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In this week’s Grumpy Economist Weekly Rant, Hoover Institution senior fellow John Cochrane explains why electric vehicle subsidies don’t help the climate—and are very costly to the economy. He breaks down the hidden carbon costs of EV production and argues that government subsidies simply shift emissions rather than reduce them. Cochrane offers a clear-eyed alternative: focus on nuclear power, research, and innovation that make low-carbon energy truly competitive.
Transcript
John Cochrane: Hi. I’m John Cochrane, senior fellow here at the Hoover Institution. Welcome to The Grumpy Economist Weekly Rant.
Today, I’m going to rant about electric vehicles and climate policy in general.
Our government has been for the last ten years or so, subsidizing electric vehicles: windmills, solar and other kinds of so-called green energy.
In Palo Alto, it’s really popular to think the way you save the climate is to buy a Cybertruck to drive down to your private jet as you flit off to Davos. Okay, that one’s ridiculous, but the argument for the others isn’t so ridiculous.
The sad fact is, subsidizing electric vehicles doesn’t do a thing to help the climate and at huge cost.
Why not?
Well, of course, there’s the fact lots of people have mentioned: it takes a lot of carbon to make an electric vehicle; somehow you get to get the power for the electric vehicle, even if that comes from windmills and solar cells —it takes a lot of carbon to make those; a lot of carbon to make the transmission lines; a lot of carbon to recycle the electric vehicle once it’s done, but that’s not my point today.
The big problem is: suppose I pay a lot of taxpayer money for you to have an electric car, that just frees up gas for someone else to burn. The total amount of gas is what it is: if you don’t burn it, somebody else does — supply and demand.
And it doesn’t even matter if it’s not this year. Reducing emissions for a year doesn’t do much good either. The climate accumulates carbon over 100 years or more. So what matters is the total amount of fossil fuels burned around the globe over the next 100 years. Even if we just delay releasing that gas, that carbon, burning that gas for a year or two, that doesn’t do anything for the climate in 100 or 200 years, which is, after all, the point.
What should we do? There’s lots of things that we should do. Nuclear works, R&D to provide cheap alternative low carbon energy that will work. It will only take over here, in China, in India, in Africa, when it’s cheaper than fossil fuels and the fossil fuels can be left in the ground for 100 years.
But that’s not really the point today. How do we fix climate? There are ways. The one thing we can make sure to do is don’t waste trillions of dollars on subsidies that don’t do anything to fix the climate.
Thanks for listening to my weekly rant and don’t forget to hit the subscribe button.
John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow of the Hoover Institution at Stanford University. An economist specializing in financial economics and macroeconomics, he is the author of The Fiscal Theory of the Price Level. He also authors a popular Substack called The Grumpy Economist.