The Electric Vehicle Transition and the Economics of Banning Gasoline Vehicles

Stephen P. Holland, Erin T. Mansur, Andrew J. Yates

NBER Working Paper No. 26804
Issued in February 2020
NBER Program(s):Environment and Energy Economics

Electric vehicles have a unique potential to transform personal transportation. We analyze the transition to electric vehicles with a dynamic model that captures the falling costs of producing electric vehicles, the decreasing pollution from electricity generation, the increasing substitutability of electric for gasoline vehicles, and the durability of the vehicle stock. Due to the external costs from pollution, inefficiencies under business as usual result from the mix of vehicles as well as the transition timing, the severity of which depends on substitutability. We calibrate the model to the US market and find the magnitude of the inefficiency is rather modest: less than 5 percent of total external costs. The optimal purchase subsidy for electric vehicles and the optimal ban on the production of gasoline vehicles both give about the same efficiency improvement, but the latter leads to a sharp increase in gasoline vehicle production just before the ban. Phasing out gasoline vehicles with a bankable production quota reduces deadweight loss substantially more than the other policies, but may lead to a very large deadweight loss if set incorrectly.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w26804

NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us