Behavioral Economist Hunt Allcott Examines Effects of Electric Vehicle Subsidies in Newest Episode of “Environmental Insights”

CAMBRIDGE MA. – Behavioral economist Hunt Allcott, Professor of Global Environmental Policy at the Doerr School of Sustainability at Stanford University, questioned the impact of new and used electric vehicle (EV) subsidies in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”

The podcast is produced by the Harvard Environmental Economics Program. Listen to the interview here.

Hosted by Robert N. Stavins, A.J. Meyer Professor of Energy and Economic Development at Harvard Kennedy School and director of the Harvard Environmental Economics Program and the Harvard Project on Climate Agreements, Environmental Insights is intended to promote public discourse on important issues at the intersection of economics and environmental policy.

Allcott, who earned his Ph.D. in Public Policy from Harvard in 2009, serves as co-director of the Stanford Environmental and Energy Policy Analysis Center, a research associate at the National Bureau of Economic Research, an affiliate of ideas42 and Poverty Action Lab, and a member of the board of editors of the American Economic Journal: Economic Policy.

The crux of Allcott’s research focuses on the ways in which human behavior affects economic decisions and outcomes in numerous contexts, and the lessons those have for policymaking. He cited several examples where government policy can influence consumer decisions that will benefit both consumers and the environment.

“It's like what behavioral economists call a shrouded attribute. It's a future cost that's kind of easy to forget when you're making a purchase decision. So, if it's… true that consumers aren't thinking very hard about these future energy costs, then we're probably erring on the side of buying too many gas guzzling cars and energy guzzling air conditioners and light bulbs. And so, as a result, the government can make us better off by pushing us in the direction of being more energy efficient,” Allcott remarked. “It was fun for me to… work with a group of others to develop actual empirical tests of, okay, how would you substantiate those consumer protection arguments in the data? So, that's some of the work that I'm most proud of.”

Allcott also discussed the national electric vehicle tax credits, which are designed to incentivize consumers to reduce carbon emissions.

“You subsidize a new electric vehicle, that's a new EV on the road, [and] that's good for the environment in most places. You give somebody a tax credit to buy a used EV, that's just trading an electric vehicle from one person to another, and so there's no new net vehicle on the road, at least [not] directly,” he stated. “Is the incidence really on the used vehicle buyer, in which case there's no environmental benefit, or maybe the prices of used electric vehicles are going up because they're worth more upon resale. That's not as good for the buyers, but then it might induce more new electric vehicle sales because when you buy a new EV, you then recognize that the resale value might be higher.”

Allcott officially joined the faculty at the Doerr School at Stanford in September 2022 as the school was being launched.

“There are 60 existing faculty members that were moved into that school as part of earth systems, energy systems, civil engineering, and some other departments. I was actually… the first external hire of this school to reach through the provost and actually show up on campus. And so, I've been here for, I guess, 15, 16 months so far, and it's just been a great experience trying to help Stanford have an even bigger imprint in this space of impact on energy and environmental issues.”

Ironically, Allcott said that much of the research taking place at the Doerr School today isn’t necessarily focused on behavioral economics.

“This has been an opportunity to step back and rethink what is the right research direction for the next five to ten years. And perhaps interestingly, all the topics that our group is now working on are what I would call non-behavioral topics. There's not really a behavioral economics angle to them,” he explained. “Upon arriving at Stanford [I asked] ‘okay, I'm in the sustainability school. What are the most important environmental economics topics?’ I think energy efficiency and behavioral economics is still on that list, but there's so much other stuff. There's the Inflation Reduction Act, there is electricity market design, and then within each one of those two, there's a lot of different sub-areas that we're actually focusing on.”

Allcott’s interview is the third episode of 2024 in the Environmental Insights series, with future episodes scheduled to drop each month.

“Environmental Insights is intended to inform and educate listeners about important issues relating to an economic perspective on developments in environmental policy, including the design and implementation of market-based approaches to environmental protection,” said Stavins. “We speak with accomplished Harvard colleagues, other academics, and practitioners who are working on solving some of the most challenging public problems we face.”

Environmental Insights is hosted on SoundCloud and is also available on Amazon Music, Apple Podcasts, Pocket Casts, Podcast Addict, and Spotify.

LINK TO PODCAST: https://on.soundcloud.com/DqUacdGZWiAui7LD8