In the race to electrification, who is getting left behind?
Tesla’s passionate, tech-forward, affluent consumer base has inspired a long list of aspiring international imitators. They are investing billions chasing luxury, performance and founder Elon Musk’s je ne sais quoi. But as electric supercars lap the competition, it’s important to sharpen our focus on the fundamental goal of electrification: a broad-based transition away from carbon-based energy. Putting EVs in the hands of Americans at all income levels is a critical piece to this puzzle. Unless policy prioritizes technologies and business models that reach beyond America’s affluent suburbs, we will end up with a mobility system that is inequitable and fails to address climate change. The solution starts with better EV policy.
Let’s begin with America’s EV tax credit and the relatively straightforward question: Should governments subsidize rich people buying fancy things? The answer is no. But today the 30D tax credit gives affluent Americans a $7,500 tax rebate for purchasing an EV. The reason this credit is only for the well-off, is because a making about $70,000 a year only has about $1,000 of federal taxes to offset. Their income would have to increase by $45,000 to take full advantage of EV purchasing incentives. As of 2019, the 30D credit has subsidized Tesla to the tune of about $3.1 billion.
Now, this subsidy played an important role in kick starting America’s EV market, increasing the volume of EV production and achieving economies of scale — and it phases out after a manufacturer sells 200,000 EVs. But the GREEN Act is trying to bring back a $7,000 tax credit — that should only happen if credits focus on incentivizing high-utilization, lower-cost vehicles for low-income consumers. (Last week the White House made a nod toward addressing such issues with a fact sheet calling for “point of sale subsidies,” as opposed to tax credits, that would “not go toward expensive luxury models.” It’s a good start!)
A related problem is the issue of EV battery degradation. Three-quarters of Americans buy used cars and as EVs age, their range gets progressively worse. These range losses are a significant penalty for used EV buyers. Good policy would incentivize extending the useful life of used EVs as long as practical and seamlessly transitioning older batteries into a second life as energy storage devices for intermittent wind and solar power.
While EV subsidies need a rehaul, America’s approach to charging infrastructure is just as bad and potentially about to get much worse. EV infrastructure provisions of the Environment and Public Works Committee’s newly released ‘‘Surface Transportation Reauthorization Act of 2021’’ pour money into EV charging solutions that mostly benefit affluent Americans and incumbent EV charging technology providers. Remarkably, one subsidy criterion is that new infrastructure “does not significantly impair existing electric vehicle charging or hydrogen fueling infrastructure providers.” In other words: Don’t compete. Such language prohibits new entrants from offering an alternative to high-priced incumbent infrastructure. (Tesla and SpaceX would not exist today if similar requirements had been applied to their initial government loans and contracts.)
Defenders of this status quo will argue that today’s system works fine and subsidizing incumbents is necessary because today over 90 percent of EV charging occurs at home – which means there is no profitable business model for unsubsidized charging. But again, that’s because today EVs are overwhelmingly owned by affluent early adopters with at-home charging. Research from Carnegie Mellon shows that almost 80 percent of Americans can’t charge at home. Neither is workplace charging a solution. Installing EV charging infrastructure is impossibly expensive for most companies. This is especially true in low-income urban communities where many residents park on the street or communal garages. EV policies that prioritize at-home and workplace charging leave these Americans stranded.
Ironically, it’s those who drive for a living that are the worst off. Many Uber, Lyft and last mile delivery drivers live in garage-less communities and rent a vehicle. Despite huge financial incentives, electric taxis are scarce. That’s because waiting around for 30 to 60 minutes to charge isn’t an option for working drivers. Wasted time comes straight out of family budgets. Rideshare drivers can clock more than 200 miles in a day. For a long-range Nissan Leaf, that means about an hour at a fast charger, five days a week or 250 hours a year. At $20/hour that’s $5,000 siphoned out of a driver’s billfold.
Yet, these are the very people who could most help America get the jump on climate change. Rideshare drivers clock about three times as many miles a year as your average American. And the more of them we shift from gasoline to electric, the faster we’ll reduce our emissions. EVs have high manufacturing emissions (as much as two times as high as a normal vehicle), so we should put them in the hands of people who drive a lot — not in suburban garages where they are parked 95 percent of the time. Yet, this week’s Senate’s Surface Transportation Reauthorization Act reifies many of these inequities.
For solutions, it is instructive to look at China, the world’s largest EV market. China used to provide some of the richest EV incentives in the world (up to $18,000 direct to consumers on top of infrastructure and other subsidies). Today, China’s policy only subsidizes low-cost EVs (less than $45,700) and battery-swap-enabled EVs. This is because battery swapping significantly reduces infrastructure costs and allows high-mileage drivers in taxi, delivery and ride-share vehicles to quickly replace a depleted battery with a charged battery — just as fast as you can fill up at a gas station.
Unlike in America, Chinese policy encourages taxi and ride-share drivers to ditch the cord, save time, save money and still drive electric. Battery swap also reduces their vehicle’s purchase price. Rather than paying for an expensive battery upfront, they pay for the battery as they go. Batteries as a service means that an individual’s EV battery won’t degrade. A driver can always swap out an older battery for a new one. So, the used EV with a worn-out battery ceases to be an issue.
One-third of GHG emissions come from transportation of which three-quarters come from road transport. Electrification is critical to dealing with those emissions. But if we design an EV system and EV policies that only work for affluent suburbanites, our goals for decarbonizing mobility won’t get very far.
The goal of electrification is clean air and a hospitable climate. If our EV system doesn’t work for working-class people, it will exacerbate the yawning economic gap between the haves and have nots, and won’t solve the fundamental problem of climate change — which requires a mass transition to EVs. We need a system that works for working-class Americans. Today, these Americans rely on their Dodge Caravans, Chevy Sparks and Ford F150s. Very soon they will need to be able to depend on their EVs.
Levi Tillemann is a former member of the Obama administration Department of Energy, senior adviser to Valence Strategic and joined Ample from the World Economic Forum where he was leading an initiative on decarbonizing manufacturing, use-phase and end of life emissions of the automobility ecosystem. Tillemann is also the author of “The Great Race: The Global Quest for the car of the Future” (Simon and Schuster 2015).
Khaled Hassounah is the CEO and co-founder of Ample, which aims to accelerate the transition to electric mobility powered by 100 percent renewable energy.
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