EV Subsidies and the Evidence From Norway to California

Walk down a residential street in Oslo and the strangest thing about the parked cars is what you do not hear when one pulls away. Norway, a country that grew rich on North Sea oil and still pumps a great deal of it, has become the place where the gasoline car is dying fastest. In 2025 nearly every new passenger car registered in the country was fully electric. Charging cables snake out of apartment garages; fast chargers line the highways up the fjords; taxis, delivery vans and police cars run on batteries. Norway's parliament had set a goal in 2017 that all new cars sold by 2025 should be zero-emission, and the country came very close to meeting it. For anyone in the United States arguing about whether to subsidize electric vehicles, Norway is the obvious exhibit. The harder question is what exactly the exhibit proves. Was it the money, the chargers, or the price of gas? And does any of it travel to a country of long distances, cheap fuel and deep political division over the cars themselves?

In short: Norway reached near-total electric car sales through decades of large tax breaks that made EVs cheaper than gasoline cars, plus perks, chargers and high fuel taxes. California got far with mandates on automakers and modest rebates. The evidence suggests that price matters most, that charging matters more than it gets credit for, and that how subsidies are targeted decides who benefits.

How Norway did it

The Norwegian story starts earlier than most people think. In the 1990s, long before Tesla, Norway began exempting electric cars from its very heavy taxes on new vehicles. Those taxes matter more than in most countries: Norway has long charged a steep registration tax on new cars, calculated partly on weight and emissions, plus a 25 percent value-added tax. A gasoline car carried a large tax bill. An electric car paid little or none of it.

Over the years, the country added perks. Electric cars were exempted from road tolls and could ride many ferries cheaply or for free. They could use bus lanes in some cities. Many municipalities let them park free. Each perk was small, but together they gave EV owners savings they noticed every day.

The result was a price structure in which, for many models, an electric car cost about the same as or less than a comparable gasoline car, even before fuel savings. Then add Norway's fuel taxes, which make gasoline expensive, and its electricity, which comes overwhelmingly from hydropower and has historically been cheap. The total cost of owning an EV became lower than owning a gasoline car for most buyers.

As EVs took over, Norway began scaling back some of the perks. Free parking and toll exemptions were reduced in many places, and the government began charging partial VAT on more expensive electric cars. Sales kept climbing anyway, which tells you something: once a market tips, the subsidies that tipped it may not be needed at the same level.

The irony, and why it matters

Critics point out, fairly, that Norway is a peculiar place to learn from. It is a small, wealthy country with a large sovereign wealth fund built from oil revenue. It can afford to give up tax money on cars. Its people mostly live in a few urban areas and drive shorter distances than many Americans. Its grid is almost entirely clean already, so every EV is a straightforward emissions win.

There is also the uncomfortable fact that the country electrifying its own cars keeps selling oil and gas to everyone else. Norwegian climate activists make this point loudly. The money that made generous EV policy affordable came, in part, from the fuel those EVs replaced.

None of that makes the evidence useless. It means you have to separate what is uniquely Norwegian, such as its wealth and hydropower, from what is general, such as the response of car buyers to price. And on price, the lesson from Norway is unmistakable. When electric cars became cheaper to buy and own than gasoline cars, people bought them, regardless of whether they cared about the climate.

California's different path

California has gone further toward electric cars than any American state, and it has done it mostly with a different tool: rules on automakers rather than checks to buyers.

Since 1990, California has had a zero-emission vehicle program requiring automakers to sell a rising share of clean vehicles in the state, with credits that companies can trade. Because California has special authority under the Clean Air Act to set its own vehicle pollution standards, with a federal waiver, and because other states can adopt its standards, its rules have shaped what automakers build for a large part of the American market. In 2022 the state adopted a rule requiring that all new cars sold by 2035 be zero-emission, with plug-in hybrids counting for part of the total.

The state also offered purchase rebates through a program that ran for more than a decade, with larger amounts for lower-income buyers, before closing to new applicants in 2023. Separate programs offered extra help to low-income households trading in old cars. Electric cars were allowed in carpool lanes. Utilities offered discounted charging rates.

By the mid-2020s, roughly a quarter of new cars sold in California were zero-emission vehicles, far above the national share. That is impressive progress and also a reminder of how far there is to go compared with Norway.

In 2025 Congress used the Congressional Review Act to revoke the federal waivers that allowed California's newest vehicle rules to take effect, and the president signed the resolutions. California sued, arguing that the review act could not be used that way for waivers. However the courts resolve it, the fight has put the state's 2035 goal in doubt, and it has left automakers planning around two possible futures at once.

The other giant in the room

Any honest look at EV policy has to include China, which became the largest electric vehicle market in the world by a wide margin. Beijing spent more than a decade subsidizing electric car purchases, exempting them from purchase taxes, giving them easier access to license plates in crowded cities where plates for gasoline cars are rationed, and pouring state support into battery makers and automakers. The result was not only high sales at home. It was an industry that can build electric cars far more cheaply than most Western competitors.

That changes the American debate. In 2024 the Biden administration raised tariffs on Chinese electric vehicles to 100 percent, keeping them out of the US market almost entirely, and both parties have generally supported keeping them out. The argument is about security, jobs and fair competition, and it has real weight. But it also means American buyers face higher prices than they might otherwise, and that American policy has to build a domestic industry able to compete rather than simply relying on cheap imports. Subsidies, in that light, are not only about getting drivers into clean cars. They are about whether the cars, and the batteries inside them, are made in Michigan, Georgia and Tennessee, or somewhere else.

What the research says about each tool

Economists have studied EV policy in many countries, and the research, while not unanimous, points in some consistent directions.

Purchase subsidies work, but some of the money is wasted. Studies of the old US federal credit, before the 2022 changes, found that a significant share of the money went to buyers who would have bought an EV anyway, and that most of it went to higher-income households who were the main buyers of new cars. That is the free-rider problem. Subsidies targeted at lower- and middle-income buyers, or delivered as an instant discount at the point of sale, tend to change more decisions per dollar, because those buyers are more sensitive to price.

Charging matters a lot. Research on the US market has found that expanding public charging stations increases EV sales, partly because buyers worry about running out of range and partly because charging infrastructure and EV sales reinforce each other. Some studies concluded that, dollar for dollar, investing in charging produced more EV adoption than subsidizing purchases, at least at the early stages of the market. That finding should get more attention than it does, because charging is a public good that individual buyers cannot provide for themselves.

Fuel prices matter, but politically they are hard to use. When gasoline is expensive, the savings from driving electric grow, and buyers respond. Europe's high fuel taxes are one reason its EV markets developed faster than America's. But raising gas taxes is close to politically impossible in the United States, and it falls hardest on rural and lower-income drivers who have no alternative. Progressives should be honest that a gas tax is not a realistic tool here, and that relying on fuel prices means accepting the volatility that comes with world oil markets.

Mandates on manufacturers shift supply. Rules like California's force automakers to build and market electric models, which increases the number of choices and pushes prices down over time through scale. They work in the background, without a budget cost, which is part of their appeal.

Taken together, the research suggests that no single tool did the work. Norway combined all of them, at very high intensity, for thirty years. That is the honest lesson.

The case against EV subsidies

The strongest case against EV subsidies comes in two forms, and both deserve to be answered.

The first is fairness. Taxpayers of modest means, many of whom drive older used cars, help pay for credits claimed by people buying new vehicles that cost more than many families earn in a year. That was a fair criticism of the old federal credit. The 2022 law tried to answer it with income limits and price caps, and with a credit for used EVs. The better answer is to put help where it changes behavior: lower-income buyers, used cars and point-of-sale rebates.

The second is cost-effectiveness. Some economists argue that subsidizing EVs is an expensive way to cut emissions compared with other options, especially where the grid still burns a lot of coal or gas. That argument has weakened as grids have gotten cleaner and as batteries have gotten cheaper, but it has not disappeared. The answer is that EV policy is not only about this year's emissions. It is about building a market and a supply chain that will make clean cars cheaper for everyone. The question is whether the United States builds that industry or buys it from somewhere else.

Affordability is the real argument

Here is where I think progressives too often lose the plot. Electric cars have been sold, in American politics, mainly as a climate policy. That framing alienated a lot of people who see them as expensive toys for coastal professionals.

The stronger case is about cost of living. Electric cars are cheaper to fuel and maintain. Used EVs have become cheaper as the market has grown. A working family that drives a lot, rural families especially, has the most to gain from lower fuel costs, and the least ability to pay a higher sticker price upfront. Policies that help those families get into used EVs, put chargers in apartment buildings and small towns, and keep electricity affordable speak to everyday concerns rather than climate ones. You can follow that conversation on the affordability and cost of living page.

What the end of the federal credit tests

After September 30, 2025, the United States ran an experiment nobody designed on purpose. The federal credit ended. Buyers rushed to beat the deadline, then sales fell back. Automakers trimmed EV plans. Some states continued their own incentives; others did not.

That gives researchers, and voters, a natural test of how much the federal credit was doing. If sales hold up reasonably well in states with strong charging networks and their own incentives, it will suggest that charging and state policy carry more weight than the national credit did. If sales collapse, it will suggest that the price gap still matters enormously. The answer will shape whatever the next Congress decides to build.

What you can do

The evidence points to price and charging, and both are decided partly by public officials you can reach.

• Push your state on charging and rebates. Many state programs survived the federal cuts. Find your state legislators and ask what your state is doing about public charging and help for lower-income buyers.
• Track where your state stands. The climate data page shows clean power by state, which tells you how clean an EV is where you live.
• Comment on vehicle rules. Federal rules on vehicle emissions and fuel economy go through public comment. The comment page lists rules open now, soonest closing first, with guidance on writing a comment.
• Find local programs. Community groups, credit unions and nonprofits sometimes help families get into cleaner, cheaper cars. The organizations directory lists environmental and community groups in every state.

Norway did not get to nearly all-electric sales because its people were greener than anyone else. It got there because, over thirty years, its government made the electric car the obvious, cheaper choice. The question for Americans is whether we can make it the cheaper choice too, starting with the families who need it most.