The Australia Institute ran an excellent webinar (Stop the Electric Vehicles Tax) this morning opposing the Electric Vehicle Tax announced by Victoria and SA. An EV tax may end up being imposed by other state governments, including NSW’s and Queensland’s, and we may see one announced in the 2020-21 state budget when it’s handed down next Tuesday. Earlier this month, the Financial Review’s Queensland bureau chief Mark Ludlow wrote Electric vehicle taxes expected across Australia. That said, I haven’t heard any rumours about a Queensland EV tax, and I can’t find any commentary from the Treasurer regarding whether he’s considering one, so this could be a false alarm.
In the webinar, the Australia Institute’s Chief Economist Richard Denniss made some very compelling arguments for why an EV tax shouldn’t be imposed, including those he made in a Guardian Australia article published today (Instead of taxing electric vehicles, heavy vehicles should pay more for the damage they cause):
…while it’s true that as the number of electric vehicles rises in Australia fuel excise collections may fall, that doesn’t make it a good idea to tax the use of electric vehicles. The amount of money Australians spend on GST-free items such as private school fees and private health insurance has risen, but that doesn’t mean we have to increase the GST on books and clothes.
We tax cigarettes and alcohol because we want to discourage their use. We subsidise vaccinations and pharmaceuticals because we want to encourage their use. If we want to encourage more people to buy low-emission vehicles we should subsidise them and if we want to discourage people from buying them we should tax them.
In the webinar, Richard made the important point there’s no direct link between money raised by the Commonwealth through fuel excise and money spent on roads by either the Commonwealth or states and territories. It’s not earmarked for that purpose. It goes into the big pot of consolidated revenue and you can’t say any one dollar in that pot is spent on anything in particular.
An EV industry representative who spoke in the webinar, EV Council Chair Tim Washington, is worried the EV tax will seriously hamper the take-up of EVs in Australia. Apparently, there are fewer than 20,000 EVs in Australia at the moment, so EV taxes will raise very little revenue (i.e. only $1 million in its first year in SA), but they may slow the take-up rate of EVs. This would be unfortunate, given EVs could make a significant contribution to reducing Australia’s greenhouse gas emissions. Regarding what state Treasurers are saying about how an EV tax needs to be imposed to pay for road maintenance, Tim said “It’s an absolute lie”, making the same point Richard did about the non-existence of a direct link between fuel excise and spending on roads.
It’s highly likely we’ll all be driving or riding in EVs one day, and I’d prefer not to have to pay a tax on the kilometres travelled. Our governments extract plenty of tax revenue from us already. I’d prefer that the Queensland Government restrain the growth of its highly paid bureaucracy rather than impose a new tax. Let’s hope we don’t see one introduced in the budget next week.
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Gene, whilst we will eventually want to encourage the use of non-fossil fuel vehicles and that seems to be EVs at the moment there is little value in them as most of our power is generated by coal and gas in QLD. In fact, you could probably show right now they emit more CO2 given the losses of energy in the generation, transfer, storage and then use in the vehicle. Their real value is in the future. I am increasing my nickel and copper shareholdings to capitalise on this. However, as time goes on and numbers increase and whilst have very low usage costs then ultimately that will lead to more congestion on our roads for which the EV drivers are not paying the fuel excise that should be used for road funding. The price of fuel pre-covid was possibly having some effect on car use and public transport for commenting. Before long the buying price will be similar to fossil fuel cars or even cheaper and the range will also be similar as battery technology and price improves. I don’t see why there should be inducements and especially not subsidies then. I also think the UK government may be making a mistake in legislating the end of fossil fuel vehicles they should just let the market decide and not try to pick winners. Force the technology to meet the market.
Hi Russell, many thanks for the comments. I agree the UK government is making a mistake and I certainly wouldn’t recommend legislating in favour of EVs. On the lifecycle CO2 emissions, I’ll need to look into that issue more. I understand electric motors are much more efficient than internal combustion motors and that must be an important factor. EV advocates claim they reduce GHG emissions regardless of generation mix. e.g. Qld TMR claims that “The average EV produces around 30% less greenhouse gas emissions compared to a conventional fossil fuel vehicle when using Queensland’s current electricity grid mix. EVs will contribute towards Queensland Government renewable energy target.” https://www.qld.gov.au/transport/projects/electricvehicles/future/benefits
One interesting point made in the webinar yesterday from the industry rep is that EVs can act as batteries which can improve the stability of the electricity grid.
Hi Gene, thanks. My comment on EV CO2 emissions was not really about life cycle it was when most of the electricity is generated by coal and gas as in QLD now. The CO2 emitted in generation of (far) more power than goes into the battery because of the losses in transmission, charging and battery inefficiency would produce significant CO2. I accept that once we are generating electricity at zero CO2 emissions sometime in the far future or you only charge your EV via your own solar panels then they would emit none or indirectly less. Another thing comes to mind as EV use significantly increases. We need to have significantly more generation capacity and that generation must be @ low or zero CO2. I can ultimately see a real case for nuclear generation as in the UK. Have you or anyone else done any analysis on how much extra generation would be required?
I think you’ve jumped off the tracks here Gene. Fuel excise may go into consolidated revenue, but without it we wouldn’t have as much money for roads. An equitable approach would be to take fuel excise off, tax all cars and heavy vehicles for road usage, using a combination of distance travelled and weight, and hypothecate that towards roads maintenance. Using a fuel excise effectively taxes road usage for weight and distance, although imperfectly because of the different fuel efficiency of different engines.
Hi Graham, yes, a more rational system of road charging along the lines you suggest would be optimal, but that’s not what governments are implementing. This new EV tax is motivated by the desire of state government’s for a new revenue source. Note the state governments aren’t collecting the fuel excise to begin with. It’s collected by the federal government. If the federal government developed a new road use charging mechanism and applied a formula that properly accounted for the cost imposed on the road network, then fine. But that’s not what this is. It’s a blatant grab for revenue (and not much in the short-term it appears) which state governments can justify politically because people think it’s unfair EV drivers don’t pay fuel excise. It’s not good for progress in my view.
In my ignorance I thought that fuel tax and EV tax would have gone back into roads. It’s disappointing and misleading to understand this is not the case.
As a user pays model I think that it is fair for those vehicles that do the most damage to contribute the most – is heavy vehicles.
I would also be interested in any data which might suggest motivations for purchasing an EV or hybrid. I drive a Prius because it aligns with my values. I was shocked when my registration was half the price of my previous car. It was nice, but not a motivator.
My Tesla Model 3 uses the energy equivalent of 1.9 litres of petrol per 100km. Even if using coal-fired power, I am producing much lower carbon emissions than almost all fossil fuel vehicles and as the grid becomes greener, I will be producing even less.
Surely the Federal Government would want to improve our balance of payments by reducing oil imports. Electric vehicles use no oil. Why would the Feds let the States impose an electric vehicle tax that discourages their adoption?
Arthur, That is very interesting. How was that number calculated? CO2 emissions or cost or some other way? Is there a reference or your own calcs? A game changer? Russell
I’m waiting for the day the Government realises there will be a huge black hole in revenue generated by speeding and mobile phone fines once fully autonomous vehicles become viable (2025-2030 if you take Nissan/Renault or Hyundai’s word for it) and maybe another decade to become commonplace. On the plus side, insurance premiums should fall dramatically as well.
Meanwhile, millions are being “invested” in cameras (which can’t even detect stolen cars) to raise as much revenue as possible. I hope the ROI is less than 10 years based on the current technology timelines…
I believe that all transport should be distance based, with a flat rate for longer distances travelled. Shipping, Airfares and Public Transport are already distance based as well as ride share and e-mobility hire. Singapore is nearly there with all modes. Saying that, it is a bit premature to move to a distance based system for EV’s and Hydrogen vehicles, until there is at least 25-30% uptake. Then all vehicles should move to distance based charging around the country and implemented Federally. The excise should then be frozen not reduced for all combustion vehicles as an incentive to move to EV and Hydrogen.