The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles

Stephen Holland, Erin Mansur and Andrew Yates

No 26804, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Electric vehicles have a unique potential to transform personal transportation. We analyze the transition to electric vehicles with a dynamic model that captures the falling costs of producing electric vehicles, the decreasing pollution from electricity generation, the increasing substitutability of electric for gasoline vehicles, and the durability of the vehicle stock. Due to the external costs from pollution, inefficiencies under business as usual result from the mix of vehicles as well as the transition timing, the severity of which depends on substitutability. We calibrate the model to the US market and find the magnitude of the inefficiency is rather modest: less than 5 percent of total external costs. The optimal purchase subsidy for electric vehicles and the optimal ban on the production of gasoline vehicles both give about the same efficiency improvement, but the latter leads to a sharp increase in gasoline vehicle production just before the ban. Phasing out gasoline vehicles with a bankable production quota reduces deadweight loss substantially more than the other policies, but may lead to a very large deadweight loss if set incorrectly.

JEL-codes: D62 H23 Q40 Q53 Q54 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-tre
Note: EEE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Stephen P. Holland & Erin T. Mansur & Andrew J. Yates, 2021. "The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles," American Economic Journal: Economic Policy, vol 13(3), pages 316-344.

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Journal Article: The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles (2021)
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