Transition to electric mobility: an optimal subsidy price rule
Aïd, René; Ben Tahar, Imen (2015), Transition to electric mobility: an optimal subsidy price rule, in Aïd, René; Ludkovski, Michael; Sircar, Ronnie, Commodities, Energy and Environmental Finance. Fields Institute Communications, vol 74, Springer : New York, NY, p. 301-313. 10.1007/978-1-4939-2733-3_11
Book titleCommodities, Energy and Environmental Finance. Fields Institute Communications, vol 74
Book authorAïd, René; Ludkovski, Michael; Sircar, Ronnie
Number of pages430
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Laboratoire d'Economie de Dauphine [LEDa]
Ben Tahar, Imen
CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Abstract (EN)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.
Subjects / KeywordsFuel Economy; Fuel Price; Purchase Price; Gasoline Price; Social Surplus
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