What Does an Electric Vehicle Replace?
Using estimates from a consumer demand model of new vehicle choice, we find that electric vehicles replace fuel-efficient vehicles. This replacement lowers the emissions savings from electric vehicle adoption relative to setting where electric vehicles replace a gasoline vehicle with average fuel economy.
- We estimate a discrete choice model of new vehicle demand, which includes all gasoline and electric vehicle models available in the U.S. market from 2010 to 2014.
- We simulate a counterfactual marketplace in 2014 that does not include electric vehicles to assess which vehicles are being replaced by electric vehicles.
- We find that electric vehicles are replacing relatively fuel-efficient gasoline vehicles that get an average 4.2 miles per gallon more fuel economy than the average gasoline vehicle.
- We also simulate alternative electric vehicle subsidy designs, finding that subsidies targeted toward low and middle income households can be more equitable and more cost-effective than the current uniform federal subsidy.
The emissions reductions from the adoption of a new transportation technology depend on the emissions from the new technology relative to those from the displaced technology. We evaluate the emissions reductions from electric vehicles (EVs) by identifying which vehicles would have been purchased had EVs not been available. We do so by estimating a random coefficients discrete choice model of new vehicle demand and simulating counterfactual sales with EVs no longer subsidized or removed from the new vehicle market. Our results suggest that vehicles that EVs replace are relatively fuel-efficient: EVs replace gasoline vehicles with an average fuel economy of 4.2 mpg above the fleet-wide average and 12 percent of them replace hybrid vehicles. Federal income tax credits resulted in a 29 percent increase in EV sales, but 70 percent of the credits were obtained by households that would have bought an EV without the credits. By simulating alternative subsidy designs, we find that a subsidy designed to provide greater incentives to low-income households would have been more cost-effective and less regressive.
Shanjun Li is a university fellow at RFF. His research areas include environmental and energy economics, industrial organization, and Chinese economy.
On the Issues — Jan 20, 2023
On the Issues: Big Decisions in 2023, Benefits of Electric Vehicles, and More
A biweekly newsletter connecting global current events, pressing climate and energy policy news, and economics research from RFF scholars. This week: big decisions in 2023, benefits of electric vehicles, and more.
Testimony and Public Comments — Jan 18, 2023
Comments to EPA on the IRA’s Transportation Programs
To the Environmental Protection Agency on the Request for Information related to the Inflation Reduction Act's Transportation Programs.
Workshops — Jan 20, 2023
2023 Transportation Economics, Engineering, and Policy Workshop
An RFF workshop highlighting new research to address pressing policy questions related to electric vehicles, traffic congestion, and e-mobility.
Common Resources — Jan 3, 2023
What Are the Benefits of Electric Vehicles for Climate, Air Pollution, and Health?
Resources for the Future scholars Joshua Linn and Daniel Shawhan review some of the findings from their new study, which investigates the benefits and costs of plug-in electric vehicles for climate, air pollution, and health.