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

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 CO 2 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. • Without VAT and weight tax exemptions, EV sales over 2010–2019 would have been 64% lower. • The exemptions reduced lifetime CO2 emissions by 3.00 Mt at an implied fiscal cost of €1,217 per tonne. • Welfare results diverge: nationally, taxing EVs increases welfare, whereas globally the status quo is optimal. • Counterfactual simulations reveal strong substitution toward gasoline hybrids and plug-in hybrids.