A targeted electric vehicle subsidy for lower income households would offer better protection against rising fuel prices than broad tax cuts, according to researchers writing in the economics journal ESB.
Economists Peter Mulder, Rens van Tilburg, and Reinier Sterkenburg argue that funding social lease arrangements for electric cars would directly help drivers who spend a disproportionate share of their earnings on petrol.
Flaws in fuel duty cuts
The authors point out that existing government relief measures are costly and inefficient. A fuel duty discount introduced in 2022 costs approximately 1.7 billion euros annually and primarily benefits higher income households who drive more and buy more fuel.
In contrast, the proposed electric lease scheme would cost roughly 1.1 billion euros per year. The researchers estimate this budget could cover 160,000 households by providing a subsidy of 7,000 euros per vehicle.
Lowering entry barriers for drivers
While electric vehicles feature lower running and maintenance expenses, high purchase prices keep them out of reach for many lower income families. Lower income drivers spend twice as much of their household budget on fuel as higher earners, leaving them vulnerable to market fluctuations.
By removing the requirement for a large upfront payment, a social lease system would allow lower income drivers to benefit from lower day-to-day transportation costs.
Looking to international examples
The Dutch national government is currently studying similar approaches, taking inspiration from a national scheme launched in France in 2024. The French initiative provided subsidized leases for fully electric vehicles priced under 47,000 euros to workers in lower income brackets.
Under the French model, state support reduced monthly lease payments on compact models to between 100 and 140 euros, generating significant interest and thousands of applications.
