This dissertation consists of three separate essays that examine widely-used policies in the electric vehicle (EV) industry. Chapters 1 and 2 study how to compare or design environmental policies to correct externalities under imperfect competition. On the other hand, Chapter 3 evaluates how much of EV consumer subsidies are passed through to EV consumers. If a regulator employs a single policy instrument to address multiple market failures, then it can have unintended consequences unless firms’ strategic responses are fully understood. Chapter 1 discusses how policy shifts from EV subsidies to tradable emission credit systems interact with market power in the vehicle and credit markets. This policy change eliminates subsidy expenditures while introducing a credit market that could exhibit two-sided market power. Traditional automakers in need of credits form an oligopsony on the credit demand side, whereas EV makers create an oligopoly on the credit supply side. Firms leverage their market power in the output market to manipulate the credit price. This incentive encourages them to raise the prices of their primary fuel-type vehicles, exacerbating the market power problem in the output market. Counterfactual simulations in this chapter separately evaluate the welfare impact of 1) removing government spending and 2) introducing a credit market. Withdrawal of subsidy expenditures raises the effective marginal costs of vehicle production, lowering total welfare by 7.4 billion RMB per quarter, amounting to 13.9% of the total subsidy expenditure. In addition, firms’ strategic behaviors in the credit market reduce consumer surplus by 2.2 billion RMB per quarter, and this reduction dominates the increase in profits and environmental cost savings, generating a further welfare loss. In a similar vein, Chapter 2 examines how to optimally design EV purchase subsidies to address externalities and market power when firms respond to these subsidies by vary- ing product characteristics. The subsidy amount often changes based on a specific product attribute, called a “base attribute”, which varies across countries from features such as driving range (China and Japan) or battery capacity (US and India) to vehicle size (South Korea). If externalities are the only cause of market failure, the subsidy should target the externality itself (e.g., emissions per mile) as the base attribute to achieve the first-best outcome. However, Chapter 2 shows that in the presence of market power, directly targeting the externality might be sub-optimal. Instead, the government’s choices of base attribute and subsidy intensity should both induce socially desirable product designs (to address externality) and encourage more EVs to be sold (to curb output distortion). This chapter first develops a theoretical framework that draws a contract curve between two origins, tracking the optimal policy trajectory when one origin focuses on dealing with market power and the other on correcting externalities. It then estimates a structural model with endogenous product attributes using comprehensive data on the vehicle market in China. Simulations show that a uniform subsidy favors small and environmentally friendly vehicles but exacerbates the quantity distortion caused by market power for high-quality products. In contrast, attribute-based subsidies increase consumer surplus by improving product quality and mitigating market power. Lastly, Chapter 3 analyzes data from thirteen countries responsible for 95% of global EV sales from 2013 to 2020 to study the pass-through of government subsidies. Large-scale financial subsidies that are global in scope provide a valuable chance to examine the pass-through of subsidies to the final consumers and the extent to which automobile manufacturers benefit. This chapter finds pass-through rates of between 70-80%, consistent with existing studies that exploit data from the automobile sector in individual countries. Moreover, the pass-through is higher for firms that sell to global markets, such as Tesla and Volkswagen, and lower for those catering to a specific region, such as BYD. This could be due to the former set of companies being more cognizant of global reference pricing and the possibility of third-party arbitrage, which makes them less likely to adjust prices in response to local (country-level) shocks.