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Will Ford's EV Vehicle Push in China Increase Chinese Air Pollution?
Ford is planning to expand its production of electric vehicles as it plans to sell these cars in China. This could raise air pollution in parts of China. As argued in this recent AER paper, when electricity is generated by coal, EVs can be worse for the environment than gasoline vehicles. Given China currently generates 75% of its power using coal, the pollution damage caused by electric vehicles could shrink sharply if China's % of power from coal declines as it shifts to natural gas, wind, solar, nuclear and hydro.
Siqi Zheng and I discuss many of these issues in our 2016 book and in our 2017 JEP paper.
An under-explored environmental research topic focuses on global supply chains. If Ford builds its EVs in China, who will produce the intermediate inputs? Will Chinese producers of intermediate inputs for a EV gain valuable “learning by doing” insights as they scale up production?
While the old “trade and environment” literature focused on the pollution haven effect and the costs of global trade (as rich countries outsource dirty production to poorer nations and hence evade rich country environmental regulations), a second generation literature needs to emerge that studies how in age of “new ideas” and differentiated products — that poorer nations can learn how to make higher quality cleaner products by joining supply chains with nations with better technology. In this case, comparative advantage actually mitigates the externality as the LDC nation jumps to the technology frontier faster because it is trading (and learning) from a rich nation.
So, I predict that the EV push in China will in the short run slightly raise air pollution there but in the long run will help to sharply reduce pollution there.
Source: http://greeneconomics.blogspot.com/2017/04/will-fords-ev-vehicle-push-in-china.html
