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Electric-car rebates: More than free money?

The federal government’s new $5,000 rebate for Canadians buying electric vehicles may encourage more drivers to make the switch — but will it make a dent in Canada’s greenhouse gas emissions?

The rebate will likely raise sales of electric cars by a few per cent, but “that’s not enough to … transform the market,” said Nicholas Rivers, Canada Research Chair in climate and energy policy at the University of Ottawa.

The real value of the rebate, Rivers said, is its potential to kick-start a longer-term switch to electric vehicles (EVs), which in turn could lead to a significant reduction in Canada’s greenhouse gases, a quarter of which are generated by the transportation sector.

“The intent is partly to push this new technology into the market so that Canadians get more familiar with it,” he said.

Once that happens, infrastructure (such as charging stations) will follow, and manufacturers will be more likely to bring electric vehicles to the Canadian market, Rivers said. And then, as more people buy these vehicles, prices should drop.

According to Transport Canada, the federal government has set targets for EVs (or “zero-emission” vehicles) to make up 10 per cent of “light-duty vehicle sales” by 2025 and 100 per cent by 2040.

Right now, it’s widely thought EVs make up one or two per cent of the cars on Canadian roads. In this respect, China, the U.K. and the U.S. are all ahead of us. But in terms of market share, Norway is the clear leader, according to the International Energy Agency. In March, EVs made up 58 per cent of new car sales in Norway — and the Norwegian government has pledged to make that 100 per cent by 2025.

Norway has achieved this transformation through “a bunch of incentives that are all piled on top of each other,” Rivers said.

Gunnar Eskeland, a professor at the Norwegian School of Economics, is more blunt about it. There have been incentives, yes, but also a “sledgehammer” in the form of Norway’s very high national taxes on vehicles — from which electric car buyers are exempt.

Add in free use of toll roads, access to high-occupancy vehicle lanes and free parking with charging stations readily available, and Eskeland said electric car ownership has become tough for Norwegians to refuse.

Eskeland said the Norwegian government introduced the tax exemption years ago, when people were “charmed” by the idea of electric cars, but very few were available. The widespread adoption of zero-emission cars in Norway today is largely because the government didn’t “turn off” those tax exemptions once foreign EV manufacturers — including Tesla and Nissan — entered the Norwegian market, Eskeland said.

The tax breaks have cost the government a fair bit, which may mean it’s not a model other countries will be eager to adopt. But Eskeland said Norway’s enthusiasm may still help push the electric car agenda forward globally.

Norway’s model “kind of tempts the world to move a little.”

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