September 30, 2023

EV adoption doesn’t lighten energy costs for all American families

Vehicle electrification is a major step toward decarbonizing the transportation sector, the biggest source of greenhouse gas (GHG) emissions in the US. In 2020, it accounted for 27 percent of the country’s emissions, more than half of which came from light-duty vehicles.

Replacing fossil fuel-powered automobiles with electric vehicles (EV) provides significant benefits for environmental and human health. Not only will carbon emissions decline, but air quality also improves, and there are fewer negative health outcomes due to pollution, says Daniel Horton, assistant professor at the Northwestern University Department of Earth and Planetary Sciences.

New research also shows that vehicle owners may see reductions in their transportation energy burden, or the percentage of their income that is spent on vehicle fuel. In a new Environmental Research Letters study, researchers found that more than 90 percent of vehicle-owning households in the country would shrink GHG emissions and their transportation energy burden if they switched to EVs.

“Due to the fuel cost savings, EVs effectively reduce the percentage of income that households have to spend on vehicles,” says Joshua Newell, professor of environment and sustainability at the University of Michigan and an author of the study.

Newell and his colleagues estimated fuel costs in terms of US dollars per mile. They created an equation that included the gasoline price for vehicles with internal combustion engines. For EVs, they used the levelized cost of charging (LCOC), which accounts for electricity prices as well as charging location, time of day, and power level. According to the study, areas with high transportation energy burden reductions have lower LCOC compared to gasoline prices, smaller temperature- and drive cycle-related impacts on fuel consumption (like how extremely cold temperatures tend to affect battery performance or how batteries or fuel cells adapt when vehicles conditions change abruptly), or both. 

Unequal benefits of driving an EV

Widespread deployment of EVs would effectively double the number of households with a low transportation burden, based on the authors’ modeling, which they defined as spending less than 2 percent of their income on fuel annually. However, the study also revealed that more than half of the lowest-income households (based on area median income) would continue to have a high energy burden—spending more than 4 percent of their income on fuel annually—despite driving an EV.

Currently, higher-income households and those with higher levels of education dominate EV ownership in the country. Vehicle-related energy costs are a relatively small portion of higher-income households’ monthly income, but they can be sizable chunks for lower-income households, says Newell.

Additional factors that contribute to this energy burden include vehicle miles traveled, fuel consumption, and electricity and charging infrastructure costs. Newell says suburban and rural households tend to experience a higher energy burden due to the lack of public transit and greater travel distances to services and jobs. 

Since the lowest-income households are not distributed uniformly in the US, the study mapped where high-energy burden communities are clustered, which were concentrated in the Midwest, Alaska, and Hawaii. This would enable policymakers and planners to “develop targeted strategies to address the uneven distribution of burdens as society transitions from internal combustion vehicles to EVs,” says Newell.

The authors recommend localized approaches to improve the benefits of EV adoption, which include regional subsidies for charging infrastructure, reducing the cost of electricity, and expanding access to cycling, walking, and other forms of low-carbon transportation.

EV policies can boost accessibility

Incentives such as tax credits to lower the upfront costs of buying new and used EVs are critical for accelerating their adoption, says Newell. The Inflation Reduction Act, which was signed into law last August, currently provides significant tax credits for these purchases.

Individuals who purchase a new EV, whether it’s the plug-in or a fuel cell kind, may qualify for a clean vehicle tax credit of up to $7,500. However, there are different rules for the tax credit depending on when the vehicle was purchased. To check if you and your vehicle qualify, visit the Internal Revenue Service websites for vehicles purchased before 2023 or those in 2023 and beyond. Those who buy a used electric vehicle starting in 2023 may also be eligible for a tax credit that equals 30 percent of the sale, with a maximum credit of $4,000.

Other policy interventions that may increase EV accessibility for older and lower-income households include incentives for new and used vehicles that aren’t necessarily tied to taxes and programs that target low-income households. For instance, low-income California residents who live in a district that implements the Enhanced Fleet Modernization Program may receive up to $1,500 for scrapping their old, high-polluting vehicle. Those who choose to replace their old vehicle altogether with a cleaner, more fuel-efficient one may get up to $4,500.

Aside from purchasing incentives, access to charging infrastructure is also critical in the transition of light-duty passenger fleets to EVs in lower-income communities, says Horton, who was not involved in the new study. According to the study, increasing access to residential or cheaper public charging is a major factor in establishing the fair distribution of benefits and burdens among everyone, especially for renters and rural, lower-income, or multi-family households.

All of these solutions hope to balance out a major barrier to EV adoption—they are costly for many. “EV batteries make up about one-third the cost of the vehicle,” says Newell, “and until these costs are reduced through economies of scale and technological improvements, EV incentives are needed to achieve price parity with gasoline-powered vehicles.”

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