The adverse effects of the Norwegian electric vehicle incentive scheme with emphasis on congestion and public funding

Abstract

Norway is one of the countries in the world with the highest market share of electric vehicles per capita. Much of this is due to a comprehensive incentive scheme to facilitate the purchase and use of electric vehicles. The purpose of the incentive scheme is to reduce emissions, which is an externality of road traffic. However, road traffic also causes other externalities, which the incentive scheme does not take into account. The purpose of this thesis is to identify and estimate the adverse effects that arise with increasing shares of electric vehicles. The adverse effects are associated with the externalities that emerge from road traffic. In particular, this thesis emphasizes the adverse effects of toll exemption for BEVs, which are related to congestion and public funding Existing literature on the incentive scheme focuses on the importance and cost-effectiveness of the incentives, and the characteristics of electric vehicle owners. Some discuss the potential adverse effects of the incentives, but fail to provide evidence and take the whole cost into account. Therefore, this thesis will try to empirically estimate how demand for driving changes with higher numbers of electric vehicles, and discuss what externalities this may cause. The demand for driving is estimated through three different models using two data sets, where the first model uses annual mileages per vehicle for all municipalities and the second and third model use toll passages in the five largest cities in Norway. All three models suggest that demand for driving increases with increasing shares of electric vehicles. This thesis argues that because demand for driving increases, the externalities from road traffic increase.