By F. Noel Perry and David Roland-Holst | Special for CalMatters
How will we pay for it? That’s the No. 1 question that gets asked in response to bold climate solutions.
The economy vs. environment narrative has been driven by decades of well-funded persuasion that we cannot transition off of fossil fuels without damaging the economy.
In California, where so many residents walk a tightrope to make ends meet, it’s easy to assume that significant action to green our economy will make things more challenging.
We tested this notion by modeling the potential impact of increasing electric vehicle adoption to successfully cut our largest source of climate pollution: gas-powered cars and trucks.
We looked at the possible impacts from increasing electric light vehicle adoption to help achieve our 2030 and 2050 emissions reduction targets, analyzing how Californians across all income levels would be impacted.
The results of our research were stunning.
We found that significantly increased electric car adoption could provide potent stimulus to the California economy. We forecast that more than 350,000 new jobs would be created, and that is a relatively conservative estimate.
More than half a million jobs would be generated under more likely scenarios that account for innovation-induced cost/price reductions and increasing the availability of plug-in electric cars.
By replacing gas-powered cars with electric cars, we could:
- Increase California’s gross state product by up to $142 billion by 2030.
- Raise real household incomes, adjusted for inflation, by more than $350 billion.
- Generate billions in additional revenue per year from existing tax instruments.
Looking out to 2050, the economic benefits of electrifying cars increase by up to seven to eight times depending on the scenario — and could increase the gross state product by 5% in that time.
How? Consumer spending is the main driver of the state economy. Californians currently spend $60 billion per year filling up their gas tanks. That is money that drains out of our state economy to largely out-of-state oil companies. When people save money at the pump, they will invest most of those dollars locally, on goods and services they really want.
What was most surprising were the potential benefits for people in lower-income communities, who tend to be most impacted by pollution. These Californians—who the policy community refers to as living in “disadvantaged communities”—represent about 25% of the state’s population.
Across all of the scenarios modeled in the study, these communities saw the greatest relative benefits from electrifying our vehicle fleet. That would include higher proportional job growth and larger per capita income gains compared to the rest of the state’s population.
This is also due in part to health improvements and savings—scenarios with more equitable distribution of EV adoption valued the additional health benefits from cleaner air for these communities to be $2 billion by 2030.
Even more benefits flow from job growth. By 2050, the electric car adoption scenario that assumes the greatest savings through falling technology costs creates 1.812 million additional jobs across the state, mostly in the goods and services sectors that tend to employ workers from disadvantaged communities.
Seems too good to be true?
The determining factor here is whether or not we can actually achieve the high level of electric car adoption that it would take to meet California’s 2030 and 2050 goals. Electric vehicle skeptics may point to their proportionally smaller sales numbers, but the latest expert evidence indicates that cost parity between a gas-powered vehicle and EVs could be reached within this decade.
Ultimately, if we were to achieve only a fraction of the benefits described in the study’s four adoption scenarios—accelerating the uptake of electric cars in California could pay substantial dividends across the state, especially if they’re accessible to lower-income Californians.
Electric cars save money for their drivers, and everyone in the economy can share the benefits. The right incentives—which have been proven to help get cleaner cars into the hands of more drivers—can also pay themselves back many times over.
Gov. Gavin Newsom’s proposed 2020-21 budget would curtail funds for passenger clean vehicle rebates. Our data show this may not be the best way forward. Every step we can take to put more EVs on the roads offers potential benefits to all Californians.
We can cut emissions, combat climate change, and clean up our air—but only if we’re prepared to save money and help create equitable access to clean cars in the process.
David Roland-Holst is a UC Berkeley economist. F. Noel Perry is founder of the non-profit, non-partisan organization Next 10. They wrote this commentary for CalMatters, a public interest journalism venture committed to explaining how California’s Capitol works and why it matters.
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