Evaluating Norway’s electric vehicle incentives

Abstract

We use car registration data from 2000 to 2021, as well as price lists and tax rules, to evaluate Norway’s incentives for consumers to choose electric vehicles. These include taxes on fossil fuels, EV exemption from car purchase taxes, and other incentives, like discounts on road tolls. We find that undoing the incentive with the largest effect, the EV exemption from purchase taxes, would reduce the EV market share to 25 percent from the 66 percent observed in 2021, increase CO₂ emissions of new cars sold by 167 percent, reduce their total weight by 22 percent, and reduce the number of new cars sold by 10 percent. Lost tax revenues imply a carbon price of 1700 USD per metric tonne. But taking into account consumer and producer surplus, the tax exemption is welfare enhancing even before putting a value on emissions reductions.