Cutting the fuel excise is akin to subsidising fossil fuels, say investors and electric vehicle owners, who have labelled the budget measure short-sighted.

The centrepiece of the federal budget was an $8.6 billion cost-of-living package, which included a 22¢ reduction to the 44.2¢ fuel excise.

Temporarily cutting the fuel excise means the average family will save $30 a week, the government said.

Tesla owner John Peck said cutting the fuel excise was politically expedient in the lead up to an election, but it represented a fossil fuel subsidy.

“It’s a high-visibility way of cutting the cost of living for people,” Mr Peck said.

“I understand why they’ve done it [but] it does seem like if you are going to give a subsidy … could you have given that subsidy more broadly to include electric cars in that too?”

Electric vehicle (EV) sales increased to 20,655 in 2021, up from 6900 in 2020, according to Electric Vehicle Council figures, with the vehicles accounting for 1.95 per cent of all new car sales, up from 0.78 per cent.

Despite the growth, Australia’s EV market is still behind most other countries, where EVs account for an average 9 per cent of sales.

Mr Peck said emissions reduction was part of his motivation to purchase a Tesla Model 3. The 32-year old sales and operations professional said the decision to reduce the cost of petrol ran counter to every other policy to reduce emissions and transition to greener energy.

“There’s a short-termism [to the policy]. It did annoy me a bit,” Mr Peck said.

“I’m not generally a person who’s for lots of subsidies – I don’t think that huge subsidies should be given to electric cars necessarily, but … if it was a cost-of-living piece, if they’d applied it evenly to all EV owners, that would have been nice.”

Fuel excise cuts slow green transition

The cuts to the fuel excise will slow the transition to greener modes of transportation, said Climate Council economist Nicki Hutley, describing the budget measure as a missed opportunity to promote public transport, cycling and walking.

EV manufacturers and retailers have been seeing lifts in enquiries as petrol prices increase, Ms Hutley said, suggesting some of the money funnelled into reducing the fuel excise could have instead been diverted into expanding the EV industry.

“It’s still very much part of this government’s mantra that fossil fuels are a core pillar of the Australian economy and we absolutely need to change that language if we’re also going to change people’s behaviour,” she added.

The budget measure sends the “wrong signals” to the market about the transition away from fossil fuels, with political energy better spent enhancing access to EV chargers and promoting a second-hand EV market, said the economist.

To understand the measures required to promote EV take-up, more research into how fuel prices impact buyers’ decisions needs to be performed, said University of Sydney senior commodity markets lecturer Elvis Jarnecic.

“I don’t think that discussing excise taxes is necessarily the right approach to incentivising electric vehicle take up,” Dr Jarnecic said.

“This excise tax has a specific role in funding infrastructure, and it’s a relatively good tax in that it’s paid by those that use that infrastructure. There needs to be other policy in place to encourage the take-up of electric vehicles.

“The government needs to think more innovatively in this regard.”

Slowing the transition to EVs and a decarbonised world more broadly will also have cost-of-living implications, said Arielle Gamble, director of climate action funding accelerator Groundswell Giving.

“We could be transitioning to cheaper, free, infinite sources of energy,” she said.

“Instead, we’re committing to increasingly high costs by staying dependent on the fossil fuel pipeline.

“We’re also facing catastrophic economic costs from the perspective of flooding and bushfires and increasing extreme weather disasters fuelled by the continued use of fossil fuels.”

“So right now, [the policy] might briefly alleviate petrol pressure, but they’re not actually looking to the medium and long term and – I’d say – the short term.”

Increases in petrol prices – while accelerated by the Ukraine-Russia conflict – are a cost-of-living trend set to linger.

As a finite resource, reliance on fossil fuels will invariably only become more expensive, Ms Gamble said.

Extracted in full from: Electric vehicle owners irked by cut to fuel excise (