When the federal government introduced the electric vehicle tax credit in 2008, policymakers designed it as an infant industry credit. The subsidy would phase out as each auto manufacturer produced more vehicles. President Biden’s Inflation Reduction Act (IRA) massively extended the $7,500 credit. A new Institute for Energy Research report suggests that repealing IRA-specific EV subsidies could save taxpayers $300 billion over the next decade.

While the IRA was initially touted as allocating $370 billion in energy-related subsidies, that figure has ballooned. The Cato Institute estimates that IRA energy subsidies will now cost between $936 billion and $1.97 trillion in the coming decade, reaching between $2.04 trillion and $4.67 trillion by 2050. 

“A significant amount of this explosion in spending comes from runaway tax credits for electric vehicles, $300 billion alone, which overwhelmingly benefits higher-income households at the expense of working-class Americans,” notes Thomas Pyle, president of the Institute for Energy Research (IER). 

IER’s new analysis flagged a key reason why these subsidies are set to balloon: EV demand is growing. In 2024, 1.7 million new light-duty (think typical household vehicles) EVs were sold. That figure is expected to reach 10 million by 2032. Annual used EV sales are expected to grow from 390,000 in 2024 to 3 million in 2032. New sales of heavier vehicles (ranging from cargo vans to semi trucks) could grow from 2,000 sold in 2024 to 36 sold in 2032. Without increasing the available tax credit, exploding demand will cost taxpayers significantly more in the coming years than it does today. 

>>>READ: The Future of Clean Energy Isn’t Government-Driven—It’s Consumer-Driven

EVs can be an important technology that improves consumer well-being and the environment. However, consumers and businesses should be free to go electric without subsidies or regulations nudging them from doing so.  Critically, they have their own set of environmental challenges. The batteries present a particular problem, as they require high amounts of critical minerals that must be mined and can be environmentally hazardous if sent to landfills at the end of the battery’s life. And, while EVs do produce no tailpipe emissions, charging off of electricity produced by higher-carbon power sources may negate some of the benefit of driving a low-emissions car in the first place. 

Subsidizing EVs will not solve America’s environmental woes, but the government could take other steps to help reduce carbon emissions. Opening access to domestic mining and processing can help increase the supply of the materials necessary for batteries, which could help bring down the sticker cost of EVs. 

Furthermore, the federal government could remove the red tape that prevents the growth of clean energy, like nuclear or geothermal. The transportation and energy sectors each produce significant portions of America’s carbon emissions. Making it easier to decarbonize energy production could improve the environmental impact of EVs, without being subsidized by taxpayers. 

Consumers who want to purchase an EV are free to do so. Government policy shouldn’t influence their decision, and the average American taxpayer shouldn’t be on the hook for any part of their purchase. In a free and open market, the government should not interfere with consumer demand. Without subsidies, it is unlikely that demand for EVs will disappear anytime soon. Eliminating the subsidies will force EV producers to make cost-competitive vehicles without relying on the government. 

 If the Trump administration wants to save taxpayer dollars, working with Republicans in Congress to roll back these subsidies, or even revert them to a pre-IRA structure, should be a priority. 

The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.