Abstract
The transition to electric vehicles (EVs) shifts the complementary market for passenger transport from oil to electricity. We develop and estimate a joint equilibrium model of the German electricity and automobile markets, emphasizing the timing of EV charging, as electricity generation costs and pollution vary intraday. Our results show that under Germany’s current electricity pricing scheme, EVs create a significant pecuniary externality: electricity expenses rise by €0.66 for every €1 spent charging. Exposing charging to wholesale price variation eliminates the pecuniary externality, makes EVs greener, and increases adoption—a triple dividend.
Keywords
Electric vehicles; electricity markets; charging; complementary markets;
JEL codes
- L5: Regulation and Industrial Policy
- L6: Industry Studies: Manufacturing
- L9: Industry Studies: Transportation and Utilities
- Q4: Energy
- Q5: Environmental Economics
Reference
Pascal Heid, Kevin Remmy, and Mathias Reynaert, “Equilibrium Effects in Complementary Markets: Electric Vehicle Adoption and Electricity Pricing”, TSE Working Paper, n. 24-1589, October 2024.
See also
Published in
TSE Working Paper, n. 24-1589, October 2024