Norway Plans to End Electric Car Subsidies

With the release of the 2018 budget on October 12, the Norwegian Parliament announced its intention to curtail successful but expensive electric car subsidies. The bill would remove the tax exemption from electric cars weighing over two tons. The Norwegian media dubbed the bill the Tesla Tax as it is most likely to affect the Tesla Model X, the SUV made by the American luxury car company, Tesla. It is estimated that the tax will increase the price of buying a Tesla by 70,000 kroner ($8,850), making the luxury electric cars less attractive to buyers.  Some worry that the new tax will harm Norway’s environmental progress. Petter Haugneland of the Norwegian Electric Vehicle Association explained that “Norway is gambling with the electric car market.” This market has helped Norway lower its carbon dioxide emissions, as electric cars are much more efficient than their gasoline-powered counterparts.

Norway’s plan to encourage electric cars began in the 1990s with tax exemptions for electric car purchases. Since then, Norway has implemented free parking initiatives, access to bus lanes, charging stations, and toll exemptions for electric car owners. These efforts caused the number of electric cars sold in Norway to rise from 7,000 in 2012 to almost 100,000 in 2016. Twenty-nine percent of all cars sold in Norway are now electric, far ahead of the next highest country, the Netherlands, at 6 percent, and the United States, at 0.9 percent. Although Norway is considering decreasing government subsidies of electric cars, the country hopes to sell exclusively zero-emission vehicles by 2025.

Despite the previous success of government subsidies, some critics want to end the tax exemptions. They argue that the subsidies are not only expensive but also increase congestion in the capital, Oslo. Rich households are buying more Teslas, which bus drivers say are clogging bus lanes. Environmental Minister Vidar Helgeson argued that large electric cars cause as much damage to roads as gasoline and diesel engines, so owners should contribute to the upkeep. He added that the subsidies were meant to encourage purchases of small, domestically-produced cars, not luxury imports for the rich.

Still, Christina Bu, general secretary of the Norwegian Electric Vehicle Association thinks 2018 is too soon to end the subsidies, saying, “Nobody is saying we are never going to tax electric vehicles. But the government had promised to keep the [tax exemptions] the same until 2020.” She also pointed to the significant fall in electric car sales in Denmark when incentives were withdrawn.

Going forward, the proposal will likely face some resistance, as the authors of the bill, the Norwegian Conservative Party, are currently ruling with a minority government, and will need support from other parties to pass the bill. With France and the U.K. looking to follow Norway’s lead and sell exclusively zero-emission cars by 2040, Norway’s electric car legislation could affect the way other European countries move toward a greener, zero-emissions future.