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Effectiveness of electric vehicle subsidies in China: A three-dimensional panel study

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  • Tong Zhang, Paul J. Burke, and Qi Wang

Abstract

Electric vehicles (EVs) are likely to emerge as the main means of zero-emission road transport. China has used a variety of policy approaches to encourage EV adoption, including vehicle purchase subsidies. This study uses a three-dimensional dataset to estimate the effect of purchase subsidies for domestic EVs on adoption in 316 cities in China over January 2016–December 2019. An instrumental variable approach that utilizes the timing of the cancellation of local subsidies by the central government is pursued. The findings suggest that purchase subsidies for domestic EVs have led to a sizeable increase in uptake, but have discouraged uptake of imported EVs. Higher consumer awareness of the subsidies is associated with a larger proportional effect on uptake of domestically-produced vehicles. We estimate that increases in the per-vehicle subsidy rate have on average reduced carbon dioxide (CO2) emissions at a marginal subsidy cost of about 4,453 CNY (US$712) per tonne, which is high. However, other benefits, including long-run benefits from the emergence of a new clean technology sector, may be substantial.

Suggested Citation

  • Tong Zhang, Paul J. Burke, and Qi Wang, 2024. "Effectiveness of electric vehicle subsidies in China: A three-dimensional panel study," Departmental Working Papers 2024-1, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2024-1
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    File URL: https://acde.crawford.anu.edu.au/sites/default/files/publication/acde_crawford_anu_edu_au/2024-02/acde_td_zhang_burke_wang_2024_01.pdf
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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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