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Bringing multiple values to the table in local decision making – NSF Coastal SEES

“Want to carry one up?” the natural resource management team with Limahuli gardens in Haʻēna, Kauaʻi asks us as they hand out potted endangered plant seedlings before our hike up the trail toward one of their native forest restoration areas. We arrive 30 minutes later to the first restoration plot and are amazed to see an oasis of diverse native plants in a broader sea of mostly non-native forest. Restoration like this provides many benefits including biodiversity, cultural value, watershed protection, but it can also be expensive. Limahuli gardens, like so many natural resource managers around the State, face decisions around where and how to invest limited conservation resources. In an effort to cost-effectively restore a larger area of forest that provides a suite of ecological and cultural (ie biocultural) benefits, managers at Limahuli are pioneering careful consideration of multiple restoration strategies, including hybrid restoration with native and culturally useful non-invasive introduced species.

Limahuli restoration area

On the other side of the Hawaiian Islands, we have the rare opportunity to spend time in the Kaʻūpūlehu dry forest restoration project in North Kona, Hawaiʻi Island, a highly successful community-based effort to restore the most threatened ecosystem in the world. Many of the community members who work here are from cattle ranching families. They see tremendous value in mixed use landscapes including native forest and pasturelands, but worry about encroaching urban development. In this context, landowners across the State, including Kamehameha Schools, face decisions about the future of pasturelands, including the right mix of continued pasture, forest restoration and other land use options like coffee or restoring to agroforestry (a once prominent land use in the region).

NSF Coastal SEES team members Tamara Ticktin and Shimona Quazi enjoy the smell of blooming Aiea plants in the Kaʻūpūlehu dry forest.

Measuring keiki recruits in the stewarded dry forest.

Pasture bordering forest in high elevation areas in Kaʻūpūlehu

Real-world decision contexts like these have spurred a growing body of research striving to shine light on the ways that land management decisions influence societal well-being. Huge strides have been made to operationalize inclusion of the ‘value’ of land into decision making. Yet, this body of work largely remains siloed between those focusing on the biophysical and monetary values and those focusing more broadly on socio-cultural values. This division precludes a pluralistic set of values being included in decision-making in a meaningful way.

Over the past 3 years, UHERO, through an NSF Coastal SEES project – “Linking local ecological knowledge, ecosystem services, and community resilience to environmental and climate change in Pacific Islands”—has been part of a transdisciplinary team of researchers who have worked closely with landowners and communities in several study sites, including Haʻēna and Kaʻūpūlehu to bridge this divide.

In Haʻēna we worked alongside Limahuli reserve manager, Kawika Winter and his staff, to explore the costs and benefits of 3 restoration strategies: 1) restore to a state before rats were introduced (pre-rat); 2) restore to a pre-European state; and 3) restore using a mix of native and culturally useful non-invasive introduced species (hybrid scenario). Within each scenario, we evaluated the restoration costs alongside the benefits in terms of native and endemic species of plants restored, resilience (measured by functional diversity), and cultural value of plants restored. Cultural value was assessed based on a framework of past and current use based on community workshops and the long-term experience of managers working in the area. Interestingly, we found that the hybrid scenario provides important ecological benefits in terms of restoring a resilient mix of native species while also supporting a variety of culturally useful plants at a cost much lower than the other restoration strategies. While conservation of endangered species requires additional strategies, hybrid restoration offers a cost-effective way of scaling up restoration that can also provide important cultural and community benefits.

Variation in environmental and cultural benefits across three different restoration scenarios.

In Kaʻūpūlehu, we worked alongside Kamehameha Schools and the Kaʻūpūlehu community to evaluate potential futures of pastureland. We considered the management costs and environmental (biodiversity, groundwater recharge, fire risk), cultural, and economic outcomes of four future land use scenarios on a large cattle ranch: 1) retain pasture; 2) restore native forest; 3) restore agroforest; and 4) convert to coffee. Unsurprisingly we found that no one land use was the best on all metrics assessed, and that cultural value (assessed using participatory, deliberative methods and an indigenous cultural values framework) was very high in all land uses except for coffee (which is not an important land use in the immediate area). Similar to Haʻēna, we found that the agroforestry scenario (a hybrid forest) offered the greatest potential in terms of multiple benefits, including economic return. Yet, it is pasture which currently provides some of the highest cultural value in terms of local knowledge and cultural connection to place. Rather than providing clear answers to Kamehameha Schools about the “best” way forward, our research provided a way to bring multiple values, including cultural and environmental values, to the table in a concrete way.

Tradeoffs and synergies among different values with land use options in North Kona.

Integrating and including diverse values into decision-making is challenging, but critically needed around the world. We see no better place than Hawaiʻi to continue to work with on-the-ground managers to move this forward to contribute to more sustainable and resilient decisions. As an extension of our work in Kaʻūpūlehu and Haʻēna, we are now collaborating with a local non-profit Kakōʻo ʻŌiwi in Heʻeia Oʻahu to consider the multiple benefits of loʻi restoration through time. More to come!

Note: The NSF Coastal SEES project Principal Investigators were: Tamara Ticktin (UHM Botany), Kim Burnett (UHERO), Alan Friedlander (UHM Biology and National Geographic), Tom Giambelluca (UHM Geography), Stacy Jupiter (Wildlife Conservation Society -Fiji), Mehana Vaughan (UHM NREM), Kawika Winter (National Tropical Botanical Garden), Lisa Mandle (Natural Capital Project, Stanford), and Heather McMillen (NREM). Special thanks also to project researchers and graduate students who carried out much of this work, including Puaʻala Pascua, Shimona Quazi, Natalie Kurashima, and Christopher Wada. Finally, we are grateful to our community and landowner partners in Kaʻūpūlehu and Haʻēna who made this project possible.

- Leah Bremer 
UHERO and Water Resources Research Center Assistant Specialist

UHERO BLOGS ARE CIRCULATED TO STIMULATE DISCUSSION AND CRITICAL COMMENT. THE VIEWS EXPRESSED ARE THOSE OF THE INDIVIDUAL AUTHORS.


Bringing together energy and climate change policy

We hear a lot about Hawaii’s Renewable Portfolio Standard (RPS) which requires 100% of the utilities’ net electricity sales to come from renewable sources by 2045. Subsidies, rapidly declining solar panel costs, and high electricity prices have led to the proliferation of distributed rooftop solar photovoltaic (PV). By the end of 2016, roughly 1 out of 7 occupied housing units on Oahu had a solar PV system (City and County of Honolulu, 2017; ACS, 2017). Integrating increasing amounts of intermittent renewable energy, including utility-scale solar and wind, presents a challenge for electricity grid operators since at any moment supply must equal demand. While it is easy to get wrapped up in how to enable more cost-effective renewable energy on an outdated grid, designed for centralized generation and a one-way flow of electricity, I’d like to step back for a moment and remind ourselves of the rationale for renewable energy policies to ensure we meet our policy objectives and, towards that end, are using the appropriate policy instruments.

Like the U.S., Hawaii relies heavily on fossil fuels to meet its electricity needs (see Figure 1 for Hawaii’s generation mix in 2016).1 Since fossil fuels are a depletable resource, the transition to renewable energy is theoretically inevitable absent any policy intervention. It is the speed of transition that is inefficient from a social perspective due to the presence of environmental externalities (Gillingham and Sweeney, 2010).2 The damages from greenhouse gas (GHG) emissions are spillover costs not reflected in current market prices for fossil fuels. As a result, there is both more fossil fuel consumption than socially optimal and the transition time to renewable energy is slower. Basic economics tells us that the best way to mitigate climate change is to “get prices right” by imposing a tax equal to the marginal damage cost of emissions or apply emissions trading.3 Such market-based incentives are less costly and allow for more flexibility than traditional command-and-control policies in which uniform standards (ambient, emissions, or technology) must be met by affected sources. The marginal damage cost of GHG emissions can be given by the "social cost" of carbon—the per unit present value of the total damages from carbon dioxide (CO2) emissions or alternatively the benefit from emissions abatement.

Figure 1. Hawaii’s Electricity Generation Portfolio, 2016.

Source: EIA, 2017.

Instead of a broad carbon tax, most of the focus in Hawaii has been on taxing the barrel of oil. This of course also discourages fossil fuel use; however, the barrel tax we have is quite modest so its major impact is as a source of funding. As only $1.05 per barrel is levied—and this excludes aviation fuel and fuel sold to a refiner—it does not capture the full externality cost. And the dirtiest fuel, coal, is also currently exempted.4 We also rely on policy instruments like the RPS or subsidies for renewable energy, which though they likely reduce carbon, not necessarily at least-cost.5 These policies were not founded on the basis of environmental impacts (namely climate change), but instead were primarily driven by affordability6 and a stronger local economy.7

To address climate change specifically, we have a separate policy, Act 234 (2007), which requires Hawaii to reduce its GHG emissions to 1990 levels by 2020. The statewide GHG limit is 13.66 million metric tons of carbon dioxide equivalent (MMTCO2e), excluding air transportation and international bunker fuel emissions and including carbon sinks. In response, GHG rules were established for the electricity sector in 2014; facilities emitting over 100,000 tons of CO2e per year (excluding municipal waste combustion operations and municipal solid waste landfills) are required to reduce emissions by 16% from 2010 levels in 2020. Partnering across the 20 affected facilities is allowed to achieve cost-effective emissions reduction.

Figure 2. GHG Emissions Inventory, 1990 and 2007.

Source: ICF, 2008.

Figure 2 shows Hawaii’s 1990 and 2007 GHG emissions inventory—the most recent inventory to date.8 It shows that the electricity sector produces approximately 30% of GHG emissions. Other sectors matter too, especially transportation. By focusing on economy-wide GHG emissions reduction, coupled with the appropriate policy instrument to meet the policy objective, not only will it encourage more renewable energy in the electricity sector, but it will also facilitate coordinated efforts in other sectors. For instance, ground transportation comprises many individual actors, which together account for 14-18% of emissions. It is also the fastest growing sector (38% increase between 1990 and 2007). Emissions from ground transportation have likely continued to increase despite increased fuel efficiency and the growth of electric vehicles (EVs) in recent years.9 This suggests that even if the electricity sector were to comply with or exceed the 16% reduction, the growth of ground transportation likely outpaces the decline in the electricity sector; without coordinated state action we may not meet Act 234.10

Climate change policy offers a potentially economy-wide approach that can align multiple policy goals—whether it is more affordable, locally produced electricity or the electrification of transportation. An economy-wide carbon tax also means that the same $/ton cost would be levied on gasoline. While there is a federal gasoline tax of 18.4 cents/gallon and a state gasoline tax of 16 cents/gallon (EIA, 2017), this does not necessarily amount to the full externality cost of pollution.11 With the proper price signals, getting more EVs on the road will happen without any other overarching goals or mandates in the transportation sector. Whereas federal Corporate Average Fuel Economy (CAFE) standards increase the fuel efficiency of new vehicles, they do not encourage people to drive less. A carbon tax would target both vehicle purchase and driving decisions for new and used vehicles. Moreover, a carbon tax offers the opportunity to address distributional impacts. Carbon taxes are perceived to be regressive because fuel comprises a greater share of spending for low-income households. However, mandates are more regressive than a revenue-neutral carbon tax which can redistribute revenues to taxpayers by cutting other taxes (e.g. payroll, personal income, and corporate taxes) or through direct payments (flat “check in the mail”).12

Lastly, a carbon tax would also address flaws in today’s current energy policies. For instance, the 100% RPS, as currently calculated, does not translate into Hawaii generating all its electricity from renewable sources since distributed rooftop PV is counted in the numerator (renewable generation) but not in the denominator (total electricity sales). As calculated, only electric utilities are subject to the law. The gas utility and other large commercial customers who install their own generators are not part of the picture, perhaps prompting large customers to switch to gas or defect from the grid entirely. Instead of devising an amended metric to close such loopholes,13 stronger GHG policy—a carbon tax to either complement or replace the RPS—would align statewide goals and avoid the consequences of any “leakage” across sectors.

A carbon tax could also help to make good on the goals of Hawaii’s energy efficiency portfolio standards (EEPS). In contrast to an RPS which targets the supply-side, the EEPS focuses on electricity consumption, calling for a 30% reduction by 2030, equivalent to 4,300 gigawatt hours based on a 2008 baseline forecast of electricity consumption in 2030. Measuring progress according to the design of the standard is extremely difficult without a “counterfactual”—that is, electricity consumption absent any energy efficiency savings. In addition, similar to CAFE standards in the transportation sector, some efficiency gains are offset by increased consumption (a rebound effect). There are also many individual actors, some regulated by the Public Utilities Commission, and others, unregulated. An economy-wide carbon tax would incent fossil fuel conservation by all. Note also the volumetric surcharge design to support energy efficiency programs currently presents regressive impacts.14

There’s a lot of background activity around compliance with Act 234 on the horizon with affected facilities submitting their updated emissions reductions plan and the DOH updating and developing GHG inventories and projections. As we move forward, we should consider not only working towards compliance in one year but in perpetuity. This blog post has highlighted the critical link between our broader energy goals and how climate change policy and its policy instruments can enable us to reach those objectives. Maybe Act 32 (2017), which commits Hawaii to meeting some of the principles and goals laid out in the Paris Accord, will be a way to keep us on track. But without any specifics as to how we are to achieve such reductions—through a carbon tax or otherwise—it is largely symbolic. It’s time for a comeback in energy and GHG policymaking.

- Sherilyn Wee 
UHERO Affiliated Researcher

UHERO BLOGS ARE CIRCULATED TO STIMULATE DISCUSSION AND CRITICAL COMMENT. THE VIEWS EXPRESSED ARE THOSE OF THE INDIVIDUAL AUTHORS.


1Though the composition of fossil fuels differs; in the U.S., natural gas and coal comprise roughly 30% each and nuclear, 20% in 2016 (EIA, 2017).

2Yet with technological advances and the discovery of new reserves, it could also be argued that the supply of fossil fuels are “nearly limitless.” In either case, without correcting for the market failure, the transition would be to slow to mitigate the impacts of climate change (Covert et al., 2016).

3For instance, the Regional Greenhouse Gas Initiative, is an electric sector cap-and-trade program between nine Northeastern States.

4See Act 73 (2010), Act 107 (2014), and Act 185 (2015).

5Emissions reduction depends on the generation source displaced and on increased consumption due to reduced prices. Murray et al. (2014) show tax credits have a small impact on GHG emissions, and in some cases, emissions increase. Palmer and Burtraw (2005) show that neither a production tax credit or an RPS leads to as high of and as cost-effective a reduction as a cap-and-trade program.

6Note low cost and renewable energy is often incorrectly regarded as synonymous; such treatment depends on context (e.g. PV versus non-PV customers) and the procurement of renewable energy sources (benefit from low-cost utility-scale renewables is shared amongst all customers). Also, if Oahu’s coal plant—the cheapest source of energy at around 3 cents/kWh—were to go offline (power purchase agreement to expire in 2022), energy costs would increase dramatically.

7See HB1464 (2009) and HB623 (2015).

8The Department of Health (DOH) is in the process of updating prior GHG inventories and developing new GHG inventories for 2015, 2016, and 2017.

9There are 6,490 EVs statewide, comprising less than 0.01% of all registered passenger vehicles as of October 2017 (DBEDT, 2017).

10Contrary to the Department of Health’s (2014) statement that “these rules will ensure that the state returns to 1990 GHG emission levels by 2020 as required under Act 234, 2007.”

11GHG emissions are a global pollutant and therefore global damages should be accounted for.

12See for example David and Knittel (2016) and Levinson (2016) on fuel economy standards.

13In the 2017 legislative session, the Department of Business Economic Development and Tourism (DBEDT) for the second time, proposed to amend the RPS calculation to correct for this error (see SB906, HB1040).

14As a per kWh charge, customers who are able to reduce or offset their energy use through energy efficiency and distributed PV pay a lower dollar amount than customers who do not have access to such technology. The expansion of distributed PV puts a greater burden on these (generally) lower-income customers.


State Government Revenue Sources

Posted November 1, 2017 | Categories: Blog, Visualizations

State governments raise revenue from a variety of sources, with most revenue coming from personal income taxes and general sales taxes.

According to the Pew Charitable Trust's "How States Raise Their Tax Dollars" personal income taxes are the greatest source of tax dollars in 28 of the 41 states that impose them. General sales taxes are the largest source in 17 of the 45 states that collect them. States that rely heavily on sales taxes, like Texas (62% of revenue) and Florida (59%) generally results in overall tax collection systems that are more regressive meaning lower income familes pay a larger share of their income in taxes than do those at the top of the income distribution. This visualization shows the source of each state's tax revenue. Select a state to highlight and compare to other states or the 50 state average.

   

For example, Hawaii raises 30.6% of its revenue from general income taxes, a bit lower share than the 37.2% for all 50 states combined. In contrast, Hawaii's General excise tax contributes 46.3% of state revenues vs 31.6% for general sales taxes for all states combined. While the property tax does appear in this visualization, most states do not levy significant taxes on personal or business property. When including taxes levied by counties in each state, using data for 2015, the Institute on Taxation and Economic Policy's 5th Edition of "Who Pays" finds that Hawaii's ranks 2nd among all 50 states in the share of family income going to taxes for families in the bottom 20% of the income distribution. To hear about other features of Hawaii's tax system, comparisons with other states and ideas for reform, join us for a tax conference this Thursday, November 2:

Hawai‘i Tax Structure & How Tax Systems Work 101


Cost-Effectiveness of Herbicide Ballistic Technology to Control Miconia in Hawaii

UHERO is working with Dr. James Leary (CTAHR) to assess cost effectiveness of Herbicide Ballistic Technology (HBT) operations to control invasive miconia (Miconia calvescens) plants before reaching maturity. Based on studies in Costa Rica, Tahiti and Australia, we can interpret spatial and temporal implications of management driven by miconia’s fecundity, dispersal, seed bank longevity and recruitment. We find that the dispersal kernel of miconia in the East Maui Watershed is closely matched to a similar probability density function developed from miconia naturalized in North Queensland, Australia (Fletcher and Westcott 2013). In this spatial model, 99% of recruitment was within 609 m with rare stochastic events (i.e., 1%) extending out to 1644 m. Based on these biological features, one autogamous, mature plant can impact up to 850 ha (i.e., 2100 acres) of forested watershed with hundreds to thousands of dispersed progeny germinating asynchronously over several decades (Fig. 1).

Figure 1. The dispersal kernel displays as a raster layer creating an 850-ha area calculation with corresponding probability density function (color shades).

Effective management is achieved when target mortality outpaces biological recruitment. Cacho et al. (2007) coined the term ‘‘mortality factor’’ described by the simple equation: m=Pd x Pk, where the probabilities of detection (Pd ) and kill (Pk)are equal determinants of the “mortality” product. Our current Pk is 0.98 for all HBT treatments. With this effective and reliable treatment technique, management outcomes largely depend on detection (Leary et al. 2013; Lodge et al. 2006). Koopman (1946) introduced the mathematical framework for estimating the probability of detection: Pd=1-e-c, where the probability of detection asymptotically approaches 1.0 with increasing coverage (Fig. 2). In operations, imperfect detection can be compensated by frequent interventions compounding coverage levels over time, but with obvious diminishing returns (Leary et al. 2014).

Figure 2. Probability of detection (blue) and the inverse for the equally important confirmation of no targets (orange). Note gray dash connotation of a theoretically “perfect” sensor, where coverage is equal to detection and confirmation.

The variable costs for HBT operations (e.g., flight time and projectiles) are driven by target density (Leary et al 2013, Leary et al. 2014). With that knowledge, we estimate the cost to manage the area (i.e., 850 ha) impacted by the dispersal of new progeny created by a mature plant. A new mature miconia with two panicles may produce ~300-400 progeny. With a single, incipient target being such a high risk, intensive efforts should be matched to comprehensively search the entire impact area over the several decades with a level probability of detection (and equal confirmation of no targets) of all progeny recruits. For instance, with 320 propagules dispersed, Pd would need to exceed 0.9968 with coverage at 5.77 s per 100 m2 pixel totaling ~136 hours of effort over the entire impact area over four decades (Fig. 3A). Any level of coverage less than that (including 99%) would be prone to missing a target that ultimately reaches maturity and newly replenishes the seed bank (Fig. 3B). Furthermore, an overwhelming majority of search effort would actually be dedicated to the confirmation of no targets, where, for instance 87% of effort is invested in looking for 1% of the targets dispersed out to the perimeter.

Figure 3. (A) Search effort (EFT; hours) over a 43-year period to match the level of coverage with the probability of detection from a random search effort. (B) is the reproduction of 2nd generation progeny by undetected targets of the 1st generation shown as Base 10 log scale.

Based on this model, we estimate accrual of future management costs ranging from $169,000-337,000 for every mature target detected, with the increase from the base cost dependent on increasing propagule loads and the static cost to treat each those individuals detected.

- James Leary, Kimberly Burnett and Christopher Wada


 

References

Cacho, O.J., Hester, S. and Spring, D., 2007. Applying search theory to determine the feasibility of eradicating an invasive population in natural environments. Australian Journal of Agricultural and Resource Economics, 51(4), pp.425-443. 


Fletcher C. S. and Westcott D. A.. 2013. Dispersal and the design of effective management strategies for plant invasions: matching scales for success. Ecological Applications 23:1881–1892. 


Koopman, B.O. (1946). Search and Screening. Operations Evaluations Group Report no. 56, Center for Naval Analyses, Alexandria, VA. 


Leary, J.J., Gooding, J., Chapman, J., Radford, A., Mahnken, B. and Cox, L.J., 2013. Calibration of an Herbicide Ballistic Technology (HBT) helicopter platform targeting Miconia calvescens in Hawaii. Invasive Plant Science and Management, 6(2), pp.292-303. 


Leary, J., Mahnken, B.V., Cox, L.J., Radford, A., Yanagida, J., Penniman, T., Duffy, D.C. and Gooding, J., 2014. Reducing nascent miconia (Miconia calvescens) patches with an accelerated intervention strategy utilizing herbicide ballistic technology.

Lodge, D.M., Williams, S., MacIsaac, H.J., Hayes, K.R., Leung, B., Reichard, S., Mack, R.N., Moyle, P.B., Smith, M., Andow, D.A. and Carlton, J.T., 2006. Biological invasions: recommendations for US policy and management. Ecological Applications, 16(6), pp.2035- 2054. 



The Role of Policy and Peers in EV Adoption

Electric vehicles (EVs) can be a cleaner means of transportation compared to cars with traditional gasoline engines. They have the added benefit of being able to provide support to the electric power grid—an increasingly important attribute in states like Hawaii with high levels of intermittent renewable energy. To achieve widespread deployment of EVs, we need to know why consumers choose to buy an EV rather than a traditional car. Towards this end, we have conducted two studies that evaluate the effects of state-level policy incentives in the United States and that estimate “spillover effects” from geographic peers in Hawaii who purchase EVs. Preliminary results are presented below.

State EV Policies

Though EV battery costs have fallen rapidly in the last several years, the upfront cost of EVs still remain a barrier to rapid adoption. States have implemented a range of policies to encourage consumers to purchase EVs—financial and otherwise—but it is unclear how effective these policies are at achieving additional EV uptake. We estimate the effect of policy on EV adoption using semi-annual new vehicle registrations by EV model from 2010 to 2015 and a rich dataset of consumer-oriented state-level policies designed to promote EV purchases. We focus our policy analysis on EV vehicle purchase incentives and a range of other policies like home charge subsidies, reduced vehicle license taxes or registration fees, time-of-use rates, emissions inspection exemptions, high occupancy vehicle lane exemptions, designated and free parking, and an annual EV fee (that discourages EV purchase). As a rough indicator capturing the overall number of policies that states have used to incentivize consumer EV adoption, we add the number of policies up by state, illustrated in Figure 1. We separate the “policy index” (ranging from 0 to 9) by battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) and show how it has changed over time (as shown in Figure 1 for the second half of 2011, 2013, 2015). Overall, there are more BEV policies, where California and Arizona are leaders in the number of EV policies adopted.

Figure 1. State Policy Index: BEVs (top) and PHEVs (bottom)


Our econometric estimates show that state policies positively impact EV adoption for both BEVs and PHEVs. The vehicle purchase incentive has a pronounced effect on BEV uptake. A $1,000 increase in the purchase incentive leads to an approximately 15% increase in sales of BEVs. We test these results by examining states that have ended large purchase subsidies, and find that BEV adoption declines. Other policies—aggregated together into a policy index—likewise increase EV uptake, though more so for PHEVs. This suggests that policies related to usage are perhaps more relevant for PHEVs. Each additional policy increases PHEV sales by 18%. The contrast between the effectiveness of different types of incentives for BEVs and PHEVs offers some guidance for policymakers evaluating current state policies or considering adopting new state EV policies. In sum, we find that state policies have driven additional EV uptake—extending EV purchases to consumers who would not have otherwise entered the market.

Geographic Peer Effects for Teslas

We also examine the role of geographic peers in EV uptake in Hawaii. Hawaii provides an excellent case for studying peer effects because it has strong EV adoption, the second highest amongst U.S. states in EVs per capita (IHS Markit, U.S. Census Bureau, 2010 – 2015). Although federal and state governments offer a variety of consumer incentives, the decision to adopt EVs may also extend beyond economic and policy motivations to include behavioral and social components. Social networks, also called “peer effects,” could have a potentially large influence on vehicle choice if people are influenced in their decision to adopt an EV by peer decisions to adopt EVs. Our second study examines peer effects defined by geographic networks, i.e., by visual observations of EVs registered in one’s neighborhood. Using zip code-level EV registration data from 2013-2016 for Hawaii, we exploit a three-month gap between adoption decisions and deliveries of Teslas to estimate presence and size of peer effects. Tesla EVs were important for reigniting interest in EVs more generally and amount to 13% of registered EVs on Maui, Oahu, and Hawaii Island. Our econometric analysis identifies statistically significant neighborhood effects. Figures 2 and 3 illustrate EV and Tesla uptake, respectively, by zipcode on Oahu, Maui, and Hawaii Island; Kauai is omitted due to data limitations.

Figure 2. EV Adoption on Oahu, Maui and Hawaii Island

 

Figure 3. Tesla Adoption on Oahu, Maui and Hawaii Island

We find that geographic-based peer effects generate one additional Tesla sale for every 26 Teslas sold in a zip code. How meaningful the magnitude of these peer effects may be is likely contextual. If for example policy focused specifically on marketing to peers and social networks, this may not provide much gain. However, as a pure spillover effect, peer effects can be meaningful. If, for example, Hawaii were to offer a second round of vehicle purchase subsidies, the peer multiplier effect estimated in our analysis would increase the additional Teslas purchased by 4-5% over each year of the vehicle’s life. As a lower bound, this amounts to roughly 1 additional Tesla per zipcode as a result of peer effects. One note of caution: whether the peer multiplier for Teslas—a very high-end vehicle—will translate as the peer multiplier for other lower-priced EVs, such as the Nissan Leaf or Chevy Volt, remains an open question.

- Sherilyn Wee, Makena Coffman and Sumner LaCroix


References

IHS Markit. (2016). Dataset of New Vehicle Registrations by state 2010-2015.

U.S. Census Bureau. (2010-2015). 2010-2015 American Community Survey 1-Year Population Estimates.


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