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Analysis of two subsidies for EVs: Based on an expanded theoretical discrete-choice model

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  • Xiao, Xu
  • Chen, Zi-Rui
  • Nie, Pu-Yan

Abstract

Electric vehicles (EVs) are one of the main tools to decrease greenhouse gas emissions. This study expands a welfare model by considering two goals for improving EV markets in China: subsidizing consumers and incentivizing innovation in EVs by conventional gasoline vehicle (GV) enterprises. By optimizing the welfare model, we analyze the optimal purchase and electricity subsidies. The effects of gasoline and electricity taxes are also analyzed. The results are as follows. First, optimal subsidies include two parts: the environmental cost of GHG emissions, and the part of the enterprise’s profits excluding the innovation risk. Second, the scale of the EV market, the level of technology, and the elasticity coefficient of capital-output can influence optimal subsidies. Third, the strength of both tax effects has an inverted-U shaped relationship with the EV market ratio. Finally, we offer some suggestions for Chinese subsidy regulation based on our study.

Suggested Citation

  • Xiao, Xu & Chen, Zi-Rui & Nie, Pu-Yan, 2020. "Analysis of two subsidies for EVs: Based on an expanded theoretical discrete-choice model," Energy, Elsevier, vol. 208(C).
    • Handle: RePEc:eee:energy:v:208:y:2020:i:c:s0360544220314821
    DOI: 10.1016/j.energy.2020.118375
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    5. Aditya Ramji & Daniel Sperling & Lewis Fulton, 2024. "Sustainable Market Incentives -- Lessons from European Feebates for a ZEV Future," Papers 2401.15069, arXiv.org.
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    8. Zhu, Xiaoxi & Chiong, Raymond & Wang, Miaomiao & Liu, Kai & Ren, Minglun, 2021. "Is carbon regulation better than cash subsidy? The case of new energy vehicles," Transportation Research Part A: Policy and Practice, Elsevier, vol. 146(C), pages 170-192.

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