Abstract:Testimony to Subcommittee on International Trade and Business Development, Los Angeles, CA

First-generation electric vehicles (EVs) will offer small greenhouse benefits and large air quality benefits. But the greatest attraction of EVs is that they open a pathway toward a much more environmentally-benign transportation future. On this basis, strong government intervention is justified to initiate the introduction of EVs. But how much and for how long are we willing to subsidize the development and introduction of EVs? In part the answer depends upon how we as a society value the environmental benefits provided by EVs. But the answer also depends upon the magnitude of the incentives and subsidies that consumers will require for them to be willing to purchase and use EVs. That is the subject of my testimony. Market demand is an important topic because it tells us whether a large investment in EVs in California is a good investment.

Unfortunately, as with the most new products that are very different, it is impossible to accurately forecast the future market for EVs. EV market studies that rely on conventional research methods typically generate conservative forecasts of one percent or so of market penetration. I will explain, based on more sophisticated research at UC Davis and elsewhere, that as EV technology becomes more familiar and is improved and modest incentives are provided, much higher levels of penetration are likely. EVs do not provide large productivity gains and therefore will not overwhelm the market as did computers—but there are many reasons to believe that consumer resistance to EVs will recede over time as they reorganize their usage of vehicles and alter their expectations of vehicles in response to incentives and a growing stream of information.