Carnegie Mellon University
October 29, 2013

Press Release: Carnegie Mellon University's Alan Jenn, Ines Azevedo and Pedro Ferreira Report Government Incentives Boost Consumer Interest in Fuel Efficient Vehicles

Research Recognizes Importance of Alternative Fuel Vehicles

Contact: Chriss Swaney / 412-268-5776 /

PITTSBURGH-Ready, set, go. The stampede for fuel efficient cars continues as Carnegie Mellon University researchers report that government incentives have increased sales of hybrid electric vehicles by as much as 20 percent.

"Despite the fact that they are still a very small share of the vehicle fleet, over the last decade we have seen rise in popularity of fuel efficient vehicles and alternative fuel vehicles, which has been spurred by a number of different factors. One of these factors are government offered incentives such as tax credits or rebates when someone buys a vehicle," said Ines Azevedo, an assistant professor in the Department of Engineering and Public Policy (EPP) and co-director of the Climate and Energy Decision Making Center.

In a recent article in Energy Economics, Alan Jenn, a Ph.D. candidate in EPP, Ines Azevedo, and Pedro Ferreira, an assistant professor in the Heinz College, show how incentive programs may have affected the adoption of hybrid vehicles while taking into account the natural growth in the adoption of hybrids.

CMU research shows that the Energy Policy Act of 2005 increased the sales of hybrids from 3 percent to 20 percent, depending on the vehicle model considered.

"We also discovered that the incentive is only effective when the amount provided is sufficiently large, but also that the contribution of incentives on inducing adoption is much lower than that was previously thought," Azevedo said.

Ferreira added that "previous studies found effects above 30 percent but they neglected the role of network externalities in the adoption of hybrids, which we controlled for in our approach. The Energy Policy Act of 2005 seems to have accelerated the adoption of hybrids even after this adjustment."

CMU research is making headway as some car companies knocked $5,000 or 13 percent of the sticker price off some electric vehicles this summer. Other companies have dropped the price of their electric cars by offering a three-year lease of $199 per month.

"Despite all the incentive fluctuations, we still find that the hybrid electric vehicles provide consumers with greater fuel efficiency and less pollution in comparison to traditional hydro-carbon powered vehicles," Jenn said.

Research funding for this project was provided by CMU's Climate and Energy Decision Making Center.