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Welfare effects, carbon abatement costs, and market impacts of EV subsidies in Norway

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  • Mustafa, Mirlind

Abstract

Using a joint demand–supply BLP model on 2010–2019 Norwegian data, I evaluate the value-added tax (VAT) and weight tax (WT) exemptions for electric vehicles. I simulate reimposing VAT, WT, or both and compute welfare under a national (consumer surplus + tax revenue + domestic producer surplus) and global (consumer surplus + tax revenue + full producer surplus − SCC) criterion. The exemptions cut lifetime CO2 by 3.00 Mt (90% CI: 1.69–5.13 Mt) but cost 3.65 Bn. € (90% CI: 2.02–6.90 Bn. €) in forgone revenue, implying a fiscal cost of 1217 € per tonne of abatement. Nationally, the welfare analysis supports reimposing VAT, while globally, once full producer rents are counted, the status quo (no additional EV taxes) is optimal. Absent exemptions, EV sales would have been about 64% lower, with substitution toward gasoline hybrids and PHEVs.

Suggested Citation

  • Mustafa, Mirlind, 2026. "Welfare effects, carbon abatement costs, and market impacts of EV subsidies in Norway," Energy Economics, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:eneeco:v:157:y:2026:i:c:s0140988326000976
    DOI: 10.1016/j.eneco.2026.109218
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    Keywords

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    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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