Environmentally Friendly and Unaffordable Electric Vehicles

July 22nd, 2011 § Comments Off on Environmentally Friendly and Unaffordable Electric Vehicles § permalink

On rebound from an SUV, last week I flirted with the idea of an electric vehicle (EV). It is now time for a reality check. EVs are really expensive. Nissan’s ‘Leading, Environmentally friendly, Affordable, Family car (LEAF)’ starts at $38,395. Nissan is redefining affordability, but I am not buying it. Even if an EV has an impressive range, where will I charge it on the road? Realistically, it can only be an extraordinarily expensive second vehicle — unless somebody else pays for it.

If you live in Ontario or Quebec, this can be arranged. Ontario’s Electric Vehicle Incentive Program pays $5,000 to $8,500 towards the purchase of a new EV. The LEAF gets $8,500 (by the way Nissan, it still isn’t ‘affordable’). When you purchase an EV in Quebec, the refundable tax credit for green vehicles takes $8,000 off your taxes.

These incentives encourage consumer adoption. Until recently, similar incentives were widely used to encourage hybrid vehicle adoption. Programs in B.C., Ontario, Quebec, and PEI provided up to $3,000 for the purchase or lease of a hybrid. The Quebec program is still continuing.

On analyzing these programs, we (two colleagues and I) found them to be not very effective. Approximately two-thirds of consumers buying hybrids during the programs would have bought them anyway. Taxpayers just subsidized their purchases.

Only a third bought hybrids due to the incentives. If they had not been offered the incentives, they would have bought small fuel-efficient cars instead. Consequently, overall fuel savings were small, and our governments spent a lot of money to generate them. The average cost to save a litre of fuel was 47 cents, and was $195 to save a tonne of CO2. At incentives of upwards of $8,000 per EV, we expect Ontario and Quebec to bear much higher costs for gasoline or carbon savings.

In Ontario, in addition to the cash incentive, EV owners also get green license plates allowing unrestricted access to High Occupancy Vehicle (HOV) lanes. Antonio Bento (from Cornell University) and his co-authors study a similar Clean Air Vehicle Stickers program in California. This program provides unrestricted HOV access to a limited number of hybrid vehicles. Even though the number of stickers is relatively small, they find significant congestion effects. Due to California’s program, driving time in HOV lanes rises by 9 per cent in morning peak hours. The authors argue that the combination of high congestion costs and restrictive benefits makes this policy very inefficient in transferring benefits to hybrid owners, approximately five times less efficient than cash incentives.

Whether it is cash incentives funded by all taxpayers, or reduced commute times underwritten by carpoolers, should we subsidize the rich buying EV’s? Is this the best way to promote a large-scale diffusion of the EV technology? Wouldn’t it be a better use of our resources to invest in charging infrastructure?

The inability to charge the EV away from home is probably the biggest impediment to their large scale adoption. Portability of fuel and an extensive network of fuel stations has allowed a proliferation of the internal combustion engine for personal transportation. However, developing such a network is the classic chicken and egg problem. There should be a large enough number of EVs for private companies to set up charging stations. If there aren’t enough charging stations, no one is likely to buy an EV. If our governments are serious about promoting EVs they would focus their investment entirely on providing minimal charging infrastructure. Equipping a few GO transit stations with charging points and hoping that retail stores do the same is not enough.

A shorter version of this post appears in the Globe and Mail’s Economy Lab blog.

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The Misperception of Safety in an SUV

July 15th, 2011 § Comments Off on The Misperception of Safety in an SUV § permalink

Sports Utility Vehicles are bigger, taller and heavier than cars. They are designed to rule our roads. Sure, it would be hard to find a parking spot, and I can foresee begging for an increase in my credit limit to fuel the monster, but me and my family would be safer in a Sports Utility Vehicle (SUV). Wouldn’t we?

I need that truck.

In this post at the Globe and Mail’s Economy Lab I argue that a perception of being safe in an SUV is incorrect.

Suggested Reading:

Bradsher K. (2002), “High and Mighty: The Dangerous Rise of the SUV,” Public Affairs, ISBN-10: 1586482033.

Anderson, M. (July 2008), “Safety for Whom? The effects of light trucks on traffic fatalities” Journal of Health Economics, 27($):973-989. doi: 10.1016/j.healeco.2008.01.001

 

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  • About Me

    I am an Associate Professor in Environmental and Resource Economics at the University of British Columbia, Canada.

    Through my research I try to gauge the efficacy of policy designed to help the environment. This research is usually joint with colleagues from the University of British Columbia---the real brains behind it. I recently studied automobile sales in Canadian provinces to determine if tax rebates for hybrid vehicles were cost-effective. Studying appliance sales in the US, I analyzed whether mail-in rebates for energy star appliances helped promote their adoption. I am currently studying whether British Columbia's vehicle retirement program, BC SCRAP-IT is cost-effective and am trying to understand what motivates someone to participate in it.

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