Australia’s carbon twist: Taxing consumers who refuse to burn fossil fuels

How good is Australia, and its series of “firsts” on climate and energy!

Do you remember how Australia first introduced a widely admired carbon price that was both world-leading in its scope, and highly effective?. And then it trashed it, much to the joy of conservatives and climate deniers.

Do you remember that Australia then considered introducing fuel efficiency standards, only to trash that idea when the Murdoch media described it a “carbon tax on wheels”, ensuring the country remains a dumping ground for dirty and expensive cars with engines so inefficient that – according to government’s own estimates –  it adds about $600 a year to the fuel cost of the average family car, and billions to the country’s health bill.

But nothing quite matches the latest idea. Australia has the slowest take up of electric vehicles in the developed world, and it’s just about to get slower: South Australia and Victoria have both announced plans to introduce a road user tax on EVs, a policy that will add around $500 to the annual cost of running such cars, and make those states the first in the world to introduce such a plan without providing any meaningful incentives to actually purchase an EV. NSW may well follow.

Of course, it’s not the first time that various governments and interest groups have sought to tax consumers who choose not to burn fossil fuels. The electricity networks quietly jacked up their fixed tariffs to stop solar households from ducking hefty network costs (many are now slugged nearly $2 a day just in network charges to import a few kilowatt hours from the grid each day) and those same solar households now also face a tax on exports of their solar back into the grid so others can share. As in the auto world, the energy sector likes to protect what it’s got.

But this is Australia, the land Down Under where the policies are Arse-End Up. We don’t tax the burning of fossil fuels, we tax those trying not to. It couldn’t happen in a country less captured by greed, self interest, powerful business lobbies, and an ignorant and spiteful Murdoch media.

The new taxes on EVs have astonished many in the auto industry. Australia already trails the world in the uptake of EVs, thanks to the disinterest of a government that makes ridiculous claims about electric cars, including that it will be “the end of the weekend”, is an “attack on tradies”, and will result in huge costs for household charging equipment.

Some major manufacturers have decided against shipping their new EVs to Australia because of the federal government’s indifference and its scare mongering, and the lack of infrastructure. Most other countries have generous incentives to accelerate the uptake of EVs, noting their benefits in public health and reducing emissions, not to mention fuel security. Many are looking to ban sales of new petrol and diesel cars in the next five to 10 years.

The fact that the first states to impose these taxes, the Liberal government in South Australia and the Labor government in Victoria, are also among the most progressive when it comes to renewable energy policies and overall climate goals, makes these moves even more mystifying. South Australia has a net 100 per cent renewables target by 2030, while Victoria – still saddled with ageing and filthy brown coal generators – has a 50 per cent renewables target.

Some may argue that this is not so much an attack on EVs, at least at government level as a naked revenue grab. Currently, the fuel excise that is collected from petrol and diesel sales at the pump goes to the federal government’s general revenue kitty. The taxes on EVs is really just a revenue grab, and EVs just happen to be the vehicle, so to speak. But it’s a hopelessly shallow and badly thought out policy. And if was not supposed to be an attack on EVs, how hard would it be to tie it together with some meaningful incentives.

The main orchestrator in all this is an influential lobby group known as Infrastructure Partnerships Australia, which has been pushing the idea of a tax on EVs for the past several years, ever since Adrian Dwyer, its policy zealot (he did a thesis on the subject) became CEO two years ago.

Dywer’s website says the IPA “backs its words with evidence and tells the truth no matter how provocative”, which seems a hollow claim when he celebrated the Victoria announcement on Saturday with so much joy that he declared it was about time “millionaires driving Teslas” paid their fair share of taxes, and not just the mums and dads in petrol powered Mazda’s and Kia’s.

There’s a couple of problems with such smug claims. One is that fuel excise is general revenue only, and is not used to directly fund roads, and EVs pay more than their fair share of general revenue through higher GST, stamp duty and other charges. And they’re not killing people with their emissions. The other is that many EVs, particularly the growing second hand market for Nissan Leafs, cost only $20,000 and are not driven by millionaires, but by people who might have once owned Mazdas and Kias, and who are being penalised for trying to do the right thing.

Dywer and the IPA also know that the biggest threat to fuel excise revenue does not come from electric vehicles, but from improvements in efficiency (despite the lack of rules and regulations) and the rapidly increasing uptake of non plug-in hybrids (such as the massively popular Corolla, Camry and RAV4), where fuel consumption is reduced by around a third, and in some case of very expensive cars, down to a measly 1l/100km. These cars are exempt from the EV tax.

So, while the mums and dads are driving around in relatively inefficient Mazda and Kia SUVs, the rich folk driving expensive Lexus hybrids and the like are paying a lot less in fuel tax revenue. But apparently that’s OK. The IPA justifies this on the basis that hybrids are just a “transition” vehicle so are not worth the bother.

But here’s the thing. The running costs of an EV has now effectively doubled. It will likely be cheaper to run a Corolla hybrid han an EV. They’ve effectively allocated a subsidy to the modern fax machine on wheels. And the overall cost will increase by around 5%, which according to the government’s own economic forecasters, will cause EV sales to reduce by around 2.5%, or 1,000 vehicles in Victoria alone.

You might also think that a group that calls itself Infrastructure Partnership Australia might have an interest in ensuring that the charging infrastructure for EVs is in place. But no, in its policy statement, it makes little mention of that, apart from saying that EV charging infrastructure should follow, rather than precede, electric vehicle uptake, and should not be funded by the government. FFS. This from a group that represents an industry that sucks on the teat of government funds for roads, ports and other infrastructure.

Who are these people? They describe themselves as a “think tank”, with a mixture of government and private ownership, but they don’t reveal their membership on their website. But we are told it includes toll road operators, contractors, and financiers, all those with skin in the massive infrastructure game.

Its board includes the bosses of major infrastructure owners and financiers, and senior public servants in Victoria and NSW treasury. (Ah-ha!). Their “patrons” include former BCA chair and notable climate skeptic Tony Shepherd, who was involved in just about every toll road in Australia at some point, along with ESB chair Kerry Schott, former NSW premier Nick Greiner, and pulp and paper executive Adrian Kloeden.

The Victoria policy also seems to be a complete mess.

Apart from slugging pure electric vehicles at a rate of 2.5c a kilometre (or $500 a year for a car that travels 20,000kms a year), it is also hitting plug in hybrids with a 2c a kilometre tax.

How will this be applied? To the just electric travel or to total travel? How will it be measured? How will the tax be imposed? The treasurer’s office said they would not answer those questions, and that’s probably because they don’t know the answers. There has been zero consultation with the EV industry on this tax.

The Victoria government was also asked if it had modelled the impact of the EVs taxes on its net zero emissions target. No, it hadn’t. It was asked if the EV tax would impact purchases of new EVs. No, it wouldn’t, it said. Had it done any modelling on that? No, it hadn’t.

Victoria tried to defend its action by saying that the cost of registrations of EVs is reduced. But that is by just $100. It’s true that road funding charges will need to be re-calibrated at some stage, but not in the way that hinders new cleaner technology. Of all the state and territory governments, only the ACT has the right idea, transitioning the government fleet to EVs and offering a $15,000 zero interest loan to private buyers.

Where to from here? The NSW treasurer Dominic Perrottet says he likes the idea of an EV road tax, but will hopefully face stiff resistance from the likes of energy minister Matt Kean, the only minister, and probably the only MP in the whole of Australia who actually drives an EV, along with transport minister Andrew Constance and premier Gladys Berejiklian.

And it’s hard to imagine that the federal government would sit idly by watching the states jump in and try grab the revenues, which currently amount to around $10 billion a year. And it should be noted that the CSIRO report on road transport revenue actually noted that it was in no danger of decline over the next 10 years in any of its modelled scenarios (see graph below), and the biggest threat comes from hybrids, not electric.

Any intervention from the federal government, however, would presuppose they actually had an EV policy.

And on that aspect, they don’t seem to have a clue what they could or should be doing, mainly because they are still terrified of the Murdoch media, don’t understand the technology and have convinced themselves it would take three days to drive to the Gold Cost from Sydney in an EV, it would be quicker to walk from Wagga Wagga to Dubbo, and that it would take five days to charge one with solar.

Angus Taylor, the energy and emissions reduction minister who has made up some of the biggest nonsense about electric vehicles, likes to describe his policy focus as “technology, not taxes.” It will be interesting to see how he dances around this one, because it looks a lot like “taxes, not technology.” In fact, it looks like a tax on technology.

Note: RenewEconomy’s electric vehicle focused sister site The Driven is hosting this Wednesday afternoon (Nov 25, 4pm) a free webinar on charging options for EVs at home and on the road. It should be fun and informative. You can click here for more information and to register. Ministers and their teams are most welcome.