Are Electric Vehicles Incentives Effective? Evidence from the Fifty U.S. States

Abstract

This study evaluates the effectiveness of state-level electric vehicles (EVs) incentives in the United States. Many barriers can prevent electric vehicles from gaining a larger market share. This study will mainly focus on two of these – “model availability” on the EV supply-side; and the “knowledge gap” on the EV demand-side to examine the heterogeneities in state-level incentive allocation structure and effectiveness. A three-level Stackelberg game model is used to illustrate the interactions among state governments, electric vehicle manufacturers, and electric vehicle consumers to understand how government subsidies should be allocated. A rich panel data set of annual state-level EV data is used to empirically evaluate the effectiveness of state incentives and policies. In addition, result of sentiment analysis of twitter data is introduced to categorize state-level public perception of electric vehicles, which can explain the importance of campaign plans and the networks among states, to better inform the future policies.

My results show an overall 5%-14% increase in EV sales per every $1000 increase in subsidies across all the states. State-level climate commitments such as ZEV mandates and emissions reduction targets have a positive effect on the promotion of EV purchases, but do not significantly increase the effect of other policies instruments. Regional alliance and educational campaign activities can increase the effectiveness of incentives. More specifically, the results from frequency words and Latent Dirichlet Allocation (LDA) model on Twitter data indicate that linking electric vehicles to some topics such as climate change, healthcare, battery etc. will gain more public attention.