In addition to a longstanding CO₂ component in fuel taxes, Norway has used two main policy instruments to decarbonise its car fleet. A CO₂-differentiated registration tax gives strong and continuous incentives to buy cars with lower registered CO₂ intensity (or higher fuel efficiency). Moreover, generous tax incentives, including registration tax and VAT exemptions, are applied to zero-emission cars, and have given Norway the highest electric vehicle sales in the world. This paper analyses effects of the two instruments (the vehicle registration tax and tax exemption) using an excellent and detailed data set.