Denmark has been often regarded as a pioneer country to champion climate mitigation strategies and adopting renewable energy sources at an aggressive rate compared to similar countries. Heavy deployment of wind power, combined heat and power plants, and mass adoption of bicycles are some of the examples that Denmark depicted to the world. Contrary to that image, Denmark has been lagging behind to incorporate electric vehicles (EV) into its transport fleet. While other Nordic countries like Norway has been leading the chart with 74.8% of the passenger cars sold in 2020 were plug-in electric vehicles and the same number for Sweden is 32.2%, Denmark is way behind with only 16.4% PEV in the same time period (WEF, 2021).
What went wrong?
In 2015, the Danish government announced that it would take away the tax breaks for electric cars which were 180% import tax for vehicles powered by Internal Combustion Engine (ICE) due to budget constraints and create a level playing field with competing technologies. Without the incentives, EVs became too expensive to buy resulting in a drastic decrease in the EV sales of Denmark while in other parts of Europe the sales were increasing. In the first quarter of 2017, it went down 60.5% and Tesla could sell only 176 units in 2016 compared to 2738 units in 2015 (Brandt, 2017)
How Denmark is tackling the challenge
The Danish government was forced to change the tax law for BEV due to the collapse of the EV market. In 2017, it was decided that the post-subsidy era was postponed unless 5000 cars were not sold between 2016 and 2018. After that, it was planned to gradually increase from 40% in 2019 to 100% in 2022. But later in 2018, it was fixed at 20% for the next two years. This boosted the EV market and a rebound was seen in the sales volume (Berggreen, 2019)
The way forward
The Danish parliament has set an ambitious plan to have at least 775000 electric and hybrid cars on the road by 2030. This plan includes gradually increasing tax and charges for combustion engine-based cars and the opposite for cleaner cars. The tax scheme is planned to be wired with CO2 emission rather than mileage which can save up to 2 million tons of GHG emissions. This target is one of the major tools to achieve Denmark’s goal of curbing emissions by 70% by 2030 compared to the 1990s level (Chris Randall, 2020).
However, the road that lies ahead is far more complicated as Denmark has only a 1.5% share of EVs on the road and the car registration tax contributes almost DKK 50 billion annually to the budget (Berggreen, 2020). Generous financial subsidies and tax breaks are essential to make EVs affordable for general buyers which in turn will greatly affect the welfare system of Denmark. Though EVs are expected to reach price parity which entails less subsidy requirement in the future. Moreover, incentives like free usage of public parking spaces should be gradually eliminated as EVs become more common (Beedham, 2020). The commission also proposes the electricity pricing for charging EVs can be designed based on demand and generation availability (Berggreen, 2020). Above all, the environmental cost of emission needs to be considered while deciding on the future course of action.
Recommendations to increase the uptake of EV
It is unanimously agreed that the biggest barrier to increasing EV penetration is the higher price range. As a result, consistent government policies, tax schemes, and subsidies foster stable investment in EVs and related infrastructures. The government needs to be proactive in the communication regarding the greater adoption of EVs. The local municipalities should also invest in building charging infrastructures and encourage their dwellers for embracing more and more EVs. Social acceptance and readiness of required infrastructures of vehicle-to-grid application is another key point to be noted. The benefit of demand-side management through EV can be staggeringly advantageous for countries like Denmark with a higher rate of variable renewable energy into the grid.
References
- Beedham, M., 2020. Denmark says switching to EVs could cost its welfare system $904M [WWW Document]. TNW Shift. URL https://thenextweb.com/news/hidden-cost-denmark-switch-electric-vehicles-904m-evs (accessed 5.8.21).
- Berggreen, J., 2020. A Million EVs On Danish Roads By 2030 Is Impossible, According To New Report [WWW Document]. CleanTechnica. URL https://cleantechnica.com/2020/09/08/a-million-evs-on-danish-roads-by-2030-is-impossible-according-to-new-report/ (accessed 5.8.21).
- Berggreen, J., 2019. Planned Tax Increase For BEVs In Denmark Scrapped — Sales Surging [WWW Document]. CleanTechnica. URL https://cleantechnica.com/2019/12/06/planned-tax-increase-for-bevs-in-denmark-scrapped-sales-surge/ (accessed 5.8.21).
- Brandt, E., 2017. Denmark EV Sales Plummet With Tax Break Elimination [WWW Document]. The Drive. URL https://www.thedrive.com/news/11089/denmark-ev-sales-plummet-with-tax-break-elimination (accessed 5.8.21).
- Chris Randall, 2020. Denmark ups taxes for ICEs and incentives for EVs [WWW Document]. electrive.com. URL https://www.electrive.com/2020/12/07/denmark-raises-taxes-for-ices-and-incentives-for-evs/ (accessed 5.8.21).
- WEF, 2021. Chart: Which countries have the most electric cars? [WWW Document]. World Econ. Forum. URL https://www.weforum.org/agenda/2021/02/electric-vehicles-europe-percentage-sales/ (accessed 5.8.21).
