Environment minister: Subsidies will not make people buy electric vehicles

Minister of the Environment Madis Kallas (SDE) said that his ministry's up to €5,000 electric vehicles grant will not see Estonians rush to buy EVs, while the €9 million program is still a step in the right direction.

The Ministry of the Environment on Wednesday introduced draft regulation according to which Estonia will cover up to €5,000 of the price of zero emissions vehicles individuals or companies buy as part of its recent electric and hydrogen vehicles support round. People can also apply for up to €1,200 for electric cargo bikes.

Minister of the Environment Madis Kallas (SDE) told ERR that he does not expect a transport revolution to follow the measure.

"I admit that such steps will not achieve a revolution in EV adoption in Estonia," Kallas said. They are still too expensive to reach the masses, including people with a lower level of income, at current support measures."

Most modern electric vehicles sold in Estonia cost €40,000-50,000.

The ministry has capped the grant at €5,000 for individuals and €4,000 for companies. A vehicle cannot cost more than €60,000 and a commercial vehicle €80,000 to qualify for the instrument. For example, a Porsche Taycan, the price of which starts at €73,359 before VAT, will not qualify for the grant. A company can use the grant to buy a maximum of 15 vehicles, while individuals can use it to buy a single EV.

Kallas admitted that it is unlikely people will give up their diesel cars in favor of EVs.

Madis Kallas (SDE). Source: Government Office

"For as long as EVs cost double what a diesel [Volkswagen] Passat does, with the price difference up to tenfold on the second hand market, this will not happen. Purchasing power simply isn't there yet. Many people for whom this applies live in rural areas, where buying an EV simply isn't realistic," the environment minister remarked.

Kallas said that electric vehicles have other shortcomings in Estonian conditions. "Looking at the Estonian climate, temperature – cars that ideally go 400-500 kilometers on a single charge have to compete with [fossil fuel] alternatives that go over 1,000 kilometers on a tank. These are also relevant aspects in terms of why ICE vehicles are still preferred."

The environment minister said that power transmission infrastructure is another concern in rural areas. He said that Estonia should invest more in power lines to avoid some areas going without power for nine straight days (as recently happened after a snowstorm in Saaremaa – ed.). "It is a matter of striking a balance in terms of how this should be achieved," Kallas suggested.

Kallas also does not see wealthy people rushing to buy EVs.

"While €4,000-5,000 is a lot of money, comparing the sum to the total cost of these vehicles, it is the same as a 10 percent discount. Therefore, I cannot see it causing a rush. People who find that an EV is the right choice for their family will rather make the decision irrespective of the instrument.

But why set up the instrument if the minister perceives it as largely ineffective?

"We also receive letters about [the benefit of] recycling and other things. It will not have a major effect on the environment in isolation, but every little bit helps," Kallas said.

Kallas said that the instrument will be made available to companies and for buying electric cargo bikes to make sure it would achieve more than just allowing wealthy people set on buying an EV anyway to spend it on options.

The minister said that state support for charging infrastructure would have an equally modest effect.

"It would still cater to the upper middle class and wealthier people who can afford an EV today. Electric vehicles are too expensive for the ordinary consumer even if we had brilliant charging infrastructure. Estonian society is not ready for EVs to hit the masses But steps in that direction must be constant and bring EV use closer to people."

The minister also said that the price per kilometer of driving an EV is much lower than for an internal combustion vehicle, which could motivate people to gravitate towards EVs if the price of electricity could be stabilized.

Kallas said that other measures, like higher fuel taxes, could help curb transport sector emissions.

"The [EU's new transport sector emissions measures package] ETS2 prescribes changes starting in 2027, while that is the general direction we're moving in. The changes should also concern motor fuels [price] and consumption," he said.

Kallas said that the problem of greater distances and increased fuel use in rural areas remains. "People can take public transport or use ridesharing in cities, while there is no such option in the country."

He added that an EV is of much greater benefit in the city where air quality is a problem, while rural areas have considerably fewer vehicles per square kilometer.


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Editor: Huko Aaspõllu, Marcus Turovski

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