Counteracting the EPA’s Tilt Away from Electric Vehicles

Investments in charging infrastructure may encourage electric vehicle adoption even more than vehicle standards.

Electric vehicles have taken off in the US. In 2017, electric vehicle sales surged by 25%. In contrast, overall vehicle sales dropped by nearly 2%. But now the Trump Administration has formally proposed several actions that would slow down electric vehicle adoption. Fortunately states have tools to fight back.

How Federal Policies Could Harm Electric Vehicles

Federal fuel economy standards — established by the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) — have saved money and reduced harmful pollution, including greenhouse gas emissions, over the last 40 years. The current standards, adopted by the Obama Administration in 2012, require that automakers cut cars’ gasoline use per mile by 25% by 2020. Prior to leaving office, President Obama had started the process to cut gasoline use by an additional 12% by 2025.

Electric vehicles are favored by the rules. For example, the rules assume that electric vehicles generate no upstream greenhouse gas emissions. In other words, the emissions from the coal and natural gas power plants that more-often-than-not produce the electricity are not counted. Also, automakers get to count electric vehicles more than once, thanks to a multiplier in the rules. The multiplier is intended to encourage sales of advanced technologies in the early years of the program. It phases out over time.

The new NHTSA/EPA proposal would freeze the vehicle standards in 2020, cancelling the additional tightening proposed under President Obama. So, after 2020, automakers would have no further incentive to increase the share of electric vehicle sales.

The Trump Administration also wants to kill California’s Zero Emissions Vehicle (ZEV) mandate. The ZEV rules require that any automaker that sells gasoline-powered vehicles in California must also sell a growing share of zero-emissions vehicles, such as electric vehicles, in the state. Automakers can also choose to buy ZEV credits from other electric vehicle producers or pay a penalty. Nine other states have adopted the ZEV mandate.

NHTSA/EPA have proposed to revoke the federal waiver that allows California and the nine other states to adopt ZEV mandates. In California, the emissions standards and ZEV mandate have contributed to electric vehicles reaching 5% of vehicle sales in 2017, over seven times the share in the other 49 states.

The proposed rule changes will likely be challenged in the courts. However, if legal challenges fail, electric vehicle sales could lose momentum. Even the legal uncertainty harms the market.

But there is something states can do to keep the electric vehicle revolution rolling.

Electric Vehicles Need Charging Stations and Vice Versa

The cost of a vehicle is not the only consideration before a driver gets behind the wheel of an electric vehicle. Convenience matters, too. At the end of 2017 there were fewer than 50,000 public charging stations in the US. In contrast, there are over 150,000 retail gasoline fueling sites. Assuming that each site has eight pumps, there are over one million gasoline pumps.

But comparing the number of fueling locations under-states the gap. An electric 2018 Chevrolet Bolt connected to a typical, Level 2 public charger will spend an hour to get enough energy to travel 25 miles. A driver of a 2018 Chevrolet Sonic, the gasoline-powered equivalent of the Bolt with a fuel economy of 30 miles per gallon, pumping gas at 10 gallons per minute will receive 25 miles worth of fuel in just 5 seconds! This means we need far more electric charging stations than gas pumps to deliver the same amount of energy. In other words, gasoline vehicle owners don’t need to worry about the availability of fueling infrastructure, but electric vehicle owners do.

Home charging can help bridge the gap, but as Lucas Davis highlights in a recent blog and working paper, many drivers, especially those in rental housing, lack the ability to charge at home, which encourages them to hold on to gasoline vehicles.

The interdependency between electric vehicles and charging infrastructure presents a challenge for policymakers. Should policy focus on promoting vehicles or infrastructure? If both, then what’s the right balance?

Research by Shanjun Li et al. published in 2017 describes how a larger charging network increases the value of adopting electric vehicles. Similarly, when there are more electric vehicles in circulation, the value of investments in charging infrastructure increases. It sounds like a virtuous cycle. The two sides of the market– the cars and the chargers — spur each other’s growth. However, that’s not what happens. Individual automakers don’t want to invest in a more robust charging network because their competitors would also benefit from the chargers, so they underinvest. Without government intervention to support the market there’s a risk that the market collapses.

An exception has been the interstate network of fast charging stations. A 2017 working paper by Jing Li describes how automakers such as Tesla have used incompatible standards to lock their car buyers into proprietary high speed charging networks. She finds that this lock-in has led automakers to invest more in their proprietary charging infrastructure. However, she concludes that consumers don’t benefit from this approach, and it’s unclear how long this situation will last.

The Li et al. paper meanwhile tries to quantify the two parts to the potentially virtuous cycle. How much does the expansion of charging infrastructure increase demand for electric vehicles and how much can increased adoption of electric vehicles increase infrastructure investments? They estimate that a 10% increase in the number of public charging stations would increase electric vehicle sales by 8%. A 10% increase in the number of electric vehicles would lead to a 6% increase in charging stations.

They also look at the effectiveness of public subsidies and conclude that public spending on charging infrastructure could be twice as effective at encouraging electric vehicle adoption as subsidies on the vehicles themselves. In part, that’s because infrastructure availability has strong effects on electric vehicle adoption. But it’s also because the number of drivers who will adopt electric vehicles early is not very responsive to the price, so large car subsidies are necessary to have much impact.

Building Out Charging Infrastructure to Keep Electric Vehicle Adoption in Drive

The new Trump administration proposals are focused on motor vehicle emissions because that’s an area where the federal government has authority under the Clean Air Act. The proposals wouldn’t affect a state’s ability to promote charging infrastructure. This can come directly through tax incentives and subsidies to households, businesses and charging network companies. It can also occur through investments by electric utilities that the state regulators and local governing boards allow to be passed onto electricity consumers through rate increases.

California is already well down this road with $2.5 billion in announced spending on charging infrastructure. Other states that want to keep the electric vehicle momentum going might want to take a similar course.