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New Energy Insights: The Federal Government’s Electric Vehicle Future Fuels Strategy Lacks Spark!

Background

The Federal Government has announced its Future Fuels and Vehicles Strategy (Future Fuels Strategy) in furtherance of its target to achieve net zero emissions by 2050.

The Future Fuels Strategy aims to reduce emissions in the transport sector - currently Australia’s third largest greenhouse gas emissions-producer – by injecting $250 million dollars into electric vehicle charging and hydrogen refuelling infrastructure. Such investment is welcome. The same infrastructure is in place in many jurisdictions, enabling governments to become early adopters of hydrogen fuel cell fleets.  For example, Sarawak in Malaysia has entered into an MOU with Australian company, H2X Global, to produce fuel cell electric buses for the Sarawak Transport System – this is only possible because of Sarawak’s established refuelling infrastructure network.

The announcement of the Future Fuels Strategy coincided with the COP26 Summit in Glasgow at which Australia, along with 30 other nations, committed to a road transport ‘Breakthrough Agenda’ to make zero emission vehicles “the new normal and accessible, affordable, and sustainable in all regions” by 2030.

Support from the states and industry driven initiatives complement the Future Fuels Strategy. However, more direct Federal funding and initiatives to support investment into zero emission fuel technologies are needed if Australia is to become a leader in this emerging space. Commitment to firm targets for the use of vehicles using electricity or hydrogen fuel cells would also give investors further confidence.

The Federal Government could showcase Australia’s depth of expertise in this sector, with fleet purchases for Federal vehicles and by mandating targets within key government procurement bodies for the use of such vehicles in the short term. This would give further comfort to other regions looking to invest in or procure hydrogen fuel cells and electric vehicles from Australia.

The Future Fuels Strategy: Key initiatives to be implemented

The Federal Government predicts that its Future Fuels Strategy will reduce emissions by over 8 metric megatons of carbon dioxide equivalent (CO2-e) by 2035, by allowing access to convenient public fast charging for up to 84% of the population and enabling 30% of all new light vehicle sales to be electric or hybrid electric vehicles by 2030 (meaning 1.7 million electric vehicles on the road). These outcomes are expected to be achieved through the following key initiatives outlined in the Strategy:

  • Establishing widespread public electric vehicle charging and hydrogen refuelling infrastructure that addresses ‘blackspots’;
  • Helping businesses to incorporate low or zero-emission vehicles into their commercial fleets, including heavy and long-distance vehicle fleets;
  • Effectively integrating battery electric vehicles into the electricity grid to prevent overloading of the grid, including by supporting the installation of smart charging technologies in households;
  • Increasing consumer access to information regarding the effectiveness of low emission vehicles, to enable consumers to make informed choices.

Where the Future Fuels Strategy needs a jump-start

While the Morrison Government has heralded the Future Fuels Strategy as a means to “give Australian consumers and business confidence to purchase low emission vehicles”, its success will be dependent on individual consumers choosing to adopt low emissions vehicles. For that, the Government is relying entirely on increasing access to information regarding the benefits of electric, hybrid and hydrogen-fuelled vehicles as well as creating “the right enabling environment through infrastructure” to encourage consumer confidence in those technologies. The Government has expressly entrusted private industry with developing technological improvements and innovations which will achieve price parity between low emission and existing petrol and diesel vehicles. However, it has not proposed any targets, mandates or financial incentives that would stimulate the motor vehicle industry to invest in producing such innovations or lowering the cost of zero-emission vehicles.

The Electric Vehicle Council has stated that Australia is unlikely to see a significant increase in the uptake of electric vehicles without introducing discounts or tax benefits to drive consumers to move away from petrol or diesel cars.

According to current projections, the impact of the Future Fuels Strategy as it stands is likely to be less significant than the Government hopes. Whilst Government modelling issued in 2019 predicted that electric vehicles would make up 27% of new sales by 2030, the Future Fuels Strategy is expected to enable 30% of all new vehicle sales to be electric and hybrid vehicles by 2030. This is a mere 3% increase from what was already projected to occur.

Fortunately, industry support for hydrogen fuel cell vehicle development has so far been encouraging.  For example, the Gippsland Circular Economic Precinct (including Ferguson Civil, Solis RE and Nexsys Industries Consulting) is securing funding from major investors, including Octopus Investments with support from the CEFC, to produce a plant for hydrogen fuel cell vehicle manufacturing plant with H2X Global in that precinct. However, more economic incentives at a Federal level would encourage more investment at a greater pace.

State governments leading the charge

In June 2021, the New South Wales government announced subsidies and a waiver on stamp duty for those who purchase electric vehicles, as well as delaying any tax on electric vehicles until 2027. These measures are forecast to result in 50% of new car sales in NSW being electric vehicles by 2030. The Victorian government announced subsidies for purchasers of electric vehicles, coupled with a target of 50% of new car sales being low or zero-emission vehicles by 2030. The ACT has instituted a full waiver on stamp duty for first-time purchasers of zero-emission vehicles as well as 2 years of free registration for any new or used zero-emission vehicles.

Western Australia and South Australia have been more conservative in their policies – the former has only offered electric vehicle owners an exemption from the transport levy, whilst the latter will limit the number of electric vehicle subsidies it hands out.

Conclusion: No Sticks, No Carrots – the Federal Circuit Disconnected

While it is reassuring to see the Morrison Government introduce policies that encourage electric and hydrogen fuel cell vehicles, more can be done to ignite a widespread switch to zero-emission vehicles across the nation. Australia has an opportunity to present a unified and credible approach to meeting its commitments under the COP26 Breakthrough Agenda and to keep up with global efforts to reduce carbon emissions. However, this will require stronger policies, tangible targets and incentives to be put in place to ensure that demand for this industry is stimulated.