March 26, 2021 | By Clare Becker | Back to blog

Q: Sustainability and green products are at the forefront of innovation right now. So why does it seem like governments haven’t kept up when it comes to more effective green technology policy?

A: So far, green products represent only a small fraction of global demand, even though many consumers express concern for the environment. Take electric vehicles, for example: They accounted for a mere 1.8% of the market share in 2020. Governmental incentives—especially monetary incentives like rebates and tax credits—often do increase the adoption of green products, but the increase can be affected by a variety of factors.

Some of those contributing factors may be:

WSB’s Cheng He

Not all consumers are in favor of the incentives. Depending on the consumer, some may actually abandon green products because of the incentives. Nowadays, some consumers treat purchasing green product as a way to signal their environmentalism. Governmental incentives could be interpreted as a decrease in the “greenness” of green products, and by extension, one’s integrity. Is concern for the environment the real driver? Or is it all about the money-saving incentives?

Consumers may get reliant on the incentives to purchase green products. The end of the incentives may mean the end of the line for consumers: When governments take these incentives back, consumers will exit the green market entirely.

Give green to get green. Another problem with government incentives, especially at the state level, is that they have very limited promotion. For example, Georgia-based consumers have no idea that purchasing an electric vehicle means they can use the carpool lane free of restrictions. Unfortunately, only those consumers who are already green-minded are aware of these incentives. The result? These green policies mostly attract green consumers, which makes these well-intended sustainable incentives ineffective.

Cheng He is an assistant professor in the Department of Marketing at the Wisconsin School of Business

Read the paper “The End of the Express Road for Hybrid Vehicles: Can Governments’ Green Product Incentives Backfire?” published in Marketing Science.

 


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