Federal Funds For Electric Cars Can Raise GDP, Cut Oil Imports

By Shannon Arvizu

Shannon Arvizu

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Shannon Arvizu is a clean-tech strategist and educator. She is currently a doctoral researcher at Columbia University and has spent the last two... More

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Federal Funds For Electric Cars Can Raise GDP, Cut Oil Imports
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1,988 views Jun 10, 2010

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Just how much could the U.S. economy benefit from the widespread use of electric cars?  Quite a lot, according to a new study.

It shows that U.S. citizens and the U.S. government could reap significant economic benefits from a set of proposed policies to ramp up EV production and adoption over the next 30 years.

The projections are timely, since the first two electric-drive vehicles from major carmakers (the 2011 Chevrolet Volt and 2011 Nissan Leaf) will go on sale in selected U.S. regions before the end of 2010.

Switch from oil to electricity

The study, "Economic Impacts of Electrification of the Transportation Sector," was conducted by the University of Maryland and Keybridge Research LLC for the Electrification Coalition.

Released last month, it attempts to measure the projected macro-economic impact of a package of policies meant to accelerate the switch from petroleum to electricity in the passenger vehicle sector.

That policy package, known as the "Electrification Roadmap," includes $121 billion in federal spending over the next 20 years.

The funds would go to consumer incentives, a national charging infrastructure, electric utility upgrades, incentives for domestic battery production, and financial support for retooling of automotive facilities to manufacture electric vehicles.

Electric miles: from 0 to 75 percent

The study concludes that such targeted investments in the electric vehicle industry could increase vehicles miles powered by electricity from today's 0 percent to as much as 75 percent of the total by 2040--just 30 years hence.

Such a conversion could significantly reduce oil imports and an increase in overall GDP. U.S. citizens would benefit from an increase in disposable income and employment in the growing electric vehicle manufacturing sector.

Oil imports down, GDP up

The study finds that if these policies are put into place, then:

• U.S. oil imports would be reduced by 3.2 million barrels per day. Cumulatively, during period 2010 to 2030, the U.S. would reduce oil imports by 11.9 billion barrels of foreign oil.
• Total U.S. employment would increase by approximately 1.9 million jobs above the base case. This is equivalent to reducing the unemployment rate by more than 1 percent.
• The typical U.S. household would have $2,763 more income (in 2008 dollars) than it would otherwise. This is an increase of about 2.2 percent in annual income.
• U.S. GDP would rise by $281 billion (about 1.0 percent more than it otherwise would have).
• Because of higher levels of income and GDP, the U.S. federal budget would improve by a cumulative (2010 to 2030) $336 billion.
• Cumulatively, from 2010 to 2030, households would experience an increase in aggregate income of $4.6 trillion (again in 2008 dollars).
• The U.S. trade balance would improve by about $127 billion, or about 0.4 percent of GDP.
• Once implemented, these measures would mitigate the impact of an oil price shock by roughly one-third (effects on peak-to-trough GDP and employment).

These numbers are, of course, based on fairly optimistic projections. But this study is important for two reasons.