Future Fuels Strategy falls short – Why buy an EV?

Future Fuels Strategy falls short – Why buy an EV?

The Australian Government is betting on consumer demand driving the transition to lower emissions vehicles.

The Future Fuel Strategy currently out for consultation lays out the Government’s plans for electric vehicles (EV) and alternative fuel vehicles infrastructure and policy. The strategy is backed by a $74.5 million Future Fuels Fund primarily aimed at providing for refuelling/charging infrastructure, and the provision of information to consumers on their options through a Green Vehicle Guide. The strategy follows similar theme to the Technology Investment Roadmap and other policies creating a consistent message that the Government believes the supply of technology will meet consumer expectations and consumers will address emissions reduction of their own volition.

While there has been a significant swell of interest in alternative fuels, electric vehicles and hydrogen vehicles will this translate into vehicle sales?

What the figures tell us

Looking at recent sales data there were 6,900 EV’s sold in Australia in 2020 accounting for 0.7% of total Australian car sales. Maybe consumers are not rushing out to buy low and zero emissions vehicles.

The National Transport Commission found that if people who purchased new vehicles in 2019 had chosen the best-in-class for emissions performance, Australia’s average carbon emissions intensity would have dropped 63% to 67 g/km. Unfortunately this was not the case nearly 50% of 2020 total sales were larger vehicles SUVs and Utes, led by Toyota HiLux ute 45,176, followed by the Ford Ranger 40,973 (RACQ 2021).

European markets actively discourage high emissions vehicles through pollution and other taxes. The result being the mid-sized SUV market has shrunk to 6.4% 2020 and EVs have increased from 3.8% in 2019 to 10.4% in 2020. We are well behind and consumer preference for heavier SUVs negates any reduction achieved by purchases of an EVs.

Vehicle emissions CO2

Australia 2019National average light commercial vehicles sold180.5 g/kg
Europe 2018Average of available data120.4 g/kg
Japan 2017Average of available data114.6g/kg
USA 2017145.8g/kg


Austroads recent report recommended policy makers consider two important factors:

  1. Accelerated support for new electric vehicle sales is insufficient on its own to bring roads sector emissions in line with a net zero emissions outcome in 2050.
  2. Incentives to accelerate the retirement of inefficient internal combustion engine vehicles are also needed to transition the national fleet more in line with net zero emissions by 2050.

Scott Morrison famously accused Shorten of ‘ending the weekend’ with Labor’s policy to set 2030 electric vehicle targets at 50% new car sales.  Australian’s like the idea that they can jump in their SUV and go camping and fishing.  They haven’t considered yet where EV’s fit into this aspiration.

International examples

International examples demonstrate the uptake of electric vehicles has been most successful with a combination of incentives, clear emissions targets and policy that drives cultural shift away from fossil fuel dependence.

A study of three early adopter countries the Netherlands, Denmark and Norway found the ingredients for successful policy that drives adoption are a mix of:

  1. Coordinated charging infrastructure.
  2. Information about the technology options.
  3. Incentives that mirror the actual carbon footprint of the vehicle.
  4. Non-financial demand side incentives like free toll roads, free parking, use of bus lanes etc.
  5. Support for energy policy and legitimising e-mobility in the community.

Full Electric cars made up 52% of Norway’s new car sales in 2020 up from 42% in 2019. Norway has vast reserves of petroleum, natural gas, iron ore and coal yet it has pursued a carbon neutral agenda. It is a leading example for Australia of what can be achieved with clear policy objectives to reduce emissions.

The Future Fuel Strategy focuses on stimulating supply side, building charging infrastructure and providing consumer option but remains silent on demand side incentives successfully trialled in other OECD countries. In short, the policy lacks the ‘why’. Why change to a low or no emissions vehicle?

Nissan Australia chief executive Stephen Lester said

Australia’s lack of leadership in embracing electrified cars was out of step with the world’s leading economies and there was no reason that Australia could not be a global leader in the uptake of the technology.

Stephen criticised the lack of incentives and demand side policies including the absence of an emission reduction target.


The transport sector in Australia has not been asked to examine its energy use or provided any targets for reduction in emissions. More energy is now used in transport than in any other sector of the economy. Transport is also the fastest growing sector in terms of energy use, and is projected to increase to 32% of all primary energy in 2045–50 (Australian Alliance for Energy Production)

The Emission Reduction Fund has not been utilised by the transport sector. The Future Fuels strategy suggests the complexity of the scheme, reporting requirements etc. require more work than the average pay back from the program. Only one company has successfully utilised the fund by shifting freight off road onto rail.

Australia has one of the oldest freight fleets of the OECD averaging 15 years compared to Europe 5 years. Almost 42% of the nation’s truck fleet above 4.5 tonne GVM was manufactured before 2003 when basic, or no, exhaust emission regulation existed. This figure consists of 119,448 (25.8%) pre-1996 trucks with no emission standards and 73,441 (15.9%) post-1996 pre-2003 trucks with elementary emission control systems (TIC).

This is primarily due to a lack of emission targets or any requirements to reduce energy consumption. Heavy Vehicle manufactures in Australia have called on the Government to mandate the requirement for more fuel efficient Euro VI vehicles. Currently Australia is one of the last countries in the OECD that supports EURO V and as such international fleet providers are not investing in the Australian market.

Australian EV truck sales are also languishing with some distributers pulling alternatives off the market due to low sales. In 2017 only 44 alternative fuel vehicles were sold (Truck Industry Council).

The time horizon required to turn over the fleet to meet carbon neutral 2050 suggest progress from 2020 is necessary to achieve this goal.

Is the Future Fuel Strategy preparing a pathway to transition?

Is it enough to encourage people to move out of their comfort zone and try an electric vehicle?

It has some of the how, funding for infrastructure, opportunities to increase consumer choice, but none of the incentives to nudge people into transitioning away from fossil fuel vehicles.

I hope you will take the time to read the Future Fuel Strategy and have your say.

Pricing the market, Fuel tax and Road user Charges – is Australia ready for reform?

Pricing the market, Fuel tax and Road user Charges – is Australia ready for reform?

Australia faces profound challenges in managing and expanding its transport infrastructure network. Demand for passenger and freight transport will double over the next 25 year and triple by 2050. Inefficient and congested freight networks have a direct impact on productivity.  Deloitte’s Economics estimates a one per cent annual improvement in supply chain efficiency will save Australia more than $1.5 billion in deadweight logistics costs.

The road charging and spending mix between the three levels of government federal, state and local government is very complicated. Revenue is collected through tax, duties, tolls, parking fees and levies.  This revenue is declining and is not directly correlated to road spending. Changing the costs for the heavy vehicle industry is always the first step for government.

Following the Transport and Infrastructure Council announcement of a 2.5 percent increase in Road User Charges Mr McCormack’s office said the logical first step for road-user charging was the heavy vehicle sector.

Should heavy vehicles pay only for what they use? And if so, is mass distance charging inevitable?

Looking globally Australia has a similar situation to many other developed nations. All are facing declining revenue and increasing costs.

Michael de Percy explains in Road Pricing and Provision chapter 2 – Where are we and how did we get here?

At the heart of the public policy problem is the entrenched perception of roads as a free public good for which users do not need to pay (despite roads not being wholly a ‘public good’ in definitional terms; one person’s enjoyment of the good can impact on another’s enjoyment through congestion). Users see roads and their usage of them more or less as an inalienable ‘right’, and itemised payments for the use of roads through tolls and charges as an annoying infringement of these same rights.

New Zealand

New Zealand potentially has a more equitable system than Australia. Anyone using the roads directly contributes to their upkeep through either fuel or road user charges. New Zealand is unique in that the revenue collected is dedicated to the National Land Transport Fund which directly funds road improvements and maintenance. Rail revenue and expenditure is also funnelled through the Fund delivering a more holistic funding approach to freight. This enables the Government to consider the balance between road and rail and aim for a zero emission target by 2050.

Perhaps our New Zealand neighbours have a more transparent system, one that merits consideration? Deloitte’s certainly agrees suggesting nationalising and simplifying the Australian system and establishing a ‘Building Australia Fund’ to allocate resources to the states and territories is a good idea.


In Australia, revenue collection is split between the states (stamp duty, licensing and registration fees) and the federal government (Road user Charge – fuel excise tax, FBT, and GST). The formal funding framework between the Australian Government, the states and territories is defined in the National Partnership Agreement on Land Transport Infrastructure Projects. This intergovernmental arrangement sets outcomes around innovative network-wide planning for land transport; the connectivity of regional communities; safety, and productivity and growth. Each State then individually negotiates a funding arrangement under the National Land Transport Act 2014.

In total the Australian governments raise approximately $30 billion in road-related revenues and spend about $25 billion on road-related funding[1].

Figure 1 Road related revenue by type BITRE (2016)

Source: Road pricing and road provision in Australia: Where are we and how did we get here? Michael de Percy

The federal government applies a national heavy vehicle Road User Charge of 25.8 cents to each litre of diesel used by heavy vehicles as set out in the Fuel Tax Act 2006. RUC is designed to recover the heavy vehicle share of road expenditure through a complicated fuel tax credit system. Claiming fuel tax credits is up to the individual operator and many are averaging their use and only partially claiming the full amount.

Road User Charges were frozen in 2014 however, this freeze has recently been revoked and a 2.5 per cent increase is expected in 2020-21 and a further 2.5 per cent increase in 2021-22.

Gary Mahon, Queensland Trucking Association said the initial proposal of an 11.4 per cent increase was completely unreasonable.

“When you’re looking at companies on margins of about 4c in the dollar, an increase like this could well send a number of businesses to the wall,” he said

The government decision to not chase the full funding gap was mainly due to the united effort of state and national industry association placing pressure on the Government.

So how large is the gap in funding?

The Government is keenly aware that the amount of fuel excise tax collected has been steadily declining since the beginning of the 2000s (see figure 1). This is primarily due to technology advances, improved logistics management, increased vehicle efficiencies, and the growth in the electric vehicle market. According to the Bureau of Infrastructure, Transport and Regional Development, in 2013–14, public sector road-related revenue totalled $27.8 billion. Fuel excise contributed about $10.8 billion or 39 per cent, down from about 44 per cent in the early 2000s.

Figure 2 Public sector spending BITRE (2016)