Top economists call for budget measures to speed the switch to electric cars


Wes Mountain/The Conversation, CC BY-ND

Peter Martin, Crawford School of Public Policy, Australian National UniversityAustralia’s top economists overwhelmingly back government measures to speed the transition to electric cars in order to meet emission reduction targets.

An exclusive poll of 62 of Australia’s preeminent economists — selected by their peers — finds 51 back measures to boost the take-up of electric cars including subsidising public charging stations, subsidising the purchase of all-electric vehicles, and setting a date to ban the import of traditionally-powered cars.

Only 11 oppose such measures, three of them because they prefer a carbon tax.

Six of the 51 who supported special measures said they did so reluctantly, as their preferred alternative would be a carbon price or a carbon tax, rather than subsidising “one alternative out of many to reduce emissions”.

Cars account for roughly half of Australia’s transport emissions, making them about 8% of Australia’s total emissions.

Yet Australia’s take-up of electric vehicles is dwarfed by the rest of the world.

On one measure, all-electric cars accounted for just 0.7% of new car sales in Australia in 2020 compared to 5% in China and 3.5% in the European Union.

Australia has no domestic car industry to protect, meaning industry policy concerns needn’t hold back the transition.




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Norway plans to outlaw new petrol car sales from 2025; Denmark, the Netherlands, Ireland and Israel from 2030; and California and Britain from 2035.

Asked whether Australia should take action to speed the transition, eight in ten of the 62 economists selected by the Economic Society said it should.



Economic Society of Australia/The Conversation, CC BY-ND

The results represent a departure for a profession whose usual advice is to avoid interfering with markets.

One participant, University of NSW professor Gigi Foster said an important question needed to be answered in order to justify government intervention: “what is the market failure here?”

The market failure was pollution, imposing costs on the community beyond the drivers of conventionally-powered cars and on the planet by pushing up global temperatures.

Broad support: subsidies for charging points

If it wasn’t to be dealt with by a carbon price, measures that sped up the switchover to electric vehicles could achieve some of the same effect.

By far the most popular measure of six presented to the panellists who supported government action was subsidising public charging points, backed by 84%.

The next most popular was removing the luxury car tax from electric-only vehicles. At present the 35% tax applies to cars valued at more than $69,152, and $79,659 for fuel-efficient vehicles.

43% supported making charging points compulsory in new homes and new car parks. 39% supported setting a date to ban the import of petrol and diesel cars.



Matthew Butlin, who chairs South Australia’s Productivity Commission, noted that much of Australia was not urban and unlikely to be served by charging points for some time.

Without government measures to speed the installation of remote charging stations, many buyers would be reluctant to go electric, even if most of their driving was in cities.

When they were in place, there would be a good case for banning the import of petrol and diesel vehicles, but not until then.




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Others wanted to hold off on banning the import of conventionally-powered cars until Australia had a lower-emissions mix of electricity.

Macquarie University’s Lisa Magnani said that with three quarters of Australia’s electricity generated from coal, electric vehicles created considerable emissions.

The Grattan Institute’s Danielle Wood disagreed, saying “network effects” built a case for switching over early.

Network effects build on themselves

The more people switched, the more charging stations would be built and the lower electric vehicle prices would drop, driving more people to switch, and increasing the benefits of decarbonising the electricity supply.

The sooner Australia swapped over, the easier it would be to get to net zero emissions by 2050 without the need for a “cash for clunkers” style scheme to buy back polluting vehicles.

Setting 2035 as the date for banning imports of petrol-powered cars as recommended this year by the International Energy Agency would give buyers time to adjust while the charging infrastructure developed.




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Tax specialist John Freebairn said electric cars were already heavily subsidised by escaping the fuel excise used to fund roads, despite the efforts of some states to plug the gap.

Sydney University economist Stefanie Schurer argued on the other hand bulky and polluting sport utility vehicles were effectively subsidised because of the tax benefits they attracted when used for work.

Former Liberal Party leader John Hewson of the Crawford School of Public Policy said smoothing the transition had become urgent.

Smooth transition now “urgent”

It took only ten years from 1903-13 for the United States to switch from horse-drawn to petrol-driven vehicles, and technology take-up was quicker today, particularly in Australia.

Other economists surveyed noted that there was much that could be done to reduce harmful emissions in addition to going electric.

Sue Richardson said Australia should impose serious limits on the tailpipe emissions of new cars. Australia is unusual among developed nations in not having such a limit, making it a favoured market for high-emission cars.




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Rana Roy said a better approach would be to limit transport itself through remote working and efforts to encourage walking and cycling. Subsidies for electric cars could send such moves backwards.

When responses to the survey were weighted by the confidence respondents had in them on a scale of 1 to 10, support of special measures to drive the transition remained about as strong, backed by eight in ten of the economists surveyed.



Economic Society of Australia/The Conversation, CC BY-ND

Detailed responses:

The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The Murray-Darling Basin scandal: economists have seen it coming for decades


John Quiggin, The University of Queensland

Nations behave wisely, Israeli foreign minister Abba Eban observed five decades ago, “once they have exhausted all other alternatives”.

One can only hope that proves the case with water policy in Australia’s Murray-Darling Basin, the nation’s largest river system and agricultural heartland.




Read more:
Billions spent on Murray-Darling water infrastructure: here’s the result


The ABC’s Four Corners program Cash Splash, aired last night, illustrates how thoroughly we are exhausting the options that don’t work to keep rivers being sucked dry by irrigators. Billions of dollars have been spent on infrastructure schemes that have failed to deliver any measurable improvement in water flows or the state of the environment.

The Murray–Darling Basin is Australia’s largest and most complex river system. With 77,000 km of rivers, it is the food bowl of the nation.
Murray–Darling Basin Authority

This failure is no surprise to economists who have studied the problems of the Murray-Darling Basin for decades.

The central problem is well understood, as are the workable (and unworkable) possible responses.

The basin covers four states: Queensland, New South Wales, Victoria and South Australia. All state governments have allocated permits to extract water for human uses (irrigated agriculture and urban water). The allocations grew rapidly in the second half of the 20th century, exceeding the sustainable capacity of the natural environment.

One sign of the failure became dramatically obvious in 1991, with an outbreak of toxic blue-green algae over 1,200 km of the Darling River. Algal blooms are fed by nitrogen and other nutrients in fertiliser runoff and sewerage. They continue to occur.

This event underlined the need to leave enough water in rivers for “environmental flows” to keep the system healthy.

Acting with what now seems like impressive promptness, the Murray-Darling Basin Ministerial Council (made up of the water resources ministers from the basin states, the Australian Capital Territory and the federal government) imposed a cap on water extractions in 1995. It limited extractions to the volume of water capable of being taken out by the infrastructure (pumps, dams, channels, management rules) that existed in 1993-94.

The cap was supposed to be a temporary measure. It wasn’t intended to solve the problem, just stop it getting any worse in the short run.

The long-term solution was to be a system of trade in water rights, introduced by the Council of Australian Governments in 1994. Combined with the right price signals from environmental purchases, this system was meant to allocate water to its most productive uses while reducing extractions to sustainable levels.

A quarter-century on, the cap is only now being phased out, and a vast array of measures have come and gone, including the National Water Initiative, the Water Act of 2007, Water for the Future and the Murray-Darling Basin Plan.

Buying block

The failure of these initiatives rests on one simple fact: the refusal of irrigation lobby groups to countenance the government buying water rights on the open market to increase environmental flows. Their opposition has been immovable, despite many individual irrigators being keen to sell their water rights and use the money to invest in alternative cropping activities or retire.

On the other hand, there are a lucky (often politically well-connected) few who have done very well from “strategic” purchases of water. Investigative journalist Michael West has noted the National Party’s Barnaby Joyce has been publicly hostile towards buybacks of water entitlements but authorised, as federal water resources minister, three major “strategic purchases”.

Instead of water purchases, politicians like Joyce have put their faith in subsidies to infrastructure, to improve the efficiency of water use.

The idea has a lot of intuitive appeal. If less water can be used, it should be possible to increase flows in the river system without reducing agricultural output. With rare exceptions, this appealing vision has dominated the thinking of politicians and much of the public.

The reality is sadly different. The failure of infrastructure-based water recovery was both predictable and predicted.




Read more:
Is the Murray-Darling Basin Plan broken?


I pointed out the main difficulties in a piece for ABC Online in 2012. The article didn’t contain any remarkable insights. It simply stated views shared by every independent economist who has worked on the issue.

The illusion of efficiency

Among the many problems with infrastructure schemes, two have stood out.

First, the measured cost of saving water through infrastructure schemes is two to three times as much as that of buying water on the open market.

Second, and more importantly, much of the supposed water savings are illusory. Much of the water “wasted” in irrigation systems is not lost to the environment. Most of the water leakage and seepage from irrigation channels eventually returns to rivers through groundwater systems. So “saving” this water through infrastructure efficiency doesn’t actually add anything more to environmental flows.

My 2012 analysis assumed a scientifically based effort to secure water savings at the lowest possible cost to the public. As the Four Corners report has shown, that assumption was massively over-optimistic. In reality, the scheme has been characterised by lax monitoring, cronyism and rorting.




Read more:
5 ways the government can clean up the Murray-Darling Basin Plan


After the expenditure of billions in public money, the system may be worse off than before. As a result, environmental disasters keep on happening.

Along with recurring algal outbreaks, we are witnessing disasters such as the massive fish kills like that in western New South Wales in January. The massive fish kills have been attributed to little or no flow in the Darling River combined with plunges from high temperatures, starving the water of oxygen.

Hundreds of thousands of dead fish in waterways around Menindee, far-west New South Wales, in January 2019.
Graeme McCrabb/AAP

As the riverine environment keeps deteriorating, there’s no sign of any positive change in policy.

Eventually, though, we must hope Abba Eban will be proved right. Having exhausted all the options that don’t work, we will have to turn to those that do.The Conversation

John Quiggin, Professor, School of Economics, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia: Carbon Price Needed Now


Thirteen of Australia’s leading economists have signed and published an open letter calling for a speedy introduction of a carbon price for carbon polluters. They prefer to have a carbon emissions trading scheme institututed as soon as possible.

The introduction of carbon pricing is designed to accelerate a move to more environmentally friendly production methods, increased reliance on renewable energy sources, etc.

For more visit:
http://theconversation.edu.au/economists-open-letter-calls-for-carbon-price-1639

View the actual letter.