Bellona warns against premature EV incentive cuts in Norway

EV-charging-berlin Credit: Think Stock Photos

Today, Bellona sent a recommendations letter to ESA (EFTA Surveillance Authority), highlighting the importance of keeping Norwegian electric vehicle (EV) incentives unchanged for next year.

According to media sources, ESA is looking into curbing  VAT exemption for EVs from the beginning of next year, on grounds that EVs have now become much cheaper to produce and thus cheaper for consumers. ESA is therefore questioning whether the Norwegian state’s subsidies to EVs are necessary.

A country can use state aid to promote environmental objectives, as Norway does with EVs. But when this support becomes more extensive than necessary, state aid is illegal under the EEA Agreement. And it’s ESA in Brussels that eventually determines when enough is enough.

In this letter, Bellona justifies why it is crucial to keep the incentives untouched at this very stage, until EV models in all sizes are available on the market, and can compete in price with internal combustion engine (ICE) alternatives. While studies are optimistic about this date coming as early as 2022[1], today and in the few years in the lead up to this point, a predictable package of incentives will be key to consumer and investor certainty.

The EV market is still fragile and its dependence on stable regulatory and economic signals is necessary to avoid fluctuations. This is reflected through the fact that municipalities that offer more local usage benefits (such as free parking) usually have a larger penetration of EVs, according to figures from Norwegian EV Association. Moreover, public scepticism towards EVs must be avoided at this stage, nationally EVs in Norway today still account for no more than 5% of all passenger vehicles (the total fleet), and fiscal and usage incentives have had a significant impact on consumers’ transition towards electro-mobility.

EV support also has the greatest environmental and human health benefits. The Environment Directorate (Miljødirektoratet) places measures related to EVs in the middle cost category, they also point out that technology development will make EVs an increasingly affordable climate measure.

Bellona strongly advices ESA to allow the Norwegian government to keep EV incentives until at least 2020, in this crucial time where we are so close to achieving the set climate goals. What is more, Bellona warns against the introduction of a tax on EVs based on weight, which would act to disadvantage EVs with heavier, more powerful batteries able to travel longer distances. A stable regulatory framework is key to safeguarding consumer and investor confidence, and thereby securing the EV market’s future growth. 

See full letter here.

[1] A recent Bloomberg study predicts that EVs’ total cost of ownership will have fallen below that of ICE cars as early as 2022:
https://www.theguardian.com/environment/2016/feb/25/electric-cars-will-be-cheaper-than-conventional-vehicles-by-2022

Bellona Europa

europe@bellona.org