IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The optimal subsidy on electric vehicles in a metropolitan area - a SCGE study for Germany

  • Georg Hirte

    ()

  • Stefan Tscharaktschiew

    ()

Many governments subsidize electric mobility (E-mobility) to increase the share of electric vehicles (EV) in the car fleet. This aims at reducing carbon emissions. Despite that there is not much research on the full economic costs and benefits of this measures. There are only a few Cost Benefit Analyses (CBA). They, however, do not take into account repercussion and substitution effects. We fill this gap in the literature and examine subsidies to EVs in a full spatial general equilibrium model. Since cities are the main area were EVs will be used, we focus on cities and apply a spatial approach. In particular, we ask whether it is optimal to subsidize or tax electric vehicles and, how large, the corresponding optimal rate is. We, first, derive analytically the optimal subsidy in a spatial partial equilibrium model of a city with two zones where commuting, carbon emissions, endogenous labor supply, fuel and power taxes are considered and where we distinguish between fuel vehicles and electric vehicles. There we find that the optimal subsidy rate is the sum of changes in externality costs (emissions + congestion), an opposite tax interaction effect, a redistribution effect between cities inhabitants and absentee landlords and a cost effect due to higher costs of producing travelling with power in comparison to fuel. The latter two effects are usually not considered in CBAs. Second, we extend the model to a full spatial general equilibrium model and employ simulations to calculate sign and size of the optimal subsidy or tax rate. This model is calibrated to a typical German metropolitan area. The results show that electric vehicles should not be subsidized but taxed. The results are robust with respect to changes in the willingness to adopt electric vehicles (EVs), changes in fix costs of EVs, and even if emission of EVs are zero. We change all these parameters to capture extreme and very unlikely behavior such as a very high demand elasticity of EVs with respect to the power tax rate, very low costs and the case that EVs have zero CO2 emissions. Concerning these variables we suggest that EVs should not be subsidized because welfare costs of achieving a small reduction in emissions are very high. We draw the conclusion that E-mobility might only be an efficient policy if it is considered as complement to other policies. This issue is left for future research.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa12/e120821aFinal00326.pdf
Download Restriction: no

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p324.

as
in new window

Length:
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:wiw:wiwrsa:ersa12p324
Contact details of provider: Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page: http://www.ersa.org

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Tscharaktschiew, Stefan & Hirte, Georg, 2011. "Should subsidies to urban passenger transport be increased? A spatial CGE analysis for a German metropolitan area," Dresden Discussion Paper Series in Economics 01/11, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  2. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
  3. Kazimi, Camilla, 1997. "Valuing Alternative-Fuel Vehicles in Southern California," American Economic Review, American Economic Association, vol. 87(2), pages 265-71, May.
  4. Anas, Alex & Xu, Rong, 1999. "Congestion, Land Use, and Job Dispersion: A General Equilibrium Model," Journal of Urban Economics, Elsevier, vol. 45(3), pages 451-473, May.
  5. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
  6. Harvey S. Rosen & Kenneth A. Small, 1979. "Applied Welfare Economics with Discrete Choice Models," NBER Working Papers 0319, National Bureau of Economic Research, Inc.
  7. AfDB AfDB, . "African Statistical Yearbook 2009," African Statistical Yearbook, African Development Bank, number 58 edited by Koua Louis Kouakou.
  8. Alex Anas & Hyok-Joo Rhee, 2004. "Curbing Excess Sprawl with Congestion Tolls and Urban Boundaries," Urban/Regional 0408004, EconWPA.
  9. Kazimi, Camilla, 1997. "Evaluating the Environmental Impact of Alternative-Fuel Vehicles," Journal of Environmental Economics and Management, Elsevier, vol. 33(2), pages 163-185, June.
  10. Viktor Steiner & Johanna Cludius, 2010. "Ökosteuer hat zu geringerer Umweltbelastung des Verkehrs beigetragen," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 77(13/14), pages 2-7.
  11. Parry, Ian W.H. & Timilsina, Govinda R., 2010. "How should passenger travel in Mexico City be priced?," Journal of Urban Economics, Elsevier, vol. 68(2), pages 167-182, September.
  12. Delucchi, Mark & Lipman, Timothy, 2001. "An Analysis of the Retail and Lifecycle Cost of Battery-Powered Electric Vehicles," Institute of Transportation Studies, Working Paper Series qt50q9060k, Institute of Transportation Studies, UC Davis.
  13. Karplus, Valerie J. & Paltsev, Sergey & Reilly, John M., 2010. "Prospects for plug-in hybrid electric vehicles in the United States and Japan: A general equilibrium analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(8), pages 620-641, October.
  14. Robert W. Hahn, 1995. "Choosing among fuels and technologies for cleaning up the air," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 14(4), pages 532-554.
  15. Tscharaktschiew, Stefan & Hirte, Georg, 2010. "The drawbacks and opportunities of carbon charges in metropolitan areas -- A spatial general equilibrium approach," Ecological Economics, Elsevier, vol. 70(2), pages 339-357, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa12p324. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.