Greening the drive: unpacking the impact and equity aspects of Germany's EV subsidy programme

Public subsidies for the purchase of electric vehicles (EVs) have been introduced in various countries as a means of incentivis ing consumers to shift away from fossil-fuel powered personal transport. In Germany, as in many other European countries, the shift towards E-Mobility has gained particular attention due to the transport sector’s increasing need to decarbonise for the country to meet national and European climate neutrality tar gets. In this paper, we use data from the country’s national EV subsidy programme (the Umweltbonus) and a survey of the re cipients of the subsidy to determine the free rider, rebound, and spillover effects, which have become indispensable to consider in the design and evaluation of contemporary energy policy. In addition, the distributive aspects of the subsidy programme are analysed, notably concerning income and regional inequalities. Our study suggests that there might be substantial inequalities in terms of the demographics of the recipients of the subsidy, whereas the rebound effects are smaller than what the literature might suggest. Future efforts to promote EV adoption might benefit if the corresponding subsidy programmes are better targeted towards recipients from economically disadvantaged groups and regions. The insights from this study contribute to the growing literature on the effectiveness of EV subsidy pro grammes using observed microdata as well as stated data. In addition, concrete lessons such as about the distributive effects of the policy can be gathered from this experience in Germany that might find application in transport policy in other juris dictions. Further redesign of the subsidy should also consider including a corresponding disincentive for buyers to buy fossil fuel driven cars, in addition to a subsidy towards EVs, which might increase distributional fairness as well as be more neutral towards the burden on state finances.