Abstract:

Electric vehicles (EVs) are likely to emerge as the main means of zero-emission road transport. China has used a variety of policy approaches to encourage EV adoption, including vehicle purchase subsidies. This study uses a three-dimensional dataset to estimate the effect of purchase subsidies for domestic EVs on adoption in 316 cities in China over January 2016–December 2019. An instrumental-variable approach that utilizes the timing of the cancellation of local subsidies by the central government is pursued. The findings suggest that purchase subsidies for domestic EVs have led to a sizeable increase in uptake but have discouraged the uptake of imported EVs. Higher consumer awareness of the subsidies is associated with a larger proportional effect on the uptake of domestically produced vehicles. The authors suggest that per-vehicle subsidy rate increases have reduced carbon dioxide emissions at a marginal subsidy cost of around $4,453 CNY per tonne, but other benefits, including the emergence of a new clean technology sector, may be substantial.