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An Empirical Assessment of the Impact of Subsidies on EV adoption in China: A Difference-in-Differences Approach

Author

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  • Xuemei Zheng

    (School of Economics, Southwestern University of Finance and Economics, Chengdu, China)

  • Flavio Menezes

    (School of Economics, University of Queensland, Brisbane, Australia)

  • Xiaofeng Zheng

    (Industrial Bank Company Ltd., Taiyuan, China)

  • Chengkuan Wu

    (School of Economics, Southwestern University of Finance and Economics, Chengdu, China)

Abstract

It is widely recognized that Electric vehicles (EVs) will play a crucial role in the electrification of transport, which is necessary for reaching a net-zero emissions economy. This recognition is reflected in the number of initiatives introduced worldwide to promote the EV industry, ranging from purchase subsidies to the provision of charging infrastructure and direct industry assistance. In this context, the Chinese government introduced a comprehensive program of government subsidies to support the sale of EVs. This paper estimates the impacts of these subsidies on EV sales in China using the difference-in-differences (DID) and propensity score matching (PSM) approach. Based on the panel data at city level from 2009 to 2018, we show that subsidies were the major contributor to the increase in EV sales. Our results suggest that the provision of infrastructure such as charging piles is also an important contributing factor. These findings are robust across model specifications and regression approaches. The heterogeneity analysis indicates that the treatment effect is heterogeneous across EV types, city sizes and regions. Our results provide empirical support for the current policy settings designed to promote EV sales in China.

Suggested Citation

  • Xuemei Zheng & Flavio Menezes & Xiaofeng Zheng & Chengkuan Wu, 2021. "An Empirical Assessment of the Impact of Subsidies on EV adoption in China: A Difference-in-Differences Approach," Discussion Papers Series 645, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:645
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    Cited by:

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    2. Shang, Wen-Long & Zhang, Junjie & Wang, Kun & Yang, Hangjun & Ochieng, Washington, 2024. "Can financial subsidy increase electric vehicle (EV) penetration---evidence from a quasi-natural experiment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 190(PA).
    3. Tao, Miaomiao, 2024. "Dynamics between electric vehicle uptake and green development: Understanding the role of local government competition," Transport Policy, Elsevier, vol. 146(C), pages 227-240.
    4. Hailin Xiao & Xiaocai Zhang, 2022. "The Market Disruption Path of Green-Oriented Trajectory-Transformed Technology Innovation: A Study of Consumer Lifestyles during the “Chasm” in China’s Electric Vehicle Market," Sustainability, MDPI, vol. 14(14), pages 1-27, July.
    5. Adrian Chmielewski & Piotr Piórkowski & Jakub Możaryn & Stepan Ozana, 2023. "Sustainable Development of Operational Infrastructure for Electric Vehicles: A Case Study for Poland," Energies, MDPI, vol. 16(11), pages 1-43, June.

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    More about this item

    Keywords

    Electric vehicles; subsidy policies; difference-in-differences approach; China.;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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