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Future legislation will drive electric vehicle sales.

The last seven months have been a rollercoaster for electric sales. The rushed cessation of the Clean Car Rebate, and the introduction of RUC has seriously stalled our progression towards a cleaner fleet. Signalling that the Clean Car Standard will be reviewed is adding to the uncertainty.

The proportion of new electric passenger vehicle sales (BEV and PHEV) is now just 8% year to date (May data) whereas in 2023 they were 23% at this point.

What consumers, manufacturers and distributors need is a clear roadmap to follow (ideally with board cross party support). Oddly, emissions reduction is getting politicised; where politicians lead the public will likely follow.

Our vehicle fleet is old. The average passenger vehicle is 15 years old in New Zealand. Older cars, even when well maintained are significantly higher emitters than their modern equivalents. We also have high levels of vehicle ownership, and so effecting a meaningful change in the composition of our fleet to reduce our emissions will take a concerted effort, and time.

This article seeks to show international examples of how other markets have tackled change, without to resorting to a ‘ute tax,’ which the current government have ruled out.

New Zealand should be able to look at what legislation works in other markets, and develop a fiscally neutral set of policies that will increase the take up of electric vehicles.

In 2023, New Zealand imported petroleum and fuel products valued at NZD 7.29 billion. This substantial expenditure reflects the country's reliance on imported refined petroleum and accounted for 8.5% of New Zealand's total imports in 2023. Petroleum and fuel products are a significant component of New Zealand's overall trade. These are imported to fuel our vehicle fleet.

Last year, around 87% of New Zealand's electricity was generated from renewable sources. This significant reliance on renewable energy primarily includes hydroelectric, geothermal, and wind power.

We can choose to create our own renewable energy to power our vehicle fleet, or we can import fossil fuels to burn.

A switch to a more efficient or renewable powered fleet will have a massive impact on our balance of trade, our emissions, and the health of our nation. Using locally produced renewable energy to power our fleet rather than imported fossil fuels is within our grasp. But only if we chose to stretch out.

Let us look at the implications of, say, achieving a 50% electric vehicle fleet in 5 years (this is a highly unlikely goal, but bear with me).

1. Current Oil and Petroleum Consumption by Vehicles.

In 2021, New Zealand consumed about 7.6 billion litres of petroleum products, with a sizeable portion used by road transport.

2. Impact of Electric Vehicles.

Electric vehicles would reduce the demand for petrol and diesel. If 50% of the vehicle fleet were electric, we could assume a proportional reduction in petroleum consumption by passenger vehicles. Ninety-one percent of vehicles registered are light vehicles. Note, however, heavy vehicles and other transportation modes would still rely on fossil fuels, as the electric adoption for line haul lags significantly (however busses suit electrification).

3. Current and Projected Vehicle Numbers.

In 2021, there were about 4.4 million vehicles in New Zealand. Assuming modest growth, the fleet might grow to around 4.8 million by 2030. If 50% are EVs, that would be approximately 2.4 million EVs.

4. Total Import Reduction.

If EVs replaced 50% of the fleet, the reduction in fuel consumption could be approximated by considering the fuel used by those vehicles. If we assume that light vehicles account for about 60% of total road transport fuel use, and half of these switch to EVs, the fuel demand could decrease by approximately 30%.

Using these assumptions, let us look at the impact for our economy and health.

1. Current Petroleum Import for Vehicles.

If total consumption is about 7.6 billion litres and 60% is used by light vehicles, that equals approximately 4.56 billion litres.

2. Reduction Due to EVs.

A 50% EV adoption among light vehicles would reduce the light vehicle petroleum consumption by 50%, so 4.56 billion litres * 0.5 = 2.28 billion litres reduction.

3. Projected Petroleum Imports in 2030.

The remaining petroleum imported would be the total current import minus the reduction. Assuming no significant increase in other sectors' demand, this would be 7.6 billion litres - 2.28 billion litres = 5.32 billion litres.

Therefore, if New Zealand achieves a 50% electric vehicle fleet by 2030, the petroleum import requirement could decrease by approximately 2.28 billion litres, resulting in a projected import of about 5.32 billion litres, assuming other factors remain constant. This would yield a $2 billion improvement in our balance of trade from fuel, every year from this point onwards.

4. Impact on Air Quality

Air pollution caused by vehicles significantly impacts New Zealand's air quality, particularly in urban areas where vehicle density is high. The main pollutants from vehicle emissions include nitrogen oxides (NOx), particulate matter (PM), carbon monoxide (CO), and volatile organic compounds (VOCs). These pollutants contribute to several environmental and health issues. However, because we currently only use Euro V as an emissions standard, there are a number of pollutants that we do not measure nor restrict, that newer emissions standards regulate, such as Nitrogen Oxides (NOx), Carbon Monoxide (CO) and particulate Matter (PM). Euro V’s standard mainly regulate Carbon Dioxide, which is a main driver of climate change. Euro VI takes a broader view of pollutants.

As a result of age and our preference for larger SUVs and utes, and a light regulatory framework, New Zealand's vehicle emissions per vehicle are high compared to many Western European countries. In Europe, stringent emissions standards, and widespread adoption of electric vehicles (EVs) have led to significant reductions in average CO2 emissions from new vehicles. For instance, the average CO2 emissions from new cars in the European Union (EU) were around 110g CO2/km in 2022, with countries like Sweden achieving as low as 66.6g CO2/km for new cars.

A bunch of carrots
We need more carrots and less sticks

Photo by Maja Vujic on Unsplash

The difference in emissions is due to several factors, including the higher proportion of older and less efficient vehicles in New Zealand, and the slower adoption of the latest Euro 6 emissions standards compared to Europe. New Zealand is however, working towards stricter standards.

If we compare a 2024 Toyota Corolla with a 2009 model, CO2 emissions are roughly half (97g/km versus 171g/km). If we compare the best selling used import 5 years ago, Nissan Tiida, with the current best seller, Toyota Aqua the CO2 emissions are 176g/km versus 92g/km, and yet if we compare a 2009 Ford Ranger (243g/km) with a 2024 Ford Ranger, (222g) or a 2009 Toyota Hilux SR 3.0L 4WD (245g) with a 2024 Toyota Hilux SR at 225g we can see that emissions have only reduced by around 10%.

Our Solutions toolbox (it's called joined up legislation).

In order to overcome these challenges, it is worth considering policies and levers in other developed markets.

1. In Service testing

New Zealand has no in-service emissions testing. CO2 emissions figure are provided by manufacturers for a new vehicle. But we know that older vehicles pollute more, particularly if they have had poor maintenance. This is compounded by a typical used import being 8 years old at the time of importation.

For example, countries with the toughest in-service emissions testing regimes in Europe include Germany, the United Kingdom, and Switzerland. These countries have stringent regulations and comprehensive testing procedures to ensure vehicles on the road meet emissions standards. Let us have a quick look.

Germany has a rigorous in-service emissions testing regime. The country conducts periodic technical inspections (PTI) which include emissions tests for all vehicles. The tests are conducted every two years for most vehicles and annually for older vehicles. Additionally, Germany employs remote sensing technology and random roadside emissions checks to ensure compliance.

The UK has a strict MOT (Ministry of Transport) test that includes detailed emissions testing. This test is required annually for vehicles over three years old. The emissions portion of the test measures pollutants like CO, NOx, and particulate matter to ensure they are within acceptable limits. The UK also has low-emission zones (LEZ) and ultra-low emission zones (ULEZ) in cities like London, which further enforce stringent emissions standards.

Switzerland also has rigorous emissions testing. Vehicles undergo emissions tests every two years, and the country has stringent standards for CO2, NOx, and particulate emissions. Switzerland also has low-emission zones and enforces strict penalties for non-compliance with emissions standards.

Specifically, the UK MOT emissions test has five parts.

a. Connection to Diagnostic Equipment.

The vehicle is connected to specialized equipment that measures emissions from the exhaust. For most vehicles, this involves inserting a probe into the exhaust pipe.

b. Measurement of Pollutants.

The equipment measures the levels of various pollutants, including carbon monoxide (CO), hydrocarbons (HC), nitrogen oxides (NOx), and particulate matter (PM). The acceptable limits for these pollutants vary depending on the vehicle's age and fuel type (petrol or diesel).

c. Visual Smoke Test

For diesel vehicles, there is also a visual check for excessive smoke. Visible smoke of any colour (white, blue, or black) can indicate different issues and lead to a test failure.

d. Diesel Particulate Filter (DPF) Check.

For diesel vehicles so equipped, the DPF must be intact and functioning. If the DPF warning light is on or the filter is removed/tampered with, the vehicle will fail the test.

e. Idle and High Idle Tests.

Emissions are measured both at idle and at a higher engine speed to ensure compliance under different operating conditions.

If a vehicle fails the emissions test, it cannot pass the MOT, and the owner must address the issues before the vehicle can be certified roadworthy.

Locally it is not uncommon for drivers to remove their catalytic convertor. This should be aa reason for WOF failure in New Zealand.

2. Creation of Low Emissions or Clean Air Zones.

a. Clean Air Zones (CAZs):

Some UK cities have implemented CAZs to improve air quality. These zones restrict or charge vehicles based on their emissions.

Vehicles failing to meet emission standards may face penalties within CAZs.

b. Low Emission Zones (LEZs):

LEZs also exist in certain areas, encouraging cleaner vehicles by imposing restrictions on high-emission ones.

3. Emissions based Rego (licence).

The VED, also known as road tax or the road fund license, is an annual tax paid by drivers of vehicles used on public roads in the UK. The current average annual VED across all UK motorists is currently £166 (320 NZD). First-Year VED Rate:

a. The first-year road tax is based on its carbon dioxide (CO2) emissions.

b. It ranges from £0 for zero-emission cars to £2,745 for models emitting 255g/km or more.

ii. Standard Rate (Second Year Onwards):

a. For cars registered on or after April 1, 2017:

i. Petrol and diesel cars pay a flat rate of £190 annually.

ii. Hybrid owners pay £180 a year.

Sweden, Luxembourg, and Spain also offer lower road tax for zero emissions vehicles.

4. Scrappage Schemes

Germany, France, Italy, Spain, and Romania have all programmes that typically involve financial support for trading in old cars and purchasing new or nearly new vehicles that are low emissions.

5. Emissions Hardware / ECU upgrades programmes

Diesel vehicles in the 14 German cities with the poorest air quality became eligible for a hardware upgrade, (or owners were offered a trade-in incentive for their diesel car). The hardware upgrades manged the emissions components of vehicles. The UK is considering a similar piece of legislation that typically incorporates AdBlue and an exhaust SCR (Selective Catalytic Reduction) targeting Heavy Goods Vehicles and buses.

6. Banded Emissions based Fringe Benefit Tax

The UK has a complex tax regime for company cars, where both the employer and the employee pay for the benefit-in-kind of a company vehicle and associated fuel. In simple terms the value of a car is calculated as is it is income, but the tax band that the income is based on depends upon the emissions of the vehicle.

i. 0-50g CO2 per km: 9% tax band

ii. 51-75g CO2 per km: 13% tax band

iii. 76g-94g CO2 per km (other low emission cars): 17% tax band

iv. For each rise in emissions of 5g CO2 per km from 95g CO2 up to a maximum of 37%.

Germany, Greece, Hungary, and Ireland also offer tax exemptions for company vehicles.

7. GST Exemption for zero-emission cars

Across Europe there are a number of countries that do not levy the full rate of GST (VAT) on zero emissions vehicles (Austria, the Netherlands, Portugal).

There is a wide array of levers that can be pulled to achieve a cleaner fleet. New Zealand is unique that it imports affordable low emissions petrol vehicles from overseas into its market and that consumers on a tight budget appreciate the affordability of a mild hybrid (MHEV). It is also a key ute market – and utes are not widely available at the time of writing as PHEV or BEV, nor as imports from Japan.

Our aged fleet that still does not have in service emissions testing is ripe for modernisation. Even targeting the worst 50% of polluting vehicles would pay dividends for motorist and the environment.

But most of all, we need an integrated multi-pronged cross-party approach to reducing emissions in our vehicle fleet, something that currently is lacking. Our bi-partisan approach has caused fiscal pain for distributors, dealers and the car buying public, and party politics is to blame.

Private vehicles are the mainstay of our transport policy, and so policies to assist consumers to make cleaner choices are sorely needed. It is time to ween ourselves off imported oil at the same time.

It is time to build consensus, to build a better future.

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