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Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors

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Listed:
  • Stephen P. Holland
  • Erin T. Mansur
  • Nicholas Z. Muller
  • Andrew J. Yates

Abstract

We combine a theoretical discrete-choice model of vehicle purchases, an econometric analysis of electricity emissions, and the AP2 air pollution model to estimate the geographic variation in the environmental benefits from driving electric vehicles. The second-best electric vehicle purchase subsidy ranges from $2,785 in California to -$4,964 in North Dakota, with a mean of -$1,095. Ninety percent of local environmental externalities from driving electric vehicles in one state are exported to others, implying they may be subsidized locally, even when the environmental benefits are negative overall. Geographically differentiated subsidies can reduce deadweight loss, but only modestly.

Suggested Citation

  • Stephen P. Holland & Erin T. Mansur & Nicholas Z. Muller & Andrew J. Yates, 2016. "Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors," American Economic Review, American Economic Association, vol. 106(12), pages 3700-3729, December.
  • Handle: RePEc:aea:aecrev:v:106:y:2016:i:12:p:3700-3729
    Note: DOI: 10.1257/aer.20150897
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    References listed on IDEAS

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    1. Banzhaf, H. Spencer & Chupp, B. Andrew, 2012. "Fiscal federalism and interjurisdictional externalities: New results and an application to US Air pollution," Journal of Public Economics, Elsevier, vol. 96(5), pages 449-464.
    2. De Borger, Bruno & Mayeres, Inge, 2007. "Optimal taxation of car ownership, car use and public transport: Insights derived from a discrete choice numerical optimization model," European Economic Review, Elsevier, vol. 51(5), pages 1177-1204, July.
    3. Graff Zivin, Joshua S. & Kotchen, Matthew J. & Mansur, Erin T., 2014. "Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 248-268.
    4. Dallas Burtraw & Alan Krupnick & Erin Mansur & David Austin & Deirdre Farrell, 1998. "Costs And Benefits Of Reducing Air Pollutants Related To Acid Rain," Contemporary Economic Policy, Western Economic Association International, vol. 16(4), pages 379-400, October.
    5. Mendelsohn, Robert, 1980. "An economic analysis of air pollution from coal-fired power plants," Journal of Environmental Economics and Management, Elsevier, vol. 7(1), pages 30-43, March.
    6. David D. Henry III & Nicholas Z. Muller & Robert O. Mendelsohn, 2011. "The social cost of trading: Measuring the increased damages from sulfur dioxide trading in the United States," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 30(3), pages 598-612, June.
    7. Archsmith, James & Kendall, Alissa & Rapson, David, 2015. "From Cradle to Junkyard: Assessing the Life Cycle Greenhouse Gas Benefits of Electric Vehicles," Research in Transportation Economics, Elsevier, vol. 52(C), pages 72-90.
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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