Understanding EV Adoption: The Role of Information Frictions and Heterogeneous Beliefs

Abstract: In 2023, the transportation sector accounted for 22% of Germany’s CO2 emissions, with only a 3% reduction in emissions since to 2010. To address this, the German government has introduced several policies to promote the decarbonization of the transportation sector. However, public uptake of Electric Vehicle (EVs) has lagged. This paper aims to explore the key drivers behind EV adoption. Through a comprehensive pre-registered survey and experiment involving 5,500 participants this study identifies significant public policy information frictions and heterogeneous beliefs about the sustainability of EVs, which appears to be dampening demand. Using two information treatments: one focused on presenting scientific evidence of the environmental benefits of EVs, and the other on public policies aimed at reducing vehicle emissions. This study finds that both increased public policy and environmental awareness increased participants' likelihood of purchasing an EV as their next vehicle, but only the environmental treatment increased their willingness to pay more for an EV. These findings suggest that while public policies play a critical role in shaping consumer behavior, accurate information on the environmental rationale behind these policies is essential to overcoming disinformation and encouraging EV adoption. Reducing these information frictions could significantly amplify the effectiveness of current policies, helping to achieve Germany’s ambitious climate targets.