Finance Minister Proposes Charge on Clean-Energy Vehicles Skip to content
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Photo: Golli.

Finance Minister Proposes Charge on Clean-Energy Vehicles

The Finance Minister has proposed a six-krona per-kilometre charge on electric and hydrogen vehicles for the upcoming year. A similar charge will be levied on hybrid vehicles. The objective is to increase the revenue of the national treasury and ensure that owners of clean energy vehicles contribute to infrastructure usage costs like other vehicle owners.

Declining tax revenues from clean-energy vehicles

Finance Minister Bjarni Benediktsson proposes a six krona per kilometre charge on electric and hydrogen vehicles for the upcoming year. The aim is to ensure that the owners of such vehicles pay the same fee for the use of roads as the owners of vehicles powered by fossil fuels. The proposal is open to public comment on the government’s consultation portal. The new toll system is expected to come into effect around the turn of the year.

As noted by RÚV, electric vehicle owners have enjoyed certain benefits from authorities in recent years in connection with energy transition plans. However, the proliferation of such vehicles on the roads has led to decreased tax revenues from vehicles and fuel use. The Finance Minister warns that without intervention, these revenues will continue to decline in the coming years. Concurrently, an imbalance has emerged in the current toll system between those utilising the transportation infrastructure.

At the same time, there is a significant need to build and maintain the country’s road network, a plan that is currently in progress. This need is anticipated to persist given the country’s growing population, burgeoning tourism, and related traffic. According to a statement from the ministry, the proposed per-kilometre charge will be applied to each vehicle and collected similarly to how service and energy companies charge for hot water and electricity supply to homes and businesses. (There have been suggestions that drivers would be responsible for tracking the distance they drive in a app, which would be verified at inspection stations.)

Two krona kilometre-charge for hybrid vehicles

Hybrid vehicles (passenger and delivery vehicles) will, as per the proposal, be charged a two-krona-per-kilometre fee next year. The deadline for submitting opinions on the proposals is set for October 16. Following this, the minister can present a bill.

According to the new draft budget of the government, there are also plans to introduce a per-kilometre charge on petrol and diesel vehicles. The existing tax system on vehicles and fuel will be reviewed. However, this will not be implemented until a year after the per-kilometre charge is applied to clean energy vehicles.

Hypothetical scenario to elucidate costs

After the Minister’s proposal was announced, RÚV performed a quick back-of-the-envelope calculation to estimate the cost of driving from Efstaleiti in Reykjavik (where the RÚV headquarters are located) to downtown Mosfellsbær; given that the drive is about 13 kilometres, the drive would cost 78 krona with the six krona per kilometre charge. Given this, residents of Mosfellsbær working in Efstaleiti would drive ca. 26 kilometres per day and pay ca. 156 krona. Over a five-day workweek, the cost amounts to ISK 780 or ISK 40,560 [$295/€280] on an annual basis.

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