What does an electric vehicle replace?

How cost-effective are electric vehicle subsidies in reducing tailpipe-CO2 emissions?

“…Innovative targeted PEV subsidy designs could be incorporated into COVID-19-related economic stimulus packages that many governments are currently considering (CNN Business 2020;Financial Times 2020a, 2020b, 2020cAVERE 2020;Reuters 2020;Caixin 2020). Targeted designs based on either consumer income or vehicle price represent viable cost-effective alternatives, as suggested by recent research (Sheldon and Dua 2019a, 2019bXing, Leard, and Li 2019).…”

“…Demand-side fiscal policies represent one of the most common policy levers for promoting deployment of PEVs (IEA 2020; Langbroek, Franklin, and Susilo 2016;Lévay, Drossinos, and Thiel 2017;Lieven 2015). However, early evidence from the light duty vehicle (LDV) markets of the United States (U.S.) and Canada suggests that promoting deployment of PEVs through subsidies is expensive Dua 2018, 2019;Azarafshar and Vermeulen 2020;Xing, Leard, and Li 2019;DeShazo, Sheldon, and Carson 2017). This paper explores the evolution of tailpipe-CO 2 emissions avoided as well as subsidy cost per tonne of tailpipe-CO 2 avoided across major PEV markets from 2010 to 2017.…”

“…We assume that in the absence of the subsidy, the PEV buyer would have bought the average ICEV of the same body type as the PEV (Holland et al 2016;Archsmith, Kendall, and Rapson 2015;Graff Zivin, Kotchen, and Mansur 2014;Sheldon and Dua 2018). It is worth noting that previous research incorporating choice-model-based counterfactuals suggests that PEVs tend to displace higher efficiency vehicles (Xing, Leard, and Li 2019;Muehlegger and Rapson 2020). Thus, the extent of tailpipe-CO 2 emissions reduction found by our conventional counterfactual approach represents an optimistic estimate; thus our estimates of the cost per tonne of tailpipe-CO 2 avoided are on the lower side.…”

“…As highlighted below in the results section, the scale of CO 2 savings dwarfs the variations related to the counterfactual vehicle assumption. Furthermore, recent research incorporating alternative counterfactuals suggests that PEVs tend to displace higher efficiency vehicles (Xing, Leard, and Li 2019;Muehlegger and Rapson 2020). Thus, our tailpipe-CO 2 emissions reductions, and in turn, the related costs per tonne, represent optimistic estimates.…”

“…In Norway and Denmark, subsidies largely take the form of generous waivers of sales taxes; in China they mainly comprise combinations of federal, provincial, and registration incentives in vehicle ownership-restricted cities. 1,720 1,740 1,760 1,780 1,800 1,820 1,840 1,860 1,880 1,900 2010 2011 2012 2013 2014 2015 2016 2017 Width (mm) 4,000 4,100 4,200 4,300 4,400 4,500 4,600 4,700 4,800 4,900 5,000 2010 2011 2012 2013 2014 2015 2016 2017 Length (mm) 2,500 2,550 2,600 2,650 2,700 2,750 2,800 2,850 2,900 2,950 2010 2011 2012 2013 2014 2015 2016 (Xing, Leard, and Li 2019;Sheldon and Dua 2018). Indeed, our own previous research suggests that detailed choice-model-based counterfactuals do allow for a more precise estimation of the fuel savings (equivalent to CO 2 savings) (Sheldon and Dua 2018).…”