U.S. EV tax credit ended early, removing $7,500 incentive for electric car buyers.
Internal combustion engine vehicles still benefit from over $20,000 in lifetime subsidies.
IMF estimates U.S. fossil fuel subsidies total $760 billion annually, mainly supporting oil use.
Canadians are still eligible for a $5,000 federal incentive for EVs.
The United States federal $7,500 electric vehicle (EV) tax credit expired on September 30, ending a key incentive program for clean transportation technologies. The credit, which was originally scheduled to remain in place for several more years, was withdrawn following a legislative decision backed by Republican lawmakers.
While the phase-out of EV incentives affects both consumers and manufacturers, gasoline-powered vehicles continue to benefit from long-standing government support. According to the International Monetary Fund (IMF), fossil fuel subsidies in the U.S. total an estimated $760 billion annually. Approximately half of these subsidies go to oil, much of which is used for transportation.
These subsidies take both direct and indirect forms. Direct subsidies include tax breaks and financial support for fossil fuel producers, while indirect or “implicit” subsidies refer to unpriced externalities, such as the public health costs and environmental impacts of pollution. A 2015 study estimated these unaccounted costs at roughly $3.80 per gallon of gasoline.
The situation is similar in Canada. Petroleum and fossil‐fuel companies receive substantial federal support through tax measures, financing, infrastructure, or regulatory relief. In 2023, the federal government’s support to fossil fuel & petrochemical companies was estimated at at least CAD 18.55 billion. In 2024, that figure was estimated at CAD 29.6 billion, including direct subsidies and financing.
Breaking down these amounts is not possible with the available information found online. However, of the CAD 29.6 billion in support in 2024, the largest single portion was CAD 21 billion in financing tied to the Trans Mountain pipeline.
Over the lifetime of an average internal combustion engine (ICE) vehicle, which is assumed to travel between 225,000 and 350,000 kilometres at a fuel efficiency of 9.8 L/100 km (24 mpg), these implicit subsidies can amount to more than $20,000 per vehicle in the U.S. Even more fuel-efficient models could carry a lifetime subsidy nearing $19,000.
By comparison, the now-expired EV tax credit offered $7,500 per vehicle at the federal level, with some states providing additional rebates or incentives. In 2024, an estimated 1.3 million EVs were sold in the U.S., representing a market share just under 10%. This equates to approximately $10 billion in total federal EV subsidies for the year, substantially less than the annual support directed toward fossil fuel consumption.
Economists and international agencies have long advocated for internalizing pollution costs through mechanisms such as carbon pricing or pollution fees. The IMF estimates that if efficient pricing policies were adopted globally, they could produce net economic benefits equivalent to 3.6% of global GDP and prevent 1.6 million premature deaths per year.
In Canada, of the near CAD 9 billion leftover, all of it goes towards public financing (e.g. via Export Development Canada) and various subsidy programs (tax breaks, grants, etc.) that benefit oil & gas broadly (including development, carbon capture, clean fuel production).
Despite these findings, implementation remains politically contentious. To no one’s surprise, Internal communications from the U.S. Department of Energy recently indicated that staff have been instructed not to publicly discuss fossil fuel subsidies, raising concerns…
Partial Source: electrek
