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A genuinely free market is the surest way to encourage innovation. The rapid development of not one but two viable vaccines to the coronavirus is the latest example of the value of competition with which we are all familiar.
Ordinarily, vaccines to novel viruses take years to produce. But the combined efforts of industry and governments to create and test several variations of a vaccine in less than a year is nothing short of astonishing. Operation Warp Speed delivered multiple vaccines in an unprecedented time frame in large part because an uninhibited market allowed researchers to pursue many different paths simultaneously.
Rather than investing in a single technology to respond to Covid-19, the government encouraged competition among different scientific approaches. And that is working to our direct benefit today, with two companies currently providing Americans with safe and effective vaccines, and potentially more on the way.
Score one for the market — and for the U.S. government knowing when to get out of the way. The government certainly didn’t rack up any points with its handling of masks and testing. We’re lucky it followed a different path in developing a vaccine response.
Policymakers should follow a similar approach when it comes to transitioning to a lower-carbon economy. Climate change is real, and addressing it will require transformational changes in how we produce and use energy and manufacture the product we use every day. It makes sense then that a market-oriented approach to reducing carbon dioxide emissions that encourages vigorous competition among various technologies would deliver the best solutions in the shortest amount of time.
It worked for COVID; why not carbon?
The transportation sector represents the nation’s single-largest source of emissions, and passenger vehicles are responsible for nearly half of all transportation emissions, so starting there makes sense. The current focus on electrifying everything may or may not be the best approach, though.
Policymakers should avoid putting all their chips on one solution to climate change. Betting everything on electrification as the answer to reducing transportation emissions would be like staking everything on a single vaccine candidate.
Battery-powered electric vehicles represent one option for curbing emissions, but they aren’t the only one. The various lower-carbon vehicle technologies and fuels available on the market or under development include hydrogen-fuel cell, natural gas, biofuels, and other alternative fuel vehicles.
Mandating battery-powered vehicles to the exclusion of other potential pathways to decarbonizing transportation could have unintended consequences. First, it ignores the fact that consumers have to want to buy the solution government is offering. So far, that has not proven to be the case.
Despite being widely available to consumers for more than a decade and enjoying generous subsidies, electric cars still make up less than 2 percent of sales. And then there’s the challenges of limited driving range and a lack of charging infrastructure.
Consumers want the freedom to choose technologies that work best for them. A one-size-fits-all approach risks mandating a solution few wish to adopt, which in turn will create an incentive for policymakers to force adoption through additional mandates, technology bans, and ever-more generous subsidies — all at taxpayers’ expense.
Mandates and subsidies distort the market and hinder innovation by prioritizing regulatory compliance over technology development and cost savings.
The ideal of the “zero-emissions” vehicle is also a misnomer. All vehicles, including battery-powered EVs, produce carbon emissions over their lifecycle, from manufacturing to disposal. A vehicle’s fuel-efficiency, or its tailpipe emissions, is a single metric in this process and doesn’t provide the full picture of environmental performance.
Research shows that advanced internal combustion engines and hybrid-electric vehicles can achieve comparable emission reductions as similarly equipped battery-powered electric cars when a vehicle’s full lifecycle emissions are measured.
And then there’s the cost to consumers. Battery-powered electric vehicles cost on average $10,000 more than cars with traditional internal-combustion engines. And subsidizing electric vehicle sales only hides that cost from consumers. In fact, a 2019 Clearview Energy Partners study found federal electric vehicle tax credits were one of the most expensive ways to reduce carbon emissions compared with other economy-wide climate policies.
In the race to decarbonize the economy, policymakers should not give short shrift to potential alternatives to electric vehicles. Consumer choice and private industry have crucial roles in determining the direction of transportation technology.
Technology-neutral policies that foster competition will more rapidly drive innovation and the transition to a lower-carbon economy than the government picking winners and losers.
If the ultimate goal is to decrease carbon emissions, mandating vehicle electrification, subsidizing electric vehicles, and excessive investment in one type of charging infrastructure may end up not only being a wrong turn but a dead end.
Electric vehicles might be the winning answer to decarbonizing the passenger fleet, or they might not. Are we willing to take that risk?