Subsidy policy and carbon quota mechanism of the Chinese vehicle industry

The development of BEVs (battery electric vehicles) can significantly mitigate the dependence on fossil fuels and reduce carbon emissions. To advance the development of BEVs, China is adjusting the subsidy and dual-credit policies. This paper addresses these two issues to help policymakers determine effective policies. Through the simulation with a system dynamics model that incorporates the government, automakers, infrastructure operators, and consumers, we find that (1) reducing the overall level of subsidies has a minor impact on the development of BEVs in the long term; (2) subsiding the construction of infrastructure, especially battery swapping stations, will produce better effects than others; (3) the proposed carbon quota mechanism, which is in line with the unified carbon market, is more conducive to the diffusion of BEVs and carbon reduction than the dual-credit policy. Our MLP-SD (multi-level perspective system dynamics) model broadens the analytical perspective of the technology transition in the automobile industry.