Balancing Fiscal Pressures and Environmental Goals: Do Electric Vehicle Fees Reduce Adoption?

• In Event: Tax Policy Design: Exemptions, Subsidies, and Revenue Effects

Abstract

As electric vehicle (EV) adoption grows, states face declining gasoline tax revenues and are increasingly adopting EV-specific registration fees to fund transportation infrastructure. While these policies address revenue shortfalls, they may also discourage EV adoption and slow progress toward decarbonization. This paper examines how EV fees affect EV uptake and whether policy design influences these effects.The central research question is whether the introduction of EV fees reduces EV adoption, and whether impacts differ across vehicle types and fee structures. Specifically, this paper asks three questions: (1) Do EV fees reduce overall EV adoption? (2) Do these effects differ across hybrid, plug-in hybrid, and battery electric vehicles? and (3) Do flat and mileage-based fee structures lead to different adoption responses? These questions are motivated by differences in how EV technologies are used and who adopts them. Hybrids continue to use gasoline and may face both fuel taxes and EV fees, effectively increasing their total tax burden relative to gasoline vehicles, while battery electric vehicles rely entirely on electricity and typically offer larger fuel cost savings. In addition, evidence shows that higher-income households are more likely to adopt battery electric vehicles, while lower-income households are more likely to adopt hybrid vehicles (Dai et. al, 2023). As a result, the same fee, combined with the additional burden of gasoline taxes for hybrid owners, may lead to larger reductions in adoption for hybrid vehicles than for battery electric vehicles. Finally, flat fees require the same payment regardless of how much a vehicle is driven, which may force a decision about whether to purchase an EV at all. In contrast, mileage-based fees allow drivers to reduce their total cost by driving less, potentially dampening their effect on adoption decisions.To address these questions, the analysis uses monthly state-level data on EV sales from the Autos Innovate EV Dashboard from 2011 to 2019, combined with a dataset of state EV fee policies. The data allow for disaggregation by vehicle type and capture variation in the timing and design of EV fees. The empirical strategy exploits staggered adoption of EV fees across states using a difference-in-differences framework. To examine policy design effects, the analysis supplements this approach with a synthetic control method for states implementing mileage-based fees.This research provides new evidence on how EV fee policies influence adoption and how these effects vary across technologies and policy designs. By distinguishing between hybrid and battery electric vehicles, the analysis highlights how uniform fee policies can generate uneven impacts across households and vehicle types. If flat fees impose larger reductions in adoption, especially for hybrid vehicles that face both gasoline taxes and EV fees, this would suggest that current policy designs may disproportionately discourage adoption among more price-sensitive households. By contrast, mileage-based fees may allow states to generate revenue while preserving incentives for EV adoption. These findings inform policy debates on designing transportation funding mechanisms that balance revenue needs with environmental and equity objectives.

Authors

• Oluwaseun Odibo, Georgia State University
  Presenting Author

• Meera Omar, Georgia State University
  Non-Presenting Co-Author