Subsidies for Electric Vehicles – How do you like them lemons?

*** Note: This post has been updated to correct errors in the initial version. Correcting these errors has not, however, affected the conclusions ***

Imagine, for a moment, that I was trying to sell you a bag of organic lemons. Now imagine that my bag of organic lemons costs 25 times the normal price. They’re very good ***organic*** lemons, I would say, while flashing a Simon Bridges smile. Well-fertilized by a lovely labradoodle called Lexie, I might add.

When confronted with such a scenario, I imagine (hope) that most of you would tell me to stick my organic lemons somewhere nice and dark. Like Norway.


View of Bergen, Norway

How is this relevant to EVs? Well, the Government has just announced policies to subsidize uptake of electric vehicles (EVs). The Government is subsidizing EVS so as to reduce carbon emissions. A noble objective, you might think. Except for one small problem: My analysis suggests the Government’s is paying 25 times more to reduce emissions via EVs than what it’d cost to reduce emissions via other channels. Put another way, if we took the money being used for EV subsidies and instead used it to offset carbon emissions elsewhere in the economy, then we’d be able to buy 25 times more for our money.

Doesn’t sound like a very good deal does it? Let me first present some numbers to support this conclusion.

First, let’s consider the benefits side of the EV subsidy equation. Information available on the MoT website suggests (from my reading) that the main objective of the Government’s EV subsidies is to reduce emissions from transport. To achieve this outcome, the Government is proposing a suite of measures (subsidies) that are designed to increase the number of EVs on New Zealand roads from approximately 5,000 now to 64,000 in 2021. Of course, under a counter-factual (do-nothing) scenario the number of EVs on NZ roads would also be expected to increase, simply because EV technology is improving over time. For the sake of this analysis let’s say that under the counter-factual scenario (i.e. in the absence of the Government’s subsidies for EVs) we’d see an additional 10,000 EVs on NZ roads. From this we can deduce the Government’s subsidies cause a ***net*** increase of 50,000 EVs.

Second, on the cost side of the equation we find that two of the nine policies are costed at $42 million per annum in 2021. However, we’d expect the cost of the subsidies to start off low and ramp up progressively over the five year period, as more people buy EVs. Let’s assume the subsidies amount to an average of $20 million p.a. over 5 years, or $100 million in total. Let’s also keep things simple and use undiscounted monetary values. To sum up, the Government’s subsidies for EVs amount to spending approximately $100 million over 5 years, which is expected to result in an additional 50,000 EVs on NZ roads. This subsidy can be broken down further: $100 million divided by 50,000 EVs equates to $2,000 per EV, which over five years amounts to $400 per EV per annum. If we further assume an individual EV will be driven an average of 12,000km p.a., then we find the subsidies amount to approximately $0.03 per kilometre travelled.

So what do New Zealand taxpayers get for this investment? Or more specifically, how much of a reduction in CO2 emissions do we get from this investment? The Government’s analysis suggests that EVs will save 0.15 kg CO2 per kilometre traveled compared to a normal car. At 12,000 km p.a. this equates to 1.8 tonnes of CO2 saved per vehicle per annum. If we then apply the current carbon price of NZD $10 per tonne, then we find the Government’s EVs subsidies cost approximately 25 times more per year than the market value of the carbon emissions that they save.

I want to pause for a second to let this sink in: The Government’s EV subsidies cost 25 times more than what it would cost to reduce emissions in other ways. Oh. Dear.

Some of you may argue that a carbon price of NZD $10 per tonne of Co2 is too low – and I’d most definitely agree. Recent research suggests a carbon price closer to $200 per tone would be more accurate. However, I think it’s worth keeping in mind that the current carbon price is the direct consequence of deliberate policy decisions implemented by this Government over the last 8 years. Specifically, the Government has chosen to give out large volumes of free carbon credits, which have suppressed the price of carbon. Hence, I’d argue that the current carbon price at least reflect the Government’s views on how much New Zealanders should be paying to reduce carbon emissions.

Other people who are reading this may be thinking that I simply can’t be right. That somewhere I’ve missed out some zeros, or got a decimal point out of place. Perhaps I’ve been doubling-down on a few too many space-cakes here in Amsterdam, and/or skipped a few too many economics classes.

To try and get an independent perspective on my calculations I undertook some further research into the impact of EV subsidies in other countries. In doing so I stumbled across a very interesting paper titled The Norwegian support and subsidy policy of electric cars. Should it be adopted by other countries?, which was published in 2014 in Environmental Science and Policy.

This paper evaluates Norway’s subsidies for EVs and concludes (pg. 167; emphasis added):

Our main conclusion is that the Norwegian EV subsidy policy should be ended as soon as possible, and that this policy certainly should not be implemented by other countries. The solution to the GHG problem of the transportation sector in the next few decades in a world in which the GDP and population growth are the main drivers of the road traffic volume (Bosetti and Longden, 2013) is not to offer subsidies making it cheaper to buy and run EVs, or other alternatives, but to introduce more taxes and restrictions on car use. There are simply too many social costs associated with car transportation (Sterner, 2007). The subsidization idea, which informs so much of environmental policy today, not least within Europe, is ineffective, has several unintended consequences and will in many cases be counterproductive (Helm, 2012). The Norwegian policy for the support of EVs is an example of this.
Reading further, one finds that the authors have reached this conclusion based on an analysis of emissions savings from Norway’s EV subsidies. And guess what? They find the cost of the subsidies was approximately 2,700 times higher than the equivalent cost of offsetting the same amount of carbon (pg. 167; emphasis added):

Under certain reasonable assumptions, we then find that the EV subsidy package that the single EV owner gains amounts to about 13,500 USD/tCO2. As pointed out, this is about 2700 times higher than the current CO2 emission price. Therefore, under similar assumptions, subsidizing 20,000 EVs adds up to the value of more than 50 million permits, or about the present yearly GHG emission in Norway. Rather than supporting EV owners, the Norwegian Government could have bought emission rights in the same amount in the quota market and kept these rights unused, meaning that the quota supply would actually have shrunk. This would have driven the quota price up and possibly contributed to a technology push along different lines. At the same time, this measure would have made Norway ‘carbon neutral’.

Also contained in the paper is some interesting information on who seems to benefit from EV subsidies (pg. 167; emphasis added), with the authors commenting as follows:
It is widely believed that this EV policy will result in less energy consumption based on fossil fuels and a reduction in the local emission and noise problems. However, our discussion and analysis show that unfortunately the issue is not that simple. One of the most worrying aspects of the current EV policy incentives in Norway is that they motivate high-income families to buy a second car. At the moment, two-car households make up a minority. However, if two cars per household become more common, they will pose an environmental challenge across several dimensions and will doubtless mean that the EV policy as a GHG emission reduction instrument is totally missing its point.

“Totally missing its point” is not something you read in academic papers everyday. It’s worth mentioning that political parties in Norway recently reached consensus on rolling back EV subsidies, by removing EVs’ ability to use bus lanes and lifting their exemptions from tolls.

If you’re looking for a sound-bite from this post then this is it: The Government is proposing to spend $100 million to subsidize wealthy households to buy electric cars in order to achieve a relatively paltry reduction in emissions.

At this point I should point out that the Government is not alone in proposing that the New Zealand taxpayers subsidize EVs. The Green Party, for example, has also proposed removing FBT from EVs. While I haven’t evaluated their policy in any detail, on the basis of the numbers I’m seeing here I’d be ***extremely*** skeptical about the effectiveness of such a policy, especially when considered from an environmental and social justice perspective.

To finish, I want to make two moderating comments in relation to my criticisms of EV subsidies.

The first caveat is that I think EV technology is really cool and has a lot of potential to make our lives better. However, observing something is a “cool technology” is not sufficient reason to implement subsidies. Call me square if you will, but I personally believe that good policy should try to 1) achieve its stated outcomes and 2) to do so in an effective manner. Spending $100 million for what appears to be little gain seems to fall outside of this definition of “good policy”..

The second caveat is to acknowledge that EVs have benefits which extend beyond carbon emissions, and include things like air quality and noise benefits. These benefits should definitely be considered as part of a detailed benefit cost analysis. However the onus for demonstrating these benefits, I would argue, lies with the Government / MoT – not some strawberry-blonde punk blogger like myself. Specifically, the Government should really be doing detailed benefit cost analysis before announcing policies. For this reason I think it’s fair for us to evaluate Government policies in terms of their stated objectives.

Notwithstanding these moderating comments, my conclusion is that the Government’s is spending about 25 times more on EVs than they should.

Personally, I feel like this is a shame because I would love to see New Zealand take some serious steps towards reducing carbon emissions. The EV policies announced by the Government, however, do not qualify as a serious step. I’m left with the distinct impression that these EV subsidies are a superficially attractive way (“greenwash”) designed to distract New Zealanders from what is a very real problem: Our carbon footprint is too damned high.


71 comments to Subsidies for Electric Vehicles – How do you like them lemons?

  • adam w

    What are the areas you think give best bang for a buck to reduce nz’s carbon footprint?

    • Brian

      Windfarms, insulation, cycling and public transport.

      • Ricardo

        Not sure why there is such a fuss. A mere pittance cf cycling expenditure.

        • Sailor Boy

          And 1/5 of the investment for 1/100 of the benefit. The cost of everything, the value of nothing as Patrick would say.

    • Matthew W

      Raise the price of carbon and let the market work that out.

      • Peter Nunns

        Or, at the minimum, raise the *marginal* price of carbon. We could tolerate the fact that current dairy farmers pay a carbon tax of $0 on their current herds if they were required to pay for the cost of their *increased* emissions. That wouldn’t reduce emissions, but it would at least send the right signal about future investment decisions.

        • Matthew W

          Yeah that is a good point. My solution for the dairy issue would be to switch taxation to carbon “consumption” rather than carbon production. I think there is a genuine issue with us taxing dairy in that could lead to perverse outcomes – production shifts to more CO2 intensive locations where carbon isnt priced. Taxing carbon consumption would involve taxing (or an ETS if it can be made to work) the “carbon add” in products which is then passed on to consumers. Exporters would get a rebate and imports would be assessed for carbon content (the same as GST currently works). That way as consumers we will be incentivised to reduce CO2 consumption regardless of where it originates. Then in terms of our dairy carbon emmsionss – as other countries set up carbon consumption taxes, those emmisions will be picked up (along with the emmisions in all other dairy products being sold in that market).

          If we had a truly global carbon agreement it wouldnt matter whether you tax carbon production or consumption, but until that happens it is much more efficient and effective for individual countries to tax carbon consumption.

      • John Parlane

        The problem with the whole missing markets approach is how on earth do you price carbon? The market was missing for a reason. If we switched to a carbon tax then all the money raised gets used here rather than being sent to pay for some credit that may or may not be legit. Our government has to levy taxes so why not levy them from consumption of something we actually want to reduce?

        • Matthew W

          I agree that a straightforward carbon tax is a better option than an ETS (albeit I think a carbon consumption tax is required for the reasons I have said above). Even with a carbon tax (as opposed to a carbon market), you can still allow the “market” (in the broad sense of the word) determine how to most efficiently reduce carbon emmisions. If you want to be explicit about emmisions reductions you could have a variable carbon tax that changes to “target” a given level of emmisions (much like the RBNZ targeting inflation with interest rates).

  • Pam

    Two questions, more philosophical than statistical: if someone is going to drive a car anyway then isn’t it better that they drive an electric car than a diesel or petrol-drive one? And regarding your point that the Government’s subsidies would spend a massive amount for a modest gain, isn’t this the same as schemes to spend big to build elaborate cycleways for the benefit of only a tiny number of citizens?

    • Where are these ‘small numbers’ that benefit from cycleways? Everybody benefits from cycleways; especially those not using them. Every bike rider is someone not using a car and out of the way of those wealth-eating private vehicle users, saving us all multiple billions in unaffordable highway overbuilds. Additionally bike users are keeping themselves and others out of hospital and off the shrink’s couch for longer saving us all higher health and welfare costs [driving makes us fat and sad]…. and so on.

      In short the benefits from one driver switching to riding to work compared to one switching from an ICE vehicle to an EV are clearly far greater. Especially the transport benefits, because an EV is still a car and remains hugely spatially inefficient. Yes it would be great if we could click our fingers and all ICE vehicles [including buses and trucks] were suddenly electric, but to subsidise EVs at the top of the market while still building massive urban highways is a double stupidity.

      All alternatives to driving are more effective in reducing the negative outcomes of auto-dependency than just trying to drive more while improving one or two of those disbenefits; GHG emissions, and local air quality.

    • sailor boy

      Cycle investments offer benefits of up to 20:1 so no, the two are in no way comparable.

    • Matthew W

      “Government’s subsidies would spend a massive amount for a modest gain, isn’t this the same as schemes to spend big to build elaborate cycleways for the benefit of only a tiny number of citizens?”

      Cycle usage can be increased to a least 30% of trips based on overseas precedent. That is huge and would do more for carbon emmsions than EVs could ever hope to – even if EVs got this level of usage. So there are real world examples we can point to where cycle infrastructure investment has resulted in massive positive changes for a city, and cheaply too (in fact cycling infrastructure saves dollars relative to alternatives). EV projections on the other hand are totally speculative.

    • Nick

      “If someone is going to drive a car anyway”. Well that’s the flaw in your argument. It’s like saying, “Assuming someone is going to eat a steak and cheese pie anyway, wouldn’t it be better to try and make a healthier pie?”.

      The thing is, to stretch the analogy further, if you want the citizens of NZ to be healthier as a whole, the answer isn’t to make pies healthier, it’s to encourage people to not eat so many pies. That gives you massively more bang for your buck.

      So the people that are going to drive whatever and will not be influenced in any way to change their habits aren’t really worth bothering about. Let’s instead focus on those people that are, and are open to using PT, or cycling, or planning their lives better to make fewer journeys, i.e. are willing to make a change for the greater good (and their own).

  • nonsense

    EV are more likely to be used in our urban centres so while in a NZ contest it won’t reduce emissions much, in the city they might make a significant difference to air quality

  • KP

    Does an electric bicycle count as an EV?

  • Josh

    Is it possible that the quicker initial uptake of EVs due to these subsidies and the consequent speedier rollout of charging infrastructure will result in a continued quicker uptake of electric vehicles beyond the life of the subsidies, resulting in greater reductions in emissions, not to mention other benefits such as drivers buying NZ-made electricity instead of foreign oil? For the record, I still think this could all be done without EV drivers using bus lanes though…

    • Bruce

      +1 Josh. The aim is to quickly boost numbers so that there is critical mass for things like EV chargers etc that reduce range anxiety and would support overall EV uptake compared to ICE cars more rapidly. In terms of subsidies, if you take away the petrol dollars that are sent offshore every year then an EV subsidy very quickly pays for itself.

  • Arum

    How many options are there for EVs. My understanding is the nissian said that the leaf was uneconomical to sell in NZ at $40,000 even with the subsidies.
    Maybe a few people will buy them but I suspect that the Government knows that this announcement will not cost them much.
    I suspect you are right and this announcement is a PR stunt while trying to avoid the real issue about climate change.

    The government could do more to reduce climate change by putting rail in CHCH, more electric trains in Auckland and light rail in the CBD. My gut feeling is those measures would be more beneficial for air quality in NZ.

  • Matthew W

    Very good post and analysis. That dog is too damn cute.

  • Stu one correction, the number of EVs in NZ right now is not 5,000 buy only just over 1,200. Ironically just as I finished reading the post I saw a Tesla S approach.

  • Bruce

    Couldn’t it be argued these subsidies are to develop EV’s to past a tipping point where they are are common enough that they are socially normal and facilities to service them are ubiquitous (mechanics, charging stations, second hand markets) then reducing the requirement for subsidies. Obviously as stand alone policy as point out it doesn’t make sense, but as a catalyst for change I think may be more of a reason for this policy.

    • Peter Nunns

      The problem with that argument is that NZ will only ever make up a small share of the global EV market. Consequently, whatever we do here will have a very small impact on the overall rate of development and deployability of EV technologies. We will get cheap EVs when overseas car-makers are able to scale up to meet growing demand in overseas car markets – end of story!

      • jmarshall

        To be fair, that is the argument folk use against doing anything about climate change, right?

        • Peter Nunns

          Yes, but it’s a really bad argument because there are existing technologies that we can adopt to reduce our emissions. (E.G. insulation to reduce home heating emissions; public transport and active modes to reduce transport emissions; planting trees.)

          Agriculture is the one area where existing technologies aren’t available for widespread deployment. However, we are closer to the technology frontier there, which means that it’s sensible to invest in developing new technologies and techniques.

      • Bruce

        I don’t think a few thousand EV cars will change technology but it might change availability of charging stations, businesses to install home charging stations, mechanic/technicians to service them… By being more common there will be information and understanding of EVs more people will know of benefits or how to DIY maintenance instead of being scared off an alien thing that no one but “hippies” have.

      • Bruce

        If no one you know owns a widget (or EV), you might not be adventurous enough to buy one, but if a bunch of your friends have a widget and you see how good they, are you might be a little more inclined to get one.
        I don’t know if this is part of decision behind policy but when it’s such an integral utility, as opposed to say hoverboards, knowing that Electric Vehicle support industry isn’t going to disappear is a big factor when investing thousands in an EV.

  • Tom Bennion

    As a recent Nissan Leaf buyer but also long time electric bike and bus commuter I cant fault this analysis. You cant beat electric or hybrid PT as best way to move greatest numbers of people at lowest emissions. Though I do like Elon Musk’s approach which is to radically disrupt the ICE industry.

  • Nick

    That economic analysis highlights the ridiculousness of the whole scheme, but for me the problem is even simpler. You’d have thought the aim of promoting electric vehicles would be to reduce the number of conventional vehicles on the road, and therefore CO2 and pollution.

    So why not just promote that? Even just state the objectives – fewer people driving, fewer cars on the road, reduced car ownership, fewer kms driven. But they can’t bring themselves to, because that’s a philosophical bridge they’re not prepared to cross.

    So instead, useless expensive tinkering.

  • Nick Lovett

    Great analysis. I think one of the key takeaways from this post is from the 2014 in Environmental Science and Policy findings – “[the need for] more taxes and restrictions on car use. There are simply too many social costs associated with car transportation”. A serious policy aimed at tackling transport emissions should use a carrot and stick approach and acknowledge the numerous ways society ‘subsidizes’ private vehicle ownership. We are addicted to cars and privately owned EVs are not the only solution. Its a bit like switching Heroine for Oxycontin – sure, the latter will probably cause slightly less social harm but we haven’t really cured the underlying addiction…

    • Exactly right. But not only will this government not even consider any measures to dis-incentivise car use, they continue to massively drive use up as much as possible. Particularly through the unfortunate highway overbuild. Quite literally investing in the wrong thing: buying more congestion, higher carbon emissions and other pollutants, making society sicker and sadder, and, worse of all, doubling down on the spread inefficient auto-dependent places.

      All of this will make trying to get our cities in shape to function well as this century unfolds much much harder; so much wealth sunk in the wrong kit. They are building for a failed past, not the fast coming future.

  • Peter Nunns

    Fantastic post, Stu.

    The key thing here seems to be that the main benefit of EVs, relative to petrol cars, is that they reduce carbon emissions and other localised pollutants. (FYI, based on the work I’ve done in the area, I’d expect the monetised value of the localised pollutant reduction to be comparable in magnitude to the CO2 reduction.) All of the other benefits and drawbacks of car use remain *exactly* the same.

    Consequently, although the aggregate gains from de-carbonising the car fleet are large, the marginal gains from subsidies to encourage early uptake of expensive EVs are small.

    These problems aren’t shared by investments in public transport, walking, and cycling, as those investments typically have a wider range of user and non-user benefits. Conclusion: Invest in proven technology!

  • mfwic

    Just excellent Stu. Those of us old enough to remember carless days in the early 1980’s will laugh about the about Norwegians buying a second car. Before carless days most families here had one car, once the government ‘intervened’ my parents like lots of others went out and bought a second. The result was more travel than ever.

  • kelvin

    The area which I see ev benefit is high density area, such as the small streets in the cbd where there is a lot of pedrestrain walking along.

    It would benefit the pedrestrain as they can can breath fresh air free from emission, and hear no engine noise.

    I would suggest to make centain city streets ev only, as a mean to indirectly ban cars.

    • As EV numbers increase so do pedestrian and cycling accidents, it would be better for the environment but the cost would outway the benefits.

  • deinotes

    The impression I got from the Nissan dealer when I looked into getting a Leaf was that they are selling them as fast as they can get them into the country. I’m not sure that government intervention is going to increase the number of EVs sold at all.
    If the government wanted to do something governmental to help, mandating that new or refurbished petrol stations had to include an EV charger would help a lot with coverage.

  • Another very effective way to curb emissions (as seen in the CBD):

    People walk.

    • Anything other than driving, is simply the answer. So investment opportunities that enable that at scale are clearly the best way to achieve reductions in GHG and all the other huge benefits of less driving.

      The only risk in investments in alternatives to driving is if they sit un- or under- used. The fear that that may happen in AKL is now proven to be very very low; particularly investments in high quality Rapid Transit systems, well designed on-street and off-road cycleways, and the conversion of city streets to pedestrian priority.
      No community is showing any resistance to using quality PT; no one is too rich or posh, these are simply mistaken beliefs from another age. The only determinant is the availability of quality options.

      • True. But I would add one more item: build the city differently. Or, as the previous post over here says: allow it to happen.

        The thing which makes walking a quality option in the CBD is the density, not investments in walking infrastructure. You can walk to the cinema because the cinema is only a 10 minute walk away. The problem in the suburbs is not the lack of a footpath, but the distance to the cinema.

      • Pam

        “No community is showing any resistance to using quality PT; no one is too rich or posh”. What about too old and frail? too time-poor? too female? Waiting for a bus alone in the inner city at night can be scary for women or teenagers. These are people for whom public transport doesn’t work all of the time. It’s not necessarily resistance to public transport that makes people choose to drive, just an acknowledgement that it doesn’t meet their needs. You would condemn my 80-year-old father to being housebound rather than admit that driving is his only reasonable option.

        • Where does anyone say that all driving or taxi/uber service etc should stop? How do you jump from the statement we need to build alternatives to no 80 year old can ever use a a vehicle? Ridiculous exaggeration.

  • Not too sure about those calculations, I worked out a factor of 12.4?

    230gm/km x 14,000km = 3.22Tns CO2 removed per EV
    3.22Tn x $10/Tn = $32.2 per EV
    $400 EV subsidy / $32.2 = 12.4

    • Peter Nunns

      Yes, that’s correct. Still not a great policy though!

      • Accelerating EV uptake was always going to cost in the short term. In the long term the subsidies will be reduced/removed and the large NZ EV fleet will contribute to significant CO2 reductions. It is the correct decision from both the environmental and tourism aspects as NZ should be seen to be encouraging EV uptake.

        • Peter Nunns

          New Zealand is a technology follower, not a leader. It doesn’t benefit us *or* the rest of the world to bet big dollars on emerging technology.

          If we want to reduce emissions it’s much smarter to focus on existing technologies that work – public transport and bicycles, say. Lower risk, and more positive side-effects related to reduced congestion and improved health.

          • Aucklands worsening congestion is the already sending more people to PT, bicycles and walking which is now aprox 7% of commuters at peak times.

            The other approx 70% are using their ICE cars because:
            A. Congestion is not bad enough for them to try other forms of transport
            B. PT is unreliable/full at peak times
            C. Bicycle is not an option (too far)
            D. Walking is not an option (too far)
            E. Working from home is not an option

            You are going to need a lot of reliable new PT capacity everywhere to move the 70% of people who use their ICE cars.

          • Matthew W

            “C. Bicycle is not an option (too far)”

            This is unlikely to be the only or most likely reason based on overseas precedent. More likely it is not an option because it is perceived as being too dangerous.

          • F. Habit and conditioning mean other options neither considered nor explored.

            But mostly they are right to only drive, because the condition of the alternatives is too often too poor. Happily that is improving, but far too slowly… And for the sake of everyone, including, no especially, those who choose or need to drive those alternatives need to be radically improved and expanded much much more quickly.

            C combined with B is a hugely under-incentived resource, and B with an electric C; is a total revolution in waiting.

          • C+B is a very effective way to get kids to school, even in the most dispersed suburbs and lifestyle blocks. Assuming parents can be confident their kids will not get killed on the streets.

            It is also very effective to go to work, with one caveat, your workplace has to be close enough to a bus route. It is not feasible to have a large amount of people on public transit with their bicycle. A 360 seat ferry can easily carry 300 people, but there’s no way it will carry 300 bikes.

        • Bruce


  • Ari

    I dislike any and all subsidies that distort the market unless it makes it cheaper for me to own an EV.

    I wonder if anyone has done the numbers of the indirect economic benefits of EVs. I spend $3000 a year on petrol. $400 of that is GST, $1200 in fuel tax and $1400 goes to the petrol companies overseas. That is half my money going off shore, mostly never coming back. If I drive a Leaf I would pay about $800 a year in power which will mostly stay in the country. The other $2200 I could spend on whatever I want, likely local consumption and let the money circulate. Eventually I would have to start paying RUC but for this example I think EVs are great for NZ.

    • Peter Nunns

      If your numbers are accurate, you’d save $2200 on fuel *even without government subsidies*. That seems like a pretty good inducement to purchase an EV. I’m not sure why you think a subsidy’s necessary.

      Of course, by your logic the government should pay you to give up your car entirely. The benefits of that policy would be even higher as it would also reduce road congestion.

    • Ari

      Well there is subsidies in that $2200 because I would have to pay RUC of about $1000 that they are subsidising.

      I don’t really like subsidies at all, even this proposed one. The one I especially dislike is the huge subsidy given to the road freight industry via petrol taxes.

  • Bryan

    imho if the government are going to subsidise EVs, they should be subsidising the ones that are going to transport the most people and have the greatest impact on noise and emissions – namely city buses and electric trains. Pay for contactless charging stations at main bus stops (i.e. all busway stations) or traffic lights on bus lanes. Anyone car to crunch the numbers on the carbon reduction from introducing the EMUs?

  • In the meantime…

    The project, estimated to cost between $1.25 and $1.85 billion, will provide a seamless link between the South-Western Motorway (SH20) and the Southern Motorway (SH1). It will also tackle congestion and provide more reliable travel times in and out of the Onehunga-Penrose industrial area, and between the eastern suburbs and the airport.

    And coming soon is the next Grand Eastern Ring Route.

    But this is all good because Electric Vehicles are going to save the day. I’m surprised that this other buzzword, “driverless” hasn’t come up yet. What a load of greenwashing.

    What’s more, I remember hearing a couple of years ago that during dry summers, we run out of hydro power, and we have to start importing and burning fossil fuel to keep up with electricity demand. How is that going to work out if a lot of people charge their electric cars?

  • Anthony

    EV’s will become common on our roads as Nissan Leafs become 7 years old in Japan, thus becoming cheap to buy 2nd hand. As Jap imports they come with subsidies paid by Jap government. The low running costs, reduction in maintenance, likely increase in reliability and convenience of fuelling at home are sufficient for me to buy one, before any subsidies.
    They will improve out balance of trade by reducing oil imports, and increase fleet diversity which has strategic importance in times of war/disaster/disruption.
    Norway may not have a lot of 2 car families but in NZ I think it would be unusual not to have at least 2 cars. I do not think adding EV’s will be responsible for increasing fleet size.
    Windfarms are expensive, unreliable and shred birds/bats. They may be a solution in other countries but NZ has plenty of Geothermal resources left to develop and some hydro.

    • David B.

      Maybe, but what will be the state of the batteries in those 7-year-old Nissan Leafs, as a matter of interest?

      People (like me) buy Japanese imports looking for a reliable car at a good price, but if word gets around that they may need expensive battery replacements then I wonder what will happen to the market for these vehicles?

      • Anthony

        Looking at the online forums battery life appears very good. Failures appear very rare and limited to extreme climate areas in the US. Most 5 year old leafs have only lost 1 bar off their battery capacity gauges.
        You can easily get a display of all battery details on the leafs multifunction display including how many standard charges, how many fast charges, and a general health indication number.
        So long as this information is provided, I see little risk in purchasing, less than an ICE car.
        I‘ll purchase online via tradecarview, beforward, autorec, etc. There are currently 80 leafs for sale at tradecarview, starting from US$6K. Just avoid crash repaired cars.

  • Diesel2PHEV

    After 8 years its fairly obvious this Govt. wouldn’t spend a brass razoo to reduce CO2 emissions ….. but finally they have realized they better put in some infrastructure and enable the transition to Electric Vehicles just to appear “up with the play” and to have a handy piece of Greenwash at hand to throw back etc. Also all the “BlueGreen” business set want to get in on it as well. Its the argument that if everyone else is doing it then we better (e.g. TPPA, cycle-ways ….) So not unexpectedly its not the greatest package but at least the outcome might be OK – as EVs are just a great thing. Clearly there are many cheaper ways to reduce carbon – in fact some don’t cost at all …but they aren’t much interested in those either or perhaps until Paula Bennet gets up to speed?? {Also think the analysis gets the numbers a bit wrong and mixes economic costs with wealth transfers but yes there is an argument there} But hey Transport people – learn to love the EV along with the cycle, foot and marvelous trains … all are likely needed especially if we need to “carbon neutral” and rapidly it seems.

  • robincole

    I’ve read that if electricity is generated by coal-fired power stations an EV can emit more carbon than ICE car. Since coal-fired power stations still produce the bulk of the world’s electricity, won’t that retard or perhaps even halt the development and spread of EVs.

  • KISS, Keep It Simple Stupid. Walking cycling and PT are the only forms of transport that can be easily maintained.

    How are EV’s carbon friendly when you look at the supply line of the materials that have to be wrestled from the earth to make them especially the battery, it doesn’t happen without energy, the only EV that makes any sense is the E-Bike which doesn’t suffer from distance anxiety when you can peddle.

    I wonder what the government advisers tell them about the state of the energy supply and it’s involvement it climate change or do the ministers put their hands over their ears and chant na na na I’m not listening, don’t they look at the evidence of corruption, that the oil industry paid the climate sceptics to cast doubt on climate change going back to the 1980’s, we now have 35 years wasted out of the 40 years of climate lag in the oceans to catch up on and still we do nothing, the electric car doesn’t come close to fixing the problem.

  • For your information, the Green Party’s policy is the removal of FBT on electric vehicles for 7 years. It’s not an open ended subsidy. The goal was to try and influence choice of company cars that would be purchased anyway, from polluting ones to electric, which would then increase the secondhand market for electric vehicles. The cost of the policy is not at the expense of public transport, walking and cycling, as it is not from the transport budget.

    It is likely to be quite low cost compared to the transport budget, of which we would be spending the vast majority of new cap ex on public transport, rail, cycling etc infrastructure.

    A feebate could be used (fee on polluting or inefficient vehicles) to cover the cost if we wanted to make it revenue neutral. But then you may as well do that on all new cars, rather than FBT.

    Our position has always been not to directly subsidise cars, but to make electric cars more attractive than conventional ones. We don’t support EVs in bus lanes for obvious reasons.

  • Helen S

    The taxpayers are paying for the subsidies it will be a debt creation .
    So the upper classes who can afford electric cars( which are not very good right now )will get funding from the poor and working kiwis by the govt creating this debt( subsidies). ultimately its a big banker and corporate handout. it will not mitigate or change the climate either as man’s C02 emissions are not the cause of climate.

  • Stu, you raise a valid point that this is more expensive way to reduce CO2 than the current ETS price of carbon. I’d agree, yet argue we were overdue to have some form of intervention to trigger EV adoption, not because it is the cheapest form of climate change mitigation, but because the sooner we begin, the sooner we can make transport net zero, which we really have to get on with. This sits alongside complimentary measures of more public transport, more active transport, and less private vehicles.

    Given I believe you are keen on public transport, you may also want to note that electric buses are given a quite a boost in this policy announcement through the new exemption of RUCs on vehicles over 3 tonnes. This should yield a discount by many thousands of dollars per vehicle per annum and I hope would make their arrival come sooner. Do note that however that converting buses from diesel to electric is relatively minor in terms of CO2 removal at a national scale (less than 1%), but nonetheless every piece helps, and it does make our cities nicer and quieter and reduces local pollutants, and (like electric taxies would) aids with cultural normalisation of electric vehicles.

    Note that agriculture is over 40% of our GHG. Vaccines and specific breeding strategies to reduce methane per unit of livestock appear to be commonly cited ways to reduce this, but solutions are not yet commercialised so would be some years off, not that I am expert in this area. Tree planting seems to be what people are saying is the immediate answer there. Transport produces around 20% of our GHG, and light transport (under 3 tonnes) is by far the majority of this, and we have solutions available now (public transport, active transport, electric vehicles). So transport is a key area to accelerate progress in, given the urgency surrounding climate change action. I’m a big fan of cleaning up our patch rather than buying trees or other offset measure internationally, but you are right in your article that we need to do so with some care around economics. Frankly, we need way more than 64,000 electric vehicles on our roads – we have 3.7 million vehicles currently.

    You mention Norway. The big difference there is they make a lot of income from petrol cars which can be used to fund their incentives. The average petrol vehicle there costs around $40,000 in terms of sales and registration tax, which is wildly different to NZ where we frown at spending $40,000 on the overall purchase price. Their incentives are not being scaled back out of concern they were ineffective or costly but rather than they have successfully catalysed action and purchasing an EV is now becoming culturally normative. Many of their policies were capped to achieving 50,000 vehicles, and they’ve now got more than twice that. For the record, they also promote public transport and active transport heavily, with electrification of vehicles part of the wider transport agenda, which includes other elements including electrification of marine transport, and biofuel for aviation. Parts of Oslo are likely to be car free soon. It is very progressive and something to aspire to.

    So as to raise the level of understanding I would suggest readers look at:

    1 – A comprehensive University of Waikato review on appropriate EV policy measures. One recommendation here is introducing a tax on petrol vehicles which is then used to pay for lowering the price of electrics. Many countries do this. The same tax might also encourage some people into other forms of transport. Clearly that recommendation is not part of the recent NZ EV policy however the majority of the other paper’s recommendations are.

    2 – A report commissioned for Ministry of Transport indicates there would be 63,000 EVs cumulatively by 2021, similar to the stated policy goal. This suggests that your notion that we would get 10,000 EVs by 2021 is off by quite a factor, and that the government’s goal is not going to be too hard to meet. You incorrectly state we have 5000 electric vehicles today; in fact there is little over 1000.

    3 – A deep dive into a variety of topics around electric vehicles is published to a document I regularly update at:

    4 – You can get a better sense of the government’s intentions by watching the EV Policy Announcement by PM John Key and Minister Bridges, about 30 minutes long, plus other speakers:


    • Peter Nunns

      I think the key point in what you’re saying is “we should tax petrol vehicles more heavily, because it would provide an equal incentive to adopt EVs or use PT/cycling.” Perhaps. I doubt that would go over very well, though.

      Also, on this point:
      “A report commissioned for Ministry of Transport indicates there would be 63,000 EVs cumulatively by 2021, similar to the stated policy goal. This suggests that your notion that we would get 10,000 EVs by 2021 is off by quite a factor, and that the government’s goal is not going to be too hard to meet.”

      If this is true, then the case for subsidies is even weaker than Stu makes it out to be. If there are likely to be 63,000 EVs on the road by 2021 *without* a subsidy, and 65,000 *with* a subsidy, then you’re effectively subsidising around 60,000 vehicles that would have been bought anyway. That’s a really, really bad idea.

      • Greg N

        Your comments are off if you you suggest that its all about tax and subsidies and nothing else.

        The obvious answer to hoohaa around the subsidies issue is to tax ALL vehicles on their expected lifetime GHG emissions at time of import [second hand or new imports] – in effect making the purchaser pre-pay the expected lifetime GHG emissions at a meaningful [todays] CO2 price. [Call this a pollution permit if you must].

        Of course this could also include the embedded GHG involved in making and transporting the vehicle to NZ thus making the usual “but EVs have more CO2 embedded in them than normal cars” issue mute.

        We could assume say 15 years lifetime for new and 10 for second hand imports and average annual Vkt for this calculation, with a rebate possible only if the new vehicle is scrapped early in its life [say first 3 years only].
        After then you lose your right to claim any rebate when its scrapped.

        To avoid the ext obvious issue of “old smoky” vehicles being kept operating beyond their paid 10/15 year GHG emission lifetime while polluting like crazy, then after that prepaid period of time an additional CO2 emissions charge is put in place to ensure a timely phase out of all older cars of all types. This would best be automatic – i.e. vehicle registration is cancelled after 15 years unless you extend the CO2 emissions payments [annually]. soon enough the old clunkers will be off the road or if still valuable enough the owners will cough up for the “extended pollution permit”.

        EV’s would under the same regime become cheaper immediately as the study done for EECA showed and Union of Concerned Scientists in the US have done as well – (B)EVs have lower overall GHG emissions over the entire “well to wheels” calculations than current regular ICE cars or PHEVs of any stripe.

        So that would naturally help steer demand towards the lower lifetime GHG emission vehicles – whatever brands or types they are.

        Along the way the Government would collect a bunch of revenue from all the cars imported to NZ that they can use to help further roll out EVs.

        For instance helping with building a national charging station infrastructure, just like they did in the old days with the National Roads Board helping with building a national road network [or national electricity grid].
        No-one begrudges the “subsidy” that was involved in building those now do they?

        Of course, if this sounds like a “subsidy” to you fine, then wear your “Econ 101” hat – but I disagree – its merely making the playing field flatter between vehicles to help transition to a future CO2 neutral position for transport.
        Which by the way, this government and whole bunch more countries signed up to last year as a stated goal of the Paris accord.

        You may see overt/obvious subsidies as a dirty word in pure economic terms, and many decry all such subsidies as a bad thing and then fail to see/accept that an implicit subsidy (like heavily subsidised road network or RUCs for heavy trucks that do not cover anywhere near their true cost of damage caused), is not also a subsidy too and therefore also bad by the same yardstick?

        Its the same damn thing, just one is gussied up in present day Government policy wank thats all.

        So lets rip away the “cloak of purity” that the likes of the Trucking industry and big oil surround themselves with and have an open and public “subsidy” put in place via a import tax to truly level the playing field.
        Then see how that unfolds.

        If it needs a “subsidy” to do so, well and good – as long as its clear and explicit and sunsets when the purpose/goals is/are achieved who can argue that its all bad?

        No matter how unpure economically it sounds.

        No matter what, allowing EVs in bus lanes is crap policy made on the hoof and should not proceed – unless they are EV buses of course when the normal bus lane access rules apply..

        Lastly the discrepancy between the MoT’s analysis of EV numbers with subsidies and without subsidies just shows poor policy research advice they’re giving the minister and little else.
        After all those numbers are MoT’s not anyone elses.

        Truth is unless its a driverless EV then the MoT couldn’t give a rats arse about the likely numbers of them on the road in 2021 or any other year.

        • Peter Nunns

          I don’t have a knee-jerk reaction to taxes *or* subsidies; I just prefer them to be well-designed and efficient.

          Stu’s analysis strongly suggests that a subsidy for EVs is likely to be inefficient – i.e. it produces relatively few benefits compared to its cost. It goes without saying that we need to get petrol vehicles out of the fleet as fast as possible… but an inefficient policy could easily backfire or close off options for us to implement more effective policies instead.

          Similarly, while I agree in principle that we should discourage new polluting vehicles from entering the fleet (and take measures to retire existing ones), I’m not sure your proposal to convert carbon taxes into an up-front fee is a great idea. For one, it will have the unintended consequence of making people delay replacing their existing cars with more fuel-efficient ones.

          For another, it’s not very well-targeted tax. Charging a lump-sum tax doesn’t discourage people from driving on a day-to-day basis, as they don’t pay by the litre. It may actually have the opposite effect, by making fuel cheaper at the pump. For that reason, I’d prefer a higher carbon price that’s factored into petrol prices.

          How much higher? Well, the current level of $10/tonne is absurd given estimates of the social cost of carbon in the range of $200/tonne. At present, we pay around 2c per litre in carbon taxes. That could probably go to 10c/L in the short term (consistent with ~$50/tonne), and aim to head to 30-50c/L in the medium to long term. Howzat?

    • [Frankly, we need way more than 64,000 electric vehicles on our roads – we have 3.7 million vehicles currently.]

      I’m all for a high tax on fuel but would be annoyed if my taxes went to subside EVs, give it to PT that would do far more good than changing from one form of car to another, better get rid of the car and road haulage, let’s have some policies about rail not road if you are really concerned about climate change then do something meaningful.

    • Well a doubling of EVs every year from this year’s 1000 gets us to 64k EVs in 2022. That’s the power of the exponential. But is that even remotely possible? Will there be these machines available in NZ in these quantities at any price, let alone at competitive prices and in a form that appeal to purchasers?

      I don’t doubt there will be the market, but only if those conditions are met. This is just like PT; we have seen that so long as the services are high enough in quality there is a huge latent demand, but only on that condition.

      Likewise with EVs; given suitable available vehicles at completive prices, they’ll be bought; can it happen? Not so much according to Mr Bloomberg:

  • Ted F

    THank you Stu for an illuminating post. I have been made aware of a new way of thinking about this subject.

  • Mike (the longstanding one)

    The MoT is asking for submissions on the use of bus etc lanes by EVs – see Closing dates for submissions are 1 February for the Energy Innovation Bill, and 1 March for changes to the Road User Rule.

    And from 6 to 20 March (only) EVs will be allowed to use the following T2/Truck lanes:

    T2 and Truck lane adjacent to the onramp northbound from McKenzie Road to South Western Motorway (Mangere/Manukau)
    T2 Lane adjacent to the onramp northbound from Rimu Road to South Western Motorway (Mangere)
    T2 and Truck lane adjacent to the onramp northbound from SEART to South Eastern Highway (Mt Wellington, Sylvia Park)
    T2 and Truck lane adjacent to the onramp northbound from Mt Wellington interchange to Southern Motorway
    T2 and Truck lane adjacent to the onramp eastbound from Lincoln Road, to SH16 North Western Motorway (Henderson)
    Truck lane adjacent to the onramp southbound from Grafton Road Onramp to North Western Motorway (Auckland Central)

    – see