June 30, 2026
The previous essay in this series found that nations which had already invested in their own clean energy generation absorbed measurably less damage from the Hormuz crisis than nations still dependent on imported fossil fuels. That difference traces back to specific policy decisions, made years — sometimes decades — before the crisis began.
This essay looks directly at what those decisions actually were: what’s accelerating the shift away from oil, and what’s working against it.
What’s Driving It Forward
Norway: A Decade of Tax Policy
For over a decade, Norway made electric vehicles cheaper to buy and own than equivalent gasoline cars — no purchase tax, no value-added tax up to roughly $42,000, reduced tolls, discounted parking, access to bus lanes. At the same time, gasoline and diesel vehicles became steadily more expensive to own. The incentives moved in both directions at once.
Norway ended 2025 with 96 percent of new car registrations fully electric; December alone hit 98 percent. The country had set a target back in 2017: all new passenger cars electric by 2025.
Rather than extending the incentives now that the goal has been met, Norway’s government is phasing them out. The tax exemption threshold drops sharply in 2026, drops again in 2027, and disappears entirely by 2028, because maintaining it was costing the government roughly $1.5 billion a year, and the original purpose has been achieved.
China: The Same Approach, at a Larger Scale
China followed a similar sequence, at a far larger scale. For more than a decade, the government provided purchase subsidies, manufacturer subsidies, research support, and infrastructure investment to build a domestic EV industry. By 2024, China was producing 12.4 million electric vehicles a year, 70 percent of global output, and was home to five of the world’s ten largest EV manufacturers.
In October 2025, China’s newest five-year economic plan dropped electric vehicles from its list of strategic priority industries for the first time in over a decade. With EV sales already above 45 percent of the new car market, the government’s stated reasoning is that further growth should come from competition and innovation rather than continued subsidy.
Two countries, different political and economic systems, arrived independently at the same sequence: incentivize until the market tips, then step back once it has.
The European Union: A Different Lever
Rather than subsidizing electric vehicles directly, the EU has relied on a different mechanism: making fossil fuel use more expensive through carbon pricing. Starting in 2028, its Emissions Trading System will extend carbon pricing directly to transport fuels, meaning the price of gasoline and diesel will begin reflecting more of their climate cost.
Built into the same policy is a Social Climate Fund, drawing €86.7 billion from carbon pricing revenue between 2026 and 2032, intended to offset the cost impact on lower-income households.
What’s Slowing It Down
The Scale of Fossil Fuel Subsidies
Globally, fossil fuel subsidies add up to far more than every clean energy program named above, combined. The figure is worth understanding carefully, because it breaks into two categories that work in different ways.
The first is explicit subsidies — money a government directly pays out to keep fuel prices low. Globally, that came to about $725 billion in 2024. This is what most people picture when they hear the word “subsidy”: a government writing a check.
The second category is far larger, and far less visible. Implicit subsidies totaled roughly $6.7 trillion in 2024 — and they aren’t payments at all. They represent the gap between what fuel actually costs society and what fuel buyers pay at the pump. Burning gasoline contributes to air pollution, which drives up asthma and other respiratory illness, and it contributes to climate change, which carries its own costs in stronger storms, flooding, and disrupted agriculture. None of that shows up on the receipt at the gas station. Someone still pays for it — through higher healthcare costs, disaster recovery spending, and climate-related disruptions to food and insurance markets. The cost is real. It’s simply paid by everyone collectively, rather than by the person buying the fuel. Economists call that gap an implicit subsidy: fuel is effectively being sold for less than its full cost, and the difference doesn’t vanish — it shifts onto other people, often people who never bought a drop of it.
Add the two categories together and the total comes to roughly $7.4 trillion in 2024 alone. Less than ten percent of that is a government writing a check. The rest is a cost being paid by someone — just not by the person at the pump.
A Different Kind of Dependency
Even where adoption is succeeding, a structural vulnerability exists underneath nearly all of it: battery mineral processing is heavily concentrated in a single country. China refines roughly 60 percent of the world’s battery-grade lithium, 68 percent of cobalt, 65 percent of nickel, and close to 90 percent of rare earth elements. For graphite, the figure is higher still — over 92 percent of battery-grade material comes from China.
This concentration is not a theoretical risk. In December 2023, China imposed export controls on graphite, widely seen as a retaliatory response to actions taken by the United States. Whatever country leads on clean energy adoption, nearly all of them remain dependent on the same narrow supply chain — including, in some respects, China itself, which still relies on raw materials mined in other countries even as it dominates the processing step.
Sequencing Matters
The United States also withdrew a major incentive — the $7,500 federal EV tax credit — but the sequencing was different from Norway’s or China’s. Industry analysts have described the move as premature, since the U.S. market was nowhere near the kind of tipping point Norway and China had already reached when they pulled back their own support. Removing an incentive before the shift it was meant to produce has occurred is a different policy decision than removing it afterward, even though both can be described simply as “incentive withdrawn.”
That reversal has effects beyond American borders, too. Electric vehicles that Chinese manufacturers once aimed at the U.S. market are now being redirected toward Europe, adding competitive pressure on European automakers who are also dealing with their own infrastructure constraints — grid connection delays in parts of the EU now stretch seven to ten years.
The Pattern Underneath the Policies
This is not about which country values clean energy more. It’s about whether an incentive ran long enough to do its job before being withdrawn, whether the underlying cost of energy reflects its true price or shifts that cost elsewhere, and whether mineral processing is concentrated enough in a small number of countries to create leverage within the supply chain.
In Plain Terms
Norway and China followed the same pattern: incentives ran until the market shifted, then were withdrawn. The United States withdrew its main incentive earlier in that process, before a similar shift had occurred. The world spends roughly $7.4 trillion a year on fossil fuel subsidies, and ninety percent of that is an indirect cost — paid through pollution and climate impacts — rather than a direct government payment. A handful of countries, China most of all, control the processing of the minerals nearly every battery depends on, and that concentration has already been used as leverage once. None of this is a matter of opinion. It is simply the policy landscape every country is currently operating in.
What is next
Policy explains why some countries have moved faster than others. It does not explain everything. The technology itself keeps changing — batteries, reactors, and storage methods that did not exist, or were not viable, even ten years ago. That frontier is where this series turns next.