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Measuring the cost-effectiveness of electric vehicle subsidies

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  • Sheldon, Tamara L.
  • Dua, Rubal

Abstract

Despite the prevalence of plug-in electric vehicle (PEV) subsidies, research on improving their cost-effectiveness and impact remains limited. To assess the scope for improving their cost-effectiveness, we develop a vehicle choice model-based counterfactual simulation using a large-scale nationally representative sample of U.S. new car buyers. Results suggest that existing federal incentives are expensive, $36k per additional PEV, as every buyer gets the subsidy. The cost-effectiveness can be improved by twofold by targeting incentives by income, vehicle disposal, geography, and/or vehicle miles traveled. Preserving the federal policy's assignment of larger subsidies for PEVs with larger battery capacities results in greater battery electric vehicle (BEV) adoption, while policies not discriminating by battery capacity result in greater plug-in hybrid electric vehicle adoption. The reduction in gasoline consumption is the same in both the cases, with a slightly lower marginal cost for the latter.

Suggested Citation

  • Sheldon, Tamara L. & Dua, Rubal, 2019. "Measuring the cost-effectiveness of electric vehicle subsidies," Energy Economics, Elsevier, vol. 84(C).
  • Handle: RePEc:eee:eneeco:v:84:y:2019:i:c:s0140988319303408
    DOI: 10.1016/j.eneco.2019.104545
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    References listed on IDEAS

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    Cited by:

    1. Sheldon, Tamara L. & Dua, Rubal, 2020. "Effectiveness of China's plug-in electric vehicle subsidy," Energy Economics, Elsevier, vol. 88(C).
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    5. Sheldon, Tamara L. & Dua, Rubal, 2021. "How responsive is Saudi new vehicle fleet fuel economy to fuel-and vehicle-price policy levers?," Energy Economics, Elsevier, vol. 97(C).

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    More about this item

    Keywords

    Clean vehicles; Air pollution; Transportation policy;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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