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Macroeconomic effects of fiscal incentives to promote electric vehicles in Iceland: Implications for government and consumer costs

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  • Shafiei, Ehsan
  • Davidsdottir, Brynhildur
  • Fazeli, Reza
  • Leaver, Jonathan
  • Stefansson, Hlynur
  • Asgeirsson, Eyjolfur Ingi

Abstract

Iceland as an island country with abundant renewable energy resources has been totally dependent on imported petroleum fuels to meet its transport fuel demand. Transition to electric vehicles (EVs) is of particular interest for Iceland as electricity can be supplied from low-cost renewable energy resources. To evaluate how the transition to EVs can be achieved through fiscal policy incentives, a dynamic simulation modelling of the integrated energy-transport system with a detailed representation of energy technologies and vehicle fleets is implemented. The model is used for a scenario analysis by incorporating key fiscal parameters including different taxes and subsidies on vehicles and fuels. The fiscal policies to induce EVs, which are applied to both vehicle usage pattern and upfront purchase cost, include petroleum fuel tax levies, vehicle tax exemption, extra fees and subsidies. Five fiscal-induced scenarios to promote EVs, including different subsidy and feebate schemes coupled with fuel tax incentives, are compared with a BAU case. The scenario analysis reveals the impact of different fiscal policy incentives on consumer decision behaviour and the implications of fiscal-induced EV promotion for vehicle ownership costs, government tax revenues/expenditure, and overall economic benefits.

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  • Shafiei, Ehsan & Davidsdottir, Brynhildur & Fazeli, Reza & Leaver, Jonathan & Stefansson, Hlynur & Asgeirsson, Eyjolfur Ingi, 2018. "Macroeconomic effects of fiscal incentives to promote electric vehicles in Iceland: Implications for government and consumer costs," Energy Policy, Elsevier, vol. 114(C), pages 431-443.
    • Handle: RePEc:eee:enepol:v:114:y:2018:i:c:p:431-443
    DOI: 10.1016/j.enpol.2017.12.034
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    Cited by:

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    11. Esteban Lopez-Arboleda & Alfonso T. Sarmiento & Laura M. Cardenas, 2021. "Systemic approach for integration of sustainability in evaluation of public policies for adoption of electric vehicles," Systemic Practice and Action Research, Springer, vol. 34(4), pages 399-417, August.
    12. Sun, Xiaohua & Liu, Xiaoling & Wang, Yun & Yuan, Fang, 2019. "The effects of public subsidies on emerging industry: An agent-based model of the electric vehicle industry," Technological Forecasting and Social Change, Elsevier, vol. 140(C), pages 281-295.
    13. Watabe, Akihiro & Leaver, Jonathan & Ishida, Hiroyuki & Shafiei, Ehsan, 2019. "Impact of low emissions vehicles on reducing greenhouse gas emissions in Japan," Energy Policy, Elsevier, vol. 130(C), pages 227-242.
    14. Zhang, Ruining & Ai, Xianneng & Li, Hui, 2023. "How to design subsidy policies for clean energy projects? A study on “coal-to-gas” project in China," Resources Policy, Elsevier, vol. 85(PB).
    15. Jinru Wang & Zhenwu Shi & Jie Liu & Hongrui Zhang, 2023. "Promoting “NEVs Pilot Policy” as an Effective Way for Reducing Urban Transport Carbon Emissions: Empirical Evidence from China," Sustainability, MDPI, vol. 15(14), pages 1-24, July.
    16. Zhao, Chuan & Ma, Xuying & Wang, Kun, 2022. "The electric vehicle promotion in the cold-chain logistics under two-sided support policy: An evolutionary game perspective," Transport Policy, Elsevier, vol. 121(C), pages 14-34.
    17. Hensher, David A. & Wei, Edward & Liu, Wen, 2021. "Battery electric vehicles in cities: Measurement of some impacts on traffic and government revenue recovery," Journal of Transport Geography, Elsevier, vol. 94(C).
    18. Robert M. Bridi & Marwa Ben Jabra & Naeema Al Hosani, 2022. "An Examination of Consumers’ Opinions toward Adopting Electric Vehicles in the United Arab Emirates: On the Effects of Functional and Symbolic Values," Energies, MDPI, vol. 15(16), pages 1-19, August.
    19. Dong Cai & Chunxiang Guo & Yue Tan, 2019. "Design of Incentive Contract for Technological Innovation of New Energy Vehicles with Asymmetric Information," IJERPH, MDPI, vol. 16(22), pages 1-14, November.
    20. Münzel, Christiane & Plötz, Patrick & Sprei, Frances & Gnann, Till, 2019. "How large is the effect of financial incentives on electric vehicle sales? – A global review and European analysis," Energy Economics, Elsevier, vol. 84(C).
    21. Shafiei, Ehsan & Davidsdottir, Brynhildur & Stefansson, Hlynur & Asgeirsson, Eyjolfur Ingi & Fazeli, Reza & Gestsson, Marías Halldór & Leaver, Jonathan, 2019. "Simulation-based appraisal of tax-induced electro-mobility promotion in Iceland and prospects for energy-economic development," Energy Policy, Elsevier, vol. 133(C).
    22. Oryani, Bahareh & Koo, Yoonmo & Shafiee, Afsaneh & Rezania, Shahabaldin & Jung, Jiyeon & Choi, Hyunhong & Khan, Muhammad Kamran, 2022. "Heterogeneous preferences for EVs: Evidence from Iran," Renewable Energy, Elsevier, vol. 181(C), pages 675-691.
    23. Cook, David & Davíðsdóttir, Brynhildur, 2021. "An estimate of the Genuine Progress Indicator for Iceland, 2000–2019," Ecological Economics, Elsevier, vol. 189(C).

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