A major oil and gas producing and exporting country is going out of its way to phase out the consumption of the two fuels in the transportation sector by encouraging and regulating electric vehicles.

I am talking about Norway where in 2015 oil reserves stood at 8 billion barrels and gas reserves at 1.9 trillion cubic meters. Oil production was 1.948 million barrels a day (mbd) and consumption was 0.234-mbd. Gas production in 2015 was 117.2 billion cubic meters (bcm) and consumption at 4.8-bcm.

The greater majority of oil and gas production was exported to international markets to generate close to $900 billion in Norway’s Pension Fund. Norway’s consumption of oil and gas is modest compared to its production and the size of its economy because it is endowed with enormous supply of hydroelectricity, to the tune of 32 million tonnes of oil equivalent a year or about 0.64-mbd, representing about 98 per cent of the country’s electric power generation.

The permanency of this renewable source and development of plug-in electric cars and hybrid vehicles made the government — and the opposition — proceed with policies to encourage consumers to switch to electric mobility.

The movement started in 1990 when electric vehicles were exempt from import tax and progressively followed by reduced annual registration tax, exemption from road tolls, free parking in public spaces, reduced company car tax. In 2001, the value added tax of 25 per cent was reduced to zero.

Free access to bus lanes and road ferries was followed by the launch of municipal-built electric vehicle (EV) charging stations for free. The country now enjoys 7,632 stations where the largest can recharge 28 cars in one go in only 30 minutes. All these incentives were extended in 2012 by parliament until 2018 or when the 50,000 EV target is reached, which it has passed.

Vehicle registrations are a good measure of the success of this programme. In 2004, only 100 electric vehicles were registered while in 2016 it was close to 51,000. The real take off came from 2013 as electric car prices declined and technology improved, especially with respect to the maximum distance travelled between charges.

In an up-to-date article in Wikipedia it says that “As of July 2016, the market concentration was 21.5 registered plug-in cars per 1,000 people, 14.2 times higher than the US. The stock of light-duty plug-in electric vehicles registered in Norway totalled more than 135,000 units at the end of December 2016, making the country the one with the largest European stock of light-duty plug-in vehicles, and the fourth largest in the world after China, the US and Japan.”

But as the time of phasing out subsidies and incentives approached the government decided to phase out free parking and the use of bus lanes after complaints from other motorists. However, municipalities were given the choice to allow free parking and the use of bus lanes and Oslo went that way.

But the taxes may only be increased gradually. To keep the competitiveness of electric vehicles the government may resort to increase taxes on gasoline and diesel fuels and vehicles. All this is implied in the National Transport Plan 2018-29 where the goal is that “all new cars, buses and light commercial vehicles in 2025 should be zero emission vehicles, that is, all-electric and hydrogen vehicles”.

Also, all new internal combustion engines vehicles must be plug-in hybrids to minimise gasoline and diesel consumption.

The programme in 1990 was driven by the desire to improve air quality in the cities but later by commitments to climate change policies. The argument is plenty whether the high public subsidies are worth the result of reducing emissions, the congestion in bus lanes, and the loss of revenue to ferry operators.

A study reported by Reuters in 2013 said that “the annual benefit of owning an electric car in Oslo is estimated at $8,200 per car, per year”. But this is disputed by the Norwegian “Green Car” study which claims more realistic assumptions and “estimates that the annual benefit of owning an electric car in Oslo is estimated at $3,336 per car, per year”.

In December 2016, plug-in cars represented 5 per cent of the 2,63 million passenger cars in Norway. However, the uncertainties about the incentives and the severe climate conditions are driving the purchase of hybrid cars rather than all electric.

Norway is a rich country who can afford such subsidies and incentives and as long as they last, people will likely go for plug in and hybrid vehicles. At the same time, Norway is a special case where almost all of its electricity comes from renewable source and therefore its experience may be repeated only in similar situations. Nevertheless, it remains to be seen whether Norway’s long term goals will be met.