Australian state governments are torn between encouraging the uptake of electric vehicles and replacing diminishing revenue from petrol and diesel.
Their decisions in coming months will have a bearing on how Australia meets its greenhouse gas emission targets.
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Governments pay for roads with petrol excise, but as more electric vehicles come into service, the amount of money they receive from taxing petrol will decline.
The obvious solution to offset the loss of petrol tax would appear to be a usage tax on the use of electric vehicles, levied according to how far they drive.
But a tax on electric vehicle would discourage their use at a time when governments want to encourage their uptake to help meet Australia’s greenhouse emissions targets.
It’s a problem New Zealand is grappling with as well. The NZ Ministry of Transport has been canvassing options for a road user charge as it considers the future of fuel excise charges.
In Australia, governments have responded in different ways.
The Victorian government is introducing a 2.5 cent per kilometre road user charge for electric vehicles. The tax would raise A$230 to A$260 per year per vehicle, compared with an average of A$600 it yields from excises on petrol or diesel fuelled vehicles.
But critics argue that, even at half the rate of the fuel excise pricing, the new tax will deter uptake of electric vehicles.
Certainly people are more likely to be deterred by a tax they are hit with upfront rather than one which is essentially hidden, such as fuel excise, because it is bundled into the cost of filling up at the service station.
Federal government modelling had suggested electric vehicles would account for about 65 per cent of new car sales by 2050, assuming existing policies remained the same.
According to a study by the University of Queensland’s Jake Whitehead, a 2.5c tax rate would reduce EV sales by 40 per cent if the additional cost was imposed without being accompanied by new incentives.
Applied nationally, this would equate to at least 4.9 million fewer EV sales. This will hamper Australia’s aspirations to meet its net zero emissions targets.
Transport is Australia’s third largest source of greenhouse gas emissions and cars account for about half of these. What’s more, transport emissions have grown more than any other sector, increasing nearly 60 per cent since 1990.
Take up of electric vehicles in Australia lags behind just about every other developed nation. Just 6900 electric cars were sold here last year, accounting for 0.7 per cent of total vehicle sales.
It’s not that Australians don’t want to buy electric vehicles.
About 50 per cent of Australians said they would consider buying an electric vehicle as their next car.
But several factors deter them.
Australians often travel long distances every day and there is a lack of public charging ports around the country.
There is also the campaign Prime Minister Scott Morrison waged against Labor’s ambition to boost electric vehicle uptake during the last election campaign.
Australia’s leader said electric vehicles would kill the weekend, because they wouldn’t be powerful enough to tow our caravans and boats.
Finally, there is a lack of electric vehicles for sale in Australia.
Only a handful are available here, and they typically aren’t the cheapest models, putting emissions free transport out of reach of many families.
One issue is the EU’s tax on car companies according to the emissions their cars produce, while offering them tax offsets for EVs.
It means Volkswagen, for instance, has more incentive to sell its electronic vehicles in Europe than to ship them to Australia.
Given all of this, drivers need don’t need further deterrents to take up electric vehicles.
Victoria is planning to encourage uptake to some extent, offering a $100 concession on registration for EVs and hybrids. It’s highly questionable if this will be enough.
The Victorian Government can’t say it wasn’t warned.
A couple of years ago, the Board of Treasurers – a states and territories forum – jointly commissioned advice on how to best introduce road-user charging on zero and low-emissions vehicles.
The report, ironically written by the Victorian Treasury, found a road user tax without new incentives to make EVs more attractive would “maximise revenue recovery” but was likely to discourage EV uptake, slow emissions cuts and lead to strong opposition from the industry and environmentalists.
The New South Wales government is also considering a road user charge, but not until there is a more substantial take up of the vehicles on the state’s roads.
It’s a much more sensible approach. The new Victorian tax will raise just $30 million over four years – peanuts for a government the size of Victoria’s – but deter untold numbers of potential EV owners.
Governments will be much better off holding off and taking the modest revenue hit for a few years to achieve the nation’s emissions reduction target.
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