Court of Audit: subsidy for electric cars is expensive for limiting CO₂

The Court of Audit states that tax incentives for electric cars are an expensive measure for reducing CO₂ emissions. The Court of Audit writes this in a letter to the House of Representatives.

At the request of the House of Representatives, the Court of Audit has mapped out the financial scope of the current incentives for electric cars and the substantiation of the costs per tonne of CO₂ saved. An important finding of the Court of Audit is that the costs per avoided ton of CO₂ emissions for the electric cars purchased in 2018 amount to almost 2000 euros, and not the 1700 euros used by the government.

According to the Court of Audit, encouraging the use of electrically powered vehicles will cost at least 700 million euros in the period 2018 to 2022. This amount refers to the 25,068 electric vehicles sold in 2018 and does not take into account indirect effects, such as lower tax revenues in the form of the loss of fuel excise duties. These 700 million euros for more than 25,000 electric cars sold are about 28,000 euros per electric car sold, the Court of Audit writes. This 28,000 euros applies for a period of five years, so 5600 euros per car per year.

The Court of Audit has the necessary comments on the calculations made by the government, including this amount of EUR 5,600 per car per year. The calculators state that this concerns an average amount per car: ‘For more expensive models, such as the Tesla Model S, Model X and the Jaguar I-Pace, the incentive amount can be considerably higher. For privately purchased electric cars, to which the adjustment discount and the MIA do not apply, the tax incentive amount is considerably lower than the average’.

The Court of Audit also states that the incentive amount of 1700 euros per tonne of CO₂ saved is strongly based on assumptions, which are subject to negotiation. That 1700 euros is calculated by dividing the 5600 euros by the assumed amount of CO₂ saved. ‘In our analysis of the assumptions made by the State Secretary of Finance, we found that the quantities of CO₂ used per km are based on unweighted averages of RDW data. The weighted average CO₂ emissions are lower, at 114 g/km for petrol cars and
111 g/km for diesel cars’. When applying weighted averages, the amount of tax incentives per tonne of CO₂ saved comes to almost 2000 euros per tonne, according to the Court of Audit. The calculators arrive at this deviating amount because they also take into account the number of cars of a certain type and associated emissions in their calculation method. In addition, the Court emphasizes that the smaller the difference in CO₂ emissions between a vehicle with a combustion engine and an electric car, the higher the costs per tonne of CO avoided.

The Court of Audit also mentions findings and recommendations from 2014. When it turned out that the tax benefit per car over a period of five years can be high: with a plug-in hybrid such as the Mitsubishi Outlander to more than 40,000 euros and for the Tesla Model S Performance. version up to about 85,000 euros per car. At the time, the Court of Audit found that this advantage mainly accrued to the business driver and hardly ever to the private driver. In addition, the institute established that the environmental benefits were limited due to the ‘unforeseen high CO₂ emissions of plug-ins’. ‘If the money had been spent differently, the cabinet could probably have saved more CO₂’, the Court of Audit wrote at the time. It was also recommended to look at alternatives to the expensive tax incentives. Board member Francine Giskes now says the following: “We already drew those conclusions in the 2013 and 2014 accountability study about the tax incentives at the time. It is unlikely that we will draw a different conclusion about the current tax benefits.”

State Secretary Snel and of Finance and State Secretary Veldhoven-van der Meer of Infrastructure and Water Management have responded to the words of the Court of Audit in a letter. They disagree with the Court of Audit on several points. Thus, incorrect assumptions were used. A spokesperson for Snel tells the AD that it is, for example, very unlikely that a person who now drives an expensive electric car because of the discount on the tax addition would choose an equally expensive petrol car if this discount on the addition was not available. However, according to her, the Court of Audit assumes that.

In the course of this year, the Court of Audit will publish a report on all tax incentives in car taxes and in the second quarter of 2020 a further study into the effectiveness and efficiency of these taxes.