Subsidizing Mass Adoption of Electric Vehicles: Quasi-Experimental Evidence from California

Research Team: David Rapson (lead) and Erich Muehlegger

UC Campus(es): UC Davis

Problem Statement: Governor Brown issued Executive Order B-48-18 that calls for 5 million zero-emission vehicles (ZEVs) on California roads by 2030. If ZEVs are to become mainstream, then they will need to be purchased by households outside of the high-income bracket, which comprise the vast majority of the vehicle-owning population. To this end, the state has implemented new incentive programs that target the middle-class and those living in disadvantaged communities. However, little is known about the effectiveness of the programs, especially how responsive middleclass households in California are to ZEV incentives.

Project Description: This project exploits a natural experiment (i.e., California’s Enhanced Fleet Modernization Program) that provides variation in large ZEV subsidies targeted at low- and middle-income households in California. Using transaction-level data, two important policy parameters are estimated: the subsidy elasticity of demand for ZEVs and the rate of subsidy pass-through. Estimates show that demand for ZEVs amongst low- and middle-income households is price-elastic and pass-through is complete.

Status: Completed

Budget: $50,000

Project Partner(s): California Air Resources Board

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