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Designing Fuel-Economy Standards in Light of Electric Vehicles

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  • Kenneth T. Gillingham

Abstract

Electric vehicles are declining in cost so rapidly that they may claim a large share of the vehicle market by 2030. This paper examines a set of practical regulatory design considerations for fuel-economy standards or greenhouse gas standards in the context of highly uncertain electric vehicle costs in the next decade. The analysis takes a cost-effectiveness approach and uses analytical modeling and simulation to develop insight. I show that counting electric vehicles under a standard with a multiplier or assuming zero upstream emissions can reduce electric vehicle market share by weakening the standards. Furthermore, there are trade-offs from implementing a backstop conventional vehicle standard along with a second standard that also includes electric vehicles, but such a backstop offers the possibility of ensuring that low-cost conventional vehicle technologies are exploited.

Suggested Citation

  • Kenneth T. Gillingham, 2022. "Designing Fuel-Economy Standards in Light of Electric Vehicles," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 3(1), pages 111-154.
    • Handle: RePEc:ucp:epolec:doi:10.1086/717220
    DOI: 10.1086/717220
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    Cited by:

    1. Viet Nguyen-Tien & Chengyu Zhang & Eric Strobl & Robert J. R. Elliott, 2025. "The closing longevity gap between battery electric vehicles and internal combustion vehicles in Great Britain," Nature Energy, Nature, vol. 10(3), pages 354-364, March.
    2. Rik Rozendaal & Herman Vollebergh, 2025. "Policy-Induced Innovation in Clean Technologies: Evidence from the Car Market," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 12(3), pages 565-598.
    3. Linn, Joshua, 2022. "Balancing Equity and Effectiveness for Electric Vehicle Subsidies," RFF Working Paper Series 22-07, Resources for the Future.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • 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
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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