The social costs and benefits of electric cars

There is a nice Room for Debate series at the New York Times on electric cars.  See here.

I like Chris Knittel's position best:
The all-electric Nissan Leaf is an exciting new product in the automobile market...

The benefits of all-electric vehicles from an environmental perspective are clear. In terms of climate change, electric motors are more efficient than internal combustion engines requiring less energy to travel the same distance. If the electricity powering the vehicles comes from low greenhouse gas-emitting sources, the transportation sector can significantly reduce its greenhouse gas emissions. In terms of local pollutants, electric vehicles move the location of these emissions from city streets to rural areas where fewer people are affected.

But there are two factors that may keep electric vehicles from being the technology of the future. First, ...[g]one will be gas stations, replaced by either 440 volt quick charge stations that will still require at least 30 minutes to charge the batteries, or battery exchanges ....

Will consumers be willing to only charge at night, or wait 30 minutes to charge during the day? The frustrated faces I see when consumers have to wait for one car to finish refueling at gas stations suggests not. Adding to these frustrations is the fact that the range of the Leaf is roughly 100 miles...

Second, batteries are expensive. They are so expensive that for most uses, even accounting for the added cleanliness of the Leaf, the full lifetime cost of the Nissan Leaf will be greater than a comparable gasoline-powered sedan.

Heavy state and federal subsidies may make the Leaf privately economic for some of us. The key question, however, is whether ... that money be better spent elsewhere? The answer appears to be yes.

The main economic argument for subsidizing .... costs in the future fall as a result of experience in building the product ... Unfortunately, the evidence on such “learning” is weak. .... It is true that costs of hi-tech products fall over time. But for many products, however, this is due to technological progress, not learning. ...

My own work suggests that ...[h]ad we kept weight and horsepower constant, fuel economy would have increased by 50 percent from 1980 to 2006. In practice, it increased by 12 percent, while weight increased by 30 percent and horsepower doubled.

All of this suggests that the money going to subsidizing the Leaf would be better spent subsidizing research and development. We might even go further and say the money should be used to subsidize battery R&D. In the short term (and the long term), if we want to reduce emissions from the transportation sector, we need to offer incentives for people to drive less and purchase more efficient vehicles. The most cost-effective way to do this is through a carbon tax or a cap and trade system. These approaches have the added benefit that they generate revenue that can be used to either lower income taxes or increase R&D subsidies.
A couple thoughts not mentioned by Knittel:

One argument in favor of subsidizing electric cars concerns the learning that will need to place to organize around new kinds of refueling stations and routines. It seems to me this kind of thing will take experience, not just R&D.

Second, is economies of scale.  This is probably limited, but I imagine that if batteries were built on a larger scale then costs may decline somewhat.  This issue is important only insofar as it combines with refueling/network issue.

Despite these two points, I think Knittel is probably right here: the subsidies would almost surely be better spent on R&D.  If they can figure out a better, more inexpensive battery, all kinds of great things will happen, and that extends well beyond electric cars.

Comments

  1. Electric motors are more efficient than internal combustion engines, so the performance of electric cars are more than fuel cars. As electric car runs on electric source of energy so there is no fear of CO2 emissions like fuel cars, so it does not affect our environment. It is necessary to encourage people to purchase fuel efficient vehicle to reduce emissions.

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