Impact of New Energy Vehicle Development on China’s Crude Oil Imports: An Empirical Analysis

Reviewer Comment

Author' Response

Revised Text

More discussion is needed for the result

Thank you for your suggestion.We improved the discussion section according to your comment.

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Reviewer Comment

Author' Response

Revised Text

1.    Abstract: While the author presents the Abstract, answer the questions carefully: What problem did you study and why is it important? What methods did you use? What were your main results? And what conclusions can you draw from your results? Please make your abstract with more specific and quantitative results while it suits broader audiences. Despite some steps have been done following the above suggestion, the revised abstract is still necessary. Besides, pls be careful to use the word "scientifically", "systematically " etc.

2. some quantitative results should be included in the abstract.

Thank you for raising this issue. We refined the structure of the discussion in the abstract section and added quantitative analysis results

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3.Introduction: The current Introduction should be further improved. A good one includes at least four aspects: motivation/background, literature review, aim and contribution, and organization of the remains of the study. Avoiding to put massive bibliographies behind one sentence. Such as XXXXX [1-5], OR 1, 2, 3, 4, 5; all references should be cited with detailed and specific descriptions

Thank you for your suggestion. We refined the introduction sector.

pp.1-3

4.Literature Review has the chance to be further improved: it seems that the authors have made the retrospection. However, via the review, what issues should be addressed? What is the current specific knowledge gap? What implication can be referred? The above questions should be point-by-point answered clearly.

Thank you for your suggestion. We refined the significance of this paper and added the specific knowledge gap from previous studies in the literature review.

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5. As a key part of a paper, Discussion should show the readers at least two elements: "breadth" and "depth". "Breadth" reflects whether the analytical results can be explained via different approaches. "Depth" reflects whether the analytical results completely answer the questions raised in Introduction. My first sense shows the current Discussion is without enough insight. This should explore the significance of the results of the work, not repeat them. A combined Results and Discussion section is OK. However, avoid extensive citations and discussion of published literature.

Thank you for your suggestion.We improved the discussion section according to your comment.

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6.Check the language.

Thank you for your suggestion.We  revised the language of the article.

7.what is the unit of fig. 1.

the unit of fig. 1 is 10K vehicles

p.5

8. robust test is need.

Thank you for your suggestion.The robustness test is to check whether the preconditions in the regression method are satisfied.The data itself passes the heteroskedasticity test. The GMM method used in this paper deals with the endogeneity of the regression process itself, and GMM is more effective than 2SLS under the premise of the existence of serial correlation.Therefore our results are robust.

9.table 7 need to improve

Thank you for this suggestion.The format of table 6 was misleading and it has been improved.

p.11

10.Use literature from the last three years.

We add the following literature written in recent years to make the article more rigorous and complete

Tan, J., Xiao, J., & Zhou, X. (2019). Market equilibrium and welfare effects of a fuel tax in China: The impact of consumers' response through driving patterns. Journal of Environmental Economics and Management. 93:20-43.

Sheldon, T. L., & Dua, R. (2020). Effectiveness of China's plug-in electric vehicle subsidy. Energy Economics. 88. 104773.

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Reviewer Comment

Author' Response

Revised Text

1. On page 3, the authors state – “For the impact of the transportation sector on energy, Wang et al. (2017) conducted a scenario analysis of energy consumption and CO2 reduction in China's transportation sector, using different scenarios to examine the relative impacts of improving vehicle energy efficiency, promoting the use of electric vehicles, and increasing fossil fuel and CO2 taxes, suggesting that the Chinese government should improve vehicle fuel economy standards, promote electric vehicle technology advancement and market expansion of electric vehicles, and increasing tax rates on conventional transportation energy and CO2, which will help reduce energy consumption and achieve peak CO2 emissions from China's transportation sector as soon as possible [17].” The authors are recommended to consider recent literature highlighting the impact of various fuel- and vehicle-price related taxes/subsidies on transport-energy and EV demand, including but not limited to:

https://doi.org/10.1016/j.eneco.2022.106192

https://doi.org/10.1016/j.jeem.2018.10.006

https://doi.org/10.1016/j.eneco.2020.104773

Thank you for your suggestion.We add the following literature to improve the literature review.

Tan, J., Xiao, J., & Zhou, X. (2019). Market equilibrium and welfare effects of a fuel tax in China: The impact of consumers' response through driving patterns. Journal of Environmental Economics and Management. 93:20-43.

p.3, line 126-130

2.I am unsure about the idea of conducting a time-series analysis using monthly data when the likely impacts, especially from EV sales, were only expected to occur in the long-term, given the small proportion of EVs in comparison to the total number of cars on the road. It is not surprising, given the data, that the authors found no relation between the two. Using annual data would have provided only a few data points for the period 2015-2021. Consequently, it may have been preferable to use panel data (region and time) and conduct a dynamic panel assessment. In addition, it would have been advantageous to use the EV share of the total car stock rather than the EV sales share. It is suggested that the authors consider conducting a dynamic panel study. Given the possibility that the authors may not have access to a panel data, the authors are suggested to at the very least caveat their findings by explaining how they could have conducted a dynamic panel data analysis with panel data

3.The authors are suggested to add a caveats section.

Thank you for your suggestion.We improved the discussion section according to your comment.

 p.12, line 379-409

4.On page 3, the authors state – “Yin et al. (2010) argue that the rapid growth of automobile sales and ownership will greatly stimulate China's oil consumption demand, while excessive foreign dependence will make China's oil security situation more severe, and propose to improve the energy efficiency of traditional automobiles and vigorously develop new energy vehicles[18].” It is recommended that the authors caveat such a hypothesis by highlighting the potential for increased implementation of supply-side policies, such as the license quote/vehicle ownership restriction policy, which effectively limit the vehicle ownership rate by considering the relevant literature, including but not limited to:

https://doi.org/10.1016/j.trd.2022.103456

https://doi.org/10.1016/j.jeem.2018.10.006

We add the following literature to make the article more rigorous and complete

Sheldon, T. L., & Dua, R. (2020). Effectiveness of China's plug-in electric vehicle subsidy. Energy Economics. 88. 104773.

p.12, line 375-380

Reviewer Comment of last round

Author' Response

Revised Text

1. On page 3, the authors state – “For the impact of the transportation sector on energy, Wang et al. (2017) conducted a scenario analysis of energy consumption and CO2 reduction in China's transportation sector, using different scenarios to examine the relative impacts of improving vehicle energy efficiency, promoting the use of electric vehicles, and increasing fossil fuel and CO2 taxes, suggesting that the Chinese government should improve vehicle fuel economy standards, promote electric vehicle technology advancement and market expansion of electric vehicles, and increasing tax rates on conventional transportation energy and CO2, which will help reduce energy consumption and achieve peak CO2 emissions from China's transportation sector as soon as possible [17].” The authors are recommended to consider recent literature highlighting the impact of various fuel- and vehicle-price related taxes/subsidies on transport-energy and EV demand, including but not limited to:

https://doi.org/10.1016/j.eneco.2022.106192

https://doi.org/10.1016/j.jeem.2018.10.006

https://doi.org/10.1016/j.eneco.2020.104773

Thank you for your suggestion. Based on the recommended papers, we add the discussion on the impact of fuel policy and relevant subsidies on transport-energy and EV demand. The revised part is as follows and in blue font in manuscript.

“Tan et al. (2019) demonstrated that compared to auctioned quotas, the fuel tax results in greater car sales and higher social welfare. However, due to the continued increase in oil prices in the international market, a further increase in the fuel tax would reduce the demand for private automobiles, which would have a negative impact on economic growth [17].”

“Sheldon and Dua (2020) used the choice model to predict PEV market share under various subsidy scenarios, and the results showed PEVs have improved China's new vehicle fleet fuel economy by roughly 2%, reducing total gasoline consumption by roughly 6.66 billion liters. However, the current PEV subsidy is expensive due to the influence of non-additional PEV purchasers, especially high-income consumers [20].”

“Bansal and Dua (2022) estimated the responsiveness of new car buyers in China and India to various fuel economy policies including income, as well as the potential for a rebound effect and the effectiveness of a feebate policy. Conditional on the purchase of a new car, fuel consumption in both markets was found to be relatively unresponsive to fuel price and income, which may mean that more effective policies may be needed to mitigate the environmental and energy impacts of the auto industry [22].”

17.Tan, J., Xiao, J., & Zhou, X. (2019). Market equilibrium and welfare effects of a fuel tax in China: The impact of consumers' response through driving patterns. Journal of Environmental Economics and Management. 93:20-43.

20.Sheldon, T. L., & Dua, R. (2020). Effectiveness of China's plug-in electric vehicle subsidy. Energy Economics. 88. 104773.

22.Bansal, P., & Dua, R. (2022). Fuel consumption elasticities, rebound effect and feebate effectiveness in the Indian and Chinese new car markets. arXiv preprint arXiv:2201.08995.

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2.I am unsure about the idea of conducting a time-series analysis using monthly data when the likely impacts, especially from EV sales, were only expected to occur in the long-term, given the small proportion of EVs in comparison to the total number of cars on the road. It is not surprising, given the data, that the authors found no relation between the two. Using annual data would have provided only a few data points for the period 2015-2021. Consequently, it may have been preferable to use panel data (region and time) and conduct a dynamic panel assessment. In addition, it would have been advantageous to use the EV share of the total car stock rather than the EV sales share. It is suggested that the authors consider conducting a dynamic panel study. Given the possibility that the authors may not have access to a panel data, the authors are suggested to at the very least caveat their findings by explaining how they could have conducted a dynamic panel data analysis with panel data

Thank you very much for your insightful suggestions. We have carefully considered your suggestions and made the following amendments to the article. The revised part is in blue font in manuscript.

(1) For the data frequency, using annual data would have provided only a few data points for the period 2015-2021 just as you said, so we use monthly data to increase the set of observations. There were also articles that use monthly sales data for academic research, for example, the empirical analysis of the below literature (Guo et al., 2020) was based on a panel data comprises of the monthly sales volumes of EVs and the monthly average PM concentration levels from 20 major cities in China.

https://doi.org/10.1016/j.jclepro.2019.119372

(2) We were not able to obtain available monthly data either at province-level in China or other regions/countries, therefore, we only conducted a time-series analysis of China as one unit for the short-time observation. This made the analysis weak in control for heterogeneity and endogeneity. We admit that if we could have relevant panel data, a dynamic panel study would solve those problems better and get more reliable findings. And we provide the following explanation in the limitations.

“In the absence of monthly data at province-level in China or other regions/countries, we did a time-series analysis of China as one unit and drew conclusion based on the short-time observation. Nonetheless, heterogeneity and endogeneity are not well controlled for in this research. Future research should employ a dynamic panel study with adequate panel data to handle these issues and get more accurate findings.”

(3) For the selection of indicators, we combine the analysis of time series and empirical results with China-specific information, in order to explore the impact of the development of new energy vehicles in China on China's crude oil imports. Because car ownership data are only available on an annual basis, which is too infrequent, and there is a strong consistency in the trends of the sales and ownership indicators, we used sales data instead of car ownership data.

(4) We have added the caveats section explaining the above-mentioned (1) - (3) into the conclusion sector and thank you again for your suggestion. The revised section in the article is highlighted in blue.

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3.The authors are suggested to add a caveats section.

Thank you for your suggestion. We have added caveats section to the conclusion sector, including the caveats section mentioned in comment 2, and the possible role of increased supply-side policies that you mentioned in comment 4. The revised part is as follows and in blue font in manuscript.

“Regarding the caveats and limitations of this study, it is difficult to obtain monthly data on new energy vehicle sales by province in China, which is an important explanatory variable for this study, so we conducted a time-series analysis rather than panel- data analysis. In the absence of monthly data at province-level in China or other regions/countries, we did a time-series analysis of China as one unit and drew conclusion based on the short-time observation. Nonetheless, heterogeneity and endogeneity are not well controlled for in this research. Future research should employ a dynamic panel study with adequate panel data to handle these issues and get more accurate findings. In addition, we do not have access to the monthly ownership data of new energy vehicles, so we use the monthly sales of new energy vehicles as a proxy. As a result, the measurement of the reduction effect of new energy vehicle development on crude oil consumption may not be accurate. Meanwhile, we need to focus on the impact of sup-ply-side policies, such as ownership restrictions and fuel tax, and so on. Vehicle ownership restrictions have had a large impact. If these restrictions had not been implemented, the number of new cars sold would have been higher in the restricted cities and the whole China. Ownership restrictions had reduced the fuel consumption and tailpipe GHG emissions of new cars. Given the externalities associated with automobiles, some policies may be implemented to restrict vehicle ownership [25]. Considering the social welfare, the choice of fuel tax or auction quota or other policy instruments is very important. The fuel tax will not only control the number of vehicles but also reduce vehicle usage and the externalities related to vehicle use [17].”

25.   Liu, A., Dua, R., Hu, W. M., & Ku, A. L. (2022). Choosing to diet: The impact and cost-effectiveness of China’s vehicle ownership restrictions. Transportation Research Part D: Transport and Environment, 111, 103456.

17.Tan, J., Xiao, J., & Zhou, X. (2019). Market equilibrium and welfare effects of a fuel tax in China: The impact of consumers' response through driving patterns. Journal of Environmental Economics and Management. 93:20-43.

In addition, the content of the discussion section has been improved, and some of the content about the caveats section has been put into the conclusion sector. The modified sections in the article have been highlighted in blue.

“From a technology and performance perspective, it is still in the period of new energy vehicle technology change. Plug-in hybrid vehicles, which account for nearly 20% of new energy vehicle sales, continue to consume a portion of gasoline, while hydrogen fuel vehicles are still in the stage of technological breakthroughs. The current electric car does not fully cover all the good basic characteristics of fuel cars, new energy vehicle battery life and charging experience have more room for improvement. And the research and development of hydrogen fuel cell vehicles, the development of intelligent vehicles and the layout of charging piles all rely on the supply-side policy to some extent. For example, whether new energy vehicles can replace fuel cars faster may depend on supply-side policies such as fuel tax and auction quota.”

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4.On page 3, the authors state – “Yin et al. (2010) argue that the rapid growth of automobile sales and ownership will greatly stimulate China's oil consumption demand, while excessive foreign dependence will make China's oil security situation more severe, and propose to improve the energy efficiency of traditional automobiles and vigorously develop new energy vehicles[18].” It is recommended that the authors caveat such a hypothesis by highlighting the potential for increased implementation of supply-side policies, such as the license quote/vehicle ownership restriction policy, which effectively limit the vehicle ownership rate by considering the relevant literature, including but not limited to:

https://doi.org/10.1016/j.trd.2022.103456

https://doi.org/10.1016/j.jeem.2018.10.006

Thank you for your suggestion. We referred to the ideas from the following literature about the impact of supply-side policies and added them in the caveats section of the conclusion. The revised section is as follows and highlighted in blue in manuscript.

“Meanwhile, we need to focus on the impact of supply-side policies, such as ownership restrictions and fuel tax, and so on. Vehicle ownership restrictions have had a large impact. If these restrictions had not been implemented, the number of new cars sold would have been higher in the restricted cities and the whole China. Ownership re-strictions had reduced the fuel consumption and tailpipe GHG emissions of new cars. Given the externalities associated with automobiles, some policies may be implemented to restrict vehicle ownership [25]. Considering the social welfare, the choice of fuel tax or auction quota or other policy instruments is very important. The fuel tax will not only control the number of vehicles but also reduce vehicle usage and the externalities related to vehicle use [17].”

25.Liu, A., Dua, R., Hu, W. M., & Ku, A. L. (2022). Choosing to diet: The impact and cost-effectiveness of China’s vehicle ownership restrictions. Transportation Research Part D: Transport and Environment, 111, 103456.

17.Tan, J., Xiao, J., & Zhou, X. (2019). Market equilibrium and welfare effects of a fuel tax in China: The impact of consumers' response through driving patterns. Journal of Environmental Economics and Management. 93:20-43.

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