Environmental Benefits from Driving Electric Vehicles?

48 Pages Posted: 22 Jun 2015 Last revised: 24 Jun 2015

See all articles by Stephen P. Holland

Stephen P. Holland

University of California, Berkeley - Energy Institute; University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics

Erin T. Mansur

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Nicholas Z. Muller

Carnegie Mellon University - David A. Tepper School of Business

Andrew Yates

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Date Written: June 2015

Abstract

Electric vehicles offer the promise of reduced environmental externalities relative to their gasoline counterparts. We combine a theoretical discrete-choice model of new vehicle purchases, an econometric analysis of the marginal emissions from electricity, and the AP2 air pollution model to estimate the environmental benefit of electric vehicles. First, we find considerable variation in the environmental benefit, implying a range of second-best electric vehicle purchase subsidies from $3025 in California to -$4773 in North Dakota, with a mean of -$742. Second, over ninety percent of local environmental externalities from driving an electric vehicle in one state are exported to others, implying that electric vehicles may be subsidized locally, even though they may lead to negative environmental benefits overall. Third, geographically differentiated subsidies can reduce deadweight loss, but only modestly. Fourth, the current federal purchase subsidy of $7500 has greater deadweight loss than a no-subsidy policy.

Suggested Citation

Holland, Stephen P. and Mansur, Erin T. and Muller, Nicholas Z. and Yates, Andrew, Environmental Benefits from Driving Electric Vehicles? (June 2015). NBER Working Paper No. w21291. Available at SSRN: https://ssrn.com/abstract=2621345

Stephen P. Holland (Contact Author)

University of California, Berkeley - Energy Institute ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States

Erin T. Mansur

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States
603 646 2398 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nicholas Z. Muller

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Andrew Yates

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

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