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The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles

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  • Stephen P. Holland
  • Erin T. Mansur
  • Andrew J. Yates

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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  • 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, American Economic Association, vol. 13(3), pages 316-344, August.
    • Handle: RePEc:aea:aejpol:v:13:y:2021:i:3:p:316-44
    DOI: 10.1257/pol.20200120
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    Cited by:

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    2. Leslie A. Martin, 2022. "Driving on Sunbeams: Interactions Between Price Incentives for Electric Vehicles, Residential Solar Photovoltaics and Household Battery Systems," Economic Papers, The Economic Society of Australia, vol. 41(4), pages 369-384, December.
    3. Haywood, Luke & Jakob, Michael, 2023. "The role of the emissions trading scheme 2 in the policy mix to decarbonize road transport in the European Union," Transport Policy, Elsevier, vol. 139(C), pages 99-108.
    4. Latino, Carmelo & Pelizzon, Loriana & Riedel, Max, 2023. "How to green the European Auto ABS market? A literature survey," SAFE Working Paper Series 391, Leibniz Institute for Financial Research SAFE.
    5. Randall Wigle, Istvan Kery, 2021. "Rationalizing Policy Support for Zero Emission Vehicles in Canada," LCERPA Working Papers bm0128, Laurier Centre for Economic Research and Policy Analysis.
    6. Zhang, Xiaoyun & Dong, Feng, 2023. "What affects residents’ behavioral intentions to ban gasoline vehicles? Evidence from an emerging economy," Energy, Elsevier, vol. 263(PB).
    7. Leard, Benjamin & Wu, Yidi, 2023. "New Passenger Vehicle Demand Elasticities: Estimates and Policy Implications," RFF Working Paper Series 23-33, Resources for the Future.
    8. Geoffrey Heal, 2022. "Economic Aspects of the Energy Transition," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(1), pages 5-21, September.
    9. Shanjun Li & Xianglei Zhu & Yiding Ma & Fan Zhang & Hui Zhou, 2022. "The Role of Government in the Market for Electric Vehicles: Evidence from China," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(2), pages 450-485, March.
    10. Hoarau, Quentin & Meunier, Guy, 2023. "Coordination of sectoral climate policies and life cycle emissions," Resource and Energy Economics, Elsevier, vol. 72(C).
    11. Kenneth Gillingham & Marten Ovaere & Stephanie Weber, 2021. "Carbon Policy and the Emissions Implications of Electric Vehicles," CESifo Working Paper Series 8974, CESifo.
    12. Gøril L. Andreassen & Jo Thori Lind, 2022. "Climate, Technology and Value: Insights from the First Decade with Mass-Consumption of Electric Vehicles," CESifo Working Paper Series 9814, CESifo.
    13. Benjamin Carton & Christopher Evans & Mr. Dirk V Muir & Simon Voigts, 2023. "Getting to Know GMMET: The Global Macroeconomic Model for the Energy Transition," IMF Working Papers 2023/269, International Monetary Fund.
    14. Johannes Mauritzen, 2023. "With great power (prices) comes great tail pipe emissions? \\ A natural experiment of electricity prices and electric car adoption," Papers 2304.01709, arXiv.org.
    15. Liu, Yajie & Dong, Feng & Li, Guoqing & Huang, Jianheng & Yang, Shanshan & Wang, Yulong, 2023. "Public willingness to support the policy of banning gasoline vehicles sales and its internal mechanism," Energy, Elsevier, vol. 271(C).
    16. Rik L. Rozendaal & Herman R. J. Vollebergh, 2021. "Policy-Induced Innovation in Clean Technologies: Evidence from the Car Market," CESifo Working Paper Series 9422, CESifo.
    17. Luo, Qi & Yin, Yunlei & Chen, Pengyu & Zhan, Zhenfei & Saigal, Romesh, 2022. "Dynamic subsidies for synergistic development of charging infrastructure and electric vehicle adoption," Transport Policy, Elsevier, vol. 129(C), pages 117-136.
    18. Lim, Sijeong & Dolsak, Nives & Prakash, Aseem & Tanaka, Seiki, 2022. "Distributional concerns and public opinion: EV subsidies in the U.S. and Japan," Energy Policy, Elsevier, vol. 164(C).

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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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