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Governments worldwide have spent billions of dollars on monetary incentives for consumers to encourage the adoption of eco-friendly (“green”) products. However, there is little consensus on the effectiveness of delayed monetary incentives with complex structures, such as tax credits in increasing green product adoption and reducing carbon emissions. The literature is also limited on the mechanisms through which monetary incentives work in general. We address these issues by studying the impact of tax credit incentives on green and nongreen vehicle sales in the U.S. auto industry. A tax credit incentive could boost green vehicle sales through cost savings on the vehicle’s price. However, the incentive may prove ineffective because of important barriers to adoption (e.g., long charging times for electric cars). To measure the sales and emissions impacts of tax credits, we study incentive changes in South Carolina …