Environment Minister Josh Frydenberg has some peculiar ideas about energy and the environment. This is a bloke who tries to explain away the fact that Australia’s CO2 emissions are at historic highs, and rising, by invoking emissions per capita, as if the laws of physics generously allow for a head count when it comes to global warming. He also, it seems, has some odd ideas about economics and protectionism when it comes to electric cars.
Electric cars are the new front of the culture wars — although this conflict is primarily inside the ranks of the right. It pits Frydenberg on one side versus climate denialists and fossil fuel dead-enders. Chief among the latter is the far-right Liberal MP Craig Kelly, who wants a punitive tax on electric cars because they don’t use petroleum. If Kelly were king, he’d wipe those smug sneers off the face of every Tesla driver in the land.
Alas, electric vehicles are a poor battleground for a culture war because the terrain is extraordinarily tricky, and ideological warriors are apt to forget which way they’re facing.
As economists have been pointing out for some time, electric cars avoid the primary means of road user charging: fuel excise. Australia only has a formal excise-based road user charging model for heavy vehicles, but all major political parties pay lip service to the idea that fuel excise and registration act as a road use charge for passenger vehicles as well. Some even hypothecate a portion of fuel excise to roads. But the reason they only pay lap service to that but no more is because far more excise is collected than spent on roads — something motoring organisations have long complained about.
(Motoring organisations want you to think that all that “extra” fuel excise is sitting in a bank account somewhere in Canberra, when it’s being spent on health and schools and defence and pensions. They don’t mention that if we redirected it all back to roads, we’d have to lift taxes elsewhere.)
Electric vehicles are a problem because — duh — they don’t use fuel with an excise on it, they use electricity from the grid. So, the more electric vehicles in the road fleet, the less excise governments collect. That’s bad news whether you’re a motoring organisation or a Commonwealth or state treasurer.
But electric cars are merely an extension of the existing highly regressive fuel excise regime: higher-income earners are already more likely to have newer, more fuel efficient vehicles, so pay less excise per kilometre than low-income earners in older cars.
That’s prompted motoring organisations to talk seriously about something that for decades they opposed: road pricing. For decades we’ve had the technology to charge every vehicle driving in built-up areas for every kilometre they drove and the congestion they caused. It’s now easier than ever given advances in toll road technology and the ubiquity of communications infrastructure (not to mention the indifference of Australians to being relentlessly surveiled). And for decades, no politician in Australia has dared touch it. In fact, the merest suggestion that a government might think about it elicited froth-mouthed rage from the media (behold this epic stupidity a few years ago). But a couple of years ago, the Coalition managed to flag the issue without so much as a whimper.
If you’re an ideological warrior — or in Kelly’s case, an ideological mule train driver — which way do you go? Dump the regressive fuel excise system that increasingly favours soy latte-sipping, Tesla-driving, inner-city elitists? Embrace road pricing that charges for every centimetre of urban and suburban road you use and double during peak hour? Or just try to ban or deter use of electric vehicles and hope the problem goes away?
Frydenberg wants to go the other way; he actively backs following the example of other countries and having “financial incentives” for electric vehicles (which he correctly argues won’t add significantly to electricity demand if charging systems are properly designed). That is, having just ended our 70-year-long addiction to handing subsidies to car multinationals to pick winners, Frydenberg wants to return to car subsidies. The last serious advocate for “green cars” was Kevin Rudd, who threw money at multinationals to encourage them to make them here. Julia Gillard wisely nixed that to save money.
The rational policy option is to switch to road pricing for urban and suburban motorists and let consumers work out whether an electric car meets their needs, without encouragement or discouragement from the government. If governments want to keep fuel excise as a general revenue source, they can explain that to voters. But fuel excise might increasingly become like tobacco excise — a shrinking revenue source targeting low-income earners unable to switch away from a product regarded with growing hostility by policymakers.