Climate

White House to End Subsidies for Electric Vehicles and Renewable Energy Use

Trump plans to end tax credits for electric vehicle purchases and utilities installing both wind and solar equipment but continue subsidies for the fossil fuel industry.

The Tesla Model S, one of the top-selling luxury electric vehicles in the world. Tesla's meteoric growth was fueled in part by the lure of tax credits. Photo: Matthew Ingram, CC

On December 3, Larry Kudlow, White House chief economic advisor, announced that Trump will be moving to eliminate both kinds of subsidies soon.

Under a law passed by Congress during the Obama era, electric car buyers are allocated tax credits of $7,500 per vehicle. It was intended as a dual incentive, in part to encourage the purchase of the zero-pollution vehicles and in part to stimulate electric vehicle development among automakers. As each auto company reaches a cumulative total of 200,000 electric cars sold, the tax credit disappears on a manufacturer-by-manufacturer basis. It is an arbitrary number, but once reached it will have had a tremendous impact on cumulative emissions in the auto industry.

Power companies across the U.S. are awarded tax credits when make use of renewable energy alternatives to both fossil and nuclear fuels. These incentives, put in place to stimulate the renewable energy industry while also keeping even more greenhouse gases out of the atmosphere, were put into law over ten years ago, long before Obama took office.

As to why the White House would consider such moves now, other than that the current administration is very “anti” anything which suggests doing something positive about climate change, two rationales are becoming clear.

In the case of the tax credits for auto emissions, at least part of it comes from a threat Trump leveled at General Motors, after the company announced it would be closing five manufacturing plants across the country. Rather than opening discussions with the company about what was happening and looking for other resolutions, Trump’s response was to suggest the government might cut the electric vehicle tax credits and raise auto tariffs.

The why behind the cut on tax credits to utilities constructing and operating solar and wind power plants is even more clear. It supports a fundamental policy laid down by Donald Trump and his cabinet to stop anything which might incentivize clean energy over fossil-fuel-based energy sources, regardless of the cost to the environment, human health and the economy. Green energy creates vastly more jobs than fossil fuels.

The White House chief economic advisor also threw in another reason behind the elimination of both categories of tax credits. As Kudlow said at his announcement on this Monday, “We want to end, we will end those subsidies and others of the Obama administration.”

Kudlow said he expects the tax credits for electric vehicle purchases will end by 2020 or 2021.

Rolling back just about anything the Obama administration put in place, especially when it relates to fossil fuel emissions and environmental protections, has been a staple for Trump’s team since they took office. This time there are a few problems in pulling off these particular actions, however.

The tax credits for renewable energy use for utilities were enacted well before Obama took office, and in fact owe much to the Republican administration of President George W. Bush for being there, so that’s not an Obama thing, but tell Trump that. And the tax credits for purchasing electric vehicles, something which has been highly successful in moving the country to a far higher percentage of EVs than ever before, were passed by Congress under Obama rather than dictated by the White House. To remove them will require Congress formally repealing the law. Considering that the House of Representatives will be dominated by Democrats starting in just a few weeks, it is unlikely that will happen anytime soon.

As has happened before with the imposition of tariffs, something which is required to happen by Congressional action rather than White House dictate except in the case of national emergencies, one can expect instead that Trump will attempt to use executive orders to cancel both tax credits for at least part of his process here.

Fortunately for the U.S., regardless of what Trump attempts to do going forward, much of the good these two initiatives were intended to do has already happened. Solar and wind power have gained such momentum in utilities across the country that in many places fossil fuel plants are not just dirtier to operate – they are also growing to be far costlier to keep going in some locations. Even without any subsidies, solar and wind are less expensive than electricity produced by coal or natural gas at current prices.

And thanks to the tax credits for EV purchases, automakers in the U.S. have stepped up to the challenge of making them and consumers have proven more than willing to make the necessary transitions.

What this leaves is a climate a little cleaner because of what past administrations managed to put in place, both for renewable use by utilities and EV use by individuals. Fortunately, the only atmosphere that might become far more toxic by Trump’s attempts to cut these subsidies is the already contentious political atmosphere in Washington.