How can personal carbon trading be applied in electric vehicle subsidies? A Stackelberg game method in private vehicles

The withdrawal of purchase subsidy policy in China has already negatively affected the market proliferation of electric vehicles (EVs), and after the end of the withdrawal, personal carbon trading (PCT) is expected to become a subsidy policy system to stimulate EV market development from the consumption-side. Academics have verified the effectiveness of PCT subsidy for EV market development, but key issues including implementation details and recommendations are still in the research gap stage. This study establishes a three-level Stackelberg game model of government-supplier–consumer for a single product supply system of vehicles when using PCT to subsidize EVs, and the Nash equilibrium solution of the three-level game is the decision behavior under the optimal utility of three players. Then numerical experiments are conducted with actual data in Beijing to discuss the key issues in the implementation of PCT subsidy mechanism, including the setting of carbon prices and allocation of initial carbon credits, and verify the correctness of the game model. The main conclusions are as follows: 1) PCT has higher subsidy efficiency than purchase subsidy and saves more total government expenditure in the auto market, and the CO2 emission reduction effect of PCT is also better than purchase subsidy, and for 100 thousand newly increased vehicles, the former can achieve 300–400 t more CO2 emission reduction than the latter. 2) When the allocation of initial carbon credits adopts the Market Clearing Model, the supply and demand balance should be calculated separately for private vehicles, taxis and buses, and a differentiated carbon price should be adopted to ensure the fairness of the trading market. 3) The two initial carbon credit allocation models, Market Clearing and Financial Underwriting, can meet different development needs and achieve similar market diffusion effects for EVs. Under both models, the initial carbon credits allocated to EV owners will keep decreasing, and the appropriate increase in carbon price can still ensure high market demand for EVs. 4) The more the government pays attention to environmental pollution, the higher the market demand for EVs will be, and the government decision should keep raising the importance of environmental pollution effect to accelerate the diffusion of EVs. The research results can promote the application of PCT subsidy mechanism and further become a subsidy policy system on the consumption-side of the auto market, helping the transport industry to take the lead in achieving the goal of “carbon peak” and “carbon neutrality”.