Wednesday, May 17, 2006

Hybrid Cars: The Indirect Solution to Oil Prices?

The Quaker Economist recently posted an article arguing that the benefit of hybrid cars is not in the short-term fuel economy they provide, but as a technological springboard to developing small enough, efficient enough battery car systems that will permit plug-in cars in the medium-term future.

I had previously argued that alternative fuels per se would not be the answer to the current energy crisis. That is, we must be clear if a given energy system is truly a novel energy source, or just a novel distribution system. For instance, hydrogen is really a novel distribution system, since there is no obviously most efficient means of production, so the administration's prior promises to extensively research hydrogen was not probably the best policy strategy. A fuel like biodiesel however has already a distribution system to plug into, and constitutes a bridge technology from fossil fuels to renewable energy sources.

The possibility of plug-in battery cars evolving from hybrid cars fits this analysis nicely as well. While battery cars would not themselves solve the demand for energy, by allowing oil-run plants to compete against nuclear, hydro, and other sources, overall energy costs would be expected to decline. As newer, cheaper means of electricity production are developed, plants with the innovations can be simply added to the existing power grid, without significant changes to the vehicles themselves. And this without the massive infrastructure investment required by a hydrogen fuel system.

That being said, I do not believe that the government should significantly subsidize hybrid car consumption. It is absurd for the federal government to support buying a hybrid SUV that gets worse milage than a non-hybrid sedan. Any federal incentives should be based on milage alone, for the government's goal is properly a more short-term effect of reducing national oil consumption. Hybrids have enough traction in the market that auto companies should be allowed to compete for smaller and more efficient designs with minimal government market distortion.

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