June 6, 2024, The Wall Street Journal I have published a short op-ed online (not in print) entitled “How electric cars can make everyone happyNot the ideal title. My article was about some big changes in EVs. policy It would make nearly everyone happier than current policies.
Here is the full editorial:
How electric cars can make everyone happy
Removing subsidies, duties and tariffs would expand EV use while allowing people to continue driving the cars they want.
by
David R. Henderson
June 6, 2024 5:48 PM ET
One of the first things you learn in economics class is the concept of trade-offs: you can’t have everything you want. This is relevant to the debate over electric cars: U.S. autoworkers want to keep their jobs. Many U.S. drivers still prefer cars with internal combustion engines. Environmentalists want Americans to buy electric cars. And free traders want free trade. Something has to be sacrificed.
Or is it? There is a path that each party can take to achieve many of their objectives. First, eliminate EV mandates and subsidies. Second, remove the 100% tariffs that President Biden imposed on EVs from China and allow them to be imported duty-free. Free trade would give low- and middle-income Americans the opportunity to buy relatively cheap imported EVs. More people driving EVs would make environmentalists happy. And eliminating mandates and subsidies would allow U.S. automakers to focus on what they do best: making internal combustion engine vehicles. This would keep U.S. auto workers employed and keep certain skills in use.
If we stick to our current policy course, we won’t achieve any of these goals. First, environmentalists won’t get there. The Environmental Protection Agency estimates that 56% of new cars will need to be electric by 2032 to meet its emissions goals. Even with subsidies and regulations like California’s, meeting this standard is unrealistic. According to the Department of Energy, only 9.1% of light vehicles sold last year were electric and hybrids combined. According to the Energy Information Administration, only 1.2% of light vehicles on the road in 2022 will be electric or plug-in hybrids.
There are three reasons why it’s unrealistic to expect more than half of new car sales to be EVs. First, EVs are expensive. The average price of a new EV sold in the U.S. is just over $50,000, which is more than most drivers are willing or able to pay. Second, people are right to worry about driving long distances in an EV and being able to get to a charging station where they can quickly recharge. Third, when temperatures drop below freezing (as they often do in many parts of the U.S.), it takes a pretty long time to charge an EV. (DRH Note: I would have disagreed with the editor’s insertion of “or can.” The vast majority of drivers can afford $50,000, but they’d have to give up a lot of other things. But I didn’t disagree because I was focused on other parts of the article I wanted the editor to get right, and she got it right.)
It’s unlikely that EVs will account for more than 25% of annual sales within the next decade. But simply pursuing free trade, without subsidies or mandates, could get us much closer to that goal in a few years. Free trade would lower the first of three barriers: costs. Chinese manufacturer BYD offers several EV models for under $20,000, significantly cheaper than U.S.-made EVs.
Making EVs more accessible and affordable by allowing tax-free imports would help environmentalists achieve their goal of putting more EVs on the road, make it easier for consumers who want to buy EVs to do so, and allow automakers to focus on building vehicles with internal combustion engines, supporting autoworker jobs.
So let’s eliminate mandates, subsidies and tariffs. There is no perfect trade-off, but some are better than others.
Henderson is a fellow at Stanford University’s Hoover Institution and served as senior energy economist on President Reagan’s Council of Economic Advisers.
