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Lock-In and the Transition to Hydrogen Cars: Should Governments Intervene?

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  • Greaker Mads

    (Statistics Norway)

  • Heggedal Tom-Reiel

    (Norwegian School of Management, Oslo)

Abstract

The density of fuel filling stations influences consumers' utility of private car transport. We investigate the technology choice of firms and consumers in a formal model of the private transport market. Two competing technologies exist; today's internal combustion engine based on fossil fuels, and tomorrow's hydrogen car. Due to network externalities, several market equilibria may exist, of which one is likely to Pareto dominate the other(s). Thus, a lock-in situation is possible. On the other hand, if either the costs of establishing hydrogen filling stations are too high or the hydrogen car technology is still in its infancy, the only equilibrium is the current internal combustion engine equilibrium. Hence, apart from internalizing the environmental externality on gasoline cars, the government has no reason to intervene before the technology is ripe.

Suggested Citation

  • Greaker Mads & Heggedal Tom-Reiel, 2010. "Lock-In and the Transition to Hydrogen Cars: Should Governments Intervene?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-30, May.
    • Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:40
    DOI: 10.2202/1935-1682.2406
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    Cited by:

    1. Mads Greaker & Kristoffer Midttømme, 2014. "Optimal Environmental Policy with Network Effects: Will Pigovian Taxation Lead to Excess Inertia?," CESifo Working Paper Series 4759, CESifo.
    2. Greaker, Mads & Midttømme, Kristoffer, 2016. "Network effects and environmental externalities: Do clean technologies suffer from excess inertia?," Journal of Public Economics, Elsevier, vol. 143(C), pages 27-38.
    3. Antje-Mareike Dietrich & Gernot Sieg, 2014. "Welfare Effects of Subsidizing a Dead-End Network of Less Polluting Vehicles," Networks and Spatial Economics, Springer, vol. 14(3), pages 335-355, December.
    4. Dietrich, Antje-Mareike, 2017. "Platform intermediation to sponsor alternative fuel vehicles," Transport Policy, Elsevier, vol. 54(C), pages 90-99.
    5. Ramjerdi, Farideh & Fearnley, Nils, 2014. "Risk and irreversibility of transport interventions," Transportation Research Part A: Policy and Practice, Elsevier, vol. 60(C), pages 31-39.
    6. Rolf Golombek & Mads Greaker & Snorre Kverndokk & Lin Ma, 2021. "The Transition to Carbon Capture and Storage Technologies," CESifo Working Paper Series 9047, CESifo.
    7. Rolf Golombek & Mads Greaker & Snorre Kverndokk & Lin Ma, 2023. "Policies to Promote Carbon Capture and Storage Technologies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(1), pages 267-302, May.
    8. Meunier, Guy & Ponssard, Jean-Pierre, 2020. "Optimal policy and network effects for the deployment of zero emission vehicles," European Economic Review, Elsevier, vol. 126(C).
    9. Greaker, Mads & Midttømme, Kristoffer, 2013. "Optimal Environmental Policy with Network Effects: Is Lock-in in Dirty Technologies Possible?," Memorandum 15/2013, Oslo University, Department of Economics.
    10. Eggert, Håkan & Greaker, Mads & Potter, Emily, 2011. "Policies for Second Generation Biofuels: Current status and future challenges," Working Papers in Economics 501, University of Gothenburg, Department of Economics.
    11. Jin, Wei, 2021. "Path dependence, self-fulfilling expectations, and carbon lock-in," Resource and Energy Economics, Elsevier, vol. 66(C).
    12. Koch, Nicolas & Ritter, Nolan & Rohlf, Alexander & Scarazzato, Francesco, 2022. "When is the electric vehicle market self-sustaining? Evidence from Norway," Energy Economics, Elsevier, vol. 110(C).
    13. Dietrich, Antje-Mareike, 2016. "Governmental platform intermediation to promote alternative fuel vehicles," Economics Department Working Paper Series 16, Technische Universität Braunschweig, Economics Department.
    14. Andreassen, Gøril L. & Rosendahl, Knut Einar, 2022. "One or two non-fossil technologies in the decarbonized transport sector?," Resource and Energy Economics, Elsevier, vol. 69(C).

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