The Explosion of Electric Vehicles Use in Norway - Environmental Consciousness or Economic Incentives?



The Explosion of Electric Vehicles Use in Norway - Environmental Consciousness or Economic Incentives?

Authors

Marie Aarestrup Aasness, Norwegian Public Roads Administration (NPRA), James Odeck, Norwegian Public Roads Administration (NPRA)

Description

The use of Electric Vehicles (EVs) has exploded in Norway where Oslo is now the capital city of EVs. We examine why this is so. We find that it is due to economic incentives rather than Norwegians being more environmentally conscious.

Abstract

There is currently an Electric "Car Fever" in Norway. Tesla S and Nissan Leaf which are electric driven vehicles are on the top of car sales statistics in Norway. As a matter of fact, the sales of electric vehicles in the Oslo area have more than doubled from 2012 to 2013 and the increase is expected to continue also in the coming years. Oslo is now recognized as the capital of plug-in electric vehicles (EVs) and Norway is now the world largest user of EV per capita. From a transportation research point of view, there are two questions that lend themselves from the observations above: (1) are the Norwegian car user more environmentally conscious than others in the western world and/or, (2) are there economic incentives in place that encourage the use of EVs in Norway more than in other countries?
In this paper we examine the two questions posed above in the case of Oslo where a toll ring has been in place since 1990 and where 60% of funds collected are used to improve the road network while the rest are used to improve both public transportation and cycling.
Our results reveal that the major explanation of the explosion of EV use in Oslo, and in Norway in general is explained by economic incentives rather than environmental consciousness among the population. The economic incentives that lead to increased use of EV in Oslo are as follows:

1. EVs are exempt in Norway from all non-recurring vehicle fees, including purchase taxes, which are extremely high for ordinary cars, and 25% VAT on purchase, together making electric car purchase more price competitive as compared with conventional cars.
2. EVs are also exempted from the annual road tax, all public parking fees, toll payments which are high, as well as being able to use bus lanes also in the rush hours.
3. EV users do not incur fuel taxes (gasoline tax and diesel tax) and the marginal fuel costs as there are numerous plug-in stations which are free of charge.
4. Judging from previous attitudinal studies from Norway as compared to other cities in Europe, there is no evidence that the Norwegians are more environmental conscious to the extent that it alone can lead to the observed explosion of EV use.

From these results we conclude that it is the economic incentives that have led to the observed explosion of EV use in Norway. Ultimately, the difference in generalised cost of EV use is insignificant as compared to a conventional vehicle.
We however, also find some drawbacks with the Norwegian economic incentives for the use of EVs and which no country whatsoever, should copy. The first is that EVs are only socioeconomically beneficial in the sense that they lead to a reduction in emissions. To that end, the only reasonable tax exemption for EVs should have been the gasoline tax which, presumably are set to account for emissions. Exempting EVs from tolls meant to finance road infrastructure is counter-intuitive; EVs need as much road space as all other traditional vehicles and therefore should pay tolls. In this paper we also estimate the loss of income to the government due to the exemption of tolls. Further we examine a first-best scenario where EVs pay the external cost of their road use versus those of conventional vehicles. We find that the external cost of EVs are much less than the conventional vehicle since they produces less air pollution and consumes less energy than conventional vehicles. However, they increase travel time and congestion on transit lanes of which they are allowed to use. This is an additional external cost that EVs impose on the society and that must be accounted for.
Our conclusions and recommendations to the Norwegian authorities given that there is an explosion of EV use are that: (1) the economic incentives encouraged the purchase and use of EVs and thereby has helped reduced emissions and, (2) given that the EV usage has increased tremendously, it is time to reconsider whether EV users also should be made to pay the full marginal cost of their road use just as other users of conventional vehicles do. The marginal costs of EV use would still be low as compared to conventional vehicles and still encourage the increased use of EVs.

Publisher

Association for European Transport