HOV STICKERS AND THE CONSUMER ADOPTION OF HYBRIDS: EVIDENCE FROM
CALIFORNIA
Kenneth Gillingham, Yale University, 203-436-5465, kenneth.gillingham@yale.edu
Calanit Kamala, University of California Berkeley, 510-388-4428, calanit@berkeley.edu
Overview
There are a variety of policies that have been implemented with the goal of reducing petroleum demand in order to
improve energy security and reduce greenhouse gas emissions. One of the more subtle policies aims to incentivize
advanced technology vehicles by providing drivers of these vehicles access to high-occupancy-vehicle (HOV) lanes,
regardless of number of occupants in the vehicle. Such a policy for hybrid vehicles was in place in California from
2005 to 2007, and a similar policy remains in effect for electric vehicles and plug-in hybrid electric vehicles. These
programs are often called “HOV Sticker” programs, for drivers of the advanced technology vehicle receive a sticker
to allow them to drive in HOV lanes. For commuters often driving on congested roads, one might expect this policy
to provide an important inducement for the purchase of an advanced technology vehicle. The induced demand for
such vehicles from the policy and resultant reduced petroleum demand are the intended benefits of the policy, yet it
is not clear whether these benefits really exist. Moreover, there is some evidence that the addition of hybrids on to
HOV lanes slows travel in the HOV lanes without much of an improvement in the travel speeds on the regular lanes
(Bento et al. 2011).
Even though hybrid vehicle “HOV Sticker” programs have been around for the past decade, the limited evidence on
whether the HOV lane access increases sales of hybrid vehicles remains inconclusive. Gallagher and Muehlegger
(2011) and Diamond (2009) use aggregate state-level data and find very little evidence that an HOV access lane
program influences sales of several hybrid vehicles. Diamond (2008) uses county-level data from Virginia and runs
a simple cross-sectional regression to find that counties in Virginia with HOV lanes tend to have greater hybrid
shares after controlling for green voting, commute times, and income. These results are suggestive that there may be
a local effect, yet these results are not detailed enough to calculate the benefits of an HOV sticker program.
Methods
We bring together a detailed zip code-level panel dataset of new vehicle purchases in California 2001-2009 to more
carefully examine the effect of the HOV sticker program. Our dataset includes new vehicle purchases by makemodel-trim, as well as the date of the vehicle purchase, where the vehicle was registered, the transaction price of the
vehicle, and whether or not the owner of the vehicle applied for and received an HOV sticker. In addition to these
data, we leverage knowledge of the exact dates of the program announcement and changes to the program, along
with data on the location of the HOV lanes. Our empirical strategy exploits both geographic and time series
variation relating to the program. Our dataset also allows for an exploration of whether the HOV access program
affected the price of hybrid vehicles as well as the sales of hybrids.
Results
The empirical results indicate that the HOV access program did have an impact on the California market for hybrids,
but that the most noticeable impact in the early years of the program was an increase in the price of the most popular
hybrid, the Toyota Prius. This corresponds with industry reports of capacity constraints and long waiting lists for the
Prius. In contrast, other hybrid vehicles showed more of a boost in sales than the Prius in the early years of the
program – and much of the boost occurred after the program was announced and before it was actually implement (at
the outset stickers were available to those who are previously purchased a hybrid). Similarly, later in the period of
the program, the evidence points to a minor effect of the HOV access program, as hybrids began to gain wider
acceptance on their own merits.
Conclusions
These results point to the importance of carefully modeling both the price and quantity impacts of a policy in
question. In addition, they are suggestive of the differential welfare effects on consumers and producers from the
policy. These results are critical for understanding HOV access policies to induce the diffusion of advanced vehicle
technologies – an important topic in the policy realm, given California’s current HOV access program to promote
electric vehicles and plug-in hybrid electric vehicles.
References
Bento, A., D. Kaffine, K. Roth, and M. Zaragoza. 2011. The Unintended Consequences of Regulation in the
Presence of Competing Externalities: Evidence from the Transportation Sector, Cornell University Working Paper.
Diamond, D. 2008. Impact of HOV Lane Incentives for Hybrids in Virginia. Journal of Public Transportation 11(3958).
Diamond, D. 2009. The Impact of Government Incentives for Hybrid-Electric Vehicles: Evidence from US States.
Energy Policy 37(972-983).
Gallagher, K., and E. Muehlegger. 2011. Giving Green to Get Green: Incentives and Consumer Adoption of Hybrid
Vehicle Technology. Journal of Environmental Economics and Management 61(1-15).