The increase of electric vehicle usage in Norway—incentives and adverse effects

Norway has been named the “capital” of Electric Vehicles (EVs) because the purchase and use of EVs in Norway has increased tremendously over the last few years. Currently, the fleet of EVs in Norway is the largest per capita in the world. From a transportation research perspective, the questions immediately asked are (i) what economic incentives make the purchase and use of EVs in Norway so attractive to road users; (ii) do these incentives have any adverse effects and, if so, how large are they; and (iii) how does the marginal external cost of EVs compare to that of conventional vehicles. We explore the above questions using available data, the literature and personal observations while relating to the city of Oslo as a case study. We find that the tremendous increase in the use of EVs is the result of multiple economic incentives, such as exemption from toll charges, exemption from purchase duties and permission to use transit lanes that induce road users to purchase and use EVs. The increase in EVs has led to a reduction in CO2 emissions. However, some of the EV incentives have adverse effects, the most serious of which is the exemption from toll charges, which has led to a sizable loss of toll revenue. We find that the marginal external cost of EVs’ road use is approximately the same as that for a conventional vehicle. The incentives for EVs should consider the adverse effects and how electricity is produced; the Norwegian approach should not be followed by other countries without due consideration of these factors.