What’s Wrong With The New Electric Vehicle Study?

2015 Nissan LEAF
Source: Nissan

The National Bureau of Economic Research has released a new study claiming that, per mile, electric cars are worse for the environment than their gasoline-powered counterparts. Specifically, the authors claim electric cars are a half-cent more costly per mile than gas-powered cars. As a result, they recommend ending the $7,500 federal tax credit.

“Because electric vehicles, on average, generate greater environmental externalities than gasoline vehicles, the current federal policy has greater deadweight loss than the no-subsidy policy,” say the authors.

The study also points out that where electric cars are driven is the most important factor in determining costs. Los Angeles is highlighted as the best place for them, as electric power is 3.3 cents cheaper per mile than gas power. In rural areas, however, electric cars become 1.5 cents more expensive per mile. The worst place to drive electric cars, apparently, is Grand Forks, N.D., where it’s a full 3 cents more expensive than gas-powered cars.

Despite the cost differences for urban and rural drivers, the federal government gives the same tax credit to everyone. Individual states and cities could tailor subsidies to encourage people to only drive electric cars in their cities, but a more localized approach supposedly has the potential to cause problems by cleaning up some states while exporting that pollution to other, more rural, states.

“This purchase makes society as a whole worse off because electric vehicles tend to export air pollution to other states more than gasoline vehicles,” say the authors. “Over [90%] of local environmental externalities from driving an electric vehicle in one state are exported to others.”

The solution, they say, is to tax cars based on the number of miles driven and adjust those tax levels depending on the environmental impact of each vehicle.

Simply reading through the arguments the authors make, it would be easy for people to be convinced that electric vehicles are a waste of money. After all, as a whole, the average environmental impact of an electric vehicle over the course of 150,000 miles will be an extra $750 per vehicle compared to a gas-powered one. The fact that the National Bureau of Economic Research is a well-respected group adds further credibility to its claims.

Drawing the conclusion that electric cars are bad, though, removes the nuance from what the authors found. The advantage or disadvantage of driving an electric car comes almost entirely from where it’s driven and how the electricity it uses is produced.

James Derek Sapienza/Autos Cheat Sheet
Source: James Derek Sapienza/The Cheat Sheet

When you look at where electric cars are sold and driven, you see that they’re clustered in very specific places. There isn’t anything close to a uniform distribution across the country, and the vast majority of electric cars sold are driven in urban areas where the study shows a greater benefit. Environmental impact aside, the limited range of most electric cars makes them best suited for urban driving anyways, and charging an electric car in rural areas can be difficult.

The other problem the authors point out is how electricity is produced across the country. Western states have more modern power grids that are cleaner and minimize the impact electric cars have on the environment. The Midwest and Northeast have more dated power grids that still rely heavily on coal and pollute more. As a result, despite the congestion in New York City, for example, driving an electric car there is supposedly considerably worse than driving one in Los Angeles.

It appears, then, that the problem with the impact electric cars have on the environment is not specific to the cars themselves and is instead a problem with the way many areas still produce electricity in the United States. Updating and cleaning up the aging power grid would make electric cars more environmentally friendly, but it would also have a much larger impact since all the electricity it produces would be cleaner to use.

Considering that Americans already experience more power outages than any other developed nation, it’s an update that’s important for more than just environmental reasons.

Following the authors’ suggestion that governments tax electric vehicles instead of incentivizing them may make economic sense now, but the consequences of doing so could have major negative effects in the long run. Implementing the infrastructure to support alternatives to fossil fuels takes time, and the U.S. can’t afford to wait until gas gets up to $8 per gallon to start making those investments.

In a sense, the $7,500 tax credit isn’t a reward for saving the environment. Instead, it’s an incentive to encourage further development of the country’s network of electric charging stations.

The biggest advantage that electric vehicles offer is that no matter what changes are made to the nation’s power grid, you’ll still be able to charge your car. They also allow for multiple solutions to all be used to move the country off of fossil fuels. Instead of having to find a single new source of energy to replace gasoline, electric cars can be powered by a combination of solar, wind, nuclear, and hydro-electric energy.

Even better, if we discover a new way to make electricity in 100 years, it won’t change a thing. Electric cars will still charge the same as they do now. The plugs themselves probably won’t be exactly the same, but surely adaptors will be available.

Electric cars certainly aren’t the best choice for everyone right now, and they might not be the future of all transportation. They’re already a great option for some people, though, and continuing to invest in their development is worth it. The NBER study makes some credible points, but using it to support the idea that electric cars are bad or not worthwhile is going too far. Instead, look at it as further proof that cities are great places for electric vehicles, and that the U.S. desperately needs to invest in updating its power grid.

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