Bryce Edwards: Will the Government’s nudge make our cars greener?

Bryce Edwards: Will the Government’s nudge make our cars greener?

Is this part of the Labour-led Government’s long-promised “nuclear-free moment”, alluded to by Jacinda Ardern when she promised radical action on climate change? The announcement this week of a proposed “feebate” which will make more environmentally-friendly cars cheaper while making the gas-guzzlers more expensive is one of the long-awaited plans for how New Zealand will get its carbon emissions down.

The solution has been relatively well-received, because it has an elegance in its “cost-neutral” approach of putting a penalty tax of up to $3000 on the purchase of new higher-emitting vehicles, and using the proceeds of that revenue to offer up to $8000 in subsidies for those buying new energy-efficient cars such as electric vehicles (EVs).

But is it enough? Does it really match the scale of the problem? And what negative consequences will it have for those who can’t afford, or aren’t able to use, electric and low-emissions cars?

A well-received policy

Newspaper editorials have been especially positive towards the Government initiative. Yesterday, the New Zealand Herald argued that the policy is a “clever” way to encourage greener car purchases, and that the public is likely to be highly supportive in the same way that the plastic-bag ban has been accepted – see: Clean cars the right road forward.

Similarly, the Otago Daily Times labelled it a “smart policy” because of its “moderate” and light-handed approach to changing consumer behaviour. The newspaper editorial emphasised that this meant the policy was likely to be enduring: “It is also sufficiently restrained to likely survive any change in government” – see: Nudging car fleet changes.

The paper praised the “nudge” component of the approach: “It is a variation of the ‘nudge’ theory, recognised in marketing circles and human psychology. Rather than use education, enforcement and over-the-top rules, it adjusts the costs of new and imported used vehicles. While how much impact that will have can only be estimated, the plan would lower one of the high hurdles to electric and hybrid ownership, the relatively steep purchase price.”

The Dominion Post has also praised the policy as “practical, maybe even elegant”, and has defended the scheme from critics who “lamented the Government’s lack of boldness” – see: Better late than never for a plan to lower vehicle emissions.

A number of other voices have been very positive about the proposal, including the motor industry. And even National is generally supportive of the subsidies for greener cars.

But attention has also been focused on those sectors of society that might be negatively affected by the cost of many cars going up – especially the poor, but also farmers and tradespeople – see Jason Walls’ National says the Government’s plan to get greener cars on the road could hurt NZ’s poorest.

National’s Brett Hudson says: “There is a risk that a feebate system could turn out to be regressive in its nature; that lower-income workers and working families might see themselves worse off compared to some people on better incomes”.

Similarly, the Taxpayers’ Union says “this is a tax on Otara vehicles to subsidies Teslas in Remuera” – see Rebecca Moore’s Government’s proposed vehicle tax taking from the poor to benefit the rich, Taxpayers’ Union says. Executive Director of the lobby group, Jordan Williams, says “Just because something is shrouded in environmental branding doesn’t make it any less nasty to the poor”.

Lacking boldness and ambition?

Is the new policy ambitious enough? After all, given the climate change emergency we face, is this policy sufficiently bold and radical to meet the challenge?

So far, environmentalists have been less than impressed. Greenpeace energy campaigner Amanda Larsson has welcomed the policy in general but questioned the penalties being imposed on the less-efficient petrol and diesel vehicles, saying that the upper level fee of $3000 is disappointing. She points out that the French equivalent is about $10,000 – see Jason Walls’ Greenpeace wants the fee charged on higher emitting vehicles to be a lot higher than $3000. Greenpeace is also calling “on the Government to set a timeline for banning the sale of new petrol and diesel vehicles.”

This is a point also made by blogger No Right Turn: “As the Cabinet paper points out, a dirty car imported today stays on our roads for 19 years on average. So the quicker we turn off that tap, the better. But more importantly, we need to turn it off permanently. Other countries have announced phase-out dates for fossil-fuel vehicles, typically aiming to ban new sales in 2030 (and non-museum-piece registrations 5-10 years after). Such a date sets market expectations and helps drive the push for people to make their next car electric. But there’s no mention of one at all in the Cabinet paper – the necessary action seems like too much for the government to take” – see: Climate Change: Timid and unambitious.

The blogger also takes issue with the timeframe of the Government’s initiative, saying “the government needs to do more than this, and it needs to do it faster. They should be pushing this through the legislative process as quickly as possible, and implementing it immediately, rather than with a 5-year phase-in.” He points out that “the government is planning to apply a vehicle fuel efficiency standard Japan and Europe had five years ago in 2025”.

Drawing attention to Jacinda Ardern’s promise of a “nuclear-free moment” in combating climate change, No Right Turn says “contrary to the Prime Minister’s rhetoric, we’re not seeking to lead on climate change, we’re not even being a ‘fast follower’. Instead, our government is dragging its feet, just like its always done.”

On this issue of whether the Government is intervening enough, business journalist Liam Dann discusses why strong intervention is required: “Left to market forces alone, the widespread adoption of electric vehicles looks a long way off – too late for the world based on current predictions of a climate crisis. So if New Zealanders collectively want to hit current climate targets and reduce fuel emissions – it seems we need further government intervention. And that means big calls about the politics of who pays” – see: Kiwis are still too addicted to petrol, Govt had to act (paywalled).

In the end, the Government’s proposed scheme isn’t likely to make a huge difference in the take-up rates of EVs. David Linklater makes the case that current EVs simply aren’t yet very economical, even once discounted. For his “reality check” on the costs of buying an EV, and the costs of running them, see: Let’s not be fundamentalist about feebates and EV ownership.

He argues that to have a truly beneficial impact on the environment, car buyers need to be buying new EVs rather than second-hand ones, but at a cost of about $60,000 it’s hard to make the case that they are more cost-efficient over the long-term than the equivalent petrol-fuelled versions. For example, he argues that “it will take you 150,000km to recover the extra cost of a Leaf over a top-line Corolla”. Nonetheless, he says the new feebate policy isn’t designed to get everyone into an EV immediately, but just to nudge everyone into more efficient cars generally.

What is missing from the Government’s green vehicle policy?

The Dominion Post editorial, cited above, makes a recommendation for improving the Government’s green vehicle policy, suggesting that a serious investment in the infrastructure of public charging stations is required: “Charging stations remain an urban novelty, and are even rarer between some of the country’s cities and towns. That is an important next step, especially if the Government hopes to have its feebate running by 2021. We can’t afford another long wait for progress.”

Similarly, the Herald says: “There is also the issue of whether there will be an adequate network of charging stations to serve an increase in electric vehicles.

The Government also considered and rejected an array of other policies before announcing the latest green vehicle initiative. For example, a more generous subsidy for EVs could have been on offer, with the consideration of an extra $2000 being possible to reduce the costs – see Jason Walls’ article, Cabinet paper reveals the Government scrapped plans for a direct $2000 subsidy for EV buyers. The Government also decided against taking GST off electric vehicles.

Reporting on a Cabinet paper on the issues, Walls says the Government “is also exploring the possibility of a second-hand EV leasing scheme aimed at reducing transport costs for low-income households and supporting EV uptake”.

But why didn’t the Government decide to put some of their own money into subsidising EVs? In another article by Henry Cooke, the Associate Minister of Transport, Julie Anne Genter explains: “We just decided it wasn’t tenable to take away $100m from schools or hospitals or hip operations to subsidise new cars that wouldn’t work for a large amount of New Zealanders” – see: Government considered $2000 subsidy and age limit on imported vehicles instead of feebate.

According to this article, the Government also rejected a “variable annual licensing fee”, which would make registration more expensive for high-emissions cars.

Will New Zealanders really care about this EV subsidy? Talkback host Ryan Bridge suggests otherwise, arguing that “Kiwis don’t care about climate change. They say they do, but then they go buy a new SUV and have another child. They have choices already and they’ve voted big, loud, and gassy” – see: Climate change tax proposed for driving utes, SUVs.

He’s rather cynical about the policy, saying “Farmer Bob from central Otago with his Ford Ranger will be hit with a $3000 tax, while latte-sipping, lentil-eating Fabio from Ponsonby with his VW Golf Electric will get an $8000 discount.” And today’s Listener editorial on the topic adds to this, saying “there is in this policy a whiff of pandering to urban liberals at the expense of workers in the provinces.”

Finally, Judith Collins took to Twitter this week to ask: “Given that EV cars have a wee electric motor, why do the manufacturers charge so much for them?” And to explain that, see David Linklater’s article, Silly car question #53: if EVs have ‘wee’ electric motors, why are they so expensive?