What Does an Electric Vehicle Replace?

• We estimate a discrete choice model of new vehicle demand, which includes all gasoline and electric vehicle models available in the U.S. market from 2010 to 2014.
• We simulate a counterfactual marketplace in 2014 that does not include electric vehicles to assess which vehicles are being replaced by electric vehicles.
• We find that electric vehicles are replacing relatively fuel-efficient gasoline vehicles that get an average 4.2 miles per gallon more fuel economy than the average gasoline vehicle.
• We also simulate alternative electric vehicle subsidy designs, finding that subsidies targeted toward low and middle income households can be more equitable and more cost-effective than the current uniform federal subsidy.

The emissions reductions from the adoption of a new transportation technology depend on the emissions from the new technology relative to those from the displaced technology. We evaluate the emissions reductions from electric vehicles (EVs) by identifying which vehicles would have been purchased had EVs not been available. We do so by estimating a random coefficients discrete choice model of new vehicle demand and simulating counterfactual sales with EVs no longer subsidized or removed from the new vehicle market. Our results suggest that vehicles that EVs replace are relatively fuel-efficient: EVs replace gasoline vehicles with an average fuel economy of 4.2 mpg above the fleet-wide average and 12 percent of them replace hybrid vehicles. Federal income tax credits resulted in a 29 percent increase in EV sales, but 70 percent of the credits were obtained by households that would have bought an EV without the credits. By simulating alternative subsidy designs, we find that a subsidy designed to provide greater incentives to low-income households would have been more cost-effective and less regressive.

This paper has also been published as a working paper by the National Bureau of Economic Research.