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How Much Is Norway Paying To Promote Electric Cars?

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Electric Cars Charging in Norway

Electric Cars Charging in Norway

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With electric cars taking up 3 percent of the market for new car sales in a country of only five million people, Norway is one of the most electric car-friendly countries on the planet.

Geographically small enough to minimize range concerns and with huge financial incentives for going electric, that perhaps isn't surprising.

But how much is Norway's pro-electric car stance actually costing the country--and can any of the country's techniques really be used elsewhere?

Probably not, concludes Reuters. That's not to say that the market for electric cars won't grow elsewhere, but it might have to do so more organically than the heavily incentivized methods used by Norway.

$8,200 in savings per year

The country's various subsidies for electric vehicles amount to as much as $8,200 per car--every single year.

That's partly down to Norway's heavy taxation, which sees the prices of regular cars pushed significantly higher than they are elsewhere. A basic Volkswagen Golf, that costs the equivalent of $24,600 in the United Kingdom, can cost $42,000 in Norway.

While a Nissan Leaf is still cheaper in the UK than it is in Norway, at $35,500, in comparison to that same VW Golf, the price looks much more attractive--$42,500.

You can bet Nissan Leafs would sell quicker in the U.S. if they cost only $500 more than an equivalent gasoline car, that's for sure.

The tax breaks on purchase amount to around $1,400 per year over a car's lifetime, according to a study by Statistics Norway analyst Bjart Holtsmark. To this, the average driver can add $1,400 in road toll savings, free parking worth $5,000 and avoid other charges of around $400. All those figures are per year savings.

In addition, electric car drivers can save time as well as money--as they're allowed to use the country's bus lanes, denied to normal traffic.

These incentives will run until 2017, when the scheme will be reviewed.

Tesla Roadster, Reva i, & Ford Th!nk electric cars parked at charging station in Oslo, Norway

Tesla Roadster, Reva i, & Ford Th!nk electric cars parked at charging station in Oslo, Norway

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Not applicable everywhere

The trouble with Norway's incentives is that they could only really work in Norway.

For a start, the country has no moral dilemma over electricity generation. Almost 100 percent of Norway's electricity is generated through hydropower, so electric cars aren't just clean at the tailpipe, they're clean at the factory too.

This varies from country to country, but some, like India or China, generate huge amounts of pollution through electricity generation--encouraging thousands of extra drivers to use electric vehicles could potentially make the issue worse, even if the streets themselves are a little cleaner.

One line of argument suggests that it could be environmentally problematic even in Norway.

Because of the cars' relatively short range, they still tend to be bought as second or third vehicles in Norway--rather than using the country's public transport system. In effect, it's encouraging the production of extra cars, and putting more traffic on the roads. An electric car in traffic might not pollute, but the vehicles stuck around it still do.

Long-term viability?

There are other issues associated with Norway's push towards electric vehicles--and even some owners themselves are worried.

First, there's the problem of just what may happen if the subsidies end. Make the cars less attractive to customers and you introduce several problems: They're more expensive to run, less convenient (those bus lane perks will disappear) and they cars become less desirable as used vehicles too--so values drop and current owners lose even more money.

And while Norway is oil and gas-rich and can afford large subsidies, the country is still paying a lot to keep those cars on the road.

Holtsmark estimates that the typical subsidies on a Nissan Leaf amount to Norway paying $13,600 to avoid one ton of greenhouse gas emissions. On the European market, the right to emit one ton of emissions is around 4 Euros--about $5.20.

That's certainly admirable from an environmental standpoint, but whether it's financially sustainable or not is a different matter--particularly as Norway's 10,000 plug-in vehicle tally rises.

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Comments (21)
  1. I wonder if the words "subsidy" or "pay" are appropriate in this case? If the government is giving out money, I see that as "paying" or a "subsidy" But if the government is allowing a lower tax on EVs, I don't think those words are correct.

    Here in Massachusetts, food and clothing are not subject to a sales tax. By the definition in this article, the government is "subsidizing" my clothes and food. I don't think that is the case.

    What do ya think?
     
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  2. I think you make a good point, John. The State of California is "giving" me a $2500 rebate on my Model S but they took over $5000 in sales tax. The $7500 Federal tax credit is not so generous when you consider the taxes I paid on the funds that purchased the car. Some critics seem to feel the money came out of THEIR pockets.
     
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  3. With the lease it does come out of their pockets.
     
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  4. We're getting down in the weeds a bit, but at least in Calfornia the leasing party must pay sales tax on the transaction so the rebate is still a PARTIAL refund of the sales tax. You pay the lease cost with Federally taxable funds, so this too is a partial refund.
     
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  5. John, I'd say the use of subsidy is okay here, but the meaning itself seems to have evolved as more examples have come about in recent years. But by the original definition, not charging tolls, for example, when ICE vehicles pay the poll? That's a very clear example of a subsidy, e.g. the government making things artificially cheaper for one choice that fits the concept of "for the public good." Whether it's a good idea or not is another story, of course.

    I think you're 100% correct in that not all things referred to as subsidies are really subsidies. There's more about subsidies only able to be granted by governments and many feel that it isn't a subsidy if given by a company, for example. I would disagree, just a private subsidy.
     
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  6. The traditional definition of subsidy (monetary assistance) would exclude such usage.

    The more modern usage, given here
    http://www.investopedia.com/terms/s/subsidy.asp
    suggests the usage we see here.

    It seems quite perverse because it assumes the government has a "right" to this tax and by waving it, this is like paying out money.

    Words do actually matter and accepting subsidy to be the same whether it is cash out of the government coffers or lower taxes I think is a mistake.

    I really think it should be reported as "preferred tax treatment" rather than subsidy.

    But the answer to my question early seems to be that taxes on other items "subsidies" food purchases in Massachusetts. Still think this is untrue.
     
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  7. What's truly remarkable is that EV's constitute only 3% of new vehicle sales, despite the extremely generous incentives. This bodes ill for the commercial future of electric vehicles.
     
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  8. I think this is definitely the future, therefore money should be invested, anyone who thinks this is a waste of money is, dare I say it, extremely short sighted.

    Hids4u
     
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  9. You're ignoring the basic fact that 99% of the vehicle offerings are still ICE vehicles. Check back in a few years when far more choices will be available for pure EVs, PHEVs, etc... Perhaps you are right, but I certainly doubt that to be the case.
     
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  10. James, you are ignoring the simple fact that current EV offerings are still comparatively very expensive. Once the early adopter pricing gives way to economies of scale, EVs will become cheap to buy as they are to now to run. Not as cheap though. My converted van cost about 1/10th to run as an EV as it did an ICEV. We will never see them that cheap - not by todays standards anyway. MW
     
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  11. There are more comments in this thread
  12. so we argue about money? is that all there is? forget the environment, the climate, the air! after all, thats all free right?

    It might not be the best solution for Norway...no, wait! may not be the greatest solution for Norway, buts its a much better solution for nearly everyone else who does not have fossil fuels coming out their A**.

    In the electricity rich Pacific NW, we squander a ton of power generating capacity daily because our nightly demand is not able to handle the minimal output from wind and hydro. so we sell it at much less than market rates elsewhere. EVs would be a GREAT idea for us and any dollar we spent to support it would come back several times over.
     
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  13. Rarely is a single thing good for an entire country and EVs may not be the best solution in the US everywhere right now but they are ready in several areas of the country but we still have this "100% solution or i will go back to my piss-poor polluting options instead not because they are better but only because that's the way its been done since way back in the days of clean water and clear blue skies
     
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  14. Wow, not one form of punctuation. Good point tho.
     
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  15. Why is the "long tailpipe" argument being mentioned here? Hasn't it been thoroughly debunked multiple times?
     
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  16. They have a strange opinion of what a subsidy is. Facts are ICE's cost he gov tons of money they they don't make selling oil, NG to other countries. They are a long term oil exporter and want to keep it that way.

    Their oil money is going into a big fund for when the oil gives out they know will happen and by having EV's and the fund it'll be a cake walk for them just as the 2008 crash was as they barely felt it, because they plan ahead smartly.

    We could learn something from them simply because of their results which are impressive.

    Facts are in 15 yrs oil will be too expensive to burn so we better get changing now to be ready.

    Luckily for me I drive my lightweight EV's for 25% of the cost of an ICE version.
     
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  17. Norway is investing into the next generation technology.
    If Norway were to invest into a network of Level 2 and Level 3 chargers
    and jack up the gas tax, it would help them balance their trade deficits.
     
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  18. "And while Norway is oil and gas-rich and can afford large subsidies, the country is still paying a lot to keep those cars on the road."

    So the subsidies for electric cars come from money Norway makes from selling oil, which is used to pollute elsewhere on this planet, effectively shifting the problem of pollution, but not solving it.
     
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  19. Can anybody provide me a Norwegian electric bus manufacturer? In the electric cars promotion country :)
    Thank you.
     
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  20. Sadly, this article is based on highly misleading numbers.

    - Total vehicle lifespan is an estimated 7,8 years
    - $5.000 per year in saved parking fees is a massive overstatement
    - The price per tonne CO2 reduced is based on an annual driving lenght of a meagre 6.000 km.

    For a full rebuttal, please see http://www.gronnbil.no/nyheter/highly-misleading-figures-regarding-norwegian-ev-benefits-in-reuters-article-article326-239.html
     
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  21. "Holtsmark estimates that the typical subsidies on a Nissan Leaf amount to Norway paying $13,600 to avoid one ton of greenhouse gas emissions."

    Holtsmark is using a Toyota Prius producing 0.60 tons CO2/year ($8200/year / $13600/ton) as the comparison target.

    Suppose a Toyota Prius gets 50 mpg. 19.4 pounds CO2 are produced from one gallon of gasoline, and the gas refining and distribution pipeline is about 75% efficient.

    0.60 tons CO2 * (1 gal / 19.4 pounds) * 50 mpg * 0.75 = 2300 miles.

    So yes. If the alternative to the Nissan Leaf is driving a Toyota Prius 2300 miles/year (at the cost of $4+/mile), then Mr. Holtsmark is spot-on.
     
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