Essay on Was the Subsidy on Electric Vehicles in 2016 Effective in Reducing Consumption of Gasoline Cars?

Introduction

Was the subsidy on electric vehicles In the UK effective in reducing consumption in gasoline cars? This is because new electric cars are eligible for a plug-in car grant(PiCG).This is a program in which the government provides cash payments for up to 2500 pounds for the purchase of an electric vehicle as seen from (Autoexpress, 2021) with an aim of stimulating demand for the same and reducing the demand for the gasoline powered vehicles. This research paper will explore the background of the thesis statement as to why the United Kingdom needs to provide subsidies for electric vehicles while tying the contributions of the gasoline vehicles to the overall environment degradation which will be exhaustively covered within the theoretical back ground of the research paper. Other attempts to reduce the climate change other than through the use of subsidies on electric vehicles will also be explored within the research paper such as the Paris Accord. The Research methodology will explain how the evidence was gathered and collated with the literature review showing past academic research into the use of the subsidy policies in other areas other than Britain and the successes there in.

Background of the Problem

The consumption of gasoline cars has caused a significant deterioration in the environment as the governments of the world continually engage in reducing climate change through the reduction of greenhouse gases. Gasoline cars which are most common on our roads act as pollutants to the environment due to the fact that these cars often produce greenhouse gases such as CO2 which is emitted from their exhausts that is known to cause the greenhouse effect as seen from (Australian government Initiative, 2021).

The world governments have recently come together with initiatives such as the Paris accord where the member countries such as the United States, France, the United Kingdom, and other European Union member states agreed to reduce carbon emissions to slow down the rate of carbon emissions into the world to limit the global warming to below 2 degrees Celsius to about 1.5 degrees Celsius as seen from (United Nations, 2021) in which 196 countries pledged to support this initiative. The agreement is based on a 5 year cycle in which climate action will be given priority by the majority of the countries in the world. These countries were on their collective plan to reduce greenhouse emissions on global scale. They also had plans to deploy long term strategies in which countries will further engage in what they term as nationally determined contributions. Countries will now individually report on their climate actions, with countries such as Britain agreeing to migrate fully to electric vehicles by 2030, as seen from the British Broadcasting Corporation (B BC, 2020). There shall be a ban on all new cars that are fully powered by diesel gasoline by 2030.

By the government of the United Kingdom subsidizing the cost of electric vehicles that are fully powered by electricity or hybrids that used a mix of electricity and gasoline, this has pushed up the demand for the electric vehicles as has been witnessed in other countries such as Norway, Germany and France where subsidies on electric vehicles were already underway. The success was so prominent that the initial subsidies which the government of the United Kingdom had set were reduced significantly from the maximum grant of about £3000 to £2500. This accounts for the significant demand that has been caused by the uptake of these vehicles based on the subsidies that the United Kingdom government has provided. The strategy is seen to work well in other parts of Europe as many countries have started rolling out support schemes as seen from (David et al, 2010) .

Research Methodology

The research proposal will employ desktop research in which existing secondary sources with information concerning the general correlation between the injection of subsidies by the United Kingdom government towards the financing of purchases of new electric vehicles and the uptake of the electric vehicles will be studied. Should the correlation be positive, this will prove the hypothesis regarding the subsidies aiding in the purchase of electric cars by the citizenry of the United Kingdom. The study will also extend to the more significant European Union market in which the United Kingdom was a member in 2016 as the Brexit took place in 2020. This is because climate action before Brexit was a collective action of all the member states, with the United Kingdom included. They all benchmarked their initiatives with standard guidelines as set in the Paris accord. Countries like France, Britain, and the Netherlands have since taken the electrification of transport and mobility seriously.

Literature Review

With the UK being at the forefront, some governments within the European Union have resorted to providing government subsidies to increase the consumer adoption of electric vehicles by the average United Kingdom motorist. This is through the injection of subsidies into the program. The government actively sets aside a budget to benefit individual motorists on the condition that they purchase an electric vehicle. The government of the United Kingdom hopes this will fully replace gasoline-powered cars by the year 2030 (A C E A, 2020). Subsidies are defined as a benefit that is advanced to an entity to reduce the burden. The overall interest is in public to promote the social good of an economic policy, as seen from (Scott 2021). Britain ceased to be a member of the European Union on 1^st February 2020. It continued with its ambitious plans of having an all-electric vehicle fleet on its roads through individual efforts as a country. This is after exiting Brexit as it would no longer be engaged in the collective reduction of greenhouse gases emissions as a member of the European Union because it was no longer part of this greater union. However, the preliminary literature review does show that the United Kingdom and majority of the other European member states except one which is Lithuania as seen from (A C E A, 2020) have all had some form of subsidies to remove barriers to owning an electric vehicle by their average citizen given that the average per capita income of a citizen in a European country was about $33927 as seen from (The World Bank, 2020)with the per capita gross domestic product of the average citizen in the United Kingdom being $42320 as seen from (World Bank, 2020).Given these kinds of income and with subsidies ranging at around $2500 for the category one cars this shows that the buyers of these vehicles would have a higher propensity to spend their incomes on electric vehicles that are subsidized therefore cost-effective as compared to gasoline-powered vehicles that are expected to cost more given the incomes of these groups.

In 2016 however, the United Kingdom was still part of the European Union in which more than 75 % of the countries engaged in some form of incentive within the European Union, which enabled the reduction in the price of electric vehicles to the end-user consumer to remove the pricing barriers that existed before the implementation of the subsidies and tax cuts as seen from the European Commission in (European Commission, 2020) where he overall electrification of transportation and mobility sector will result in faster economic recovery for the region as well as a reduction in greenhouse gas emissions in line with the Paris Accord.

Research shows that the success of the subsidies has been immense in promoting the uptake of electric vehicles because this strategy has been deployed worldwide and not just in the United Kingdom. In China, the subsidy policies have resulted in a 40-70% uptake of electric vehicles, as seen from (Frontiers in Energy Research, 2021) . The Chinese market is one of the biggest gasoline car markets in the whole world, which means that it has replicated the success that has been achieved by its counterparts in the United Kingdom through the use of subsidy policies to promote the uptake of electric vehicles. This is also informed by the fact that China began its subsidy policies on electric vehicles in the year 2017 soon after the United Kingdom saw the rise in uptake of electric cars after the introduction of its subsidy programs, which were first capped at 3000 pounds and subsequently reduced to about 2500 pounds per electric vehicle. The drop in the subsidies provided by the government of the United Kingdom could be attributed to the ever-increasing demand for electric cars and to make the subsidies at par with the incentives offered by the other European Union member states.

Conclusion

As seen from the research, many countries the world over, such as China and Japan with other countries within the European Union, have significantly adopted the implementation of subsidies. This is to stimulate the uptake of electric vehicles by their citizenry to reduce greenhouse gas emissions within these countries in line with the Paris climate agreement. The subsidy policy has successfully reduced the demand for gasoline-powered cars because many countries have replicated these policies, not just in the European Union but the East as well, which shows the popularity of subsidies due to its success in reducing the demand for electric vehicles. The Increased uptake has also stimulated the popularity of electric cars, with electric vehicle companies now struggling to meet the surge in demand.

Works Cited

A-C E A. (2020). Overview – Electric vehicles: tax benefits & purchase incentives in the European Union. Overview – Electric vehicles: tax benefits & purchase incentives in the European Union.

Australian government Initiative. (2021). Vehicle emissions. Vehicle emissions.

B B C. (2020). Ban on new petrol and diesel cars in UK from 2030 under PM’s green plan. Ban on new petrol and diesel cars in UK from 2030 under PM’s green plan.

David et al. (2010). Evaluation of European electric vehicle support. Evaluation of European electric vehicle support.

European Commission. (2020). Mobility and Transport. Mobility and Transport.

Frontiers in Energy Research. (2021). The Effects of Subsidy Policy on Electric Vehicles and the Supporting Regulatory Policies: Evidence From Micro Data of Chinese Mobile Manufacturers. The Effects of Subsidy Policy on Electric Vehicles and the Supporting Regulatory Policies: Evidence From Micro Data of Chinese Mobile Manufacturers.

Scott. (2021). Subsidy. Subsidy.

The World Bank. (2020). GDP Per Capita. GDP Per Capita.

United Nations. (2021). What is the Paris Agreement? What is the Paris Agreement?

World Bank. (2020). GDP Per Capita. GDP Per Capita.