Driving in the wrong direction? Modelling policy mixes for EV adoption

Source abstract

Car-centric societies face challenges in transitioning to sustainable mobility, with electric vehicle adoption depending on the interaction of consumer behaviour, firm innovation, and policy incentives. To examine these dynamics, we develop an agent-based model calibrated on California data from 2001-2023. Heterogeneous consumers influence each other in their acceptance of EVs, while manufacturers incorporate these changes into their innovation and product-mix strategies. We evaluate individual and combined policy instruments, including carbon pricing, new and used purchase rebates, production subsidies, and electricity price subsidies. Results show that only carbon pricing and new vehicle purchase rebates achieve 95% electric vehicle adoption by 2035. Each policy has trade-offs: carbon pricing reduces consumer welfare, while new purchase rebates create heavy fiscal burdens. Policy combinations reduce the intensity of interventions and transitional costs, while mitigating trade-offs. By 2050, combinations of carbon price and subsidies yield 30% reductions in cumulative emissions against the business-as-usual scenario.