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Numerous cities around the world have tried to internalize externality costs from road traffic by instituting charges for entering their city centers. The revenues collected from these charges are often redistributed to improve conditions for motorists, cyclists, pedestrians, and public transport. At the same time, many schemes allow for exemption of cleaner vehicles, which potentially reduces revenue collection. This paper assesses the effect of exempting electric vehicles from urban toll ring charges on the charge that is levied on conventional car drivers. Using panel data of Norwegian cities that have urban toll rings, I exploit regional variation in electric car adaption and find that owners of conventional cars pay 3.3 NOK (0.36 USD) more per passage due to the exemption. Moreover, I find that local governments that are fragmented or have a left-wing majority increase toll charges more due to the loss in revenue. As the majority of electric vehicle owners have above-average incomes, the exemption implies a distributional effect in which low-income groups pay the largest portion of the increased toll price.

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