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Transition to electric cars

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





Elektronik-Zeit/Shutterstock

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

Australia’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.





Read more:
Going electric could be Australia’s next big light bulb moment


 

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.





Read more:
Could electric car batteries feed power back into the grid?


 

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.





Read more:
Want an electric car? Here's how to buy second-hand


 

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 who heads 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.





Read more:
The trucking industry has begun to turn electric; cars will take longer


 

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.

 


Responses (999)


 

peter abelson

Remove the luxury car tax from all-electric cars

These questions are difficult because they are a partial approach for a much broader question. Our preferred policy is to tax CO2 emissions, not to subsidise one alternative out of many ways to reduce CO2 emissions. If the broad policy is to subsidise alternatives that reduce CO2 emissions, then it would be appropriate to include electric cars. But fundamentally greenhouse gas emissions require a comprehensive policy platform, not a piecemeal one.


 

Garry Barrett

Subsidise the purchase of all all-electric cars, Subsidise public charging points for electric cars

9


 

Nicole Black

.

9

What we need is good pricing policy around pollution and then people can adapt to that with whatever is the best decision. This may or may not be electric cars. This type of interfering in markets is inefficient and misguided.


 

Harry Bloch

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars

10

Electric cars are the future. The sooner Australia gets up to scale with distribution and even production of electric cars, the fewer dinosaurs will be left on the road in twenty years time. If the market for electric cars gets large enough quickly enough, there is a potential for domestic production as the scale requirements for competitive production cost is still low relative to petrol or diesel vehicles. Subsidies are preferable to mandates given the technological uncertainties.


 

Adrian Blundell-Wignall

.

8

None of the above are suitable. Set a binding price on carbon in general, tax Co2 emissions, and impose more strict Co2 emission limits on petrol and diesel cars. The market should drive the substitution towards electric cars based on prices. Subsidies and quantitative import restrictions and bans should be avoided.


 

Alison Booth

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars

7

Set a date to ban the import of petrol and diesel cars. Also (i) introduce an export ban on our petrol and diesel cars to prevent dealers exporting them to developing countries (ii) introduce a scrapping subsidy for diesel and petrol cars.


 

Robert Breunig

.

10


 

Matthew Butlin

Subsidise the purchase of all all-electric cars, Subsidise public charging points for electric cars, Make charging points compulsory in new homes and new carparks

8

Currently electric cars appear to fit urban populations and dense traffic routes with relatively frequent stopping points. A significant part of Australia does not fit this, including long distance routes and hauling significant payloads (such as caravans and trailers to remote locations). Current technology has not yet solved this and seems unlikely to do in the next five years. (I hope to be surprised on the upside.) Once this problem is solved cost efficiently l support banning imports of petrol and diesel vehicles. But not until then.


 

Lisa Cameron

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

10

Greater uptake of electric vehicles is essential for reducing our carbon emissions. It also lowers air pollution levels, improving city amenity and population health. Electric cars are much more expensive in Australia than in many other industrialised nations. Our low population density also means that average trip lengths are longer and a lack of charging stations is a serious disincentive to buying an electric vehicle. Prices will drop once sales volumes increase. There is a role for government in kick-starting this process. Subsidising public charging points is an obvious place to start. Studies have found that the cost savings to society from cleaner air exceeds the costs of installing the charging stations themselves. I am opposed to a blanket subsidy on all electric vehicles as wealthier households are likely to benefit disproportionately but subsidising cheaper electric vehicles is less regressive and will promote wide adoption. We should also follow the UK's lead and make charging points compulsory in new homes and new carparks as this the way of the future and it will be more expensive to retrofit charging stations. Last year Germany went a step further and passed a law making it compulsory for building owners to upgrade the wiring in the building so that tenants can install charging stations. I have my eye on a Mercedes electric van but am also contemplating a road trip to the Northern Territory - currently two incompatible aims. I won't be buying an electric vehicle until the public infrastructure is substantially improved!


 

Fabrizio Carmignani

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars, Make charging points compulsory in new homes and new carparks

9

The government should play an active role, hence my recommendation would be to design and implement a package of measures at federal level (there is still too much dispersion and inconsistency at state level). However, I am not fully convinced about the introduction of a subsidy to the purchase EVs. While in principle a subsidy would make EV more affordable, it could also lead to a situation where the price of these vehicles stays too high for too long. Banning imports is another measure that requries more consideration in terms of design. The rationale is clear, but again the risk ? as with any import ban ? is that in the end the final consumer will bear the welfare loss associated with restrictions to international trade. I therefore favor other measures, including subsidies for public charging points and removing luxury car tax from all EVs. I also support a measure such as the one applied by the ACT government to waive registration fees on the purchase of all electrical cars or other zero emission vehicles.


 

Rebecca Cassells

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars, Make charging points compulsory in new homes and new carparks

7

Australia needs to take a holistic approach to reducing CO2 emissions. Encouraging the uptake of electric vehicles will only be effective if the reliance on non-renewable energy sources is reduced at the same time. The volume and variety of EV production and sales has been increasing significantly world-wide, placing downward pressure on prices ? and they cost less to run than oil-fuelled vehicles. Households are already buying EVs to take advantage of lower running costs and more will likely follow suit as prices come down further. Governments should direct resources towards infrastructure needed to accommodate an EV fleet, including public charging points and incorporating charging capabilities into new home planning. At some stage setting a target date where ultimately petrol and diesel vehicles will be phased out will be needed, but this needs to happen alongside other policies. The long-term viability of current battery options for EVs, battery recycling facilities, along with the integration of EVs into electricity grids will need to be assessed and planned for.


 

Bruce Chapman

Subsidise the purchase of all all-electric cars, Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars

9


 

Ken Clements

.

9

A tax on carbon emissions is the first-best policy. Subsidies/taxes on cars involve a higher social cost.


 

Kevin Davis

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars

8


 

Janine Dixon

Remove the luxury car tax from all-electric cars, ubsidise public charging points for electric cars, ake charging points compulsory in new homes and new carparks

Removing luxury car tax on electric vehicles is a small and achievable step to accelerate the take-up of electric cars, however it probably would not have a large impact because the really big take-up will be below the luxury car tax threshold. Governments can help by funding the infrastructure (charging points) required by electric cars.


 

Brian Dollery

.

8

Market forces should determine the uptake of electric cars, especially given the vast distances in Australia, and the huge differences in transport infrastructure between metro, regional and rural areas.


 

Uwe Dulleck

Remove the luxury car tax from all-electric cars, Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

10

EVs will be the future of individual mobility, the earlier Australia can set up the infrastructure, the more will Australians benefit from its engineering capability, developing industries and contributing to setting the standards. I feel Australia, with its high rate of urbanisation lends itself to EVs. At the same time, developing these in urban areas allows us to engage now in the debate and the developments how to develop a strategy to cope with the long distance travel that is also part of the Australian situation.


 

Chris Edmond

Remove the luxury car tax from all-electric cars, Subsidise the purchase of all all-electric cars, Subsidise public charging points for electric cars

10

I favour aggressive subsidies to encourage Australian households to substitute towards electric vehicles. I would prefer *very* aggressive subsidies instead of making charging points compulsory or banning the import of petrol and diesel cars. Given widespread adoption of electric vehicles, I think private charging points (as opposed to public ones) would be rapidly installed in private homes and carparks without further compulsion. Similarly, in the presence of very aggressive subsidies for electric vehicles an outright ban of imported petrol and diesel cars would rapidly become unnecessary.


 

Craig Emerson

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars

10

The luxury car tax should be removed for EVs that are above the existing price threshold but below the top-of-the line EVs. Federal government support for fast-charging stations would reduce range anxiety and send a strong positive official message. The federal government should embrace EVs in its public statements and refrain from claiming they can't pull a boat and will wipe out the Aussie weekend as we know it.


 

ALLAN FELS

Subsidise only the purchase of non-luxury all-electric cars, Make charging points compulsory in new homes and new carparks

8


 

Gigi Foster

Subsidise public charging points for electric cars

6

The EV question relates strongly to the core economic ideas of externalities and public goods, as well as to the age-old question that needs to be answered in order to justify government intervention in a market: "what is the market failure here?". On externalities, the emissions of combustion engines carry third-party costs (dirtier air for everyone) and this is something addressed in many countries, including Australia, with petrol taxes. So, one option the government has at its disposal if it wished to intervene more in the market for vehicles would be to adjust the rate of the fuel excise tax. This would then also be an effective tax on electric generators of all sorts, which also emit. EV do still produce emissions - just at the source of electricity generation, rather than via the tailpipe - so the argument for adjusting the fuel excise tax would have to be about either wanting to switch the location of pollution, or to recognise the lower (not zero) net emissions of EV compared to combustion engines, and thus the lower externality caused by driving them. However, adjustments to the fuel excise tax weren't on the list for this question. I would add that some options on the list are interventions that compel market actors to take particular actions - like bans and mandates - and these are generally a bad idea in the land of economic policy: they seek to apply direct control, rather than to remove market failures. For a similar reason, subsidising a specific good (like all-electric vehicles) is generally a worse option than adjusting marketplace incentives more broadly through correcting market failures. The reason that public goods are relevant to the EV question is that infrastructure to support driving is already funded by the government, as a public good (more or less - congestion happens of course, and some tolls exist). In the case of EV, special infrastructure is needed in order to make these new cars viable and competitive with combustion-engine cars - particularly in light of Australia's vast driving distances. Subsidies for re-charging stations along some major intercity highways would help level the playing field for EV, given that in the absence of sufficient EV traffic on the roads, the private market will not provide this public good in sufficient quantities. It's sort of like a chicken and egg problem where the government can help by buying the chicken. Again, this sort of investment only makes sense if we perceive that there is an externality problem to correct: i.e., if the net emissions of EV are expected to be lower than those of combustion engines, or if the location of emissions matters to the total externality cost paid, which could be argued to be true here because of the denser populations in big cities where the bulk of driving occurs.


 

John Freebairn

.

8

Subsidising electric vehicles is a very second-best way to reduce greenhouse gas emissions. For the next decade it is likely that more than a half of electricity generated in Australia will continue to use fossil fuels and associated pollution. In the context of current government taxes and charges for the use of motor vehicles, and the social costs of the use of motor vehicles, electric vehicles receive a large effective subsidy in the form of non-payment of the 44 cents per litre fuel excise on on-road use of petroleum products relative to conventional motor vehicles. Approximately, revenue collected from the fuel excise plus state taxes on motor vehicles match government expenditures on investment in road infrastructure and its maintenance, although not hypothecated. Without additional electric vehicle subsidies, electric vehicles would be subsidised in the sense of under-pricing of government provided road services. And, no congestion charges. An additional subsidy for electric vehicles would exaggerate the distortions associated with under-pricing of road usage by such vehicles. Ideally, commonwealth and state governments should cooperate to develop a logical system of user charges for conventional vehicles and electric vehicles. This would include a road usage charge for provided infrastructure and its maintenance, external pollution costs, and for congestion.


 

Paul Frijters

.

9

This is an opportunity to tax. So one should tax luxury cars, electric cars, charging points, the lot. The idea that one should subsidise everything is a version of 'free money'.


 

Renee Fry-McKibbin

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars

10

The Australian government should contribute to the infrastructure that is needed for drivers to recharge their electric cars as the take up of electric cars will be low if it is difficult to drive distance. However, the electricity generated to power the electric cars needs to come from renewable sources otherwise car transportation will still contribute to the emissions generated in Australia.


 

Lata Gangadharan

Remove the luxury car tax from all-electric cars, Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

9

Many of these policies can be implemented in conjunction with each other. In Australia, there is hardly a market for electric cars. To kickstart it, perhaps we need some variant of stringent regulations, such as the second (banning the import of petrol and diesel cars) and the fifth option (compulsory charging points in new homes and carparks), in the list. Once these regulations are in place, a market will be created and market based incentives such as subsidies can help.


 

John Hewson

Remove the luxury car tax from all-electric cars, Subsidise the purchase of all all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

10

The transition to electric vehicles is an imperative and inevitable in an effective response to climate. It will happen faster than most think once major car manufacturers release an affordable electric car. Remember it took only 10 years from 1903-13 for the US to transition from horse-drawn to petrol-driven vehicles, and technology development and adaptation are much quicker today. particularly important for Australia. Governments are far short of recognising the scale and the urgency of an effective and fair transition to at least net zero by 2050. Australia is a global laggard, unwilling to meet its global responsibilities. Smart governments move decisively, not delay.


 

RICHARD HOLDEN

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars

10

EVs are a classic example of where there are network externalities that hinder adoption. That is why I support subsidizing charging stations. This intervention operates directly on the network externality. In addition, removing the luxury car is a no-brainer. It's a profoundly silly tax in any case. EV adoption is about internalizing an externality, NOT about income redistribution. So subsidizing only the purchase of non-luxury EVs is misguided. Making charging points compulsory in new homes is a mistake because it effectively requires three-phase power and only a handful of houses in any street can have that without making the grid unstable.


 

Guyonne Kalb

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

10

Australia lags behind Europe and the US in the take-up of this cleaner type of car. Not taking action to catch up is likely going to be a disadvantage to Australia as more and more other countries move towards electric cars, and towards banning petrol and diesel cars. In addition, transitioning to more electric car use would help in reducing Australia's CO2 emissions substantially. Ensuring that electric cars are not unnecessarily more expensive than petrol cars, and ensuring that facilities are in place to make electric car use more feasible for more people, especially in high-density metropolitan areas, are two crucial steps towards ensuring that electric car use becomes viable for more Australians. This is not my area of expertise, but I do not understand why there is so much opposition from the government to a broad range of cleaner technologies: from renewable energy to electric cars. These are clearly the future and will not go away. Not joining in now means Australia may be caught out some time in the (near) future, and we may then need to rush a transition to these new technologies as the old ones become obsolete.


 

Michael Keane

Subsidise public charging points for electric cars

8

As a general rule, the government shouldn't be in the business of subsidising particular final products. The proper role for government is to help provide the necessary infrastructure to support electric vehicles. At the same time, there ought to be higher taxes on greenhouse gas emissions (carbon, nitrous oxide, methane), as well as on air pollutants (carbon monoxide, nitrogen oxides, particulate matter, etc.). Such taxes would increase the cost of operating traditional vehicles. They would also raise government revenue, which could be used to fund other useful projects or to reduce income taxes.


 

Michael Keating

Make charging points compulsory in new homes and new carparks

9

I think electric cars will be competitive with petrol and diesel cars, so I don't see any further subsidy as being necessary or appropriate. However, I would favour the government moving to change its own car fleet over to electric cars as soon as possible.


 

Geoffrey Kingston

.

8

Is it heresy to suggest that the proposed action be accompanied by a cost-benefit analysis? Various interventions have already encumbered the supply side of the power industry. The proposed action would boost demand. Do we really want a pincer movement that would further degrade the affordability and reliability of power?


 

Michael KNOX

.

10

Most of the work on electric cars show that the reduction in carbon emissions happens because of more efficient operation of electric vehicle is large metropolitan areas. Electric vehicles actually create more emissions in rural areas because of the decreased efficiency and the higher emissions expended in the generation of relatively more electric power than the conventional energy required by conventional vehicles. Add this to the very large spaces in Australia between major cities and one very quickly comes to the conclusion that electric cars are not an efficient technology for Australia, A far more effective policy might be to continue our success in reducing emissions in electric power generation while focusing on greater fuel efficiency for conventional vehicles.


 

Emily Lancsar

Remove the luxury car tax from all-electric cars, Subsidise the purchase of all all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

9

To achieve the target of net zero emissions, reducing road sector emissions is essential. Incentivising the uptake of EVs is one important way to do this and the above policies will help reduce the upfront and ongoing cost of EVs and make petrol/diesel cars less appealing. Charging points in new homes/carparks are part of the infrastructure required to support EVs as is investment in highway charging stations. Lost revenue from fuel excise is of course a consideration but not insurmountable; lost revenue from removing luxury car tax from EVs could be offset by reducing the threshold for the luxury car tax on petrol and diesel cars ? further improving the relative price difference between EVs and petrol/diesel cars. Beyond the policy options outlined above, we also need electricity generated from alternatives to fossil fuel on which to run EVs. Better yet, or at least additionally, we should consider the benefits (climate, health, etc.) of active travel.


 

Guay Lim

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars

6


 

Elisabetta Magnani

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

9

In Australia, transport is one of the largest sources of greenhouse gas emissions. Australia must formulate a plan to reduce cars? contribution to emissions if it is serious about meeting its commitments to the Paris agreement. In this sense, taking action to accelerate the take up of electric vehicles (EV) is a no-brainer. In 2019, only 0.6% of new sales were EV, but 56% of surveyed consumers would want to purchase an EV as their next car (Electric Vehicle Council, 2020). Given the presently large price gap between EVs and traditional cars, it is reasonable to expect that a subsidy to all-electric cars will lead to a higher take up of EVs. This will produce a sizeable change in cars? direct greenhouse emissions. To the extent that a subsidy to all EVs benefits households who possibly would purchase an EV without the subsidy, a subsidy to all all-electric cars would be ?regressive? (NBER Working paper 25771, Feb 2021). A subsidy to all non-luxury all-electric cars would avoid this problem and make the subsidy more cost-effective and less regressive. By including alternative subsidy design, for example a plan for the provision and location of charging points in both public and private places, Australia can prepare for the hopefully rapid take up of greener forms of private transportation. The real issue here is whether isolated policies, such as subsidies, can tackle the challenge of greenhouse gas emission reductions to meet international obligations. The answer to this question is not straightforward. EVs are not zero emission vehicles and their indirect contributions to greenhouse emissions depend heavily on how/where we build these EVs as well as how we fuel them. Firstly, the production of EVs requires highly polluting mining and refining activities to produce the rare metals needed for EVs? batteries and magnets. Rare earth refining produces radiation waste. Whether these activities take place in Australia or overseas, is not a minor issue. However, the fact that EVs? production indirectly contributes to a global public bad, namely greenhouse emissions, remains. Secondly, if EVs continue to be powered with energy generated from burning fossil fuels, they still indirectly contribute to greenhouse gas emissions. Coal accounts for about 75 per cent of Australia?s electricity generation, followed by gas (16 per cent), hydro (5 per cent) and wind around (2 per cent) [Geoscience Australia]. That is why a subsidy to support the purchase of EVs should go hand in hand with real efforts to support the phasing out of fossil fuel energy, to support the production of renewable energy and to set deadlines for phasing out conventional cars on our roads. In the end, given that three quarters of our population live in cities and this percentage is projected to grow to over 90% by 2030, meeting international obligations requires us to formulate a green transformation strategy that includes strong support to urban public transportation.


 

Tony Makin

.

7

As mentioned in an earlier poll on this theme, if the rationale for subsidising electric cars is to limit emissions, it doesn't make much sense subsidising them if charging their batteries depends heavily on coal generated power. It would be interesting to know the average quantum of emissions per vehicle for running electric versus petrol/diesel. And if electric cars are to subsidised, what about hydrogen-powered? Honda in Japan is already making these.


 

Leslie Martin

Subsidise public charging points for electric cars

10

Although transport emissions are some of the most expensive sources of emissions reductions, almost 20% of Australia?s greenhouse gas emissions come from cars and trucks, so to make large emission reductions we will likely need to involve the transport sector. Most policies that promote electric vehicles (EVs) today do so in order to move particulate emissions away from high population density areas and get the long-lived vehicle stock and system of charging infrastructure ready for a future when the electrical grid will hopefully be much cleaner than it is now. Currently EVs are not really ?clean?. EVs substitute petrol/diesel emissions for electricity emissions. The cleaner the grid is, the more EVs will pay environmental dividends. In the meantime, the swap leads to greenhouse gas and particulate emissions moving out of cities, where cars are driven, to lower population density regional areas, where fossil fuel power plants are located. (See Holland, Mansur, Muller, Yates 2016 AER for excellent analysis of the geography of emission profiles changes with increased adoption of EVs in the US.) We don?t know exactly how much EV adoption is optimal today to be able to best take advantage of a cleaner future grid. We would ideally start by pricing all fossil fuels, i.e. both petrol/diesel and fuels used to generate electricity, at their true social cost. That is unlikely to be enough, though, because there are also network effects associated with charging infrastructure. In terms of specific policies, purchase subsidies (equivalently, the removal of the luxury tax) are problematic on distributional grounds. Like solar panels -- even more so -- purchase subsidies for EVs usually favor the highest income families. In the US the top income quintile have received about 90% of all EV credits (Borenstein Davis 2016 NBER) and primarily benefit home-owners over renters, even after controlling for income (Davis 2018 AEL), likely due to availability of fixed parking spaces and incentives to invest in home charging stations. Policies to target subsidies to lower income households have had decent success with hybrid vehicles, but very low take-up for more costly vehicles that are entirely petrol-free. (Muehlegger and Rapson 2020) Encouraging the conversion of public sector vehicle fleets, especially those that operate in high density areas, is one good policy that isn't regressive. I also recommend focusing on infrastructure: policies to develop the density and range of fueling stations. These could include encouraging apartment complexes to provide charging stations for owners and renters alike. But these policies should focus on expanding the network, not subsidizing its use. Free or heavily-discounted charging rates can be problematic as long as electricity is still disproportionately produced using fossil fuels. As EVs become more widespread and increases system load, we will also need to think more about how we price electricity. These prices will affect when people charge their vehicles, which determines which fuels get displaced, i.e. how clean the charging is in the short run, and the extent to which the extra load will increase or stabilize grid volatility, i.e. affect overall system cost. Links: Holland, Mansur, Muller, Yates 2016 AER: https://www.aeaweb.org/articles?id=10.1257/aer.20150897 Borenstein Davis 2016 NBER: http://www.journals.uchicago.edu/doi/abs/10.1086/685597 Davis 2018 AEL: http://faculty.haas.berkeley.edu/ldavis/Davis%20AEL%202018.pdf Muehlegger and Rapson 2020: http://www.erichmuehlegger.com/Working%20Papers/MR_Mass_EV_Adoption.pdf


 

Warwick McKibbin

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars

8

If the generation of electricity is not shifted quickly to low carbon emissions then we should not move to electric cars because emissions will rise as we drive with coal rather than oil. I assume the intention of the question is prefaces with the statement "If Australia's electricity system decarbonizes '.... if the question is actually as stated then given current policies I would answer no to every question.


 

Flavio Menezes

Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

10

A carbon tax ? with lump sum compensation to low income earners ? is the appropriate instrument to internalise the externalities (emissions) generated by conventional vehicles. In its absence, quantity regulation (i.e., a ban on importation and setting standards) can achieve the same goal of reducing emissions, but at a higher cost. It makes little sense to subsidise electric vehicles as standard arguments in support of a subsidy (i.e., to promote industry development through increased scale) do not apply as we don?t manufacture electric cars, and there are equity issues.


 

James Morley

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars

7


 

Margaret Nowak

Remove the luxury car tax from all-electric cars, Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars

9

As happened with rooftop solar, to have the take up of new technology supported by government action in the early stages is important to build volume and thus reap economies of scale/further tech development. There are significant externalities (noted below) which will be mitigated by move to electric vehicles. In the case of electric cars further issues for Australia are the long lead times needed to replace the whole vehicle fleet, and the likelihood that without intervention the rest of the developed world will move ahead of us to the extent that we will be importing vehicles with obsolete technology within the next five or so years. The case for a subsidy, at least in the early phase of this change over in technology is based on the external costs of the the continued use of the existing internal combustion technology. There exist demonstrable beneficial public health effects to be gained by moving away from petrol/diesel fuel, especially within metropolitan areas, and there will be an important impact on carbon emissions. In addition such a move will ensure the reduction in dependence on imported fuel (given Australia's potential for abundant clean locally produced electricity).


 

Lionel Page

Subsidise public charging points for electric cars

6

It is difficult question. The ability of electric vehicles to reduce emissions depends on the propensity of the country to produce electricity with limited carbon emissions. Unfortunately, in Australia, the production of electricity is mostly relying on coal and gas. As a consequence the production of electricity is the largest source of emission of CO2 in Australia (33% of its total in 2019). The nature of the energy mix of the country is critically relevant to assess the likely impact of electric vehicles on the reduction of carbon emissions. The spread of electric vehicles in Australia would not have the same impact on the reduction of emissions as it would have in countries whose production of electricity relies more on nuclear energy and renewables.


 

A Abigail Payne

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars

8

What I have not seen/read is a benefit-cost analysis of the use of electricity versus gas/diesel. We should also take into consideration the externalities associated with moving fumes from gas/diesel from major cities to the locations where electricity is generated. From a quick search, there is a belief that over 40% of energy-related carbon emissions are due to the burning of fossil fuels for electricity generation.


 

Alison Preston

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

6

The auto industry recognises that its future is in electric and has begun the transition to meet emission standards in Europe, China etc. Demand for electric vehicles (EVs) in Australia is low, hampered by taxes, cost, charging infrastructure, range anxiety, a lack of understanding as to what EVs offer and concerns about the environmental costs associated with batteries, scrapping etc. Meanwhile demand for new petrol/diesel cars grows, driven by generous government subsidies in the last budget. If we wish to see more EVs on the road and less conventional cars then policy settings will need to change and a specific vision/strategy enunciated.


 

John Quiggin

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars

10

An end date of 2035 would provide a firm basis for planning, and would support global moves by vehicle manufacturers to cease production of petrol and diesel vehicles. As regards vehicle taxes, the term "luxury" refers only to price. Since electric vehicles have higher cpaital costs, some would be subject to the tax despite not having the characteristics associated with the term luxury (I leave aside the question of whether luxury car taxes are appropriate). Public expenditure should be directed towards supporting infrastructure rather than subsidising vehicle purchases. I would support making charging points compulsory in carparks, but not in homes.


 

Mala Raghavan

Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

7

Electric cars do reduce harmful exhaust emission and improve air quality, which can help to decrease our exposure to adverse health outcomes. Though electric cars help to reduce air pollution, they still create greenhouse gas emissions if the source of energy to power these cars come from the electricity grid generated from fossil fuels. Further, all vehicles (irrespective of conventional or electric) produce substantial life cycle emissions such as vehicle production, processing, and distribution. Therefore, to reduce Australia?s carbon emissions and to realize the long-term benefit, the push to take up electric vehicles should be complemented with the push to switch to renewable energy such as solar panels, wind turbines or hydroelectric. These moves are essential for Australia to keep its greenhouse emissions below the ?carbon budget?.


 

Sue Richardson

Remove the luxury car tax from all-electric cars, Subsidise the purchase of all all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars

10

The most important and first thing that Australian governments should do is to put serious limits on tailpipe emissions of new cars. At present, Australia is unusual among developed nations in not having such a limit. It means that car makers around the world send their high emission cars to Australia, and do not send their electric cars. Electric cars are used by car makers to reduce the average emissions of all the cars that they sell in a country, to meet country emission limits. Since there are no such limits in Australia, they save their electric cars for elsewhere. Petrol and diesel cars emit particulates that are harmful to health. They also emit CO2. Both of these are harmful externalities that are not paid for by the user. It is efficient to charge an additional tax for petrol/diesel cars, or to subsidise electric ones, to account for the externalities. To reduce the impact of transport on greenhouse gas emissions, it is necessary for the electricity that is available at charging stations to be from non-fossil fuel sources.


 

Leonora Risse

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Make charging points compulsory in new homes and new carparks

9

The government can play a role in incentivising the uptake of electric vehicles by reducing the relative costs for a consumer to purchase and operate an EV, relative to a non-electric vehicle. The justification for allocating public funding towards such policies would be on the grounds of public interest: encouraging the use of EVs contributes to a reduction in carbon emissions, which is for the benefit of society and wellbeing overall. However, it would not be an efficient use of public funding to subsidise consumer behaviours that are likely to occur anyway. Subsidising the EV purchases of wealthier consumers, for instance, is likely to have less payoff compared to subsidising purchases among lower- and mid-income consumers, for whom cost is likely to be an actual barrier to their capacity to opt for cleaner energy choices. Targeting support for consumers at the lower end of the income/wealth spectrum could also be regarded as an equitable approach, reflective of individual capacity to pay. This list of potential government interventions is largely focused on end-user, private household activity. There is scope for public policy to do more to incentivise a shift in behaviour among businesses and in the provision of government services, including facilitating the uptake of EV in public transport service and government vehicle fleets. There is also scope for governments to support and incentivise investments in the technological innovations, R&D and manufacturing activity that would support the development of EV infrastructure, such as global battery supply chains, which the World Economic Forum has identified as a critical component of the global shift towards cleaner energies.


 

Rana Roy

.

9

What next?! Subsidised sedan chairs for ?the great and the good?, to enable them to virtue-signal their zero-emissions journeys as they ride around on the shoulders of coolies, conscripted through a new work-for-the-dole programme? So far as concerns the equity implications of the current campaign for subsidised electric vehicles (EVs), I can only applaud the Australian Government?s position, as articulated by Minister Angus Taylor: "We're not into subsidising luxury cars, it's not something we're going to do as a government" ? see link: https://www.abc.net.au/news/2021-06-09/electric-vehicles-victim-of-culture-wars-expert-says/100196982. Thankfully, the proposal does not pass ?the pub test?. But neither would it pass a comprehensive cost-benefit test. And for the benefit of those who wish to see, as I do, the rapid de-carbonisation of the transport sector as well as the minimisation of its several and various other externalities ? air pollution, accidents, congestion, and so on ? I should like to spell out at some length the larger case against Australian governments subsidising EVs, over and beyond its regressive impact on equity. Australia?s take-up of electric vehicles (EVs) lags most OECD countries primarily because most OECD countries ? including each and every one the member-states of the European Union who constitute a majority of OECD members ? impose a much higher effective rate of tax on CO2 emissions in road transport ? aka the ?effective carbon rate?, or effective rate of tax in OECD-speak. (See link: https://www.oecd-ilibrary.org/taxation/effective-carbon-rates_9789264260115-en.) They do so through a variety of instruments, including fuel taxes, mandatory fuel efficiency standards on new vehicles, and caps on CO2 emissions through the European emissions trading system, which prompt vehicle manufacturers to seek offsets through their sales of less CO2-intensive vehicles. (On this last point, see here ? https://www.abc.net.au/news/science/2021-04-20/australians-want-to-buy-electric-cars-what-is-stopping-us/100071550 ? for a useful if less than complete summary.) In contrast, consumer subsidies have played relatively little part in this story. A greater part in the recent story of EVs belongs to the recent ?regime change? in regard to diesel vehicles in the European Union and across much of the OECD world ? both through the tightening of EU regulations and the termination in several national markets of the long-standing tax preference to diesel relative to petrol, a tax preference which had helped to trigger a significant shift from petrol to diesel vehicles. Hitherto, vehicle manufacturers had been able to virtue-signal their contribution to mitigating long-term climate change, by means of more ?fuel-efficient? diesel vehicles, even as these same vehicles contributed to a rising toll of deaths and disabilities from air pollution in the here and now, as a result of generating a far higher count of fine particles known as PM2.5 (measuring less than 2.5 micrometres in diameter) of nitrogen oxides, and of the fraction of nitrogen oxides emitted as nitrogen oxides. Today, seven years after the first of my several successive studies for the OECD on The Cost of Air Pollution ? see link: https://www.oecd.org/env/tools-evaluation/thecostofairpollution.htm ? the major vehicle manufacturers finally understand that their task is to exit from both petrol and diesel. In short, the progress of EVs owes more to high and rising taxes that have served to raise the price of travel by petrol and diesel cars up toward its marginal social cost than to subsidies aimed at driving the price of travel by EVs to below its marginal social cost. Against this background, and for reason of its contribution to both the mitigation of climate change and to the fight against air pollution, I applaud and welcome the progress made by EVs in capturing a rising share of the global vehicles market. The share of new car sales claimed by EVs has already risen to 2.6% globally, and 3.5% in the European Union, even as Australia sits at 0.6% ? see link: https://www.abc.net.au/news/2021-02-25/electric-autonomous-cars-hype-v-reality-car-sharing/13178910. And given the recent and prospective technical progress in EVs relative to other also-promising technologies (such as, for example, hydrogen fuel cells), it is highly probable that EVs will be an important part of the decarbonisation of transport in the coming years and decades. Nonetheless, it should be stressed that EVs, and specifically electric cars, are but one of several channels by which to achieve the requisite de-carbonisation of transport (and the minimisation of its several other externalities). These channels include: (1) a mode shift to public transport, including especially already-electrified trains and trams (2) a greater take-up of active transport (walking and cycling) within cities (3) a reduction in the transport task itself: that is, a reduction in the sum of kilometres travelled, through the more extensive use of technology to enable remote working, virtual meetings, and so on ? the possibilities of which have been demonstrated abundantly in the last eighteen months. Subsidies to electric cars will do nothing to promote these developments and might well impede them. Finally, as the ABC?s science and environment reporter Nick Kilvert put it: "How green an electric car is, compared to a petrol car, depends on how green the grid is? ? see link: https://www.abc.net.au/news/2021-02-25/electric-autonomous-cars-hype-v-reality-car-sharing/13178910. And Australia?s grid is less green than that of many other OECD countries, including especially those countries that are leading the race on EVs. Therefore, the most advisable course for Australian governments to pursue today is to attend to the urgent tasks that are already on the policy agenda in this field: to facilitate (1) the mode shift to public transport (2) the greater take-up of active transport (3) the reduction of the transport task by means of technology (4) the greening of petrol cars by means of improved fuel efficiency standards (5) the greening of the grid. Progress on points (1) to (5) will contribute directly and immediately to de-carbonisation. It will also ensure that the future large-scale take-up of EVs in Australia ? which should obtain naturally as and when further technical progress in Europe and elsewhere drives down the (unsubsidised) market price of EVs to within reach of Australian consumers ? will be of greater environmental and economic benefit to Australia than it would be today.


 

Stefanie Schurer

Remove the luxury car tax from all-electric cars, Subsidise the purchase of all all-electric cars, Subsidise public charging points for electric cars

10

Subsidies are an effective tool to change consumer preferences, including tastes for cars. In the past decade, the market share of Sport Utility Vehicles (SUVs) climbed to almost 50% (https://www.carsguide.com.au/car-advice/australian-car-market-car-sales-statistics-and-figures-70982). The biggest winners in recent years were dual-cab utes. These are super-bulky tanks that take up almost two lanes in family neighbourhoods. They easily knock cyclists off the road because their owners don't know how wide they are. The reason for the stark increase in their sales is that the government gives tax benefits (when used for work) and special parking privileges in cities (ute drivers can use loading zones: https://www.carsguide.com.au/car-news/toyota-hilux-not-tesla-model-3-why-the-government-incentivises-us-to-buy-utes-instead-of). There are no tax or other incentives for electric vehicles (EVs) except for a modest lift in tax thresholds that comes into effect 1 July 2021 (https://thedriven.io/2021/06/01/australia-raises-luxury-car-tax-threshold-for-evs-for-second-year-in-row/). It comes at no surprise that such EVs are rarely seen on Australian roads. Sales statistics confirm this impression. Australia is falling behind dramatically in a global competition for carbon emission reduction. The smartest governments worldwide now compete for being the quickest to transform their countries into low-carbon economies, clean technology powerhouses, and locations of pollution-free cities. Whereas the most innovative countries in the world heavily subsidise EV sales and privilege EV users in cities and on the roads (e.g. Norway, Germany), Australia opts for subsidising the big polluters. And why? Australia builds its economic recovery on ute sales and thus gives those tax write offs (https://thenewdaily.com.au/finance/2021/06/11/utes-tax-write-offs/). It's for a short-term gain. And that is idiotic.


 

Peter Sheehan

Subsidise only the purchase of non-luxury all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars

10

While much progress is being made in reducing emissions in key sectors such as electricity. Australia's performance with transport emissions remains poor. Even after the reduction in transport activity and emission in 2020, due to COVID-19, CO2 emissions from transport in 2020 were 43% higher over that in 1990, having risen steadily over that time to 2019. This is especially concerning given that Australia now manufactures no motor vehicles but has skills relevant to various types of electric vehicles. We should take carefully considered measures to stimulate the use of EVs and to facilitate creation of charging infrastructure, but this should be in the context of a broader policy, badly lacking over the past decade, to make our vehicle fleet more efficient and less polluting.


 

Jeffrey Sheen

Subsidise public charging points for electric cars, Make charging points compulsory in new homes and new carparks

7


 

Julie Toth

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars, Make charging points compulsory in new homes and new carparks

10

The costs, performance and benefits of electric vehicles (buses trucks bikes and cars) relative to petrol/diesel vehicles are improving rapidly. The charging infrastructure that is required to support them is currently a key stumbling block that is almost impossible for individuals and smaller businesses to overcome, no matter how willing. Charging points and systems must be assisted by government nationwide. Governments all around Australia can also encourage & enable electric vehicle adoption by getting more active with phasing in all-electric public buses and government vehicle fleets.


 

joaquin vespignani

.

9

In Australia, the environmental benefits of electric cars are not very well understood: First, about 80% of electricity in Australia is produced using fossil fuels (such as coal, gas, and oil), therefore the benefit of using electric cars is largely offset by the source of electricity production. Secondly, electric cars are substantially less environmentally friendly during manufacturing and at the end of their life cycle (lithium batteries are not efficiently recycled). In short, environmental policies in Australia should focus on producing clean electricity before encourage the purchases of electric cars.


 

Rachel Ong ViforJ

Subsidise only the purchase of non-luxury all-electric cars

6


 

Beth Webster

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars

8

If there was a price on carbon, incentives to buy cars based on renewable energy would provide the optimal incentives and we would not be having this discussion.


 

Danielle Wood

Remove the luxury car tax from all-electric cars, Subsidise public charging points for electric cars, Set a date to ban the import of petrol and diesel cars, Make charging points compulsory in new homes and new carparks

3

If Australia is going to be on a path to net zero by 2050, emissions from the transport sector will need to start coming down. Given the significance of passenger vehicle emissions, it is clear that the take-up of electric cars will need to play an important role. In the absence of an economy wide carbon price, government should focussed on the lowest cost per tonne interventions that can help build take up of EVs. This is market with network effects ? increased take up of EVs makes it more profitable for private providers to provide charging infrastructure, further increasing the attractiveness (and therefore the take up) of EVs. In these types of markets, government support for either the supply or demand side of the market can have dynamic benefits - by building critical mass, and driving further take up. I'm not an expert in this area, but my inclination is that demand-pull policies like subsidies are probably an expensive way to generate take-up, assuming at current (relatively high) price points demand is relatively inelastic. In other words, subsidies would give away a lot of $ to people who would have purchased an EV anyway while not inducing much new demand. These subsidies will also largely benefit high income earners that can afford expensive cars. I would be more inclined to support subsidies for lower priced (non-luxury) but I would need more information on demand responsiveness. My understanding is prices are coming down quickly in any case as production ramps up overseas. I would support removal of the luxury car tax for these vehicles because it is a tax that generally has no sound policy rationale and would send some price signal. Requiring new houses (and particularly apartments) to have charging infrastructure makes sense because these are much more expensive to retrofit (and complicated where there are strata title issues) but for any home buyers the availability of charging infrastructure is not a front of mind issue just yet. There is likely to be a case for governments to provide in more remote spots to help fill gaps in private-sector coverage and help buyers overcome the range anxiety barrier. There may also be a case for governments to provide more ?on street? infrastructure for those without private parking. This could be done on a LR cost recovery basis but could help overcome a big barrier to take up and would also substantially increase the salience of EVs. Finally, give the long life of internal combustion engine cars (20-ish years on average) it seems like setting a phase out date will be necessary, otherwise many of the vehicles purchased in the 2020s, 2030s, and 2040s will still be on the road post-2050. That means either we?ll have many more emissions to offset (a risky strategy, given competing demands for offsets), or we?ll need an expensive cash-for-clunkers program in 2050 to push the internal combustion engines out. Setting a date like 2035 as recommended by the International Energy Agency should given consumers plenty of time to adjust their purchases and will still leave new and second hand internal combustion cars as an option for an extended period while the charging infrastructure network develops.