Denmark is slowly retreating from some of its most ambitious, self-regarding climate initiatives. In an unforeseen attack of common sense, the government is readying to end its generous tax breaks for citizens who buy low-carbon vehicles because of the expense imposed on the public purse.
This will triple the retail price of electric cars like the popular Tesla (Model X pictured above) and remove their competitive price advantage against standard fossil fuel-powered models.
A draft budget proposed last week would extend an existing 180 per cent automobile tax to electric vehicles and place their pricing alongside all other standard competitors.
Bloomberg reports the country will also make diesel vehicles more attractive by cancelling a pollution levy, according to provisions in the 2016 budget draft. The government is defending the measures by saying they will help businesses save money and create more jobs.
“Things have to be done with reason,” Finance Minister Claus Hjort Frederiksen told reporters after the draft was unveiled in Copenhagen on Tuesday.
Denmark’s move marks its latest retreat from measures that had once put the Scandinavian country at the forefront of policies designed to promote renewable energy. The three-month-old centre-right Liberal government led by Lars Løkke Rasmussen has already said it is abandoning ambitious CO2 emissions targets and dropping plans to become fossil-fuel free by 2050.
Denmark’s government has also flagged a pull back from decommissioning coal-fired power stations. That policy shift was revealed on Sept. 2, the same day U.S. President Barack Obama made a global appeal for urgent action to fight climate change.
Mr. Frederiksen argues that tough decisions need to be made against the backdrop of a widening budget deficit and subsidising green power projects is no longer financially viable.
“The former government may have promised to keep electric cars exempt from car taxes, but they just forgot one thing: finding the money to do so,” Mr. Frederiksen said.
Norway accounted for a third of all European battery-powered car sales last year, official data shows, and 19 per cent of all cars sold so far in Norway in 2015 were electric, against 13 per cent in 2014.
A total of 1,240 electric cars were sold in Denmark during the first half of 2015, up 97 per cent from a year earlier, according to the latest figures from the European Automobile Manufacturers Association. Tesla’s Model S consolidated its role as a Danish best-seller during the period.
Those numbers are only made by possible by heavy government subsidy and ignores the fact that 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.
Denmark plans to raise just short of 30 billion kroner on car taxes in 2016, while the Tax Ministry estimates that treating electric cars like their fossil-fuel equivalents will add 450 million kroner a year in revenue.