Key Takeaways
Norway is leading the world in the adoption of electric vehicles, aided by very generous government subsidies, fee waivers and other special treatments.
Despite the incentives for electric vehicles, the use of internal combustion-fueled cars increased along with EV ownership.
Wealthy Norwegians bought electric vehicles to get free parking, toll waivers and other special treatments, but used internal combustion engines at other times, increasing energy demand.
Norway can lavish subsidies on its population as it has $1.5 trillion in a sovereign wealth fund derived from its huge oil and gas production.
Researchers have found that electric vehicles are less efficient than their internal combustion counterparts, and the “all-in” energy costs of manufacturing and maintaining an electric vehicle and other “green energy” products are slowing efficiency gains.
Supposedly, the reason for switching to electric vehicles from gasoline-powered vehicles is to reduce carbon dioxide emissions by using less gasoline and thus oil. However, a country that was way ahead of the United States in the transition to electric vehicles found that its oil demand did not decline from EV use despite electric vehicles making up 64 percent of new car sales and despite thousands of dollars in annually recurring subsidies. In fact, Norway’s ownership and use of gas-powered cars increased, especially for long trips where electric vehicles have a range problem. Despite Norway having some of the “greenest” electricity in the world with its vast hydropower resources, a Norwegian EV owner needs to get 45 years of use out of the vehicle’s imported EV battery, which has an expected life of 15 years, to offset the global carbon dioxide emissions from producing it.
Norway’s EV Incentives
The Norwegian government offered consumers massive subsidies to purchase an electric vehicle. New electric vehicles were exempt from several onerous taxes and the 25 percent value added tax (VAT). On average, a large new ICE vehicle would be subject to $27,000 in various taxes and an equivalent EV would pay none. Electric vehicles were also exempt from any road or ferry tolls, were allowed to use bus lanes, were offered free parking and charging in municipal areas, and had “charging rights” in apartment buildings. Although Norway rolled back some of these subsidies starting in 2017, an Oslo resident can still expect EV benefits that total $8,000 annually. Norway can do this in part because they have the largest sovereign wealth fund in the world, made possible by revenue generated by their oil and gas production. The fund is approaching $1.5 trillion, representing about $250,000 per resident.
Norway spends nearly $4 billion annually on EV subsidies—about the amount it spends on total highway and public infrastructure maintenance. Because EV subsidies favor high-income urban citizens, who take advantage of free tolls, parking, and charging and avoid the onerous tax on larger luxury vehicles, public scrutiny made the Norwegian government reduce several subsidies. Municipal parking is no longer free, EV passengers (not the vehicles) are subject to certain tolls, and a partial purchase tax was introduced on new electric vehicles. The changes will likely reduce EV penetration. For example, in 2022, Sweden eliminated several subsidies that resulted in a 20 percent drop in EV sales.
Norwegians are reluctant to give up their ICE vehicles, even after purchasing an electric vehicle. Two-thirds of Norway’s EV households own at least one ICE vehicle. From 2010 to 2022, Norway added 550,000 electric vehicles, but the number of ICE vehicles on the road, rather than falling, increased by 32,630. While the population grew by 11 percent, the total number of passenger cars grew by 25 percent. Norwegians are using their electric vehicles when they want to avoid a road or ferry toll, have access to free parking or charging, or avoid congestion by using bus lanes. Otherwise, they use their ICE vehicle.
Norway’s electricity demand has increased as it shifted from fossil fuels to electricity for transportation, heating, and lighting. Since 2010, Norwegian electricity demand increased by 20 percent and total primary energy demand for all forms of energy increased by 5 percent. The shift to electric vehicles did little to reduce overall energy consumption despite claims they are far more efficient.
The Efficiency of EVs vs. ICE vehicles
Electric vehicles are less energy efficient than ICE automobiles when all the costs of the supply chain are considered, including the costs of both the battery and the renewable power required to make “carbon-free” electric vehicles. Manufacturing an electric vehicle consumes far more energy than an ICE vehicle. Most of the additional energy is spent mining the materials for and manufacturing an EV’s lithium-ion battery. Mining companies use energy-intensive trucks, crushers, and mills to extract each battery’s nickel, cobalt, lithium, and copper and the manufacturing process consumes vast amounts of energy. While many analysts tout the carbon savings from displacing fossil fuels, they are not adequately accounting for the battery’s increased energy consumption. Once these adjustments are made, most, if not all, of the EV’s carbon advantage disappears.
Throughout the history of energy, there has not been an example where a new technology with inferior energy efficiency has replaced an existing, more efficient one. As a result, electric vehicles will fail to gain widespread adoption despite massive subsidies and the threat of ICE bans. Recently, both Ford and Hertz had to scale back their EV initiatives due to lower-than-expected consumer interest.
The Efficiency Issue in the “Green” Transition Is Even More Widespread
Global energy efficiency, which was improving by 1.9 percent annually for more than a decade, has been growing at only half that rate since 2021. The “green” energy transition, pushed by politicians, is actually making it more difficult to reduce carbon emissions because it is stimulating more energy consumption overall through increasing electricity demand and encouraging inefficient solar and wind investments that result in more emissions due to increased mineral mining and less energy output.
The Irony Continues
As Western countries are pushing electric vehicles and solar and wind power, China is building coal plants to produce the “green” technologies that the West needs for its energy transition. China’s BYD car maker has surpassed Tesla in EV sales; China manufactures over 70 percent of the world’s solar panels and it dominates the world in the processing of critical minerals needed for EV, “green” energy technology and weapon production. Subsidizing electric vehicles and green energy technologies actually gives China and other developing nations the incentive to use more fossil energy and release more carbon emissions making these products for Western countries whose governments encourage them.
Conclusion
The Biden administration needs to look at Norway for an understanding of the use consumers put to electric vehicles and ICE vehicles to realize that subsidies and regulatory mandates will not make consumers march to those orders. Norway’s experience brings out the reality that electric vehicles are purchased by the wealthy who get wealthier from government subsidies that make their lives better by providing benefits such as free parking, use of bus lanes and free tolls. Norway did not reduce oil use from selling more electric vehicles and thus its EV movement did not reduce carbon emissions. Instead, the movement resulted in more government spending. That is what President Biden is doing with the energy transition in the United States—spending government funds. The carbon emission reductions that have occurred in the United States have resulted from switching from coal to low-cost natural gas in the electric power sector, largely before Biden became President.
