Levy on traditional vehicles may fund ‘freebate’ for electric vehicles

The Productivity Commission has put out a draft discussion document calling for drastic measures to shift from fossil fuels to clean electricity. One proposal, being promoted by climate change minister James Shaw, is to put a surcharge on new vehicles that rely on fossil fuels and use that to provide a ‘freebate’ to lower the price of electric vehicles.

RNZ: Fuel-car levy could subsidise electric vehicles – govt

In a draft discussion document, the Productivity Commission estimated carbon prices may need to be 12 times higher, up to $250 a tonne, to reach the government’s goal of net zero emissions by 2050.

That is a huge change in what is supposed to be a market.

It called for a shift from fossil-fuels to clean electricity and greater use of farmland for forestry and horticulture.

Green Party co-leader and Climate Change Minister James Shaw told Morning Report one option being looked at was the prohibitive cost of electric vehicles.

“So what the report is talking about is a freebate system where essentially we charge a price on – we put a levy on – fossil fuel vehicles and you use that revenue to subsidise electric vehicles.”

“What we all know right is that electric vehicles are a lot cheaper to run because they’re roughly about a third of the price per kilometre versus petrol, they’re a lot cheaper to maintain because they’ve got fewer moving parts, but the up-front cost of the vehicle is prohibitive.”

“If we continue to allow greenhouse gas emissions to increase, and we don’t invest in new technologies, and we don’t switch our car fleet and we don’t change how we do electricity, then yes they’re suggesting that there will be a bit of a shock to the economy.”

He said he did not know when such a change might be brought in, and it was just one of many options they were considering.

National is critical:

National’s transport spokesperson Jami-Lee Ross said the government should follow their lead and continue prioritising electric vehicles for the crown fleet.

Mr Ross said a levy would hit people at the lower end of the socio-economic spectrum hard.

He said people who can only afford cheap secondhand Japanese imports would effectively be subsidising the cost of electric cars for the wealthier New Zealanders who can afford them.

That same argument applies in part to subsidies for home insulation and for installations of solar panels.

For vehicles this could be resolved by putting a big enough levy on fossil fuel driven vehicles to enable a full ‘freebate’ – giving electric vehicles to poor people for free. That would be popular, especially in the winter for those who are given a free handout to help pay power bills.