The effectiveness of decarbonizing the passenger transport sector through monetary incentives

Passenger cars account for most road transportation emissions, and almost half of overall transport sector emissions in the EU. Countries in Europe have established policies to achieve emissions reductions in the transport sector by incentivizing the acquisition of fuel-efficient vehicles. In this paper, we perform a pair-wise comparison of common passenger vehicles sold in 2017, which implements newer data and more realistic assumptions than an earlier study. The pair-wise study compares an electric vehicle (EV) against a similar combustion vehicle to simulate a real market choice for consumers—a method commonly used to elicit preferences—and shows that fiscal incentives are effective at increasing EV acquisition. Acquiring EVs over conventional vehicles alone contributes to about a 60% reduction per kilometer of well-to-wheel emissions, based on average emissions of new EU vehicle fleets in 2017. A second mechanism at reducing emissions in the transport sector is through incentivizing consumer charging behavior to use less carbon intense electricity. The electricity used to charge EVs is variable throughout a day; therefore, we propose a dynamic pricing mechanism dependent on the carbon intensity of the electricity grid. We do this analysis through a case study for Portugal using the entire country’s public charging demands from 2017. The responsiveness of the users to the variable price is reflected by the market price elasticity of demand, and the resulting reduction in demand from the surcharge is approximated. Our study finds that a surcharging mechanism based on the carbon intensity of the electric grid can yield an emissions reduction of 20 tonnes per year while still achieving profits.