Does the National Electric Vehicle Strategy go the distance?

Last week, the federal government released their long awaited National Electric Vehicle Strategy. At the heart of the policy is a fuel efficiency standard, which sets a limit for carbon emissions from vehicles, to incentivise the sale of electric vehicles.

Listen to Marion Terrill, Transport and Cities Program Director, Lachie Fox, Associate, and host Kat Clay, discuss this new strategy, and whether it goes far enough.

National Electric Vehicle Strategy

The Grattan Car Plan

The Grattan Truck Plan

Transcript

Kat Clay: Last week, the federal government released their long awaited National Electric Vehicle Strategy. At the heart of the policy is a fuel efficiency standard which sets a limit for carbon emissions from vehicles to incentivize the sale of electric vehicles. With me to discuss this new strategy and whether it goes far enough are Marion Terrill, Transport and Cities Program Director, and Lachie Fox, Associate.

Marion and Lachie have co authored two reports on this topic, the Grattan Car Plan, which was released in October 2021, where they recommended an emissions ceiling and did the numbers to show how it could work. The other report they’ve authored is the Grattan Truck Plan, which was published last year when they considered the same questions for trucks.

Marion, to start with, what are the key points of the government’s National Electric Vehicle Strategy?

Marion Terrill: So the centerpiece of the strategy is definitely the fuel efficiency standard, or emissions ceiling, as we put it. And, and what that is, is it’s a regulation that’s imposed, on manufacturers bringing vehicles into the country that, It sets a limit on the average emissions that of the vehicles that they bring in and over time that limit gradually ratchets down so that we can sort of work back if you like from 2050 when we’ve got a commitment to net zero.

That is the centerpiece of the strategy. There’s a few other. New things in there. There’s an emphasis on battery recycling. So the government would like to get involved, would like to sort of spark more battery recycling in this country. And there’s also some, a couple of things to do with, recharging infrastructure.

So there’s they’re promoting the idea of a national mapping tool to support optimal investment, in ev charging infrastructure and also tools and guidance to enable EV uptake for residents of, of apartment blocks and the like. So, so they’re the main elements. in the EV strategy, there’s also sort of re-announcement of a lot of, of existing policies of the government.

In terms of what’s not there, I think the biggest thing from our perspective is that there’s, there’s no detail on what would be, what the fuel efficiency standard or emission ceiling design would be. So that is now subject to a new round of consultation, over the next, month and a half, with an announcement expected by the end of 2023.

So quite a long time period to get actually any design of the fuel efficiency standard a couple of other key emissions from our perspective is the document doesn’t say anything about, relaxing restrictions on the import of vehicles. so with a new or second hand, there’s quite restrictive arrangements about imports and we’ve been hoping to see, a relaxation to to sort of support a second hand market and greater diversity in the EV and low emissions vehicle market. And finally, there’s nothing about trucks. so trucks account for 4 percent of Australia’s emissions. It’s less than cars and light vehicles at 11%, but it’s not trivial and we would have liked to have seen, some focus on trucks in this strategy.

Kat Clay: I did note that there was a lack of discussion of imports in this strategy, and it’s something that we’ve written about previously, and we will talk about later on the podcast. Clearly, a fuel efficiency standard will reduce emissions, but how will it all work? Do we actually know how big the emission savings will be?

Lachlan Fox: As Marion described, the broad way that an emission ceiling works is by making manufacturers sell more fuel efficient cars. And so manufacturers have different options into how they choose to do that. They will get a target for how efficient the average car they sell must be. That might be, for example.

150 grams of carbon dioxide per kilometer driven in an early year, and that would get more stringent over time. Manufacturers could choose to sell a lot more electric vehicles, which have zero emissions and bring their average down that way, or in earlier years, when the target still got a bit more room to move, they could just sell it.

More fuel efficient petrol vehicles to try and bring that down. And so regardless of how they do it, it will save emissions because they end up selling more efficient vehicles. The government stated in some of their documents, they’re aiming to save about 3 million tons of carbon dioxide by 2030. We think that a standard could, and probably will save a lot more emissions than that.

A lot of the fuel efficiency standards that we modeled back when we did our report in 2021 actually saved about 20 to 30 million tons of emissions by 2030. That is partly because we proposed slightly more ambitious standards, but also just because over time, the emissions reductions you get from fuel efficiency standards do ramp up as these new sales kind of get into the market and are driven by more people.

Kat Clay: You were talking about the potential for 20 to 30 million tons of carbon emissions being saved. Proportionally, like, what is that? Like, I mean, that sounds like a big number to me, but I don’t know kind of what that is in the scale of emissions.

Lachlan Fox: Australia’s total annual emissions tend to be around 450 to 500 million tons of carbon dioxide a year.

So a saving of 20 to 30 million tons over, you know, five or six or seven year period, it’s, it’s difficult to say exactly what that would be, but it’s getting up to five to 10 percent of a single year’s worth of emissions. So it’s a very significant chunk of emissions that you’re reducing.

Kat Clay: Yeah, that’s, that’s really big.

So, I mean, Lachie, I am looking to buy a new car. What does this kind of standard, and this new strategy mean for me looking to buy my new car?

Lachlan Fox: So, there’s sort of two main changes that will happen in the new car market under a fuel efficiency standard. The first one, which government has gone to quite large lengths to point out, is that The choice of car that you will be able to buy will probably only get better, not worse.

So at the moment, there’s lots of demand for hybrids and for more efficient vehicles and electric vehicles and car companies are struggling to keep up with that demand. Fuel efficiency standards give them another really good incentive to bring those cars to the Australian market as opposed to overseas.

So you’ll probably get more choice in the types of efficient cars that you can buy. The second thing that will happen is that the car that you end up with will, in all likelihood, use less petrol. than it would otherwise. And so that will add up to quite big fuel savings for the vast majority of consumers.

In our modeling in 2021, we estimated that under a relatively ambitious standard, it would save consumers at least a couple hundred dollars a year, in all likelihood just for the average driver. Obviously, the savings are bigger for consumers that drive more and smaller for consumers that drive less, but yeah, over the life of a vehicle, those savings from a more efficient vehicle that uses less fuel and therefore has lower fuel costs do add up to be in the thousands of dollars.

Kat Clay: Lachie, I mean, what should this standard look like?

Lachlan Fox: So there’s lots of detail which the government has asked questions about in their consultation paper. We don’t know which direction they necessarily want to go in, but there’s some pretty clear international precedents for us to follow. Australia is so far behind the pack on this that there’s no need for us to do anything new or out of the box.

We can simply follow what other countries have done overseas and the standard will work just fine. For example, in the U. S. just recently, the U. S. EPA has proposed a new regulation for their fuel efficiency standard. And I use the U. S. as an example because they have quite big cars similar to us and drive long distances similar to us.

And their standards are quite ambitious. They’re looking to reduce emissions from cars by about 50 percent over the 2026 to 2032 period and have similar if not slightly greater reductions for slightly bigger cars like utes and SUVs. At a minimum, Australia would want to be looking at reductions in emissions similar to that over that period.

But in all likelihood, because we’re starting from a much worse base than them, our cars are currently more emitting. We could probably, as a percentage reduction, move a little bit faster. And New Zealand really shows the way in that regard. Like us, they were late to the party, but now they have quite ambitious standards to catch up to the EU and the US over the next five to seven years.

And if we implemented something along the lines of what they implemented, there’d be big consumer savings and also really big emissions reductions in the transport sector.

Marion Terrill: One of the other points about this that is sometimes forgotten is that Although people who mainly care about cost and general driving will get these cost savings, for people who do have special interests or who need a special vehicle or just prefer one, it doesn’t preclude any of that.

There is still space for that, because every gas guzzling sort of car that can tow a caravan or that is a hot rod or whatever it might be can be offset by an electric vehicle. So it does allow a more consumer choice than is necessarily, recognized.

Kat Clay: It struck me as I was reading the strategy, there was a couple of points and the first Was one that spoke to what you were talking about before, Lachie, is that Australia is one of the very few developed countries that don’t have an emission ceiling for cars.

And so it’s helpful to look overseas to see what other countries are doing and kind of learn from that. and the other thing, Marion, and we’re just about to get into talking about imports, is that, you know, the demand is there. EVs are selling out as you know they hit Australia. So I’m really curious what you would have liked to see in this strategy about imports, because surely that would help with demand.

Marion Terrill: It would, at the moment we’ve got quite restrictive rules about importing cars. which I believe were designed to protect the car manufacturing industry back when we had one. Both new and second hand vehicles, are difficult to import to this country and largely it doesn’t happen. One of the, the focuses in the strategy is on, equity and broad access to electric vehicles and opening up the secondhand market is definitely, a way to do that.

So, we would have liked to see the government, relax current restrictions on the import of new and secondhand. low and zero emissions vehicles, provided they meet Australian safety standards. so it would increase the supply in the near term. And it’s the near term where we’ve got demand that’s outstripping supply, but also just this idea of, sort of triggering a more lively second hand market.

So it, that hasn’t happened. So it is. still something that the government could do and, and we would like to see that happen. Just to bring more diversity and, and lower cost options in. It’s something that’s been done very successfully in New Zealand. I think people worry about safety concerns, but The reality is that it’s so widespread in some places that the manufacturers just offer their normal warranty, even if a car has been privately imported.

Or, so, so it seems like, again, we don’t have to invent this. the strategies have been proven overseas and it’d be good for us to, to get on board.

Kat Clay: Lachie, just turning to you, we have done significant work on trucks, but the strategy here only targets light passenger and light commercial vehicles.

Should the policy be broadened to include heavy vehicles?

Lachlan Fox: I think heavy vehicles are probably one of the biggest missed opportunities in this strategy. Heavy vehicles like trucks and buses are a pretty big contributor to national emissions. They’re about 4 percent of national emissions compared to about 11 percent for cars.

So the focus on cars is obviously a good one, but you can’t ignore trucks, particularly with a goal of getting to net zero by 2050. We in our report last year on heavy vehicles proposed a few ideas of how the government could ramp down emissions from trucks. These policies are similar to the policies that we propose for cars, but not exactly the same.

So the big difference is that for cars. There’s still enough time, and it’s simple enough to put in an emissions ceiling across all the manufacturers to get manufacturers to sell more efficient cars in Australia. For trucks, it’s a fair bit more complicated, and this relates mainly to the fact that it’s a lot harder to test a truck for its emissions than it is to So trucks, when they’re sold and then used in lots of different configurations with different trailers, et cetera, and being able to say, Oh, that manufacturer sold that truck and that should contribute X amount of emissions per kilometre to their total is a bit more challenging.

And so one thing the Australian government could do to simplify this process is simply to look at a few specific technologies. For example, zero emissions trucks and try and increase their uptake. So this would be the same as doing an emission standard, but saying you’re only allowed to make those gains through these specific technologies.

So we propose putting in targets for, zero emissions trucks. It could be hydrogen. It could be alternative fuels. It could be electric. and those targets would increase over time. The targets we proposed are quite similar to what the U. S. Is broader scheme that they introduced quite a while ago. is looking to achieve as well.

And it would look at having uptake rates of zero emissions trucks, depending on the category for smaller rigid trucks of about 30 percent by 2030. And for slightly larger trucks about 20 percent by 2030, and that would have a big effect on emissions. While the gains in the first few years, because the uptake rates are lower, won’t be huge, the big thing it will do is it will turn the corner on truck emissions.

Without these sort of policies. Truck emissions are simply going to keep going up until 2030. So these policies will really help it start to turn the corner, bring down emissions. And they also have lots of side benefits, like reducing pollution, which helps our health as trucks are a big contributor to pollution in cities.

Marion Terrill: So a final comment I’d make is that the National EV Strategy does have as one of its objectives to encourage an increase in EV demand. And, what I would say about that is. It’s certainly better for any given trip, any given car trip to be taken in an EV than in a petrol or diesel vehicle. But it is important to recognize that driving is not an end in itself.

EVs are not an end in themselves. They’re a means. to reducing our emissions from transport, and they’re not the only means to do that. One of the concerns that, that I think is going to grow over time is that switching to EVs, means that they’re cheaper to run. And it is great for drivers, as Lachie’s highlighted.

There are real savings for drivers in fuel and running costs, but cheaper driving does also lead to more driving and more driving means more accidents, more congestion and ever increasing demands for roads and parking. So more holistic transport oriented strategy would, would contextualize EVs, in this, in this way.

And I think although it’s more a job for the States than the federal government, one of the ways would be to, to impose congestion charging, I think distance based driving charges, COVID safe public transport, traffic safe cycling, all of these are important strategies in thinking about how we move around in a lower emissions way.

Kat Clay: Thank you so much, Marion. I do like this idea of a holistic transport strategy, taking into account all of the things that go into our roads and, also public transport and active transport. And I think we’ll probably see some of that stuff coming out in the submissions, to government in this.

Consultation process as well. If you’re interested in reading the national electric vehicle strategy or any of our research mentioned in the podcast today, I’ve included the links to these papers in the show notes. It’s coming to the end of the financial year and Grattan offers courses in policy and data visualization.

We do have an upcoming course on making killer charts, which is a whole lot of fun where you learn what makes a good chart and a bad chart, and also. Expand Your Data Visualization Toolkit. It’s going to be held on the 15th to 16th of May from 1 to 3 p. m. and it’s online. If you’re interested in this, register at grattan.edu.au/grattan-academy. And if you want to talk to us about the National EV Strategy or anything else we’ve discussed in the podcast today, do find us on social media on Twitter at grattaninst and at Grattan Institute on all other channels. As always, please do take care and thanks so much for listening.