The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles
AbstractElectric 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.
CitationHolland, Stephen P., Erin T. Mansur, and Andrew J. Yates. 2021. "The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles." American Economic Journal: Economic Policy, 13 (3): 316-44. DOI: 10.1257/pol.20200120
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L51 Economics of Regulation
- L62 Automobiles; Other Transportation Equipment; Related Parts and Equipment
- L94 Electric Utilities
- Q53 Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling