Subsidy policies towards zero-emission bus fleets: A systematic technical-economic analysis

We establish a bus market evolution model to explore the implications of subsidy policies in Hong Kong (HK) for the transition to a zero-emission bus (ZEB) fleet using an unsubsidized case as the benchmark scenario. Using the system dynamics (SD) approach, we capture the intricate feedback mechanisms among market share dynamics, cost considerations, consumer preferences, and competitive interactions within the bus market. These interactions are encapsulated within three pivotal feedback loops: scale economy, public acceptance, and bus market competition. We systematically integrate the HK-specific features of hydrogen buses (H-buses), battery electric buses (E-buses), and diesel buses (D-buses) from technical and economic perspectives and compare them to the benchmark scenario. The results show that only 66% of the bus fleet would be ZEBs by 2050, and this underscores the necessity for governmental financial incentives to expedite the transition to a fully zero-emission fleet. Furthermore, we evaluate various ZEB subsidy policy alternatives in terms of timing, intensity, and recipients. The analysis suggests that policies offering long-term and low-intensity subsidies are most beneficial, taking into account the cumulative effects and inherent delays associated with policy implementation. Importantly, the study highlights the critical balance that policymakers must achieve between short- and long-term objectives, especially given the counter-intuitive outcomes observed in the early stages of policies favoring H-buses exclusively. This study provides valuable policy insights for policymakers and upstream energy companies in HK, with potential applicability in wider real-world contexts.