Welfare Implications of Electric-Bike Subsidies: Evidence from Sweden

34 Pages Posted: 11 Mar 2022 Last revised: 15 Mar 2022

See all articles by Anders Anderson

Anders Anderson

Swedish House of Finance

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: March 10, 2022

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: Electric bikes, subsidies, welfare analysis

JEL Classification: I18, D10

Suggested Citation

Anderson, Anders and Hong, Harrison G., Welfare Implications of Electric-Bike Subsidies: Evidence from Sweden (March 10, 2022). Swedish House of Finance Research Paper No. 22-02, Available at SSRN: https://ssrn.com/abstract=4054168 or http://dx.doi.org/10.2139/ssrn.4054168

Anders Anderson (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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