Quantifying the Welfare Effects of Electric Vehicle Subsidies: Evidence from China

Qing Ji, Chunan Wang, Xiaoyong Zheng and Ying Fan

Journal of the Association of Environmental and Resource Economists, 2026, vol. 13, issue 1, 1 - 40

Abstract: We evaluate the welfare effects of China’s electric vehicle (EV) subsidy policy from 2015 to 2019. Our findings indicate that the subsidies primarily transfer funds from the government to consumers, with car manufacturers capturing only a small share. This outcome is driven by EV demand curvatures exceeding one and significant heterogeneity in consumer price sensitivities. We further decompose the welfare effects into two key components: the baseline subsidy based on driving range and the subsidy adjustment coefficients targeting technological innovations. While the latter intensifies competition among EVs, reducing manufacturer profits, it also enhances environmental benefits by lowering emissions. Finally, our results underscore the need to account for nonenvironmental externalities—such as traffic accidents and congestion—as well as the assumptions regarding the transportation mode underlying the outside choice in welfare analysis. Varying these assumptions can yield opposing conclusions on the overall social welfare effect.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/737533 (application/pdf)
http://dx.doi.org/10.1086/737533 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jaerec:doi:10.1086/737533

Access Statistics for this article

More articles in Journal of the Association of Environmental and Resource Economists from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().