Energy Prices and Electric Vehicle Adoption

Résumé

This paper presents evidence that gasoline prices have a larger effect on demand for electric vehicles (EVs) than electricity prices in California. We match a spatially-disaggregated panel dataset of monthly EV registration records to detailed records of gasoline and electricity prices in California from 2014-2017, and use these to estimate the effect of energy prices on EV demand. Two distinct empirical approaches (panel fixed-effects and a utility-border discontinuity) yield remarkably similar results: a given change in gasoline prices has roughly four to six times the effect on EV demand as a similar percentage change in electricity prices. We explore the implications for optimal EV subsidies, which promote externality reduction benefits and correct for consumer mis-optimization stemming from the undervaluation of future electricity costs. (with James Bushnell and David Rapson)