The social cost of the internal combustion engine

ITA

This week newspapers were full of commentary to a table created by ACEA (the European association of automobile manufacturers) reminding the world of how the Automotive sectors represents for Governments the source of a staggering €440B in fiscal revenues.

a not-so-subtle prod to “Remember who pays the bills!” and the tone of the articles I saw (perhaps influenced by the language in the accompanying press release) was unequivocally suggesting a veiled critique to the European Green Deal: a too hasty transition to Electric Mobility poses a significant fiscal threat, a position echoed recently by big industry honchos like the CEOs of Toyota and Bosch.

The table however deserves a few words of comment (even though I cannot hope for a comparable echo):

  1. Some of the lines in the table actually will not decrease at all and perhaps briefly marginally increase: for example VAT at the moment is on the rise, given the 30-40% price premium between an EV and its ICE equivalent; registration taxes moreover don’t and won’t change at all.
  2. Maintenance-derived fiscal revenues will decrease, simply because an EV requires…. much less maintenance! If this line of reasoning was sound, we should encourage the commercialization of products that break more often to avoid “starving” the repair shops. Are we ready to go back to cathode-ray tube televisions and filament lightbulbs?
  3. Ownership tax exemption is not universal and obviously a temporary measure which will disappear as EVs become more ubiquitous.
  4. The biggest share of decreases derives from lower excises and VAT from the sale of fuels; but the values that appear on the table prompt a couple of criticisms:
    • let me pick the example of Italy, credited for almost €38B fuel taxes decrease. The analitical calculations (ITA only, sorry) show that the total loss of excise taxes and VAT for the Italian Government on the 39 billion litres of automotive fuels sold annually is €25B, minus the €3B of similar taxes weighing on the additional electrical energy which would be consumed. €22B is decidedly NOT €38B.
    • missing (and I don’t think it’s by chance) from the table are the €19B of subsidies (ITA only) received by the Oil&Gas industry, many of which would logically disappear with a sharp drop in fossil fuel sales.

One more thing…

But there is another point, conveniently ignored by ACEA’s communicators, but which some journalist with a straight back could easily raise, and this is that

Pollution is expensive!

The European Environmental Agency publishes every year a report on air quality (click here for the 2020 edition). On page 110 we find a terrifying table tallying the number of premature deaths due to pollution across the (still) 28 countries making up the EU, totalling over half a million.

Obviously internal-combustion engines are not the sole culprits: depending on the study (and depending which GHG you’re looking at) the responsibility quotas ranges between 30% and 50%; personally, when I look at the effects of the pandemic-induced lockdown (page 20 on the same report) I tend to lean on the higher end of the bracket, at least for Italy:

But let’s use the lower figure: the scary costs of a third of half a million or 150,000 deaths is not listed on this or any other table, but come straight out of the pockets of the same people paying the salaries of the EU and of all the ACEA members, i.e. European citizens.

So while it is true that the transition to electromobility will dramatically impact the whole Automotive segment, it’s also true this is old news (ITA only) as it’s old news the fact that it will take another 20 to 30 years to complete: it would be more far-sighted if, instead of issuing thinly-veiled threats, industry players used this not-so-short time to embrace the change and drive it, instead of being steamrolled while vainly attempting to slow it down.


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