Re-Thinking Procurement Incentives for Electric Vehicles to Achieve Net-Zero Emissions

Procurement incentives are a widely leveraged policy lever to stimulate electric vehicle (EV) sales. However, their effectiveness in reducing transportation emissions depends on the behavioural characteristics of EV adopters. When an EV is used, under what conditions and by whom dictates whether or not these vehicles can deliver emissions reductions. Here, we document that replacing gasoline powered vehicles with EVs may—depending on behavioural characteristics—increase, not decrease, emissions. We further show that counterfactual vehicle inventory—how many vehicles a household would own absent an EV purchase—is an important influencer of these effects. We conclude that achieving emissions reductions using EVs requires redesigning procurement incentive programmes in a manner that (re)distributes incentives towards the second-hand EV market. Doing so would not only facilitate emissions reductions but also address fiscal prudency and regressivity concerns associated with these programmes.