The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles
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Stephen P. Holland
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Erin T. Mansur
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Andrew J. Yates
- American Economic Journal: Economic Policy (Forthcoming)
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.
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