The age of the electric vehicle seems to be upon us—though it would be more correct to say that the government is hastily ushering it in. In 2023, electric vehicles made up 7.6% of all new light duty vehicles sold in the U.S., but the federal government is clearly setting its sights much higher—and on a fast timetable. Several states, including California, New Jersey and Virginia, have issued mandates that all new vehicles sold beginning in 2035 are to be electric vehicles. The Environmental Protection Agency’s proposed vehicle emissions standards, set to be officially confirmed in March 2024, target a 60% market share for new battery-powered electric vehicles (BEVs) by the 2030 model year.
Whether subsidies or mandates, each of the policies the government has pursued favoring EV use is problematic and likely to create more harm than good. Electric vehicle sales mandates, in particular, should be abolished because they will raise transportation costs for many families and reduce freedom without producing significant benefits to the environment or climate. The same could be said for other costly government policies that distort the market in favor of electric vehicles.
A Host of Unintended Consequences
Those who support electric vehicle sales mandates maintain that vehicle emissions make up a large share of CO2 emissions in the U.S. (Although EVs do not emit any CO2 while they are operating, CO2 is emitted to produce the electricity used to charge their batteries.) However, the generation of electricity to power EVs results in less CO2 per mile driven than gas-powered vehicles emit, and the emissions of EVs will be lower if a larger share of the electricity they use is produced from renewable sources.
But while operating EVs results in lower CO2 emissions, this is partially offset by the fact that 30% to 40% more CO2 is emitted in the production of EVs than gasoline cars. Battery production results in substantial CO2 emissions. Therefore, how much CO2 reduction occurs from owning and operating EVs depends on how the electricity is generated and the life of the vehicle.
Part of the argument in favor of EVs depends on renewable energy being used to generate a growing share of electricity over the years so that CO2 emissions will decline more over time with EVs than with gas-powered vehicles. President Biden issued an executive order in 2021 calling for “100% carbon pollution-free electricity” by 2030. Yet this goal has no chance of being achieved: The U.S. Energy Information Administration projected that the share of electricity from renewable sources (wind, solar and hydroelectric) will double from 21% in 2020 to 42% by 2050. The reality is that we’re moving toward 100% clean energy much more slowly than the administration wants.
A rapid transition to EVs could have a number of unintended consequences. One concern is that if electric vehicle use increases fast enough to satisfy mandates, the electric grid may be overloaded, especially during peak periods. The problem can be illustrated by the example of Palo Alto, California, which has a goal of 80% EV use by 2030. More than 3,000 transformers distribute electricity to different parts of the city. But without improvements to the transformers, if the city indeed meets its EV and electrical appliance targets by 2030, more than 95% of them would be overloaded. On top of that, overloading transformers causes them to wear out sooner.
Limiting the costs of the transition to EVs will require demand management—giving people incentives to charge their vehicles at times when electricity demand is not too high. But getting the timing of demand right is more complicated than just getting most people to charge their vehicles overnight, when overall demand for electricity is low. Too much overnight charging could interfere with traditional nighttime cool-down periods for transformers, reducing their lifetimes.
The reduction in CO2 that can be achieved by switching to EVs depends on how large the share of electricity from renewable sources becomes. But any increase in renewable energy use for generating electricity will also have unintended consequences, particularly higher costs and reduced reliability of the electric grid. Because they are intermittent, new wind and solar capacity cannot replace fossil fuel generating plants on a one-for-one basis. Many of those plants will need to continue to be available as backup sources of power to be used when the wind is not blowing or the sun is not shining.
Although wind and solar power have similar or lower total costs than fossil fuels, including discounted capital costs, the additional cost of backup generating capacity and increased grid costs make wind and solar power more expensive. Furthermore, proponents of wind and solar power have downplayed the environmental consequences of a massive expansion of the area covered by solar panels and wind turbines. Estimates are that if all electricity in the U.S. were generated by renewable energy, between 16% and 33% of the entire land area of the U.S. would be covered by windmills and solar panels.
Problems with a Government-Directed Transition
A transition to electric vehicles involves a large number of interdependent changes in infrastructure, social institutions and government policy, as well as operational challenges. Although markets and cultures can handle rapid change (and have done so in the past), bottom-up change works much better than change that comes from centralized government plans. Government mandates lead to outcomes in which the costs exceed the benefits for many people.
In the pursuit of expanded EV production, supply chain challenges abound. A whopping 8 million EV batteries would have to be produced annually to make even half of all the new vehicles sold in the U.S. EVs—about seven times as many as were produced in 2023.
If half of the vehicles sold in 2030 are EVs, McKinsey & Co. estimates that 1.2 million public charging stations would be needed, which would require building an average of about 400 new chargers every day. The cost of hardware, planning and installation for this would exceed $35 billion—much more than the amount appropriated in the Bipartisan Infrastructure Law enacted in 2021. And it is unlikely that charging stations would be profitable to operate: It takes five times as long to charge a vehicle at a fast charging station than it does to fill a vehicle with gasoline, and the capital cost of a fast charging station is about five times as much as a gas pump.
Without government subsidies, many fewer people would own and use EVs. But even with subsidies, EVs are more expensive than gasoline vehicles. EV owners are mostly white males, with more than half older than 55; 57% earn more than $100,000 per year. As it stands, EVs are simply out of reach for many Americans. Many drivers also have concerns about the availability of chargers, particularly for long-distance travel.
The problems of traveling long distances in an EV are illustrated by a June 2022 story in the Wall Street Journal about a trip from New Orleans to Chicago and back. The 2,000-mile trip in a gasoline car would have involved spending an average of 8 hours per day on the road over four days. But because they were driving an EV, they had to travel late into the night on two of the four days when some charges did not last nearly as long as expected and some charging stops took much longer than anticipated.
The Texas Public Policy Foundation has estimated that without direct subsidies, regulatory credits and subsidized infrastructure, a 2021 EV would cost almost $50,000 more to own over a 10-year period than a gas-powered vehicle. This includes the federal tax credit of $7,500 per electric vehicle, state subsidies, subsidies for charging infrastructure, the additional cost of electricity transmission and generation that is borne by other ratepayers, and the cost of regulatory mandates, including corporate average fuel economy (CAFE) standards and federal greenhouse gas emissions standards.
The biggest transfer to EV owners is the cost of CAFE credits, which is hidden from the public. Makers of gasoline and diesel vehicles must buy regulatory credits from EV producers in proportion to the amount the average fuel economy of their fleet falls short of 36.3 miles per gallon, while EV producers can sell credits in proportion to the amount the appraised average fuel economy of their fleet exceeds this average. The cost of buying these credits gets passed along to gasoline-car buyers, while the revenue from selling them gets passed along in reduced prices to EV buyers. Although federal tax credits are being phased out as EV sales increase, penalties for not meeting fuel economy standards, and thus the value of CAFE credits, are increasing.
Despite the enormous subsidies, EV output increased faster than demand so that many producers lost money on their EV sales in 2023. Hertz also found higher than expected collision and damage expenses for EVs and decided to sell 20,000 EVs from its fleet and replace them with gas vehicles. In response to recent trends, almost 4,700 auto dealers across the U.S. sent a letter to President Biden asking him to delay EV mandates until the battery supply chain develops outside of China and the charging infrastructure can support a significant increase in the number of EVs.
Environmental and Social Costs
While many assume that EVs must be better for the environment, the reality isn’t quite so clear. Lithium-ion batteries, which power most EVs, pose substantial risks to the environment. Some methods of lithium mining require enormous amounts of water, often in arid environments where water supplies are very limited. In the Atacama Desert of Chile where lithium mining has grown recently, water levels in wells have declined, meadows and lagoons have shrunk, and the flamingo population has declined. The environmental costs are likely to be larger with a rapid transition, because given enough time, firms can find innovative ways to reduce the harmful consequences of battery production and associated mining.
Besides the environmental impact of battery production, labor practices associated with the mining of lithium, nickel and cobalt, which are used in EV batteries, are concerning. A Chinese supplier of batteries to Tesla and BMW is exploring opportunities to mine lithium and nickel in Xinjiang, where Uyghurs and other Muslims have been subjected to forced labor. Cobalt mines in Congo also employ thousands of child laborers.
Overall, it’s clear that government EV mandates will do more harm than good. EVs are already too costly for many Americans to buy, and a rapid, required transition may increase costs of owning and operating them because of the difficulty of expanding battery production and building enough charging stations. It may also reduce the reliability of the electrical grid. Meeting EV mandates may do less to reduce CO2 emissions than proponents anticipate, and the environmental and social costs of expanding lithium battery production quickly are substantial.
A less intrusive alternative would be to impose a moderate carbon tax on gasoline and diesel fuel. This would give people an incentive to switch to more fuel-efficient vehicles or to EVs without imposing on Americans the high costs of eliminating gas-powered vehicles. Because increased atmospheric CO2 has both benefits and costs and there is still considerable uncertainty about how much it impacts climate, the question of whether to impose a carbon tax deserves further debate.
Many Americans value the freedom to continue to choose what vehicles to buy based on cost, convenience and reliability. Rather than enforcing mandates with all the possible unintended consequences, allowing people to choose the vehicle they drive as changing technology makes more options available will likely lead to more sustainable approaches to limiting climate change and its consequences.
