News

Last week, the California Air Resources Board (CARB), an unelected regulatory body, announced a plan to try to force the state’s car fleet to change over to electric vehicles. The plan seeks to ban the sale of new purely hydrocarbon-fueled cars in California by the year 2035. The plan will be very expensive, is completely impractical, and is certain to fail, as even CARB seems to acknowledge by reserving the right to amend the targets if the market fails to respond to their diktat. The only question is how much cost and disruption will happen before CARB is forced to accept reality.

This is part three of a three-part series focusing on the CARB 2035 plan.

Part one can be read here.

Part two can be read here.

Part 3: Likely to fail

Despite all the fanfare of the announcement, California’s attempt to ban the sale of ICE vehicles by 2035 is certain to fail. We have already covered the huge expense involved and the impracticality of an EV mandate, both of which on their own make the mandate unlikely to be successful. Beyond those factors, though, is a whole panoply of deficiencies in the rule itself, economic factors, and legal factors that make the program a guaranteed failure right out of the gate.

Poorly designed

The design of the mandate leaves numerous holes that assure that CARB will fail to prevent new ICE vehicles from coming to California and indeed may even impede the claimed goal of the program, reducing greenhouse gas emissions. First, the rule does not prevent a Californian from traveling across the state line and purchasing an ICE vehicle.  Indeed, CARB likely cannot prevent such an action given the obvious constitutional infringement on interstate commerce. Second, the rule does not cover used cars, which can continue to be bought and sold normally. Modern cars are exceptionally durable, lasting decades with proper maintenance. This rule will likely inflate the value of used cars, but those used ICE vehicles will be on the roads for a long time. The used car exemption also opens up an enormous loophole, as cars can be bought new in another state and then resold later in California as “used.” A lucrative arbitrage opportunity, but hardly a recipe for successful regulation. Third, the rule does not require the purchase of an EV, indeed that would probably be illegal. So, consumers can, and will, simply hold on to their existing cars even longer than they otherwise would have. Given that new ICE vehicles are exceptionally clean and efficient, any rule that encourages the retention of older cars actually slows emissions reductions. Both the used car exemption and optional EV purchase element encourage the continued use of older, less efficient cars, thus undermining the stated goal of the entire program.

Economically illiterate

There are glaringly obvious economic factors that are already undermining the rule before it has even been implemented. We are already seeing limits on supply of many of the mineral inputs for EV. This has caused some price increases among EVs, but the supply constraints also limit the sheer number of EV that can be manufactured. There are no projections of massive increases in mining capacity in the near term, so the likelihood of this supply limit easing anytime soon is nonexistent.

What’s more, the regulation just assumes a massive increase in EV manufacturing capacity. While that may materialize, it is far from a guarantee. It seems an instance of “if we mandate it, they will come.” What happens when a deadline is reached and car manufacturers simply don’t have EVs to sell?

Legally dubious

Finally, there are major legal hurdles for this regulation to overcome before it can go into effect, significant enough that the rule going into effect as designed is highly unlikely. First, as mentioned previously, the compliance with California EV mandate raises the cost of vehicles in other states. Attorneys General in the harmed states have a strong case to make that this rulemaking is extraterritorial regulation: while California may be able to harm their own citizens, they are not empowered to harm the citizens of other states. 

A second major legal hurdle is related to the Clean Air Act, and California’s special waiver ability under that Act. The CAA grants California, and California alone, the ability to request a waiver of the CAA to allow it to implement regulations that are stricter than those set by the federal government. Such regulations are presumptively banned by the CAA, subject to this caveat that California may make such an application. However, that waiver authority was granted for California to address air quality challenges that are unique and particular to that state (for example: smog in the Los Angeles area). It is not a general waiver authority to implement their own stricter regulations whenever the state feels like it. Clearing this hurdle is made extremely difficult because CARB justified its regulation by citing the need to fight climate change. But climate change is not an air quality issue particular to California, it is global and impacted by global emissions. Thus, CARB actually undermined the state’s case for claiming a waiver under the CAA.

A third obvious legal challenge is the previously mentioned issue of interstate commerce. Banning the sale of any good across state lines by one state is presumptively illegal, one of the core historical reasons that the Constitution was drafted to replace the Articles of Confederation. It’s not clear how California thinks it can get around this basic constitutional issue. Citing a CAA waiver authority to regulate isn’t going to cut it because that just invites the Supreme Court to invalidate that waiver authority for impeding interstate commerce, the last thing that California’s hyperactive regulators would want.

Designed and Destined to Fail

On practically every level this EV mandate seems designed to fail. The program has gaping loopholes, is out of touch with economic reality, and has numerous serious legal deficiencies. CARB itself seems to acknowledge this reality as in its announcement it reserved the right to alter the deadlines if the market does not develop as they want it to. Thus, despite all the happy talk about a historic ban on ICE vehicles, CARB has already preemptively surrendered. When the deadlines are not met, they will move the goalposts. In this, they will be no different than the numerous countries and localities which have announced sweeping ICE bans, but which are always conveniently 10 or more years in the distance. The politicians and regulators of today get to pat themselves on the back for being so virtuous, leaving future officials to deal with the fallout.

Last week, the California Air Resources Board (CARB), an unelected regulatory body, announced a plan to try to force the state’s car fleet to change over to electric vehicles. The plan seeks to ban the sale of new purely hydrocarbon-fueled cars in California by the year 2035. The plan will be very expensive, is completely impractical, and is certain to fail, as even CARB seems to acknowledge by reserving the right to amend the targets if the market fails to respond to their diktat. The only question is how much cost and disruption will happen before CARB is forced to accept reality.

This is part two of a three-part series focusing on the CARB 2035 plan. Part one can be read here.

Part 2: Impractical

California’s EV mandate is impractical as a threshold matter. EVs quite simply are not able to replace ICE vehicles for all needs, and for the economy as a whole EVs are an inferior option. Now perhaps the idea is that some people will have to give up some of those needs in order to achieve EV nirvana. Some environmentalists are frank and open about such a desire, the “degrowth” movement for example. But are Californians really on board with that? The way that elected officials pretend that EVs are all gain and no pain suggests they know better.

To start, while homes with garages might be able to easily install a charger for an EV, not everyone lives in a home with a garage. But those folks would count themselves lucky to have to pay for their own charger installation, apartment-, condo- and townhome-dwellers face the problem of having to rely on public charging infrastructure. And more mandates are hardly a solution, the cost of trying to retrofit every apartment building with charging stations would be astronomical. 

Public charging infrastructure is notoriously decrepit, just look at the genre of news articles where the correspondent documents a long-distance EV journey, only to discover many of the EV charging stations marked on maps are non-functional upon arrival. Going for a drive becomes an exercise in planning not what locations to visit, but where the vehicle can be charged. The number of charging terminals is also a major question: while six to 12 gas pumps can serve many thousands of customers a day, because charging terminals must be occupied for an extended period, far more terminals are needed to serve a comparable number of cars.

Massively increasing electricity demand for charging EVs is also a major problem for the electricity grid, especially for California where blackouts are already becoming a regular and expected occurrence, but also for most other states where politicians may have done less preexisting damage to their grids. As mentioned in a previous section, billions of dollars’ worth of new transmission and generation capacity is needed to meet this increase in demand. This need is made even more difficult because the electricity demand will be happening in new locations and at unplanned-for levels: for example, a rural gas station which now only requires enough electricity to run its lights and appliances will require major connection upgrades to support charging infrastructure. And those upgrades aren’t just at the station itself, but all along the extended rural lines that reach out to it. This is more than a matter of cost; transmission lines are unsightly and usually opposed by affected landowners. California also believes it can meet this new demand solely through wind and solar power, which both likewise have major land use impacts. Even with unlimited money, it is not at all clear that a democratic society can build out the vast expansion of grid infrastructure needed to support EVs purely as a practical matter of land use.

There are many conditions and uses where EVs are inferior to ICE vehicles. The above-mentioned blackout conditions are one: people can’t get to work if they are prevented from charging their vehicles. Natural disasters are another example: if there is a wildfire, you need to pack up the family and go, you don’t have time for the car to charge up (and that’s assuming the fire hasn’t already knocked out your power. A person who drives for a living can scarcely afford to be wasting long periods of time recharging during the day. Given all these limitations, the practical use of an EV would be as perhaps one of two cars: an EV for predictable short-haul driving, and an ICE vehicle for emergencies, long road trips, or more unpredictable driving conditions. 

Finally, as a whole, electricity is a hugely impractical basis for a flexible transportation system. Despite conspiratorial thinking among environmentalists and others, liquid hydrocarbon fuels like gasoline and diesel did not become dominant in transportation because of some secret plot or government subsidies. These fuels achieved dominance because they are highly concentrated and energy-dense, efficient, and easy to transport and store. This provides a highly flexible and yet low-cost energy supply in a sector where flexibility and low-cost are required. Electricity is none of those things: unconcentrated and volatile, subject to huge waste in transmission, and difficult to transport and store. Electricity is useful for a fixed location like a factory, or even a railroad line, again in a fixed location, but the more flexibility required, the less reliable electricity becomes by its very nature.

Ultimately, California’s EV mandate exists in an alternate universe, where government can order and the economy and society magically conform. It does not recognize the practical limitations of EVs nor the lived preferences of citizens. In the real world, EVs simply cannot replace ICE vehicles in our modern society, unless as mentioned above the intent is actually to change modern society by limiting citizens’ ability to move about freely. In a free society, plenty of people would choose EVs, because they make sense for certain situations or lifestyles, but there are plenty of situations and lifestyles where EVs are not practical. California can’t centrally plan its way out of that.

Last week, the California Air Resources Board (CARB), an unelected regulatory body, announced a plan to try to force the state’s car fleet to change over to electric vehicles. The plan seeks to ban the sale of new purely hydrocarbon-fueled cars in California by the year 2035. The plan will be very expensive, is completely impractical, and is certain to fail, as even CARB seems to acknowledge by reserving the right to amend the targets if the market fails to respond to their diktat. The only question is how much cost and disruption will happen before CARB is forced to accept reality.

This is part one of a three-part series focusing on the CARB 2035 plan.

Part 1: Expensive:

California’s EV mandate will be expensive, likely for many individuals and certainly for the state economy as a whole. EVs are not cheap to purchase, are only affordable to operate if you assume electricity prices stay low, and need expensive infrastructure upgrades to support general use. Mandating more EVs than the market would organically support is a guaranteed recipe for unnecessary costs. 

Electric vehicles (EVs), at all price points, are more expensive than comparable internal combustion (ICE) vehicles. This is primarily due to the cost of the large, heavy battery packs required to give EVs something resembling the range people need from their cars. On average, EVs retail for about $18,000 more than the average ICE vehicle. That big upfront difference is why EVs are still mostly a luxury item, a second or third car for the wealthy. And that price differential is not coming down, in the last year, multiple car companies have announced increases in the prices of their EV offerings. The California government asserts that this price differential will come down as batteries get cheaper to manufacture, but there is little evidence that battery prices will fall indefinitely. Indeed, a primary reason for the announced price increases is the increasing cost of battery inputs. The supply and price of mineral inputs like lithium, nickel, or cobalt are not controlled by regulatory diktat or wishful thinking. 

The state further argues that EVs cost less to own over the life of the vehicles largely thanks to not needing to pay for gas. But there are many reasons to doubt the accuracy of that calculation. It is highly dependent on how a person uses their vehicle, for one. It also assumes that electricity prices remain low relative to gasoline, even as California has the highest electricity prices in the country and is implementing policy actions that will only increase rates. The calculation also takes no account of the cost of time: even “fast” chargers take far longer to fuel an EV than it takes to fill up a gas tank. And faster chargers are more expensive to build and maintain so likely to remain relatively rare; if forced to charge at slower chargers, the time cost to EV owners is increased. And don’t forget that the lifetime of battery packs is less than the lifetime of the car, which means that a used EV will need an expensive battery replacement, a replacement that may cost more than the value of the entire car.

Another cost that regulators like to ignore is the cost of infrastructure needed to support EVs. Chargers are expensive to build and must be maintained. There are also billions in additional transmission and electrical grid infrastructure that must be built to even allow for more chargers to be built. These costs are often hidden for an individual EV owner by subsidies or spread across electricity ratepayers, but in the economy-wide tally, those costs still exist. And these costs are not being imposed to meet an organic need, liquid fuel infrastructure is widespread, efficient, and serves everyone in the state. Duplicating this entire transportation infrastructure is a political need, not an economic one. 

Another cost of this program is actually borne by non-Californians. As has been seen under California’s existing zero-emission vehicle program, in order to get Californians to buy electric vehicles so they can comply, carmakers have to sell EVs at cost or even a loss or buy credits from a company like Tesla. The carmakers don’t just eat this loss, they increase the prices of vehicles in other parts of the country to balance out their California compliance losses. These imposed costs on other states is one grounds for the inevitable legal challenges to this new rule that will shortly arise.

In short, there are a huge number of known costs that make widespread EV adoption an expensive proposition, both at the individual level and at the economywide level. Now subsidies may hide some of the costs to individuals, but the costs are borne by people somewhere. The claimed savings are notional and modeled for future savings. Meaning that they are not necessarily going to happen: if the model assumptions are wrong, then the “savings” evaporate. Massive upfront costs in the hazy hope of future savings is a hell of a way to try to run an economy, but then we are talking about bureaucrats and politicians, not people who have to run a business in the real world.