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Welfare Implications of Electric-Bike Subsidies: Evidence from Sweden

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Abstract

Electric bikes are a potentially important tool to address global warming since they can be a viable alternative to cars in urban areas. Governments are using subsidies to promote household adoption. Welfare analyses are challenging, requiring pass-through estimates from transactions, incidence of non-additionality (i.e. those who would have bought even without the subsidy), and resulting substitution from driving. We combine administrative, insurance and survey data from a large-scale Swedish subsidy program in 2018, which is similar to other programs around world, to evaluate these implications. We find (1) complete pass through of the average $500 subsidy to consumers, (2) a near doubling of E-bikes sold but one-third of adopters are non-additional; and (3) a savings of 1.3 tons of carbon emissions during the life of the E-bike. Combining these estimates, an E-bike subsidy program can only be justified with a social cost of carbon that is several hundred dollars higher than what is typically used.

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  • Anderson, Anders & Hong, Harrison, 2022. "Welfare Implications of Electric-Bike Subsidies: Evidence from Sweden," Misum Working Paper Series 2022-8, Stockholm School of Economics, Mistra Center for Sustainable Markets (Misum).
    • Handle: RePEc:hhs:hamisu:2022_008
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    More about this item

    Keywords

    Sustainability; household behavior; subsidies; carbon emissions; welfare analysis;
    All these keywords.

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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