Well-designed subsidies boost electric vehicle adoption

In the 1990s, Atlanta was out of compliance with federal air quality standards for ozone, and vehicle emissions were primarily responsible. In 1998, the legislature passed a $1,500 tax credit for alternate fuel vehicles, which was increased to $2,500 for all low-emission vehicles and $5,000 for zero-emission vehicles over the next 3 years. The tax credit applied to buyers and first lessees of EVs. At the time, the bills were uncontroversial.As years passed, EVs became more widely available and declined in cost. The tax credit was successful at helping EVs gain a foothold in Georgia, particularly in Atlanta, where the range limitations of early EVs were less problematic than in rural areas. By mid-2015, Georgia had more EVs in service than any other U.S. state except California.It is crucial that these policies be designed with a long time horizon, that subsidy rates keep up with technological progress, and that they be phased out gradually according to a schedule or formula set years in advance. Programs in Georgia and China show the potential for policy to achieve success and specific pitfalls to avoid. With well-designed regulatory incentives and cost declines from advancing technology, quiet, zero-emission EVs can quickly become a common sight in cities worldwide.