Is Pollution Reduced or Redistributed? The Impact of Electric Vehicle Subsidies in China

In this paper, we study the geographically heterogeneous environmental effects of electric vehicle ( EV ) subsidies in China and compare the EV subsidies with alternative policies pricing externalities. A structural model featuring both demand and supply sides is estimated and then applied to analyze the environmental effects of EV subsidies through counterfactual analysis. Our findings suggest that EV subsidies redistribute the major pollutants and greenhouse gases from electricity importers to exporters. Local governments' decisions on EV subsidies could be inefficient if the pollution exported to the other provinces is ignored. In this situation, a centralized policy could partially address the problem. In addition, subsidies on technology that is less polluting are not the first-best abatement policy. Pricing the externalities of internal combustion engine vehicles could reduce pollutants more efficiently