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Ruhr Economic Papers #1015


Lavan T. Burra, Stephan Sommer, Colin Vance Ph.D.

Free-Ridership in Subsidies for Company- and Private Electric Vehicles

Consumer subsidies are commonly employed to incentivize the purchase of battery electric vehicles (BEVs), but free-ridership potentially undermines their effectiveness. The present study investigates BEV subsidies in Germany, distinguishing their effect between company- and private cars. Drawing on a panel of high-resolution car registration data, we use the estimates from a Poisson pseudo-maximum likelihood model to predict BEV registrations in the absence of the subsidy. We calculate aggregate free-rider rates of 19% for private cars and 43% for company cars. We further find that the cost of the subsidy per induced BEV among private consumers is €5,400, while it is €7,215 among companies. Overall, the estimates suggest that the subsidy is considerably less cost effective among company cars, which comprise 55% of new BEV sales.

ISBN: 978-3-96973-181-9

JEL-Klassifikation: H23, L91, Q58

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