Welfare Implications of Electric-Bike Subsidies: Evidence from Sweden

Electric bikes are a potentially important tool to address global warming since they can be a viable alternative to cars in urban areas. Governments are using subsidies to promote household adoption. Welfare analyses are challenging, requiring pass-through estimates from transactions, incidence of n...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Anderson, Anders, Hong, Harrison
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2022
Subjects
Electric bicycles
Subsidies
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Summary:Electric bikes are a potentially important tool to address global warming since they can be a viable alternative to cars in urban areas. Governments are using subsidies to promote household adoption. Welfare analyses are challenging, requiring pass-through estimates from transactions, incidence of non-additionality (i.e. those who would have bought even without the subsidy), and resulting substitution from driving. We combine administrative, insurance and survey data from a large-scale Swedish subsidy program in 2018, which is similar to other programs around world, to evaluate these implications. We find (1) complete pass through of the average $500 subsidy to consumers, (2) a near doubling of E-bikes sold but one-third of adopters are non-additional; and (3) a savings of 1.3 tons of carbon emissions during the life of the E-bike. Combining these estimates, an E-bike subsidy program can only be justified with a social cost of carbon that is several hundred dollars higher than what is typically used.