Subsidies for electric cars in Quebec aren’t paying off
Quebec would seem like a good place to promote the sale of electric and hybrid vehicles.
After all, motor vehicles are the leading source of greenhouse gas emissions in the province and Quebec has an abundant store of clean and renewable hydroelectric power to offer.
So the provincial government provides rebates of $4,000 to $8,000 for consumers who buy or lease all-electric or plug-in hybrid vehicles, depending on the battery size. And it throws in a rebate of up to $1,000 on the cost of a 240-volt charging unit.
But subsidizing what many Quebecers might see as a luxury purchase doesn’t make much sense.
Electric vehicles are too expensive for most consumers and their limited range makes them a poor choice for the average household budget. If they’re basically an extra car in the driveway for people who already can afford them, why are Quebec taxpayers picking up part of the tab?
And if the goal is to cut GHGs, there are more cost-effective ways of doing so.
Quebec’s program has good intentions. The province wants to be a leader in the fight against climate change and has ambitious goals for electric transportation: its 2011-2020 Action Plan for Electric Vehicles sets a goal of 300,000 electric cars by 2020 or 5.8 per cent of all passenger vehicles.
But current reality is a long way from that dream. While sales in Quebec are picking up, there are just 5,516 plug-in passenger cars on the road today, according to the Société de l’assurance automobile du Quebec.
The subsidies — as generous as they are — aren’t convincing enough Quebecers to make a purchase.
About 2,700 plug-in vehicles were sold in Quebec in 2014, estimates economist Youri Chassin of the Montreal Economic Institute. He pegs the annual cost of subsidies at approximately $22 million.
“This cost will likely increase given that yearly sales are on an upward trajectory that seems likely to continue,” he said in a recent report. In order to meet the government’s 2020 goal, “the effective subsidy per vehicle would have to be much higher than it currently is.”
The question is whether it’s money well spent. We shouldn’t be subsidizing electric cars just because we feel good about the technology; we should be doing it because it’s a cost-effective way to cut GHGs.
Chassin calculates that it would be far cheaper for the government to purchase emission quotas under Quebec’s cap-and-trade system than to continue to pay out expensive rebates.
Quebec’s subsidy program is modelled on one in Norway, a country that’s considered a leader in the adoption of electric vehicles and that has, like Quebec, plenty of hydroelectric power available.
Norway offers a vast array of incentives for owners of electric vehicles, from sales tax and registration tax exemptions to exemptions on toll road charges and parking costs.
But despite much larger subsidies than those offered here, the proportion of electric cars in Norway is just 1.35 per cent, Chassin noted in a report published last November.
And under Norway’s vehicle-subsidy program, the cost of avoiding one tonne of greenhouse gas last year was $6,925 compared to a cost of $11.39 for buying one tonne of emission quota on the carbon market.
The bill in Quebec isn’t quite so astronomical. The economist calculates that the cost of avoiding one tonne of GHGs by subsidizing electric cars last year was $1,560 vs. a cost of $11.39 per tonne on the carbon market.
Obviously, this is “a very expensive way to reduce GHG,” says energy economist Pierre-Olivier Pineau at the HEC Montreal business school. As a subsidy for car ownership, the policy also encourages urban sprawl and congestion instead of public transit.
“It is socially unacceptable because ... only the higherincome households can afford it. You almost need to own a house to be able to plug it, so the barriers to entry are multiple.”
This is one case where we’d be better off letting buyers of that Tesla S or Nissan Leaf pay for it themselves.