Federal senators on the economics committee will scrutinise a new law, proposed by The Greens, that would penalise state governments for taxing electric vehicle owners, after the Victorian and South Australian governments announced controversial plans to do just that.
In November, South Australia announced it would impose a tax on EV owners per kilometre driven. The Victorian government quicly followed suit, while NSW appeared to be moving in the same direction.
In Victoria’s case, the tax would 2.5c a kilometre for full electric vehicles, and 2 cents a kilometre for plug in hybrid vehicles, amounting to $500 a year for a fully electric car driven 20,000kms.
The rationale was that electric car owners don’t pay fuel excise, and should therefore contribute to the maintenance of roads in some other way.
But the plan immediately drew criticism because Australia is already one of the few countries in the world that does not provide incentives to encourage EV take-up. By introducing a tax, state governments would be actively discouraging take-up of EVs. And in any case, the biggest threat to fuel excise income is from non-pluggable hybrids.
Under the Greens’ proposed law, the federal government would calculate the revenue from EV taxes, and subtract the same amount from financial grants from the COAG Reform Fund, a federal fund set up in 2008 to help fund states’ “nation building” infrastructure projects. The penalty would make the EV taxes revenue neutral and therefore completely self-defeating, because they would still discourage EV take-up.
On top of that, the amount that would have gone to states with EV taxes would be redistributed among states without EV taxes, providing a double incentive not to introduce EV taxes.
In the first reading of the bill, Greens senator Janet Rice described the EV taxes as “terrible ideas” that would only make EVs more expensive.
“The reason this is all so unacceptable is that we know that electric vehicles are already more expensive than they should be, and that governments should be doing more to incentivise their uptake.
“Economic analysis shows that every driver who switches to electric vehicles provides a $1,370 boost to government revenue, and an $8,763 boost to the Australian economy. Keep in mind that’s even without a price on carbon, based on current settings. Converting just a quarter of Australia’s fleet to electric vehicles would deliver a $4.4 billion economic benefit – again, in a context without a carbon price.”
She said the law was a last resort, and that she would prefer a constructive national EV strategy that incentivised uptake of EVs.
Earlier this month the federal government released it “future fuels” policy, which was supposed to provide a plan to encourage the take-up of EVs. But the plan was heavily-critised as a “do nothing” document, and was particularl criticised for its claim – debunked here – that hybrid cars have lower emissions than full battery EVs.
The federal government’s apparent indifference to EV take-up suggest the Greens bill hasn’t got much of a chance of getting through the lower house, although the economic arguments against state-level EV taxes will likely get a good airing in the committee hearing.
It may be a moot point in Victoria though, where The Age reports independents in the upper house are planning to block the EV tax. And South Australia’s plans also face defeat in its parliament.
Submissions to the Senate Economics Legislation Committee on the bill are now open, and close on March 4. The committee will report at the end of April.
James Fernyhough is a reporter at RenewEconomy and The Driven. He has worked at The Australian Financial Review and the Financial Times, and is interested in all things related to climate change and the transition to a low-carbon economy.