As President-elect Joe Biden observed during his second debate with soon-to-be-former President Donald Trump, we need to begin the transition off of fossil fuels. Biden and most other rational observers understand this will be a gradual and difficult transition. While here in New York City, the largest source of greenhouse gases is our buildings, in the remainder of America the largest source is transportation. The second largest source of greenhouse gasses nationally comes from the generation of electricity. In order to reduce our greenhouse gas emissions, we must switch electricity generation from fossil fuels to renewables and we need to transition from the internal combustion engine to electric vehicles. This transition will require new technology stemming from government-sponsored research and development, institutional reform of electric utilities and their government regulators, and the rapid development of new private-sector production capacities.
The market alone will not produce the changes required, but the market can deliver key elements of decarbonization. Tesla has already demonstrated that there is at least a niche market for electric vehicles, and last week General Motors bet the ranch on a mass market. As Neal E. Boudette reported in the New York Times:
“For the last few years, Tesla has not only dominated the market for electric cars but also captivated the imaginations of investors, a phenomenon that has lifted its market value to stratospheric heights even though it only just started turning consistent profits. Now General Motors is planning an all-out push to catch up to Tesla, in E.V. sales and in catching investors’ eyes. In a presentation to financial analysts on Thursday, the automaker said that it was expediting plans to introduce electric cars and trucks over the next five years, and expected to spend $27 billion by 2025 on the effort, up from a previous budget of $20 billion.”
The irony of this increased investment is that the extra funds were generated over the summer from higher than expected sales of high-profit, gas guzzling SUVs. GM is not aiming for a niche market and is thinking much bigger by planning to introduce 30 electric vehicle models over the next several years. GM will sell electric Hummers, Cadillacs, pickup trucks and SUVs. The GM electric vehicles will have a battery with a range of 450 miles and that range will grow as technology continues to develop.
GM is not alone in entering the electric vehicle market, as the Times’ Boudette observed:
“Ford has said it is spending $11.5 billion on electric vehicles in a five-year period ending in 2022. Volkswagen recently said it would spend 73 billion euros on electrification over the next five years. In the next few months, Ford plans to start selling a key model in its E.V. push, a battery-powered S.U.V. under the Mustang name. V.W. will introduce an electric S.U.V., called the ID4, early next year. BMW, Toyota, Nissan, Fiat Chrysler and others are also making substantial investments in E.V.s.”
For many Americans living in suburban homes with driveways and garages, the ability to charge their electric vehicles is already present. They simply need to clear some of the junk they are storing in their garage and find an outlet to plug into. For those of us living in cities or people traveling away from home, public charging stations must be built. Parking lots and garages are the logical places to install charging stations and credit cards or smartphones could be used to enable drivers to pay for electricity. In some places, on-street parking meters might be converted into charging stations. But all of these facilities must still be built. Tesla has already created its own “Supercharger network” with 2,000 locations and 20,000 chargers. They claim that the cost of a charge is less than the cost of a gasoline fill-up. While Tesla’s charging network may work for a niche market, it is far from sufficient for a mass market. To accelerate the mass market, some of the infrastructure will require a public subsidy, or at least a public capital investment to be repaid by vehicle charging fees.
In addition to charging infrastructure, the American consumer must be convinced that the electric vehicle is better than a vehicle with an internal combustion engine. For a generation, both will exist side-by-side and we should expect that early on every failed EV will be a news story. Repair shops that make their living off of today’s motor vehicles may not make as much money with electric vehicles since they have fewer moving parts and require less repair work. In addition, auto mechanics will need to learn the new technologies, and some will be unwilling to re-train. Auto repair shops have learned how to repair modern computer-laden autos, so there is reason to believe some would adjust to electric vehicles. Auto companies know how to market vehicles and the billions of dollars and euros on the line will motivate them to learn how to message the advantages of the new models they are building. But the process will take time and the only way to speed it up is for government to provide subsidies to consumers.
Early electric vehicles cost more to purchase but cost less to operate. For people with wealth, the higher capital cost is not an obstacle to purchase. With the development of a mass market and new technology, we can expect the price to come down, but that too will take time. For a few years, government could eliminate sales and excise taxes on electric vehicles, they could provide a tax credit or deduction and they could revive the “cash for clunkers” program to accelerate the retirement of the internal combustion engine. None of this will be popular with the fossil fuel industry and its continued opposition to decarbonization should be expected.
California is already on a path to end the sales of non-electric vehicles by 2035, and to be effective, the goals adopted in California need to be adopted nation-wide. The goals are aspirational and have value, but without a business and implementation plan, they are meaningless. The diffusion of new technology is a complex process and it is rarely neat. There are many examples of new technologies replacing old ones. Smartphones have replaced most but not all landlines. Streaming music and video have replaced tapes and discs, but the market for vinyl records is making a comeback. Many people read electronic books, but many still prefer paper books. Government bans on products have a bad track record: One only need to examine the case of alcohol consumption during Prohibition and marijuana consumption today. Prohibition led to a boom in alcohol consumption. Inducement and incentives work better than penalties and punishment in influencing most behaviors. Obviously, behaviors like murder and theft require punishment, but buying the “wrong” car should not be penalized.
Government decarbonization policy should be designed to accelerate the transition from fossil fuels. Fossil fuel companies should be encouraged to redefine themselves as energy companies and federal policy should be designed to pay them to keep their fossil fuels in the ground and invest capital in renewables. Just as GM used SUV profits to invest in EVs, oil companies should be encouraged to use their profits to invest in renewable energy. The federal government must invest in mass transportation, charging infrastructure and decarbonization research and development. The goal should be to reward behavior that accelerates the transition and not punish those who resist change.
The details of this process are complex and may at times look daunting. We will make many mistakes along the way and there will be pitched political battles between pragmatists and idealists and between those seeking change and those resisting it. Nevertheless, with political will and agility, these changes can be made in the United States and then shared with the rest of the world. The climate problem can only be addressed globally. As Rene Dubos would say, we have to think globally while acting locally; but America’s responsibility is to help other parts of the world lacking resources to act locally along with us.
Electric vehicles and the infrastructure needed to support them are critical elements of a decarbonization strategy. To those who believe that government should not play a central role in this transition, please remember that government has always played a central role in building transportation infrastructure; Roads, interstate highways, ports, canals, trains, and airports have all been built via a partnership between the public and private sectors. We need to revitalize that partnership now.