Effectiveness and Heterogeneous Effects of Purchase Grants for Electric Vehicles

Abstract

We evaluate German purchase subsidies for battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) using data on new vehicle registrations in Germany dur¬ing 2015-2022. We account for confounding time trends and interacting EU-level CO2 standards using neighboring countries as a control group. We find that 40% of BEV and 25% of PHEV registrations were subsidy-induced. The program had strong distributional effects, with greater uptake in wealthier and greener counties. We estimate implied abate¬ment costs of 870 euro per ton of CO2 for BEVs and 2,470 euro for PHEVs, suggesting that policy makers should re-balance support schemes away from PHEVs.