Flannery: “Profound” tax reform needed to encourage EVs in Australia

It is critical that Australia’s tax system is urgently reformed in a way that encourages the uptake of electric vehicle uptake, adding a crucial tool to the task of reducing carbon emissions, says environmentalist, professor and chief councillor for the Climate Council Tim Flannery.

In a keynote address to an online audience on Friday morning, Flannery pressed home the urgency with which Australia and the world needs to act in order to avoid average global warming of more than 2°C, which would create enormous changes to the planet’s weather systems.

“The best science we have tells us if we want best chance of avoiding tipping points, we need to reduce carbon emissions by 8% per year every year through to 2030,” Flannery said at the 2020 EV Vision e-Conference presented by the Australian Electric Vehicle Association.

But to achieve this ambitious and absolutely necessary goal, Australia needs to undergo a significant transformation of tax structures, including the fringe benefits tax which currently subsidises the burning of petrol and diesel but offers no such incentives for electric vehicles.

By doing so, the business case would make more sense to transition private vehicle fleets, which would in turn garner more confidence from car makers to bring more electric models to Australia, and feed a second hand EV market.

“We need to start pushing electric vehicles into fleet sales,” said Flannery. “Fleet sales are the engine house of the second hand market.”

But, he said: “One of the biggest problems we have is the way the fringe benefit tax is crafted – currently you get fringe benefits for fuel you burn, but there is not the equivalent for electric vehicles.

“We need profound reform for fringe benefits to allow electric vehicle uptake – it’s a message we need to hear at a political level,” he said.

In the same breath, Flannery lambasted the “EV tax” which has dominated news this week, drawing scathing opposition from many economic, automotive and environmental experts, and which would reduce the number of models brought to Australia, while killing any industry growth.

This message was echoed this week by the Tax Institute, which is also questioning why it is appropriate to discourage EV uptake via new taxes.

“Victoria’s proposed electric vehicle tax raises a number of challenges and questions,” said The Tax Institute’s GM for tax policy and advocacy Scott Treatt in a note by email to The Driven.

“One must question the underlying objectives of the Victorian Government in introducing such a tax. The disincentive introduced by this seems at odds to the nation’s call for further investment in emerging technologies and the global movement for reducing carbon output.”

“The time is not right for (introducing EV taxes),” Flannery said. “We need rapid uptake, we need 8% reduction (of CO2) per year …. we’re not going to achieve that with roadblocks.”

Flannery likened the response of Australia and the world to the Coronavirus pandemic and the unprecedented funding being poured into the search for a vaccine.

“We are in a true emergency situation, we need to use all of the tools we can to get that reduction per year,” he said.

Aviation and global shipping

Flannery said aviation and shipping sectors also need to address the burning of fuels, and said he believes hydrogen may make sense for shipping.

“It seems pretty clear that hydrogen is going to be shape of the fuels for the shipping industry,” he said.

He added that e-fuels, created from carbon in the atmosphere such as by Canada’s Carbon Engineering, may prove a solution for aviation, one of the most difficult problems for clean transport.

“Aircraft is most difficult problem we face,” said Flannery adding that Carbon Engineering’s solution “produces very energy dense fuels – these are available now, they are more expensive than traditional fuels but nevertheless they are there and are in use.”

Public transport would be a relatively easy problem to resolve – such as e-buses, which have known routes and can have drivetrains and batteries made to match routes.

“Again, this is a long term, ambitious, expensive program but absolutely necessary to (make the planet) sustainable again,” said Flannery.

“This is a critical moment for this generation and future generations,” he said, adding that the notion of an orderly transition – better known as a slow transition – would commit the planet to a disorderly climate.

“The decisions we make now will weight disproportionally for us, our children and everyone subsequently,” said Flannery.