When is the electric vehicle market self-sustaining? Evidence from Norway

Nicolas Koch (), Nolan Ritter (), Alexander Rohlf () and Francesco Scarazzato ()
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Nicolas Koch: Mercator Research Center for Global Commons and Climate Change (MCC), EUREF Campus 19, 10829 Berlin, Germany; Institute of Labor Economics (IZA), Schaumburg-Lippe-Straße 5–9, 53113 Bonn, Germany
Nolan Ritter: Mercator Research Center for Global Commons and Climate Change (MCC), EUREF Campus 19, 10829 Berlin, Germany
Alexander Rohlf: Mercator Research Center for Global Commons and Climate Change (MCC), EUREF Campus 19, 10829 Berlin, Germany
Francesco Scarazzato: Department of Economics, Vienna University of Economics and Business

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: This paper investigates whether the world’s most mature electric vehicle (EV) market in Norway has overcome critical mass constraints and can achieve sustainable long-term equilibria without subsidies. We estimate a structural model that allows for multiple equilibria emerging from the interdependence between EV demand and charging station supply. We first estimate the resulting indirect network effects using an instrumental variable approach. Then, we simulate long-term market outcomes for each of the 422 Norwegian municipalities. We find that almost 20% of all municipalities faced critical mass constraints in the earliest stage of the market. Half of them are effectively trapped in a zero-adoption equilibrium. However, in the maturing market, all municipalities have passed critical mass. Overall, about 60% of the Norwegian population now lives in municipalities with a high-adoption equilibrium, even if subsidies were removed. This suggests that critical mass constraints do no longer justify the provision of subsidies.

Keywords: electric vehicles; network externalities; critical mass; subsidies (search for similar items in EconPapers)
JEL-codes: H23 L62 Q48 Q58 R48 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur, nep-tre and nep-ure
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