Norway: EVs don't solve our cities' problems; cutting incentives to emphasize public transport

In the global push to combat climate change, Norway has been lauded in the adoption of electric vehicles (EVs), with 87 percent of new car sales being fully electric, according to the Norwegian Road Federation.

What makes Norway's approach intriguing is its lack of a domestic manufacturing industry and a disinterest in the EV supply chain, in contrast to countries like China.

Historically, Norway's economy has been tied to fossil fuel exports. Unlike China, a major player in the EV supply chain and manufacturing sector, Norway relies heavily on imported EVs rather than fostering a robust domestic industry.

One key factor in Norway's success is its geographical and social landscape. With a history rooted in rural living, the shift to urbanisation in postwar Norway saw a growing fascination with cars. The government's early attempts to establish itself as a global hub for EV manufacturing fell short, but the incentives remained in place.

These incentives, including exemptions from steep taxes on car purchases, tolls, parking fees, and even ferries, sparked a surge in EV adoption when global market conditions improved.

Interestingly, Norway's support for EVs is not driven by a desire to strengthen its manufacturing sector or dominate the EV supply chain. Rather, it aligns with the country's commitment to clean energy, as its electricity is primarily sourced from hydropower.

However, recent analyses of Norway's EV strategy reveal some unintended consequences. While Norway's initiative has slashed emissions, it's also sparked a wealth divide and bolstered a surge in car ownership, challenging the nation's egalitarian values.

In short, the perks for EVs mostly help rich people, and having more EVs is making cities worse. The money used to support electric cars, which mostly benefit the wealthy, could be used for public transportation that benefits everyone.

More critically, it's impeded the shift towards public transportation and cycling – more effective measures for reducing emissions and improving urban life.

Oslo Mayor's climate advisor, Tiina Ruohonen, articulates the dilemma, "Everyone agrees that 100 percent of cars should be electric. That’s not the question. The real question is whether you really need to own a car in Oslo."

Oslo's response to this challenge has been robust, cutting down over 4,000 parking spaces since 2016 and prioritizing bike lanes and pedestrian-friendly initiatives. This strategy has showed results: Oslo reported zero pedestrian or cyclist deaths due to traffic accidents in 2019, showcasing the safety and lifestyle benefits of a car-less urban environment.

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However, the national focus on EVs has sometimes clashed with local ambitions to reduce car dependency. The allure of EVs, bolstered by incentives like exemption from tolls and parking fees, has made car ownership more attractive, to the detriment of investment in public transportation projects.

Oslo's ambitious public transportation projects faced financial hurdles as toll revenues, a significant funding source, diminished with the rise in EV ownership. Promoting EVs without diminishing car use could compromise other vital environmental and social objectives.

Recently, Norway's EV incentives have been partially rolled back, with the government introducing fees for parking, roads, and ferries for EVs, aligning with a broader policy shift to balance the scales.

The Norwegian government also retracted Value Added Tax (VAT) exemptions, particularly for higher-end EVs, which began from January 1, 2023.

The VAT exemption for EVs priced above NOK 500,000 (approximately RM 211k) was revoked. The new VAT structure became dynamic, with higher-priced electric cars incurring a higher VAT fee.

The Norwegian Electric Car Association, representing 110,000 EV owners in the country, expressed dissatisfaction with the new VAT measures. Christine Bu, the association's general secretary, labelled the entire policy change as "incomprehensibly bad."

The Norwegian public road administration had previously proposed changes to the incentives enjoyed by EV drivers. In a letter to the Ministry of Transport, the administration recommended the prohibition of EVs from using dedicated bus and taxi lanes, a privilege they currently enjoy.

The proposal also suggests increasing the tolls paid by EV drivers from the current 50 percent to 70 percent until 2025. Beyond that, toll benefits for EVs could be entirely eliminated, contingent on the condition that only zero-emission new cars are sold in Norway by that date.

Ingrid Dahl Hovland, Road Director, said in a statement as quoted by Norwegian publication BPN, "An electric car is also a car that takes up space in traffic. We want to reduce car traffic in cities. With half a million electric cars on the roads, we are approaching a point where we need to think about phasing out the toll benefits."

Norwegian Transport Minister Jon-Ivar Nygard highlighted the need to make alternative modes of transport more appealing, stating, "Electric cars give us greener transport, but they also have a clear intermodal competition with public transport in urban areas. We must make it more attractive to travel by public transport, cycle, and walk."

Bjørne Grimsrud, director of the transportation research centre TØI, told Vox, “Countries should introduce EV subsidies in a way that doesn’t widen inequality or stimulate car use at the expense of other transport modes, but that’s what ended up happening here in Norway.”

The American news outlet also quoted Ruohonen, the Oslo mayoral adviser, stating, “The mistake is to think that EVs solve all your problems when it comes to transport. They don’t.”

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