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Governments should optimize electric vehicle subsidies

Nature Human Behaviour volume 7, pages 470–471 (2023)Cite this article

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However, the economically efficient administration of purchase subsidies — a politically, financially and socially advantageous outcome2 — necessitates that three conditions must be met. First, the subsidy should target consumers whose vehicle-purchase decisions change owing to the presence of the subsidy. Second, the subsidized EV should replace a petrol-powered vehicle. Third, the vehicle being replaced should, to the extent possible, be ‘maximally polluting’. The more polluting the replaced vehicle is, the greater the emissions reductions that are potentially realized owing to EV adoption. Emerging evidence raises questions about whether, and to what degree, these conditions are being met.

Studies challenge the extent to which purchase subsidies motivate EV adoption. In the USA, up to 70 per cent of federal programme dollars are claimed by EV owners who would have purchased an EV regardless of the presence of the subsidy3. Similar purchasing patterns persist in Canada and China4,5. These findings are problematic as purchase subsidy claims by consumers who are indifferent to the presence of the subsidy tempers the efficacy of subsidies as an economically efficient pathway to emissions reductions.

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Authors and Affiliations

  1. Department of Economics, Harvard College, Cambridge, MA, USA

    Ashley Nunes & Lucas Woodley

  2. The Breakthrough Institute, Berkeley, CA, USA

    Ashley Nunes

  3. Center for Labor and a Just Economy, Harvard Law School, Cambridge, MA, USA

    Ashley Nunes & Lucas Woodley

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  1. Ashley Nunes
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  2. Lucas Woodley
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Correspondence to Ashley Nunes.

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Nunes, A., Woodley, L. Governments should optimize electric vehicle subsidies. Nat Hum Behav 7, 470–471 (2023). https://doi.org/10.1038/s41562-023-01557-1

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