Suggested Citation:
Chakraborty, Debapriya, Adam Davis, Gil Tal (2024)

The Cost of Aggressive Electrification Targets – Who Bears the Burden Without Mitigating Policies?

To reduce greenhouse gas emissions, governments worldwide have set aggressive targets for a transition from internal combustion engine vehicles (ICEVs) to electric vehicles (EVs). Considering California’s electrification goals for the light-duty vehicle sector as a case study, we estimate the economic cost of achieving aggressive electrification targets based on total cost of ownership (TCO) analysis. When TCO estimates incorporate both technology costs and relevant household factors (income, fleet size, dwelling type), EVs reach cost parity with ICEVs for most consumer segments in the next decade, around 2032 or later. However, the share of households with cost benefits or consumer surplus from the EV transition does not reach 100% even by 2035 without mitigating policies and the benefits and loss from EV adoption vary across sociodemographic groups over the transition period. Before 2030, high-income (middle-income) households bear an average of 35% (59%) of the $2.8 billion transition cost; and after 2030 out of the total 2 billion transition cost incurred in this period low-income households incur an average 41% of the loss. These findings highlight the long-term need for mitigating policies like monetary incentives to achieve aggressive electrification targets even if TCO parity is achieved at the vehicle-level and the temporal distribution of the household segments that will need these policies to transition to EVs.