An Economic Evaluation of the Electric Car Incentive Program in Italy 2022-24-0024

To encourage electric mobility, governments may pay part of the price of the new car. An economic evaluation of this incentive program is proposed. The economic value results from a comparison between the with-incentive scenario and the without-incentive counterfactual scenario. Four contributions are considered: the change in consumers’ welfare, the government expenditure, the change in the discounted costs of energy consumption for the portion that is purchased abroad, and the change in the discounted costs of well-to-wheel greenhouse gas emissions. A logit model is used to represent choices between differentiated cars and the consumption of all other goods in the economy (the numéraire). The car market in Italy in 2019 had incentives for all-electric and plug-in hybrid electric cars. In a worst case where no consumer scraps the old car the economic value is negative. The economic value is positive in the best case where all scrap. Sensitivity in realistic ranges of shadow price of greenhouse gas emissions, yearly mileage and car life years is assessed.