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Thursday, July 18, 2024

Electric cars may lose some incentives

As Norwegian politicians argue over how “green” their budgets are, one aspect of the proposed state budget is raising red flags. Norway’s conservative government coalition wants to raise annual registration fees for electric cars while lowering those on some vehicles fueled by diesel and gasoline, thus cutting into the incentives that have made the country a world leader in electric car sales.

Electric cars have become enormously popular in Norway, not least the Tesla Model S, largely because of all the tax incentives they've had. The Progress Party still supports tax breaks for low- and zero-emission vehicles, but is backpedaling on any plan to ban sales of fuel-driven cars from 2025. PHOTO: Norsk elbil forening
Electric cars remain enormously popular in Norway, not least the Tesla Model S, largely because of all the tax incentives they’ve had. Now some of those incentives may disappear, setting off more political arguments. PHOTO: Norsk elbil forening

There are few places you can see so many electric cars on the road than in Norway, because they’re taxed much lower than conventional vehicles. That makes electric cars an attractive alternative, with owners also enjoying a wide variety of other incentives like free parking, exemptions from tolls and the ability to use taxi- and bus lanes. The lower fees on electric cars (called elbiler) have even made it relatively reasonable to buy the popular and otherwise expensive Tesla, because they’re not priced much higher in Norway than many other conventional cars and are even cheaper than many other luxury vehicles.

The new proposal to boost Norway’s annual registration fee on cars (called årsavgiften) has put the government on another collision course with one of its government support parties, the Liberals (Venstre). The Liberals, who strive to maintain an environmental profile, claim they were surprised by the hike in the elbil fee, and very unhappy.

“You can’t offer tax relief on traditional cars (using fossil fuels) while raising taxes on electric cars,” Ola Elvestuen, deputy leader of the Liberals, told news bureau NTB. “That doesn’t hang together,” Elvestuen added, with the government’s stated intention to reduce carbon emissions.

‘Can’t run away now’
The government’s other support party in Parliament, the Christian Democrats, was also unhappy. While acknowledging that there was some talk during budget negotiations of gradually imposing or raising some taxes on electric cars, Hans Fredrik Grøvan of the Christian Democrats said it was not supposed to trigger any decline in taxes on vehicles using fossil fuels.

Instead the government is proposing to raise the annual registration fee on electric cars from the currently low NOK 445 (USD 55) to equal half that currently charged on conventional cars. It would thus be equal to that charged for motorcycles: NOK 1,960 in 2018 and up to NOK 2,820 by 2020. The government also plans to lower the annual tax on conventional vehicles from as high as NOK 3,655 this year to as low as NOK 2,820 by 2018.

The government parties point to an agreed statement after budget negotiations with their support parties, that “zero-emission vehicles can be charged half the (conventional) annual fee in 2018 and the full annual fee in 2020.” State secretary Jørgen Næsje of the government’s Progress Party told newspaper VG that the increase shouldn’t come as any surprise for the Liberals: “There was full agreement on this. They can’t run away from it now.”

Vidar Helgesen, Norway’s government minister in charge of climate and environmental issues from the Conservative Party, also pointed to earlier agreement on electric car taxes. “Even though electric cars are very good for the climate, they have other effects that shouldn’t make them completely tax-free,” Helgesen told VG. He said there should still be some advantages that make them more attractive to potential buyers, though, adding that there will be.

‘Government doesn’t care’ about the climate
It’s the latest budget argument following heated debate over the low level of fuel tax hikes the government is willing to impose. Environmental organizations are also objecting to how the government has proposed cutting taxes on vehicles with lots of horse power. The buyer of a new Lexus SUV, for example, could see its price drop by NOK 119,975, because of new calculations regarding horse power and emissions that would lower the vehicle’s one-time sales tax (called engangsavgift).

“The government is showing that it doesn’t care at all about either the climate or the environment,” claimed Nina Jensen, the head of WWF in Norway who also is the sister of Finance Minister Siv Jensen. They disagree on many political issues.

The quarreling is set to continue over how taxes should be used to help cut emissions. The proposal to raise taxes on electric cars and lower them on fossil-fueled cars “is almost too incredible to be true,” wrote commentator Arne Strand in newspaper Dagsavisen, pointing out that the politicians involved don’t even know what they agreed to. It all must be settled by the end of the fall session, to prevent the government from falling over a budget that’s not approved. Berglund



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