Could e-bikes DOUBLE car emissions?

It seems like this week former Republican presidential candidates can't keep themselves out of hot water.

Of course, I'm talking about my senator and the former Republican presidential candidate, Mitt Romney.

Lawmakers are debating how e-bikes can contribute to reducing emissions. Some Democrats want to subsidize e-bikes. The subsidies come in two forms: a direct subsidy, giving people money to buy them, and an indirect subsidy, building more infrastructure like bike lanes that make using an e-bike easier.

There is an easy case to make for subsidizing e-bikes. If people switch from cars to e-bikes, they are reducing pollution. That means their choice has positive externalities because I benefit from cleaner air and I didn't have to pay for it. Thus, the social benefit is higher than just the private benefit, which means people are under-consuming e-bikes. A subsidy would help bikers internalize the social benefits they are creating.

But Mitt Romney does not think the social benefit is high.

This last week I saw a few people sharing this quote from Romney on the idea:

"I'm not going to spend money on buying e-bikes for people like me who have bought them — they're expensive," he said. "Removing automobile lanes to put in bike lanes is, in my opinion, the height of stupidity, it means more cars backing up, creating more emissions."

He has two concerns. One is about the direct subsidy, and the other is the indirect subsidy. The comment on the direct subsidy is pretty straightforward. Giving people money to buy a big-ticket item usually means you are just subsidizing the rich. Sure, there are people on the margin who might buy a bike now that it's cheaper, but the proposed subsidy is for 30% of the purchase price, which still leaves a big chunk of the price left for the consumer to pay.

The indirect subsidy is more interesting because it relates to every intro economics student's favorite topic: elasticity.

First, the basic argument. If we expand bike lanes, that means we have to shrink car lanes. And when we shrink car lanes, we get more congestion. If cars are sitting in traffic longer, that means they are spewing more missions. So these subsidies could actually increase pollution.

Totally reasonable argument! But it all depends on the elasticities. There are few in mind.

First, what is the own-price elasticity of demand for e-bikes? If we drop the price of e-bikes by 30%, how much will that increase the quantity of e-bikes purchased? My gut says that demand is relatively inelastic. America isn't really designed for bikes, so even a cheap bike won't be attractive to most consumers.

Second, what is the elasticity of bike use to road safety? If we improve safety by 10%, how much does that increase bike use? I think there could be a decent response here. For a year in California, I biked to work every day. The main motivator was that there was a bike path from my house to my job, so it was very safe. And one of the big barriers to riding a bike is that you share the road with cars that could easily kill you. If riding a bike was safer, I could see more people using the convenience of e-bikes. Especially kids and young adults.

Finally, what is the elasticity of car use with respect to congestion? If expected travel time doubles, how many drivers stop traveling? This is a weird one to think about, since as drivers leave the expected travel time decreases, which gives more drivers an incentive to stay. But overall, traffic jams around the country indicate that drivers are pretty inelastic to commuting times.

So if we get a modest increase in e-bike usage and almost no reduction in car usage, Romney has a really good point. We could easily see these subsidies make pollution worse.

Why are we even discussing it? Probably because it's more politically palatable. The obvious solution is a congestion tax or some other sort of carbon pricing. But Americans are really adverse to that. But people like discounts, especially on flashy toys. So our discussion focuses on silly policies rather than real solutions.