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Norway Is Running Out of Gas-Guzzling Cars to Tax

When it comes to sales of electric cars , Norway is in a league of its own. In September, battery-powered electric vehicles accounted for 77.5 percent of all new cars sold. That figure makes Norway a world leader by a long way—leapfrogging over the UK, where 15 percent of new car sales were electric as of October, and the US, where that number is just 2.6 percent.

Norway’s electric dream has been credited to a series of tax breaks and other financial carrots that mean brands like Tesla can compete on price with combustion engines. But these incentives—and their success—have created a unique predicament: Norway is running out of dirty cars to tax.

It’s quite a big problem. The previous government—a center-right coalition that was replaced by a center-left minority government in October—estimated that the popularity of EVs was creating a 19.2 billion Norwegian krone ($2.32 billion) hole in the country’s annual revenue. While EVs might be great news for the environment, their rapid success in Norway is now forcing some serious fiscal consternation.The road to this point has been long—and offers lessons to other countries racing to ditch gas-guzzling combustion engines. In Norway, the most progressive electric vehicle policies in the world started with a pop group, an environmentalist, and a small red Fiat Panda. It was 1988 when activist Frederic Hauge, along with fellow green campaigners from the band A-ha, traveled to the Swiss city of Bern, where they found the red Fiat. A previous owner had converted the car to run off a lead battery, and the group planned to use the vehicle to persuade the Norwegian government to encourage electric vehicle uptake.The Fiat became the centerpiece of a nine-year campaign in which Hauge and members of A-ha drove the car on Norway’s toll roads without paying. The fines racked up, and when they remained unpaid, the vehicle would be impounded and sold at auction, where Hauge would buy it back and repeat the cycle of toll dodging. A-ha’s celebrity members added glitz to the crusade against toll fees for EVs and Hauge—who has led an environmental group called Bellona since 1986—courted press attention to demand incentives for electric cars. “By being a positive vigilante, he made the media and also the politicians aware of the electric car,” says Øyvind Solberg Thorsen, director of Norway’s Road Traffic Information Council, which publishes statistics about the country’s roads and vehicles.Eventually, in the late 1990s and early 2000s, the incentives the group campaigned for started to materialize, handing EVs a superior status on Norway’s roads. Rules were introduced that exempted EVs from all toll charges and parking fees and allowed them to skip traffic by using bus lanes. More meaningfully, purchases of new EVs were exempted from hefty taxes—including VAT and purchase tax—meaning a new Volkswagen e-Golf cost €790 ($893) less than a VW Golf with a combustion engine.The problem was that people responded to the policy so well that it eradicated an important source of income for the government, says Anette Berve, spokesperson for the Norwegian Automobile Federation, a group representing car owners. “So this is a clash of two different goals.”