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FCEV subsidies mainly shift sales from other ZEVs

A white electric vehicle is plugged into a modern black charging station along a tree-lined urban street, with the charging cable connected to the vehicle's charging port.
Research area:MicroeconomicsEnergy, Environment, and Transportation PoliciesElectric Vehicles and Infrastructure

What the study found

Subsidies for fuel cell electric vehicles (FCEVs) mainly shift demand away from other zero-emission vehicles (ZEVs), especially electric vehicles (EVs), rather than from internal combustion engine vehicles (ICEVs, fossil-fuel cars).

What the authors say this matters
The authors conclude that standalone FCEV subsidies are a limited decarbonization tool in a market that is strongly segmented. They suggest that policies reflecting consumer behavior, along with broader carbon disincentives, may be more effective for transportation decarbonization.

What the researchers tested

The researchers analyzed consumer choice behavior and market competition in South Korea’s passenger car market. They used a nested logit model, a statistical model for comparing related purchase choices, and ran policy simulations to examine subsidy effects and sales targets.

What worked and what didn't

The cross-price elasticity between FCEVs and ICEVs was near zero, meaning FCEV subsidies did not meaningfully reduce fossil-fuel vehicle sales. The subsidies primarily cannibalized sales of other ZEVs, particularly EVs, and simulations suggested that reaching a modest FCEV sales target would require substantial extra subsidies with negligible net growth in total ZEVs relative to the fiscal cost.

What to keep in mind

The summary provided does not describe additional limitations beyond the finding of strong market segmentation. The results are specific to South Korea’s passenger car market and the subsidy program examined.

Key points

  • FCEV subsidies had near-zero cross-price elasticity with ICEVs.
  • The main substitution effect was from other ZEVs, especially EVs.
  • Policy simulations found that a modest FCEV sales target would require substantial extra subsidies.
  • The abstract says the net increase in total ZEVs would be negligible relative to fiscal cost.
  • The results are framed as evidence that standalone FCEV subsidies are a limited decarbonization instrument.

Disclosure

Research title:
FCEV subsidies mainly shift sales from other ZEVs
Authors:
Taejun Mo, Brian H. S. Kim
Institutions:
University of Illinois Urbana-Champaign, Urbana University, Seoul National University
Publication date:
2026-03-07
DOI:
10.1016/j.trd.2026.105294
OpenAlex record:
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AI provenance: This post was generated by OpenAI. The original authors did not write or review this post.

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