Is California’s Electric Vehicle Rebate Regressive? A Distributional Analysis

Abstract

Economic incentives are in widespread use to stimulate the development of the electric vehicle industry. However, the distributional effects of such incentives have been subject to little empirical inquiry. This study examines how California’s electric vehicle rebate program impacts different income groups financially. Two effects are considered: the income distribution of rebate beneficiaries and the income distribution of the rebate payers. The results reveal that the overall net financial impacts of the electric vehicle rebate program are regressive: the benefit distribution is highly regressive while the cost distribution is slightly progressive. Recent efforts to improve the fairness of the rebate program do not alter our findings. Policy implications are discussed.

A Green and Just Recovery from COVID-19?

“…It is important to recognize that EV subsidies primarily benefit high-income earners (Ku and Graham 2022) although there have been efforts in some jurisdictions to target subsidies to low-income earners (California's program is discussed in Section 3.3) (Linn 2022). Targeted subsidies make economic sense because a rebate or grant is more likely to influence a low-income earner's decision to purchase an EV (wealthier households are more likely to be "free riders" who would have purchased an EV in the absence of a subsidy) (DeShazo and Di Filippo 2021).…”