Cost-benefit analyses of policy tools to encourage the use of Plug-in electric vehicles

Abstract

Over the last several years, the global automotive market has undergone a technological change towards increased usage of Plug-in Vehicles (PEVs), Battery PEVs (BEVs) and Plug-in Hybrid PEVs (PHEVs). This trend is, to a significant extent, the result of internal policies implemented by different countries around the world, primarily developed countries, with the aim of reducing greenhouse gas emissions from traffic. PEVs have been the primary means for achieving this reduction. However, there are several barriers that make it harder to penetrate the market, among them the high acquisition cost and limited travel distance of these vehicles, as well as limited charging infrastructure deployment. To overcome these barriers, governments need to employ policy measures to encourage the formation and development of the PEV market.In this paper, we used a cost-benefit analysis to determine the most efficient policy tools to accelerate the PEV market in Israel. We composed three alternative policy sets, with each alternative differentiated and rated based on the extent of governmental support and investment required, as well as its estimated impact on PEV market growth and the benefits derived from the policies. We found that the optimal level of government incentives is the basic level. Extended governmental support doesn’t pass a cost-benefit analysis.