashing in.

    https://www.utilitydive.com/news/utility-trade-groups-press-epa-to-embrace-evs-in-fuel-standard-rewrite/524196/

    • 0 avatar
      sportyaccordy

      Utilities love steady load. Off peak EV charging would increase utilization and enable more efficient deployment of capital for additional/future generation capacity. Better to build a simple plant running full bore all the time than to try and anticipate and scale along a range.

      • 0 avatar
        mcs

        @sporty: More EVs might mean more used batteries to use as storage systems so they can balance out their loads.

        • 0 avatar
          sportyaccordy

          This too, though battery material scarcity is becoming an issue. I think for utilities some kind of mechanical battery would be ideal.

          • 0 avatar
            mcs

            @sporty: Remember, the battery for a power plant doesn’t have to be lithium. Drill some thousand foot deep 50 foot diameter holes and make the world’s largest lead acid sears diehard battery. There are probably other better materials, but given the space and lack of weight limits, there are a lot of battery technologies that won’t work in EVs that are perfect for power plants.

          • 0 avatar
            mcs

            Here’s a wikipedia page with all the options:

            https://en.wikipedia.org/wiki/Grid_energy_storage

        • 0 avatar
          fIEtser

          Not just that, but it also means a whole platform of batteries that the utility doesn’t have to buy and maintain. I can see an opportunity arising in the near future where a utility might even offer free EV charging during the day to absorb the excess solar load then those people could plug into a V2B system when they get home and power their house during the evening peak. That saves the utility from having to try to pay to get rid of midday excess and negates the need for as much evening peak capacity as they would otherwise need.

          • 0 avatar
            mcs

            @fIEtser: “those people could plug into a V2B system when they get home and power their house during the evening peak”

            For that to happen, we need to improve the durability of batteries. But, guess what? That seems to be happening. Samsung SDI is shipping 500k mile batteries that could support more cycles. That didn’t make sense before, but now I think it’s possible.

            https://insideevs.com/lets-look-at-the-specs-of-the-samsung-sdi-94-ah-battery/

            My EV hasn’t moved in two days (nice weather means its Italian carbon fiber garage-mate gets some exercise) so it could have been doing a bit of off-peak buffering.

      • 0 avatar
        Kendahl

        Better to store excess electrical energy in vehicle batteries than to worsen light pollution by running too many outdoor lights.

  • avatar
    stingray65

    On top of all these issues, EVs will clean the environment so effectively that billions of people will live decades longer from all that clean air and cooler temperatures, which will make the current social-security/pension crisis even worse. Of course, these live extending benefits might be offset if most EV adopters choose the Tesla with their self-destruct auto-pilot systems.

    • 0 avatar
      Kendahl

      Further exacerbating the imbalance between time spent paying into Social Security and Medicare and time spent drawing benefits is only part of the problem.

      We all know that health care is expensive and getting more so. Many conditions which used to result in a fairly prompt death can now be cured or at least managed for many years. The treatments are expensive. They also keep elderly people alive long enough to need other expensive treatments.

      Retirees aren’t the only ones not paying into the system. Jobless people don’t either. We don’t yet know if automation will result in massive systemic unemployment, simply because there won’t be much left that robots can’t do better and cheaper, or if it will create new, better, less physically demanding and, most importantly, more jobs.

    • 0 avatar
      fIEtser

      They might live longer, but with fewer pollution-related illnesses and the associated cost, starting much earlier in life.

  • avatar
    brandloyalty

    Touchstone: Waste is not wealth.

    Ev’s are more efficient and cleaner than ICE cars. Therefore society gets the same benefits as from ICE cars with less resources and expenses. Even without environmental costs factored in.

    So society is wealthier with ev’s. Which means finding funding for things paid for with gas taxes is more of a book keeping problem, than some sort of crisis.

    Wherever the funds come from and go to, less funds are needed. So people have more money for other things. Like schools, health care and retiring earlier. And we get a cleaner environment as a bonus.

    • 0 avatar
      28-Cars-Later

      Run the numbers, the economics of EVs do not scale. From limited use, cost of production, cost of batteries/replacement, cost and mode of electricity. Does not compute on a large scale and never will.

  • avatar
    brandloyalty

    “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.”

    What happened to the far greater impact of a multitude of cars being driven on inefficient shopping trips to distant big box stores? Even better if the delivery vans are electric. Duh.

    The valid issue is the increased use of packaging.

  • avatar
    tonyd

    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.

    • 0 avatar
      arach

      If you default to 25k, then doesn’t that mean everyone who drives a lot will just default to 25k?

      that might be OK if we want to “cap” it…

      But there are some other loopholes… for example in my state you don’t have to register certain vehicles. And what if your vehicle has no Odo? And what about trailers?

      It would end up being pretty complex in practice.

      Plus all the staff they’d have to hire to check ODO on registration. Our state also does all registration, even receiving your license and stuff in the mail. They’d have to staff more locations for people to check ODO… either that or you’d have to get certified by a shop, but we know how well that works ;)

      Lastly, the EPA combined thing seems a bit unfair. If I live in a rural area, 95% of my driving is highway driving. My PICKUP TRUCKS get in the mid 20s because its alll highway. Compare that to someone in stop-and-go city driving.

      Since you already took into account CURB WEIGHT, you are kind of double dipping with the EPA mileage component. Instead I’d rather see it kind of like the gas guzzler tax. Maybe any vehicle that doesn’t meet a certain threshold gets a higher tax, and maybe you have a discount premium for cars over 40?

      However, since they won’t be getting rid of the gas tax, I’d ignore that MPG component completely and just accept that gassers will still pay the gas tax and that piece is taken care of.

    • 0 avatar
      TW5

      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.

  • avatar
    HotPotato

    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.

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