 Hi everybody, I'm Dan Jurgen. I'm a director of New America and very pleased to welcome you to this discussion today on the electric car. And also very happy to welcome the viewers on C-SPAN to our discussion. We are going to be talking about a terrific book today. It's called The Great Race by Levi Tilliman. It's a very timely book. This is really the fourth time that the electric car has appeared on the scene. And the first time was when Thomas Edison was a great proponent of the electric car and spent a million dollars in the dollars of that day, which would be many millions of dollars today over a period of 10 years trying to develop it. He promised the head of the biggest electric utility company in America that he was going to give him lots and lots of piglets who would be on his electric system and what a great market it would be didn't work out. There were two more episodes. And finally, we are here today. It is challenging to write a book on this subject and to write the book that Levi has written. Several requirements are necessary. One, you need to know cars. Two, you have to have a sense of automobile technology. Three, you have to know Chinese and Japanese. And four, you have to have a sense of national politics and international competition. So Levi, there are not very many people who meet those requirements, but you actually do meet them. And I think it would be to get started. I remember when this was just originally an idea. Can you just give us a sense of what made you think? Because when you started the book, we were going to run out of oil. Oil was going to be $200 or $500 a barrel. And the electric car had this urgency. Today, oil is $50 a barrel. But nevertheless, last year, 120,000 electric cars were sold in the United States. So tell us how you got involved with this and what made you decide to want to write on this subject. Well, it's true. A lot has changed since I started the project. One thing seems to never change, which is the Patriots always win the Super Bowl. And we may have different feelings about that. But yeah, when I started the book in really 2008, 2009, the inspiration for me to look into electric vehicles actually came from a meeting I had at the Ford Motor Company. I was meeting with the person who was in charge of all of their product development. And his name was Derek Kuzak. And his role was really to set the long-term strategic development plan for the company. And I had a startup company that I was working on called Iris Engines at the time. We were working on a very radical, small, efficient internal combustion engine. And we hoped that that was going to be the future of automotive technology. And we expected that. And in fact, we really didn't take batteries very seriously. But when I had my meeting with Derek Kuzak, the lights came on and he congratulated me. He said, this is a really interesting design, but I'm not going to put money into it because it would cost billions of dollars. And within 15 to 20 years, everything is going electric anyway. So I already have a technology called EcoBoost. We're going to EcoBoost through the next decade and a half, two decades. And then we're moving to electric vehicles. And that was a huge shock for me. I walked out of the meeting with my partner and I turned to him and I said, do you think he was serious about batteries? And my partner said, yeah, I don't think he was joking. He wasn't laughing. And so that made me return to the drawing board and take a look at electrification and what were the drivers behind electrification. And there were some very clear kind of macro drivers, things like oil scarcity that we thought was a big deal at the time, things like carbon constrained world that we're moving towards, which hasn't changed, but also the idea of industrial leadership and the fact that there were these big countries, big economies, that knew that the automotive sector was going to be a critical part of their industrial infrastructure going forward. So what happened to the iris engine? So the iris engine is kind of on ice right now. Let's just say that I bought into the thesis of electrification. And I know that internal combustion engines are going to be a part of the transportation picture for the next 20, 30 years. But increasingly, there's going to be a move towards batteries and perhaps fuel cell vehicles as well. So I know that one other thing that was very significant for you was when you were in Shanghai and you saw what the Chinese were doing on electric cars. Was that an epiphany as well? Or were you already committed to the subject? Well, the thing that's really amazing to me is how much has changed since 2010 when I was at the World Expo in Shanghai. GM and their Chinese partners psych. I don't know how many of you are familiar with the structure of the Chinese automotive economy. But basically, you have all of these big, multinational automotive manufacturers. And in order to sell cars in China, in order to produce and sell cars in China, they have to partner with a local company. And so the largest of these is the Shanghai Automotive Industrial Corporation. And they have partnered with a number of companies. Amongst these is General Motors. And for the 2010 World Expo, they were asked to put together a vision of what the future of Shanghai could look like. And so they created this absolutely dazzling display where you walked into a stadium seating amphitheater. There was a huge IMAX screen. You strapped into a five-point harness. And it flew you through this incredibly technologically advanced, incredibly clean, electrified world where all of the vehicles were autonomous. There were no stoplights. There were blind people who could drive around the city freely. There were mothers who were making it to the hospital on time to deliver their babies because they had an efficient autonomous driver. And how did this tie into electric cars? Well, so the interesting thing is that that looked like something that was certainly not going to happen by 2030 and might never happen in 2010. But in 2015, it's pretty reasonable to assume that something like that is going to be well on its way towards characterizing the transportation system of 2030. And we already have things like the Google car that are on the street today. Every major automotive manufacturer has a serious autonomous vehicle program under development. And every major automotive manufacturer has a very serious electric vehicles program as well. So from this discussion, and from reading the book, you get a sense of at least you'll be able to form your own opinions as to what kind of car you'll be driving in five or 10 or 15 years. And we'll come back to that subject at the end of this. But the architecture of the book is really a competition among three countries, China, Japan, and the United States. Why, rather than companies, did you organize in terms of countries? That's a good question. And actually, a lot of people have asked me about that because automakers are multinationals. I mean, GM sells more cars in China today than it does in the United States. But you see that one of the things it drives technology and one of the most important things driving the evolution of the auto sector today is regulation. And regulation still happens on a national scale. And sometimes it even happens on a subnational scale. So in the case of the United States, you have a big regulatory. We're going to go into that in a minute. Why you chose those three countries? Why did you choose Russia or Germany? Why did you choose those three? So they're the largest automotive economies in the world. They're the three largest single country economies in the world. And I conveniently spoke Chinese and Japanese. So that made it an even easier choice. How's your German? My German still needs a little bit of work. It's Portuguese, but again, Brazil wasn't a player. You know, I could have added Brazil into the mix. They have some interesting history on import, substitution, industrialization. But it wasn't quite as sexy as autonomous cars. So you started to get to the study. But you talk about China. You talk about the United States. You talk about Japan. And then you talk about what may be the most powerful unknown agency in the world, California Air Resources Board, CARB. And you talk about the long reach of CARB and how important that is. Tell us why California, which at this point is still part of the United States, you treat as a separate sovereign. So starting in the 1940s, California was subject to really a rolling environmental crisis, which was a smog crisis. And the problem was in the 1940s, nobody knew where the smog came from. It sounds crazy to us today. It seems obvious that smog comes from industrial emissions and from automobiles. But at that time, people really didn't know. And there was a California-based scientist from the California Institute of Technology named Ari Hogan-Smith, who did some cutting-edge research and figured out that most of the smog, in Los Angeles in particular, was coming from cars. The result of that was over the next 10, 20, 30 years, California built up what was by far the most sophisticated regulatory infrastructure for researching and also regulating the emissions of automobiles, but also other forms of environmental pollution. And in 1970, when the Clean Air Act was passed in Washington, DC, the federal government recognized that. They recognized that California was actually far ahead of them in terms of understanding the science of smog, but also how to regulate smog and how to drive manufacturers towards bringing new technologies to market. And so they created a special cutout in a carve out in the 1970 Clean Air Act that allowed California to set its own regulations for emissions. Now, that was. So that meant that decision made in 1970, then, actually, and that's quite a long time ago, then has a big impact on the electric car today. It reverberates very strongly to the present day. And it's even more impactful because of the fact that other states are allowed to opt in to California's very strict air pollution requirements. And those pollution requirements are really the root of California's program. So when did carves start trying to? I mean, from reading the book, you get the impression that carves was, if you're trying to say, where does the electric car, modern one, come from, a lot of it comes from California, from carves. I think that's right. That's what your book says. Yeah. So you agree with your book. You haven't changed your mind. Yeah, I mean, sometimes I have disagreements with myself, but not in this case. Yes. So tell us how carve got, where we are now, how what carve did to get the electric car on the road? So it's an interesting story. In the 1980s, General Motors was really in a bad place. They were being drubbed by the Japanese, who were flooding the US market with really high quality, low cost, automotive imports. And in fact, it had gotten so bad that the free trader, Ronald Reagan, made a political deal with the Japanese government to have something called voluntary export restraints, where the Japanese throttled back the number of vehicles they would export to the United States. And so things were not looking good for the US auto industry. Chrysler had just gotten a billion dollar bailout from the federal government. And General Motors decided that they were going to, and it's a little bit more complicated story than this, but they were going to enter a solar race across the Australian outback to show just how cutting edge they still were, that they weren't losing out to the Japanese, that they could still compete on a world stage in the most cutting edge technologies of the day. And they crushed the competition. I think it was like a week-long race, and they were three days faster than the closest competitor. So what did that have to do with CARB? Well, so it was an electric car. Right. And they decided to continue this development project, and they built a concept car that they had wanted to call it the Santana, but GM leadership decided to call it the Impact, and it had a huge impact on the automotive industry, because regulators from CARB drove it at the Los Angeles Auto Show, and they decided that this was their perfect weapon. Was that the one that was called the Egg on Wheel? I, maybe, yeah, it was, I'm not sure if I've heard that terminology, but I'm sure you can call it a lot of things. Yeah, so that was the forerunner of a vehicle called the EV1. Oh, this EV1, that's the Egg on Wheel. Yeah, that many people have probably heard of through the documentary Who Killed the Electric Car, but really it was the impact that convinced California regulators that an electric car was a viable consumer option, and it caused them to develop a set of rules that was tucked into a much larger package of air pollution related rules that essentially set out a timeline for innovation, and said by 1998, 2% of the cars that are sold in California have to be electric, and by 2003, 10% have to be electric. But that failed. So I would say it didn't fail, I would say it was postponed, and one of the good things about this policy was there was a built-in review mechanism. Every couple of years, they would come back, they would say, is this working? Is this not working? Why is it not working? Is the technology ready? And then they would also fight a lot with automakers about it. Yeah, so how do the automakers feel about carb? I don't think they like them very much in general. Probably Tesla likes them, but it's been an evolving relationship. At various times, the relationship has been more or less fraught, but in general, the relationship has been characterized by a series of very contankerous lawsuits. Right, so what is carb requiring today and how's that working? So today you have a situation where seven states, in addition to California, have bought into carb's zero emission vehicle mandate, which basically requires that automakers, if they're going to sell cars in California, or these seven other states, have to sell a certain proportion of electric vehicles. The interesting thing that they've done though is they've overlaid a market on top of this mandate, which is enormously efficiency enhancing. It means that rather than just saying every single automaker has to sell two percent electric cars this year, three percent electric cars next year, an automaker can make a strategic decision, whether it makes sense for them to build electric cars themselves, or buy what are called ZEV credits, which are credits that are awarded to automakers when they sell an electric vehicle. They can buy them from another automaker. How much do they cost? Well, it changes depending on who's selling more or fewer electric vehicles, and sometimes the price is really, really high. A couple of years ago, the maxed out Tesla Model S was producing about the people estimated $35,000 worth of ZEV credits per vehicle. So in other words, Tesla, in addition to making money from selling the car, or making revenues from selling the car, was also making revenues from selling credits. And still are. In Q3 of 2014, Tesla made $76 million through ZEV credits alone. Credits? Yeah, so it's a lot of money, and it has a big impact on the business model for these electric vehicles. So how many electric cars are of the 120 that was thousand that were sold last year? What proportion are in California? A lot. And if you look at California plus the states that are following the ZEV mandate, it's almost all of them. It's hard to get really good numbers on exactly where the cars are being sold. But California put out an announcement, I think November of last year, that it, together with its partner states, had sold 250,000 electric vehicles. And that was when the U.S. electric vehicle market had cumulatively sold about 250,000 electric vehicles. So it's not all of them, but it's a lot of them. So let's turn to China now. China, if we were having this conversation five years ago, the news coverage, the articles were about how China was gonna eat everybody else's lunch with the electric car. Why is China so committed to the electric car? And then once you answer that, we'll come back to the question of how it has worked out and how it hasn't worked out. There are a number of reasons why the electric vehicle makes a lot of sense for China. First of all, they have horrible air pollution problems. Anyone who spent time in China has seen this. I know when I go to China, I wake up early, I look out the window, and if you can see the sky, I strap on my running shoes and I go running because there's a good chance you're not gonna be able to do that again for the next six or seven days. The pollution there is so bad that frequently you can't get a good view of the building that is across the street from you. And so they have an environmental crisis that is in some way similar to the California crisis of the 1950s. You're from California originally, aren't you? So you probably remember the painful breathing of smog. And it's just as bad, if not worse, in China today. Actually, it's a lot worse in China today. And so that's the first reason. The second reason is energy imports. China's economy is growing very quickly, not as quickly as it was over the past 10 years, but it's still growing at a rate of seven plus per cent a year. And that translates into increased energy demand and especially increased oil demand. And so the electric vehicle is a means by which China can still gain increased mobility but not increase their oil imports. And the third reason, though, is to me the most interesting, and I think it's the real reason why the Chinese are interested in electric vehicles, which is that the current minister of science and technology used to be an Audi engineer. This is a very interesting story, yeah. His name is Wang Gong. And he came up with this idea when he was in Germany of leapfrogging the West into the era of electric vehicles. He knew, because he worked at Audi, which makes some of the best motors in the world, he knew how hard it was to build a production system that could produce these kinds of products at a world-class scale. And he knew it was going to be very difficult for China ever to catch up to Germany or Japan or the United States in these critical technologies. And so his thesis was that if China instead looked to the future and focused on electric vehicles instead, that they could leapfrog and they could command the market for the emerging age of automotive technologies. So they saw this as a way to be a global player in the automobile business. Exactly. And that his view was they could not become a global player with a conventional because they were too late. Exactly. And so what happened was he met the then minister of science and technology. They very quietly brought him back to China. And it seems like probably a lot of decisions had been made by the time Wang Gong came back. They installed him at one of the best universities in the country. They very quickly promoted him to president of that university. They made him in charge of the 863 program, which is the Chinese government program for developing bleeding edge technologies. And then they made Wang Gong. You're skipping over it, but that's a very important thing in China. It's a huge thing. And it's like NASA plus. It's kind of like if you... NASA and DARPA and... NASA and DARPA and the National Science Foundation all rolled into one. And then they made Wang Gong, who was not a member of the Communist Party, a member of the State Council. They made him minister of science and technology. And that was just an unprecedented thing. It hadn't happened for 40 years that someone who was not a member of the Communist Party had been a member of the State Council. And Wang Gong is still driving this thesis of electrification from a central level in China. And so the program, the leapfrog hasn't happened yet. I mean, I think as you read the Great Race, you have the sense that China started very strong and hasn't kept the pace. What's happened there? They put an enormous amount of money into this program. And there was an enormous amount of enthusiasm and a lot of propaganda that underpinned China's electric vehicles program. I mean, that's really what this GM Psych Expo exhibit was. It was the Chinese government putting a lot of pressure on GM and Psych to demonstrate to the world what China's EV system of the future was going to look like. And the problem is that they really got the incentives wrong. You see, it couldn't be much more diametrically opposed to the way things worked out in California. In California, they had made a bunch of mistakes in the past. They had already been involved in this kind of tug-of-war with the industry over the 1990s and before that with emissions technology. And so they understood how to pressure automakers. They understood what kinds of incentives automakers responded to. And the Chinese, on the other hand, put a lot of political pressure on the heads of major state-owned enterprises who are not just CEOs but politicians in China. They put a lot of money behind the electric vehicles program. They were giving huge subsidies, $9,000, $10,000 from the central government. Many cities and provinces were putting another $9,000, $10,000 behind electric vehicles. But it hasn't taken off in the same way it has in the States? It hasn't taken off. And to me, that's one of the most fascinating things because it shows that propelling these industries forward isn't just a question of money. It's not just how much money you throw at something. It's whether you get the incentives right. Right. Now, there's a third player in this great race, which is Japan. Where does Japan start? How did Japan get into the game and how are they doing? Japan has a terrific place in this narrative. And by the way, we'll talk about the utilities. And I think there's some people here from some of the Japanese utilities, so it's interesting. So yes, so tell us how Japan got into the game. At the beginning, Japan's role was really kind of almost as a spoiler for the American auto manufacturers. Starting in the 1970s, Carb was putting a lot of pressure on the big three to reduce their emissions. And they had come together and formed a study committee that was theoretically working together on developing new emissions technologies. But they were promptly sued because the federal government thought that they were actually colluding to keep more expensive, better emissions technologies out of the auto market. And I think Carb was very skeptical of their collaboration as well. And so what Carb did was they turned to the Japanese and they said, we have a huge market here and we have very defined goals for our market in terms of air quality. And what we want you to do is develop the technologies that Detroit isn't willing to. And Nissan and Toyota, they're almost like the big three of Japan. They weren't that interested in getting out ahead of policy. But Honda saw a market opportunity there. And they closed down their F1 racing team. They put all of their best engineers on this project. Soichi Rohanda himself, who is the founder of Honda Motor Company, would come in every day. And he would work shoulder to shoulder. So is this on electric cars? This is emissions. OK, but let's OK. But does this lead to electric? We'll skip forward. Yeah, let's skip, please. It leads to electric cars, yeah. So they developed this new set of technologies that Detroit had said was impossible. And so Japan became kind of a recurring competitor to Detroit's theme within the American regulatory community, was that if Detroit can't do it, look to Japan. And they might actually provide a way forward. Yeah, so then get us to the electric car. Right, so the electric car angle comes in in the 2000s. In the 1990s, just like every car company that was selling vehicles in California, the Japanese were forced to build electric cars. And they were building electric cars. They weren't doing it with great gusto. Certain companies latched on to the technology more than others. But as the first EV program that California put forward was getting mired in lawsuits and kind of slowing down, there was a nuclear engineer who worked at the Tokyo Electric Power Company. And his name is Takafumi Anegawa. And his specialty was core safety. He actually started his career at the Fukushima Daiichi Nuclear Complex, which many of you may be familiar with because that's where there was this horrible nuclear accident starting in 2011. Well, Anegawa decided that the best way to promote nuclear power in Japan was to show the Japanese that there was value to nuclear power beyond your standard industrial uses and lighting and home heating. And so he presented a plan to the management of the Tokyo Electric Power Company to build an electric vehicle infrastructure that would allow Japan to transition away from oil and towards a nuclear-fueled automotive fleet. And they said, this is a great idea. We have to find someone to do it. Nobody wanted to. And so Anegawa left his position as a very respected nuclear engineer to run this electric car program. He spent years knocking on doors, trying to get people involved. But most of the Japanese automakers said, we're not interested, because now that California is enforcing us to do this, we have zero incentive to get out in front of the pack from a technology perspective and to build an electric vehicle. Finally, Subaru and Mitsubishi decided that this was something that they were interested in. And at least with Mitsubishi, it wasn't really a decision that came from the top of the company. There was an individual there who ran a big research program who loved electric cars. He'd been very involved in building the electric vehicles to respond to the California EV program in the 1990s. And he knew that his leadership would shoot him down immediately if he said he wanted to start developing a new generation of electric vehicles. But he decided to secretly build a vehicle for Anagawa anyway. They developed this new ecosystem for electric cars, and then they moved to enlist METI, which is the Japanese Economic Planning Organization, the Ministry of Economics Trade and Industry. And METI decided to do a study on whether electric vehicles really were the future of transportation. They brought in academics. They brought in consultants and industry specialists. And the end result was they decided that for Japan to remain at the cutting edge of automotive technology, they were going to have to put serious money behind plug-in electric vehicles. This was 2006, 2006, 2007. And that's when Nissan got in, in a big way. And after Nissan got in, the scale of funds going towards developing these automobiles just changed. It was a step change. So if you were going to evaluate the rate, your book's called The Great Race. It's China, Japan, and the United States. Handicap where the race is now and who you think will lead the race. Certainly the Japanese are selling a huge number of electric vehicles. They're more plug-in electric vehicles. Are they the best on batteries? Japanese and Koreans are both very good on batteries. They both sell very high-quality batteries. Japanese are a little bit more sophisticated when it comes to automotive technology and integrating those batteries into cars. But I think you could make the argument that the Japanese would probably have been leading this race or at least be much farther out ahead with the United States than they are today, except for the 2011 tsunami and nuclear disaster. After that disaster, Tepco, who had really been driving this entire process, had their resources gutted. They slashed funding for their EV development program. Leadership for Japan's EV program was really transferred to Nissan. And Anagawa, who had built this entire program to promote nuclear power, was taken off the electric vehicles program that he had actually grown. He had started to really be very enamored with this program. And eventually he was put in charge of Tepco's entire nuclear energy program. And the reason why is interesting. He wasn't involved in the 10 years of decisions that led up to the Fukushima nuclear disaster. Instead, he had left to work on this EV program to promote nuclear power. And the result was that when they reached this kind of cataclysmic point in Tepco's nuclear power program, Anagawa had a lot of credibility. He had done something incredible and he was made the lead. So which country would you put at the forefront now? So I think America is far out in the front, especially because of Tesla, but also because of CARB. By coincidence, Levi's new dog is named Tesla. That's just a coincidence. But we haven't really talked about Tesla. Do you want to say a word, just a couple more questions and we'll open it up to the audience, but a couple. Yeah, she was barking till two in the morning last night. It was really. So tell us about the impact of Tesla. I spent a lot more time at the dog park. No, I'm just kidding. So Tesla is an incredible company. It is the result of a set of technologies that was really the outgrowth of the EV movements in the 1990s. The individual that Elon Musk bought the original technology for a Tesla motor company from had been an engineer on the SunRacer, which was the name of that GM car that they'd raced across the Australian outback in the 1980s. And I think Tesla has really changed the game in terms of public perception of electric vehicles. People used to think of them as golf carts. And now you have these YouTube videos where they put a Tesla Model S sedan, which is a fairly large sedan that can fit seven people peak capacity against these supercars with eight cylinders, and they have them drag race. And Tesla leaves the supercars in the dust, at least for the first eighth of a mile, because the acceleration is just phenomenal. And so that has been hugely important for just shifting the perception of electric vehicles. So two questions before we open up. One is, you are a big proponent of industrial policy, wisely administered. It's a theme that comes through in the book. I mean, it's only a small part of the book. The book is really a narrative of the story we've been hearing about. Some might read it and say, wait a second. This is about rent-seeking behavior rather than innovation industrial policy. Address the question of innovation, role of government, role of markets, and industrial policy versus rent-seeking behavior. That's a great question. And for me, it always comes down to the difference between the strategy and tactics. The scary thing about the world today is we confront a lot of challenges in terms of energy and climate. And we have to make some pretty huge changes if we're going to avoid catastrophic climate change. But the nice thing is that that gives us a very clear goal that we can use as a strategic guidepost for where we need to be in the next two, three, four decades. And so I think it's very important when you think about industrial policy to have a strategic mindset regarding the long-term goals but then to be somewhat tactically flexible. In terms of technology, the California Air Resource Board understands that, look, any zero-emission option that doesn't create a lot of air pollution is going to be fine from our perspective. And they're actually pursuing a number of different technologies and they put a lot of money into seeding new technologies. They're working quite aggressively on fuel cells. But the main focus is electric vehicles. And that's because it's quite clear that within the next 20, 30 years, the only technology that is viable to bring us to really zero emissions in terms of both criteria emissions, which are the emissions that are bad for human health because they create air pollution, and carbon emissions, which are emissions that generate climate change. Electric vehicles are the only thing that really exists out there. And so I think it makes a lot of sense to use those strategic guideposts and to create systemic incentives that allow us to efficiently drive towards a place that is going to be better compliant. And do you think that the policies the U.S. has put in place have worked to achieve their goals? The problem with the policies from the federal government is that most of them were formulated on an extraordinary timeline during the stimulus. The federal government had to spend $700 billion within an extremely compressed period of time. And so you can see that the efficiency of the California policies in terms of expenditure of funds is just much, much better than the federal. What was the goal initially that President Obama said was it a million cars, electric cars on the road by? By 2015. We're not going to make that. And we're definitely not going to make that. When do you think we might make it? The 2017 or 2018, depending on what the market does. That's not far away. That's not far away. And I think the interesting thing was, I don't know where that goal came from. And it's just, it's a goal that- But it was far enough away at the time. Well, it was far enough away. And it sounds like something that was formulated for a speech. If you look at California's goal, it's together with these seven other states, we will have 3.3 million vehicles on the road by 2025. They modeled this out very carefully and they calibrated the incentives together with their partners to figure out how many cars can we really achieve? So in your Washington Post op-ed the other day, you did take on a question that I'm sure is on the mind of people here and people watching on C-SPAN, which is the question of oil's $50 a barrel, as we speak now, not 500. Low gasoline prices, probably people filled up today. It's a little over $2, something like that. Of course, it's gonna be fluctuate over time. So what did low gasoline prices do? That was one of the basic premises for the policy. Will this affect things? It will certainly affect things. I mean, this is just such a huge systemic issue for the U.S. economy. As you know, Dan, it has massive stimulus effects in terms of consumer spending, but it's also potentially a big problem in terms of energy production in places like North Dakota or Texas. Do you have any idea actually what it's doing to economic growth in Texas or North Dakota? It's negative. Yeah, it's obviously negative. Are there any hard numbers on that? But you see it obviously has these huge systemic effects, but the nice thing about the California program is that they've created a shock absorber mechanism for the EV market, which is the ZEV credits. If you sell fewer electric vehicles, that mandate is still in place, and so that means the price of the credits for electric vehicles goes up, and that creates an incentive for automakers to lower their prices, to do whatever they have to do to sell more electric vehicles, so they don't either have to buy really expensive credits from someone else or so they have to meet this mandate. That's the critical thing, and I don't see the Californians retreating on that, so it will probably have some effect, but the truth is that there's kind of this self-equilibrating mechanism. Well, let's open it up to questions, and I believe there are microphones right there, so let's start, the first thing I saw is one way in the back, and we've got to use the microphones because of the viewers here on C-SPAN. This is Henry Hedger, researcher at NARA. Maybe a few years ago, I heard that they were trying to define what is an electric car, and General Motors indicated that the Volt is an electric car, and then we heard analysis saying that it's not a true electric car, it's a hybrid. However, the motor it has in it is just to recharge, it's electric motors. It's batteries, so the electric motor is the drive system. We have the Japanese small electric cars, a hybrid car, that's considered a hybrid. What are the percentages that are required in these limitations on California 2017 or 2016 that you mentioned? That's a good question, how do we define electric car? And I have another point. I live in a high-rise. You live what? A big high-rise, 300 units, and I wondered a couple of years ago about getting a plug in hybrid, and I needed it in my space. I have an underground space, and I wondered how to handle this, and they said they'd look into it, but absolutely nothing got done due to the difficulties in developing lines strong enough so the current could reach where I'm located. So that's the infrastructure. It's a problem for every person that lives in that. Okay, so that's, thank you, so that's the infrastructure. So there are two questions, how do you define and the infrastructure question? So I'll start with the second question first, which is the infrastructure is a big issue, and especially urban infrastructure. I live in a condo, there would be street parking for my car, and I would actually love to have an electric car, but I can't because I don't have a place to plug it in. And that is, I think, the big issue going forward in terms of expanding electric vehicle use in dense urban areas. It's much easier in a suburb or in a commuting neighborhood where people have garages that they park their car in every night. And I think that was the original target for the EV market, but EVs are actually a terrific solution for the city as long as we can find a place to plug them in. And so I worked a little bit on these issues at DOE. There's some interesting initiatives in places like New York City and in California to try to address that problem. And the first question about what, what do we consider an electric car? Well, there are kind of gradations of electrification. The first kind of vehicle that you mentioned was a pure plug-in electric vehicle. And I think most people draw the line between what we would call an electric car and something that is not really an electric car with an extension cord, which is if you plug that car into the wall and it gets its electricity from the grid rather than getting it from an internal combustion engine, then you consider that a plug-in electric vehicle. Otherwise it's a hybrid. Otherwise it's a hybrid. You have batteries in cars like the Toyota Prius, and yes, they have electric motors that enhance the efficiency, but all of the energy that is being used by that Prius comes from gasoline. There was a question in the middle here, right there. Yes, my name's Joel Hedger. I'm retired from the government. Can you hold up, Michael, a little closer? Oh, yes. The Fisker had a loan guarantee of like what a huge amount of money, I forget what was a flop. And Toyota's coming out with a hydrogen fuel cell next year in 2016. They're giving away 5,000 patents. Is that gonna be more important than the electric car, the hydrogen fuel cell? Okay, so the question is the hydrogen fuel cell, is that going to become an important competitor? Most people look at the future of transportation as a spectrum of technologies, and they don't think that one technology is going to win out completely. You see these growth pads for plug-in electric vehicles, hybrid electric vehicles, advanced internal combustion engines, and I think the debate amongst serious policy analysts is not whether one is going to take over the entire space, but what are those different growth pads going to be in? Which ones are going to grow faster, and which ones are going to grow less fast? So the hydrogen fuel cell is something that the Japanese government is putting a fair amount of money into. Toyota and Honda are both very invested in it. The Californians are putting a fair amount of policy work behind hydrogen fuel cells as well. But personally, I have a really hard time getting around the infrastructure issues for hydrogen fuel cells. It's very expensive to produce hydrogen. Today, hydrogen is produced mostly from natural gas, or you can produce it from coal, which means you don't get a big win in terms of greenhouse gas emissions. I keep trying to get a good answer from hydrogen fuel cell proponents why anyone would ever want to own a hydrogen fuel cell vehicle as opposed to a standard gasoline vehicle, because with an electric car, I see it. The fuel is really cheap. You can fuel at home, which means you never have to go to the gas station, and the performance can be terrific. With a hydrogen fuel cell, you still have to go to the gas station. It's not cheap. The cars aren't cheap, and the fuel isn't cheap. And I don't see a compelling business model there that is better than a gasoline-based business model. We talked about China, Japan, United States. Is France, is the EU a player in this, or is it the fact that there are large automobile companies in Europe who are playing to an American audience? The EU is definitely behind the United States and Japan, and I would say for a time, it was reasonable to say they were behind China as well, but Germany has really come on in a big way over the past. But Germany, you mean the German government, or do you mean the German automobile makers? Both, actually. At first, it was the German automakers. BMW came on very strong with a really neat electric vehicle called the i3 that is made out of carbon fiber. It drives great. You have to sit in it and feel what the interior is like. It is just one of the best designed vehicles that I've ever been in in my life. And it has doors that open like this rather than this, which makes it kind of cool as well. And then they also have an electric supercar that they have developed called the i8, which has a plug-in electric technology that is kind of similar to the Chevy Volt, but much more robust. And again, this is about the coolest looking car you've ever seen in your life. They're actually cooler than a Tesla. It looks cooler than a Tesla. I mean, it's not quite as, I don't think it's necessarily quite as good of a car for the money as Tesla, but it's a really cool car. And I will just finish by saying that with BMW getting into the electric vehicle segments in a very serious way, the German government has finally decided that they're going to start putting some incentives behind. Right. Roger, right up front here. We need the mic up here and then the lady behind you. Hi, Roger Cranberg, IHS. You mentioned four generations of electric cars and we're in the fourth generation. What's different about the fourth generation? Is it a signal of what the future holds? That's a great question. I think the thing that is different about the fourth generation to me. You should just briefly say what were the... So Thomas Edison was the first generation. Yeah, so I mean, I think you can say there are four and a half generations and it depends on what continent you're on. There's Thomas Edison who put more than a million dollars of his own money into electric vehicles. After World War II, there was like a brief blip in Japan where they were building electric cars because consumer automobiles had been basically banned by the occupying Allied forces and electric cars were kind of a loophole. And so Toyota had a division called Denso that started to build electric cars and they were selling them and people were using them instead of traditional vehicles but when the ban was lifted. And cheap gasoline. And cheap gasoline. The third one. The third was in the 1970s. After the oil shocks with the price spikes in gasoline there was a lot of interest both from a policy level but also among some private sector entrepreneurs in building a new generation of electric cars. And it's interesting because we read the language of that time it sounds remarkably like the language of five years ago. I mean, it wasn't the cycle. And then the three and a half. Yeah, and then the other is in the 1990s with California's first, I would say, aborted or extended electric car program. And the current generation of electric vehicles really started in Japan in 2006, 2007. What would you say is different about this one? The first thing that's different is just the scale. I mean, the scale is so much bigger today than it's ever been in the past. So we sold 120,000 electric vehicles in the West last year which may not sound like a lot in terms of a 16, 17 million vehicle automotive industry but it's huge in terms of laying the technology foundations for truly mass produced and mass market electric vehicles. And I think that's the number one thing. From a technology perspective there are some things that are clearly different. So we have better motors that are the results of a new generation of permanent magnet based battery. I'm motors that are, they're just superior to the ones that they were using in the 1990s. We have a different set of technologies going into the batteries. In the 1990s, the batteries that they were using were mostly lead acid batteries, some nickel metal hydride batteries, some very early stage lithium ion batteries. But the batteries that you're using today are almost all lithium ion batteries and the cost has come down enormously. Just since 2008, the cost has plummeted by 75, 80%. And so things are moving really fast. Right. The lady there had her hand up. Hi, Zoe Liebman from the Blue-Green Alliance. First, Levi, this is a great story you're telling here and very, very exciting to see it come out. The earlier question about how do all the different technologies across automotive innovation connect? I'd like to sort of follow up that, especially since we're here in DC, because we're seeing a transformation across the automotive technology at the moment. Can you talk a little bit about how some of the federal, whether you think some of the federal policy drivers that are transforming the industry as a whole impact the electric vehicle industry? And maybe just for example, the earlier speaker mentioned Fisker. Well, the same loan programs were critical for both Tesla and Nissan and highly successful. And so I just was curious, how do some of the larger automotive federal incentives connect to this story? That's a huge question and a very good question. Obviously the federal government was very important for buoying Tesla through a very, very difficult period during the economic crisis. The federal government basically saved the US auto industry as Zoe, I know you're an expert on these issues. So, you know, better than anyone, we could have lost General Motors, we could have lost Chrysler, and if both of those companies would have gone under, then that really would have had horrible effects on the supply chain of Ford, which could have meant that we lost Ford as well. And so... And so horrible effects in the US economy. Horrible effects on the US economy. I mean, I think the kind of mid-range projections are that we would have lost another two million jobs if Chrysler and General Motors would have gone under. So it would have been a huge problem. And the federal government, although they spent a lot of money during that time period, and some of the money was perhaps not put to use in the most efficient manner, has had some very, very important policies over the last 10 years that supported the industry and the electric vehicles industry specifically. There's a very important federal tax credit of $7,500 for electric vehicles that has made a big difference in terms of consumer willingness to purchase electric cars. And then the final thing is fuel economy requirements. And that is just the most interesting story. I was talking with one of Obama's energy advisors the other day, Heather Zeichel. And Heather was saying that Mary Nichols, who was head of the California Air Resource Board, was practically running the federal government's negotiations with automakers when they were negotiating the fuel efficiency requirements. And so these fuel efficiency requirements will promote electric vehicle manufacturing to a certain extent because people are going to want to up their MPGs by deploying electric vehicles. But most people say that 54.5 miles per gallon by 2025, which is what the future fuel economy requirements are, can be achieved mostly without plug in electric vehicles. It's not something that's going to drive electrification in the same way that the California programs do specifically drive electrification. Right, I think there's a last question there. Yeah, those last two questions and then two questions from me. I'm Tamika Tillerman. I'm at New America and a very long time fan of Levi's work. And Levi, I want to go back to an earlier point that Dan Jurgen had raised and in his question about industrial policy. There are two ways as an economist to look at industrial policy for a new sector of the economy. You can make a very strong argument that if you have a new industry that's coming online, it makes sense to put out incentives in order to help them get a foothold and build the infrastructure that they need to compete. But you want a time limit that. You don't want to provide those incentives forever. But you can also look at the incentives that are being provided to the electric vehicle industry from an environmental perspective and say that it's a mechanism for mitigating externalities associated with the internal combustion engine. And in that sense, maybe you don't put time limits on the incentives. And I'd be curious to know your view, how you see this process unfolding in a perfect world. Should there be an expiration date on the incentives that are being provided? Or is this necessary in order to reduce the harm that's being caused by carbon-based technologies? You could write many dissertations on the question that you just asked. I think that there is definitely, there should not be a argument as to whether the sunrise industry of electric vehicles should be subsidized right now. It makes a lot of sense to get this industry off the ground with some pretty serious subsidies from the federal government and as far as state and local governments are willing to jump on board. That's also terrific. I think there are probably better ways of dealing with the long-term externality of climate change than subsidizing the electric vehicle industry specifically. But the thing that I see in effective industrial policy is that it is administered by people who are not so constrained politically that they can't recalibrate when the external environment changes. And you see that very clearly in terms of how the Japanese have approached the automotive industry and also in terms of how the California Air Resource Board has approached the automotive industry. You can't know what's coming in the future. And so to just expect that you're going to be able to set out a philosophy or a specific game plan and follow that for the next 10 or 20 years is a little bit naive. I think what you need to do is have a long-term strategic goal, have a thesis, start acting upon that thesis, revisit that thesis on a regular basis, and then figure out whether that thesis still holds. And so I don't think that I could actually give a definitive response except to say that you have to think strategically and then you have to have a certain degree of flexibility tactically. All right, I think there's a last question there. Yeah, I'm Ethan Goffman of Sustainability Science Practices Policy. And just a question about how California's carb, even in the oil glut, it's counteracting and making the electric car worth pursuing anyway, even in this environment of cheap oil. Is that like unique to California carb or if you zoom back and look at the global level, are there other countries that are doing that and... Okay, let's get that question in. I think that is somewhat unique because of the fact that California has created this market mechanism to govern the deployment of electric vehicles. I mean, it's very powerful to have a mandate paired with the market, but you've seen this in other federal programs. You saw it in the acid rain program. They had this mandate regarding reductions of sulfur dioxide emissions, but they also had a market overlaid on that mandate that allowed them to dramatically reduce the compliance costs. And the Californians are clearly not the first people to use this mechanism, but I think in terms of the global automotive industry, they're the only people applying it to electric vehicles right now. Just one more point on that. To me, it is a great way of delinking our innovation policy from OPEC. It seems a little bit crazy that you should let the oil market govern how much money is going into your innovation policy for vehicles. Traditionally, when oil prices go down, people start buying less fuel-efficient vehicles and a lot of money flees the fuel efficiency and oil alternative sector. And that has created very damaging cyclicality within these spaces. And the carb mechanism of establishing this mandate with a market attached to it really allows California to set its own innovation policy rather than OPEC to set the U.S. innovation policy. So, Eli, in the last couple of minutes that we have, this is a book, Incredible Research. We found out things and inside, not only the U.S., but China, Japan, the industry that's really quite fascinating, great storytelling, great personalities, and a very important narrative. So now I'm gonna ask you to go out on a limb or maybe to go out at the very end of a very long extension cord and tell us what you think people will be driving in 2025 or 2030, the people here in this room and the people watching in C-SPAN and people across the country. Well, the thing is that the timelines for developing automobiles are so extended that you don't have to go too far out on the extension cord to make those predictions. We know that by 2025, there is this mandate in place within California and these other seven states. It says 3.3 million electric vehicles, minimum, are going to be on the road. So that's a floor, not a ceiling. We know that companies like Bosch have already created their timelines for deploying certain kinds of autonomous vehicle technology. They have a strategic roadmap for gradiating their level of autonomy starting in 2020, moving to 2025, by which time they expect to have fully autonomous systems on the road. So what will be the driving experience? The driving experience will still- What will people get into? They'll get into electric cars? In large part, it depends on what you're going to want to drive. And so if you decide you wanna drive an electric vehicle, you'll be able to drive an electric vehicle. If you decide that you want a car that has autonomous capabilities by 2025, you should be able to purchase a car with substantial autonomous capabilities. And some people aren't going to opt for those options in 2025. Some people are still gonna drive their Chevy Silver Auto pickup truck. So what are the autonomous features that people will have? They'll have definitely- Well, so today we have a lot of autonomous features. You have lane keeping, you have dynamic cruise control, which allows the car to slow down and speed up based on the speed of the car in front of it. By 2025, Bosch and Google are saying that you're going to essentially be able to get in your car, program a destination, and it will drive you from point to point. All right. Well, I think this is quite a story. It starts a long time ago. The book actually starts with Henry Ford. And in a sense, although it ends now, it really ends in 2025 or 2030 in terms of it as it plays out. So I think this is a book to take along on the trip and recommend the great race to everybody. And thank you all for joining us with Levi Tillock. Thank you. Thank you.