Norway Reaffirms Electric Car Subsidies After Bboom

The country's high EV subsidies mean that one in five cars sold in the Nordic nation so far in 2015 is battery-powered.

The success of electric cars in the nation of 5 million people has led to a projected tax shortfall of 2 billion crowns ($267.79 million) for 2015 because of exemptions from value-added tax and other benefits.

On Tuesday, Norway's right-wing government said it would review car taxes and work out new rules for 2016 but stressed that policies would "stimulate a newer, safer and more environmentally friendly car fleet."

Last month, electric car sales in Norway reached a cumulative total of 50,000, or 2% of all cars on the road. They make up fractions of a percent in most nations. The total meant that sales reached a threshold set for a review, leading to fears among electric car owners of radical cuts.

The government said many tax breaks for electric cars would be maintained until 2017, as planned, and then gradually phased out. It also extended some tax breaks, now applied only to private buyers, to leased electric vehicles.

The government will also give local authorities more say over policies such as allowing electric cars to drive in bus lanes, or to be exempt from parking charges and road tolls. And it might offer more benefits for owners of hybrid cars, which run on gasoline and electricity.

"We are very positive that this electric vehicle success will continue," Petter Haugneland of the Norwegian Electric Vehicle Association told Reuters.

Frederic Hauge, head of the Norwegian environmental group Bellona, who drives a Tesla Model S, said: "There are still reasons to say 'look to Norway' when it comes to electric vehicles." Still, he criticized the government for indicating that it might favor cheaper, small electric cars over Teslas, which start at about $70,000. He said small cars were often bought in Norway merely as second cars.

The EV subsidies led to the Model S becoming Norway's top-selling car for a short time, prompting calls to end subsidies for wealthy buyers.

Norway accounted for a third of all European battery-powered car sales last year, official data show, and 19% of all cars sold so far in Norway in 2015 were electric, against 13% in 2014.

The country generates nearly 100% of its electricity from hydropower so the shift to battery powered cars results in a net reduction in greenhouse gas emissions -- part of the country's plans to reduce emissions by at least 40% by 2030 compared to the 1990 level.

Norway is also Western Europe's biggest oil and gas producer with about 3.7 million barrels of oil equivalents per day and its offshore energy sector accounts for a fifth of the economy.