Electric Vehicles Could Short Governments $92 Billion in Taxes by 2030


electrify-america-ev-charging-station, Electrify America

As governments across the globe push for the proliferation of electric vehicles, they’re creating a new problem for themselves. While EVs may be helpful in mitigating pollution in and around city centers, they’re not going to be nearly as friendly on the infrastructure.

A report from the International Energy Agency suggests the ramp-up of battery powered automobiles could result in a $92 billion tax shortfall by 2030, assuming everything goes according to plan. But even if global governments only manage to get halfway to their intended electrification goals, they’re still missing out on an estimated $47 billion in fuel duties. 

That translates into the world needing somewhere between 4.8 and 2.6 million fewer barrels of gasoline and diesel per day, according to the Financial Times. Still, as impressive as that sounds, we’re nowhere near that mark just yet. Despite EVs having their best sales year on record in 2017, the vehicles themselves still only accounted for around 1 percent of the total market.

Automakers and enthusiastic governments hope to increase that figure to 30 percent by 2030. Some nations aim to phase out exclusively gas-powered vehicles entirely by 2040. While it remains to be seen if these ambitious goals are feasible, even approaching them will have unintended consequences.

Losing out on fuel taxes will be enough of a blow to governments that most will need to pursue other means of financing infrastructure projects in the coming years. “The major increase in the estimate of foregone revenues for the 2030 timeframe suggest that, for governments to retain sufficient income to invest in and maintain infrastructure, as well as to cover externalities from road transport, alternative taxation systems will be needed,” the the International Energy Agency said, suggesting road tolls and congestion charges as possible alternatives.

Other estimates are less forgiving. The center-right think tank Policy Exchange claims the United Kingdom alone could lose as much as $225 billion in fuel taxes between now and 2030.

There are all kinds of hidden dangers and benefits linked to EV adoption. Replacing oil-based propulsion with energy that could potentially be sourced from renewable resources is good for the environment. But some suggest widespread implementation of electric cars would do a number on most countries’ power grids, and battery construction has a higher environmental cost than one might think. The world is also butting up against a potential shortage on the materials necessary to facilitate expanded battery production, and EVs don’t address the simple fact that there are more miles being driven than ever before.

Even something as seemingly innocuous as online shopping has had a meaningful impact on the environment, as a multitude of delivery vehicles have been added to roadways to cope with deliveries. Meanwhile, people still undertake their daily commutes while ever greater numbers of cars, commercial trucks, ships, and airplanes roll out of factories. Electric or not, it all has to be powered somehow. Most new power plants don’t use renewable energy.

Those are disparate issues, though. Simply finding the money necessary to maintain roads will be a big enough challenge in itself — even if electric vehicles don’t end up being nearly as popular as predicted.

[Image: Electrify America]