Elon Musk and the Myth of the Lone Inventor

The Tesla CEO's Curious Opposition to Government Subsidies

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Tesla, SolarCity, and SpaceX depend heavily on direct and indirect taxpayer subsidies. Musk should thus not be calling for their elimination.

May 30, 2013 | Michael Shellenberger & Ted Nordhaus

It wasn’t enough for Tesla CEO Elon Musk to publicly announce that he had paid back his $452 million government loan nine years before it was due. He had to go on to declare his opposition to all such subsidies.

“I 'got rich' from Zip2 & PayPal w zero govt anything, put 100% of that into SpaceX, Tesla & SolarCity," he tweeted. A carbon tax is better than subsidies, he continued. “Market will then achieve best solution.”

In a new piece for the New Republic, we show just how curious this statement is when it comes from a man whose fortune comes from companies that greatly benefitted from government support:

The argument for a carbon tax is that it corrects distortions in the market due to the externalized costs of emitting carbon, which in turn would allow companies that produce zero-emission vehicles, like Tesla, to compete on a level playing field without further public assistance. This argument allows Musk to elide just how dependent his companies—both those that offer low carbon benefits and those, like SpaceX, that don’t—have been on direct public support for the development and commercialization of the technologies upon which they were built. 

While a carbon tax might have provided some benefit to Tesla or Musk's residential solar company, Solar City, there is no imaginable carbon tax that would begin to approximate the value of the $7,500 tax credit that the federal government offers to buyers of electric cars. Or the $2.4 billion dollars that the federal government invested in battery manufacturing through the 2009 stimulus. Or the half-billion dollar loan that financed the factory in which Tesla manufactures the Model S. Or the 20 years of funding from the American and Japanese governments that have resulted in dramatic advances in the lithium batteries that power the Model S.

Nor would any seriously imaginable carbon price make Solar City economically viable. Without the federal investment tax credit and state deployment mandates, which functionally require utility ratepayers to subsidize solar panels, companies like Solar City would not be in business. Moreover, the panels that Solar City sells would not exist were it not for 40 years of government R&D. Those panels have gotten much cheaper over that time thanks to enormous deployment subsidies in the U.S., Japan, and Germany. And Solar City currently sells panels manufactured in China, where huge government subsidies for solar panel factories have helped solar prices fall further still.

Given that Tesla has been the whipping boy for critics of federal investment in low-carbon technology, Musk's defensiveness about the help that his businesses have received from the federal government is perhaps understandable. But the debt that Musk owes to public investment in new technology goes well beyond recent federal investments in low-carbon technologies.

 

Read the rest here.

 

Photo Credit: Solidsmack.com


Comments

  • Right or wrong on subsidies and if they were needed or not, I would argue there is nothing wrong with being against an available benefit in principle but still taking advantage of that benefit since it is available.  There is no hypocrisy in that.  It’s about being against the giving and not the receiving; a subtle but important distinction.

    By Scott Arnold on 2013 06 01

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  • Since I’m not a TNR subscriber I can’t post at their site, but having read the article I think there is a real confusion in the article as to what government can do that leads to productive outcomes with respect to new energy technologies.  Government can and should subsidize and expand R&D.  But as my new book, U.S. Energy Policy and the Pursuit of Failure (Cambridge University Press) shows, too often the goal of energy programs is commercialization of technologies that simply are not commercially viable. Let’s be clear as to what is R&D and what is not:  The $7500 tax credit for purchase of EVs and PHEVs is not R&D.  RPS and RFS mandates are not R&D. Feed-in tariffs also are not R&D.  In fact in over 60 years of trying (including nuclear power) government commercialization programs have never succeeded in creating an alternative energy product that can be commercially competitive without ongoing subsidies. As Larry Summers put it, the government is “crappy’ at VC; that has been especially the case with respect to energy.  It should also be noted that Tesla only makes a profit because it can sell various environmental credits in California.  Without them no profit, no early pay back of government loans.  Tesla like wind and solar enterprises remains dependent on the largesse of government and likely will for the foreseeable future.

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