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Optimal policy and network effects for the deployment of zero emission vehicles

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  • Meunier, Guy
  • Ponssard, Jean-Pierre

Abstract

We analyze the impact of indirect network effects in the deployment of zero emission vehicles in a static partial equilibrium model. In most theoretical analyses, direct and indirect effects are conflated, and relatively few authors have explicitly considered indirect network effects. We also introduce the market power of vehicle producers and scale effects in the production function. The model exhibits a multiplicity of local social critical points and market equilibria, suggesting a possibility of lock-in. The optimal two subsidies for vehicles and stations are derived so that the Pareto dominating market equilibrium would coincide with the social optimum. Configurations associated with different values of the parameters are explored to revisit the policy issues at various stages of deployment of hydrogen and battery electric vehicles.

Suggested Citation

  • Meunier, Guy & Ponssard, Jean-Pierre, 2020. "Optimal policy and network effects for the deployment of zero emission vehicles," European Economic Review, Elsevier, vol. 126(C).
  • Handle: RePEc:eee:eecrev:v:126:y:2020:i:c:s0014292120300817
    DOI: 10.1016/j.euroecorev.2020.103449
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    3. Andreassen, Gøril L. & Rosendahl, Knut Einar, 2022. "One or two non-fossil technologies in the decarbonized transport sector?," Resource and Energy Economics, Elsevier, vol. 69(C).
    4. Hou, Rui & Lei, Lei & Jin, Kangning & Lin, Xiaogang & Xiao, Lu, 2022. "Introducing electric vehicles? Impact of network effect on profits and social welfare," Energy, Elsevier, vol. 243(C).
    5. 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.
    6. Shanjun Li & Xianglei Zhu & Yiding Ma & Fan Zhang & Hui Zhou, 2022. "The Role of Government in the Market for Electric Vehicles: Evidence from China," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(2), pages 450-485, March.
    7. Randall Wigle, 2019. "The Economic Case for EV Supports? Or: Network Effects, EV Pessimism and EV Supports," LCERPA Working Papers ec0123, Laurier Centre for Economic Research and Policy Analysis, revised 23 Oct 2019.
    8. Koch, Nicolas & Ritter, Nolan & Rohlf, Alexander & Scarazzato, Francesco, 2022. "When is the electric vehicle market self-sustaining? Evidence from Norway," Energy Economics, Elsevier, vol. 110(C).
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    10. Rostad Sæther, Simen, 2022. "Mobility at the crossroads – Electric mobility policy and charging infrastructure lessons from across Europe," Transportation Research Part A: Policy and Practice, Elsevier, vol. 157(C), pages 144-159.
    11. Li,Shanjun & Zhu,Xianglei & Ma,Yiding & Zhang,Fan & Zhou,Hui, 2020. "The Role of Government in the Market for Electric Vehicles : Evidence from China," Policy Research Working Paper Series 9359, The World Bank.

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    More about this item

    Keywords

    Network effects; Technology deployment; Lock-in; Optimal policy;
    All these keywords.

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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