Should we be subsidising e-vehicles?

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Posted on: 6 November 2017    

Many governments are making moves away from petrol and diesel vehicles.  United Kingdom and France have both announced that no new petrol or diesel vehicles will be sold after 2040.  India has pledged the same by 2030, and Norway by the even more aspirational date of 2025.  China has also pledged to ban sales of non-electric vehicles by an undisclosed date.

The New Zealand (NZ) government is encouraging electric vehicle (e-vehicle) take-up while not yet making the stronger declaration of future sale bans for non-electric vehicles.  If, as is usually the case, NZ follows the trends in Europe then we will soon follow suit. 

Currently, the NZ government has exempted e-vehicles from vehicle licensing charges until they comprise 2% of the fleet.  To power their vehicles, owners simply pay the cost of electricity (exempting them from fuel excise duty). In addition, in 2017/18 and 2018/19 ACC levy rates will be reduced for owners of all e-vehicles.  Furthermore, legislation enabling road controlling authorities to allow e-vehicles into special vehicle lanes on the State Highway network and local roads has been passed. 

This package of measures goes some way to counteract the high purchase price of e-vehicles.  It is therefore no surprise to see that the e-vehicle fleet in NZ, in line with most other parts of the world, is growing rapidly.  The fleet size as of September 2017 was close to 5,000 vehicles, up from less than 200 vehicles in 2013 – at an average growth rate of 100% per annum.  This is still a very small proportion of the NZ light vehicle fleet of over 3 million vehicles but at this exponential growth rate, NZ is on track to meet the government’s stated goal of 64,000 e-vehicles by 2021, by which time the government may have to reconsider the road tax exemption for e-vehicles.

E-vehicles avoid much of the pollution costs that petrol and diesel vehicles incur and if the electricity is generated through clean fuels, they even have the potential to be powered by renewable electricity.  The government’s position of supporting e-vehicles is needed to ensure the successful adoption of the technology.  However all vehicles impose brake and tyre pollution, wear and tear costs on infrastructure, and depending on where and when they are driven, impose congestion, noise, and increased crash risk costs.  The legislation permitting e-vehicles to be driven in special vehicle lanes has the potential to infer the same priority on e-vehicles as buses and implies that e-vehicles are valued as highly as buses in the hierarchy of road users. 

In economic terms, the value of a single commuter in an electric car is significantly less than that of a bus load full of passengers.  Therefore, leniency towards e-vehicle use (particularly in special vehicle lanes) may result in reduced benefits for public transport users and undervaluation of e-vehicle costs.  Whilst it is appropriate to encourage e-vehicles, this must be tempered by consideration of the costs that all vehicles impose.  Fuel pollution is just one of those costs.  

There's plenty to contemplate about the future of e-vehicles on our roads, it will be interesting to keep an eye on developments in this space...

Look out for my next blog, on "The future road funding crisis".

Blog written by Jo Draper, Principal Transportation Planner, Abley Transportation Consultants

 

Reference articles:

http://www.transport.govt.nz/ourwork/climatechange/electric-vehicles/

http://www.transport.govt.nz/research/newzealandvehiclefleetstatistics/monthly-electric-and-hybrid-light-vehicle-registrations-dec-2016/

http://money.cnn.com/2017/09/11/news/china-gas-electric-car-ban/index.html

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