Buy Your Own Damn E-Bike

If you offer people free money and they take it, is that evidence of a policy's success? For some electric bicycle advocates, the answer is yes.

As e-bikes sales have grown rapidly in recent years, so too have programs at the state and local level to subsidize their purchase. Prices range from a few hundred to a few thousand dollars, as do the subsidies on offer.

Writing in CityLab, David Zipper reports on a number of local and state programs that provide tax rebates and vouchers worth anywhere from $400 to $2,000 to purchasers of new e-bikes. Earlier this year, lawmakers in D.C. re-introduced legislation to create a $1,500 federal e-bike tax credit as well.

Supporters argue these subsidies are justified by e-bikes' potential to take gas-powered cars off the road, thereby cutting emissions, benefiting the environment, and improving road safety.

Many of these state and local subsidy programs are quickly oversubscribed, with the number of applicants vastly outstripping the number of vouchers. For Zipper, that's evidence that these policies are driving adoption and should be expanded.

"Limits on the availability of e-bike incentives is throttling their enormous upside," he says. "The growing army of e-bike-enthused advocates and public officials should ask themselves: What incentive structure can attract the largest number of new riders? One lesson is becoming clear: Get vouchers into as many hands as possible."

I'm not sure that lesson is so clear.

For starters, it's not obvious that voucher programs are driving e-bike purchases. There's good reason to think they're subsidizing purchases that would have happened anyway.

Zipper notes that in Denver, when the city cut the value of e-bike vouchers in order to expand the number of vouchers it could offer, "demand seemed unaffected; the city still exhausted its January batch of vouchers within 20 minutes."

In other words, demand wasn't very sensitive to the value of the subsidy. If cutting it isn't cooling purchases, perhaps zeroing out the voucher entirely would have a similarly muted effect.

A lot of these local and state subsidies aren't means-tested. Many vouchers and rebates are surely ending up in the hands of people who would easily afford an e-bike on their own. In those circumstances, there's a good chance the subsidy is merely going toward purchasing a nicer, more expensive model.

That's good for the recipient but doesn't provide any benefit to the wider taxpaying public that's picking up the tab.

One would expect there to be some marginal consumers who otherwise wouldn't have purchased an e-bike without a voucher. But there's a reason these consumers are "marginal": They place a lower value on owning an e-bike in the first place. They're likely to use it less often, undercutting whatever emissions reductions the e-bike is supposed to provide.

The social justification for e-bike subsidies is that these vehicles are replacements for cars, or at least for some car trips. But if e-bikes are in fact a real substitute for traditional gas-powered cars, then there's no need to subsidize them because they're already much cheaper than the competition.

Even an older car is going to cost you more than a spanking new e-bike. They can already compete on price.

That should be a huge selling point for e-bike boosters: Here's a product that provides a range and speed comparable to a car's when taking trips around the neighborhood or within an urban area, it's better for the environment, and the industry doesn't require subsidies.

Users of all forms of transportation, from cars to mass transit to air travel and Amtrak, have long received some level of subsidy from the taxpayer. Both road and public transit spending has become more heavily subsidized in recent years as well.

This is a bad development, for reasons of both efficiency and fairness. It's also not how things have to be. The U.S. has a robust history of privately run and financed infrastructure.

E-bikes have the potential to add to that proud legacy. Instead, their biggest proponents want to make them another part of the subsidized transportation blob.