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Measuring the cost-effectiveness of electric vehicle subsidies

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  • Sheldon, Tamara L.
  • Dua, Rubal

Abstract

Despite the prevalence of plug-in electric vehicle (PEV) subsidies, research on improving their cost-effectiveness and impact remains limited. To assess the scope for improving their cost-effectiveness, we develop a vehicle choice model-based counterfactual simulation using a large-scale nationally representative sample of U.S. new car buyers. Results suggest that existing federal incentives are expensive, $36k per additional PEV, as every buyer gets the subsidy. The cost-effectiveness can be improved by twofold by targeting incentives by income, vehicle disposal, geography, and/or vehicle miles traveled. Preserving the federal policy's assignment of larger subsidies for PEVs with larger battery capacities results in greater battery electric vehicle (BEV) adoption, while policies not discriminating by battery capacity result in greater plug-in hybrid electric vehicle adoption. The reduction in gasoline consumption is the same in both the cases, with a slightly lower marginal cost for the latter.

Suggested Citation

  • Sheldon, Tamara L. & Dua, Rubal, 2019. "Measuring the cost-effectiveness of electric vehicle subsidies," Energy Economics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:eneeco:v:84:y:2019:i:c:s0140988319303408
    DOI: 10.1016/j.eneco.2019.104545
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    References listed on IDEAS

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    3. Burra, Lavan T. & Sommer, Stephan & Vance, Colin, 2023. "Free-Ridership in Subsidies for Company- and Private Electric Vehicles," Ruhr Economic Papers 1015, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
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    6. Azarafshar, Roshanak & Vermeulen, Wessel N., 2020. "Electric vehicle incentive policies in Canadian provinces," Energy Economics, Elsevier, vol. 91(C).
    7. Hongchen Li & Huijun Qi & Hongjian Cao & Li Yuan, 2022. "Industrial Policy and Technological Innovation of New Energy Vehicle Industry in China," Energies, MDPI, vol. 15(24), pages 1-17, December.
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    9. Gulnaz Ivanova & António Carrizo Moreira, 2023. "Antecedents of Electric Vehicle Purchase Intention from the Consumer’s Perspective: A Systematic Literature Review," Sustainability, MDPI, vol. 15(4), pages 1-27, February.
    10. Hayashida, Sherilyn & La Croix, Sumner & Coffman, Makena, 2021. "Understanding changes in electric vehicle policies in the U.S. states, 2010–2018," Transport Policy, Elsevier, vol. 103(C), pages 211-223.
    11. Sheldon, Tamara L. & Dua, Rubal & Alharbi, Omar Abdullah, 2023. "Electric vehicle subsidies: Time to accelerate or pump the brakes?," Energy Economics, Elsevier, vol. 120(C).
    12. Martin Kalthaus & Jiatang Sun, 2021. "Determinants of Electric Vehicle Diffusion in China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(3), pages 473-510, November.
    13. Zhou, Kaile & Cheng, Lexin & Lu, Xinhui & Wen, Lulu, 2020. "Scheduling model of electric vehicles charging considering inconvenience and dynamic electricity prices," Applied Energy, Elsevier, vol. 276(C).
    14. Burra, Lavan T. & Sommer, Stephan & Vance, Colin, 2024. "Free-ridership in subsidies for company- and private electric vehicles," Energy Economics, Elsevier, vol. 131(C).
    15. Zhang, Tong & Burke, Paul J. & Wang, Qi, 2024. "Effectiveness of electric vehicle subsidies in China: A three-dimensional panel study," Resource and Energy Economics, Elsevier, vol. 76(C).
    16. Bjertnæs, Geir H.M., 2023. "Taxation of fuel and vehicles when emissions are constrained," Energy Economics, Elsevier, vol. 128(C).
    17. Nie, Qingyun & Zhang, Lihui & Li, Songrui, 2022. "How can personal carbon trading be applied in electric vehicle subsidies? A Stackelberg game method in private vehicles," Applied Energy, Elsevier, vol. 313(C).
    18. Jungers, Brenna & Abbott, Joshua K. & Bair, Lucas S., 2024. "Casting Away Invaders," 2024 Annual Meeting, July 28-30, New Orleans, LA 344017, Agricultural and Applied Economics Association.
    19. He, Juan & Zheng, Xiaoyong, 2024. "Do consumers try to solve the air pollution problem themselves? the effects of air pollution on purchase of hybrid and electric cars," Journal of Economic Behavior & Organization, Elsevier, vol. 220(C), pages 850-868.
    20. Sheldon, Tamara L. & Dua, Rubal, 2021. "How responsive is Saudi new vehicle fleet fuel economy to fuel-and vehicle-price policy levers?," Energy Economics, Elsevier, vol. 97(C).
    21. Adekunle Mofolasayo, 2023. "Assessing and Managing the Direct and Indirect Emissions from Electric and Fossil-Powered Vehicles," Sustainability, MDPI, vol. 15(2), pages 1-33, January.
    22. Nie, Qingyun & Zhang, Lihui & Tong, Zihao & Hubacek, Klaus, 2022. "Strategies for applying carbon trading to the new energy vehicle market in China: An improved evolutionary game analysis for the bus industry," Energy, Elsevier, vol. 259(C).
    23. Schwab, Julia & Sölch, Christian & Zöttl, Gregor, 2022. "Electric Vehicle Cost in 2035: The impact of market penetration and charging strategies," Energy Economics, Elsevier, vol. 114(C).
    24. Liao, Yanjun (Penny) & Luo, Bei & Spiller, Beia, 2024. "A Tale of Two Investments: Charging Stations and Purchase Subsidies for EV Adoption," RFF Working Paper Series 24-12, Resources for the Future.
    25. Chen, Rongkai & Fan, Ruguo & Wang, Dongxue & Yao, Qianyi, 2023. "Effects of multiple incentives on electric vehicle charging infrastructure deployment in China: An evolutionary analysis in complex network," Energy, Elsevier, vol. 264(C).

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    More about this item

    Keywords

    Clean vehicles; Air pollution; Transportation policy;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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