Effectiveness of carbon pricing policies for promoting urban freight electrification: analysis of last mile delivery in Madrid

Abstract

This research analyzes the effect of carbon pricing policies in transport electrification. It combines a heuristic algorithm to solve the Green Vehicle Routing Problem with Multiple Technologies and Partial Recharges with an economic Total Cost of Ownership model. The paper compares the performance of battery electric (BEV) and internal combustion vehicles (ICEV) for last mile delivery, using real data of Madrid (Spain). The results show that carbon pricing is scarcely effective when daily mileage is low (precisely when BEVs require incentives), and its effectivity increases as mileage increases (precisely when it is not so necessary to incentivize BEVs). Hence, carbon pricing is not an effective tool for promoting electric vehicles in the short term, and as a result, any political decision to fix CO2 prices must be adopted with a long-term view in mind. Specifically for the case of Spain, this research shows that current aids to BEVs are insufficient, with the exception of some regions like Madrid, which complement national subsidies with regional ones.