Leading International Electric Vehicle Policies: Success Stories of Norway and China

Guest post by Diying Wu

The global electric vehicle (EV) market continues to power up, with potential global sales of 11 million in 2025. China is the leading EV market with a global market share of 48%, followed by Europe with 26%. In Europe, Norway has been the frontrunner in both EV incentive policies and purchases.

The two case studies described in this blog illustrate examples of policy stickiness and policy ambition. A sticky policy is one that improves a complex social problem by kickstarting a transformation and gaining wide public support over time. Norway’s “sticky” policy kickstarted the EV revolution with strong incentives, and attracted public support over time. When the initial niche support expanded to include more Norwegian regions and social groups, the policy “stuck” because future governments could not easily roll it back.

China’s EV policy is part of the government’s ambition to combat air pollution and meet its climate change goals, as outlined in its 13th Five-year Plan for 2016-2020 and its nationally determined contribution. With a new dual-credit system to regulate automotive manufacturers, generous subsidies, and infrastructure support, China’s policy demonstrates high ambition to promote all-electric battery electric vehicles (BEVs) over traditional vehicles, including over plug-in hybrid electric vehicles (PHEVs).

Norway

You don’t need to be an environmentalist to buy an EV in Norway - it just makes financial sense for consumers, thanks to incentives such as VAT exemptions. The Norwegian tax system ensures that the polluter pays: the purchase tax for new cars is based on their weight and emissions of carbon dioxide and nitrogen oxide. On the other hand, Norway’s tax breaks lower the upfront cost of an EV, and small models enjoy such a high tax break that their cost barely exceeds the import price.

In Norway, everyday consumers choose to drive an EV on a daily basis. While gasoline prices are high at approximately $2.60 (Cdn) per litre, the country produces clean and cheap electricity. Since driving an EV is cheaper than driving a vehicle powered by fossil fuels, EVs have gained popularity over time. Starting from 2008, EV purchases have spread out from the initial cities like Oslo to the surrounding municipalities and finally to the entire nation. Last year, 52 percent of all new car sales in Norway were electric vehicles.

China

China recently introduced a dual-credit regulatory system, which rewards or penalizes manufacturers with positive or negative credits based on their car models’ fuel consumption and driving range. The system awards more positive credits to BEVs than to PHEVs: the BEVs get two to six credits based on driving range, while PHEVs receive only two credits regardless of driving range. The system gives a complex formula to calculate the credits for all vehicles, and vehicles with a great environmental impact are likely to end up with negative balances.

Under this new dual-credit system, if an automaker does not produce any EVs, then it will have to purchase credits from other automakers through a credit-trading system. If any automaker ends up with a negative credit balance, in the most severe cases it might be penalized by being ordered to halt their production of vehicles with high fuel consumption.

The Chinese government aims to form an all-electric transportation ecosystem by building public charging piles. 214,000 of them were already in place by the end of 2017. According to the Chinese National Energy Administration, the government plans to construct over 12,000 charging stations and 4.8 million distributed charging piles by 2020 to satisfy the goal of 5 million EVs nationwide.

China has committed to relaxing its foreign investment requirements in the automobile industry to create a more competitive market for Chinese automakers and force them to improve their performance. Tesla was the first to respond - Elon Musk signed an agreement with the city of Lingang, Shanghai to build a Gigafactory just days after the policy change was announced.

In 2016-2017 alone, the Chinese government issued 18 billion USD in industrial EV subsidies, but it’s gradually phasing out such subsidies; Between 2017 and 2020, PHEVs will lose 20% of their subsidies for 2017-2018, 40% for 2019-2020, and 100% after 2020.

Conclusion

China’s example demonstrates the ambition of a strong central government and what it can do using a top-down approach to meet climate change goals. The Chinese transition from subsidy-driven to market-driven policy will prepare domestic automakers for competition with foreign companies once they start their own Chinese businesses in five years. The Norwegian case study illustrates the importance of policy’s stickiness, because once the general public embraced the transition (and supporting policies) to EVs on a national level, it is hard for future governments to roll them back. Currently, Quebec is the first Canadian province to apply a zero-emission vehicle policy. Canada can learn from Norway to make driving EVs an economic decision instead of an environmental one.