Electric Cars – They will in time increase car use without effective road pricing reform

We are told that electric vehicles, cars in particular, will be good for the environment. We agree totally, but what exactly might this mean? It is true that end use emissions will be significantly reduced when we move from fossil fuels to green energy sources (putting aside the life cycle implications when we account for the energy generation source – be it coal or water or hydro etc.)

With a substantial (hopefully total) switch to electric cars, the general position of experts is that the cost of an electric vehicle will be significantly less that a petrol or diesel car (the switching point is unclear, but many suggest in about 10 to 20 years), and that the cost of using such vehicles will decline. A taxi driver of a fully electric taxi in London said recently that his fuel costs have dropped by one hundred pounds per week or $Aud178 per week, or close to $Aud10,000 per annum. This is substantial. In Australia the EV Council suggests that an EV’s fuel cost will be 34.3 cents per kWh compared with average petrol cost of $1.36 per litre. This translates into 5.15 cents per kilometre for an EV compared to 14.39 cents per kilometre for an internal combustion engine using petrol, an average saving of $1,275 per annum on fuel costs alone.

Simple economics, which often drives decisions, suggests to me that the private car will be more affordable and more attractive to use. So all other things being equal, we can expect a notable increase in car kilometres travelled. However if ‘all other things being equal’ is modified to become a reform of road pricing, such that government introduces a re-pricing of road use that reflects a position that ‘those who benefit’ should pay an efficient (and equitable) charge for using the roads, then we may be able to contain what is expected to be a huge growth in car use. This will also be important as fuel excise on fossil fuels disappears, although we expect governments to find new charges for green energy electric vehicles. With road pricing reform this latter action can be avoided.

Thus, moving to green energy to reduce (if not eliminate) end use vehicle emissions runs the very real risk of increasing congestion significantly if governments continue to reject road pricing reform. The amount of money committed in Australia to new public transport investment is, in my view, inadequate to put a significant dent in the continuing dominance of the private car, which has always been a key objective in investing in public transport, rail in particular. Indeed the fantastic new Metro rail system in North West Sydney has resulted, to date, in a major loss of bus patronage (21% on the long haul M2 services) and a small 2% reduction in car use. 2% is a still a good number, but does illustrate that one of the best new rail services is likely to have a small impact on car use as it grows in popularity as car ownership and use costs plummet over time under a green energy plan. Congestion will increase, and in itself may make some car users give up using their car, but we doubt it is enough without road pricing reform.