On June 6, 2024, the The Wall Street Journal published my short op/ed online (but not in print) and it said, “How Electric Cars Can Make Everyone Happy.” It wasn’t a good topic. My topic was how several major changes EV the policy it would make almost everyone happier than would be possible with current policy.
Here is the entire op/ed:
How Electric Cars Can Make Everyone Happy
Eliminating subsidies, mandates and taxes will increase the use of EVs while allowing people to continue driving the cars they want.
By
David R. Henderson
June 6, 2024 at 5:48 pm ET
One of the first things you learn in an economics course is the concept of trade-offs: You can’t have everything you want. This is important in the discussion about electric vehicles. American auto workers want to keep their jobs. Most American drivers still prefer cars with internal combustion engines. Environmentalists want Americans to buy EVs. And free traders want, well, free trade. Something has to give.
Or is it? There is a way that each group can achieve many of their goals. First, end regulations and subsidies for EVs. Second, remove President Biden’s 100% tariff on EVs from China and allow duty-free imports. Free trade would give low- and middle-income Americans a chance to buy cheaper imported EVs. More people driving EVs would please environmentalists. And ending the mandate and subsidies will allow US automakers to do what they do best: make cars with internal combustion engines. That would keep America’s auto workers employed and able to continue to use their specific skills.
If we stick to our current policy path, none of these goals can be achieved. First, environmentalists cannot achieve their goals. The Environmental Protection Agency estimates that 56% of new vehicles will need to be EVs by 2032 to meet the agency’s standards. Even with subsidies and California-style mandates, meeting that benchmark is a no-brainer. According to the Department of Energy, EVs and hybrids combined made up only 9.1% of all electric vehicles sold last year. According to the Energy Information Administration, only 1.2% of vehicles on the road in 2022 will be EVs or plug-in hybrids.
There are three reasons why it would be unreasonable to expect more than half of new car sales to be EVs. First, EVs are expensive. A new EV sold in the US costs, on average, just over $50,000, more than most drivers are willing or able to pay. Second, people are rightly concerned about driving an EV a long distance and being able to access a charging station that charges the vehicle quickly. Third, when temperatures drop below freezing—which is common in many parts of the US—it takes much longer to charge an EV. [DRH note: I would have challenged the editor’s insert of “or able.” The majority of drivers are able to pay $50,000; it’s just that they would have to give up so much else. But I didn’t challenge because I was focused on other parts that I wanted her to get right, which she did.]
It is unlikely that in the next 10 years EVs will make up more than 25% of all vehicles sold annually. But we could be very close to reaching the 25% mark in a few years, without subsidies or mandates, by pursuing free trade, which would reduce the first of the three barriers: costs. BYD, a Chinese manufacturer, offers EV models that cost less than $20,000—much cheaper than EVs made in the US.
If the US makes EVs more accessible and affordable by accepting tax-free imports, environmentalists will get closer to their goal of getting more EVs on the road, consumers who want to buy EVs will be able to do so more easily, and automakers can. focus on making cars with internal combustion engines, which will support the jobs of car workers.
So let’s get rid of mandates, subsidies and taxes. There is no perfect trade-off, but some are better than others.
Mr. Henderson is a researcher at the Hoover Institution at Stanford University. He was chief energy economist with President Reagan’s Council of Economic Advisers.
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