Electric Vehicle Subsidies in the Era of Attribute-Based Regulations

In: Canadian public policy: Analyse de politiques, Band 43, Heft 1, S. 50-60

Abstract

Electric vehicle (EV) subsidies are costly and ineffective policy mechanisms in the battle against greenhouse gases. Furthermore, their operation is not well understood given the new regulatory environment governing emissions standards and fuel efficiency that is common to the United States and Canada. Given these standards, the sale of more EVs permits manufacturers to sell fossil fuel vehicles with higher carbon dioxide (CO2) emissions. Paradoxically, more EV sales result in more CO2 emissions. I explore possible rationales for subsidies, but none is easily validated. Consequently, the case for traditional externality-correcting policies such as carbon taxation that approximate "first-best" solutions is compelling.