January 1, 2008
Publication:
John F. Kennedy School of Government, Harvard University

Federal, state and local governments use a variety of incentives to induce consumer adoption of hybrid-electric vehicles. Reports indicate 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 value of the tax incentive. Conditional on value, we find that sales tax waivers are associated a seven-fold greater increase in hybrid sales than income tax credits. In addition, it is estimated the extent to which consumer adoption of hybrid-electric vehicles (HEV) in the United States from 2000-2006 can be attributed to government incentives, changing gasoline prices, or consumer preferences for environmental quality or energy security. After controlling for model specific state and time trends, and finding that rising gasoline prices are associated with higher hybrid sales, although the effect operates entirely through sales of the hybrid models with the highest fuel economy. In total, tax incentives, rising gasoline prices and social preferences are associated with 6, 27 and 36 percent of high economy hybrid sales from 2000-2006.

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