THE PRIVATE AND PUBLIC ECONOMICS OF ELECTRIC VEHICLES Erich - PowerPoint PPT Presentation

THE PRIVATE AND PUBLIC ECONOMICS OF ELECTRIC VEHICLES Erich Muehlegger, UC Davis and NBER David Rapson, UC Davis TE3 conference October 18, 2019

2 Muehlegger and Rapson Public and Private Economics of EVs EVs and the policy environment • Policy makers view electric vehicles as a central element of addressing energy and environmental challenges • Yet, transportation, energy and environmental policy often have multiple objectives and are often uncoordinated • We survey the existing policy landscape to evaluate: • How do existing policies help (or hinder) EV adoption? • Are policies consistent with the economic rationales for intervention?

3 Muehlegger and Rapson Public and Private Economics of EVs Private economics: upfront costs • Invoice prices: Nissan Leaf @ $30,000 vs Versa @ $14,000

4 Muehlegger and Rapson Public and Private Economics of EVs Private economics: operational costs

5 Muehlegger and Rapson Public and Private Economics of EVs Variation in residential electricity prices within the Bay Area

6 Muehlegger and Rapson Public and Private Economics of EVs Public Economics of Electric Vehicles • Are existing policies aligned with the societal impacts of EVs? • Externalities from usage • The environmental impacts of EVs differ from ICEs • Energy security, congestion, accidents • Externalities from vehicle stock • EV adoption might create “network externalities”, such as stimulating the construction of charging infrastructure or vice-versa. • Are there meaningful spillovers to be captured from EV production?

7 Muehlegger and Rapson Public and Private Economics of EVs Private fuel savings from EV adoption are not closely aligned with environmental impacts Cost Savings and Environmental Benefits of EV vs ICE 6 Environmental Costs WA 5 NV Fuel Cost Savings (cents/mile) OR 4 ID DC WY MT ND IL UT NE SD FL KYLA NC OK WV PA IN CO IA 3 GA TN AR MS AZ OH CA MN NM TX WI MO VA DE MD KS NY MI ME AL SC VT 2 CT Environmental Benefits NJ RI NH 1 MA 0 -3 -2 -1 0 1 2 Environmental Benefits (cents/mile) Source: Environmental Benefits based on Holland et al. (2016), Fuel Costs are authors’ calculation.

8 Muehlegger and Rapson Public and Private Economics of EVs Network effects from adoption • Network effects arising from charging stations feedback • But, likely local in nature and diminishing as stock of vehicles increases • Are the network effects appropriable by the firm (e.g., Tesla superchargers)? • And, at least in principle, relatively modest barriers to entry in charging Source: https://www.mlive.com/news/ann-arbor/2019/05/residents-lead-charge-to-install-ann-arbors-first-curbside-ev-station.html

9 Muehlegger and Rapson Public and Private Economics of EVs Externalities from production • Are there meaningful benefits from production experience? • Are the benefits appropriable by the firm? • If so, are consumer adoption incentives the best way to stimulate non- appropriable benefits? Source: Tsiropoulos, Tarvydas and Lebedeva, “Li-ion batteries for mobility and stationary storage applications,” JRC Science for Policy Report, European Commission, Figure 1

10 Muehlegger and Rapson Public and Private Economics of EVs Policy takeaways and summary • Private benefits of adoption vary significantly by space • Gas taxes and electricity prices are not set with an eye towards EVs • Environmental benefits: • Do not line up with private incentives for adoption • Negative in much of the U.S., although shifting when (if) the grid transitions to cleaner sources of energy • Benefits from adoption: • Likely diminishing as adoption increases and, if appropriable by the firm, unlikely to justify a subsidy on economic grounds