Equity, Emissions and the Inflation Reduction Act

TL;DR

This paper evaluates the effectiveness of the Inflation Reduction Act's incentives for preowned electric vehicle purchases among low-income households, highlighting eligibility issues, emission reduction potential, and procurement pathways.

Contribution

It provides a detailed analysis of how IRA incentives influence preowned EV adoption, considering eligibility, vehicle pricing, and procurement pathways, which was previously underexplored.

Findings

Up to 8.4 million low-income households may be ineligible for incentives.

Ineligibility could prevent 113.9 million tons of lifecycle emissions reductions.

Procurement pathways vary with vehicle price and affect incentive effectiveness.

Abstract

Preowned vehicles are disproportionally purchased by low-income households, a group that has long been unable to purchase electric vehicles. Yet, low-income households would disproportionally benefit from EV adoption given the operating costs savings offered by electrification. To help realize this benefit, provisions of the 2022 Inflation Reduction Act offer preowned EV purchasing incentives. How effective might these efforts be. Leveraging data from the United States Census Bureau, the National Household Travel Survey, and the Greenhouse gases, Regulated Emissions, and Energy use in Technologies Model, we address this question. Our findings are fourfold. First, we demonstrate that although low-income households are more likely to benefit from preowned EV purchasing incentives offered by IRA, up to 8.4 million low-income households may be ineligible owing to heterogeneity in vehicle procurement pathways. Second, we show that program ineligibility risks preventing up to 113.9 million tons in lifecycle emissions reduction benefits from being realized. Third, we find that procurement pathways depend on vehicle price. More expensive preowned vehicles are purchased directly from commercial dealers, while less expensive preowned vehicles are purchased from private sellers. These procurement pathways matter because qualification for IRA incentives necessitates purchasing solely from commercial dealers. Fourth, we demonstrate that while incentives motivating preowned vehicle purchases from commercial dealers may be effective if the vehicle is expensive, this effectiveness diminishes at higher price points. The implications of our findings on decarbonization efforts and energy policy are discussed.