Private vs social costs of vehicle adoption and ownership: a sales-weighted analysis

Source abstract

The economic competitiveness of battery electric vehicles (BEVs) relative to internal combustion engine vehicles (ICEVs) remains an important question for transportation and climate policy. Existing studies have largely relied on representative vehicles or scenario-based assumptions, providing limited insight into current market outcomes. This research develops a sales-weighted framework using observed sales of best-selling U.S. light-duty vehicles to evaluate both total cost of ownership and total societal cost, which incorporates carbon externalities and government purchase incentives. Results show that BEVs remain more expensive than comparable ICEVs due to higher BEV capital costs outweighing gains from lower operating costs. Monetizing carbon emissions using the societal cost of carbon reduces, but does not eliminate, the societal cost difference under 2024 market conditions. These findings suggest that economically efficient transportation electrification requires continued reduction in BEV purchase costs, electricity-sector decarbonization, and policies that more fully internalize the societal cost of carbon emissions.