Problem Definition

Background Information: Climate change continues to develop as an existential threat to the global population, and transportation is the frontrunner of culprits: one quarter of global energy usage and energy-related GHG (greenhouse gas) emissions come from transportation [6]. Increasing GHG in the atmosphere, the main catalyst of climate change, devastates nearly all ecosystems and habitats, and many species of animals and plants are ‘committed to extinction’ [13]. Demand for vehicles are projected to more than double by 2050, and because of this GHG emissions are expected to increase by more than 80% in this same timeframe [6]. Additionally, global fossil fuel reserves are running out—it is projected that they will be mostly depleted by 50 years for oil, 60 years for natural gas, and 80 years for coal [1]. Catastrophic consequences lie ahead if climate change is left unaddressed. However, citizens, lawmakers, and corporations all recognize the prevalence of climate change and are actively working towards solutions. One such solution is to shift away from traditional ICE (internal combustion engine) vehicles to electrically powered ones. Manufacturers recognize this, and over the past decade, EV (electric vehicle) production is up 1500%.

Policy Problem: Will government subsidies for electric vehicles be an efficient and effective way to encourage electric vehicle purchase, reduce pollution, and positively impact the environment?

Analyst’s Problem: Determine the effect of EV subsidies on consumer willingness to purchase EVs. Determine the effect of replacing ICE vehicles with EVs. Research and analyze alternative policies for encouraging EV purchases and positively impacting the environment. Examine and weigh the costs and benefits of EV subsidies. Look at potential externalities, implementation issues, and offsetting behaviors resulting from EV subsidies. Provide a recommendation for passing EV subsidies.

Background Information

Legislative History: State Legislation: Between 2019 and 2020, 50 states introduced legislation regarding the study, regulation, taxation, and funding of EVs and EV infrastructure. 0 states passed EV subsidy laws, but 1 state passed legislation allowing DTC (direct-to-consumer) sales of EVs from manufacturers to incentivize their purchase. 14 states introduced legislation regarding EV charging stations and infrastructure, 9 states addressed taxation and tax credits for EVs and 3 states addressed the study of the impact of EV implementation. Refer to A1 for the extended state legislative history. Federal Legislation: America's Clean Future Fund Act S.4484 referred to the Committee on Finance in 2020, amends the Internal Revenue Code of 1986 to establish a carbon fee to reduce greenhouse gas emissions. The Moving Forward Act H.R.2 received in the Senate in 2020 was a bill to invest in environmental sustainability of transportation on highways and transit systems. Electric Vehicles for Underserved Communities Act H.R.5751 referred to the Committee on Energy and Commerce and the Committee on Science, Space, and Technology was a bill to require the DOE to assess EV charging infrastructure in underserved communities. Refer to Appendix A2. Court Ruling: In the 2020 case of Golden Door Properties, LLC v. County of San Diego, San Diego County’s climate action plan was deemed as inadequate by the court and did not meet proper protocols under Public Resources codes and Healthy and Safety Codes. Their plan was compared to another climate action plan named “Newhall” which the court determined was far more robust as a climate change plan and in line with municipal codes because of its inclusion of incentives like EV subsidies and 2000 EV charging stations. In the 2018 case of AAA Oregon/ Idaho v. State of Oregon, AAA Oregon/Idaho challenged EV rebates, but in a unanimous ruling, the court ruled that the Oregon Constitution statute that the plaintiff attempted to apply that would otherwise bar such a rebate did not apply in this case. Refer to Appendix A3.

Political Environment: Expanders: Supporters argue that EVs and EV subsidies are crucial to preserve the health of planet Earth [11]. Supporters include those who generally lean politically left, Tesla founder Elon Musk, and Joe Biden. Contractors: Contractors argue that electric vehicles will never become the mainstream and clean energy efforts have not been effective [11]. The opposition includes those who generally lean politically right, oil companies like BP and Shell, and flagship ICE car companies like GM. 

Research Design

Objectives and Methods: I. Do EV subsidies increase EV ownership? A 2019 study by scientists from University of South Carolina and a scientist from the King Abdullah Petroleum Studies and Research Center will demonstrate the cost-effectiveness of government subsidies for electric vehicles. To examine this, they create a model-based simulation of a nationally representative sample of 275k new U.S. vehicle consumers. Combining this model with a mixed logit model for 90 subgroups, they predict the probability of a given consumer choosing an EV or a traditional ICE vehicle. Source: 10. II. Do EVs help the environment? A 2012 study from scientists from Shell Global Solutions in the UK and 2012 study from three scientists from Norwegian University of Science and Technology examine the environmental impact of EVs. The first study performs a lifecycle analysis of ICE and electric vehicles and their GHG emissions primarily within two consumer markets of the UK and California. The second study provides a meta-analysis 55 studies from peer-reviewed literature that quantifies each vehicle type’s impact in terms of carbon emissions and other pollutants over the entire lifetime of the vehicle. Sources: 3,6. III. What are the costs and benefits of implementing EV subsidies? A 2015 study from two researchers from Hiroshima University and Kyushu university and a 2015 study from a scientist from Università Cà Foscari in Venice will be utilized to perform a cost benefit analysis on EV subsidies. The first study examines the economic validity of EV diffusion and conducts a sensitivity analysis on cost reductions for vehicles for 5 million fuel cell vehicle diffusion scenarios based on a tank-to wheel analysis. The second study reviews existing models on the impact of the implementation of EVs and points to certain modeling issues underlying other policy evaluations to ultimately perform a cost-benefit analysis on adoption of electric vehicles in Germany Sources 4, 7. IV. What alternative policies exist to achieve the same outcomes in New Avery? A 2020 study from Beijing Jiaotong University examines various alternative policies to EV subsidies and warrants its analysis through a stated preference survey in Beijing and form a binary logit model. Policy outcomes and their statistical likelihood of increasing consumer gravitation towards EVs are presented. Source: 5. V. What are the possible externalities, offsetting behaviors, and implementation problems resulting EV subsidies? A 2018 study from University of New South Wales, a 2018 study from the Centre for Climate, Energy and Society in Austria, and a 2017 study from the University of Thessaly will look into the externalities, offsetting behaviors, and implementation problems of EV subsidy policy. The first study provides an analysis of the best and worst practices of EV policymaking in Europe and the US. A focus of this study are the financial and soft incentives involved to encourage EV diffusion. The second study discusses the psychological effects of electric vehicle implementation. The study goes into the depths of why household-level rebound effect occurs after the purchase of EVs through structural equation modelling and applies it to cross-sectional survey data on electric car adoption in Austria. Additionally, there’s a longitudinal sample of electric bike riders to validate the findings. The last study presents the total cost ownership and externalities associated with internal combustion, hybrid, and full electric vehicles. They perform life cycle cost analysis that factors in all direct and indirect costs of vehicle ownership. Sources: 2, 8, 9. 

Research Results and Analysis

Effect on Ownership: The 2019 study found that existing federal subsidy structure in the US accounted for 17% of EV sales in the 2015 model year [10]. To increase these results, a more tailored subsidy approach is required, particularly one that limits subsidies to away from consumers who would not have otherwise purchased a PEV without the subsidy, and their findings indicate that the direct impact of EV subsidies increases from 17% to 30% which would reduce the policy cost per EV to $16,000 and gasoline savings fall to $2.22 per gallon [10]. They support the results of their model to include historical regression models of EV subsidies and consumer behavior in the vehicle market in over 30 countries and their findings report that 30-40% of sales were attributed to EV subsidies [10]. Environmental Impact: The first 2012 study from Norwegian University finds that adjusted for a common lifetime of 200,000 km, ICE vehicles tend to have the lowest production-related GWP (global warming potential) with a generic ICEV emitting only 30 gCO2e/km and the next lowest emitting EV was a hybrid emitting 34 gCO2e/km [3]. However, they find that GWP scales better with EVs compared to ICEVs in relation to mass [3]. Refer to Table A4 for full GWP data for ICE and EVs. Additionally, the second 2012 study from Shell Global Solutions finds that lifecycle GHG emissions for ICEVs are 38.1 gCO2e/km compared to 54.5 gCO2e/km for battery EVs on grid intensity [6]. However, the results form a full well-to-wheel analysis point to EVs having 54.7 gCO2e/km of GHG emissions compared to their ICE counterparts with 163.1 gCO2e/km [6]. Refer to Table A5 for lifecycle GHG data for ICE and EVs. Alternative Options: An alternative to EV subsidies that would accomplish similar goals is a bus lane driving permit [5]. In the 2020 study from scientists from Beijing Jiaotong University, currently implemented electric vehicle subsidies in China at 32,500 CNY ($4678.30) impact consumer sensitivity to purchasing an EV at 45.94% [5]. Refer to Table A6 for price sensitivity analysis of EV purchase subsidies. They find that if EV subsidies are removed and replaced with a bus lane permit for EV owners, the probability of consumers purchasing an EV is 52.67% [5]. See table A7 for sensitivity analysis of bus lane permits on EV choice probability. 

Analysis: EV subsidies are generally found to have a significant impact on consumer purchase of an electric vehicle [5,10]. However, the overall environmental impacts that EVs have are somewhat less clear as some consumer ICE vehicles have lower rates of carbon emissions compared to their EV counterparts, possibly due to the longer production timeframe that ICE vehicles have had in the course of history [3, 6]. The overall findings suggest that EVs, in a well-to-wheel analysis combined with lifecycle analysis that there are modest decreases in GHG emissions compared to ICEVs [3,6]. A seemingly effective alternative to EV subsidies is the bus lane driving permit [5]. However, the results that a bus lane driving permit have on EV subsidies have on consumer behavior are currently theoretically based and do not have an empirical basis [5]. In general, EV subsidies are a historically proven way to increase purchase of EVs, but their environmental benefits leave something to be desired [3,6]. 

Costs and Benefits: Proposed Policy: Private Costs: The cost of gasoline may increase to 1.7 dollars per liter [4]. Private Benefits: EVs will be widely available and cheaper to the general public as a result of subsidies [7]. Social Costs: the Net Present Value of implementing EV subsidies reached as high as 19 billion dollars in model scenario, possibly increasing tax costs for citizens [3].  Social Benefits: charging infrastructure will be more widely available and it is cheaper to power vehicles through grid electricity than importing gasoline from foreign countries [7] 

Alternative Policy: Private Costs: Lower-income families would be disproportionately affected by driving in regular traffic lanes, as EV costs are currently higher than their ICE counterparts [5]. Private Benefits: Consumers who are able to purchase EVs can enjoy the luxury of avoiding general traffic and driving in bus lanes [5]. Social Costs: Overall bus traffic may increase as EV ownership becomes more widespread and both EVs and buses occupy the same lane [5]. Social Benefits: Traffic congestion, time spent on the road, and therefore energy consumption will decrease as there are more available lanes for cars to drive in [5]. 

Policy Externalities, Offsetting Behavior and Implementation Problems: Externalities: Positive: A positive externality of EV subsidies that widespread EV ownership decreases overall noise pollution that stem from ICE vehicles [8]. A decrease in noise pollution will help natural ecosystems that surround roads and highways to flourish, as some animals are dependent on noise to navigate and search for food. Negative: A negative externality of EV subsidies is higher SO emissions and reliance on raw materials like rare earth metals for battery production [8]. Rare earth metals are often exclusively found in countries that source child labor or face significant conflict with surrounding countries. Offsetting Behaviors: In a 2018 study from the Centre for Climate, Energy and Society in Austria, the psychological effects of increased EV ownership are studied [9]. They find that certain households, particularly low-income households were more likely to exhibit some form of rebound behavior—offsetting behaviors that were not present before the diffusion of EVs and occur as a result of their adoption [9]. These rebound behaviors, such as decreased regard for personal waste production, can reverse the environmental progress that can be made by EV subsidies, so it is crucial that policymakers consider the psychological effects of their policies. Implementation issue: Widespread EV diffusion may not be possible with EV subsidies alone, as consumers face factors like charging times, prices, etc. of whether or not to transition away from ICEVs [2]. A 2018 study finds that EV acceptance and successful policy implementation requires already available EV charging infrastructure [2]. In 2015, up to 40% of London’s public rechargers were out of services at any one time, and if problems like this were to occur, EV subsidies would ultimately fail to sway consumer confidence in EVs [2]. 

Conclusions

Proposed Policy: EV subsidies are generally effective to encourage widespread diffusion and ownership of electric vehicles, but their environmental benefits are modest. More infrastructure such as additional charging stations will be required to catalyze a true transition away from ICEVs, and measures need to be taken to counteract against psychological rebound effects of EV ownership.

Alternative Policy: A bus lane permit for EV owners are another good incentive to increase overall EV diffusion. Overall traffic would decrease with their implementation which is beneficial to the environment as cars spend less time on the road, and there is less idling. 

Recommendations: Based on the research presented, the US federal government ought to pass comprehensive legislation including EV subsidies, additional EV charging infrastructure, and a bus lane permit for EV owners. The comprehensive nature of this plan will signal to the public that our legislature is serious with its commitment towards the environment and is ultimately aiming for all of its residents to own EVs. Subsidies ought to be variable relative to the needs of a given EV owner and a committee ought to be established to review applications for EV subsidies to ensure due process and affordability to a majority of the population, including low-income households. To disseminate the availability of information surrounding new EV policy and the urgency of environmental policy in general, policymakers ought to adapt an environmental information campaign to demonstrate the importance of maintaining environmentally friendly practices and to avoid the possibility of psychological rebound. In conclusion, the implementation of EV subsidies must come alongside increasing EV charging infrastructure and additional incentives like bus lane permits to create a genuine shift in what cars citizens drive.

 

 

Appendix

A1. State Legislation

State Legislation

State	Bill	Legislative Summary	Last action
Alaska	2020 AK S 207 Electric Vehicle Infrastructure Fund 02/21/2020	To establish the EV infrastructure fund	2/21/2020 Adjourned - Senate Labor and Commerce Committee
Arizona	2020 AZ S 1203 01/21/2020	To create an electric car charging station pilot program not previously instituted.	2/10/2020 - Adjourned - Senate Government Committee
Colorado	2020 CO S 167 02/13/2020	To increase consumer access to EVs by allowing manufacturers to sell DTC	03/23/2020 - Enacted
Connecticut	2020 CT H 5226 02/20/2020	To remove restrictions on the installation of EV charging station	02/21/2020 - Public Hearing Scheduled
Delaware	2019 DE H 177 06/04/2019	To encourage adoption of EVs by creating more EV charging infrastructure	06/30/2019 - Defeated by Senate.
Washington DC	2019 DC B 193 03/19/2019	To create infrastructure for EV parking and charging.	12/09/2019 - Public Hearing held.
Florida	2019 FL S 452 10/04/2019	To require the DOT with the Office of Energy to support EV charging	03/14/2020 - In SENATE. Died in committee.
Georgia	2020 GA S 353 02/03/2020	To remove a fee for alternative fueled vehicles and provide tax credits for them	02/04/2020 - To SENATE Committee on FINANCE.
Hawaii	2020 HI SR 32 02/28/2020	To create training courses for repair and maintenance of alternative fuel vehicles	03/05/2020 - Additionally referred to SENATE Committee on EDUCATION.
Illinois	2020 IL S 53 01/16/2019	To create accessible EV charging	03/22/2019 - Rule 3-9(a) / Re-referred to ASSIGNMENTS Committee.
Indiana	2020 IN S 6 1/28/2020	To require EV or hybrid vehicles to pay extra fee to register	02/10/2020 - To HOUSE Committee on ROADS AND TRANSPORTATION.
Iowa	2020 IA S 101 01/24/2019	To establish fuel-efficient motor vehicle tax refund	01/29/2019 - In SENATE Committee on WAYS AND MEANS: Subcommittee assignments: R. Smith, Behn, and Quirmbach.
Kansas	2020 KS S 189 02/14/2019	To create extra registration fee for hybrid and EVs	03/12/2019 - Senate Hearing: Friday, March 15, 2019, 8:30 AM Room 546-S.
Kentucky	2020 KY H 182 01/07/2020	To create tax credit for EV owners	01/09/2020 - To HOUSE Committee on APPROPRIATIONS AND REVENUE.
Maine	2020 ME S 191 02/01/2019	To provide income tax credit for purchase of new EV	04/11/2019 - In SENATE. Placed in Legislative File (DEAD).
Maryland	2020 MD H 111 01/13/2020	To provide greater access to EV charging	03/06/2020 - To SENATE Committee on FINANCE.
Massachusetts	2020 MA HD 94 01/07/2019	To create EV charging stations	02/28/2019 - Assigned House Bill No. 3052
Michigan	2020 MI S 406 08/20/2019	To create EV Infrastructure Council	08/20/2019 - To SENATE Committee on TRANSPORTATION and INFRASTRUCTURE.
Minnesota	2020 MN H 466 01/28/2019	To create alternative fuel vehicle tax	01/28/2019 - Referred by Chair to HOUSE Committee on TRANSPORTATION FINANCE AND POLICY DIVISION.
Mississippi	2020 MS H 536 02/05/2020	To repeal EV taxes	06/03/2020 - Died in committee.
Missouri	2020 MO S 825 01/07/2020	To subsidize customer EV charging stations	02/19/2020 - Hearing conducted.
Montana	2020 MT D 323 08/28/2020	To revise biodiesel blending and tax credits	09/23/2020 - Draft in legal review.
Nebraska	2020 NE L 366 01/16/2019	To change registration fee for EVs	06/21/2019 - First Session Adjourned - Carried Over to Second Regular Session.
Nevada	2020 NV BDR 33 07/01/2020	To revise laws on EVs	07/01/2020 - FILED.
New Hampshire	2020 NH S 221 01/03/2019	To establish commission to study alternatives to road toll of EVs	05/02/2019 - Failed to pass HOUSE.
New Jersey	2020 NJ ACR 94 01/27/2020	To oppose EPA standards on reductions to emissions	02/03/2020 - To ASSEMBLY Committee on ENVIRONMENT AND SOLID WASTE.
New Mexico	2020 NM S 2 01/16/2020	To modify the EV tax credit	02/19/2020 - From HOUSE Committee on TAXATION AND REVENUE: Do pass.
New York	2019 NY S 1153 01/11/2019	To create alternative fuel incentive fund	01/11/2019 - To SENATE Committee on FINANCE.
North Carolina	2020 NC H 329 03/11/2019	To exempt EV charging stations from regulation	07/19/2019 - Session Law Number 2019-132
Ohio	2020 OH H 202 04/16/2019	To establish the EV Infrastructure Study Committee	04/30/2019 - To HOUSE Committee on TRANSPORTATION AND PUBLIC SAFETY.
Oklahoma	2020 OK S 802 01/23/2019	To create accessible EV charging stations	02/14/2019 - To SENATE Committee on APPROPRIATIONS.
Oregon	2020 OR D 222 01/09/2020	To amend code for construction of EV charging stations	01/09/2020 - FILED.
Pennsylvania	2020 PA HR 861 05/04/2020	To conduct study on EVs	05/04/2020 - To HOUSE Committee on TRANSPORTATION.
Rhode Island	2020 RI H 7108 01/15/2020	To require vehicles owned and operated by government are electric powered	01/15/2020 - To HOUSE Committee on FINANCE.
South Carolina	2020 SC H 4732 11/20/2019	To facilitate EV charging stations	01/14/2020 - To HOUSE Committee on LABOR, COMMERCE AND INDUSTRY.
South Dakota	2020 SD S 85 01/28/2020	To establish annual fee for EV	02/07/2020 - In SENATE Committee on TRANSPORTATION: Deferred to the 41st Legislative Day.
Tennessee	2020 TN H 1601 01/13/2020	To preview EV issued stickers and project future ownership	06/04/2020 - To HOUSE Committee on CALENDAR AND RULES.
Utah	2020 UT H 59 01/23/2020	To extend availability of tax credit on heavy duty EVs	04/01/2020 - Vetoed by GOVERNOR.
Vermont	2020 VT H 191 02/07/2020	To amend lack of public utility commission and department of public services jurisdiction over EV stations.	02/08/2019 - To HOUSE Committee on ENERGY AND TECHNOLOGY.
Virginia	2020 VA SJR 32 01/06/2020	To request Department of Environmental Quality to study impact of EVs	01/24/2020 - In SENATE Committee on RULES: Passed by indefinitely.
Washington	2020 WA H 1110 01/10/2019	To reduce GHG emissions associated with transportation	03/12/2020 - By order of Resolution - Returned to HOUSE for Third Reading.
West Virginia	2020 WV S 248 01/10/2020	To repeal additional fees on alternative fuel vehicles	01/10/2020 - To SENATE Committee on TRANSPORTATION AND INFRASTRUCTURE.
Wisconsin	2020 WI S 236 05/23/2019	To create grant program for charging EVs	04/01/2020 - Failed to pass pursuant to Senate Joint Resolution 1.

Source: www.web.lexis-nexis.com

A2. Federal Legislation

Federal Legislation

Bill or Act	Legislative Summary	Last Action
2020 116th Congress S.4484 - America's Clean Future Fund Act 08/06/2020	A bill to amend the Internal Revenue Code of 1986 to establish a carbon fee to reduce greenhouse gas emissions.	08/06/2020 Read twice and referred to the Committee on Finance
2020 116th Congress H.R.2 - Moving Forward Act 06/26/2020	A bill to invest in environmental sustainability of transportation on highways and transit systems	07/20/2020 Received in the Senate.
2020 116th Congress H.R.7330 - GREEN Act of 2020 06/25/2020	A bill to amend the Internal Revenue Code of 1986 to create incentives for renewable energy and energy efficiency	06/25/2020 Introduced in House
2020 116th Congress S.3594 - Ending the Electric Vehicle Entitlement for the Wealthy 05/04/2020	A bill to eliminate tax credit for EV whose income exceeds $163k a year.	05/04/2020 Read twice and referred to the Committee on Finance.
2020 116th Congress H.R.5428 - Grid Modernization Research and Development Act of 2020 02/12/2020	A bill to require the DOE to invest in research and devleopment and grant programs to modernize the electric grid.	08/11/2020 Placed on the Union Calendar, Calendar No. 380.
2020 116th Congress H.R.5751 - Electric Vehicles for Underserved Communities Act of 2020 02/04/2020	A bill to require the DOE to assess EV charging infrastructure in underserved communities	02/04/2020 Referred to the Committee on Energy and Commerce, and in addition to the Committee on Science, Space, and Technology, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
2019 116th Congress H.R.5530 - Electric Vehicle Infrastructure Rebate Act of 2019 12/19/2019	A bill to require a DOE to encourage investment in EV charging infrastructure.	12/20/2019 Referred to the Subcommittee on Energy.
2019 116th Congress H.R.5393 - Affordable American-made Automobile Act 12/11/2019	A bill to expand tax credits to include used and new electric vehicles. Credit is applicable to EV charging stations	12/11/2019 Introduced in House
2019 116th Congress S.2403 - Community Health and Clean Transit Act of 2019 07/31/2019	A bill to make direct loans to buses and bus facilities of state and local governments to acquire electric buses	07/31/2019 Introduced in Senate
2019 116th Congress H.R.2741 - Leading Infrastructure for Tomorrow's America Act 05/15/2019	A bill to create new programs for infrastructure development, including communication, drinking water, energy, or health care infrastructure.	06/04/2019 Referred to the Subcommittee for Indigenous Peoples of the United States.

Source: www.congress.gov

A3. Court Rulings

Case	Year	Holding
Golden Door Properties, LLC v. County of San Diego	2020	San Diego County’s climate action plan was deemed as inadequate and did not meet proper protocols under Public Resources codes and Healthy and Safety Codes. Their plan was compared to another climate action plan named “Newhall” which the court determined was far more robust as a climate change plan and in line with municipal codes because of its inclusion of incentives like EV subsidies and 2000 EV charging stations.
AAA OREGON/ IDAHO AUTO SOURCE, LLC; AAA Oregon/ Idaho; and Oregon Trucking Associations, Inc., Petitioners, v. STATE OF OREGON, by and through the Department of Revenue, Respondent.	2018	AAA Oregon/Idaho challenged EV rebates. In a unanimous ruling, the court ruled that the Oregon Constitution statute that the plaintiff attempted to apply that would otherwise bar such a rebate did not apply in this case

 

Table A4 [3]

Table A5. [6]

Table A6. [5]

Table A7. [5]

 

 

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