IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/25359.html
   My bibliography  Save this paper

Subsidizing Low- and Middle-Income Adoption of Electric Vehicles: Quasi-Experimental Evidence from California

Author

Listed:
  • Erich Muehlegger
  • David S. Rapson

Abstract

Little is known about electric vehicle (EV) demand by low- and middle-income households. In this paper, we exploit a policy that provides exogenous variation in large EV subsidies targeted at the mass market in California. Using transaction-level data, we estimate three important policy parameters: the rate of subsidy pass-through, the impact of the subsidy on EV adoption, and the elasticity of demand for EVs among low- and middle-income households. Demand for EVs in our sample is price-elastic (-3.3) and pass-through to buyers is indistinguishable from 100 percent. We use these estimates to calculate that the expected subsidy bill required for California to reach its goal of 1.5 million EVs by 2025 is likely to exceed $12-18 billion.

Suggested Citation

  • Erich Muehlegger & David S. Rapson, 2018. "Subsidizing Low- and Middle-Income Adoption of Electric Vehicles: Quasi-Experimental Evidence from California," NBER Working Papers 25359, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25359
    Note: EEE PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w25359.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Egbue, Ona & Long, Suzanna, 2012. "Barriers to widespread adoption of electric vehicles: An analysis of consumer attitudes and perceptions," Energy Policy, Elsevier, vol. 48(C), pages 717-729.
    2. Shanjun Li & Lang Tong & Jianwei Xing & Yiyi Zhou, 2017. "The Market for Electric Vehicles: Indirect Network Effects and Policy Design," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(1), pages 89-133.
    3. Meghan R. Busse & Christopher R. Knittel & Florian Zettelmeyer, 2013. "Are Consumers Myopic? Evidence from New and Used Car Purchases," American Economic Review, American Economic Association, vol. 103(1), pages 220-256, February.
    4. Filippini, Massimo & Wekhof, Tobias, 2021. "The effect of culture on energy efficient vehicle ownership," Journal of Environmental Economics and Management, Elsevier, vol. 105(C).
    5. Fiona Burlig & James Bushnell & David Rapson & Catherine Wolfram, 2021. "Low Energy: Estimating Electric Vehicle Electricity Use," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 430-435, May.
    6. Severin Borenstein & Lucas W. Davis, 2016. "The Distributional Effects of US Clean Energy Tax Credits," Tax Policy and the Economy, University of Chicago Press, vol. 30(1), pages 191-234.
    7. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    8. Atif Mian & Amir Sufi, 2012. "The Effects of Fiscal Stimulus: Evidence from the 2009 Cash for Clunkers Program," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1107-1142.
    9. Helveston, John Paul & Liu, Yimin & Feit, Elea McDonnell & Fuchs, Erica & Klampfl, Erica & Michalek, Jeremy J., 2015. "Will subsidies drive electric vehicle adoption? Measuring consumer preferences in the U.S. and China," Transportation Research Part A: Policy and Practice, Elsevier, vol. 73(C), pages 96-112.
    10. Chandra, Ambarish & Gulati, Sumeet & Kandlikar, Milind, 2010. "Green drivers or free riders? An analysis of tax rebates for hybrid vehicles," Journal of Environmental Economics and Management, Elsevier, vol. 60(2), pages 78-93, September.
    11. James B. Bushnell & Erich Muehlegger & David S. Rapson, 2022. "Energy Prices and Electric Vehicle Adoption," NBER Working Papers 29842, National Bureau of Economic Research, Inc.
    12. Turrentine, Thomas S. & Kurani, Kenneth S., 2007. "Car buyers and fuel economy?," Energy Policy, Elsevier, vol. 35(2), pages 1213-1223, February.
    13. Gulati, Sumeet & McAusland, Carol & Sallee, James M., 2017. "Tax incidence with endogenous quality and costly bargaining: Theory and evidence from hybrid vehicle subsidies," Journal of Public Economics, Elsevier, vol. 155(C), pages 93-107.
    14. Arie Beresteanu & Shanjun Li, 2011. "Gasoline Prices, Government Support, And The Demand For Hybrid Vehicles In The United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 161-182, February.
    15. James Archsmith & Erich Muehlegger & David S. Rapson, 2022. "Future Paths of Electric Vehicle Adoption in the United States: Predictable Determinants, Obstacles, and Opportunities," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 3(1), pages 71-110.
    16. Gallagher, Kelly Sims & Muehlegger, Erich, 2011. "Giving green to get green? Incentives and consumer adoption of hybrid vehicle technology," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 1-15, January.
    17. Turrentine, Tom & Kurani, Kenneth S, 2007. "Car buyers and fuel economy?," Institute of Transportation Studies, Working Paper Series qt56x845v4, Institute of Transportation Studies, UC Davis.
    18. Krause, Rachel M. & Carley, Sanya R. & Lane, Bradley W. & Graham, John D., 2013. "Perception and reality: Public knowledge of plug-in electric vehicles in 21 U.S. cities," Energy Policy, Elsevier, vol. 63(C), pages 433-440.
    19. Li, Shanjun & Linn, Joshua & Spiller, Elisheba, 2013. "Evaluating “Cash-for-Clunkers”: Program effects on auto sales and the environment," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 175-193.
    20. James M. Sallee, 2011. "The Surprising Incidence of Tax Credits for the Toyota Prius," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 189-219, May.
    21. Hsu, Chih-Wei & Fingerman, Kevin, 2021. "Public electric vehicle charger access disparities across race and income in California," Transport Policy, Elsevier, vol. 100(C), pages 59-67.
    22. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lucas W. Davis, 2023. "The Economic Determinants of Heat Pump Adoption," NBER Chapters, in: Environmental and Energy Policy and the Economy, volume 5, pages 162-199, National Bureau of Economic Research, Inc.
    2. Qiao Yu & Brian Yueshuai He & Jiaqi Ma & Yifang Zhu, 2023. "California’s zero-emission vehicle adoption brings air quality benefits yet equity gaps persist," Nature Communications, Nature, vol. 14(1), pages 1-14, December.
    3. Vona, Francesco, 2023. "Managing the distributional effects of climate policies: A narrow path to a just transition," Ecological Economics, Elsevier, vol. 205(C).
    4. Rosa, Carmen Brum & Francescatto, Matheus Binotto & Neuenfeldt Júnior, Alvaro Luiz & Bernardon, Daniel Pinheiro & dos Santos, Laura Lisiane Callai, 2023. "Regulatory analysis of E-mobility for Brazil: A comparative review and outlook," Utilities Policy, Elsevier, vol. 84(C).
    5. Fournel, Jean-François, 2023. "Electric Vehicle Subsidies: Cost-Effectiveness and Emission Reductions," TSE Working Papers 23-1465, Toulouse School of Economics (TSE).
    6. Pessoa, Joao Paulo & Santos, Roberto Amaral & Chimeli, Ariaster, 2023. "Natural Gas Vehicles: Consequences to Fuel Markets and the Environment," SocArXiv 7tvgy, Center for Open Science.
    7. Burra, Lavan T. & Sommer, Stephan & Vance, Colin, 2023. "Free-Ridership in Subsidies for Company- and Private Electric Vehicles," Ruhr Economic Papers 1015, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. Erich J. Muehlegger & David S. Rapson, 2023. "Correcting Estimates of Electric Vehicle Emissions Abatement: Implications for Climate Policy," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(1), pages 263-282.
    9. David S. Rapson & James B. Bushnell, 2022. "The Electric Ceiling: Limits and Costs of Full Electrification," NBER Working Papers 30593, National Bureau of Economic Research, Inc.
    10. Katarzyna Sobiech-Grabka & Anna Stankowska & Krzysztof Jerzak, 2022. "Determinants of Electric Cars Purchase Intention in Poland: Personal Attitudes v. Economic Arguments," Energies, MDPI, vol. 15(9), pages 1-26, April.
    11. Wes Austin & Stefano Carattini & John Gomez Mahecha & Michael Pesko, 2020. "COVID-19 Mortality and Contemporaneous Air Pollution," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper2016, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    12. Tsanko, Ilona, 2023. "Would you like to supersize your car? The effect of environmental subsidies on emissions," ZEW Discussion Papers 23-033, ZEW - Leibniz Centre for European Economic Research.
    13. Soetevent, Adriaan R., 2021. "I’d Like to Move It! Consumption Rivalry in the EV Public Charging Market: Demand Estimation with Deterministic Choice Set Variation," EconStor Preprints 228520, ZBW - Leibniz Information Centre for Economics.
    14. Roberto Amaral-Santos & Ariaster Chimeli & Joao Paulo Pessoa, 2023. "Natural Gas Vehicles: Consequences to Fuel Markets and the Environment," Working Papers, Department of Economics 2023_07, University of São Paulo (FEA-USP).
    15. Peter Haan & Adrián Santonja & Aleksandar Zaklan, 2023. "Effectiveness and Heterogeneous Effects of Purchase Grants for Electric Vehicles," Discussion Papers of DIW Berlin 2032, DIW Berlin, German Institute for Economic Research.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. James Bushnell & David Rapson, 2022. "The Electric Ceiling: Limits and Costs of Full Electrification," Working Papers 2220, Federal Reserve Bank of Dallas.
    2. Chandra, Minal, 2022. "Investigating the impact of policies, socio-demography and national commitments on electric-vehicle demand: Cross-country study," Journal of Transport Geography, Elsevier, vol. 103(C).
    3. Nathan Delacrétaz & Bruno Lanz & Jeremy van Dijk, 2020. "The chicken or the egg: Technology adoption and network infrastructure in the market for electric vehicles," IRENE Working Papers 20-08, IRENE Institute of Economic Research.
    4. Clinton, Bentley C. & Steinberg, Daniel C., 2019. "Providing the Spark: Impact of financial incentives on battery electric vehicle adoption," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    5. Jeremy Dijk & Nathan Delacrétaz & Bruno Lanz, 2022. "Technology Adoption and Early Network Infrastructure Provision in the Market for Electric Vehicles," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(3), pages 631-679, November.
    6. Gulati, Sumeet & McAusland, Carol & Sallee, James M., 2017. "Tax incidence with endogenous quality and costly bargaining: Theory and evidence from hybrid vehicle subsidies," Journal of Public Economics, Elsevier, vol. 155(C), pages 93-107.
    7. Sun, Shanxia & Delgado, Michael & Khanna, Neha, 2017. "Hybrid Vehicles and Household Driving Behavior: Implications for Miles Traveled and Gasoline Consumption," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258502, Agricultural and Applied Economics Association.
    8. Azarafshar, Roshanak & Vermeulen, Wessel N., 2020. "Electric vehicle incentive policies in Canadian provinces," Energy Economics, Elsevier, vol. 91(C).
    9. Patrick Bigler & Doina Maria Radulescu, 2022. "Environmental, Redistributive and Revenue Effects of Policies Promoting Fuel Efficient and Electric Vehicles," CESifo Working Paper Series 9645, CESifo.
    10. 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).
    11. Seiho Kim & Jaesik Lee & Chulung Lee, 2017. "Does Driving Range of Electric Vehicles Influence Electric Vehicle Adoption?," Sustainability, MDPI, vol. 9(10), pages 1-15, October.
    12. Sun, Shanxia & Delgado, Michael S. & Khanna, Neha, 2019. "Hybrid vehicles, social signals and household driving: Implications for miles traveled and gasoline consumption," Energy Economics, Elsevier, vol. 84(C).
    13. Alberini, Anna & Di Cosmo, Valeria & Bigano, Andrea, 2019. "How are fuel efficient cars priced? Evidence from eight EU countries," Energy Policy, Elsevier, vol. 134(C).
    14. James M. Sallee, 2011. "The Taxation of Fuel Economy," Tax Policy and the Economy, University of Chicago Press, vol. 25(1), pages 1-38.
    15. Xing, Jianwei & Leard, Benjamin & Li, Shanjun, 2021. "What does an electric vehicle replace?," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    16. Carley, Sanya & Zirogiannis, Nikolaos & Siddiki, Saba & Duncan, Denvil & Graham, John D., 2019. "Overcoming the shortcomings of U.S. plug-in electric vehicle policies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 113(C), pages 1-1.
    17. Zhang, Xian & Wang, Ke & Hao, Yu & Fan, Jing-Li & Wei, Yi-Ming, 2013. "The impact of government policy on preference for NEVs: The evidence from China," Energy Policy, Elsevier, vol. 61(C), pages 382-393.
    18. Jonathan E. Hughes & Molly Podolefsky, 2015. "Getting Green with Solar Subsidies: Evidence from the California Solar Initiative," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(2), pages 235-275.
    19. Wolf, Ingo & Schröder, Tobias & Neumann, Jochen & de Haan, Gerhard, 2015. "Changing minds about electric cars: An empirically grounded agent-based modeling approach," Technological Forecasting and Social Change, Elsevier, vol. 94(C), pages 269-285.
    20. Muehlegger, Erich & Rapson, David, 2018. "Understanding the Distributional Impacts of Vehicle Policy: Who Buys New and Used Alternative Vehicles?," Institute of Transportation Studies, Working Paper Series qt0tn4m2tx, Institute of Transportation Studies, UC Davis.

    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:25359. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.