On June 6, 2024, the Wall Street Journal published my short op-ed online (but not in print) and titled it: “How electric vehicles can make everyone happy.” It wasn’t an ideal title. My article was about some big changes in EV policy could make almost everyone happier than current policies are likely to make.
Here’s the entire op-ed:
How electric vehicles can make everyone happy
Ending subsidies, mandates and tariffs would increase the use of electric vehicles while allowing people to continue driving the cars they want.
By means of
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 relevant in the debate about electric driving. American auto workers want to keep their jobs. Most American drivers still prefer cars with internal combustion engines. Environmentalists want Americans to buy electric vehicles. And free traders want, well, free trade. Something has to give.
Or is it? There is a path that allows each party to achieve many of its objectives. First, end electric vehicle mandates and subsidies. Second, eliminate President Biden’s 100% tariff on electric cars from China and allow duty-free imports. Free trade would give lower- and middle-income Americans the opportunity to buy relatively cheap imported electric vehicles. More people driving electric cars would make environmentalists happy. And ending mandates and subsidies would allow American automakers to do what they do best: make cars with internal combustion engines. That, in turn, would keep American auto workers employed and able to use their specific skills.
If we stick to our current policy path, none of these goals will be achievable. First, environmentalists cannot achieve their goals. The Environmental Protection Agency estimates that 56% of new cars will need to be electric by 2032 to meet the agency’s emissions targets. Even with subsidies and California mandates, hitting that benchmark is unrealistic. According to the Energy Department, electric vehicles and hybrids together made up just 9.1% of all light-duty vehicles sold last year. According to the Energy Information Administration, only 1.2% of light-duty vehicles on the road in 2022 were electric vehicles or plug-in hybrids.
There are three reasons why it is unrealistic to expect that more than half of new cars sold will be electric cars. First, electric cars are expensive. A new electric car sold in the US averages just over $50,000, more than most drivers want or can afford. Secondly, people are rightly concerned about driving an electric car over long distances and being able to reach a charging station that charges the car quickly. Third, it takes significantly longer to charge an electric car when temperatures drop below freezing – which often happens in much of the US. [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 electric vehicles will account for more than 25% of all annual car sales within the next decade. But we could probably get much closer to the 25% mark in a few years, without subsidies or mandates, simply by pursuing free trade, which would lower the first of the three barriers: costs. BYD, a Chinese manufacturer, offers a number of EV models that cost less than $20,000 – significantly cheaper than American-made electric cars.
If the U.S. makes electric cars more accessible and affordable by welcoming duty-free imports, environmentalists will move closer to achieving their goal of getting more electric cars on the road, consumers who want to buy electric cars will be able to do so more easily, and automakers can make this easier. focus on making cars with internal combustion engines, which would support the employment of auto workers.
So let’s get rid of mandates, subsidies and tariffs. There is no perfect trade-off, but some are better than others.
Mr. Henderson is a research fellow at the Hoover Institution of Stanford University. He served as senior energy economist on President Reagan’s Council of Economic Advisers.