Welfare Implications of Electric-Bike Subsidies: Evidence from Sweden
Electric bikes are a potentially important tool to address global warming since they can be a viable alternative to cars in urban areas. Governments are using subsidies to promote household adoption. Welfare analyses are challenging, requiring pass-through estimates from transactions, incidence of non-additionality (i.e. those who would have bought even without the subsidy), and resulting substitution from driving. We combine administrative, insurance and survey data from a large-scale Swedish subsidy program in 2018, which is similar to other programs around world, to evaluate these implications. We find (1) complete pass through of the average $500 subsidy to consumers, (2) a near doubling of E-bikes sold but one-third of adopters are non-additional; and (3) a savings of 1.3 tons of carbon emissions during the life of the E-bike. Combining these estimates, an E-bike subsidy program can only be justified with a social cost of carbon that is several hundred dollars higher than what is typically used.
We especially thank the Swedish EPA and Solid for providing us with the data and Karl Sigfrid for excellent research assistance. We are grateful to Vinnova and the Jan Wallander and Tom Hedelius Foundation for generous funding. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.