As debate continues to rage over whether electric cars should be subsidised or taxed in Australia, a new report has suggested their uptake could help, not hinder, government revenue – once economic and societal benefits are taken into account.
The report, conducted by consultancy firm EY and commissioned by Australia's Electric Vehicle Council (EVC), seeks to examine the suggestion electric cars unfairly benefit from avoiding the government's fuel excise – a tax on fuel and petroleum products that is put towards the maintenance and expansion of Australia's road infrastructure and goes into consolidated revenue.
Critics of electric vehicles (EVs) argue they should be subject to the excise, or an equivalent charge, because they use the same road systems as their petrol- and diesel-powered cars.
The report acknowledges the average electric car imposes costs on the government estimated at $5879 in lost fuel excise revenue over 10 years, as well as $8585 of lost GST revenue (that would have been spent on liquid fuels) over 10 years.
However, the report claimed despite a combined $14,464 in lost revenue over 10 years, an electric car that replaces a petrol car delivers a net government revenue benefit of $1370, or an overall net societal and economical benefit of $8763, over the same 10-year period.
To obtain these estimates, EY calculated both the direct and indirect benefits and downsides of electric cars and petrol and diesel vehicles on on a cost-per-kilometre basis – taking into account factors such as fuel excise payments, sales taxes, operational GST, greenhouse gas emissions, noise pollution and implications for the electricity market and public health.
The report claims benefits from electric cars – such as an increase in discretionary household spending because of the lower running costs associated with electric cars, or a reduction in direct health impacts from particulates – can counteract the revenue lost from the fuel excise exemption.
Matt Bell, EY Climate Change and Sustainability Leader, said it's a complicated issue, adding that EY's report wasn't seeking to refute previous studies examining the cost of electric cars, but rather to provide a summary of their positive effects – and ascribe a monetary value to these benefits.
"On the societal side, (electric cars) have benefits when it comes to minimising greenhouse gas pollution and climate change and reducing direct health impacts from particulates," said Mr Bell.
"Some of the positive impacts of (electric cars) we didn't even include in the report, because the data is changing too quickly – for example, one of the benefits is they connect into the grid and lower electricity pricing, but the technology is not at scale yet," said Mr Bell.
While electric cars don't pay a fuel excise, Mr Bell said the report accounted for the fact they "tend to cost more" than their petrol or diesel counterparts, thus bumping up the cost of registration or luxury car tax paid (even though the LCT exemption threshold is higher for fuel-efficient vehicles).
EVC CEO Behyad Jafari claims the report "puts to bed" the notion that electric cars should be taxed in order to compensate for the fuel excise loss.
“You often hear this idea that when someone replaces their petrol engine vehicle with an electric car they reduce their tax, because they don’t pay the fuel excise anymore. This analysis blows that argument out of the water,” said Mr Jafari.
"The fuel excise is just one tax among many, you have look at the entire plate – EVs have to pay GST on things like electricity that ICE cars don't."
Mr Jafari said it was important to put a dollar figure on the societal impact of electric cars and the additional value they provide over their life cycle.
"Clean air might not cost you at the pump, but at some point along the chain the government has to pay for these things ... they get the cleaner air, they don't have to pay for the hospital down the line."
Geoff Gwilym, CEO of the Victorian Automobile Chamber of Commerce, says any modelling on electric vehicles needed to take into account how they obtain their power by acknowledging that Australia's grid is majority coal-powered.
"If you use electricity from a coal-powered power station to charge your (electric car), any benefits would have to be reconsidered – you can't assume they all run on green energy," said Mr Gwilym.
In response, Mr Jafari said the report does factor this in – assuming EV owners will be using the coal-powered grid to charge their cars, and looking at the effects of a combination of both coal power and renewable energy being utilised over the 10-year period.
Mr Gwilym said electric cars should technically be paying for some sort of fuel excise, given their road use was the same as other cars.
"If you have a car running around with the same footprint and the same wear and tear, there has to be an argument that it should be paying the same excise," said Mr Gwilym.
However, while Mr Gwilym said the VACC was against subsidising electric cars to encourage their uptake, he acknowledged a new taxation system could be helpful as we move into the era of alternative energy.
"I think ultimately governments will move to a road user charging system for petrol and electric vehicles, which means it doesn't matter what vehicle you're in or what fuel you're using, you'll be charged by kilometre based on size, weight or distance travelled," said Mr Gwilym.
"We've got a system of taxation that's old and we've got new electric vehicles – how do we get money to help run the road system? We charge vehicles per kilometre on the road like GST and then it equalises any type of fuel whether hydrogen, petrol or electric."
Mr Gwilym added: "It's hard for the government to do because they've already got the infrastructure for the fuel excise so this would mean retrofitting things to cars or getting people to make an annual statement on the amount they've travelled."
Mr Jafari agrees this kind of approach would make "a lot of sense", but he'd still like to see electric vehicles receive a tax break compared to petrol or diesel cars.
"Using a more holistic pricing method is something that makes a lot of sense – if we already had that, electric vehicles could slot in a lot better," said Mr Jafari.
"The part of the fee that pays for the road upkeep, that can be the same across (electric) and (conventional) cars, and then the rest can be charged accordingly."
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