September 20, 2012 / 10:13 PM / in 5 years

U.S. policies promoting electric cars to cost $7.5 billion by 2019: CBO

(Reuters) - U.S. federal policies to promote electric vehicles will cost $7.5 billion through 2019 and have “little to no impact” on overall national gasoline consumption over the next several years, the Congressional Budget Office said in a report issued on Thursday.

Consumer tax credits for buying electric vehicles, which can run as high as $7,500 per vehicle, will account for about 25 percent of the $7.5 billion cost, the CBO said.

In the study, the CBO looked at the tax credits and other federal policies for plug-in hybrid vehicles like the General Motors Co (GM.N) Chevrolet Volt and fully battery-electric vehicles like the Nissan Motor Co (7201.T) Leaf.

While drivers of these electric vehicles use less gasoline and emit less greenhouse gas such as carbon dioxide, the cost to the government can be high, the CBO found.

For each gallon of gasoline not burned as a result of a consumer driving an electric vehicle, it will cost the federal government from $3 to $7 per gallon. The CBO said it compared similar-sized electric and conventional gasoline-engine vehicles with average fuel economy ratings.

Once stricter auto industry fuel economy ratings to be enacted in coming years are considered, there is also a possible indirect impact that could diminish air quality and fuel economy gains made by having electric vehicles on the road, the CBO said.

Sales of plug-in hybrid electric vehicles and vehicles that have no gasoline engines at all are so far low.

In 2012, through August, 13,497 Chevrolet Volt have been sold, and Nissan has sold only 4,228 Leaf.

The federal tax credits apply to the first 200,000 electric vehicles sold by each manufacturer.

“Increased sales of electric vehicles allow automakers to sell more low-fuel-economy vehicles and still comply with the federal standards that govern the average fuel economy of the vehicles they sell (known as CAFE standards),” the CBO said.

CAFE is the corporate average fuel economy, the theoretical standard used to determine if each auto manufacturer is meeting fuel efficiency requirements.

By 2016, each auto manufacturer is to meet a CAFE standard of 35.5 miles per gallon, up from the current average of 29.7 mpg. By 2025, the CAFE standard is to be 54.5 mpg.

    However, that is not the “real world” fuel economy ratings as measured by the U.S. Environmental Protection Agency.

    For instance, the 54.5 mpg CAFE standard relates to a “real world” fuel economy rating of 39 mpg, the EPA says.

    This “real world” EPA rating is what is shown on the window sticker for new cars at U.S. dealerships.

    The costs of electric vehicles -- fully electric and plug-in hybrid electric -- are much higher than similar-sized gasoline vehicles, and the federal tax credit of $7,500 per vehicle is not enough to bridge the gap, the CBO said.

    The CBO said an average plug-in hybrid vehicle with a battery capacity of 16 kilowatt-hours is eligible for the maximum tax credit of $7,500.

    “However, that vehicle would require a tax credit of more than $12,000 to have roughly the same lifetime costs as a comparable conventional or traditional hybrid vehicle,” the CBO said.

    And, the bigger the battery the greater the cost disadvantage for buyers of plug-in vehicles and conventional vehicles, the CBO said.

    Additional reporting by Deepa Seetharaman in Detroit; Editing by Bob Burgdorfer

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