Decarbonising the Transport Sector: The Electrification Transition

What is the electrification of transport?

The electrification of transport refers to replacing fossil fuel-powered travel modes with those powered by electricity, including passenger vehicles, commercial vehicles, heavy duty trucks, buses, scooters, electric bikes and others.

However, consideration of the grid emissions factor is required, as EVs will be considered greener where the electricity is generated from hydro, solar or wind, compared to areas where grid electricity generation is primarily fuelled by coal.

The uptake of EVs can be assessed in a variety of ways, including process/outcomes evaluation approaches.

An evaluation should prioritise identifying policies and practices that deliver the most favourable long-term outcomes and tangible community benefits for EV deployment in Australia. Evaluations should explore individual preferences regarding government incentives, investigate how decision-making processes vary among different population segments when incentives are provided, and assess the effectiveness and quantifiable impact of each incentive. A comprehensive evaluation should also highlight the key issues needing advocacy to accelerate EV adoption in Australia.

Australia’s EV uptake has been slow

Despite government interventions, Australia has experienced a slow uptake of EVs compared to global markets. In 2023, 1 in 5 vehicles sold worldwide were electric, whereas in Australia, EV sales were less than 1 in 10.

By 2030, the Victorian Government aims for half of all light vehicle sales to be zero-emission, in alignment with NSW and Queensland ambitions. In comparison, the UK targets all vehicle sales to be zero-emission by 2035.

Multifaceted problems to EV adoption

Issues relating to EV adoption are complex and multifaceted, requiring a holistic ecosystem approach. These include:

• Policy complexity – not adequately considering the integration of appropriate infrastructure, energy transition, costs and awareness for widespread EV adoption.
• High purchase prices.
• Limited availability of public charging stations.
• Range anxiety – Australia has significant transit distances between cities and urban centres
• Time taken to charge.
• Concerns over resale values.
• Labour and infrastructure – where the availability of a broader downstream infrastructure for maintenance, service, and repair is lacking.
• Supply – Australia’s cheapest electric car is available for $35,000, but there is a months-long gap between ordering and delivery due to supply issues.

Governments have taken both monetary and non-monetary approaches in an effort to increase EV uptake.

Non-monetary approaches:

In a recent study, non-monetary incentives were found to be ineffective in promoting electric vehicles. These include:

• Update to National Electric Vehicle Strategy – A key element of the Federal Government’s update is the New Vehicle Efficiency Standard (NVES), effective January 1, 2025, which aims to encourage manufacturers to expedite EV availability in Australia, enhancing competition and lowering prices.
• Usage of bus and transit lanes – Allows EV drivers to make use of its transit lanes pushing for public servants to adopt EV fleet cars wherever possible.
• On-street parking permits – Local councils have previously provided those who adopt EVs with on-street parking permits.
• EV ready – States such as the ACT and Victoria now mandate that new construction projects include provisions for EV charging infrastructure in their parking spaces.

Monetary approaches:

Australians responded positively to stamp duty and registration discounts, rebates on energy bills and parking fees as incentives for EV adoption. The preferred one-off financial incentive was a rebate on the upfront cost of an EV. Other monetary government approaches include:

• Novated leases: The Federal Government’s Electric Car Discount Policy has significantly reduced the cost of novated leases for EVs priced under $91,387. With the increased threshold for the 2024/25 financial year, more EVs qualify for the discount. Additionally, EVs are now exempt from Fringe Benefits Tax (FBT).
• Rebate schemes: Up to $3,500 and $2,000 for EVs in WA and Tasmania respectively.
• Zero-interest loans: The ACT government is continuing to offer zero-interest loans of up to $15,000 for eligible households to purchase an EV.
• Road tax: States have investigated and, in some cases, eliminated road user taxes for EVs. NSW planned to introduce such a tax by July 1, 2027, or when EVs surpassed 30% of new car sales however an October 2023 High Court ruling deemed Victoria’s similar tax unconstitutional, leading NSW and other states to reconsider.

There is evidence that EV adoption increases with rebates, with NSW’s program boosting EV sales by 400%in middle-income and suburban areas. However incentives and rebates have in some instances been cut, which can threaten Australia’s climate and net zero goals.

Transitioning from internal combustion engine (ICE) vehicles to EVs demands technical skills (i.e. electronic and computer technicians), rather than traditional mechanical trades. Australian businesses and workforces maintaining EV fleets must develop new competencies. Governments can consider the following interventions:

• Transitioning electricity generation from coal to renewable energy: Continue to phase out gas and coal power plants with renewable energy generation to decarbonise the grid.  
• A concerted effort across all levels of Government to enable new electric vehicle technologies: In Australia EV policy has progressed with the likes of the National EV Strategy and various state policies. However, targeted policy and meaningful investment is required with measurable outcomes across all levels of government
• Incentivising: States to consider continuation or reinstatement of EV incentives. Incentives are crucial to accelerate adoption and make them accessible to a broader audience. They help offset the higher upfront costs, encourage manufacturers to invest in EV production, and stimulate competition that drives down prices.
• Partnership and collaboration: Partnerships with a range of industry partners, including those with international experience are necessary to increase uptake.
• A blended finance approach: Governments to collaborate with private finance to achieve shared objectives. This enables scalable solutions tailored to local needs, enabling collaboration among government, the private sector, and communities. Ultimately, this approach can accelerate the transition to EVs by securing essential financial resources and promoting sustainable investment practices.

• Fleet electrification incentives: Accelerating the shift to EVs is crucial for transport decarbonisation. Governments can incentivise the freight sector with tax credits, grants, and subsidies for electric trucks and delivery vans. The Australian government’s policy on novated leases for EVs could serve as a model, reducing upfront costs and lowering long-term expenses through decreased fuel and maintenance costs, thus encouraging fleet operators to adopt cleaner technologies.

Decarbonising the transport sector through the electrification of passenger vehicles and increasing the uptake of EVs is critical to Australia meeting its net zero and climate commitments. Governments play an integral role in enabling this transition – by providing the financial mechanisms and energy infrastructure to support in this electrification transition.

To discuss further, reach out to our team below. Alternatively, you can read more of the conversation on decarbonisation in our 2024 City Leaders Survey results here.