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A new report from the American Energy Institute (AEI) sheds light on the rising costs of gas-powered vehicles and utility bills, revealing that government subsidies for electric vehicles (EVs) and stringent emission mandates are distorting the market. As automakers are forced to comply with Corporate Average Fuel Economy (CAFE) standards and greenhouse gas regulations, production costs for traditional gas-powered cars are climbing—with the burden ultimately falling on consumers.

The report highlights how a complex credit system, meant to incentivize EV production, has unintentionally increased costs for traditional vehicle buyers. In addition, federal and state subsidies for EV charging infrastructure are leading to higher utility rates, as power companies pass these expenses onto consumers.

How EV Mandates Are Driving Up Gas Car Prices

Under federal and state clean energy regulations, automakers must produce a certain number of EVs to comply with emissions targets. If they fail to meet these quotas, they must purchase regulatory credits from other manufacturers who exceed their EV production targets. This credit system, while designed to encourage cleaner vehicles, is causing ripple effects across the auto industry:

• Higher Production Costs for Gas Cars: As automakers divert resources to EV production, manufacturing gas-powered vehicles becomes more expensive, resulting in higher prices for consumers.
• Regulatory Credit Purchases: Automakers that do not meet EV quotas must buy emission credits, creating additional expenses that are passed down to gas car buyers.
• Supply Chain Shifts: Increased demand for battery materials like lithium, nickel, and cobalt has strained supply chains, further raising costs for all vehicle types.

According to the AEI report, these factors are contributing to an overall increase in gas vehicle prices, with some models seeing price hikes of 10-20% in recent years.

The Hidden Costs of EV Charging Infrastructure on Utility Bills

The financial impact of EV policies isn't just affecting car buyers—it's also hitting homeowners and businesses through higher utility costs. The AEI report found that as the government invests in EV charging networks, power companies use these funds to justify higher base rates.

• State-Level Incentives: 40 states offer rebates for in-home Level 2 chargers, transferring costs to electricity ratepayers.
• Federal Subsidies: The Biden administration’s $7.5 billion investment in EV charging infrastructure has boosted utility profits but also led to increased rates.
• Residential Cost Burden: With over 1.1 million EVs sold in 2023, tax credits for home chargers alone totaled more than $827 million, according to AEI estimates.

The report highlights an example: If a homeowner receives a $500 rebate for an EV charger, all 10 households on the street absorb the cost, amounting to roughly $50 per household in hidden fees through utility rate hikes.

Experts Warn of Market Distortions and Inequities

Jason Isaac, AEI CEO and co-author of the report, argues that these policies are not about consumer choice but rather government interference that unfairly redistributes costs:

"By distorting the market with regulatory credits, subsidies, and behind-the-scenes rulemaking, federal agencies are shifting costs from affluent EV buyers to working-class Americans—while straining a grid that’s already under pressure."

According to a study by the National Bureau of Economic Research, a majority of EV buyers come from high-income households that would have purchased EVs even without subsidies. Meanwhile, the AEI report estimates that each EV benefits from $94,000 to $153,000 in hidden subsidies over a 10-year period, factoring in:

• Automaker costs to meet mandates
• Lost revenue from EV production requirements
• Government-funded infrastructure spending

Professor Hunt Allcott, a senior fellow at the Stanford Institute for Economic Policy Research, acknowledges the climate benefits of EV incentives but warns of economic downsides:

"While the Inflation Reduction Act’s electric vehicle tax credits have slowed climate change and shifted production to U.S. manufacturing firms, they also impose high costs on U.S. taxpayers."

Calls for Policy Changes and Market Rebalancing

With rising energy costs, inflation, and supply chain constraints, critics are calling for an end to costly EV mandates. AEI’s Jason Isaac believes rolling back these policies would:

• Lower gas vehicle prices by allowing automakers to allocate resources more efficiently.
• Reduce utility costs by eliminating ratepayer-funded EV incentives.
• Stabilize the energy grid, which is already strained by the growing demand for EV charging.

"Eliminating these costly EV mandates is exactly the kind of action needed under President Trump’s energy emergency. It would jump-start a resurgence in the American auto industry, lower the price of new vehicles, and ease pressure on our electric grid," said Isaac.

Despite these concerns, EV advocates argue that subsidies are necessary to accelerate the transition to cleaner energy and meet climate goals. However, several EV advocacy groups, including Drive Change. Drive Electric, Plug In America, and the Sierra Club, declined to comment on the AEI report.

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