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Performance evaluation and improvement for ZEV credit regulation in a competitive environment

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  • Huang, Weixiang
  • Zhu, Han

Abstract

The Zero Emission Vehicle (ZEV) credit regulation and its variants are now widely implemented in automobile industry to promote electric vehicle (EV) production with the ultimate goal of reducing emissions from motor vehicles. In this work, we study how the ZEV credit regulation affects competition between automobile manufacturers and stakeholder payoffs in a Nash game. We find that the ZEV regulation can indeed reduce the total emission. However, when the ZEV regulation becomes more stringent, it fails to further promote and even discourages EV production—the production quantity of EVs is always decreasing, and the market share of EVs can be reduced. Consequently, if the ZEV regulation becomes tightened, which is really happening in reality, a manufacturer that used to produce EVs may now stop EV production, other than fuel vehicle production. We then propose a modified ZEV regulation, in which the aforementioned adverse effect is eliminated such that a more stringent regulation can encourage manufacturers to produce more EVs and increase the market share of EVs. We also show that these results remain valid, when the unit credit trading price is endogenized or when there are multiple competing manufacturers in the market. Our findings have practical implications for policymakers to improve the ZEV credit regulation.

Suggested Citation

  • Huang, Weixiang & Zhu, Han, 2021. "Performance evaluation and improvement for ZEV credit regulation in a competitive environment," Omega, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:jomega:v:102:y:2021:i:c:s0305048320306484
    DOI: 10.1016/j.omega.2020.102294
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    References listed on IDEAS

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    Cited by:

    1. Xiang Zhang & Haojie Sun & Kurt Yang Liu & Shaohui Liu, 2026. "Dual credit policy, product line decisions, and CO2 emission reduction," Annals of Operations Research, Springer, vol. 359(1), pages 705-729, April.
    2. Bai, Qingguo & Chen, Jiguang & Xu, Jianteng, 2023. "Energy conservation investment and supply chain structure under cap-and-trade regulation for a green product," Omega, Elsevier, vol. 119(C).
    3. Pi, Zhenyang & Wang, Ke & Wei, Yi-Ming & Huang, Zhimin, 2024. "Transitioning from gasoline to electric vehicles: Electrification decision of automakers under purchase and station subsidies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 188(C).
    4. Wang, Zhenxiao & Xu, Fen & Xiao, Li & Yang, Peng, 2026. "Optimal production, fuel economy investment and credit trading decisions under dual-credit policy," Omega, Elsevier, vol. 138(C).
    5. Pi, Zhenyang & Wang, Ke, 2025. "Does lower electric vehicle production cost spur traditional automaker electrification? Spillovers of cost-reduction investments," Resource and Energy Economics, Elsevier, vol. 81(C).
    6. Zhu, Han & Li, Tong & Tang, Jiafu & Huang, Weixiang, 2023. "Corporate social responsibility strategies in competition and their implications," International Journal of Production Economics, Elsevier, vol. 265(C).
    7. Zhenyang Pi & Ke Wang, 2026. "Operations and decarbonization of gasoline vehicle automakers under the dual credit policy: green technology innovation and electric vehicle market entry strategies," Annals of Operations Research, Springer, vol. 359(1), pages 363-394, April.
    8. (Ryan) Choi, Ji-Hung & Yoon, Jiho & Song, Ju Myung, 2023. "Adaptive R&D contract for urgently needed drugs: Lessons from COVID-19 vaccine development," Omega, Elsevier, vol. 114(C).
    9. Zhiying Tao & Jianbin Li & Zhixin Liu, 2025. "Trade-in for carbon emission reduction under tax regulation," Annals of Operations Research, Springer, vol. 347(1), pages 367-404, April.

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