Electric dreams actually a nightmare for taxpayers

Electric cars are the upmarket smashed avo. The perfect status signaller for inner city eco-lovers in their (fair trade) hemp-cloth suits. So they’ll be popping the corks on their sparkling kombucha at news that the Electric Vehicle Council is requesting government subsidies and tax breaks. To help save the planet, of course — and also conveniently boost electric car sales.

Yes. Another day, another industry asking governments to join the commercial crusade to reduce CO₂ emissions. But subsidising rent-seekers in climate change policy has a long history of failure, where the only guarantee is lining the pockets of vested business interests.

Subsidy fans should heed the lessons from other ill-targeted policies that have tried this tactic — such as the NSW government’s ethanol mandate, which has pushed up fuel prices with little benefit to the environment. Not to forget the numerous taxpayer handouts to wind farm developers, government incentives to install solar panels on your roof and – my personal favourite – your own backyard mini hydro power generator.

Rather than caving in to industry rent-seekers, governments could instead develop general standards aimed at reducing CO₂ emissions at the economy-wide level, or at the very least the industry level.

Why does it matter if the reduction of one tonne of CO₂ emissions comes from the car industry or the power industry?  Why subsidise electric cars when hybrid and/or hi-tech diesel engines could also reduce emissions at lower cost?  Why adopt a CO₂ reduction scheme that would disproportionally subsidise luxury cars like the $300,000 BMW i8, when other policies could benefit more Australians than just the environmentally-conscious rich?

And in fact, the green credentials of electric cars may not be all they are touted to be. While all-electric cars produce zero emissions when driving, a battery-powered electric car will still produce ‘lifecycle CO₂ emissions’ … that is, emissions from building the car itself, from the source of the electricity used to power the car and from recycling the car’s parts at the end of its operational life.

Building an electric car is often more CO₂ emission-intensive than building a conventional car because the batteries used to power the electric car require the mining of lithium, nickel and cobalt.  Mining and processing these minerals generates significant CO₂ emissions.

Australia’s reliance on fossil fuels for its power needs means that substituting petrol and diesel cars with electric cars may just lead to drivers replacing fuel-based CO₂ emissions with coal-based emissions.

Given this doubt about green credentials, government policy should be technology-neutral in trying to achieve emission reductions.

Why should taxpayers risk betting on the wrong horse in this race, whether it be electric cars, ethanol fuel or solar panels? Governments should promote a level playing field that encourages the adoption of different technologies to reduce emissions.

To paraphrase Thomas Jefferson: “all CO₂ reductions are created equal.”

Eugenie Joseph is a Senior Policy Analyst at the Centre for Independent Studies.