**3. Scenario Design**

The ZEVs purchase subsidy is provided for cars (LDV4W) and buses for both BEVs and FCEVs. Subsidy for motorcycles (LDV2W) and freight trucks (less than 1 tonne) is available only for BEVs. Subsidy is provided not only by the national government but also by the local government. Subsidy from the national government is the same everywhere, but subsidy from the local government is different. For example, local government subsidy for LDV4W's BEVs range from \$4100 in Seoul to \$10,000 in Ulleung-gun, Gyeongbuk. The national government subsidy for LDV4W is between \$5600 and \$7500, depending on the vehicle model. On the other hand, local government subsidies for LDV4W's FCEVs are available only in eight provinces, ranging from \$9100 in Incheon to \$18,000 in Goseong-gun, Gangwon. The government subsidy for one of the FCEVs, NEXO, manufactured by Hyundai, is \$20,500. Note that subsidy for LDV2W, buses, and trucks is equally supported by all local governments. Although the national government offers tax incentives for ZEV buyers, this study considers only the ZEV purchase subsidy.

To apply subsidy to GCAM-Korea, vehicle models are first classified into vehicle types. Then, the average subsidy of each vehicle type is calculated for each province. The calculated subsidy for BEVs and FCEVs is given in Appendices B and C respectively.

Second, future subsidy scenarios are developed (Table 3). According to CPFDM, subsidy for passenger cars will gradually be phased out, although the exact information on expiration has not been announced. A 'Sunset' scenario, therefore, is assumed in which subsidy for only LDV4W's BEVs will be phased out by 2040. In this scenario, the subsidy declines linearly to zero by 2040. A 'NoSunset' scenario is assumed for comparison. In both the scenarios, ZEVs subsidy is available from 2020. For the baseline analysis without any subsidy, a 'REF' or a reference case for the projected emissions of the baseline is prepared.


In GCAM-Korea, new technologies such as hydrogen buses, electric buses, and electric freight trucks (less than 1 tonne), have not been modeled yet. Hence, these new technologies are added to the nesting structure of the transportation sector in GCAM-Korea for an analysis (Figure 3). As future technology cost estimations largely depend on the scope of research, a relative cost approach is adopted. Purchase costs are obtained from various sources, and maintenance costs are calculated by applying the ratio of maintenance costs to the present value of purchase costs from previous studies (see Appendix D). Infrastructure costs such as charging stations and hydrogen production facilities are not considered. Future cost trends of electric buses and trucks are assumed based on the decreasing rate of cost of electric passenger cars in GCAM version 5.1.3. Likewise, the trend of hydrogen buses is assumed based on the trend of hydrogen passenger cars in GCAM.

**Figure 3.** New nesting structure for the transportation sector in GCAM-Korea. Note: Red line indicates a newly added technology and blurry figures denote non-road transportation sectors.

Finally, the subsidy is subtracted from the total cost of each vehicle technology. According to our calculations, the total cost of an electric bus and a hydrogen bus is about 2.1 times and 4.0 times that of a diesel bus respectively. The total cost of an electric freight truck is about 1.8 times that of a one-tonne diesel truck.

## **4. Results**
