Denmark offers us the latest proof that regulations and government policy are not the keys to the electric car revolution. Until the end of 2015, electric cars were exempt from Denmark’s whopping taxes on new cars, which can reach as much as 180% of the sales price. Not surprisingly, sales of electric cars were booming.
Then the government decided to rein in its generous incentives. Startting January 1, 2016, electric car buyers were assessede a tax equal to 20% of the purchase price. Sales in December were the best ever, as Danish citizens rushed to take advantage of the old zero tax rate. 1,588 electric cars were sold in that month — the highest number ever in this tiny country.
In January, only 68 cars were sold in Denmark. Since then, things haven’t gotten much better. Through the end of July, a total of 1,332 clectrics have found new homes in Denish driveways, a drop of nearly 80% compared to last year. Taxes on conventional cars have been reduced, making them less expensive when compared to EVs. Things will get worse on January, 2017 when the tax rate doubles to 40%. By 2020, the advantage for electric cars will expire entirely.
The Danish experience tracks what happened in Georgia recently. Until June 20, 2015, Georgia had the highest elecric car incentive in the nation at $5,000, but the Georgia legislature voted to end it as of July 1, 2015, After that, dealers couldn’t give electric cars away. Sales of the LEAF plunged from more than 1,000 a month to just 66 in August.
We have touched on this subject often here at Gas2. Our position is that ending subsidies on fossil fuels is more effective at promoting market decisions that benefit all of society than regulations that mandate people to buy certain products or incentives that benefit only a few. Making the price of fossil fuels accurately reflect their true cost to society — including the health care costs associated with their use — is the most intelligent way forward toward a sustainable world.
Source: E24 Norway Hat tip to Leif Hansen