Scandinavian Working Papers in Economics

Misum Working Paper Series,
Stockholm School of Economics, Mistra Center for Sustainable Markets (Misum)

No 2022-8: Welfare Implications of Electric-Bike Subsidies: Evidence from Sweden

Anders Anderson () and Harrison Hong ()
Additional contact information
Anders Anderson: Mistra Center for Sustainable Markets (Misum), Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Harrison Hong: Columbia University, Postal: 1022 International Affairs Building (IAB), Mail Code 3308 , 420 West 118th Street, New York, NY 10027

Abstract: 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.

Keywords: Sustainability; household behavior; subsidies; carbon emissions; welfare analysis

JEL-codes: G50; H20

Language: English

27 pages, March 9, 2022

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