How good are the carrots? : the impact of incentives for alternative fuel vehicles on households' vehicle ownership choice and usage in the United States

Abstract

With growing concern for air pollution, global warming, energy sustainability, and oil security, both federal and local governments in the United States have shown greater interest in promoting alternative fuel vehicles (AFVs). Besides attention from the government, consumers in the United States have also shown increasing interest in AFVs, partly due to their concern on the environment and partly due to the increasing gasoline prices. However, despite the raising interest from both the government and the consumers, the number of AFVs in use is still relatively low in the United States.

In an effort to promote the adoption of AFVs, the federal and local governments have initiated different incentive programmes for AFVs. Although these “carrots” have been started for more than two decades, studies on the effectiveness of them are still very sparse and are mostly for hybrid vehicles only. Therefore, this study filled in this gap in evaluating the effectiveness of AFV incentives in promoting the ownership and usage of AFVs on a national scale in the United States. As an improvement over prior studies on this topic, this study employed a system of equations approach to capture the interrelationship between households’ vehicle ownership choice and usage, which is often neglected in similar studies. In addition, a Bayesian estimation approach was adopted to overcome the difficulties in the estimation of the system.

Using the 2009 National Household Travel Survey data, I found weak relationship between the state level AFV incentives and vehicle ownership and usage. In addition, although I found positive impact of AFV incentives on AFV usage, I also found mixed results on the impacts of the different types of AFV incentives on AFV ownership. These results suggested that further research should be done to investigate why these “carrots” are not as good as expected.