Associate professor’s take on Volvo’s public offering, commitment to electric vehicles and their impact on South Carolina
With an emphasis on electric vehicles, Moore School economics associate professor Tamara Sheldon focuses her research on environmental and energy economics and their interaction with public policy. Her research specifically on electric vehicles has been published in numerous academic journals. With Sheldon’s interest in electric vehicles, she was intrigued when Volvo announced in October that they were going public with an IPO in Stockholm so they could finance efforts to make all of their new vehicles electric.
Published research: Sheldon has published a number of scholarly articles focused on governmental subsidies to fund electric vehicles. Recent examples include:
“How responsive is Saudi new vehicle fleet fuel economy to fuel-and vehicle-price policy levers?” Energy Economics, November 2020.
“Effectiveness of China’s Plug-in Electric Vehicle Subsidy,” Energy Economics, April 2020.
“Measuring the Cost-effectiveness of Electric Vehicle Subsidies,” Energy Economics, October 2019.
Why it matters:
- With Volvo’s IPO to go public and the dedication to eventually produce all electric vehicles, the Volvo plant in Ridgeville, South Carolina, will likely see more jobs and ramped-up production as Volvo makes the eventual switch to entirely electric vehicles. Plans to begin building electric vehicles at the South Carolina location are already set for 2022.
- Transitioning to all EV production is a high-cost initiative and will require not only investments in technology, manufacturing and workforce development but also dealership training and new marketing strategies. The payoff is uncertain but potentially large if Volvo can gain an early mover advantage.
- Not only will this likely add stable jobs to South Carolina, but it will also improve skills and workforce expertise in the EV space, not only at the Ridgeville plant, but also along the supply chain. This could position the South Carolina factory to have a foothold in the EV industry going forward.
Research design:
- Exploring electric vehicle policies in different countries — usually, this involves estimating vehicle choice models using large datasets of new vehicle registrations combined with consumer demographic information. These models quantify consumer preferences (e.g., for different vehicle makes, body types, fuel economies) as well as price sensitivities.
- Use the calibrated models to run counterfactual simulations under different policy scenarios (e.g., changing EV subsidies) to assess how sensitive EV sales are to these policies. We find that EV subsidies are often effective but not cost-effective. This is because a lot of EV adopters would purchase EVs regardless of the subsidy — but there is no way to identify these buyers, so everyone gets the subsidies.
- Sometimes, four or more subsidies must be given to these “free riders” just to induce one new consumer to buy an EV (who wouldn’t have otherwise bought it). We show various ways to improve cost-effectiveness of subsidies- for example, by increasing subsidies for lower income households.
“The Biden administration is targeting a 50 percent sales share for electric vehicles by 2030, and China has even more ambitious targets. U.S. government policies, including substantial consumer incentives in the last decade, have barely moved the needle on electric vehicle market share. Volvo’s announcement — as well as similar recent announcements by other automakers — in many ways marks a turning point. The full-scale commitment of major auto makers to EV production suggests not only that such ambitious targets may actually be feasible but also that the private sector might lead the way,” Sheldon said.
About Tamara Sheldon:
- Sheldon joined the Moore School’s economics department in August 2015 as an assistant professor. She was named a Moore Research Fellow and promoted to associate professor in 2021.
- Her research encompasses environmental and energy economics and how these fields interact with public policy. Her current research projects relate to climate change and adoption of plug-in electric vehicles.
- Sheldon teaches environmental economics and principles of microeconomics.
- She earned her bachelor’s degree in environmental engineering from the Massachusetts Institute of Technology and her Ph.D. in economics from the University of California-San Diego.
Ongoing research:
Papers currently under peer review include:
“Electric Vehicle Subsidies: Time to Ramp Up or Dial Down?” with Rubal Dua and Omar Al Harbi (revisions requested at Energy Policy)
“How Cost-Effective are Electric Vehicle Subsidies in Reducing Tailpipe-CO2 Emissions? An Analysis of Major Electric Vehicle Markets” with Rubal Dua and Omar Al Harbi (revisions requested at Energy Journal)