This paper theoretically explores the welfare effects of regulation and fiscal incentive policies aimed at promoting electric vehicles. The following results are obtained. First, when negative externalities per gasoline vehicle are low, the zero emissions vehicle mandate is socially preferable; however, when these externalities are high, fiscal incentive policies significantly improve social welfare. Second, a subsidy dependent on battery capacity improves social welfare to a greater extent than a subsidy dependent on vehicle price because the former can capture more
consumers by inducing manufacturers to lower vehicle prices.
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