Are There Environmental Benefits from Driving Electric Vehicles?

The Importance of Local Factors


Stephen P. Holland, Erin T. Mansur, Nicholas Z. Muller, and Andrew J. Yates

American Economic Review, Volume 106, Issue 12, December 2016, Pages 3700−3729.    Online Appendix   Data   AEA Summary
Working Paper, May 2016.
NBER Working Paper 21291, June 2015.  
VOX summary, August 2015.
Cato Research Brief, September 2015.



We combine a theoretical discrete-choice model of vehicle purchases, an econometric analysis of electricity emissions, and the AP2 air pollution model to estimate the geographic variation in the environmental benefit from driving electric vehicles. The second-best electric vehicle purchase subsidy ranges from $3025 in California to -$4773 in North Dakota, with a mean of -$742.   Ninety percent of local environmental externalities from driving electric vehicles in one state are exported to others, implying they may be subsidized locally, even when the environmental benefits are negative overall.  Geographically differentiated subsidies can reduce deadweight loss, but only modestly.