8 - [Economics] Incentives & Electric Cars

Incentives, Impact, and Implications of the Electric Vehicle Revolution

Electric vehicles are increasingly becoming a better investment. Electric vehicles have existed since 1827. However, the innovation of cheap assembly cars in the early 1900s reduced the demand for electric cars. In the 1970s, innovations in semiconductors made it possible to control the power level of batteries with enough capacity to be used for cars. Fast-forward 30 years, and electric cars were reintroduced to consumers. Fast forward another 20 years to today, and there is currently a push to incentivize consumers to buy electric vehicles. This is what this reflection paper will discuss.

James McCarten, a reporter for The Canadian Press, says that "The tax-credit scheme that President Joe Biden is proposing [aims] to encourage U.S. consumers to buy more electric vehicles". In economics, we've learned that fiscal policies are sometimes created to encourage certain outcomes. This tax credit fiscal policy, proposed by the president, aims to encourage people to buy electric cars by effectively reducing the costs to buy one. In conclusion, this tax credit is an incentive to encourage people to buy more electric cars.

Another thing the tax credits aim to incentivize is the use of union labor. McCarten also says that "If they are [built with union labor], though, the tax incentives of up to US$12,500 on cars and trucks assembled stateside with union labor [would apply]". One of the stipulations of the tax credit is that to qualify, the cars must be built using union labor. This tax credit would also encourage businesses to use union labor in the United States. In conclusion, in addition to encouraging consumers to buy electric cars, this tax credit also incentivizes firms to use union labor.

Finally, these tax incentives would have an impact on other economies. McCarten says that "It would amount to what the federal government in Ottawa calls a 34 percent tariff on vehicles built in Canada". While not entirely clear, it appears that because Canada also produces cars, the demand for Canadian cars would decrease since cars produced in the United States would be significantly cheaper as a result of this tax credit. It is interesting to note that this policy would affect another country's economy as well.

In conclusion, electric vehicles are becoming an increasingly better investment. Electric vehicles have existed since 1827, but the innovation of cheap assembly cars in the early 1900s reduced the demand for electric cars. In the 1970s, innovations in semiconductors made it possible to control the power level of batteries with enough capacity to be used for cars. Thirty years later, electric cars were reintroduced to consumers, and now, 20 years after that, there is a push to incentivize consumers to buy electric vehicles. This reflection paper discussed President Biden's effort to encourage consumers to buy electric vehicles through tax credits. It also examined another goal of the tax credit: to encourage businesses to use union labor. Finally, it's important to note that these tax credits will affect other economies, such as Canada's.