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Anchor he-cheng he-cheng
The End of the Express Road for Hybrid Vehicles: Can Governments' Green Product Incentives Backfire?
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| he-cheng |
Synopsis
In response to growing environmental concerns, governments have promoted products that are less harmful to the environment—green products—through various incentives. We empirically study the impact of a commonly used non-monetary incentive, namely the single-occupancy permission to high-occupancy vehicle (HOV) lanes, on green and non-green product demand in the U.S. automobile industry. The HOV incentive could increase unit sales of green vehicles by enhancing their functional value through time-saving. On the other hand, the incentive may prove counterproductive if it reduces the symbolic value (i.e., signaling a pro-environmental image) consumers derive from green vehicles. Assessing the effectiveness of green-product incentives is challenging given the endogenous nature of governments' incentive provisions. To identify the effect of the HOV incentive on unit sales of green and non-green vehicles, we take advantage of incentive changes at the county level, and we employ a multitude of quasi-experimental methods, including difference-in-differences with Coarsened Exact Matching, border strategy, and regression discontinuity in time. Unlike previous studies that only examine the launch of the HOV incentive and find an insignificant association between incentive launch and green vehicle demand, we concentrate on its termination. We find that the termination of the HOV incentive decreases unit sales of vehicles covered by the incentive by 14.4%. We provide suggestive evidence that this significant negative effect of HOV incentive termination is due to the elimination of the functional value the incentive provides: time-saving. Specifically, we find that the negative effect is more pronounced in counties where consumers value time-saving more (i.e., counties with a longer commute to work and higher income). Additionally, in line with prior literature, the launch of the HOV incentive is not found to have a significant effect on green vehicle sales. Combined, our findings reveal that the effect of termination is not simply the opposite of that of launch, implying that governments' green product incentives could backfire.
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