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EV incentives and city bans in Europe: an overview

The road to electrification is littered with carrots and sticks. Fleet managers have to know where they are, so they can build a cost-efficient mobility policy around them. Here’s a road map of EV incentives – the carrots – and city bans of ICEs – the sticks – across Europe.

In line with the Paris Agreement of 2015, the European Union aims to be carbon-neutral by 2050. Decarbonising mobility is an important slice of the overall effort. But each member state has a different approach. As do non-EU-members like Norway and the UK.

What almost all do share: they use a mix of carrots and sticks to get citizens and corporates to switch to EVs. For corporate fleets, the best electrification policy is the one that makes efficient use of those carrots and sticks on a per-country basis. 

Fiscal policy

Fiscal policy is one of the most efficient tools individual countries have to redirect mobility behaviour. That’s why more than 20 European countries have linked car taxation to CO2: cars that emit more are taxed more. That’s the stick approach, but most countries also offer financial and fiscal carrots, most in the form of purchase incentives, some by way of tax reductions. 

International accountants BDO have ranked European countries for the effectiveness of their fiscal carrot-and/or-stick approach. 

Four countries fall into the top category:

  • Norway: there is a specific calculation of BIK for EVs, which are exempt from registration tax and VAT, and also get a reduced rate for Traffic Insurance tax
  • Sweden: there is a bonus-malus system and tax relief for EVs.
  • The UK: a diverse range of measures favourable to EVs.
  • Denmark: has a ‘polluter pays’ policy. Taxation tends to incentivise eco-friendly cars. 

Nine countries are in the middle group:

  • Ireland: continues to reform its car tax policy towards the ‘polluter pays’ principle by taxing emissions and incentivising EV purchases.
  • Portugal: VAT deduction for EVs, plus some advantages for corporate income tax.
  • Austria: EVs are exempt from certain taxes, such as car license duty and vehicle tax. Some state and local governments offer purchase subsidies.
  • Belgium: incentives, which vary per region, include purchase incentive, reduced or no registration and road tax, 100% tax deduction for the least-polluting hybrids. 
  • Finland: with tax closely linked to CO2, EVs generally are taxed a lot less.
  • France: specific exemptions and bonuses are available for EVs.
  • Germany: EVs get some premiums and temporary tax exemptions.
  • The Netherlands: EVs are exempt from private motor vehicle tax.
  • Switzerland: reduction of circulation tax for EVs; in some cantons even a total waiver. 

Eleven countries are classed as low-incentive:

  • Bulgaria: EVs exempt from property tax.
  • Czech Republic: EVs exempt from road tax.
  • Greece: EVs exempt from classification duty.
  • Hungary: EVs get preferential rate for registration tax.
  • Italy: Income tax reduction if individual installs EV charger.
  • Latvia: EVs exempt from exploitation tax.
  • Poland: some subsidies available.
  • Romania: Non-refundable grant when buying EV.
  • Slovakia: EVs get some tax relief.
  • Slovenia: EVs get some tax relief.
  • Spain: measures vary per autonomous region.

Three countries offer (close to) no fiscal incentives for EVs:

  • Estonia: doesn’t have car tax at all.
  • Lithuania: no tax relief for EVs.
  • Luxembourg: no tax relief for EVs.

ICE bans

Cars with internal combustion engines (ICEs) are increasingly unwelcome in a list of European cities many hundreds long and growing. If these cities are within your area of operation, you may want to adjust your electrification policy accordingly. Most bans still allow the most efficient diesel engines (Euro 6), but the writing is on the wall: these so-called low-emission zones (LEZs) will only multiply and get stricter – eventually turning into zero-emission zones (ZEZs). 

The situation is fluid and fast-evolving; rules are typically different from city to city, and the picture changes from month to month. With that caveat in mind, here’s an overview of the situation in Europe’s most important markets.

A pioneer of urban emissions reduction, Germany currently has more than 80 cities with LEZs, including all major ones. Access rules differ from city to city, but there is a national framework. Drivers must have the environmental access sticker that corresponds to their vehicle’s emissions level. Each LEZ determines who gets access, how and when. 

LEZs are currently in operation only in Paris, Lyon Grenoble and Strasbourg. Some LEZs are only for delivery vehicles. In each LEZ, vehicles must have the appropriate Crit’Air sticker. These are mandatory, both for French and foreign vehicles. 
United Kingdom
London was and remains the trailblazer, with a LEZ and a few small ZEZs (on top of a congestion charge zone). Many other cities have since set up LEZs, including Birmingham, Oxford and Manchester. Scotland has its own national LEZ framework, with cities like Glasgow, Edinburgh and Aberdeen participating. 

There are dozens of LEZs in Italy – including virtually all major cities – each with their own standards and access periods. Most are in northern Italy, some also in the middle and Sicily. In Milan and Palermo, LEZs and urban road tolling schemes are combined.

Barcelona has instituted a LEZ. In Madrid, parking costs are emissions-based (higher for more polluting vehicles, and vice versa) and there is a small ZEZ. 

All other European countries have emissions-based access restrictions of some kind in at least some of the larger cities. Any list is exhaustively long and soon outdated. It is more useful to indicate the direction of travel. 

In October 2019, 35 global cities pledged to make “a major area” of their urban centre emissions-free by 2030. The C40 Fossil-Fuel Free Streets Declaration was signed by 17 European cities, including Amsterdam, Barcelona, Berlin, Copenhagen, Manchester, Madrid and Warsaw. Some specific examples: 

  • Oslo: fossil-free city centre within Ring 3 by 2024. All cars in the city fossil-free by 2030. 
  • Paris: ban diesels by 2024 and petrol cars by 2030. 
  • Rome: emissions-free transport in the city centre by 2030. 
  • London: central London to become a ZEZ by 2025. 
  • Brussels: ban all diesels by 2030 and petrol (and LPG) cars by 2035. 

On top of that, many European countries have committed themselves to phasing out the sale of new combustion-engine vehicles in the near future. Here is an overview of some of the countries and their cut-off date for selling ICEs, after which only zero-emission vehicles may be sold. 

  • 2025: Norway 
  • 2030: Denmark, Iceland, Ireland and the Netherlands
  • 2032: Scotland 
  • 2035: the UK
  • 2040: France and Spain

Other countries are studying similar moves and may announce their targets soon. 

The one message that shines through all these changes: we are at a pivotal moment in the history of mobility. Any corporate fleet’s future is electric – perhaps not totally, but at least significantly more than it is today.

Source: FleetEurope

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