The proposed tax on electric vehicles by South Australia and Victoria, and under consideration by other governments of similar proposals, would slam the brakes on their goal of encouraging more drivers to use low-emission vehicles. The proposals are counterintuitive and premature.
Our system of taxes and charges is designed to serve a range of purposes. In this case there are contradictory objectives. On the one-hand, road charges and fuel excises exist in part as a pseudo user-pays levy for the cost of our road network. On the other, tax policies are often designed to change behaviour – to act as either a positive financial encouragement or, conversely and more frequently, a disincentive for a particular course of action. Taxes and charges on electric vehicles must surely be considered in that second category.
Proposals to apply new road user charges on electric vehicles sends a very strange signal and will set back efforts to reduce emissions from the transport sector. It will have a real impact.
The uptake of electric vehicles in Australia is already low. Much lower than many other nations. For example, in South Australia, EVs make up about 0.1% of cars on the state’s roads.
There are several reasons why Australians have been hesitant to enter the electric vehicle market. One is cost and while we will get to price parity for EV’s during this decade, we are not there yet. The advantage they do already have are lower running costs. The NSW government’s electric and hybrid vehicle plan states that:
The NSW government is right to identify these advantages and would be wrong to imperil them by following the South Australian pathway.
In fact, a report by Ernst and Young released in September this year, dispels the myth that EVs are a net hit to the Australian economy because drivers don’t pay current fuel excises.
Instead, the report found that each EV provides a $8,763 net benefit to the economy over a 10-year life span and, when accounting for the loss of fuel excise revenue, directly contributing more to government revenue per vehicle than petrol or diesel-based vehicles.
There are significant economic benefits EVs deliver in meeting emission-reduction goals as well as improving air and noise pollution in our cities. Our goal of zero net emissions cannot be met without major changes in the transport sector.
State and federal governments are investing funds to promote EVs – from charging stations to research. The federal government is preparing its own low emission vehicle strategy and agencies like Arena have been at the forefront of supporting the development of the EV market in Australia.
With funding flowing from all levels of government, new state charges on EVs smack of giving with one hand while taking with the other.
So instead of making electric vehicles, and other future technology – such as hydrogen-fuelled transport – more expensive, we should be looking at developing the EV market with lower costs while it matures. Options include, at the federal level, removing the luxury car tax on low emission vehicles and at the state level, cost relief on tolls and other charges.
Overseas experiences prove that government incentives to increase EV uptake do work, especially when the market is small like in Australia.
The South Australian and NSW governments are standout leaders among the states in developing plans to reduce emissions through the deployment of new technology. Electric vehicles fuelled by renewable electricity have to be part of the solution. Now is not the time for them to take the foot off the accelerator.