The Trade-Off Between Decarbonization and Reshoring Evidence from the French EV Environmental Score Reform

Abstract

Governments increasingly tie clean-technology subsidies to social and industrial aims, hoping to accelerate decarbonization while nurturing domestic production. In 2024, a French reform embedded a life-cycle environmental score in its electric-vehicle (EV) purchase bonus (based on estimated emissions during the production process). Linking exhaustive French registration records to assembly plants and battery origins, we exploit the sharp induced eligibility shock in a difference-in-differences design. Treated EV models experience 60% decline in sales relative to EVs remaining eligible. We combine these estimates with survey-based stated preferences in or- der to estimate a nested-logit demand system. Model-based counterfactuals suggest that the reform reduced total EV penetration by 0.9 pp, implying slower fleet decarbonization. The reform cut both public spending and consumer surplus and raised tank-to-wheel emissions enough to offset manufacturing-stage CO2 gains. A budget-neutral variant that recycles the fiscal savings into larger bonuses for eligible models would restore the lost electrification, and would cost about 4500 euros of consumer surplus per reshored battery while turning the net environmental gains positive.