Transport Minister Simeon Brown says the Clean Car Discount was never self-financing, and rescuing the subsidy scheme would have cost more than it generated in benefits.
A rough estimate by officials of the costs and benefits of scrapping the scheme said scrapping grants for buying EVs would cost the country $549 million in quantified costs, while bringing $259 million in quantified benefits over around 30 years.
But the analysis also noted that as well as the $259 million in quantified benefits, there were “high”, “unmonetised” benefits from scrapping the scheme that were not calculated.
Simeon Brown said it is not true to conclude that ending the Clean Car Discount would cost more money than it would save, because the scheme did not pay for itself as intended.
“The previous government claimed that the so-called Clean Car Discount would be self-financing, but it was not. In just 17 months the scheme cost taxpayers more than $300 million,” he said in an emailed statement to RNZ.
Transport officials noted in their analysis that as well as the $259m in quantified benefits from scrapping the scheme, there were “high” unmonetised benefits that were not calculated.
Although the scheme was designed to be self-financing over 10 years by using levies on the highest-emitting vehicles to pay for the grants, high demand for EVs saw it struggle to pay for itself.
The analysis notes the scheme would have had to change if it was going to become cost-neutral. However, the change of government saw it scrapped.
The rough quantified costs of scrapping the scheme include $93m lower car maintenance costs, which will be forgone by scrapping the discounts (because EVs need less maintenance), $138m in fuel savings, plus improvements in air quality that would have saved $224m on health costs.
On the climate front, if the policy had stayed, the country’s vehicles would have pumped out between 1.1 and 2.2 million tonnes less carbon dioxide from now until 2050 — in the same ballpark as what oil company OMV produces in New Zealand in a year, or what NZ Steel emits annually from its Glenbrook steel mill.
The quantified benefits of scrapping the policy include saving the country $177m in car prices, $37m lower administration costs for Waka Kotahi and $15m lower compliance costs for businesses, the analysis says.
The advice was finalised in November but never officially presented to Cabinet, because the new government has suspended the need for regulatory impact statements for undoing Labour-era policies.
Uptake of EVs has quadrupled since July 2021, beating the expectations of both the government and the car industry. They are now at 13% of the import market. That has pushed the average planet-heating emissions of imported vehicles down by almost a quarter, according to the Ministry of Transport’s analysis.
The National Party committed to ending the Clean Car Discount as part of its 100-day plan, citing concerns about both the cost and what the party sees as unfair impacts on the basis that wealthier households are more likely to be able to afford EVs.
The scheme was expected to result in higher uptake of cleaner vehicles and fewer people buying dirtier cars.
Without the Clean Car Discount, the Ministry of Transport told the Government it would need to come up with another way to cut emissions from transport from 2026-2030 and 2031-2035, as part of a five-year climate plan the Government needs to deliver this year.
The calculations say that, without new policies, a hole will open up in the Government’s climate goals for transport from 2031, partly because EV uptake wouldn’t be high enough to meet the targets. The sector should remain on track, or close to it, until that point.
On the flipside, the advice also noted that EV prices have dropped significantly on their own since the policy was enacted, partly because of cheaper Chinese electric vehicles entering the New Zealand market.
“When the scheme was introduced the cheapest EV available had a retail price of around $65,000. Now a similar new EV can be purchased for around $44,500,” says the regulatory impact statement, while noting that this is still about $20,000 more than a comparable new petrol car.
Advice from the ministry also says that changes to the scheme’s design were causing spikes and troughs in the car market, as people tried to get ahead of penalties and benefit from maximum subsidies.
By Eloise Gibson of rnz.co.nz