How Incentives Drive our Future: An Empirical Analysis of Incentives for BEV Adoption

Abstract: The adoption of electric vehicles (EVs) has only been a matter of time since the first governments proclaimed bans on combustion vehicles in the near future. As a new technology, however, EVs face various adoption barriers that lengthen the process. Governments globally have aimed to mitigate these by offering EV incentives. Even though the adoption of pure battery electric vehicles (BEVs) and not hybrids is the ultimate goal, previous publications on the effect of EV incentives focus on the joint effect on both BEV and hybrid adoption. The purpose and contribution of this paper is to comprehensively evaluate the effect of government incentives on BEV adoption, and to evaluate how that effect changes when considering socio-economic characteristics, in relation to charging infrastructure, and over time. To examine this in an unbalanced panel of 23 European countries between 2013 and 2019, I construct a novel dataset of BEV incentives. I further utilize multilinear ordinary least square panel regressions with a time trend, country fixed effects and various control variables. I identify a significant increase between 17.6% and 19.4% in BEV registrations, per 1000 euros additional incentive, with an indication of a differing effect in small markets. This result is robust to various controls and self-selection into the panel. This paper aims to contribute to the discussion around EV incentives and adoption, as well as reinforcing empirical results on the effects of incentives on BEVs specifically.