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Home / Business

Liam Dann: Kiwis are still too addicted to petrol, Govt had to act

Liam Dann
By Liam Dann
Business Editor at Large·NZ Herald·
9 Jul, 2019 06:30 AM4 mins to read

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Close-up of the vehicle plug on New Zealand's first solar-powered electric vehicle (EV) charger which is located in downtown Tauranga. NZH File Photo.

Close-up of the vehicle plug on New Zealand's first solar-powered electric vehicle (EV) charger which is located in downtown Tauranga. NZH File Photo.

The good news is that debate about the need to tackle climate change is over.

The bad news is that the debate about who pays for it is not.

In fact, as the proposed introduction of new vehicle subsidies and taxes shows, it's set to be every bit as contentious as it starts to hit us in the back pocket.

We can't avoid the politics of climate change because, sadly, when it comes to market forces the technological advances around clean energy are struggling to keep up with fossil fuels.

Late 20th century fears about peak oil proved ill-founded. Thanks to fracking and shale oil, the dirty black stuff is not running out.

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As the ACT Party has been quick to point out, motorists already pay an emissions trading scheme charge of about 6c per litre when buying petrol.

"They then pay a further 64c of other taxes and, in Auckland, a further 10c regional fuel tax. GST is charged on top of those costs, taking the total tax per litre to around 81c per litre (and 92c in Auckland)," ACT leader David Seymour says.

While ACT's point is presumably that petrol consumers are already over-taxed it also serves to illustrate just how addicted to petrol we remain.

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Shifting to a cleaner way of living because greener technology is better than older alternatives is always preferable.

But clean energy is not winning this race and we are running out of time.

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The price of petrol - taxes aside - continues to fall as producers apply new technology to extract previously marginal oil deposits.

It brings to mind the ability of the tobacco industry to perpetually reduce production costs in the face of rising taxes.

Relatively speaking, running a gas guzzler in 2019 is cheaper than it was in the 1980s.

Petrol cars are more fuel efficient now too - but they are cheaper and more abundant. Families are more likely to own two.

Left to market forces alone, the widespread adoption of electric vehicles looks a long way off - too late for the world based on current predictions of a climate crisis.

So if New Zealanders collectively want to hit current climate targets and reduce fuel emissions - it seems we need further government intervention.

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And that means big calls about the politics of who pays.

The Government's new plan to subsidise the price of more fuel-efficient vehicles by imposing penalty taxes on the biggest polluting vehicles has critics on all sides.

There are many environmental activists who believe it doesn't nearly go far enough.

There are others that are unhappy.

To be fair, the motor industry groups have been measured in their response, accepting the need for change but questioning the workability of some parts of the proposal.

For the most part, this is a user pays tax, which is the kind business is supposed to prefer.

The Motor Industry Association has called the move sensible and agreed more needs to be done to lower vehicle emissions.

They have concerns about the imposition on importers and on the additional business costs of users of light industrial vehicles.

It still seems likely business groups won't be thrilled by these new costs

For big polluters, New Zealand has led the way in applying market forces to climate change costs.

We launched the emission trading scheme in 2008, covering energy use, industry, waste disposal and forestry (which provides the transactional balance in soaking up emissions).

We have not yet fully addressed agricultural emissions - which remains one of the biggest difficulties in this process.

As much as the need to address climate change is now agreed by both major political parties in this country, so too is the need not too put our farmers out of business.

They are too important to this economy.

And there is no question that New Zealand needs to maintain a strong economy if it wants to continue to take the lead on climate change.

We need an economy that is strong enough to withstand the kind of political calls that governments are going to have to make in the coming years.

We need an economy that allows us choices.

And hopefully, as consumers, we will start to make some more of the right ones.

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