Transition to Electric Mobility: An Optimal Price Subsidy Rule

Part of the Fields Institute Communications book series (FIC, volume 74)

Abstract

Many public policies declare electric mobility as a key lever for insuring the carbon emission target and attaining the objectives of oil-dependence reduction. However, the cost of an electric vehicle (ev) is still way too expensive compared to the conventional fuel-powered vehicle (fv) and constitutes a serious barrier against its diffusion. In this note we formulate a tractable model to analyse the dynamics of the adoption of ev’s. The dynamic is driven by increasing marginal production returns and consumer’s willingness to pay. We define the social benefit of replacing an fv by an ev as the fuel-economy it allows to realize, and solve for the optimal subsidy rule. We show that in a context of expensive fuel price, a voluntary policy of subsidy can transform the present fuel-powered fleet into an electric one.

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.EDF R&DFinance for Energy Market Research CentreClamartFrance
  2. 2.Université Paris-Dauphine, CEREMADEFrance and Finance for Energy Market Research CentreClamartFrance

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