RFF-CMCC EIEE Webinar-Seminar

Title: The Electric Vehicle Rebound Effect

Speaker: Kenneth Gillingham, Yale School of the Environment

Abstract: Electric vehicles (EVs) are a promising technology for the decarbonisation of transportations, especially now that battery storage technologies are becoming more energy-dense and affordable and policy efforts are in place to make electricity generation cleaner. This has triggered intense policy action around the planned phase-out of internal combustion engine (ICE) vehicles and large volumes of investments by automakers as they convert their production. Yet, the degree to which EVs and ICEs are substitutable in the eyes of consumers is an empirical question. EVs are different from ICEs on a number of dimensions, most notably they generally cost much less to drive but more upfront, and charging stations are not yet as pervasive as gas stations so that users often complain about range anxiety. As EVs are substantially cheaper to drive per mile than ICEs, a rebound effect may occur after a household purchase a EV if the savings are then reallocated to increase total VMT and the miles traveled using ICEs. Yet, applying estimates of the rebound effect obtained from studies that look at purchase of more fuel-efficient vehicle would be inappropriate as the difference in costs per miles is substantially more pronounced. Moreover, policies that make charging cheaper (such as TOU rates, managed charging) may again increase total driving (a second type rebound effect), potentially reducing the promised environmental benefits of EVs. At the same time, policies that increase gasoline prices (such as carbon/gasoline tax) should shift VMT away from ICE vehicles and towards EVs. Understanding the substitutability between these vehicles is therefore crucial as we move towards pricing policies that internalize externalities of gasoline consumption. The aim of this paper is to look at how households adjust their total VMT and the allocation of VMT between vehicles in response to the purchase of an EV (we focus in particular on battery electric vehicles, or BEVs), as well as in response to changes in gasoline prices and electricity rates. These results will also help us estimate to what extent EVs can offset the use of existing ICE vehicles. To answer these questions, we use detailed information on the composition of households’ vehicle portfolio in Massachusetts (from registration data) and the miles driven by each vehicle over time (from inspection data), combined with a rich set of household and location characteristics.

 

This research is the result of a joint work with Beia Spiller (RFF) and Marta Talevi (UC Dublin).

 

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