More taxes, subsidies needed to meet electric vehicle goals - economist

One of New Zealand's biggest petrol retailers doesn't think the country is going to make the switch to electric vehicles (EVs) as quickly as a recent Government report suggests.

The Climate Change Commission's (CCC) report Ināia tonu nei: A low emissions future for Aotearoa, released in June, says electrifying the country's 4.5 million road vehicles is "a critical element" of reaching New Zealand's net-zero emissions goal by 2050.

It recommended stopping the import of new combustion engine cars by 2032, and used by 2035 - at the latest. 

But Z Energy says it expects demand for petrol to stay strong well beyond then. In a report released on Wednesday, the company said it expects uptake of EVs to be slower than the Government would like, and price parity to take longer to reach. EVs currently cost an average $16,000 more than traditional vehicles, according to the report - and that's before taxes like GST. 

"Our view is that although annual growth in petrol and diesel demand will slow markedly from 2025 and turn negative from 2026 for petrol and 2028 for diesel, it will not reduce as quickly as the CCC predicts," Z Energy's report said.

"We see demand for both fuels remaining substantially higher than the commission does out to 2040."

Part of that's because there will remain a lack of suitable electric alternatives to heavy vehicles. 

Economist Frances Sweetman of Milford Asset Management told The AM Show on Thursday Z Energy's outlook was more cautious than that of the CCC "for two reasons".

"First of all, policy and regulation is going to be a massive driver here because EVs are more expensive and price is a big part of any decision. So they don't think there will be an outright ban on the imports of petrol and diesel cars from 2030 or 2035. 

"The second part really is the ability to have an electric heavy fleet, electric trucks and the battery life that requires, which is going to be challenging."

Turning the vehicle fleet electric is part of the Government's overall goal of making New Zealand carbon-neutral by 2050. Z Energy in its report said while it "may differ on some assumptions" made by the CCC, "we strongly agree with the CCC that the time to take action is now".

Sweetman said the Government would likely need to do more to encourage people into EVs than it has to date. That might be politically difficult, with outrage from the Opposition to new taxes on heavy-emitting vehicles. 

"If you look at Norway, which is a fantastic example, they now have two-thirds of new car sales being electric," said Sweetman. "Their target is 100 percent by 2025 I think. They have used significant subsidies - like no VAT [a tax similar to GST], much reduced road tax, much reduced parking, the use of bus lanes, lots and lots of subsidies. So I would expect subsidies and potentially more taxes on your petrol and diesel vehicles. 

"Ultimately, electric vehicles are coming - it's our biggest opportunity to decarbonise." 

The Government has to respond to the Climate Change Commission's report by December 15. Any decisions on whether to ban imports of petrol-driven cars will be in the hands of Transport Minister Michael Wood.