On June 6, 2024, the the wall street journal I published my short editorial online (but not in print) and titled it “How Electric Vehicles Can Make Everyone Happy“It wasn’t an ideal title. My article explained how some major changes in electric vehicles policy This could make almost everyone happier than is likely under current policy.
Here is the full editorial:
How Electric Vehicles Can Make Everyone Happy
Ending subsidies, mandates and tariffs would expand the use of electric vehicles while allowing people to continue driving the cars they want.
By
David R. Henderson
June 6, 2024 at 5:48 p.m. ET
One of the first things you learn in an economics class is the concept of trade-offs: You can’t have everything you want. This concept is relevant to the debate over electric vehicles. American auto workers want to keep their jobs. Most American drivers still prefer cars with internal combustion engines. Environmentalists want Americans to buy electric vehicles. And free traders want, well, free trade. There are trade-offs.
Or is it? There is a path that would allow each party to achieve many of its goals. First, end mandates and subsidies for electric vehicles. Second, eliminate President Biden’s 100% tariffs on electric vehicles from China and allow tariff-free imports. Free trade would give low- and middle-income Americans the ability to buy imported electric vehicles at relatively low prices. More people driving electric vehicles would make environmentalists happy. And ending mandates and subsidies would allow American automakers to do what they do best: make cars with internal combustion engines. That would allow American autoworkers to keep their jobs and continue to use their specialized skills.
If we stick to our current policies, none of these goals will be achievable. For one thing, environmentalists won’t be able to meet their goals. The Environmental Protection Agency estimates that 56 percent of new cars would need to be electric vehicles by 2032 to meet the agency’s emissions targets. Even with California-style subsidies and mandates, reaching that threshold is unrealistic. According to the Department of Energy, electric and hybrid vehicles combined accounted for just 9.1 percent of all light-duty vehicles sold last year. According to the Energy Information Administration, just 1.2 percent of light-duty vehicles on the road in 2022 were electric or plug-in hybrid vehicles.
It’s unrealistic to expect that more than half of all new cars sold will be electric vehicles for three reasons. First, electric vehicles are expensive. The average new electric vehicle sold in the United States costs just over $50,000, more than most drivers are willing or able to pay. Second, people are right to be concerned about driving an electric vehicle long distances and being able to reach a charging station that will charge the car quickly. Third, when temperatures drop below freezing—which is common in much of the United States—it takes much longer to charge an electric vehicle. (HR note: I would have objected to the editor’s inclusion of “or able.” Most drivers are able to pay $50,000; it’s just that they would have to give up a lot of other things. But I didn’t object because I was focused on other issues I wanted her to address, which she did.)
It’s unlikely that in the next decade, electric vehicles will account for more than 25 percent of all cars sold each year. But we could probably get close to that mark in a few years, without subsidies or mandates, simply by pursuing free trade, which would lower the first of the three barriers: cost. BYD, a Chinese automaker, offers electric vehicle models that cost less than $20,000, significantly less than electric vehicles made in the United States.
If the United States makes electric vehicles more accessible and affordable by accepting tariff-free imports, environmentalists will be closer to achieving their goal of putting more electric vehicles on the road, consumers who want to buy electric vehicles will be able to do so more easily, and automakers will be able to focus on making cars with internal combustion engines, which would support jobs for autoworkers.
So let’s get rid of mandates, subsidies and tariffs. There is no perfect compromise, but some are better than others.
Mr. Henderson is a senior fellow at the Hoover Institution at Stanford University. He served as senior energy economist on President Reagan’s Council of Economic Advisers.
