NewslettersSeptember 14th, 2021

PG #90: EVs are still cars

Chris Marmo
Chris Marmo, Chief Executive Officer
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There’s been controversy recently in Victoria around a new piece of government legislation taxing electric vehicles (EVs). The tax is a usage tax, where the government will levy a per kilometre charge on owners of electric vehicles – so, the further you drive, the more you pay.

Car usage accounts for 10% of Australia’s carbon emissions, more than any other segment of the transport sector (including air travel). The world is transitioning to electric vehicles, and – like with most climate policies – Australia is lagging behind.

To the average climate-engaged person, a tax on EVs might seem like the exact opposite of what we should be doing. Surely we should be offering tax incentives to switch away from fossil fuels?

I’m not so sure. While Australia has a track record of terrible climate policies, I don’t think this is one of them.

Firstly, it’s worth noting that the take-up of electric vehicles in Australia is limited by supply, not demand, so incentives are unlikely to have an impact.

Secondly, usage taxes for cars and roads are environmentally progressive, especially when used intelligently with other taxes, like congestion taxes. They discourage car usage in favour of cycling, walking and public transport, leading to increased personal and community health and the transformation of central urban spaces to be more green, more walkable, and more sustainable.

Australia has historically been hostile to car usage taxes, but this EV tax is a rare opportunity to introduce it without prohibitive political cost.

Right now, only about 0.6% of new cars purchased are EVs. They are luxury items, typically purchased by people who can likely afford higher taxes – and who are concerned with sustainability. While new taxes are never popular, it’s not a demographic the Victorian government risks alienating with this move.

In fact, outside of the environmental concerns, the only serious objections come from car lobby groups. Introducing a tax like this, right now, is as politically easy in car-mad Australia as it will ever be.

I’m really interested in people’s thoughts on this – if your first reaction to this tax (or this article!) was negative, I’d love to hear why. You can email me here or just reply to this newsletter.

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