Abstract:Motor vehicles generate large benefits for society but also cause large adverse impacts. Many of those impacts can be mitigated with a variety of new and improved technologies. In this report, we focus on electric-drive vehicle technology; we assess their desirability in Sweden, and explore the role of government in guiding investments.

The desirability of electric-drive vehicles will vary over time and across regions. In the case of Sweden, key factors determining which technologies might be desirable and when, include the following: the small size of the domestic market, inexpensive and clean electricity, Sweden's strong environmental ethic, a strong automotive industry (including buses and trucks), a well educated population, and strong advanced technology and telecommunications firms. In the long term, we find that virtually all versions of electric-drive technology are expected to eventually prove environmentally superior to internal combustion engine (ICE) vehicles, and in many cases also to prove superior in satisfying consumer desires. In the short term, we find that major automotive companies

• have mostly abandoned plans to build and market conventional-sized battery-electric vehicles
• are on the verge of deciding whether to make major investments in fuel cell electric vehicles
• are tentatively beginning to invest in hybrid electric vehicles.

The technology for building competitive electric vehicles is known and available, with the exception of batteries and fuel cells. Batteries are expensive and bulky—and expected to remain so—into the foreseeable future, though with continuing improvements. Fuel cells are of greater interest for traction energy because they are potentially inexpensive (comparable to ICEs) and superior in many ways to ICEs.

Based on the above insights, and an assessment of Sweden's particular situation, we suggest the following two strategies for Sweden:

• An industrial and environmental policy of designing, manufacturing, and deploying heavy duty vehicles (buses and trucks) powered by electric drive;
• An environmental policy of deploying small electric vehicles for on and off-road transportation applications.