Next 10 report says widespread EV adoption in California could deliver significant economic benefits to the state by 2030 and 2050
Widespread adoption of plug-in electric vehicles (PEVs) in California could confer significant economic benefits by both 2030 and 2050, resulting in increases to Gross State Product (GSP), employment, real household incomes, and state revenue, according to a new report commissioned by the think tank Next 10.
The report, Clean Transportation: An Economic Assessment of More Inclusive Vehicle Electrification in California, was prepared by Berkeley Economic Advising and Research (BEAR) and assesses the economic implications of the projected increase in electric vehicle use with a long-term economic forecasting model, focusing on the policy milestone years of 2030 and 2050.
BEAR considered four scenarios to illustrate the consequences of different pathways for large-scale electrification of the light vehicle fleet, with two key factors informing the variations between each scenario: (1) electric vehicle adoption patterns and (2) Incremental Vehicle Costs (IVC).
The adoption patterns vary among the scenarios, with the Baseline assuming current adoption patterns—meaning greater adoption at higher-income levels—while the other scenarios assume the adoption patterns converge by 2030 or 2050.
Even under a relatively conservative baseline scenario that assumes no improvement in EV costs in the coming ten years, EV adoption could result in significant economic benefits by stimulating the overall economy, reducing pollution, and improving public health outcomes. Other scenarios that consider anticipated drops in price and increase in innovation show even greater gains.
These results indicate that wider and more rapid PEV adoption will benefit most Californians—whether they buy a PEV or not—by stimulating the overall economy and reducing harmful criteria pollution. The study also finds that promoting PEV adoption in lower-income communities improves both economic and health benefits to them without significantly reducing benefits to others.—“Clean Transportation: An Economic Assessment of More Inclusive Vehicle Electrification in California”
Key findings include:
By 2030,vehicle electrification will increase California’s GSP by between $82 billion to $142 billion, depending on the scenario. California’s 2018 GSP was almost $3 trillion ($2,997,732.8 million, according to the Federal Reserve Bank of St. Louis (FRED)). Thus, the EV influx would provide approximately a 2.7% to 4.7% boost over the 2018 GSP.
Real income is projected to increase substantially, ranging from between $311 billion to $357 billion in 2030, depending on the scenario.
This overall economic expansion generates billions in additional revenue per year from existing tax instruments.
Study authors calculated an estimated increase of 394,000 new jobs in 2030 under the relatively more conservative scenario (LTES)—and more than half a million new jobs under the scenarios that account for declining costs and increasing availability of PEVs. These do not include the employment gains that exceed direct job creation.
Looking out to 2050, the economic benefits increase by seven to eight times, depending on the scenario, over those in 2030 as the growth dividends from more efficient mobility are amplified. Even in the conservative LTES scenario, vehicle electrification increases California’s GSP by about 5% by 2050.
In the scenarios (Innovation and Equity) that reflect more aggressive vehicle cost reductions, the gains are almost twice as large.
The report notes that the manufacturing of fuel-efficient vehicles is already associated with 14,776 jobs in California. More indirect employment could be generated through increased demand for charging infrastructure and utility load. The projected job growth and economic benefits noted in the study come from avoided fuel costs alone.
While the adoption of electric vehicles in California has thus far been concentrated in higher-income segments and areas, the state recently amended its incentive programs to focus on increasing uptake in traditionally disadvantaged areas.
To help quantify the potential impacts of a more equitable distribution of EV uptake in the state, this study modeled the impacts of an “Equity” scenario that assumes EV purchasing would become equal among income groups by 2030—meaning the same overall deployment of EVs, but more rapid adoption among lower-income groups.
Across all of the scenarios modeled in the study, disadvantaged communities saw the greatest relative benefits—with higher proportional job growth and larger per capita economic gains compared to the rest of the state’s population. But when adoption is concentrated in lower-income communities, the gains are even larger, and higher income groups experience the same benefits across scenarios.
Other findings include:
Employment and income benefits are proportionately higher among Disadvantaged Communities (DAC) even though they represent only 25% of the state’s population. This is because the dollars spent from fuel savings will go primarily to goods and services industries—sectors that disproportionately employ DAC workers.
By 2050, the Innovation scenario—which assumes greater cost savings through improved technology costs—creates 1.182 million additional jobs across the state, with more than 36% benefiting DAC households.
The study focused on Los Angeles County and the Central Valley as 75% of the state’s DACs are in these regions. By 2050, under the Innovation scenario, DACs in both regions would see substantial incremental employment benefits (192 jobs created per DAC in LA County and 216 per DAC in the Central Valley).
Air pollution reductions from large-scale electric vehicle adoption also benefit DAC households more than higher-income groups. The study found that in an Equity scenario, the economic value of health benefits from the reduction in pollution would amount to $2 billion by 2030—including $800 million from avoided mortality and $1.2 billion from averted medical costs.
Currently, there are persistent uncertainties regarding the state’s authority to regulate vehicles and other energy use technologies. Fiscal authority to offer economic incentives is much more secure. The results suggest the state could pursue this much more aggressively, reaping net benefits in terms of GHG emissions and a variety of economic and health co-benefits. The scope for incentives can also be significantly expanded, to include purchaser prices, financing, vehicle sharing, dealer and manufacturer incentives, infrastructure (e.g. charging) and component technology subsidies.
This study utilizes the Berkeley Energy and Resources (BEAR) model to evaluate the long-term economic and other impacts of plug-in electric vehicle adoption in California. The BEAR model is a detailed and dynamic economic forecasting model that traces the complex linkage effects across the California economy as they arise from changing policies and external conditions.