The Urban Equilibrium Effects of Electric Vehicle Tax Credits

Weihua Zhao, William Larson and Becka Brolinson

Journal of the Association of Environmental and Resource Economists, 2026, vol. 13, issue 4, 1079 - 1114

Abstract: This study extends the monocentric city model to incorporate endogenous household automobile fuel choice and dwelling energy consumption. Electric vehicle (EV) tax credits lower direct energy consumption and emissions via commuting but also cause important urban general equilibrium effects, including sprawl. This creates a substantial emissions rebound effect via larger homes, longer commutes, and greater consumption of the numeraire good. Nevertheless, EV tax credits are welfare enhancing unless electricity production is heavily tilted toward coal, with total household energy consumption and carbon emissions falling substantially.

Date: 2026
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