High Costs of GHG Abatement with Electrifying the Light-Duty Vehicle Fleet with Heterogeneous Preferences of Vehicle Consumers

Abstract

Ambitious policy targets have recently been set in the US to increase the share of battery electric vehicles (BEVs) in new vehicle sales to 50%, supported by the Clean Vehicle tax credit and investment in electric vehicle charging infrastructure, to reduce GHG emissions from the transportation sector. We develop an integrated multi-sector model that accounts for the effects of consumer heterogeneity in the tangible and intangible costs of BEVs and behavioral preferences in influencing vehicle purchase choices, the dynamics of vehicle stock turnover, and the additional emissions from electricity generation induced by EVs to analyze the effectiveness of these policies in achieving their targets and their economic costs. We find that with the projected mix of electricity generation, these policies will increase the share of BEVs in vehicle stock to 20% at most and reduce GHG emissions by 5% (net of the increase in GHG emissions from the electricity sector) in 2030 compared to the baseline. The net present value of the cumulative welfare costs of these policies over 2022–2030, on the transportation and electricity sectors, is $411 Billion (B) and their cumulative GHG abatement is about 0.9 B metric tons (Mg) of CO₂, implying a welfare cost of abatement of $458 per Mg of CO₂; this is several times larger than estimates of the social cost of carbon. Our findings question the efficacy of a single-minded policy focus on the electrification of vehicles to decarbonize the transportation sector and indicate a significant role for a diversified approach that includes advancing low-carbon biofuels that can lower the carbon intensity of driving most vehicles that will continue to require liquid fuels in the coming decades.