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The Economics of Electric Vehicles

Author

Listed:
  • David S. Rapson
  • Erich Muehlegger

Abstract

We examine the private and public economics of electric vehicles (EVs) and discuss when market forces can be expected to produce the optimal path of EV adoption. Privately, consumer cost savings from EVs vary. Some experience net benefits from choosing gasoline cars, even after accounting for EV subsidies. Publicly, we survey the literature documenting the external costs and benefits of EVs and highlight several themes for optimal policy design. These include (1) promoting regional variation in EV policies that align private incentives with social benefits, (2) pursuing a time-path of policies that reflects changing marginal benefits, and (3) rationalizing electricity and gasoline prices to reflect their social marginal cost. On the one hand, research suggests optimal policy be front-loaded and then ramp down over time as industries gain experience in EV production and as charging infrastructure is put in place. On the other hand, as electricity generation becomes cleaner over time, environmental considerations may favor increasing subsidies as the environmental benefits of driving EVs rise relative to conventional vehicles.

Suggested Citation

  • David S. Rapson & Erich Muehlegger, 2023. "The Economics of Electric Vehicles," Review of Environmental Economics and Policy, University of Chicago Press, vol. 17(2), pages 274-294.
    • Handle: RePEc:ucp:renvpo:doi:10.1086/725484
    DOI: 10.1086/725484
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    Cited by:

    1. Sandeep Jagani & Erika Marsillac & Paul Hong, 2024. "The Electric Vehicle Supply Chain Ecosystem: Changing Roles of Automotive Suppliers," Sustainability, MDPI, vol. 16(4), pages 1-19, February.
    2. Arlt, Marie-Louise & Astier, Nicolas, 2023. "Do retail businesses have efficient incentives to invest in public charging stations for electric vehicles?," Energy Economics, Elsevier, vol. 124(C).
    3. Robert Michael Bridi & Marwa Ben Jabra & Naeema Al Hosani & Ahmed Hassan Almurshidi, 2024. "The Propensity to Adopt Electric Vehicles in the United Arab Emirates: An Analysis of Economic and Geographic Factors," Sustainability, MDPI, vol. 16(2), pages 1-19, January.
    4. Tong Zhang, Paul J. Burke, and Qi Wang, 2024. "Effectiveness of electric vehicle subsidies in China: A three-dimensional panel study," Departmental Working Papers 2024-1, The Australian National University, Arndt-Corden Department of Economics.
    5. Gilbert E. Metcalf, 2023. "The Distributional Impacts of a VMT-Gas Tax Swap," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 4(1), pages 4-42.
    6. Gan, Zhongying, 2023. "Do electric vehicle charger locations respond to the potential charging demands from multi-unit dwellings? Evidence from Los Angeles County," Transport Policy, Elsevier, vol. 138(C), pages 74-93.
    7. 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.

    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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