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February 14, 2006

Hybrid Hype: Incentives Gone Wild

HybridHybrid cars are good for us, right? So policymakers should provide incentives--things like tax breaks, access to HOV lanes, and free parking for hybrid drivers.

Well, not so fast, says a great article in today's Washington Post. [Free registration req'd.] There's growing reason to believe that those incentives for hybrids will make things worse--actually generating more gasoline use, not less. That's because many of the incentives confuse the means for the end.

Reducing fuel use (and attendant ghg emissions, air pollution, etc.) is the goal; getting drivers into hybrids is simply one instrument in pursuit of that goal.

But one of the more popular incentives to boost fuel efficiency has been to encourage hybrid ownership by offering hybrid drivers access to HOV lanes, even when the drivers are alone. And as the article rightly points out:

An incentive -- whether it's access to a carpool lane or cut-rate financing -- still aims to put another car on the road, and that undermines efforts to encourage carpooling.

Giving over HOV lanes to hybrids is probably counterproductive. In Virginia, where allowing hybrids in HOV lanes was pioneered, officials are worried that solo drivers in hybrids are clogging the high-capacity lanes and thereby discouraging carpools (because carpooling is no longer any faster than driving alone). In fact, 25 percent of all Virginia HOV lane users are hybrid drivers. And despite their hype, hybrids are not so fuel efficient that they can offset the fuel efficiency of an ordinary car with two or three riders. So the fuel efficiency of Virginia hybrids may become illusory as the vehicle fleet actually consumes more gas because drivers give up carpooling.

Same goes for other popular incentives: tax breaks and free or reduced-price parking. These incentives encourage people to drive by making it cheaper.

And if some incentives are wrong-headed, it's because they seem to miss the reason why hybrids are good in the first place. If we want to reduce fuel use, it's hard to see why hybrids deserve special tax breaks that are not afforded to buyers of other fuel efficient gas-powered cars (some of which are actually more efficient than certain hybrids). What's so special about hybrids?

But wait! Incentives catalyze the market. That's the basic argument for hybrid-centric policies. The idea is that by encouraging people to get into hybrids now, we'll reduce fossil fuel consumption down the road, when hybrid cars become cost-competitive.

There's some merit to this line of reasoning, but it's starting to seem outdated. The market for hybrids is scorching hot and growing--it probably doesn't need to an additional catalyst. Hybrid sales in 2005 were 10 times higher than in 2001 (and 20 times higher than 2000) and the growth looks set to continue. Incentives are probably a contributing factor, but high fuel prices are probably a much bigger reason.


What's more, the incentives may actually be counter-productive to the real goal. As we've seen, HOV lane access encourages solo driving; free parking and tax breaks make driving cheaper. (Plus, there may be weird counter-intuitive problems that arise from buying certain kinds of hybrids.)

The bottom line is that there's nothing especially laudatory about hybrid cars in and of themselves. The only thing special about them is that--generally speaking--they burn less gas per mile than internal combustion cars. But as the hybrid market diversifies into SUV and Lexus flavors, there's increasingly less reason to lionize hybrids per se. What really matters is fuel efficiency--plain old unsexy fuel efficiency, whether the car runs on gas, electricity, LNG, switch grass, or tiny elves.

I'm not saying that all incentives should disappear, but the incentives should be for fuel efficiency, plain and simple. It doesn't do much good to encourage buying a hybrid Ford Escape when a vanilla Civic is far more eco-credible. Efficient hybrids will still benefit, as will other fuel-sipping cars--just the kind we want on the road.

And there's an asterisk here too: the incentives shouldn't conflict with other instruments to reduce fuel use. Allowing solo drivers into carpool lanes makes about as much sense as slapping a surcharge on bus fare or bicycles to fund rebates for hybrids.

So what kind of incentives would work to increase the fleet's fuel efficiency? Feebates. Gas (or carbon) taxes. Pay-As-You-Drive insurance. Blah, blah, blah. Plus, lots of other stuff that would help make driving a choice, not a necessity.

Posted by Eric de Place | Permalink


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One could also rationalize that having hybrid vehicles in HOV lanes frees up space in the non-HOV lanes, which then allows traffic to flow more smoothly there.

Now that hybrids are becoming "so passe," perhaps HOV lanes need to be true to their original name, so that HOV doesn't become an acronym for a lane which is Highly Occupied by Vehicles. . .

Posted by: Michelle Parker | Feb 14, 2006 8:47:38 PM

Dude, what's up with the anti-hybrid jihad on Cascadia Scorecard? I know the HOV incentives are dumb, but what's with all the negative vibes about hybrids lately? They are generally very cool and I'm looking forward to when they include OEM-fitted plug-in support. Then maybe I'll think about getting one. Aren't there more important stories? You guys seem obsessed.

Please stop referring to the nonsense the Times printed about hybrids being used to game CAFE standards. That's just crazy talk-- the big SUVs are slugs on the lot these days and there's no way Ford is pursuing that as a serious strategy. They need to compete with Toyota or they're done. Toyota obviously has no CAFE issues and Ford is worried about getting on the hockey stick growth curve you cited, not producing more hulks that won't move.

Posted by: Jason | Feb 14, 2006 11:46:07 PM

Yikes, I hope it's not a "jihad." For the record, I think hybrids are very cool (and so do the rest of the writers here). Hybrid-electric engines are a very useful technology, but I like them just insofar as they consume less fuel. I worry a bit that there's a weird fixation on hybrids--as if it's a technology that can solve our energy depedency. What really matters, of course, is just reducing our fuel use. So I tend to think carpooling is cooler than driving a Prius. And I think walking is even cooler.

Posted by: Eric de Place | Feb 15, 2006 10:12:57 AM

I hardly see a "anti-hybrid jihad" represented in the Scorecard blog lately. Nobody is saying that Hybrids aren't cool – they are. (I personally can’t wait for a plug-in Subaru Forester or Legacy) However, they are simply one piece of the puzzle. A hybrid, even a nifty plug-in hybrid getting over 100mpg, still consumes gasoline, requires gobs of energy and resources to manufacture, and takes up space on a road or in a parking lot. Showing how hybrids can be used to game CAFE standards simply reinforces that hybrids are NOT a panacea.

Posted by: Matt Leber | Feb 15, 2006 10:16:16 AM

What's so special about hybrids? Well, it makes a lot of sense with your driving. plus the hybrid car is that the gasoline engine can be much smaller than the one in a conventional car. even more efficient... http://toyotapartsfull.blogeasy.com/article.view.run?articleID=206622

Posted by: Mark Clarkson | Feb 16, 2006 6:34:43 PM