Investigating the effects of incentives on the
adoption of electric vehicles
Alan Jenn
Postdoctoral Researcher
Institute of Transportation Studies
University of California, Davis
Katalin Springel
PhD Candidate
Department of Economics
University of California, Berkeley
Anand Gopal
Deputy Director of Sustainable
Transportation
International Energy Studies Group
Lawrence Berkeley National
Laboratory
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Transportation accounts for 14% of the nearly 10 million
metric tons of carbon dioxide being emitted annually
worldwide
https://www3.epa.gov/climatechange/ghgemissions/global.html
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…but vehicle sales continue to grow
worldwide
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Electric vehicles may help to reduce transportation
emissions and reliance on fossil fuels
Image attributions:
http://assets.inhabitat.com/wp-content/blogs.dir/1/files/2016/02/Koch-Brothers-Fossil-Fuels-Vs-Electric-Vehicles.jpg
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Battery electric vehicles (BEVs) vs.
Plug-in hybrid electric vehicles (PHEVs)
 BEVs
Operate entirely on an
electric drivetrain
 Typically use large lithium
batteries so that longer
ranges can be achieved
 Popular models include the
Tesla Model S (240-310 mi)
and Nissan Leaf (73-107 mi)

 PHEVs
Contains both an electric
drive as well as a traditional
engine
 Typically smaller batteries
with shorter range, when the
battery runs out of charge
the combustion engine takes
over
 Popular models include the
Toyota Prius PHEV (12 mi)
and the Chevrolet Volt (4050 mi)

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A brief history in the US
 The first commercial was introduced into the market
in 2008 as the Tesla Roadster (BEV)
 In December of 2010, the Chevrolet Volt (PHEVs)
and Nissan Leaf (BEVs) became commercially
available
 There are currently over 30 electric vehicle models
being sold in the US, both the Volt and the Leaf
have already seen updates from the first model
cycle
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Electric vehicle sales in the US
the Nissan Leaf, Chevy
Volt, and Tesla Model S
though there are now
nearly 30 different models
available commercially
 Sales of EVs are currently
in the exponential growth
phase but account for less
than 1% of total market
sales
 The split between BEVs
and PHEVs is roughly 5050
Montly Registrations (thousands)
 The most popular EVs are
10
5
0
0
12
24
36
48
60
72
Months (starting Jan 2010)
FuelType
EV
PHEV
Combined
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Where are electric vehicles selling?
(normalized to market share)
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Factors for regional variation
 Demand
Social/cultural differences
among populations
 Provision of incentives
 Knowledge of electric
vehicles, knowledge of EV
incentives
 Availability of vehicle
chargers

 Supply
Manufacturer’s decisions on
providing vehicle stock in
certain areas
 Dealership limitations and
risks
 Production shortages and
limitations

Our work focuses primarily on understanding the
demand-side issues due to limitations on supplyside data
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Vehicle incentives overview
 Many institutions promote the adoption, use, and
charging of electric vehicles in different ways and
for a variety of reasons:
Technology push towards electric vehicles
 Decrease in carbon emissions
 Reduced reliance on foreign oil
 Lowering urban pollution from transportation
 Stabilizing the electric grid

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Tax credits/rebates
 A reduction of the upfront purchase price of the vehicle,
notable examples include:

Plug-in Electric Vehicle Incentive (Federal): income tax credit up to $7,500

Clean Vehicles Rebate Project (California): $2,500 for BEVs,$1500 for PHEVs

Zero Emission Vehicle Tax Credit (Georgia): Tax credit of 25% of the vehicle
up to $5,000
 The mechanism can differ from one incentive to the next,
e.g. a direct discount on the purchase versus a mail in
rebate versus a credit received on taxes
 The incentives can be flat amount or depend on the
technology, the vehicle model, the price, and/or the size of
the battery
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Fleet credits
 Similar to tax credits but offered only for
commercial, business, or government entities
 Tremendous variation in incentives:
Direct rebates (often with limitation on quantity)
 Funding based on operation
 Grant funding for fleet acquisition
 Favorable business loans

 Scope of fleet incentives in the US is significantly
smaller than credits for individuals
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EVSE incentives
 Electric vehicle supply equipment (EVSE)
incentives are incentives for vehicle chargers, and
span home, public, and workplace installations
 EVSE incentives include:
Home installation: credit ranging from $400 up to $2,500
 Public installation: credits, loans, grants

 The incentives can vary depending on the type of
charger installed (e.g. Level 1 versus Level 2
versus other chargers)
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Other incentives
 High Occupancy Vehicle (HOV) lane access: allows
EVs to use the carpool lane
 Time of use (TOU) rates: special electricity rates at
certain times of the day for owners of EVs (to help
utilities manage electricity demand)
 Registration fee reduction: reduces annual vehicle
registration fee (varies from state to state)
 Vehicle inspection exemption: states that require an
emissions inspection provide a free pass for EVs
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Knowledge of EVs and incentives
 One critical aspect for the performance of
incentives and the adoption of EVs is how well
informed the car buying populace is of the
incentives
 Our model proxies for knowledge by using article
counts related to EV incentives
1.
2.
3.
All articles related to EVs scraped from Lexis-Nexis
database
Articles parsed using the Stanford Natural Language
Processor identifying electric vehicle incentives
Entries categorized by several breakdowns
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Modeling the effect of incentives
 Because there is tremendous variation in the type
and level of the incentive both over time and from
state to state, we can compare the effect of the
incentives using econometric approaches. For
example:
Comparing sales in a state with strong incentives (CA)
versus a state with no incentives (WY)
 Comparing sales in a state before the introduction of an
incentive versus after the introduction of the incentives

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Model structure
ln ( Ritr ) = a + å b Xitr × Ktr ( Ztr ) + å mY M tr + q i + d tr + e itr
XÎI
Y ÎM
 The model specification simply states that vehicle
registrations (R) are a function of:
Incentives (X) [tax credits, EVSE credits, HOV access]
 Knowledge (K) which is a function of total articles (Z)
 Macroeconomic variables (M)
 Fixed effects [vehicle model θ, state and month δ]

 Primary variable of interest is learning the value of
the βs which tell us the effect of the incentive
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A novel instrument
 Endogeneity: we explain the sales of EVs by the knowledge
variable (article counts of incentives), but the reverse could
be true: as more EVs are sold, more articles about EV
incentives could be written
 We employ a two-stage least squares (2SLS) approach
where we control for endogeneity by using an instrumental
(correlated to explanatory variable but not the response
variable)
 Instrument: the cumulative article count of all articles not
related to electric vehicles or EV incentives
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Regression results
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What incentives are the most
important?
 In the US, we find the most critical policies to be:
Individual tax credits
 EVSE incentives

 But the strength of the policy is conditional on the
knowledge of the incentives
 HOV access may be important, but the resolution of
data about the incentive makes this difficult to
ascertain
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A $7,500 incentive under current
knowledge conditions
Percentage Adoption
% Increase
0 − 0.196
0.196 − 0.257
0.257 − 0.342
0.342 − 0.586
0.586 − 2.99
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Example vehicle models
(CA incentive)
Chevrolet Volt
Tesla Model S
Nissan Leaf
MSRP: $33,220
Incentive: $9,000 (27% off)
Sales change
CA: 2.38%
TX: 0.86%
FL: 0.97%
NY: 0.61%
CO: 0.28%
GA: 0.36%
MSRP: $90,700
Incentive: $10,000 (11% off)
Sales change
CA: 1.07%
TX: 0.35%
FL: 0.40%
NY: 0.25%
CO: 0.11%
GA: 0.15%
MSRP: $29,010
Incentive: $10,000 (34% off)
Sales change
CA: 2.74%
TX: 0.90%
FL: 1.01%
NY: 0.64%
CO: 0.29%
GA: 0.38%
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Results contradict other studies
 Empirical comparison of incentive uptake rate in
CVRP, massively different (unless majority of
incentive takers are free riders)
 Compared with non-econometric estimates,
incentive effect is extremely small
 High occupancy vehicle lane incentive has been
demonstrated to be very important in California
according to numerous survey studies
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Misalignment due to supply
constraints?
Incentive intensity
EV market share
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Conclusions
 Preliminary results indicate monetary incentives are
an important factor for the sale of electric vehicles
but effect is small
 Dissemination of knowledge, both of the technology
and of the incentives is a critical aspect of adoption
as well
 Model needs further investigation to understand
discrepancy with other studies—supply constraint
of EVs is a serious shortcoming
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Questions and Feedback
[email protected]
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