I suspect a fair number of you know what I mean by energy tourism – sure, you’re up for sight-seeing and museums, but you also note the local gas prices, gawk as you fly over wind turbines and grill anyone who will answer about the local energy policy issues of the day.
My husband and I are both in the energy industry, so our kids have gotten used to flipping through vacation photos of solar farms or gasoline in Absolut bottles for sale in Indonesia.
On the first day of a recent trip to Norway, my daughter and I saw two Teslas on a street corner in Oslo – a rare coincidence even at home in Northern California. Over the next couple days in Oslo though, Tesla sightings became so commonplace that we stopped noting them, until we saw the Tesla taxi, pictured below.
As we learned, Norway is Tesla’s second largest market after California, and with one-tenth the population of California, this is an amazing penetration of Teslas per capita. Teslas outsold ALL other models in Norway in March 2014.
One of our hosts, who drove us around in her Nissan Leaf, explained all the reasons consumers are drawn to electric vehicles (EVs) in Norway. (Tesla also lists them on their website.)
The big one is that you don’t have to pay the heavy import taxes, so it can be cheaper to buy a Tesla than a regular sedan. It looks like a typical car has to pay a 25% import tax. The exemption from import taxes is set to expire as soon as 50,000 EVs are sold, which may be soon. Anticipating the end of the subsidy, buyers scrambled to buy Teslas and other EVs in March 2015. EV owners also get a break on the annual vehicle tax, paying about $50 while non-electric vehicles pay a couple hundred dollars.
Norwegians also have relatively high gasoline prices – I saw $7/gallon – and low electricity prices, so the operating costs favor EVs more than in the US.
Another benefit of owning an EV is that you get to use the carpool lane. So many people in the well-to-do western Oslo suburb have bought Teslas that they occasionally clog the favored lanes. EV owners are also exempt from parking fees at municipal lots, can ride the ferry for free, can charge for free at certain municipal charging stations – the list goes on.
If I were a benevolent world planner, and if I believed that we needed a bunch of electric vehicles on the road somewhere, I would definitely drop a bunch of them in Norway. I’d probably even put more there than in California.
First, Norwegians are rich and better able to afford EVs, which, absent subsidies are still more expensive than comparable cars. The World Bank lists Norway as the second richest country in per capita terms, and it has famously flat income distribution, so the wealth is spread across more Norwegians.
There are also important differences in the environmental benefits of electric vehicles depending on where they are located. A recent working paper by Holland, Mansur, Muller and Yates (HMMY) goes through detailed calculations for the United States. As the authors point out, driving and charging a Tesla/Leaf/etc. in Ohio can lead to more CO2 emissions and more damaging local pollutant emissions than driving a comparable car running on gasoline. Ohioans get a lot of their electricity from coal, so there are a lot of GHGs, NOx, etc., emitted when they charge a Tesla.
Here’s where the Norwegians come in: their electricity system runs on over 95 percent hydro, which does not emit GHGs or local pollutants. As HMMY and others have pointed out, though, we want to think about the marginal emissions when an EV owner charges the battery, not the average emissions on a system. In other words, we want to identify which power plants would produce slightly less in a world without that particular EV.
HMMY go through careful calculations to estimate state-by-state marginal emissions from charging EVs. They then use an atmospheric model to figure out how many people the power plant emissions will impact. They use the same model to figure out who is impacted by emissions from gasoline vehicles and summarize the relative benefit of EVs in the map below. Red areas indicate that EVs are more polluting than gasoline cars in much of the Eastern US.
An HMMY-style calculation is a bit tricky on a hydro system like Norway’s. Roughly, you can think of charging an EV as draining a reservoir more quickly, so you really want to know whether the reservoir is likely to run dry – in which case, the EV might lead to emissions from a fossil fuel or nuclear plant. Norway is interconnected with Sweden, Denmark and the Netherlands, which have cleaner systems than most of the US, but more polluting than Norway. On the other hand, if new rain or snow will fill the reservoir, the EV charging is pretty much emissions free.
The thing about looking at marginal emissions is that this assumes the main benefits and costs to the EV are abating pollution now. I suspect that, to a large degree, US and Norwegian subsidies for EVs are motivated by policymakers’ desire to jump start EVs.
Those benefits are more uncertain and harder to put a number on, but they include the benefits of helping companies like Tesla down learning curves, incentivizing companies to locate more charging stations (see Max’s recent post), incentivizing more research on lightweight batteries, and making consumers feel more comfortable with EVs.
We do not yet know whether EVs will be an important part of a low-carbon future – biofuels may have a resurgence, or someone may come up with a completely new way to power personal transportation. On the other hand, EVs may be the only game in town in a matter of decades. In the meantime, Norway is the perfect place to be running the EV experiment to help us sort everything out.
Catherine Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business, University of California, Berkeley. During Academic year 2018-19, she will serve as the Acting Associate Dean for Academic Affairs at Berkeley Haas. She is the Program Director of the National Bureau of Economic Research's Environment and Energy Economics Program, Faculty Director of The E2e Project, a research organization focused on energy efficiency and a research affiliate at the Energy Institute at Haas. She is also an affiliated faculty member of in the Agriculture and Resource Economics department and the Energy and Resources Group at Berkeley.
Wolfram has published extensively on the economics of energy markets. Her work has analyzed rural electrification programs in the developing world, energy efficiency programs in the US, the effects of environmental regulation on energy markets and the impact of privatization and restructuring in the US and UK. She is currently implementing several randomized controlled trials to evaluate energy programs in the U.S., Ghana, and Kenya.
She received a PhD in Economics from MIT in 1996 and an AB from Harvard in 1989. Before joining the faculty at UC Berkeley, she was an Assistant Professor of Economics at Harvard.