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Transition to electric mobility: an optimal subsidy price rule

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Date
2015
Dewey
Economie de la terre et des ressources naturelles
Sujet
Fuel Economy; Fuel Price; Purchase Price; Gasoline Price; Social Surplus
JEL code
Q.Q4.Q43
DOI
http://dx.doi.org/10.1007/978-1-4939-2733-3_11
Book title
Commodities, Energy and Environmental Finance. Fields Institute Communications, vol 74
Author
Aïd, René; Ludkovski, Michael; Sircar, Ronnie
Publisher
Springer
Publisher city
New York, NY
Year
2015
Pages number
430
ISBN
978-1-4939-2732-6
Book URL
10.1007/978-1-4939-2733-3
URI
https://basepub.dauphine.fr/handle/123456789/19895
Collections
  • LEDa : Publications
Metadata
Show full item record
Author
Aïd, René
163511 Laboratoire d'Economie de Dauphine [LEDa]
Ben Tahar, Imen
60 CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Type
Chapitre d'ouvrage
Item number of pages
301-313
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.

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