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Clean Cars Hero2

More incentives needed

MTA and others in the auto sector are lobbying the Government for tweaks to its Clean Car Standard regime that would lessen the anomalies and make its goals more attainable.

Without change, MTA believes the standard will fail and imported car prices will increase significantly.

The standard takes effect in 2023, with an initial limit of 139 grams of carbon per kilometre on the average emissions of imported new and used light vehicles. By 2025, that limit will be 105 grams.

Each gram over the target will cost $75 for a new light vehicle and $37.50 for an imported used vehicle. This would add $3,750 in carbon penalties for a new car producing 50grams more than the target.

MTA Strategy and Advocacy Manager Greig Epps says the emission target and fee formula is linked to vehicle weight bands. More weight means higher allowable CO2 emissions.

“But the formula has some flaws with unintended consequences. Some small hybrids, like the popular Suzuki Swift, or Toyota Aqua, will be hit with penalties, even when they achieve better emissions than the national target of 105 grams. Other hybrids attract a credit, with the heavier SUV hybrids allowed higher CO2 so penalties are lower.

“With ICE vehicles, the same thing happens: lower emitters can be penalised at a higher amount than heavier, higher emitters. In 2025, a petrol Honda Jazz (130g CO2) would come with a penalty that is 2.5 times higher than for a diesel VW Toureg (176g CO2). How does this help reduce overall emissions?”

The intent is to get the importer to bring in more electric vehicles. It is left to the importer to decide what vehicles to bring in to meet market demand while also offsetting the penalties against the credits. Importers must try to get their year’s imports to average out at the permitted target (105g in 2025). However, many in the industry believe importers will be unable to reach the target and so will incur substantial CO2 penalties, which will be passed on to consumers.

Automotive industry strategist Phill Haynes has examined the way other countries have introduced lower emission targets for their national fleets, to see what works and what doesn’t. He says New Zealand has come up short.

“We have over-simplified the key elements of the European schemes, leaving out tools that mitigate such anomalies (super credits and various tax incentives) to make it work better. It should be noted, these countries also started their decarbonisation
20 years ago.”

Meeting demand

Phill, MTA and others in the industry are also concerned that the Clean Car Standard (CCS) does not reflect the real-world ability of manufacturers to produce enough electric vehicles to meet demand, at an affordable price.

“The world’s manufacturers simply cannot make a rapid switch to EVs – it takes years to tool up. There are not enough used EVs to import either. Also, there’s not much point making millions of EVs if they are too expensive for people to buy,” says Greig. He noted that the policy focus has been on bringing more cars into the country without any thought of what to do with the existing fleet.

Phill says, “The aggressive New Zealand targets alone won’t change consumer behaviour, and will penalise the benefits of hybrid technology as a transition transport.”

The Suzuki Swift hybrid is a particularly good example of this. At 1,240 kilos it will be allowed 84grams of CO2 in 2025. “With today’s technology, only a BEV could meet that target at that weight, so the standard is not allowing for low emission hybrid technology. The Swift hybrid emits only 94 grams but it would cost the importer $750 in CO2 penalty.”

Incentives

He also believes there are not enough incentives for businesses to give up ICE vehicles, particularly their utes, and swap them for EV or hybrid SUVs or wagons.

“The Fringe Benefit Tax exemptions currently apply only to Commercial Vehicles used by employees for their own use. But the exemption could be extended to include all business EV and hybrid Light Passenger Vehicles. This could save an operator as much as $10,000 a year on their tax.

“A feebate that subsidises or incentivises consumers to choose a low emission vehicle could also be introduced. However, it could affect prices at used vehicle auctions overseas, which would undermine its effect,” says Phill.

Depreciation rates could also be made more advantageous to encourage businesses and fleet operators to buy electric vehicles and hybrids, he says.

“Generous depreciation rates would be an incentive for buying the vehicles and then selling them on early in their life to get them into the private market within a few years. Rental car companies already get higher depreciation rates on their vehicles. A low emission depreciation could be set at a comparative, or even a higher rate.”

Both Phill and Greig were encouraged by a statement from Minister of Transport Michael Wood in February who said the Government would consider options for an incentive scheme for electric vehicles, and he would have “further announcements on our plan to reduce transport emissions in the coming months”.

Greig says, “We are hopeful that this means there could be some changes introduced next year, before penalties start to be applied in 2023.” MTA and others in the industry continue to meet with Ministry of Transport officials to discuss the anomalies and the best ways to reduce the carbon emissions of the national fleet.