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Shifting Gears: A Growing Debate on How to Electrify U.S. Transportation

Last week, ITIF released Shifting Gears: Transcending Conventional Economic Doctrines to Develop Better Electric Vehicle Batteries, which explores the challenges confronting today’s electric vehicle (EV) industry and presents an “innovation economics” strategy for overcoming them. It has added to a growing debate on the short-comings of today’s EV policy approach and better ways energy policy can support electrifying U.S. transportation. Politico correctly summarized the core issue: better EV batteries are “the unseen force behind electric vehicle sales,” but “neither higher taxes nor domestic and international subsidies have spurred enough [technology] momentum.” Referring to Shifting Gears, Politico states that “The only answer is a robust R&D strategy to develop much better and cheaper batteries to dramatically lower the cost and increase the performance of EVs.” As ITIF Senior Analyst Matthew Stepp put it in a Bloomberg Businessweek article that highlights the report, “Government investment in high-risk, high-reward technologies is critical.”

Business Insider’s Alex Davies concurs, pointing out that while the conventional policy approach has been to either subsidize EV purchases or impose taxes to increase the price of gas cars, the report “lay[s] out a variety of cases in which all these tactics have been tried” and makes it “clear these approaches do not work, because so little progress has been made.” Davies goes on to endorse an innovation economics approach:

Yin and Stepp suggest funding research with money that would be used to provide EV subsidies and tax credits. They also suggest improving and legislating the relationship between the Departments of Energy and Defense, both of which sponsor research in the field, especially with respect to lithium ion batteries.


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