Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Electrification of passenger cars as a pathway to reducing
household emissions is not as cost-effective or as fast as it
should be because buyers keep their old cars even after they buy an
electric vehicle (EV), warned a working paper published by the
International Monetary Fund (IMF).
The working paper, commissioned by
the IMF and published on 8 June, estimates the cost-effectiveness
of using sales tax-exempt EV purchases to cut household
emissions.
The paper draws insight from EV policy in Norway to inform other
countries' creation of climate strategies, especially as EVs
feature strongly in the national recovery plans created by
countries in the wake of the COVID-19 pandemic, the authors
said.
For example, the EC's plan for the EU's Recovery and Resilience
Facility, a €672 finance package intended to facilitate a green
recovery, supports installation of 1 million electric car charging
points by 2025 and 500 hydrogen refueling stations, according to
IHS Markit analysts.
Norway has a very high share of EVs in its car fleet, owing to
tax incentives and other policies that cut 40% from the pre-tax
price. In 2020, 54.3% of new cars sold in the country were pure
electric cars, according to the national government.
Norway's EV sales now make up more than 10% of Europe's, where
4% of cars sold are pure electric, according to Norway's Road
Traffic Information Council.
Norway also has one of the highest levels of public charging
stations per capita. In 2016, the government published a target to
sell only zero-emissions vehicles (ZEV) by 2025 alongside plans to
pass a ban on sales of fossil fuel-powered cars.
The household-level emissions savings of one EV in Norway amount
to around half the level of emissions from passenger cars of the
average car-owning household (2.3 mt CO2 annually), the paper
revealed.
But the paper argues that, even with the current and future high
market share of EVs in Norway, it would be "several decades" before
the vehicle fleet would be fully electrified at current rates.
The authors assume the emissions savings from the purchase of
one EV are 17.55 mt CO2, implying a cost from the VAT exemption for
EVs of around $710/mt CO2. The $710 figure overshot a simulated
benchmark for marginal abatement costs that was capped at $420/mt
CO2. What is more, Norway's Ministry of Finance estimated the cost
of all tax benefits, including the VAT exemption, to be around
$1,400/mt CO2 saved.
Another negative finding was that in households that own EVs and
at least one internal combustion engine (ICEV) car, EVs are used
18% less than the median ICE vehicle. Only about a third of
EV-owning households own EVs exclusively.
"This suggests that the degree of substitution between EVs and
ICEVs could be an important factor for the environmental impact of
EVs," said the paper's authors.
The paper showed that the emissions savings from purchasing EVs
are larger in households that only own EVs, and when these fully
rather than partially replace conventional cars. Also, emissions
savings are largest if EVs fully replace the most-polluting ICEVs,
which is not always the situation, according to the report.
The working paper suggested scrapping households' ICEVs to
create greater emissions savings, rather than allowing those cars
to be sold domestically or abroad.
In the paper, the authors also looked at the way household
income affected emissions savings, noting they consider Norway to
be among the most socially equal countries.
Emissions reductions from EVs across all households were
similar, but richer households bought them more often. The median
income of households owning electric cars was NOK 900,000
($105,000).
Norway's sales tax exemption for EVs favors wealthier households
in part because those households are more likely to buy a car or
multiple cars. This inequality might be corrected with tax rebates
for low-income households and higher taxes on the use of
conventional cars, the paper's authors suggest.
Climate and Sustainability News has been renamed Net-Zero
Business Daily™ in order to better reflect our focus on the
business and financial impacts of the global transition to a
lower-carbon and, eventually, net-zero carbon global economy. Each
day, IHS Markit will bring you accurate and detailed information on
recent developments, as well as far-sighted analysis on the
challenges that lie ahead.
Posted 17 June 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability
{"items" : [
{"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"https://www.facebook.com/sharer.php?u=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fimf-working-paper-calls-taxfree-evs-costly-way-to-netzero-.html","enabled":true},{"name":"twitter","url":"https://twitter.com/intent/tweet?url=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fimf-working-paper-calls-taxfree-evs-costly-way-to-netzero-.html&text=IMF+working+paper+calls+tax-free+EVs+costly+way+to+net+zero++%7c+IHS+Markit+","enabled":true},{"name":"linkedin","url":"https://www.linkedin.com/sharing/share-offsite/?url=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fimf-working-paper-calls-taxfree-evs-costly-way-to-netzero-.html","enabled":true},{"name":"email","url":"?subject=IMF working paper calls tax-free EVs costly way to net zero | IHS Markit &body=http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fimf-working-paper-calls-taxfree-evs-costly-way-to-netzero-.html","enabled":true},{"name":"whatsapp","url":"https://api.whatsapp.com/send?text=IMF+working+paper+calls+tax-free+EVs+costly+way+to+net+zero++%7c+IHS+Markit+ http%3a%2f%2fcleanenergynews.ihsmarkit.com%2fresearch-analysis%2fimf-working-paper-calls-taxfree-evs-costly-way-to-netzero-.html","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"}
]}