In January 2019, the Senate Select Committee on Electric Vehicles provided an extensive list of recommendations on how to increase the uptake of electric vehicles (EVs). Despite subsequently committing to a national EV strategy, the Commonwealth Liberal government has comprehensively undermined action on EVs, including attacks during the 2019 election that were subsequently shown to be unsupported.
In the absence of the needed Commonwealth leadership, state governments have taken steps to introduce additional taxes on EV, that would further hinder the uptake of EVs, and slow the urgent action we need on emissions to address the climate crisis.
The urgency of reducing emissions
As highlighted by the Australia Institute in their submission, transport emissions are an important and growing contributor to the climate crisis:
Transport is one of the fastest growing sources of emissions in Australia, increasing by 62.4 per cent in March 2020 from 1990 levels, and makes up almost a fifth of our national emissions profile. The National Energy Emissions Audit found transport emissions have already rebounded after dipping during the pandemic.
If Australia is to meet its international commitments, and reduce emissions to the level required, it will require nationally coordinated action to reduce emissions:
Achieving the goals of the Paris Agreement requires steep reductions in emissions across all sectors. Decarbonising the transport sector must be a national priority, backed by policies to increase the uptake of electric vehicles.
Additional benefits from electric vehicles
In addition to the need to reduce emissions, EV uptake provides a range of other benefits, as highlighted by evidence to the committee. EV generate higher levels of revenue to governments, despite arguments to the contrary:
Recent research from EY commissioned by the [Electric Vehicle Council] EVC demonstrates that the argument that electric vehicles are causing a decrease in tax revenue is unfounded. In fact, today electric vehicles create upwards of $8,700 in net benefits, while consumers pay more in tax than a comparable internal combustion engine vehicle.
EVs also provide health benefits to the broader community, and reduce fuel dependency:
The accelerated adoption of electric vehicles (battery and plug-in hybrid electric) would provide enormous social, economic, and environmental benefits for Australia. Today, they are already a cleaner form of transport than internal combustion engines, and, as our energy mix continues to decarbonise, provide the only pathway to a zero-emission transport future. They reduce our reliance on imported oil and will improve urban amenity as they are quieter and do not pollute local communities.
Australia in the international context
The lack of action by the Commonwealth government has meant that Australia lags dramatically behind its international peers. As the Australia Institute summarised:
Australian EV uptake is low compared to global uptake. For the year 2020, EVs (battery and plug-in electric vehicles) accounted for 0.7 per cent of new vehicle sales, compared to the global average of 4.2 per cent. In Norway, where ambitious public policies promote EV uptake, 75 per cent of new car sales are EVs.
Australia’s poor EV uptake is largely due to the lack of polices encouraging the transition to EVs. The Bloomberg G20 Zero-Carbon Policy Scoreboard report assesses the decarbonisation policies implemented by G20 countries. For road transport policies, Australia ranks third last, ahead of only Saudi Arabia and Russia—two of the world’s largest oil exporters. Australia’s score of 27 per cent is well below the top score of 80 per cent for France, Germany, and China—countries that have implemented robust policies to drive EV sales.
Similarly, the EVC noted a number of countries and other jurisdictions that have committed to clear timeframes to phasing out internal combustion engines (ICEs). Many other countries offer clear upfront incentives to a value of A$5,000 equivalent or significantly higher, to encourage EV purchases. As the EVC noted in evidence to the committee:
In 2020 electric vehicle sales made up 0.75 per cent of all new vehicles sales. In Australia we sell sub one million new vehicles each year—69,000 of those were electric vehicles. If we compare ourselves to markets like the UK or the EU more than 10 per cent of their sales were electric. Leaders like Norway—of course, 75 per cent of their new sales are electric. Even in a global average sense, so including undeveloped and Second World nations, in terms of all new vehicles sales sold right around the world 4.2 per cent of all new vehicles sales were electric.
The Commonwealth's failure to act
A fundamental cause for Australia’s poor uptake of EVs is the lack of a coordinated strategy by the Commonwealth government to drive urgent, rapid uptake of EVs. As Australia Institute witnesses noted:
Unfortunately, electric vehicle policy at the federal level is severely lacking. The recently released Future Fuels Strategy, in place of a dedicated electric vehicle strategy, contains no new funding commitments and, disappointingly, rules out policies that work—like purchase incentives for EVs, fleet procurement targets and vehicle CO2 standards. These policies have not only been shown to work in overseas markets but have also been highlighted by the government funded Australian Electric Vehicle Market Study as levers that would drive uptake of EVs in Australia. The lack of federal policy support for easy uptake has led to perverse policy outcomes at the state level…
Australia was promised that strategy two years ago. We were meant to have an electric vehicle strategy at the federal level but it has been consistently delayed and has now turned into the Future Fuels Strategy, which, as we said in our opening remarks, leaves a lot to be desired in terms of those incentives. We're really not seeing those policies coming through in that strategy… What we are missing now is the federal leadership to actually address Australia's latent interest in electric vehicles and help correct it by putting in place incentives that lower the sticker price so everyday Australians can benefit from this technology…
In turn, that failure by the Commonwealth government has made Australia a dumping ground for dirtier, more polluting vehicles from manufacturers, who prioritise their zero or low emissions vehicles (ZLEVs) for other jurisdictions with stronger incentives and policies. Combined with the announcement of unnecessary state taxes, this reduces the incentives for manufacturers to bring affordable EVs to Australia, making it harder for community members to access affordable EVs.
As the Federal Chamber of Automotive Industries noted in their submission:
The contradiction by state governments of setting net zero targets and then putting in a RUC [Road User Charge] that disincentivise the take up of ZLEVs is confusing for our member companies and extremely difficult to explain to their global headquarters …
The combination of these mixed signals being sent by Australian state governments combined with other countries competing for the allocation of vehicles results in automakers prioritizing the allocation of ZLEVs vehicle production for sale in countries other than Australia.
The transition to EVs is still in the early stages and requires support for Australia to catch up to the pace of adoption with other OECD nations. Taxes specifically targeting electrified powertrains will have significant negative impact on the technology uptake in Australia by impacting both customer demand and ultimately prioritisation of global allocation of new technologies.
Proposals for state taxes
The Australian Greens support comprehensive transport pricing reform that ensures a just and sustainable transport system, with support for low income households, and a sustainable pricing system. However, the proposals put forward by state governments will have profoundly problematic impacts on EV uptake when it is crucial that EV uptake is encouraged, to address the climate crisis. As outlined above, a vacuum in Commonwealth policy has resulted in fragmented, disjointed proposals by state governments.
One of the key proponents of the proposal, Infrastructure Partnerships Australia, has described itself variously as an ‘independent think tank’, but also as a ‘peak body for the national infrastructure sector’. IPA’s membership includes major toll road companies, and they have previously made political donations to major parties.
Throughout evidence to this inquiry, and in a range of other contexts, a wide range of stakeholders have raised profound concerns about the state government proposals, particularly when adopted in an ad-hoc approach, without a national plan to encourage EVs with significant incentives. An open letter from 25 organisations, including environmental groups, car manufacturers, Doctors for the Environment Australia and others criticised the Victorian state government’s tax as the 'worst in the world', as the only tax that specifically applies to EVs and not to other vehicles. The letter states:
No other jurisdiction has introduced such a targeted levy on the cleanest vehicles on the road without significant incentives to balance it out. Most industrialised countries are prioritising incentives for electric vehicles to benefit from cleaner air and new jobs from a growing industry. This new tax means the world’s manufacturers are far less likely to send Victorians their best, most affordable, zero emissions vehicles. That makes things much harder for Victorian families who want to buy and drive electric. Every other state and territory in Australia has ruled out or delayed plans for a premature new tax on electric vehicles. Going it alone will mean Victoria has the worst electric vehicle policy in the world. While the Victorian Government is pushing ahead with an EV tax, it has delayed setting emission reduction targets for 2030, including a target for the transport sector. Members of Parliament, please vote against this EV tax and vote for cleaner Victorian roads and stronger climate action. Victoria, don’t pull the handbrake on electric vehicles.
Impacts on consumer uptake of EVs
These state taxes, particularly if imposed in a policy vacuum at the national level, will have devastating impacts on the uptake of EVs. Professor Jake Whitehead, of the University of Queensland, summarised his research on the impact of state EV taxes:
The introduction of the proposed EV taxes risks pushing Australia even further into the wilderness in terms of EV uptake …
State governments that introduce EV taxes without any significant financial incentives for households and businesses to purchase these vehicles, are highly unlikely to meet their own emissions targets, and will rob Australia of the economic benefits that this technology transition can deliver. As such, the Australian Government should penalise jurisdictions that implement these punitive actions against Australians who have already purchased an EV, or are looking to do so…
We found that if a 2.5 cent per km EV tax was introduced, the consumer would see this as being equivalent to approximately a $4,500 increase in the vehicle’s purchase price. In other words, for a $45,000 EV, the proposed EV road tax is predicted to have an effect approximately equivalent to an additional 10 per cent tax, or doubling the current GST rate, in terms of consumer perception…
We found that if a 2.5 cents/km EV tax was to be implemented nationally it could result in the share of electric vehicle sales being as low as 30-40 per cent by 2050. In other words, over the next 30 years, these proposed EV taxes could result in 35-68 per cent lower sales, or 4.9 to 9.5 million fewer EVs being sold in Australia.
The Australian Electric Vehicle Association, representing the interests of EV owners, provided clear evidence that the increased tax would create a significant additional barrier at the key point of purchase:
We have already had feedback from a wide range of people who have openly said, 'Well, if it's going to be taxed extra then I'm not going to make the move.' We know from an international perspective—and I know you will have some other witnesses speaking—that one of the key things is to get a range of vehicles available here in Australia to make that change. That is also not going to happen when we're sending out signals to industry that we're going down this path.
The COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020
The COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020 was introduced to prevent the imposition of state taxes that will create a roadblock to EV uptake. As summarised in the explanatory memorandum:
This bill seeks to neutralise the revenue effect of states and territories that legislate discriminatory taxes or charges against the purchase and use of electric vehicles. The bill will also financially reward states and territories that don’t place such road blocks to electric vehicle uptake by redistributing the money withheld from noncomplying states and territories.
This bill will insert a statutory condition on grants of financial assistance to the states and territories from the COAG Reform Fund, that will provide that a jurisdiction with a discriminatory charge against electric vehicles will either have their grants reduced in the following financial year by the amount raised from such taxes and charges in a given financial year or will be required to pay back to the Commonwealth an amount of the grant equal to the amount raised from such taxes and charges.
A number of witnesses noted that in the vacuum created by the absence of Commonwealth policy, and facing the prospect of additional barriers to EV uptake from state taxes, the bill was an appropriate response to encourage EV uptake:
The No EV Tax Amendment neutralises the revenue effect of state-based RUCs for EVs. This discourages states and territories from introducing perverse and targeted RUCs, but does not impede the future introduction of equitable road user charging systems based on best- practice rather than political expedience. To do this, the federal government should take the lead on developing a comprehensive policy for funding transportation.
Professor Jake Whitehead:
I strongly urge the Australian government, including Senators considering this bill, to lead on the development of a fair, transparent, future road pricing scheme that does not unfairly penalise EV ownership. The Australian government should ensure that any state government that introduces additional taxes on EVs, without significant financial incentives, is held accountable and penalised—as one such mechanism to do so is presented in the bill this committee is considering.
HMCA supports the COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020 as a federal response to address in the state-based actions to introduce discriminatory taxes and charges on electric vehicles…. HMCA supports a level playing field approach…. (and) a patchwork approach state by state will lead to inconsistency and confusion for consumers with some technologies unfairly penalised.
RAC broadly supports the COAG Reform Fund Amendment (No Electric Vehicle Taxes) Bill 2020’s general intention of deterring state governments from introducing state-based road user charges which could act as a road block to the uptake of EVs.
We support the view in this Bill that Australia will be best served by a national electric vehicle strategy. With the comparatively small market that exists in Australia, the introduction of short-sighted and ad-hoc taxes will stunt the development of this emerging industry and leave Australia well behind other developed nations.
that state governments not proceed with discriminatory taxes on EVs; and
that the Australian government introduce a national strategy to urgently increase the uptake of electric vehicles.
Senator Janet Rice
Greens Senator for Victoria