Friday, November 19, 2021

A good problem to have

Norway is the global success story on electric car uptake, with early policy and a well-signalled 2025 cutoff point for fossil vehicles resulting in 77% of new cars being EV's. But now they have a problem: not enough dirty cars to tax:

Norway’s electric dream has been credited to a series of tax breaks and other financial carrots that mean brands like Tesla can compete on price with combustion engines. But these incentives—and their success—have created a unique predicament: Norway is running out of dirty cars to tax.

It’s quite a big problem. The previous government—a center-right coalition that was replaced by a center-left minority government in October—estimated that the popularity of EVs was creating a 19.2 billion Norwegian krone ($2.32 billion) hole in the country’s annual revenue. While EVs might be great news for the environment, their rapid success in Norway is now forcing some serious fiscal consternation.

New Zealand will eventually face this problem too. Currently we pay for roads through hypothecated petrol taxes and road-user-charges (RUCs). But EV's don't use petrol, and are currently exempt from RUCs, so if policy is successful in promoting uptake, we're eventually going to have a funding gap like Norway's. Which will mean moving to new ways of funding roads - an electricity price surcharge, through registration fees, increased use of toll roads, or just through general taxation (RUCs are probably too easy to cheat on to be used for all cars). Still, that's a good problem to have - because it means transport emissions will be being crushed (and maybe we'll also see a sufficient mode-shift to make the required funding lower anyway).