This is an Open Access article. You will receive access to the full text.

How Cost-effective are Electric Vehicle Subsidies in Reducing Tailpipe-CO2 Emissions? An Analysis of Major Electric Vehicle Markets

We estimate the cost-effectiveness of plug-in electric vehicle (PEV) subsidies in reducing tailpipe-CO2 emissions in China, the U.S., and nine European countries. We find that the per-tonne cost of tailpipe-CO2 avoided increases linearly with the government-subsidized percentage of the PEV price. Costs are relatively higher in the Netherlands and Denmark, which subsidized high-priced PEVs including plug-in hybrids, and lower in the U.S., where PEVs replaced higher-emissions cars. Chinese PEV subsidies have a short-run static cost of up to $1,600 per tonne, far exceeding the social cost of carbon, suggesting that subsidies are more a part of China's industrial policy than its carbon policy. When subsidy-induced PEV sales and power generation emissions are considered, the ordering of countries based on the cost-effectiveness of subsidies changes. The long-run dynamic subsidy cost is expected to be lower, as current subsidies may drive future innovation and sales, and due to grid decarbonization.

Download Executive Summary Download PDF

Download Appendix 

Keywords: Plug-in electric vehicle, Transportation policy, Subsidy, Greenhouse gas emissions

DOI: 10.5547/01956574.44.2.tshe

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 44, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2024 International Association for Energy Economics | Privacy Policy | Return Policy