Electric Vehicle Adoption in California Could Increase Gross State Product by More Than $140 Billion: Report

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Electrification of light-duty vehicles in California could be a potent catalyst for economic growth over the next 10 years. That’s according to a new study by Next 10 on the impact on the California economy if the state achieves electric vehicle (EV) adoption that is consistent with its climate goals.

The report, "Clean Transportation: An Economic Assessment of More Inclusive Vehicle Electrification in California," was prepared by Berkeley Economic Advising and Research and assesses the economic implications of the projected increase in electric vehicle use with a long-term economic forecasting model — focusing on the policy milestone years of 2030 and 2050. Even under a relatively conservative baseline scenario that assumes no improvement in EV costs in the coming 10 years, EV adoption could result in significant economic benefits by stimulating the overall economy, reducing harmful pollution, and improving public health outcomes, the report notes. Other scenarios that consider anticipated drops in price and increase in innovation show even greater gains.

Key findings include:

  • Successfully hitting California’s 2030 GHG reduction goals with the scale of increased EV adoption modeled in this study would create more than 390,000 new jobs under a relatively conservative scenario — and more than half a million new jobs in the scenarios that account for steeper declining costs and increasing model choices.
  • By 2030, the Gross State Product would increase between $82 to $142 billion, depending on the scenario analyzed.
  • Real income (income adjusted for inflation) is projected to increase substantially, ranging between $311 billion to $357 billion in 2030.
  • This overall economic expansion has significant fiscal benefits – generating billions in additional revenue per year from existing tax instruments.
  • Looking out to 2050,the economic benefits increase by up to seven to eight times over those in 2030, depending on the scenario. Even under a relatively conservative estimate, California’s GSP stands to increase by about 5% by 2050. Under scenarios that reflect more likely vehicle cost reductions — the gains are almost twice as large.

The report notes that the manufacturing of fuel-efficient vehicles is already associated with 14,776 jobs in California — and more indirect employment could be generated through increased demand for charging infrastructure and utility load. The projected job growth and economic benefits noted in the study come from avoided fuel costs alone.

Other findings include:

  • Employment and income benefits are proportionately higher among Disadvantaged Communities (DAC) even though they represent only 25% of the state’s population. This is because the dollars spent from fuel savings will go primarily to goods and services industries — sectors that disproportionately employ DAC workers.
  • By 2050, the Innovation scenario—which assumes greater cost savings through improved technology costs — creates 1.182 million additional jobs across the state, with more than 36% benefiting DAC households.
  • The study focused on Los Angeles County and the Central Valley as 75% of the state’s DACs are in these regions. By 2050, under the Innovation scenario, DACs in both regions would see substantial incremental employment benefits (192 jobs created per DAC in LA County and 216 per DAC in the Central Valley).
  • Air pollution reductions from large-scale electric vehicle adoption also benefit DAC households more than higher-income groups. The study found that in an equity scenario, the economic value of health benefits from the reduction in pollution would amount to $2 billion by 2030 — including $800 million from avoided mortality and $1.2 billion from averted medical costs.

“The benefits to GSP and income are much larger than some other climate policies, including California's cap-and-trade program and far exceed the funds committed thus far to clean vehicle incentive programs,” noted David Roland-Holst, BEAR Managing Director and Economics professor at UC Berkeley, and lead author of the report. “Studies have shown that incentives are successful in helping car buyers opt for cleaner alternatives, and what we see here is that increased EV adoption, especially in lower-income communities, can have a measurable and lucrative payback.”

Currently, the state is planning to significantly curtail budgeting for electric car and light-duty SUV incentives.

Environment + Energy Leader