After Tesla’s early repayment of their DoE loan recently, CEO Elon Musk posted the above tweet arguing against government subsidies for low-carbon or carbon-free technologies. Michael Shellenberger and Ted Nordhaus argue that he shouldn’t be so quick to disparage a program that benefited Tesla so much:
The argument for a carbon tax is that it corrects distortions in the market due to the externalized costs of emitting carbon, which in turn would allow companies that produce zero-emission vehicles, like Tesla, to compete on a level playing field without further public assistance. This argument allows Musk to elide just how dependent his companies—both those that offer low carbon benefits and those, like SpaceX, that don’t—have been on direct public support for the development and commercialization of the technologies upon which they were built.
While a carbon tax might have provided some benefit to Tesla or Musk’s residential solar company, Solar City, there is no imaginable carbon tax that would begin to approximate the value of the $7,500 tax credit that the federal government offers to buyers of electric cars. Or the $2.4 billion dollars that the federal government invested in battery manufacturing through the 2009 stimulus. Or the half-billion dollar loan that financed the factory in which Tesla manufactures the Model S. Or the 20 years of funding from the American and Japanese governments that have resulted in dramatic advances in the lithium batteries that power the Model S.
Christopher Koopman describes how the subsidies Shellenberger and Nordhaus reference were instrumental in Tesla’s success in recent years:
These subsidies have become so central to Tesla’s business model that it advertises them to customers as a way to cover the cost of a down payment. And for states that do not yet offer subsidies for electric cars? Tesla’s website provides links to help consumers encourage state and local legislators to subsidize the purchase of such vehicles. The company’s site even goes so far as to recommend consulting a tax professional.
Even with the support of federal and state politicians, Tesla would still be reporting losses were it not for its ability to profit off of other auto manufacturers in California. In the first quarter of 2013, Tesla reported its first-ever quarterly profit by using special credits from California’s Air Resources Board, which rewards auto manufacturers for the production of “zero-emission” vehicles. So far this year, Tesla was able to turn what would have been a $57 million loss into an $11 million gain by selling $68 million worth of these credits to other auto manufacturers in California.
Recent Dish on Tesla’s early loan repayment here.