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Giving green to get green? Incentives and consumer adoption of hybrid vehicle technology

  • Gallagher, Kelly Sims
  • Muehlegger, Erich

Federal, state, and local governments use a variety of incentives to induce consumer adoption of hybrid-electric vehicles. We study the relative efficacy of state sales tax waivers, income tax credits, and non-tax incentives and find that the type of tax incentive offered is as important as the generosity of the incentive. Conditional on value, sales tax waivers are associated with more than a ten-fold increase in hybrid sales relative to income tax credits. In addition, we examine how adoption varies with fuel prices. Rising gasoline prices are associated with greater hybrid vehicle sales, but this effect operates almost entirely through high fuel-economy vehicles. By comparing consumer response to sales tax waivers and estimated future fuel savings, we estimate an implicit discount rate of 14.6% on future fuel savings.

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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 61 (2011)
Issue (Month): 1 (January)
Pages: 1-15

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Handle: RePEc:eee:jeeman:v:61:y:2011:i:1:p:1-15
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-77, September.
  2. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.
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  7. Bento, Antonio M. & Goulder, Lawrence H. & Jacobsen, Mark R. & von Haefen, Roger H., 2007. "Distributional and Efficiency Impacts of Increased U.S. Gasoline Taxes," Working Papers 127021, Cornell University, Department of Applied Economics and Management.
  8. Geroski, Paul A, 1999. "Models of Technology Diffusion," CEPR Discussion Papers 2146, C.E.P.R. Discussion Papers.
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