National Electric Vehicle Strategy: consultation paper

27th October, 2022
The Hon Chris Bowen MP, Minister for Climate Change and Energy
House of Representatives
Parliament House
Canberra, ACT, 2600

By email: chris.bowen.mp@aph.gov.au and NEVS@industry.gov.au
RE: NATIONAL ELECTRIC VEHICLE STRATEGY CONSULTATION.

Dear Minister Bowen,

Following our discussion in September, I am writing to you on behalf of my community in Wentworth regarding the government’s consultation on the National Electric Vehicle (EV) Strategy. Along with other members of the crossbench, I have been calling for action on EVs – particularly the introduction of mandatory light vehicle fuel efficiency standards – for some time, and therefore I am delighted to see the government moving in the right direction.

An accelerated shift to zero emissions vehicles is essential to Australia’s climate ambitions, to our fuel security, and to easing cost of living pressures. Transport is responsible for almost one-fifth of
Australia’s carbon emissions and the bulk of this comes from our roads.1 The average passenger vehicle in Australia is around 45% more emissions intensive than in Europe2 and new light vehicles tend to last at least 15 years, meaning rapid decarbonisation is essential if we are to reach net zero by
2050. Given that we import over 90% of our liquid fuel from overseas and that these imports are heavily exposed to East Asia,3 decarbonisation is also an energy security priority. Importing nearly all our fuel means we are also exposed to global price shocks, as has been demonstrated in recent months. Transition to EVs powered by Australian sunshine is therefore a cost-of-living priority.

Despite these imperatives, Australia is being left behind. The International Energy Agency, Energy
Transitions Commission and many others are clear that we must have 100% new zero emissions car sales by 2035 at the very latest if we are to achieve net zero by 2050.4 25% of the global car market has already committed to this target and put in place policies to achieve it.5 Consequently, EVs make- up 86% of new car sales in Norway and 19% in Europe.6 In Australia, a decade of policy failure and scaremongering means that EVs represent just 3% of new sales, despite over half of the country saying they would consider purchasing an EV as their next car.7

In a global marketplace that is likely to be supply-constrained in the immediate future, it is critical that
Australia acts immediately and decisively. If we do not, we risk missing-out on the benefits of the transition to cheaper, cleaner, zero emissions vehicles. In August, I met with the UK Secretary of State for International Trade, major global car manufacturers, and charging infrastructure providers, to discuss how we could accelerate uptake of these vehicles in Australia. Their message to me was clear;
Australia is not currently an attractive market in which to supply EVs and it is only through coordinated and bold action at the Federal level that this will change.

1 The Grattan Institute (2021). The Grattan Car Plan, page 3
2 Department of Climate Change, Energy, the Environment and Water (2022). Transport – Light vehicles information page
3 Department of Climate Change, Energy, the Environment and Water (2019). Liquid Fuel Security Review, page 3
4 International Energy Agency (2022). Global Electric Vehicle outlook, page 55
5 International Energy Agency (2022). Global Electric Vehicle outlook, page 55
6 Deloitte (2022). Driving Australia to Net Zero – Vehicle emissions forum (2021 figures)
7 EV Council (2022). State of EVs report, page 7 (2022 figures)

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The paragraphs below outline the priority measures I believe should be considered as part of the
National EV Strategy. These primarily relate to consultation questions #2 (international implications);
#4 to #6 (demand), #7 to #10 (efficiency standards), and #11 to #14 (supply). Specifically, they cover:

(A) Mandatory light vehicle fuel efficiency standards (sometimes referred to as an ‘emissions ceiling’
or a ‘CO2 emissions standard’);
(B) Supporting measures to increase supply, including relaxation on second-hand import restrictions;
(C) EV charging infrastructure;
(D) Supporting measures to increase demand;
(E) Broader measures for decarbonising the transport sector.

(A) Mandatory light vehicle fuel efficiency standards.

As described above, Australia is an outlier in the global light vehicle market, with an anachronistic fleet and limited choice of EVs relative to other advanced economies. Over many years, car manufacturers have been incentivised to sell older, more expensive, and higher emissions vehicles in Australia, slowing our transition to cheaper and cleaner vehicles. Recent data shows that the average CO2 intensity for new passenger vehicles in Australia was ~170g CO2/km, compared to ~130g CO2/km in the US and only ~120g CO2/km in Europe.8 Correspondingly, whilst consumers in Europe have a choice of almost 200 EV models,9 Australia families have only around 45 available.10

The main reason for this is Australia’s lack of mandatory fuel efficiency standards. These have been adopted by around 80% of the global light vehicle market, leaving Australia alongside Russia as the only country in the OECD without a standard in place.11 Fuel efficiency standards regulate the efficiency of new vehicles sold via a fleet-wide average target, with manufacturers paying a penalty when that target is exceeded. Although it should reduce over time, such a standard allows manufacturers to continue to sell vehicles with emissions performance above the target, so long as this is compensated for by also selling lower emissions vehicles. It is therefore a flexible mechanism to decarbonise light vehicles and provide increased choice to consumers, at no cost to the taxpayer.

The recent introduction of a voluntary standard by the Federal Chamber of Automotive Industries
(FCAI) has been a welcome first step, but it remains inadequate for the transition required. As shown below, FCAI’s target (blue) is unambitious relative to similar markets overseas (e.g. USA – Red; NZ –
Black; EU – Purple) and insufficient relative to the path required for Australia to reach zero emissions for all new car sales by 2035 (green). The 2030 target under FCAI is similar to the EU’s legally enforceable target for 2021, demonstrating how Australia is almost a decade behind.12 The voluntary nature of this standard, along with numerous carve-outs for those that participate, also mean that even the trajectory below is a best-case scenario that is unlikely to be achieved.13

The most critical action to accelerate EV uptake, reduce emissions, cut fuel bills for households, and improve our energy security, is therefore to introduce a strong mandatory fuel efficiency standard.
This should be at least as ambitious as a linear decline path to zero by 2035 and should be introduced as soon as is practically possible (by 2024 at the latest). The standard should apply to all light vehicles

8 The Australia Institute (2022). Fuelling efficiency, page 2 (2018 figures)
9 Electric Vehicle Database (2022). Accessed September 2022
10 Electric Vehicle Council (2022). The State of EVs Report, page 7
11 The Australia Institute (2022). Fuelling efficiency, page ii
12 The Australia Institute (2022). Fuelling efficiency, page 17
13 EV Council (2022). Securing affordable electric vehicles, page 7

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and be enshrined in legislation. It should be accompanied by careful monitoring, including a shift to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) and manufacturers reporting directly to the National Transport Commission. Introduction of such a standard would send a strong signal to global manufacturers that Australia is a viable mass-market for EVs and therefore it is imperative the government acts now. If it fails to do so, there is the realistic prospect that Australia will be partially locked-out of a supply-constrained global market for the next few years.

Figure 1: Comparison of different fuel efficiency standards for light vehicles (cars / SUVs)14

Implementation of the standard is a significant but necessary policy change, and therefore it is important that flexibility is incorporated in the first few years to encourage decarbonisation at lowest cost. For example, manufacturers who exceed their emissions targets could be awarded credits to trade with others for whom meeting the standard is more difficult. In addition, the government could create a mechanism that allows manufacturers to receive ‘super-credits’ for selling zero emissions vehicles, in order to encourage greater supply (this is currently done as part of the European Union’s standard). Finally, regular review periods (e.g. every 18-24 months) could be incorporated into the standard to enable the government and industry to respond to changing market dynamics if necessary
(e.g. in the event that global supply constraints persist for a sustained period of time and make achieving a path as ambitious as the linear decline infeasible).

However, it is critical that any flexibility mechanisms have integrity and do not create the perception of decarbonisation without real action. For example, super-credits must not be awarded to

14 EV Council (2022). Securing affordable electric vehicles, page 8

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conventional hybrid vehicles because they cannot operate at zero-emissions for any significant distance, and they must not enable manufacturers to artificially meet standards via ‘off-cycle credits’ for selling vehicles with certain features (e.g. solar reflective paint). Super-credits must have a clear sunset clause (e.g. 2026-2028 or when EV penetration reaches a certain level, whichever is earlier) and any banking arrangements for credits must be strictly time-limited (e.g. 1-2 years).

Analysis over many years has consistently shown that the net economic benefits of introducing fuel efficiency standards are significant on account of the large fuel cost savings to families and the increased supply of cheaper vehicles that they encourage. For example, 2016 analysis by the Bureau of Infrastructure, Transport, and Regional Economics (BITRE) on behalf of the Ministerial Forum on
Vehicle Emissions showed that introducing a standard of between 105g CO2/km and 135g CO2/km by
2025 would lead to a net economic benefit of $5.8BN to $13.9BN by 2040.15 More recent work shows that if fuel efficiency standards had been introduced in 2016, Australian consumers and businesses would have saved $5.9BN in fuel costs.16 Such a standard would have also prevented 9 million tonnes of CO2 from being emitted, similar to a year’s worth of emissions from domestic aviation.17 The economic benefits are therefore clear.

(B) Supporting measures to increase supply.

Fuel efficiency standards are the best lever to increase EV supply and action to introduce them should be immediate. However, the government may also wish to consider several additional areas that could help increase supply of both light and heavy vehicles with lower fuel costs and lower emissions.

First, for zero emissions vehicles only, the government should change the law that prevents
Australians importing any models and variations of vehicles that are sold, or have been sold, through manufacturers’ distribution networks. This would substantially increase price competition for zero emissions vehicles and catalyse the affordable second-hand market in Australia. Such a change was recommended by the Productivity Commission in 2014 but has not been acted on.18 Whilst I appreciate that some have safety concerns related to imported second-hand vehicles, this is not an issue that is beyond solving. This has been demonstrated by the thriving second-hand import market in New Zealand, where warranties are offered by EV manufacturers on imported EV models.19

While we still need it, the government should also continue to take steps to improve the quality of our petrol and diesel. I welcome the measures you have already taken to cut sulphur content in our fuel and the government should continue to take steps to ensure our petrol is of sufficient quality for vehicles to comply with Euro 6d pollution standards. Correspondingly, the government should update the Australian Design Rules to require light vehicles to meet Euro 6d vehicle pollution standards. This should be done immediately for diesel vehicles and as soon as fuel quality improvements are regulated for petrol vehicles. Note, these measures should be viewed as entirely separate to the introduction of mandatory light vehicle fuel efficiency standards. Introduction of fuel efficiency standards is not contingent on these changes.

15 BITRE (2016). Emissions discussion paper
16 The Australia Institute (2022). Fuelling efficiency, page 19
17 The Australia Institute (2022). Fuelling efficiency, page 19
18 Productivity Commission (2014). Australia’s Automotive Manufacturing Industry, Inquiry Report, page 160
19 The Grattan Institute (2021). The Grattan Car Plan, page 37

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Separately, the government should also pursue a strategy for decarbonisation of Australia’s heavy vehicle fleet. This is likely to require a different set of tools to the light vehicle market, on account of the differing maturity of vehicle technologies.

(C) EV charging infrastructure.

As you and I have discussed, the lack of available charging infrastructure is the most common barrier to EV ownership that people in Wentworth raise with me. This challenge is reflected nationwide, with
92% of responded to the EV Council’s Consumer Attitudes survey saying that convenient fast public charging would be the biggest encouragement to purchase an EV.20

Through the “Drive electric NSW EV fast charging grants” and the “NSW EV destination charging grants”, the NSW government has successfully encouraged investment in both ‘superfast’ (80% charge in 15-45 minutes) and ‘destination’ (80% in 6-8 hours) chargers.21 These grants have often been targeted at regional areas, helping link major cities like Sydney with surrounding areas. However, there remains a lack of charging infrastructure relative to EV demand in cities themselves. For example,
Wentworth is within the top 10 suburbs for EV ownership in Australia,22 but has just 19 public chargers, only 3 of which are ‘fast’ chargers (80% in 45-120 minutes) and none of which are ‘superfast’.23

Approximately 1.9 million Australian’s don’t have access to off-street parking, the majority of which reside in densely populated city suburbs like Wentworth.24 I am delighted to see initiatives such as
ARENA’s partnership with Intellihub, which will see EV chargers mounted on power poles, however these must be only the first part of a broader federal plan. These ‘destination’ charges can service only a limited numbers of cars, because longer charging times mean they are only convenient for people who can park overnight or stay for an extended period of time.

To cater for a broader range of EV owner ‘use cases’, electorates like Wentworth need a range of charging options. In particular, ‘fast’ chargers provide an attractive balance between cost, charge speed and consumer parking habits. These chargers can be easily installed in locations that people already park at for an hour or two, such as supermarkets, shopping centres, sports facilities, and even the beach. In these places, it is likely that businesses will contribute to installation costs due to the positive correlation between charger infrastructure and revenue.25 Increasing the number of these fast chargers provides a convenient place for drivers to charge where they already park, is cost effective, and minimises the likelihood of expensive and time-consuming network augmentation required for superfast chargers.

During the period where commercial viability of charging infrastructure remains challenging, the federal government should therefore take further steps to encourage the development of charging solutions for densely populated areas. This could include competitive grant or co-financing auctions to local businesses with off-street parking facilities to install fast chargers, as well as grants or co-

20 EV Council (2021). Consumer attitudes survey
21 For the purposes of this letter, charging infrastructure is grouped into three distinct categories: (1) Destination charges (AC, 22kw – 80% charge in 6-8 hours); (2) Fast chargers (DC, 25-75kw, 80% charge in 45 minutes – 2 hours); (3) Superfast chargers (DC, 100kw plus – 80% charge in 15-45 minutes)
22 Drive.com (2021). Australia’s top ten suburbs for EV ownership
23 PlugShare (2022). EV charging map – correct as of this submission
24 ARENA (2022). EV charging stations on the up
25 greenlots (2020). How EV charging boosts retail sales

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finance for super-fast chargers where there is no or limited network augmentation costs (e.g. petrol stations). Such support must include clear sunset clauses to ensure the government’s role is additional to that of the private sector and that investments provide taxpayers with value-for-money.

As part of the above, I would also like to see more done to ensure development of coordinated strategies to improve access to EV charging across local, state, and federal governments. This reduces the chance of inefficient network design, reduces equipment acquisition costs, and reduces the need for businesses to communicate with multiple different layers of government or public sector bodies.

I am conducting work within Wentworth on these matters and would be happy to discuss it further.

(D) Supporting measures to increase demand.

As well as measures to improve the availability of charging infrastructure, the government may also wish to consider other ways to stimulate demand. One important step would be to work with state and territory governments to harmonise financial incentives for purchasing a zero emissions vehicle.
This would provide greater certainty to international vehicle manufacturers supplying the Australian market. During my consultation with these firms, several highlighted that inconsistency in support measures across the country currently makes it more difficult to build the business case for supplying the Australian market.

I also welcome moves by the government on import duties and fringe benefit tax, but any further financial incentives provided at the federal level should carefully consider distributional consequences and the need to ensure value-for-money for taxpayers. If new incentives are desirable, these should be funded through reducing subsidies to internal combustion vehicles. For example, loopholes in the
Luxury Car Tax Act (1999) currently provide significant subsidies to petrol vehicles. By revising the definition of ‘fuel efficient’ in the Act to cover only vehicles that can travel 100kms on four litres of fuel or less, the government would save $450MM over the next three years that could potentially be re-invested in incentives or charging infrastructure.26

(E) Broader measures for decarbonising the transport sector.

In addition to measures outlined above, I am glad to see the government is considering broader measures to decarbonise the transport sector, in particular its own vehicle fleet. Where possible, I would also encourage measures that support the shift away from vehicle use and towards cycling and walking. These have substantial health benefits, as well as climate, cost, and security benefits.

26 Parliamentary Budget Office (2022). Changing the definition of “fuel efficient cars” in Section 25.1(4) of the Luxury Car Tax Act 2008

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I urge you to act strongly and decisively on the areas detailed above. This consultation is the latest in a long line of federal government reports on this issue, and now is the time to get on with the job.
Mandatory light vehicle fuel efficiency standards are essential to reducing fuel costs for consumers, reducing our emissions, and improving our energy security, and must be implemented as a priority.

I would welcome the opportunity to discuss the above points with you in more detail – either bilaterally or with other colleagues from the crossbench. In the interests of transparency and given the public nature of consultation submissions, I may publish the contents of this letter at a later date.

Kind regards,

Signed electronically to avoid delay.

Allegra Spender MP
Independent Member for Wentworth

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