The budget should have been a road to Australia’s low-emissions future. Instead, it’s a flight of fancy


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John Quiggin, The University of QueenslandLooking at other nations around the world, the path to cutting greenhouse gas emissions seems clear.

First, develop wind and solar energy and battery storage to replace coal- and gas-fired electricity. Then, replace petrol and diesel cars with electric vehicles running off carbon-free sources. Finally, replace traditionally made steel, cement and other industries with low-carbon alternatives.

In this global context, the climate policies announced in Tuesday’s federal budget are a long-odds bet on a radically different approach. In place of the approaches adopted elsewhere, the Morrison government is betting heavily on alternatives that have failed previous tests, such as carbon capture and storage. And it’s blatantly ignoring internationally proven technology, such as electric vehicles.

The government could have followed the lead of our international peers and backed Australia’s clean energy sector to create jobs and stimulate the post-pandemic economy. Instead, it’s sending the nation on a fool’s errand.

Prime Minister Scott Morrison, left, and Treasurer Josh Frydenberg shake hands
Prime Minister Scott Morrison, left, and Treasurer Josh Frydenberg should have used the budget to create jobs in the clean economy.
Mick Tsikas/AAP

Carbon-capture folly

The Morrison government is taking a “technology, not taxes” approach to emissions reduction. Rather than adopt a policy such as a carbon price – broadly considered the most effective and efficient way to cut emissions – the government has instead pinned its hopes on a low-emissions technology plan.

That means increased public spending on research and development, to accelerate the commercialisation of low emissions technologies. The problems with this approach are most obvious in relation to carbon capture and storage (CCS).

The budget contains A$263.7 million to fund new carbon capture and storage projects. This technology promises to capture some – but to date, not all – carbon dioxide at the point of emission, and then inject it underground. It would allow continued fossil fuel use with fewer emissions, but the process is complex and expensive.

In fact, recent research found of 39 carbon-capture projects examined in the United States, more than 80% ended in failure.




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The government’s CCS funding is focused on capturing CO₂ from gas projects. This is despite the disappointing experience of Australia’s only CCS project so far, Chevron’s Gorgon gas field off Western Australia.

Some 80% of emissions from the operation were meant to be captured from 2016. But the process was delayed for three years, allowing millions of tonnes of CO₂ to enter the atmosphere. As of January this year, the project was still facing technical issues.

CCS from gas will be expensive even if it can be made to work. Santos, which has proposed a CCS project at its Moomba gas plant in South Australia, suggests a cost of $A30 per tonne of CO₂ captured.

This money would need to come from the government’s Climate Solutions Fund, currently allocated about A$2 billion over four years. If Moomba’s projected emissions reduction of 20 million tonnes a year were realised, this project alone would exhaust the fund.

two men stand over equipment
Plans to capture carbon from Chevron’s Gorgon gas project have not gone to plan.
Chevron Australia

What about electric vehicles?

There is a striking contrast between the Morrison government’s enthusiasm for carbon capture, and its neglect of electric vehicles.

It ought to be obvious that if Australia is to achieve a target of net-zero emissions by 2050 – which Treasurer Josh Frydenberg this week reiterated was his government’s preference – the road transport sector must be decarbonised by then.

The average age of Australian cars is about 10 years. This implies, given fairly steady sales, an average lifespan of 20 years. This in turn implies most petrol or diesel vehicles sold after 2030 will have to be taken off the road before the end of their useful life.

In any case, such vehicles will probably be very difficult to buy within 15 years. Manufacturers including General Motors and Volvo have announced plans to stop selling petrol and diesel vehicles by 2035 or earlier.

But the Morrison government has ruled out consumer incentives to encourage electric vehicle uptake – a policy at odds with many other nations, including the US.




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The US jumps on board the electric vehicle revolution, leaving Australia in the dust


Despite the “technology, not taxes” mantra, this week’s federal budget ignored electric vehicles. This includes a A$10 billion infrastructure spend which did not include charging stations as part of highway upgrades.

Unless the government takes action soon, Australian motorists will be faced with the choice between a limited range of second-rate petrol and diesel vehicles, or electric vehicles for which key infrastructure is missing.

It’s hard to work out why the government is so resistant to doing anything to help electric vehicles. Public support appears strong. There are no domestic carmakers left to protect.

The car retail industry is generally unenthusiastic about electric vehicles. Its business model is built on combining competitive sticker prices with a high-margin service and repair business, and electric vehicles don’t fit this model.

At the moment (although not for much longer), electric vehicles are more expensive than traditional cars to buy upfront. But they are cheaper to run and service.

There are fears of job losses in car maintenance as electric vehicle uptake increases. However, car dealers have adjusted to change in the past, and can do so in future.

electric vehicle on charge
The budget ignored electric vehicles.
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Wishful thinking

The Morrison government is still edging towards announcing a 2050 net-zero target in time for the United Nations Climate Change Conference in Glasgow this November. But as Prime Minister Scott Morrison himself has emphasised, there’s no point having a target without a strategy to get there.

Yet at this stage, the government’ emissions reduction strategy looks more like wishful thinking than a road map.




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Australia’s states are forging ahead with ambitious emissions reductions. Imagine if they worked together


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.

The trucking industry has begun to turn electric — but passenger vehicles will take a little longer


Janus Electric

Gail Broadbent, UNSW and Graciela Metternicht, UNSWAustralia’s trucking industry is making moves to go electric. The latest development — a system for using swappable batteries instead of time-consuming recharge stations for long-haul trucks between Sydney and Brisbane — shows how this transition is gathering momentum.

There will be clear socio-economic, environmental and health-related benefits from the switch to electric trucks — for the broader community as well as for the trucking industry and truckies themselves. As electric vehicle researchers, we think swappable batteries could work well for trucking, but are perhaps less suitable for everyday electric cars.

Electric trucking

There are many benefits from electrifying truck transport. Companies such as Woolworths and Ikea have already started to transition to electric delivery vans for the environmental benefits (and a possible boost for their brands).

Many leading truck manufacturers such as Scania,
Mercedes Benz and Volvo are proceeding apace with trials and plans to make their trucks electric.

Trucks make up 20% of the vehicles in Australia, and Australia’s transport emissions are still growing.

Australia’s motor vehicles consume more than 33 billion litres of fuel each year. The transport sector was responsible for about 100 million tonnes of carbon dioxide emissions in 2019.

Australia spent some A$31 billion in 2019 to import oil, with half used for road transport. This not only affects Australia’s balance of trade, but poses a risk to our freight industry (including supermarket deliveries) if geopolitical instability affects fuel imports (which mainly come from just a few countries).

The trucking company Linfox appears to have understood the advantages that transition to electric trucks can bring to its business, and is one of the early adopters trialling them here in Australia.

Not just trucking companies

Many big companies are making commitments to cut their carbon emissions, such as Fortescue Metals’ target of net zero operational emissions by 2040. Its mining fleet operations account for half of its operational emissions.

Procurement of electric trucks by government and mining fleets could not only help reduce transport emissions but signal to the community that the transition away from more polluting vehicles can be done.




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Modernising the fleet is an imperative that we need to prioritise. The business sector can play a key role in the success of the latest Australia Government Technology Investment roadmap.

Innovative solutions such as the truck battery swap system mean that not only big companies but also sole operators can make the change, by converting existing trucks and leasing batteries.

A typical articulated truck uses 53.1 litres of diesel per 100 kilometres. A trip from Brisbane to Sydney could cost more than A$600 in fuel (which you, the consumer, help pay for when you purchase transported goods). Going electric would not only at least halve that cost but reduce maintenance costs and reduce emissions, even if batteries are recharged from the grid.




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Swap and go?

Swapping out depleted batteries, rather than stopping to recharge, is a great solution for trucks: they make regular trips along major routes with regulated rest stops for drivers, which means you only need battery-swapping stations at key points along the routes.

However, battery swapping for ordinary passenger vehicles may be a different story. It has been tried before, but didn’t take off.

A US-based company called Better Place, founded in 2007, got as far as setting up trial stations (with one even planned for Canberra). But the company collapsed in 2013.

One problem was that car manufacturers would have had to agree to use a common battery platform to enable swapping, and only Renault came on board. Another was that the cost of installing enough battery swap stations to satisfy the wider community was enormous.

Trucks travelling on major transport routes won’t face this problem, so battery-swapping has a better chance of success.

How to go electric

Our ongoing research on policies to foster electric vehicle adoption has found that electric passenger cars are mostly recharged at home. This means we need solutions to help those without off-street parking get access to convenient local rechargers. This will help Australia reduce its balance of trade problems, reduce our health costs, and help the environment.

We just have to hope our government comes on board with suitable regulatory action to help us all go electric. One step might be to follow the US government’s recent announcement that it will electrify its entire fleet of vehicles. This will help car manufacturers, help bring down carbon emissions, help reduce the nation’s health budget and also help everyday people reduce their transport costs, which would be fairer and more sustainable.The Conversation

Gail Broadbent, PhD candidate Faculty of Science UNSW, UNSW and Graciela Metternicht, Professor of Environmental Geography, School of Biological Earth and Environmental Sciences, UNSW Sydney, UNSW

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

The US jumps on board the electric vehicle revolution, leaving Australia in the dust



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Jake Whitehead, The University of Queensland; Dia Adhikari Smith, The University of Queensland, and Thara Philip, The University of Queensland

The Morrison government on Friday released a plan to reduce carbon emissions from Australia’s road transport sector. Controversially, it ruled out consumer incentives to encourage electric vehicle uptake. The disappointing document is not the electric vehicle jump-start the country sorely needs.

In contrast, the United States has recently gone all-in on electric vehicles. Like leaders in many developed economies, President Joe Biden will offer consumer incentives to encourage uptake of the technology. The nation’s entire government vehicle fleet will also transition to electric vehicles made in the US.

Electric vehicles are crucial to delivering the substantial emissions reductions required to reach net-zero by 2050 – a goal Prime Minister Scott Morrison now says he supports.

It begs the question: when will Australian governments wake up and support the electric vehicle revolution?

A do-nothing approach

In Australia in 2020, electric vehicles comprised just 0.6% of new vehicle sales – well below the global average of 4.2%.

Overseas, electric vehicle uptake has been boosted by consumer incentives such as tax exemptions, toll road discounts, rebates on charging stations and subsidies to reduce upfront purchase costs.

And past advice to government has stated financial incentives are the best way to get more electric vehicles on the road.

But government backbenchers, including Liberal MP Craig Kelly, have previously warned against any subsidies to make electric cars cost-competitive against traditional cars.




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Releasing the government’s Future Fuels Strategy discussion paper on Friday, Energy and Emissions Reduction Minister Angus Taylor said subsidies for electric vehicles did not represent good value for money.

(As argued here, the claim is flawed because it ignores the international emissions produced by imported vehicle fuel).

The Morrison government instead plans to encourage business fleets to transition to electric vehicles, saying businesses accounted for around 40% of new light vehicle sales in 2020.

The government has also failed to implement fuel efficiency standards, despite in 2015 establishing a ministerial forum to do so.

The approach contrasts starkly with that taken by the Biden administration.

Craig Kelly struggling to open a bottle
Liberal MP Craig Kelly, pictured here struggling to open a bottle of water, opposes government subsidies to encourage electric vehicles.
Lukas Coch/AAP

Biden’s electrifying plan

Cars, buses and trucks are the
largest source of emissions in the US. To tackle this, Biden has proposed to:

And by committing to carbon-free electricity generation by 2035, the Biden administration is also ensuring renewable energy will power this electric fleet.

This combined support for electric vehicles and renewable energy is crucial if the US is to reach net zero emissions by 2050.




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Made in America

US companies are getting on board to avoid missing out on the electric vehicle revolution.

The day after Biden announced his fleet transition plan, General Motors (GM) – the largest US vehicle manufacturer and a major employer – announced it would stop selling fossil fuel vehicles by 2035 and be carbon-neutral by 2040.

This aligns with plans by the US states of California and Massachusetts to ban the sale of fossil fuel vehicles by 2035.

GM is serious about the transition, committing $US27 billion and planning at least 30 new electric vehicle models by 2025. And on Friday, the Ford Motor Company said it would double its investment in vehicle electrification to $US22 billion.

A General Motors ad for its electric vehicle strategy which aired during the US Superbowl.

Opportunities and challenges abound

Using government fleets to accelerate the electric vehicle transition is smart and strategic, because it:

  • allows consumers to see the technology in use

  • creates market certainty

  • encourages private fleets to transition

  • enables the development of a future second-hand electric vehicle market, once fleet vehicles are replaced.

Biden’s fleet plan includes a clear target, ensuring it stimulates the economy and supports his broader goal to create one million new US automotive jobs. Prioritising local manufacturing of vehicles, batteries and other components is key to maximising the benefits of his electric vehicle revolution.

On face value, the Morrison government’s business fleet plan has merit. But unlike the US approach, it does not involve a clear target and funding allocated to the initiative is relatively meagre.

So it’s unlikely to make much difference or put Australia on par with its international peers.

Man inspects an electric vehicle battery
Australia is well placed to capitalise on demand for electric vehicle components.
Shutterstock

Australian governments must wake up

Compounding the absence of consumer incentives to encourage uptake in Australia, some states are mulling taxing electric vehicles before the market has been established.

Our research shows this could not only delay electric vehicle uptake, but jeopardise Australia’s chances of reaching net-zero emissions by 2050.

Australia is already a world leader in building fast-charging hardware, and manufactures electric buses and trucks. We could also lead the global electric vehicle supply chain, due to our significant reserves of lithium, copper and nickel.

Despite these opportunities, the continuing lack of national leadership means the country is missing out on many economic benefits the electric vehicle revolution can bring.

Australia should adopt a Biden-inspired electric vehicle agenda. Without it, we will miss our climate targets, and the opportunity for thousands of new jobs.




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The Conversation


Jake Whitehead, Advance Queensland Industry Research Fellow & Tritum E-Mobility Fellow, The University of Queensland; Dia Adhikari Smith, E-Mobility Research Fellow, The University of Queensland, and Thara Philip, E-Mobility Doctoral Researcher, The University of Queensland

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

On an electric car road trip around NSW, we found range anxiety (and the need for more chargers) is real




Amelia Thorpe, UNSW; Declan Kuch, Western Sydney University, and Sophie Adams, UNSW

Replacing cars that run on fossil fuels with electric cars will be important in meeting climate goals – road transport produces more than 20% of global greenhouse gas emissions. But there are obstacles to wider uptake, particularly in Australia.

Too much of the debate about these vehicles revolves around abstract, technical calculations and assumptions about cost and benefit. Tariffs, taxes and incentives are important in shaping decisions, but the user experience is often overlooked. To better understand this we took a Tesla on a road trip from Sydney through some regional towns in New South Wales.




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We soon found “range anxiety” is real. That’s the worry that the battery will run out of power before reaching the destination or a charging point. It’s often cited as the most important reason for reluctance to buy an electric vehicle.

Even as prices come down and hire and share options become more widespread, range anxiety about electric vehicles is hindering their wider uptake. We found it can largely be overcome through a range of strategies readily available now.

Lessons from our road trip

The first is simply to accumulate driving experience with a particular vehicle. Teslas promise a far simpler machine with fewer moving parts, but also incredibly sophisticated sensing and computational technology to help control your trip. This means you need to get a feel for the algorithms that calculate route and range.

These algorithms are black boxes – their calculations are invisible to users, only appearing as outputs like range calculations. On our trip, range forecasts were surprisingly inaccurate for crossing the Great Dividing Range, for example.




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Second, we found it very helpful to connect with other electric vehicle users and share experiences of driving. Just like any new technology, forming a community of users is a good way to gain an understanding of the vehicle’s uses and limits. Owner associations and lively online groups such as Electric Vehicles for Australia make finding fellow enthusiasts easy.

This connection can also help with the third strategy. It involves developing an understanding of how companies like Tesla control their vehicles and issue “over the air” software updates. If these specify different parameters for acceptable battery charge, that can change the vehicle’s range.

Public investment in charging network will help

Public investment in charging infrastructure could – and should – further ease range anxiety. Better planning and co-ordination are needed, too, to build on networks like the NRMA’s regional network of 50 kilowatt chargers.

electric car travelling at speed on highway
Long driving distances call for better planning and co-ordination of a nationwide charging network.
alexfan32/Shutterstock

Understanding what is involved for users is also crucial to the environmental benefits of electric vehicles. Their sustainability isn’t just a function of taxes and technologies. The practices of people driving electric cars matter too.

You learn with experience what efficient driving requires of you. You can also work out how your charging patterns could match solar generation at home, for those lucky enough to have rooftop PV panels.

These vehicles can deliver significant environmental benefits. They produce zero tailpipe emissions, reducing both local air pollution and global greenhouse gas emissions.

Regenerative braking also reduces brake particulate emissions. That’s because the electric motor operating in reverse can slow the car while recharging its battery.

Electric vehicles won’t cure all ills

Switching from internal combustion to electric cars won’t address all the problems of our current car-based system. Some, such as road congestion, could get worse.




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Road traffic will still cause deaths and injuries. Electric vehicles will still produce deadly PM2.5 particulates as long as they use conventional brakes and tyres. Many models do, providing similar driving experiences to combustion vehicles.

Congestion and the costs of providing and maintaining roads, parking and associated infrastructure will still create enormous social, economic and environmental burdens. Electric vehicles need to be part of a much wider transformation – especially in urban areas where other transport options are available.




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Rural and regional Australia can benefit too

Longer distances and lower densities make walking, cycling and public transport more challenging in rural and regional areas. Better support for electric vehicles, particularly chargers, could make a significant difference here.

These vehicles can help rural and regional areas in other ways too. Many holiday towns rely on tourist incomes but their electricity supply is at the mercy of long thin power lines that run through bushland. Electric vehicles could potentially help with this problem: when parked they can feed power back into the grid.

Tesla being charged at a rural charging point
Improving rural and regional charging networks can benefit those areas as well as the drivers of electric vehicles.
Shutterstock

Regional economic planning that supports visits by electric vehicle drivers can reduce the need to invest in energy generation or battery systems. There are huge opportunities to integrate electricity planning and the (re)building of bushfire-affected towns, which a trial in Mallacoota will explore.

Pooled together, the batteries of an all-electric national vehicle fleet could provide power equivalent to that of five Snowy 2.0s. This would boost energy security and flexibility.




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In the US, President Joe Biden has announced electric vehicles will replace the entire federal fleet of 645,000 vehicles. An extra 500,000 public charging stations are to be built within a decade.

In Australia, the policy landscape is more [contested]. It’s time we caught up here.

We can start by recognising the importance of governments in the progress made internationally. Examples include the US$465 million US government loan to Tesla in 2009 to develop the landmark Model S, and Norway’s co-ordinated national approach to properly accounting for the environmental and social costs of cars. Norway’s success is now the focus of a laugh-out-loud Superbowl ad from GM, a company that in the past killed the electric car.

We need to understand users and have democratic debates about planning for charging infrastructure before we can sit back and enjoy the ride.The Conversation

Amelia Thorpe, Associate Professor in Law, UNSW; Declan Kuch, Vice Chancellor’s Research Fellow, Institute for Culture and Society, Western Sydney University, and Sophie Adams, Research Fellow, School of Humanities and Languages, UNSW

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

Victoria’s electric vehicle tax and the theory of the second-best



Alexandru Nika/Shutterstock

John Quiggin, The University of Queensland

One of the central ideas in tax policy is the principle of the second-best.

Economic theory gives us a good idea of what an ideal tax system would look like, given our objectives. But in real life, things fall short.

It might be thought that piecemeal reform, moving some taxes closer to the ideal, would be a step in the right direction.

But it needn’t be, if other taxes aren’t moved.

Here’s an example. Imagine that the goods and services tax exempted health products, both mainstream and alternative.

An ideal GST wouldn’t exempt health products (though the government might provide subsidised access to some products, as it does through the Pharmaceutical Benefits Scheme).

Imagine is administratively possible to remove the exemption for mainstream health products, which would bring it closer to the ideal.

Now imagine that for jurisdictional reasons it isn’t as easy to remove the exemption for alternative products.

Second-best can make things worse

Removing the exemption for mainstream products, which can be done straight away, seems like a good idea because it would be one step closer to removing all exemptions.

But if it is actually done straight away, without waiting the removal of the exemption on alternative products, it would have unintended (and perhaps dangerous) consequences.

People would be encouraged to switch from mainstream to alternative health products.




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The same sort of issues arise with the plans to charge electric vehicles per kilometre driven in order to treat them more like conventionally-powered vehicles (which are taxed per kilometre driven through fuel excise).

South Australia and NSW have announced plans to do so. Victoria has announced details, and will introduce the charge from July 2021.

It will charge electric and other zero emission vehicles 2.5 cents per kilometre travelled and plug-in hybrids at cents per kilometre travelled.

Victoria justifies the charge this way:

Australian drivers pay fuel excise when they fill up their vehicle with petrol, diesel or liquefied petroleum gas. Zero and low emission vehicle owners currently pay little or no fuel excise but still use our roads.

Conventionally-powered car typically pay about 4.2 cents per kilometre through fuel excise and fuel-efficient cars about 2.1 cents.

This means Victoria will be charging electric vehicles as much or more than fuel-efficient vehicles, even though (at least when charged through rooftop solar) they won’t contribute to global warming.

Not only that, but conventionally-powered cars generate health and other costs through air and noise pollution, for which they are not charged.

What first-best would look like

The ideal system would include charges to cover the cost of

  • building and maintaining the roads

  • congestion

  • the injury, death and damage caused by car crashes

  • the health and other damage caused by air and noise pollution

  • the global price of carbon emissions

Right now we charge through fuel taxes, registration fees and tolls (mostly paid to private firms, but this is irrelevant in economic terms) along with a variety of minor fees.

However, because fuel excise was frozen by the Howard government in 2001 (and only began increasing again in 2014) the revenue from it is barely enough to cover the cost of constructing and maintaining roads and grossly insufficient to cover the broader costs of conventional vehicle use.

Conventional vehicles get things for free

Although there is much debate about how carbon can or should be priced, any serious attempt to achieve the goals of the Paris Agreement is likely to require a carbon price of $100/tonne, which corresponds to 23 cents a litre.

Estimates for local air pollution costs (including the cost of deaths from cancer and asthma) start at 10 cents a litre. Noise pollution costs are extra.

Electric vehicles powered by renewable energy generate hardly of these costs.

Put simply, just as much (or more than) the owners of electric vehicles, the owners of conventional vehicles pay a mere fraction of what they should.

Second-best would be worse

Increasing what the owners of electric-powered vehicles pay is a second-best solution that might move us further away from first best.

It might discourage the takeup of vehicles that impose fewer costs on society.

To end on a positive note, the 1997 decisions of the High Court that effectively prohibited states from taxing petrol forced the Commonwealth to collect the tax and pass it on to the states, exacerbating the problems of an unbalanced federal tax system.




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There appears to be no constitutional impediment to a tax on kilometres travelled (and nor a privacy impediment, Victoria will implement it by asking for odometer readings once a year rather than monitoring where cars travel).

It would help redress the tax imbalance.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.

Think taxing electric vehicle use is a backward step? Here’s why it’s an important policy advance


Jago Dodson, RMIT University and Tiebei (Terry) Li, RMIT University

The South Australian and Victorian governments have announced, and New South Wales is considering, road user charges on electric vehicles. This policy has drawn scorn from environmental advocates and motor vehicle lobbyists who fear it will slow the uptake of less-polluting vehicles. But, from a longer-term transport policy perspective, a distance-based road user charge on electric vehicles is an important step forward.

Superficially, a charge on electric vehicle use seems misguided. Road sector emissions are the worst contributors to climate change. Electric vehicles powered by clean energy offer the promise of near-zero emissions.




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As electric vehicle and renewable energy costs decline we can expect a shift to full electrification of urban vehicles over the next 30 years. Surely accelerating this transition is an urgent climate task?

The downside lies not in the carbon benefits of these vehicles, but in their use as private passenger transport in congested urban areas and the costs this use imposes on cities. As renewable energy becomes cheaper, the marginal cost of every kilometre driven is likely to decline. As driving becomes cheaper, more of it is likely to occur.

More driving means more congestion. Inevitably, that increases demand for increasingly expensive road projects, such as Sydney’s WestConnex, or Melbourne’s Westgate Tunnel and North East Link. It certainly will run against the recognition in urban plans such as Plan Melbourne that we must shift to alternative transport modes.

If we don’t have a pricing regime that accounts for the cost of car use in cities, the transition to electric vehicles is likely to work against the wider goals of urban and transport policy.




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How would distance-based charging work?

Many urban transport policy advocates have called for distance-based road-user charging to be imposed on all vehicles in cities. This sounds great in theory, but in practice is difficult for technical and political reasons of privacy and surveillance. Such concerns will diminish over time as cars increasingly incorporate automated telematics that necessarily track their movement.

Distance-based road-user charging efficiently matches road use to its costs – of infrastructure, congestion, noise, pollution and deaths. It improves on fuel excise, which drivers can nearly completely evade by using a highly efficient vehicle. It also goes beyond tolling to fund major roads, which typically apply only to specific links.

Second, road-user charging can be varied in response to demand that exceeds road capacities. Higher rates can be applied at peak times to ensure free-flowing traffic and shift travel to other times and modes. Various taxation reviews, including the 2009 Henry Taxation Review and Productivity Commission reports, have promoted such policies.




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Exactly how big would the disincentive be?

Would imposing such charges on electric vehicles retard their uptake?

Based on our work with ABS Census journey-to-work data, in Melbourne the average daily round-trip commuting distance by car is about 25 kilometres. The proposed Victorian charge is 2.5 cents per kilometre. Thus, in Melbourne the average daily commuter’s road user charge is likely to be 63 cents – $3.13 for a typical five-day working week. Over a 48-week working year that totals A$150, hardly a large sum for most people.

By comparison, a commuter in a conventional vehicle with the average current fuel efficiency of 10.9 L/100km will use about 2.73 litres of fuel on which they pay 42.3 cents per litre in fuel excise. That’s about $1.15 a day, or $5.75 a week.

The average tax saving for electric vehicles compared to conventional vehicles will be about 2.1 cents per kilometre. Electric vehicle drivers will be taxed about 53 cents a day, or $2.64 a week, less for their car work travel. They’ll be about $126 a year better off.

Commuting trips make up about 25% of car use, so electric car users’ overall savings are likely to be even greater.

It is difficult to see how such savings on excise tax are a disincentive to electric vehicle uptake. Fears of a “great big new tax”, as the Australia Institute puts it, seem unfounded, as are concerns that road-user charges would “slam the brakes on sales”.

Let’s be clear, the big barrier is the upfront cost of electric vehicles, about $10,000 more than their conventional equivalents. Advocates for electric vehicles should focus on that difference, and the failures in Australian government policy, not state road-user charges.




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Why taxing actual road use matters

It needs to be recognised that, with lower marginal costs, electric vehicles are likely to be used more than conventional cars. That would increase pressure on urban road capacity. So while the new road-user charge of 2.5 cents per kilometre is flat across the time of day or the route driven, this will likely need to change.

Distance-based road-user charges have been politically controversial. Imposing a tiny charge on a minority vehicle type is an expedient way of introducing a needed reform. Fewer than 1.8% of vehicles in Australia are currently electric or hybrid. But as all cars become electric, distance-based road charges will become an increasingly powerful policy tool.

Thanks to advancing telematics, transport planners will eventually be able to impose variable road-user charging by time of day and route, similar to ride-hailing companies’ “surge” pricing. We could then apply novel approaches such as a cap-and-trade system. A city could allocate its motorists an annual kilometres quota, which is then traded to create a market for excess urban road use.

The private car could also be integrated into mobility-as-a-service models.

Road-user charges could be regressive for people with few alternatives to the car. But telematic tracking could allow for lower charges for less affluent households in dispersed outer suburbs with few other options.

Beyond fuel, private cars have high environmental costs in steel, plastic, aluminium, glass and rubber use. And about one-third of our increasingly valuable urban space is given over to cars in the form of roads and parking.




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Freeing up the huge areas set aside for parking can transform our cities


To reduce this demand on resources and space, car use could be priced to shift travel to, and fund, more sustainable and city-friendly modes such as public transport, walking and cycling. We could even price the car out of cities completely. The most environmentally sustainable car, after all, is no car at all.The Conversation

Jago Dodson, Professor of Urban Policy and Director, Centre for Urban Research, RMIT University and Tiebei (Terry) Li, Research Fellow, School of Global, Urban and Social Studies, RMIT University

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