Incentives And Tax Credits To Buy Hybrid And Electric Cars Does Not Reduce Gasoline Use Or Greenhouse Gas Emissions: CBO Report

Federal tax credits and incentives to buy electric and hybrid cars and trucks do not reduce gasoline use and automotive greenhouse gas emissions due to the interplay between the incentives and the existing US government's mandated automobile manufacturers Corporate Average Fuel Economy [Cafe] standards for new vehicles.

CAFE standards require auto manufacturers to achieve an average level of fuel economy. Incentives that increase the sales of hybrid and electric vehicles, which have above average fuel economy, allow automobile and truck manufacturers to sell more vehicles that have below mandated average fuel economy, while still meeting the required US government's average fuel economy mandates. As car manufacturers sell more above average fuel economy hybrids and electric vehicles, they sell more below average fuel economy vehicles. The result is that the total gasoline use and greenhouse gas emissions for the total vehicle sales remains the same with and without the incentives that increase the sale of hybrids and electric vehicles.

From CBO, "Effects of Federal Tax Credits for the Purchase of Electric Vehicles" September 2012:

Comparing the Tax Credits with Other Recent Subsidy Programs in the Transportation Sector
CBO compared the effects of the current tax credits in reducing gasoline use and greenhouse gas emissions with the effects of three other recent subsidy programs aimed at the transportation sector: federal tax credits for the purchase of traditional hybrid vehicles, which were in effect until 2011; federal tax credits, most of which have expired, for companies that blended biofuels with petroleum fuels; and the 2009 “Cash for Clunkers” program, which made payments to people who traded in eligible lower-fuel-economy vehicles for higher-fuel-economy vehicles. Like the current credits for electric vehicles, the credits for traditional hybrids did not reduce gasoline use or greenhouse gas emissions in the short term, because sales of those high-fuel-economy vehicles allowed vehicle manufacturers to sell more low-fuel-economy vehicles and still comply with CAFE standards. By contrast, the other two programs did reduce total gasoline use and greenhouse gas emissions in the short term. The biofuel credits lowered the emissions of vehicles already purchased, and “Cash for Clunkers” raised the average fuel efficiency of all vehicles in operation (by reducing the number of less fuel-efficient older vehicles in favor of those with higher fuel economy). [Emphasis added.]