A third of electric car drivers forgo VAT tax exemption
In 2024, the number of applications for funding from the Greenhouse Gas (GHG) quota regulation for electric vehicle (EV) owners saw a significant drop. This decrease can primarily be attributed to the early termination of the EV tax credits by the US federal government, seven years ahead of schedule.
These tax credits, initiated under the Inflation Reduction Act in 2022, provided up to $7,500 for new EVs and higher incentives for commercial vehicles and used EVs, serving as a major financial support to increase EV adoption. However, with the termination of these credits by September 30, 2025, the financial incentive that had catalyzed consumer purchases and industry investment in EVs was removed.
This sudden withdrawal has the potential to destabilize the EV market, discouraging automakers and consumers. Consequently, demand and incentive applications tied to the GHG quota funding have decreased. The removal of these consistent policy signals at a critical moment when EV adoption was gaining momentum has created uncertainty, leading to fewer applications for related funding programs that depend on such incentives.
Other environmental and regulatory factors, such as carbon market complexities, renewable fuel standards, and evolving biofuel policies, have more indirect effects on EV funding applications. However, the dominant and immediate driver is the removal of direct federal EV tax credits, which historically formed the backbone of financial assistance for EV owners under the GHG quota regulation.
The United Nations Climate Change (UNCC) reports that approximately 4,095 GWh of electricity was certified from charging points in 2024, with charging points becoming eligible for the GHG quota in the same year. Interestingly, charging points delivered about 50% more electricity than in the previous year but the number of GHG quota applications for charging points fell significantly to just 500 in 2024.
The UBA attributes the decrease in applications not only to the termination of federal EV tax credits but also to stronger bundling of larger quantities by service companies and the near-complete cessation of individual notifications by charging point operators. Additionally, the UBA has identified a decline in GHG quota bonuses as a likely main reason for the drop in applications.
One in three electric vehicle owners did not apply for funding from the GHG quota regulation last year. Some electric vehicle owners choose not to apply for GHG quota funding because their saved CO2 is sold to the mineral oil industry in the form of emission rights via the THQ quota.
The GHG quota for electric vehicles was introduced in 2022. Unused GHG quotas are subsequently marketed by the state. In 2022, bonuses of several hundred euros per vehicle were possible, but are now often only in the double-digit range, with some offers just over 100 euros.
This trend is expected to continue as the EV market navigates the post-tax credit landscape. As the industry adapts to this new reality, it remains to be seen how consumer behaviour and demand will evolve.
- The decrease in applications for funding from the Greenhouse Gas (GHG) quota regulation for charging points in 2024 can be linked to the termination of EV tax credits by the US federal government, as the financial incentive that previously supported EV adoption has been removed.
- The UBA attributes the decline in GHG quota bonuses as a likely main reason for the drop in applications from electric vehicle owners, as the savings from reduced carbon emissions are now often sold to the mineral oil industry in the form of emission rights via the THQ quota.
- In the post-tax credit landscape, the environmental-science and finance sectors, including the energy industry and carbon market complexities, will play significant roles in shaping the EV market's future as consumer behaviour and demand evolve.
