The Australian Government Standing Committee on Climate Change, Energy, the Environment and Water has invited written submissions as part of its inquiry into the transition to electric vehicles.

The transport sector currently constitutes the third-highest share of Australia’s greenhouse gas emissions.

Government projections show that the transport sector will be the largest source of emissions by 2030.

Projected emissions reductions come primarily from electric vehicle (EV) uptake and a vehicle efficiency standard for light vehicles.

The transition to EVs is therefore an important lever to decarbonise transport.

With battery and plug-in hybrid EVs at 8.5 percent of sales in 2023, Australia is not yet on track to meet existing, aggregated state and territory targets (equivalent to 46 per cent EV uptake by 2030).

Recent Climateworks modelling shows that even higher EV uptakes are required – 56 per cent and 73 per cent respectively – to keep decarbonisation within bounds of the Paris Agreement’s temperature goals of well below 2°C and 1.5°C.

Not meeting such uptake could put Australia’s climate goals at risk.

Our 2022 report, Accelerating EV uptake, identified the lack of a vehicle efficiency standard as a major barrier to uptake.

Without addressing supply, consumer demand cannot be met and EV uptake will be severely limited.

There are also significant savings to be gained by increasing the share of EVs in the fleet.

Raising national ambition on EV uptake could save approximately $20 billion in vehicle running costs and abate 24 MtCO2e of emissions by 2030 compared to Australia’s current projected uptake.

The EV transition strategy should, therefore, first focus on unlocking supply by setting ambitious vehicle efficiency standards.

These standards must be competitive globally, as manufacturers prioritise EVs for markets with strong standards.

Vehicle efficiency standards complemented with a comprehensive policy package will further ensure a fast and smooth transition for individuals and businesses.

Overall, coordinated and sustained policy support will help the EV market transition through its emergent stages into a well-established marketplace.

While rapid uptake of EVs will be critical, complementing this with other actions to reduce transport emissions will ensure Australia can reach its climate goals.

In our 2023 report Delivering freight decarbonisation, Climateworks estimated that just under 40 per cent of transport emissions come from freight, of which approximately 51 per cent is from short-haul freight.

This highlights another area of transport that also needs to decarbonise to achieve sufficient emissions reductions from the transport sector.

Further, our upcoming report on transport decarbonisation scenarios will show that incorporating transport efficiency measures and mode shift, including rail freight, will be critical to initiate and keep transport emissions reduction on track.

The following is a summary of our responses to specific terms of reference in the submission:

• The establishment of resources, systems and infrastructure required to support transition to EVs Climateworks recommends a focus on increasing supply of EVs to the Australian market and building a comprehensive policy package that supports transition for individuals, businesses and the energy grid. Climateworks’ recommendations under this term of reference also cover policies that optimise EV charging, discharging and infrastructure.
• The impact of moving from internal combustion engine vehicles, including fuel excise loss, existing auto industry component manufacturers and the environment Shifting from ICE vehicles to EVs can have a significant impact on reducing Australia’s transport emissions. In 2021, passenger and light commercial vehicles made up 63 per cent of Australia’s transport emissions. In other words, even a transition to light-duty EVs only could reduce over half the emissions from transport.
• The impact on electricity consumption and demand EVs have the potential to become the largest resource for demand management, where the variable nature of renewable energy can be balanced by EVs returning electricity to the grid during periods of unexpectedly high demand. This means EVs can have an important role in the future electricity system. Climateworks recommendations explore the technical standards, frameworks and rules that are necessary to integrate EV charging with the grid.
• Other recommendations: Climateworks also recommends deploying complementary policies to support a stable and fair transition to EVs in the long run. Important policies here are those that boost the second-hand market to enable more equitable access and transition to EVs.