Working Paper: NBER ID: w29067
Authors: Kenneth Gillingham
Abstract: 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. Further, there are tradeoffs 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.
Keywords: Electric Vehicles; Fuel Economy Standards; Greenhouse Gas Emissions; Regulatory Design; Cost-Effectiveness
JEL Codes: H23; Q48; Q53; Q54; Q58; R48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Electric Vehicle Credit (EVC) (R48) | Increased Conventional Vehicle Sales (CVS) (L92) |
| Backstop Standard (BS) + Electric Vehicle Standard (EVS) (L94) | Increased Electric Vehicle Market Share (EVMS) (L94) |
| Generous Crediting (GC) (H81) | Increased Conventional Vehicle Sales (CVS) (L92) |
| Increased Conventional Vehicle Sales (CVS) (L92) | Increased Overall Emissions (OE) (F69) |