Evaluation of state-level U.S. electric vehicle incentives

Published: 2014.10.31

Lingzhi Jin, Stephanie Searle, and Nic Lutsey

Many U.S. states offer incentives to encourage consumers to purchase electric vehicles. Are these various incentives beginning to significantly influence electric vehicle adoption rates? In this early stage of electric vehicle market development, governments could benefit from an improved understanding of best-practice policies emerging to cost-effectively spur electric vehicle sales.

This paper seeks to answer these questions by comparing the total monetary benefit available to consumers through U.S. state incentives to electric vehicle sales in 2013. This paper is the first to monetize specific consumer-oriented U.S. state-level incentives, including purchase subsidies, license tax and fee reductions, annual fees for electric vehicles, electric vehicle supply equipment financing, free electricity at public chargers, free parking, and emissions testing exemptions. The authors also make first attempts at quantifying the indirect incentives associated with carpool vehicle lane access, emissions testing exemption time savings, and range confidence from public charger availability.

Key findings and conclusions:

State electric vehicle incentives are playing a significant early role in reducing the effective cost of ownership and driving electric vehicle sales. A statistical regression reveals that the total monetary benefit to consumers from state incentives significantly positively correlates with sales of battery electric vehicles. These findings suggest that future state efforts to incentivize battery electric vehicle sales through measures that drive down the total cost of owning and operating electric vehicles are likely to be effective.

Some types of incentives appear to be more effective in driving electric vehicle sales than others. The analysis presented here shows that the most effective incentives are subsidies, carpool lane access, and emissions testing exemptions initiatives. In addition, a basic benefit-to-cost analysis that compares incentives’ benefits to consumers to state spending shows that public charger availability and carpool lane access are particularly cost effective measures.

Further research is needed to more deeply analyze the impact of other factors on electric vehicle sales. Many factors, including vehicle regulations, utility and workplace actions, and technology improvements, are beyond the scope of this study. Further research on these factors may help explain how some cities and states are more or less effective at accelerating electric vehicle adoption in the future.