Purchase subsidies for 100% zero-emissions vehicle sales goals: Effectiveness, government cost, and supplier capture
Globally, purchase subsidies are among the most common policies used to support the deployment of zero-emissions vehicles (ZEVs). However, it is unclear if subsidies alone can effectively and efficiently achieve ambitious long-term ZEV sales goals, such as the 100% by 2035 target adopted by numerous...
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Elsevier
2025-01-01
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| Series: | Transportation Research Interdisciplinary Perspectives |
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| Online Access: | http://www.sciencedirect.com/science/article/pii/S2590198224002914 |
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| author | Chandan Bhardwaj Jonn Axsen |
| author_facet | Chandan Bhardwaj Jonn Axsen |
| author_sort | Chandan Bhardwaj |
| collection | DOAJ |
| description | Globally, purchase subsidies are among the most common policies used to support the deployment of zero-emissions vehicles (ZEVs). However, it is unclear if subsidies alone can effectively and efficiently achieve ambitious long-term ZEV sales goals, such as the 100% by 2035 target adopted by numerous developed countries. To shed insight on subsidy impacts under consumer-supplier dynamics, we use a technology adoption model (AUM) that endogenously represents consumer preferences for (and purchases of) light-duty passenger ZEVs, and automaker decision-making about ZEV pricing, innovation activities, and charger deployment. We use AUM to simulate the impacts of different levels and durations of ZEV purchase subsidies in the 2023–2035 time frame in the case region of Canada. Results indicate that a subsidy-dominated policy mix needs to increase subsidy values to at least $40,000 per ZEV by 2035 to achieve the 100% goal in Canada. In that scenario, average government expenditure on subsidies is 450–820 $/tonne CO2e abated, and up to $180 billion in total direct government expenditure. Across subsidy-dominated scenarios, automakers capture 15–23% of subsidy value and increase their overall profit; both trends increase with higher subsidy duration and value. In short, a subsidy-dominated approach to inducing ZEV sales is likely to prove costly; other policies should be considered to lead a policy mix, such as regulation, taxation, or a feebate program. |
| format | Article |
| id | doaj-art-50fb8af65a9f4e41bc6fe2d72e7b6bd2 |
| institution | Kabale University |
| issn | 2590-1982 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Transportation Research Interdisciplinary Perspectives |
| spelling | doaj-art-50fb8af65a9f4e41bc6fe2d72e7b6bd22025-02-09T05:01:14ZengElsevierTransportation Research Interdisciplinary Perspectives2590-19822025-01-0129101305Purchase subsidies for 100% zero-emissions vehicle sales goals: Effectiveness, government cost, and supplier captureChandan Bhardwaj0Jonn Axsen1Corresponding author.; Sustainable Transportation Action Research Team, Simon Fraser University, 8888 University Dr., Burnaby B.C. V5A 1S6, CanadaSustainable Transportation Action Research Team, Simon Fraser University, 8888 University Dr., Burnaby B.C. V5A 1S6, CanadaGlobally, purchase subsidies are among the most common policies used to support the deployment of zero-emissions vehicles (ZEVs). However, it is unclear if subsidies alone can effectively and efficiently achieve ambitious long-term ZEV sales goals, such as the 100% by 2035 target adopted by numerous developed countries. To shed insight on subsidy impacts under consumer-supplier dynamics, we use a technology adoption model (AUM) that endogenously represents consumer preferences for (and purchases of) light-duty passenger ZEVs, and automaker decision-making about ZEV pricing, innovation activities, and charger deployment. We use AUM to simulate the impacts of different levels and durations of ZEV purchase subsidies in the 2023–2035 time frame in the case region of Canada. Results indicate that a subsidy-dominated policy mix needs to increase subsidy values to at least $40,000 per ZEV by 2035 to achieve the 100% goal in Canada. In that scenario, average government expenditure on subsidies is 450–820 $/tonne CO2e abated, and up to $180 billion in total direct government expenditure. Across subsidy-dominated scenarios, automakers capture 15–23% of subsidy value and increase their overall profit; both trends increase with higher subsidy duration and value. In short, a subsidy-dominated approach to inducing ZEV sales is likely to prove costly; other policies should be considered to lead a policy mix, such as regulation, taxation, or a feebate program.http://www.sciencedirect.com/science/article/pii/S2590198224002914Electric vehiclesPurchase subsidiesSubsidy cost-effectivenessSubsidy free ridershipSubsidy incidence |
| spellingShingle | Chandan Bhardwaj Jonn Axsen Purchase subsidies for 100% zero-emissions vehicle sales goals: Effectiveness, government cost, and supplier capture Transportation Research Interdisciplinary Perspectives Electric vehicles Purchase subsidies Subsidy cost-effectiveness Subsidy free ridership Subsidy incidence |
| title | Purchase subsidies for 100% zero-emissions vehicle sales goals: Effectiveness, government cost, and supplier capture |
| title_full | Purchase subsidies for 100% zero-emissions vehicle sales goals: Effectiveness, government cost, and supplier capture |
| title_fullStr | Purchase subsidies for 100% zero-emissions vehicle sales goals: Effectiveness, government cost, and supplier capture |
| title_full_unstemmed | Purchase subsidies for 100% zero-emissions vehicle sales goals: Effectiveness, government cost, and supplier capture |
| title_short | Purchase subsidies for 100% zero-emissions vehicle sales goals: Effectiveness, government cost, and supplier capture |
| title_sort | purchase subsidies for 100 zero emissions vehicle sales goals effectiveness government cost and supplier capture |
| topic | Electric vehicles Purchase subsidies Subsidy cost-effectiveness Subsidy free ridership Subsidy incidence |
| url | http://www.sciencedirect.com/science/article/pii/S2590198224002914 |
| work_keys_str_mv | AT chandanbhardwaj purchasesubsidiesfor100zeroemissionsvehiclesalesgoalseffectivenessgovernmentcostandsuppliercapture AT jonnaxsen purchasesubsidiesfor100zeroemissionsvehiclesalesgoalseffectivenessgovernmentcostandsuppliercapture |