South Korea Gets Aggressive With EV Incentives, Infrastructure

South Korea is now the fifth largest auto manufacturing company in the world. Its domestic automakers produced 1.8 million vehicles in the first 5 months of 2016. Over 60% of them were exported to foreign markets. Korea’s two largest manufacturers, Hyundai and Kia, make many hybrid and EV cars, but sell few of them domestically. The Korean public has little interest in such cars.

“The lack of domestic e-car infrastructure has been an impediment to e-car development and production in South Korea, but that will change from now,” Lee Won-joo, director of the Automobile Aerospace Division, told Bloomberg Business News Asia. That may soon change. South Korea is about to embark on an aggressive push to make electric and plug-in cars more palatable to local customers.

The plan includes development of an EV battery with energy density high enough to more than double the travel distance on a charge to 400 kilometers or nearly 250 miles. By 2020, high speed charging stations will become available at an average of one within a two-kilometer radius in the capital city of Seoul, with a population of 10 million. In addition, 30,000 slow charging stations will be strategically located at about 4,000 apartment complexes nationwide by 2020.

EV buyers will get other inducements, too. Starting this year, the tax paid at the time of purchasing an EV will be reduced. Drivers will also see cuts in insurance premiums, expressway tolls, and parking fees. The standard one time government subsidy available to EV buyers was increased to $12,100 from $10,400 as of July 8.

According to Global EV Outlook 2016 released by the International Energy Agency, market share for EVs in South Korea was a paltry 0.2% in 2015. That makes it among the lowest in comparison with 15 other members of the Electric Vehicles Initiative international governmental forum. The government estimates that the current and future policy programs will help increase the EV market share in South Korea to 0.5%in 2017 and 5.3% in 2020.

Cars manufactured in South Korea account for 8.5% of the global market. The government would like for Korean made EV sales to equal 8.5% of the global market for plug-in hybrid and electric cars within a few years. Both Hyundai and Kia are about to introduce hybrid, plug-in hybrid versions of their latest cars to global customers later this year.

Washington State Expands Electric Car Incentive Program

A new law signed by Washington governor Jay Inslee makes two important changes to the state’s electric car incentive program. The changes add plug-in hybrid cars, provided they have at least 30 miles of range. It also raises the maximum sale price from $35,000 to $42,500. Not coincidentally, the higher sale price will allow several cars like the Chevy Volt, Nissan LEAF SL, and the upcoming Tesla Model 3 and Chevy Bolt to qualify for the state incentive of $3,100. The rebate is available whether the car is purchased or leased.

Curiously, the changes do not go into effect until July 1, meaning sales of higher end electric and plug-in cars will probably have a lull in Washington over the next 10 weeks or so. JJ McCoy, legislative director for the Seattle Electric Vehicle Association tells Inside EVs,

“This bill will help get more Washington residents behind the wheel of a great EV. Several exciting mid-market cars with 200 miles of range will be in showrooms soon, and Washington’s incentive will give them a boost. Electric vehicles have a host of benefits – lower carbon emissions, lower fueling costs, better air quality – but they still cost more to make than an equivalent gas car,” McCoy said.

“As car makers scale up battery production and prices fall, EVs will soon be able to compete un-subsidized and provide a compelling value proposition. Fueling up costs just $0.85 a ‘gallon’ on Washington electricity rates, so once you have the car, you’re saving money with every mile. They’re also just a lot of fun to drive. We find that once people try an EV, they never they never want to go back to their gas car.”

The rebate program is scheduled to end on July 1, 2019, or one month after Washington sells 7,500 EVs that qualify for the exemption. McCoy says current estimates, based on the rate of electric car sales in his home state, are that there will be 7,500 qualified EVs on the road by the middle of 2018. If you are planning to buy an EV and live in the state of Washington, the time to act is now if you want to save an additional $3,100 on the purchase price of your car.

Photo credit: Seattle Electric Vehicle Association

Ontario Doubles Down On Electric Car Incentives

Ontario is serious about reducing its carbon emissions and wants to encourage its residents to buy an electric car. Its leaders know that doing so will take money. Lots of money. A new incentive program will pay drivers up to $14,000 to buy an electric car. At present, there are only 5,800 electric cars on the road in Ontario, which is Canada’s most populous province. “We know we can do better than that,” Premier Kathleen Wynne said Wednesday,  according to the Toronto Star.

The goal of the $20-million program is to get people thinking about reducing greenhouse gas emissions from automobiles, which account for 35% of all emissions in the province.  “Cars account for more greenhouse gas emissions than the iron, steel, cement and chemical industries combined,” Wynne says.

Under the current incentive plan which went into effect in 2010, electric car buyers are eligible for subsidies of between $5,000 and $8,500, depending on the price of the vehicle. Under the new program, the incentives will increase to between $6,000 and $10,000. If the car costs more than $75,000, the amount is limited to $3,000, on the theory that someone who can afford a car that expensive doesn’t need as much help from the taxpayers.

Wynne says some plug-in hybrid cars will qualify if they are approved by the Ministry of Transport. Also, the total subsidy can rise to as much as $14,000 if an electric car has an extra-large battery and seats at least five people, making it suitable for carpooling. Details about what constitutes an extra large battery have not yet been finalized. If the new Chevy Bolt qualifies for the maximum subsidy, that could make it very attractive to Ontario drivers.

Ontario is aggressively pursuing other methods to reduce its greenhouse gas emissions by 37% below 1990 levels. It will soon announce a cap-and-trade system for industrial carbon emissions. The government is also boosting its funding to build more electric vehicle charging stations by $20 million.  Transportation Minister Steven Del Duca said electric vehicles can use HOV lane regardless of how many people are riding in them and will be able to use high occupancy toll lanes foe free once they are up and running.

Getting people to transition to zero emissions cars isn’t hard. All it takes is commitment, leadership, and money — three concepts the US Congress is largely unfamiliar with.

Economists, Environmentalists Wrangle Over EV Incentives

Last month, representatives from 200 nations around the world gathered in Paris to address the issue of climate change. Many of them believe the only hope for mankind is if the entire world transitions as quickly as possible to electric power and electric vehicles. They think the best way to get more people to buy electric vehicle is to give them significant financial incentives to do so. For them, the size of the incentive is irrelevant.

The chart above is an interactive map created by Plug In America. If you clink the link, you can see every federal and state incentive currently in effect. Colorado is the most generous state. It allows a credit of 80% of the purchase cost of a qualifying electric vehicle, up to a maximum of $6,000. Add that to the $7,500 federal tax credit, and the lucky people of Colorado can get a total of $13,500 off the price of an electric car.

The question of how much of an incentive should be given to promote the conversion to electric cars is one that many economists have strong opinions on. James Bushnell is an economist at the University of California – Davis. In December, he posted a long and carefully researched article on the Haas School of Business at Berkeley website. Bushnell’s primary question for environmentalists goes like this: “Is society getting good value for its money when it provides such generous incentives?” That’s an excellent question and one that has as many answers as the number of people who ask it. In general, the answer is, “It depends.”

His article is entitled Economists Are From Mars, Electric Cars Are From Venus and it’s an interesting read. The substance of his argument is as follows. “[Economists] Archsmith, Kendell, and Rapson, using $38/ton as a cost of carbon, estimate the lifetime damages of the gasoline powered, but pretty efficient, Nissan Versa to be $3200. In other words, replacing a fuel efficient passenger car with a vehicle with NO lifecycle emissions would produce benefits of $3200. That puts $10,000 in EV tax credits in perspective.”

Obviously, no economist worthy of the name would advocate for incentives that exceed their anticipated benefit by a factor of three. To an economist, that is just crazy talk. But who says the the cost of carbon is $38 a ton? The EPA sets it at $40, but may other researchers say it should be much higher. They think $200 to $400 a ton is more realistic. If that’s true, that makes a $10,000 incentive to drive a zero emissions car look like an absolute bargain.

David Roberts, writing for Vox on December 31, raises some cogent and troubling questions. “How much is a human life worth? You can’t calculate the benefits of saving one without a number. How much is it worth to avoid a sickness? How much are intact ecosystems worth? How much are other species worth?

“How much is a life this year worth compared with a life ten years from now, or 50 years from now? How much weight we give future costs and benefits relative to the present is measured by our “discount rate.” Discount rates are particularly important in climate change discussions, where the connections between cause and effect are measured in decades, sometimes centuries. The choice of discount rate can make the difference between a model that counsels urgent action and one that counsels delay.”

Max Weber, German economist, 1964 – 1920

In other words, the answer to how to address climate change is all in how you frame the debate and what questions you ask. Roberts tends to favor more rather than fewer EV incentives. His justification is that EVs have intangible benefits that are difficult to put a dollar value on. More EVs mean the electric grid gets greener, faster. Since electrification of everything is the only possible way to avoid climate disaster, let’s stop arguing over numbers and get busy, he says. After all, there won’t be any economists left to argue about these things if we are all dead from breathing poisonous air.

Roberts last point is that electric cars are popular with voters and politicians. Greening the electrical grid is not. Since EVs enjoy a high approval rating (thanks in large measure to the constant drumbeat in favor of them by Elon Musk), why not put all of society’s eggs in the EV basket, since EVs will necessarily promote the other worthy but less sexy measures the world needs? In other words, isn’t it ultimately better to swim with the current rather than against it?

Max Weber said “Politics is a strong and slow boring of hard boards.” Roberts calls it “a draining and frustrating business.” If the winds are blowing in favor of electric vehicles, isn’t it wise to take advantage of those breezes, he asks, even if the precisely correct amount of incentives cannot be calculated down to the last penny?  His final word to practitioners of  economics, which Thomas Carlyle calls “the dismal science,” is this: “There are more things in heaven and earth, Horatio, than are dreamt of in your economics.”