Working Paper: NBER ID: w21291
Authors: Stephen P. Holland; Erin T. Mansur; Nicholas Z. Muller; Andrew J. Yates
Abstract: Electric vehicles offer the promise of reduced environmental externalities relative to their gasoline counterparts. We combine a theoretical discrete-choice model of new vehicle purchases, an econometric analysis of the marginal emissions from electricity, and the AP2 air pollution model to estimate the environmental benefit of electric vehicles. First, we find considerable variation in the environmental benefit, implying a range of second-best electric vehicle purchase subsidies from $3025 in California to -$4773 in North Dakota, with a mean of -$742. Second, over ninety percent of local environmental externalities from driving an electric vehicle in one state are exported to others, implying that electric vehicles may be subsidized locally, even though they may lead to negative environmental benefits overall. Third, geographically differentiated subsidies can reduce deadweight loss, but only modestly. Fourth, the current federal purchase subsidy of $7500 has greater deadweight loss than a no-subsidy policy.
Keywords: Electric Vehicles; Environmental Benefits; Subsidies; Air Pollution
JEL Codes: D62; H23; Q53; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Electric Vehicle usage (R48) | Local air quality (Q53) |
| Subsidies for Electric Vehicles (H25) | Environmental benefits (Q52) |
| Electric Vehicle usage (R48) | Negative environmental benefit (Q52) |
| Current federal subsidy of $7,500 (H20) | Greater deadweight loss (H21) |
| Differentiated taxes on miles driven (R48) | Greater welfare gains (D69) |
| Local pollution damages from EVs (Q53) | Exported to other states (H79) |
| Local pollution damages from GVs (Q53) | Exported to other states (H79) |