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The market for plug-in electric vehicles (EVs) exhibits indirect network effects due to the interdependence between EV adoption and charging station investment. Through a stylized model, we demonstrate that indirect network effects on both sides of the market lead to feedback loops that could alter the diffusion process of the new technology. Based on quarterly EV sales and charging station deployment in 353 metro areas from 2011 to 2013, our empirical analysis finds indirect network effects on both sides of the market, with those on the EV demand side being stronger. The federal income tax credit of up to $7,500 for EV buyers contributed to about 40% of EV sales during 2011–13, with feedback loops explaining 40% of that increase. A policy of equal-sized spending but subsidizing charging station deployment could have been more than twice as effective in promoting EV adoption.
We examine distributional effects of changes in local air pollution from driving electric vehicles in the United States. An econometric model estimates power plant emissions and an integrated assessment model values damages in air pollution from electric and gasoline vehicles. Using data on currently registered electric vehicles, we find that people in census block groups with median income greater than about $65,000 receive positive environmental benefits while those below this threshold receive negative environmental benefits. On average, Asian and Hispanic residents receive positive environmental benefits, but white and black residents receive negative environmental benefits. In multivariate analyses with census region fixed effects, environmental benefits are positively correlated with income and urban measures and with Asian, black, and Hispanic block-group population shares. Created environmental benefits tend to be larger in states offering purchase subsidies. However, for these states, an increase in subsidy size is associated with a decrease in environmental benefits.
In many countries, the revenue from gasoline taxes is used to fund highways and other transportation infrastructure. As the number of electric vehicles on the road increases, this raises questions about the effectiveness and equity of this financing mechanism. In this paper, we ask whether electric vehicle drivers should pay a mileage tax. Though the gasoline tax has been traditionally viewed as a benefits tax, we instead take the perspective of economic efficiency. We derive a condition for the optimal electric vehicle mileage tax that highlights a key trade-off. On the one hand, there are externalities from driving, including traffic congestion and accidents, that imply a mileage tax is efficient. On the other hand, gasoline tends to be underpriced, so a low (or even negative) mileage tax might have efficiency benefits in encouraging substitution away from gasoline-powered vehicles. We then turn to an empirical analysis aimed at better understanding the current policy landscape for electric vehicles in the United States. Using newly available, nationally representative microdata, we calculate that electric vehicles have reduced gasoline tax revenues by $250 million annually. We show that the forgone tax revenue is highly concentrated in a handful of states and is highly regressive, as most electric vehicles are driven by high-income households, and we discuss how this motivates and informs optimal policy.
This paper identifies and quantifies major determinants of future electric vehicle demand to inform widely held aspirations for market growth. Our model compares three channels that will affect electric vehicle market share in the United States from 2020 to 2035: intrinsic (no-subsidy) electric vehicle demand growth, net-of-subsidy electric vehicle cost declines (e.g., batteries), and government subsidies. Geographic variation in preferences for sedans and light trucks highlights the importance of viable electric vehicle alternatives to conventional light trucks; belief in climate change is highly correlated with electric vehicle adoption patterns; and the first $500 billion in cumulative nationwide electric vehicle subsidies is associated a 7%–10% increase in electric vehicle market share in 2035, an effect that diminishes as subsidies increase. The rate of intrinsic demand growth dwarfs the impact of demand-side subsidies and battery cost declines, highlighting the importance of nonmonetary factors (e.g., charging infrastructure, product quality, and/or cultural acceptance) on electric vehicle demand.
Electric vehicles are declining in cost so rapidly that they may claim a large share of the vehicle market by 2030. This paper examines a set of practical regulatory design considerations for fuel-economy standards or greenhouse gas standards in the context of highly uncertain electric vehicle costs in the next decade. The analysis takes a cost-effectiveness approach and uses analytical modeling and simulation to develop insight. I show that counting electric vehicles under a standard with a multiplier or assuming zero upstream emissions can reduce electric vehicle market share by weakening the standards. Furthermore, there are trade-offs from implementing a backstop conventional vehicle standard along with a second standard that also includes electric vehicles, but such a backstop offers the possibility of ensuring that low-cost conventional vehicle technologies are exploited.
Transportation electrification is viewed by many as a cornerstone for climate change mitigation, with the ultimate vision to phase out conventional vehicles entirely. In a world with only electric vehicles (EVs), transportation pollution would be primarily determined by the composition of the electricity grid. For the foreseeable future, however, environmental benefits of EVs must be measured relative to the (likely gasoline) car that would have been bought instead. This so-called counterfactual vehicle cannot be observed, but its fuel economy can be estimated. A quasi-experiment in California allows us to show that subsidized buyers of EVs would have, on average, purchased relatively fuel-efficient cars had they not gone electric. The actual incremental pollution abatement arising from EVs today is thus substantially smaller than one would predict using the fleet average as the counterfactual vehicle. We discuss implications for climate policy and how to accurately reflect EV choice in integrated assessment models.
Both electric cars and residential solar panels are environmentally friendly durable goods that are often subsidized. The relationship between the two in demand will affect the efficiency of a range of green policies. This study explores the complementarity between the two goods, taking an instrumental variables approach. Using global horizontal irradiance as an instrument, I find that each existing solar adoption leads to approximately 0.184 additional electric car sales, including 0.121 battery electric vehicles and 0.063 plug-in hybrid electric vehicles. Utilizing availability of high occupancy vehicle lanes and gasoline prices as instruments, I find that each electric vehicle ownership leads to roughly 0.26 additional solar installations. The complementarity mainly comes from lack of charging stations and insufficient compensation for excess solar energy sold back to the grid. The findings imply substantial spillovers from policies affecting either choice, changing the cost-benefit calculus for a range of green policies.