In a memorable Super Bowl Commercial, Will Farrell was very frustrated that “Norway sells way more electric cars per capita than the U.S.” In 2020, 60 percent of all vehicle sales were electric vehicles (EVs) in Norway, but only 2 percent in the U.S.
But once the subsidies and incentives for EVs are considered in Norway, the bigger question is why do Norwegians buy so many cars with internal combustion engines?
The proponents of subsidies and mandates forcing people to use electric cars approvingly cite Norway’s example for a high percentage of EVs sold per capita. For example, IER saw this recently when analyzing a proposed regulation from New Jersey mandating that manufacturers sell a percentage of electric trucks. [IER’s comment on the proposed rule is here.] New Jersey produced a report evaluating progress and identifying pathways to reduce carbon dioxide emission by 80 percent by 2050. In the report it states:
Norway can serve as a strong case study for complementary incentive programs. They are currently leading the world in electric vehicle usage, having implemented electric vehicle incentives starting in the late 1990’s (Henley, 2020). Using Norway as an example, New Jersey should explore other incentive structures to galvanize electric vehicle adoption, including: exempting electric vehicles from paying road tolls, allowing free parking, providing company car tax reductions, giving access to high occupancy vehicle lanes, and offering compensation for scrapping fossil vehicles when converting to zero-emission vehicles.
Norway can indeed serve as a case study on EV incentive programs. It turns out that Norway provides vast incentives for EVs. As Michael Cembalest of JP Morgan Asset and Wealth Management writes:
In Norway, EVs are exempt from VAT taxes and receive a 50% discount on toll roads and parking fees while ICE [internal combustion engine] cars are subject to a 25% VAT, a CO2 tax, an NOx tax and a weight tax. As a result, Norwegian ICE cars are more expensive to buy and 75% more expensive to operate [emphasis added]
When EVs are less expensive to buy and less expensive to operate, it is interesting that 40 percent of Norwegians still purchase cars with internal combustion engines. That presumably speaks to the flexibility, range, and reliability of cars with internal combustion engines. It also suggests there might be an upper bound on EV sales. Certainly, EVs make sense for a number of applications, but not all applications or situations, as 40 percent of Norwegians shows.
Lastly, Cembalest also notes how expensive Norway’s EVs subsidies are. He states, “A full conversion to EVs would put its EV subsidies at the second-largest gov’t expenditure behind pensions.”
It is certainly possible to provide massive incentives to get people to purchase EVs, but how many other governments have enough wealth (in Norway’s case because of decades of fossil fuel production) to subsidize EVs to the level Norway’s government has?
