Wednesday, May 12, 2010

Who Pays For Alternative Energy?

Government-owned General Motors received huge taxpayer bailout funding, so it can roll out the Chevy Volt at a subsidized cost, to be financed with tax subsidized low interest rates from the old GMAC (now Ally Bank to confuse the public), so that the Volt buyer can receive up to $8,600 in federal tax subsidies when buying the Volt. QUIZ: What is the true cost of the Chevy Volt?

There seems to be a disconnect when politicians begin to wax eloquent on Alternative Energy and “saving” the American people money. Perhaps a look at the facts will help.

Government-owned GM will release its new gasoline-electric combination Volt automobile this year. Nissan will roll out its all-electric Leaf in December.

Pricing will be fairly modest for these cars – perhaps around $25,000 to $30,000. This is because you and I will be paying for the car with a $7,500 federal tax credit. Electric car buyers will also have to pay for a $2,200 charging station, but federal tax credits will pay for half of that cost as well. Various states such as California, Georgia and Tennessee will chip in as much as $5,000 in tax credits as additional incentive.

Thus is born another tax lobby to pressure congress to keep these subsidies up. This is regressive taxation, because all Americans pay for this while initially these cars are little more than toys for wealthy hobbyists.

The fact is that if you power your car with electricity from a coal-fired power plant, you will be releasing more CO2 into the atmosphere than if you owned a Hummer. And half of American electricity is produced from coal. The fact is if you want a more efficient automobile; just add one passenger and you increase its efficiency by 50%. Or drive less.

Meanwhile over in the wind power fantasy, the federal government has authorized the Cape Wind project off shore from Nantucket. Monday this project asked for authority to enter into a 15-year purchasing contract with the utility company National Grid at a price that will cause consumers in that grid to pay $1.59 more per month on an escalating price curve.

This works out to $443 million in extra energy costs, even though this project will contribute very little power to the grid. It does however help the state to meet an arbitrary alternative energy mandate enforced by the state’s Green Communities Act, so the consumer be damned.

And so it goes. Just as the ethanol industry has developed into a huge federal tax subsidy machine to generate profits for private companies, so too will electric vehicles and wind power. Facts are stubborn things.

Richard Wottrich

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