The power of the electric vehicle to transform personal mobility and make it compatible with environmental goals is unique. Governments and manufacturers already know. Last week, at the Automobile Barcelona, the Spanish Association of Automobile and Truck Manufacturers (Anfac) asked the government not to postpone the deadlines any longer to adhere to the Strategic Project for the Recovery and Economic Transformation (Perte) of the electric vehicle that will mobilize up to 23,000 million euros until 2023. Spain is the second largest car manufacturer on the continent and tries to maintain that leadership with new technology.
More than time limits, the key factor in this transition is the substitutability. If the electric car is an excellent replacement for the
combustion, people will naturally adopt it as prices drop. But if it is not, they will turn their back on it. And if a date is imposed to ban the combustion engine and electric vehicles are poor substitutes, then there will be an irretrievable loss of efficiency: everyone will travel in cars that are inferior to what we had.
One of the worst ways to carry out this transition is one that seems logical to many politicians: setting a date from which the sale of vehicles that produce polluting emissions is prohibited. This decision can cause the unwanted effect of an abrupt transition., where companies feel incentivized precisely to increase the production of combustion vehicles even before the limit. This is one of the caveats of the study ‘The transition from electric vehicles and the economic consequences of banning gasoline vehicles’ in which economists Stephen P. Holland, Erin T. Mansur and Andrew J. Yates perform a dynamic simulation of the evolution towards the electric car. The study appeared in August in the American Economic Journal.
In Spain, the deadline for the sale of combustion vehicles has been set in 2040. The Climate Change and Energy Transition Law, approved last April, provides that “new passenger cars and light commercial vehicles … gradually reduce their emissions , so that no later than the year 2040 they are vehicles with emissions of 0 g CO2 / km ». However, in July, the European Commission proposed to advance to 2035 the ban on the sale of cars or vans that emit carbon dioxide. In total, more than 20 countries have adopted laws to ban the sale of fossil fuel-powered vehicles, starting with Norway in 2025 and ending with Costa Rica in 2050.
The work of Holland, Mansur and Yates recognizes that the autonomy of electric cars has increased and their production costs are falling thanks to technological advances in batteries, electric motors and new materials. To this must be added the investment in refueling infrastructure. All this makes the electric car an increasingly effective substitute for combustion. If to this is added the decrease in pollution produced by electricity generation (another Holland study found that pollution for this reason in the US went from 245,000 million dollars to 133,000 million in the period 2010-2017), the Pressures for the transition to the electric vehicle to be faster are much more frequent.
But “what should manufacturers do if a time limit is imposed on them?” Asks Holland. “Companies know that gasoline vehicles will be banned from 2040, so they will increase the production of gasoline vehicles in 2038 and 2039, just before the ban. By setting a goal, you give companies the incentive to do exactly what we don’t want to do. ‘
To avoid this, the authors propose the implementation of a novel policy: a cumulative share of combustion vehicle production. This measure is similar to the one that the US Environmental Protection Agency (EPA) implemented to reduce lead in gasoline in the 1980s. It would try to establish the number of gasoline cars that manufacturers can produce, but without telling them when to do it. “So if they want to produce gasoline cars after 2040, for example, they have to reserve an earlier permit and then use it later. Therefore, any gasoline car produced after 2040 would have to be compensated for by a car that was discontinued before that date, ”explains Holland. This would ensure a smoother transition, according to the authors.
The study also assesses two sources of inefficiencies: the moment of adoption of the new technology and the combination of gasoline and electric vehicles in the long term, which will depend on the substitutability between the two. He also stresses that the success or failure of public policies can improve the efficiency of this transition. In fact, there is a case in which the ban on the gasoline vehicle can mitigate an eventual irrecoverable loss of efficiency: if the electric car were to become an excellent substitute for the traditional vehicle. However, if it were revealed as deficient and it was decided to ban combustion engines, the resulting loss of efficiency is almost 200% of the costs generated by the negative externalities of conventional cars.