Free-Ridership in Subsidies for Company- and Private Electric Vehicles

Lavan T. Burra, Stephan Sommer and Colin Vance

No 1015, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Consumer subsidies are commonly employed to incentivize the purchase of battery electric vehicles (BEVs), but free-ridership potentially undermines their effectiveness. The present study investigates BEV subsidies in Germany, distinguishing their effect between company- and private cars. Drawing on a panel of high-resolution car registration data, we use the estimates from a Poisson pseudo-maximum likelihood model to predict BEV registrations in the absence of the subsidy. We calculate aggregate free-rider rates of 19% for private cars and 43% for company cars. We further find that the cost of the subsidy per induced BEV among private consumers is €5,400, while it is €7,215 among companies. Overall, the estimates suggest that the subsidy is considerably less cost effective among company cars, which comprise 55% of new BEV sales.

Keywords: Electric vehicles; consumer subsidy; company cars; free ridership (search for similar items in EconPapers)
JEL-codes: H23 L91 Q58 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-dcm, nep-ene, nep-mfd and nep-tre
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:1015

DOI: 10.4419/96973181

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