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Will EV Adoption Become California’s Next Economic Engine?

A new study details dramatic economic benefits and large cuts in carbon emissions for California from the impact of electric vehicles over the next 10 years. Other states can profit from the lessons learned.

EV charging station
Shutterstock/Matej Kastelic
By 2030 the projected growth in light-duty electric vehicles in California could increase its Gross State Product by as much as $142 billion, according to a study just released by Next 10, a non-partisan economic and environmental research organization. Expanding sales of EVs will increase real income by more than $300 billion and create at least 394,000 new jobs in the next 10 years, say the authors.

The projections were made using the UC Berkeley Economic Advising and Research (BEAR) model, an advanced forecasting tool that simulates the economic impact of interactions between policy, technology and external factors. The California Energy Commission, Public Utilities Commission and Air Resources Board have used BEAR simulations to gauge the policy implications of environmental and economic policy pathways, as have legislators and governments in other states.

“Electric vehicles can really make a significant difference in reducing transportation emissions,” said Next 10 Founder Noel Perry. “But above and beyond that, we wanted to understand what a BEAR analysis would tell us regarding the positive economic impacts from the purchase of electric vehicles.”

The research considered four possible scenarios, ranging from one in which costs associated with EV adoption remain unchanged to those in which technology innovation drives vehicle costs down, as predicted in reports from the International Council for Clean Transportation and the California Energy Commission. “In all of the scenarios evaluated, large-scale carbon fuel savings translate into billions of dollars of new in-state consumption, income, and tax revenue,” the researchers report.

“In California, we're spending $60 billion a year on gasoline and most of that is coming from out-of-state companies, or out-of-country companies,” said Next 10 Research Director Colleen Kredell. “We can invest in California electricity instead.”

When EV drivers refuel, they contribute to a multiplier effect. Not only do they keep more money in the state, they keep more in their own pockets. It’s already cheaper to fuel an electric car than a gasoline powered-one, according to the U.S. Department of Energy. 



Fuel calculator used by permission of U.S. Department of Energy.


“Consumers are the drivers of the economy,” said David Roland-Holst, a UC Berkeley economics professor and the lead author of the Next 10 study. “Seventy percent of that spending is on services. That’s much more job-intensive than spending on fossil fuels.”

Spending on services creates jobs that can't be outsourced, according to Roland-Holst. “These are state and local employment benefits,” he adds. “The money for fossil fuel energy goes out of most states because they're importers of energy.”

The authors note that economic benefits will be most deeply felt in disadvantaged communities. Because service workers come largely from disadvantaged communities, the BEAR simulation found that an increase in consumer spending will have the greatest benefits for these citizens. 

Lower-income communities also are more likely to suffer health problems as a consequence of air pollution from both vehicles and industrial facilities. Increasing their access to EVs and charging technology can improve air quality, with impacts on both quality of life and health-care costs.

The lessons learned from the Next 10 research on EVs in California deserve attention elsewhere, according to Roland-Holst. “These benefits can be enjoyed in any state in the union because we're talking about vehicle technology that is available to anybody.” 

The study comes at a time when federal regulations or programs are unlikely to be primary drivers for EV adoption. States, however, have the power to offer incentives. “It might be a better path for individual states who want to exercise their right to promote clean technology adoption to simply subsidize it rather than trying to establish standards that might be discordant with federal objectives,” suggested Roland-Holst.
ev-shift-graphic.png
 
The money returned to the economy from EV adoption will go to sectors that are much more job-intensive than the fossil fuel sector. (Source: Next 10)

“The gains for the economy, for households, for disadvantaged communities and for health are so significant that it absolutely makes sense to create policies that are going to get more and more electric vehicles on the road,” said Next 10’s Noel Perry. “I think we need a very significant new push in that direction.”

“Elected officials should appreciate that they can improve the livelihoods of citizens and improve public health by promoting these kinds of policies,” said Roland-Holst. “I would really like to see them place more emphasis on that and not get caught up in millennial visions of a world without global warming. Everything we do in that direction that respects innovation and equity is also going to help us in very material ways.”

Carl Smith is a senior staff writer for Governing and covers a broad range of issues affecting states and localities. He can be reached at carl.smith@governing.com or on Twitter at @governingwriter.
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