Published on May 1st, 2018 | by Steve Hanley0
Denmark Rethinks EV Incentives After Market Collapses
May 1st, 2018 by Steve Hanley
The Scandinavian countries are a laboratory for what works and what doesn’t when it comes to EV incentives. Sweden has some incentives and sales of electric cars are rising. Norway has many and sells a ton of EVs. Denmark is a mixed bag. Until the beginning of last year, it had significant electric car incentives in place and EV sales were fairly brisk. Then it reversed course and watched sales plunge from many thousands to a few hundred.
Danes are pretty happy people. In fact, according to the latest World Happiness Report, the country is one of the three happiest places on Earth. One thing Danes are happy about is that their country is a world leader in renewable energy. Vestas Wind Systems, the largest wind turbine company in the world, and Ørsted, the largest offshore wind farm operator in the world, are both located there.
In fact, if you drive east from Copenhagen across the Kattegat toward Sweden, you can tell where the border is between the two countries. The waters off the coast of Denmark are thick with wind turbines. The coast of Sweden has none, as in zero. The differences between the renewable energy policies of the two neighboring countries couldn’t be more stark.
Denmark has no domestic auto manufacturing, so every car purchased is imported from somewhere else — and pays an import tax that can go as high at 180%. The Danes may be happy but they still make buying decisions like everyone else. Until recently, registration fees for new electric cars were waived, which made them very attractive to Danish buyers. (This is very similar to a key policy in Norway as well, where there are high taxes on cars but electric cars are exempted.)
Then, in 2015, the Liberal government of Prime Minister Lars Lokke Rasmussen decided to end the incentives over a period of years until registration fees for EVs and conventional cars reached parity in 2022. The reason for the change was a case of simple economics leavened with a dose of free market principles.
The incentives were costing the government a lot of money and it was never intended that electric cars would get a free ride forever. The incentives were meant to prime the pump until such time as electric cars could survive in the marketplace on their own merits.
“It’s no secret electrical vehicle sales have been below what we expected a year and a half ago,” says tax minister Karsten Lauritzenin in a statement snagged by Bloomberg. “The agreed phase-in has turned out to be hard and that likely halted sales.”
Now, the Social Democrat party has announced it proposes to ban the sale of new diesel-powered cars if it wins control of the government in the next elections, scheduled for June 2019. Partly as a result of that announcement, Rasmussen now says, “We have tax incentives for electric cars, and you could discuss if they should be bigger. I will not exclude that.”
The new incentives, whatever they are, will be made public this summer as part of a larger $2 billion plan to boost renewable energy consumption, according to Bloomberg. The goal is to make Denmark’s electricity sector 100% fossil fuel free by 2050. The government is considering lowering taxes on electricity in order to encourage Danes to heat their homes with electrons rather than oil, which would eliminate a lot of carbon emissions, if those electrons come from renewable sources.
But the on-again, off-again EV incentive policy has a knock-on negative effect on sales, according to Laerke Flader, head of the Danish Electric Car Alliance. The electric car industry “doesn’t want to invest in a market that may not be there next year. They’d rather invest where conditions are better and predictable long term,” he says.
In Sweden, which has had a stable system of incentives for electric car buyers, the sale of EVs is going up steadily, if not quite as rapidly as in neighboring Norway, which now has nearly 50% of all car sales being sales of electric cars. With Norway hitting such a mass-market stage, and the financial costs rising for the government, it is thinking about dialing the incentives back somewhat. However, when a nascent market like Denmark does that, the result is the death of the nascent market.
Back to the broader statistical perspective, Denmark electric car sales accounted for approximately 0.4% of all car sales in the country in 2017. That’s not 4% but 0.4%. Sweden achieved a 5.3% market share, one of the best in the world, and Norway had a whopping 39% EV market share.
Here’s a look at 2017 electric car sales (total sales, not market share) in the top 15 countries in Europe:
There are two takeaways from all of this. One, government policies have a big impact on the marketplace. Two, there is wide disagreement about which policies are best to move the world toward a fossil fuel free future. Other nations will be watching Scandinavia closely to learn from its successes and avoid its mistakes.