Charged for success? Electric vehicle owners are so up in arms about Victoria’s new per-kilometre charge on EVs that they’re heading to the High Court to fight it.
Opponents of the charge have dubbed it “the worst electric vehicle policy in the world” and believe it will delay the switch away from petrol cars exactly when Australia is lagging on any credible path to net zero carbon emissions by 2050.
Don’t listen to them. The Victorian charge is far from perfect, but it’s an important first step in Australia to recognising that electric vehicles are cheaper to drive, and so unless action is taken, that’s going to mean more driving.
Instead of abolishing the charge, it should be amped up by state governments around the country.
Since July 1, Victorian drivers of electric vehicles are required to pay 2.5¢ per kilometre, and drivers of plug-in hybrids 2¢. NSW and South Australia have announced that they’ll impose the same charges from 2027 or whenever electric vehicles make up 30 per cent of new car sales, whichever comes first.
Neither of the two rationales given for these new per-kilometre charges is particularly convincing. One rationale is fairness between drivers of different types of vehicles. It’s true that drivers of electric vehicles have gone from paying no distance-based charge to an estimated $375 a year (if they drive 15,000 kilometres), but that’s still less than most petrol drivers will pay in fuel excise to travel the same distance.
Electric vehicles are only ever going to be the least worst, not the best, means of getting around Australian cities.
The other rationale is revenue; governments have to raise money somehow. It’s unconvincing, because the $30 million over four years that the charge is expected to raise is more than offset by the $45 million that the Victorian government will spend on boosting take-up of electric vehicles.
However, the door is open to raising the charge over time. Motorists may hate it, but it’s probably only going to have a modest impact on the amount of driving people do.
A 10 per cent increase in the price of petrol generally reduces driving by only 1 per cent to 1.5 per cent in the short term, and a small add-on to the cost of driving an electric vehicle is probably going to have a broadly similar effect.
In fact, the per-kilometre charge may have even less impact on driving, at least in the early days of electric vehicle uptake, because the people buying EVs so far tend to be pretty well-heeled.
The motorists who most hate the charge are saying it penalises people who are trying to do their bit to reduce greenhouse gas emissions. And there’s no doubt that cleaner, greener driving would be an improvement on the kind of driving that’s prevalent in Australia today, but electric cars are hardly a silver bullet.
Just like every other kind of car, electric cars contribute to accidents. The cost of road trauma in Australia is in the tens of billions of dollars each year. Electric cars may well prove even more dangerous to cyclists and pedestrians, as they are much quieter than petrol and diesel cars.
Contributors to congestion
Just like every other kind of car, electric cars contribute to congestion. Right now the streets are quiet in locked-down cities, but congestion was a significant problem before COVID-19; according to Infrastructure Australia, the avoidable cost to the economy in the eight capital cities was $16.5 billion pre-pandemic.
Just like every other kind of car, electric cars take up public space. Estimates from the US suggest that many cities devote 50 to 60 per cent of their real estate to roads and parking. The more cars we have, and the more people drive them, the more pressure there is from the community for ever more roads and ever more parking.
The fact is that electric vehicles are only ever going to be the least worst, not the best, means of getting around Australian cities.
To reflect the harms that all cars cause, state governments should apply the new per-kilometre charge not just to electric vehicles but to petrol and diesel cars too.
If drivers have paid fuel excise to the federal government, the state government should rebate that amount – until the federal government abolishes the tax.
The per-kilometre charge should be imposed at a higher rate for larger vehicles, which are more dangerous to other road users and bigger contributors to congestion.
Let’s not set our sights too low; life isn’t always better in the fast lane.
While you’re here…
Grattan Institute is an independent not-for-profit think tank. We don’t take money from political parties or vested interests. Yet we believe in free access to information. All our research is available online, so that more people can benefit from our work.
Which is why we rely on donations from readers like you, so that we can continue our nation-changing research without fear or favour. Your support enables Grattan to improve the lives of all Australians.
Danielle Wood – CEO