Learning from Norway’s Rapid EV Adoption

Norway is five to ten years ahead of the rest of the world when it comes to EV adoption.

It’s on target to reach 100% electrification by 2025. The rest of the world can learn from its successes and not repeat its errors, says Ptolemus Consulting Group. Its report identified Norway’s strategic successes, as well as some pitfalls to avoid.

Is Norway an anomaly?

Norway certainly has several advantages when it comes to electrification. It’s a wealthy country with high levels of trust. All stakeholder groups collaborated from charging operators and automakers to politicians across the political spectrum and even drivers who were willing to put up with poor early charging experiences.

Says Frederic Bruneteau, Ptolemus managing director, said: “Norway was a country-level response.” That could be Norway’s biggest success factor and the major stumbling block for other countries. Other advantages are that it’s a major energy supplier to Europe, with one of the greenest production mixes in Europe, with 92% coming from hydro power and only 2% from coal. It spends heavily on road infrastructure and plans to invest trillions more in transport infrastructure.

Yet, its biggest advantage may have been time, says Lars Godell, Ptolemus director of strategic foresight. “Norway put the 2025 target in place six years ago but experimentation with EVs in Norway started in 1990,” he says. The good news is: “There’s no need for other countries to repeat that long period of experimentation.”

Incentives not subsidies

Instead of subsidizing the purchase price of EVs, Norway focused on tax breaks and usage benefits. It offers purchase tax and VAT exemptions worth an average of €1,600 ($1,557) to €1,800 for new EVs, plus toll road discounts adding up to from €200 to 300 a year. Since it also has some of the highest gasoline prices, EV drivers can save €600 to €1,100 a year. Plus, there’s no tax on electric charging, versus a road usage tax for fossil-fuel cars.

That’s not to say that purchase incentives don’t work. Ptolemus found that, in Europe, each €1,000 in incentive value provided a 5% to 7% increase in the share of sales, while removing or reducing financial incentives is often followed by a 30 to 90 decline in EV sales. On the other hand, because cars are often sold across national borders, taxpayers in one country can end up subsidizing buyers in other countries.

What to do better than Norway

Norway’s EV push also revealed some pitfalls that other countries can avoid. It’s expected that the EV tax breaks would lead to a revenue shortfall. In fact, these breaks are unsustainable, Godell says, and Norway is in the process of rolling them back.

However, use of public transportation also fell as more people bought and drove EVs. That led to cuts in services, further reducing usage. Meanwhile, traffic congestion increased as more EVs replaced bus and rail trips.

“The pandemic was obviously one driver but there’s also convenience and practicality,” Godell says. “The Norwegian government has seen this and started to scale back some of the EV advantages. Over the next few years, the huge advantage for EV drivers will have to go away.”

One of the biggest errors of Norway’s approach, according to Ptolemus, was subsidizing hybrids as well as EVs. It refers to a study by the European Union’s Transport & Environment organization that found that hybrids only run in electric mode 38% of the time and EVs are three times cleaner overall.

In addition to the increase in emissions from a hybrid, the purchase of a new hybrid slows down full EV penetration by 10 to 15 years, the amount of time that car will remain in service. If everyone is forced to go all-electric, demand for more infrastructure will increase.

Bruneteau says: “The hybrid approach is good if you believe the world can’t be perfect. Norway was impressive in believing it’s possible to make a world that goes toward perfection if we all work together.”

The continuing and false belief in hybrids as green is owing to carmakers that exaggerating range and emissions numbers, Godell says. This, in turn, is driven by testing standards that aren’t real-world examples of how people drive and the effects of terrain and road conditions.

This will change soon, according to Godell. “The EU is the dominant policy-making party and in a few years will not allow automakers to report these semi-fake range numbers for hybrids. It’s just a matter of time in this part of the world for this mini scam about how wonderful hybrids are from an energy perspective,” he says. [This argument ignores the current situation in most other countries where fossil-fuels still make up the bulk of electricity generation – Ed]

Too far, too fast?

If Norway has to roll back its EV incentives, does that mean it went too far in the first place?

Bruneteau says: “Norway did the right thing to trigger the take-off of EVs. Now the system has already moved to electrification and it won’t go back.”

While in hindsight, it seems Norway did go a bit too far, Bruneteau thinks it’s definitely the model to follow. “Other countries should try to go quite fast. They’ll reduce their emissions much faster,” he says. “It’s good to know Norway is ahead but it’s better to know why.”