SEEN AND UNSEEN.

It doesn't matter whether Harvard students learn Henry Hazlitt's maxim, "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups," as long as there are students who look beyond the immediate.  "You bought an electric car. Why did your carbon footprint grow?"

Those electric cars aren't made by Keebler's elves in a hollow tree.  "As a sophomore, Lucas Woodley ’23 started asking tough questions about electric vehicles. Are tax credits effective at reducing carbon emissions? If not, how might incentives be improved for greater social benefit?" Look no further than your reduced spending on motor fuel, miss a lot.  Mr Woodley did a double major, in economics and psychology, and his work qualifies him as thinking like an economist, in the sense of Hazlitt.  "The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences."

The fun finding: if you buy an electric car for short trips around town, and walk or ride your bike whenever possible, you might have a bigger carbon footprint than if you bought that econobox for the short trips.

Woodley’s first big research project, published last year in Nature Sustainability with [Ashley] Nunes as lead author, found EV buying incentives often fail to deliver on the government’s investment. Not only do U.S. subsidies flow to the well-off, with new EVs still averaging nearly $12,000 more per vehicle in 2022 than those powered by fossil fuels, but it turns out tax credits (up to $7,500 in 2023) can incentivize the wrong buyers. Many are led to increase their carbon footprint.

“If you’re somebody who drives a fair amount then you are likely well-suited to drive an electric vehicle,” Woodley said. “If, on the other hand, you’re someone who seldom drives, and the vehicle is mostly going to sit in the garage, then you may counterintuitively be better off owning a gasoline-powered vehicle.”

This is because the batteries that power EVs are responsible for an outsize share of emissions during the manufacturing process. Because EVs are dirtier to build but cleaner to drive, Woodley explained, they must meet certain mileage thresholds before environmental advantages are realized.

General equilibrium analyses get hard, because if your "drives a fair amount" is in long trips, such as DeKalb to Cincinnati and return, you outrun the range of the battery.  Or, perhaps, the analyses involve insufficient choices.  Might the owner of the gas-powered econobox think about an electric bicycle in place of a car?  I see enough references to electric bicycles and related velocipedes configured to haul cargo in urbanist X-twitter.  Research projects impound a lot in ceteris paribus, don't they? 

One set of longer effects at a time.  (Does "non-luxury" suggest the luxury versions are polluting virtue signals irrespective of use?)

In the U.S., the typical non-luxury EV needs to log between 28,069 and 68,160 miles before netting any emissions benefits.

“However, many households sell their vehicle before they get there,” he said.

Tax credits, the researchers concluded, should incentivize long-term use of individual EVs. Furthermore, low- and middle-income buyers are, on average, better positioned to realize the emissions advantages of EV drivership (that is, they log more miles relative to the number of cars they own).

That research might have influenced Our Political Masters to provide a tax credit (adjusted for depreciation?) for the purchase of used electric vehicles.  There's yet another opportunity for further research: if you're racking up thirty to seventy thousand miles on an electric, how often are you on the hook for a battery replacement, and is that included in the analysis?

But when you start looking beyond the immediate consequences, you find unanticipated surprises, some of which might induce you to rethink your priors.

Woodley used his thesis to investigate the economic impact of the very tax credits for which he and Nunes had advocated. In the end, Woodley concluded that most of the value of used EV tax credits accrued to individuals selling their cars, [economist James] Stock explained.

“Lucas started off in a different place, with the much more conventional view that tax credits would benefit people with lower incomes. After a lot of hard work and analysis, he had quite a different conclusion.”

Good. That's why we call it research, and that's often what happens.

The goal is not to discourage EV ownership, Woodley said, but to improve policymaking and maximize emissions reduction per public dollar spent. “Like a lot of people my age, I’m concerned about climate change,” he said. “For me, there’s always the question of how to improve environmental sustainability while recognizing the associated political and financial realities.”

He's got the opportunity to devote a career to grappling with those tradeoffs.  He might also learn how to think along the margins, rather than that "emissions reduction per public dollar."