Are E-Bike Subsidies Cost Effective in Mitigating Carbon Emissions?

Abstract

E-bike subsidies are used in a number of large carbon-emitting countries. Evaluating their cost effectiveness in reducing emissions is more complicated than for other durable green goods since e-bike owners might not substitute away from driving. We evaluate a representative Swedish subsidy program by combining administrative, insurance, car registry and survey data. We find a complete passthrough of the subsidy to consumers, which incentivized a doubling of e-bike sales. For the 90,000 individuals in our subsidy sample, we find however only a small substitution from driving based on registry estimates, much smaller than reported by subsidy recipients in surveys. The cost of carbon would have to be $800 per ton for the program to be cost effective. We also address additionality, coincidental benefits and alternative more cost-effective e-bike subsidy designs.