By Ari Peskoe | originally posted at Americans for Energy Leadership

The electric car is back.  With an assist from government, Nissan delivered the first models of its new electric vehicle (EV) to customersearlier this month, and thanks to a $100 million Federal program hundreds more will be on the road soon.  Nissan is the first manufacturer out of the gate, but others are expected to offer EVs for sale in the next couple of years.  While governments at the Federal, state, and local levels have been heavily involved in the roll-out of EVs, the new Congress will decide whether EVs will continue to receive government support.

The primary rationale for continued government support is that EVs can help wean the US off of its addiction to oil.  Each day, the US burns 380 million gallons of gasoline, and more than 60 percent of oil consumed in the US is imported. But with 255 million oil guzzling registered vehicles in the US today, even the most optimistic forecasts predict that it will take decades before EVs meaningfully contribute to a reduction in oil consumption.

EVs have also been touted as a means for creating jobs and stimulating the struggling car industry.  To that end, the February 2009 Recovery Act included $2 billion in grants for battery and component manufacturers, and the DOE’s Advanced Technology Vehicles Manufacturing loan program, passed by Congress during the Bush Administration, has lent $2.4 billion to support the development of EV factories.  Perhaps no state has leveraged Federal money as successfully as Michigan, which is looking to revitalize its auto industry. By offering packages of tax credits in combination with Federal incentives, the state has attracted eighteen companies developing advanced batteries, an effort that the Governor predicts will generate 63,000 jobs.State and local governments have been active too in developing plans to deploy public chargers, buying EVs for their fleets, and clearing regulatory obstacles, such as by shortening the permitting process for charger installations.  Much of the funding has come from Washington, including the $100 million program that will will buy up to 1,000 Nissans and deploy nearly 15,000 EV chargers in select markets.  The Federal government is also handing out tax credits worth up to $9,500 to the first purchasers of EVs and home chargers.

But with most of the Federal funding either expiring or running out, the incoming Congress will have important decisions to make about the near-term progress of EVs.  The recent tax bill signed into law by President Obama extends and reduces the tax credit for EV chargers through 2011, and while the $7,500 tax credit for vehicle purchasers will also run through 2011, it is set to expire once certain sales thresholds have been reached.  Grants to manufacturers were mostly part of the Recovery Act, a one-time funding boost, and the Department of Energy is still accepting applications for the loan program created in 2007.

Ultimately, there is only so much the Federal government can do for the future of EVs.  The pace and scale of EV adoption will be largely influenced by the price of oil and the rate of technological innovation.  Nonetheless, particularly in areas that the market is likely to overlook, there are opportunities for government investment.  For example, Congress was right to continue to fund ARPA-E, an office originally funded by the Recovery Act to support high-risk, high-reward energy R&D and whose funding was recently renewed.  Public EV charging, which is unlikely to be profitable without a much larger volume of EVs on the road, may also be overlooked by the private sector.  But without additional public charging, consumers may be less interested in driving EVs.

When the new Congress considers whether or not to continue the recent “EV Stimulus,” it should put EVs in the context of a wide-range of recent transportation fuel initiatives. Because it seems unlikely that there will be a single solution to reducing our reliance on oil for transportation, the Federal government is right to also invest in advanced biofuels, natural gas vehicles, and hydrogen fuel cells. With regard to traditional combustion engines, recently updated fuel efficiency standards for light-duty vehicles mandate a 40% improvement in average MPG by 2016 and include a “bonus” for manufacturers that sell EVs.  The Administration also announced its intention to issue more stringent standards for vehicles manufactured after 2016 and proposed the first ever efficiency standards for heavy duty vehicles.

As The Daily Show recently documented, every President since Nixon has talked to about reducing the country’s dependence on foreign oil, and yet US imports have steadily grown. It is tempting to conclude that the government’s support for a transition away from oil is irrelevant, futile, or even counterproductive.  But the issue is too important for government to ignore. The US government, particularly the military, is the largest consumer of oil in the world.  Investing in the future of transportation fuel is simply a good idea for the government’s bottom line.

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Ari Peskoe is a Contributor with Americans for Energy Leadership and currently attends Harvard Law School.