No state is more car-crazy than California—and they've paid a big price for it, not just in $6-per-gallon gas. The heat waves, droughts and calamitous wildfires that have ravaged the state in recent years are by-products of climate change, to which greenhouse-gas emissions from California tailpipes (and elsewhere) have contributed.
To Governor Gavin Newsom and other state political leaders, the fix is clear: Regulate the tailpipe out of existence. In August, in a continuation of its half-century-plus tradition of setting the nation's auto emissions standards, California ruled that by 2035 all new cars and trucks sold in the state must be fossil-fuel-free. Instead, electric vehicles, or EVs, will become the law of the land.
Shifting the world to zero-emissions all-electric vehicles would in theory eliminate about one-fifth of all carbon-dioxide emissions, the chief greenhouse gas behind climate change. But making the transition quickly is a tall order and creates new problems. EVs are currently too expensive for most people. The U.S. electric grid needed to power them all is unreliable and still derives much of its energy from burning fossil fuels. Charging stations are few and far between. Supply-chain and manufacturing issues have led to wait lists. And although EVs are popular in California—they constitute 15 percent of sales versus 3 percent for the U.S.—it's unclear how many more enthusiasts the state has left.
The timetable is ambitious, even for California. It goes well beyond the state's past clean-air efforts in scope and exceeds the Biden administration's goal to increase manufacturing of EVs to 50 percent by 2030. The price tag will be staggering: tens of billions of dollars in state spending on EV subsidies and improvements to the electric grid and EV-charging infrastructure will be needed, experts say.
Californians are in no mood to write the state a blank check. In November, they voted down a new tax measure that would have supported EVs, and since then the state has projected a $25 billion deficit for next year. The U.S. is also facing prospects of a recession. Given Newsom's apparent presidential ambitions, it's questionable whether he'll be willing to push voters to accept tax hikes to cover the program's costs. (Newsom's office declined repeated requests to make the governor or any other official available for an interview.) If gas becomes cheap again, as some experts predict, the political will for big EV investments could weaken or evaporate.
"2035 may seem like a long way off, but trying to get to 100 percent of sales by then is going to be tricky," says Jessica Caldwell, executive director of insights at car-guide publisher Edmunds. "We're talking about depending on products and infrastructure that don't exist yet, and it all has to be built in parallel."
The stakes couldn't get much bigger. Since California leads the U.S. in auto regulations, its new rules have the potential to set the U.S., one of the world's largest emitters of greenhouse gasses, on a path to significant reductions, breathing new life into global efforts to avoid the worst effects of climate change. Big Auto is on board and so is New York Governor Kathy Hochul, who announced in September that her state will follow California's lead.
After the recent COP 27 United Nations climate conference in Egypt, where nations failed yet againto reach an agreement to phase out fossil fuels, anyone hoping that the world can get a grip on climate has to be rooting for California's bold measures to succeed. But it's going to take much more than cheering to get the initiative across the finish line.
The Case for California's Plan
Californians have already proven themselves EV-friendly relative to the rest of the U.S. More than a million EVs are on California roads, about half of all the EVs in America. That number would almost certainly be higher if it weren't for long wait lists for the few sub-$35,000 EV models offered in the U.S. At present, the best-selling car in the state is a Tesla Model Y, which starts at $65,990.
Unlike the 1990s, this time around all the big auto manufacturers have expressed commitments to providing more EV options, and not only in response to prodding by the U.S. and California. Demand is already exceeding EV supply and is expected to grow. Ford is spending $50 billion to beef up its EV offerings and General Motors has declared its intentions to go all-EV by 2035. President Joe Biden's Inflation Reduction Act is pumping money into getting more EVs on the road, including a $7,500 tax credit for some EV purchases.
As more consumers bite, a network effect that entices others to switch will kick in, says David Reichmuth, a senior engineer in the Clean Transportation program at the Union of Concerned Scientists. California may already be at that tipping point. "When people start getting positive feedback from others they know who own EVs, they'll feel better about buying one," he explains. With gas prices near historic highs, and more public charging stations popping up on streets and in parking lots, the temptation to go electric is only likely to grow in the near term.
Still, a big fraction of the people in California who are willing to jump into EVs may have already done so. Getting the rest of them on board runs into some tricky economics. Setting up a home charging cable can be a complex and costly chore and may not be possible for those who park in the street or in a lot. Charging challenges are worse with trucks, which require more power and outnumber cars in the state. "EVs aren't going to work for everyone," says Edmunds' Caldwell. "California is vast and mostly rural and spread out, where people may have to drive hundreds of miles, some of it in mountain ranges. They may not be able to get the charging they need to make it round-trip."
At the moment, the cost of EVs is a big sticking point. The average price paid for a new car in the U.S. is about $47,000, but for EVs it's $63,000, and that number has been steadily climbing. The Nissan Leaf and Chevy Bolt, both compact cars that start at under $30,000, are difficult to find and smaller than what most consumers are looking for. Rebates and tax credits from Sacramento and Washington can amount to $10,000 or more, but they come with income and other qualifications that eliminate many buyers and they don't cover all EV models. Even those consumers who qualify for rebates must wade through layers of paperwork and then wait six months or more to get the money. "The buying process is too complicated and it keeps changing," says Caldwell. Meanwhile, dealers have taken advantage of the short supply of EVs to add on mark-ups that can easily exceed the rebates.
By California's reckoning, EV prices will continue to drop over the next 10 years. EVs also have lower maintenance costs—they don't need gas, oil changes, spark plugs and timing belts, for instance. Together, these factors will bring EVs to "parity" with gas-powered cars, Newsom's office says via email.That forecast relies in part on an assumption that battery costs will continue their decade-long trend of steeply falling prices, despite current and projected shortages.
If EV costs stay high, the new rules will price many people out of the market for new cars, making an already bad equity problem even worse. The rules keep ratcheting up the pressure year by year on automakers to sell more EVs, fining them $20,000 for every gas-powered vehicle they sell beyond the mandated percentage. As the auto industry copes by yanking gas cars off the lots, less-affluent new-car buyers will find themselves forced to choose between EVs they can't afford and beat-up gas guzzlers that sell for a premium. Incentives to keep people choosing EVs run the risk of raising costs for those least able to afford them.
The California Air Resources Board is promising more assistance to lower-income buyers, but making sure the money gets to the people who need it will be challenging, judging by the problems existing programs have faced. So will funding the rebates. Proposition 30, which was on the California ballot on November 8, proposed a new income tax that would have raised a projected $4 billion or so largely to fund financial assistance for EV purchases, but it was defeated at the polls. Newsom himself opposed it, ostensibly because he wanted ridesharing companies like Uber and Lyft to provide more money for their drivers' EV purchases rather than counting on the state to chip in. (Uber is, in fact, providing $800 million to its drivers to help them acquire EVs.) Many observers, though, believe Newsom feared that raising state taxes, already the highest in the U.S., might hurt his chances in a potential 2024 run for president.
Without the funds Proposition 30 would have provided—or some other new taxes that haven't yet been proposed—the prospects for meeting the state's EV goals may rest on the hope that the auto, electric and charging industries will hugely ramp up their own investments, produce more cars and bring costs down. The federal government could give California an off-ramp by kicking in far more in assistance than it has already committed to, but this seems unlikely now that Republicans will soon take control of the House of Representatives
The Charger Shortage
Another challenge to California's EV mandate is that there aren't nearly enough places to plug the vehicles in. Most owners will be able to install charging cables at home and get enough juice to make it through the day. But a large percentage either won't be able to charge at home because they don't have a garage or private driveway, or else they'll drive far enough to need a re-up along the way. Some may be able to charge at work, but most will have to rely on public charging stations, where EVs can get at least a top-up charge in an hour or so.
By 2035, California will need about 2 million public charging stations, according to a UC Davis study. Right now there are fewer than 100,000. At a typical cost of about $50,000 each, the tab could hit $100 billion. That leaves the state with a chicken and egg problem, says Caldwell. "People aren't going to want to buy an EV if they're worried they're not going to be able to charge it," he says. "But it's going to be hard to justify spending to put in the chargers if the EVs aren't out there yet."
Those charger stations will also need costly maintenance. The state has already fallen behind in maintaining its few existing ones. A study by the University of California Berkeley and the non-profit environmental organization Cool the Earth found that as many as a quarter of charging stations in and around the San Francisco Bay Area—a leader in EV adoption—are out of service. And because lower-income car owners are more likely to lack facilities for home charging or live in communities without good access to working public chargers, the charger shortage will hit them hardest. That issue will be difficult to solve without changing building codes so that new apartment buildings and other structures can more easily accommodate multiple charging facilities, says Reichmuth of the Union of Concerned Scientists.
Even if these advances materialize, staggeringly large investments in EVs and infrastructure will have to come first. According to a 2021 report from energy industry trade group Advanced Energy Economy, a $274 billion investment would be needed to bring the U.S. EV infrastructure up to speed. Given California's aggressive timetable and enormous market size, the state would need a big chunk of that investment, easily running to the tens of billions of dollars.
Can Automakers Deliver?
Even if most California car buyers decide they want EVs, manufacturers may not be able to make them fast enough, given supply chain challenges and the need for massive changes in design, engineering and manufacturing. The problem is largely one of scale, says David Rapson, co-director of the University of California Davis Energy Economics Program and a senior research economist at the Federal Reserve Bank of Dallas. The existing capabilities, investments and infrastructure that have enabled the state to reach its current EV market share are grossly inadequate for the number of EVs the new rules mandate.
"It's one thing when you're talking about a 15 percent market share, but another when you're talking about 50 percent or more," he says. The 100 percent EV mark is still 13 years off, but the new rules call for sharp increases that start kicking in right away, including hitting 35 percent by 2026 and 68 percent by 2030.
Automakers claim they'll be ready to meet burgeoning demand, but there's good reason to be skeptical. So far, they've turned out small numbers of mostly high-priced models and even that isn't enough to meet demand. To hit California's goals they'll have to fill lots with affordable EVs. That's the plan, insists GM spokesperson Elizabeth Winter. "California's policy is complementary to ours," she says. "We're hyperfocused on delivering EVs across a range of categories and price points." She notes that the company will be rolling out the Equinox SUV for a starting price of about $30,000, as well as an all-electric Sierra truck, which will compete with Ford's F-150 Lightning EV. To keep prices down, she says, GM is building most of its EVs on the same basic battery platform.
Challenges abound. For one thing, supply chain problems may extend far beyond the temporary glitches caused by the pandemic. There is already a shortage of batteries needed to power EVs. More than half those batteries have come from China, an increasingly unreliable source given trade and political tensions. Biden's infrastructure plan pumps more than $3 billion into expanding U.S. battery manufacturing capacity, but a global shortage of lithium and other exotic metals required for EV batteries threatens to leave manufacturers with only a tenth as much as they need to meet Biden's goals of 50 percent EV sales by 2030 for the U.S., never mind California's more ambitious target of 68 percent EVs by that year. A shortage of semiconductor chips—the average EV needs 2,000 of them—is expected to last at least another two years. Car companies will also have to retool their workforce in the midst of a labor shortage around the country. Engineers who can design EVs may be a particularly rare commodity.
GM has already locked in agreements for the battery materials and other needed supplies for producing a million EVs a year by the end of 2025, Winter says. That might be just enough to meet California's goals, if all the cars were shipped there. Shortages will continue to threaten EV production and affordability over the coming decade, making it difficult to keep existing agreements in place, Rapson of the University of California Davis predicts. "Supplies will increase over time, but there will be periods where demand outstrips supply and prices spike, leading to more expensive batteries and slower EV adoption," he says.
Juicing Up
Even if affordable electric vehicles were ready on California dealer lots, the state's troubled electric grid may not be. In theory, it could keep 5 million EVs charged up, assuming it's working at full capacity—which is frequently not the case, thanks in part to aging, unreliable equipment and especially to the heat waves and fires that have been increasingly plaguing the state. Utilities are addressing the grid problems, to the tune of $3 billion over the next 10 years. Improvements will be slow in coming.
Meanwhile, brownouts have become common and a flood of plugged-in EVs could bring the already-struggling system to its knees long before the needed upgrades are made. A Stanford study earlier this year calculated that at projected rates of EV growth, electricity demand could skyrocket by up to 25 percent in the coming years; peak demand could double by 2030. That's assuming that most EVs are charged at night, which is currently the case for about 80 percent of them. That poses an additional complication in California, which loses up to half its grid capacity when the sun goes down, due to its heavy dependence on solar power.
As California builds out a charging infrastructure, there will be opportunities to address many of these challenges through technological innovation, EV advocates say. For example, new types of enormous battery banks and other large-scale energy storage technologies may be able to collect electrical power from the grid during the day, store it away and feed it back at night, while most EVs are charging.
EVs can also be equipped with advanced smart-charging features that communicate with the grid to draw power for charging only when it's most available, and even to push energy back into the grid when it's needed somewhere else. "Most EVs can't do that today, but over the next 20 years we'll see EV batteries being integrated into the grid in helpful ways," says Reichmuth.
Still, EVs call for massive investments in the grid that go well beyond the $5 billion that Southern California Edison has already pledged to spend—a Boston Consulting Group study suggests the cost will be in the tens of billions of dollars. "Making enough electricity and getting it to the right places is going to be very expensive," says Rapson. "Even if California customers care deeply about climate change, I don't know if they're going to put up with the grid costs and unreliability."
Gas-Powered Politics
It's far from a sure thing that the investments California needs to make will happen. Newsom, the Air Resources Board and the Democratic-dominated legislature have so far mostly been on the same page in committing to the big push to EVs. But the failure of Proposition 30 is a reminder that voters aren't ready to give politicians and regulators unlimited funds to realize their EV goals—and that even climate-change leaders like Newsom are prone to bow to political expediency. The state's track record in meeting its own environmental goals is uneven; a report put together by the state last year found that it has fallen behind existing emissions-reductions goals.
Meanwhile, there's one more threat hanging over the future of California's audacious goals for EVs: cheap gas. While mitigating climate change is the chief motivation behind the EV push, rising gas prices have put a wind at policymakers' backs. That wind would shift if gas prices drop, conceivably making gas guzzlers cheaper to buy and cheaper to refuel. "Cheap and abundant energy is central to our lives and economy," says Rapson. "Any policy that increases energy costs is going to put the tradeoffs of that policy into stark relief."
The lure of cheap gas would be especially potent in California, where electricity costs are among the highest in the nation—nearly twice the U.S average. That's thanks to fees and taxes tacked on to finance maintenance and improvements to the grid and to deal with fires and other weather-related disasters. Though gas prices have come down from historic highs last spring, they are still at an oppressive $85 or so a barrel, making even California electricity feel like a pretty good deal. But that could easily change with growing EV sales. "If the use of oil decreased, the price would likely fall to $30 a barrel or less," says Borenstein. "It would be hard for electricity to compete with that."
With cheap gas, contends Borenstein, the only way to keep voters on board with an EVs-for-everyone policy would be to find a way to bring EV costs sharply lower than they're expected to be in coming years.
"If you want EVs to remain a nice niche business, just keep beating $4-a-gallon gas," he says. "If you want to change the world, you need to beat $1-a-gallon gas." That's going to be a steep road to climb.
