The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles

Stephen Holland, Erin Mansur and Andrew Yates

American Economic Journal: Economic Policy, 2021, vol. 13, issue 3, 316-44

Abstract: Electric vehicles have a unique potential to transform personal transportation. We analyze this transition with a dynamic model capturing falling costs of electric vehicles, decreasing pollution from electricity, and increasing vehicle substitutability. Our calibration to the US market shows a transition from gasoline vehicles is not optimal at current substitutability: a gasoline vehicle production ban would have large deadweight loss. At higher substitutability, a ban can reduce deadweight loss from vehicle mix and adoption timing inefficiencies. A cumulative gasoline vehicle production quota has smaller deadweight loss, and an electric vehicle purchase subsidy is more robust to regulator misperceptions about substitutability.

JEL-codes: H23 L51 L62 L94 Q53 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (24)

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Working Paper: The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles (2020)
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DOI: 10.1257/pol.20200120

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