Giving green to get green? Incentives and consumer adoption of hybrid vehicle technology

• Published in: Journal of environmental economics and management Vol. 61; no. 1; pp. 1 - 15
• Main Authors: Gallagher, Kelly Sims, Muehlegger, Erich
• Format: Journal Article
• Language: English
• Published: New York Elsevier Inc 2011; Elsevier; Elsevier Science Publishing Company, Inc
• Series: Journal of Environmental Economics and Management
• Subjects: Automobiles; Consumer behavior; Consumer behaviour; Economics; Effectiveness; Energy prices; Environmental economics; Estimation; Fuels; Gasoline prices; Hybrid vehicles; Hybrid vehicles Tax incentives Tax salience Gasoline prices Technology adoption; Incentives; Income; Income taxes; Local government; New technology; Sales; Sales taxes; Studies; Tax credits; Tax incentives; Tax salience; Technology adoption; U.S.A; United States > US; Technology adoption; Tax salience; Hybrid vehicles; Tax incentives; Gasoline prices
• ISSN: 0095-0696; 1096-0449
• DOI: 10.1016/j.jeem.2010.05.004

Federal, state, and local governments use a variety of incentives to induce consumer adoption of hybrid-electric vehicles. We study the relative efficacy of state sales tax waivers, income tax credits, and non-tax incentives and find that the type of tax incentive offered is as important as the generosity of the incentive. Conditional on value, sales tax waivers are associated with more than a ten-fold increase in hybrid sales relative to income tax credits. In addition, we examine how adoption varies with fuel prices. Rising gasoline prices are associated with greater hybrid vehicle sales, but this effect operates almost entirely through high fuel-economy vehicles. By comparing consumer response to sales tax waivers and estimated future fuel savings, we estimate an implicit discount rate of 14.6% on future fuel savings.