Saturday 24 August 2019

Drive to get motorists buying electric 'risks our financial stability'

Target: Environment Minister Richard Bruton has committed to a sharp increase in electric vehicles. Picture: Collins
Target: Environment Minister Richard Bruton has committed to a sharp increase in electric vehicles. Picture: Collins
Kevin Doyle

Kevin Doyle

The push to get motorists to buy electric vehicles (EVs) could pose "a substantial risk to the stability of the State's finances".

A review of Government spending has raised major questions about the commitment to have almost one million EVs on our roads by 2030.

It says the upfront costs of subsidising the EVs "greatly outweigh the projected benefits".

The report, compiled for Finance Minister Paschal Donohoe ahead of October's Budget, outlines how Ireland has some of the "most generous supports in the world" for EVs. However, they are "regressive in nature, in that they tend to benefit the wealthier in society".

If current trends continue, the €200m allocated for encouraging motorists to go green over the next decade will be exhausted by 2021.

The average EV purchaser currently receives a direct subsidy from the State of between €10,141 and €13,616.

This compromises a purchase grant, vehicle registration tax relief, a toll incentive, a home charger installation grant and reduced motor tax.

But officials are now arguing that this level of support is not justified.

"When compared to the cost of reducing greenhouse gas emissions through other mechanisms, the cost to the Exchequer of the current range of EV supports appear quite high," the report says.

For every 100,000 new EVs on our roads, it will cost the State between €1.14bn and €1.36bn. There is also a warning for Mr Donohoe to consider the long-term impact of lost motor tax, VAT and excise duty on petrol and diesel. It is estimated the State will lose out on €1.5m in taxes between now and 2030 and another €500m annually after that.

"Government must be aware of the severity of these revenue losses if EV penetration grows to the levels set out in the Climate Action Plan 2019," the review states.

As a result, Mr Donohoe will have to make major changes to the way vehicles are taxed in order to compensate for the losses.

His officials said maintaining revenues will require "careful consideration and alternative taxation models will need to be considered".

Just 1,233 electric vehicles were registered in the whole of 2018, but the Department of Public Expenditure says: "2019 has seen a particularly sharp increase in the level of EV purchase and it is expected that the total number of purchases this year will be considerably in excess of previous years.

"Grant expenditure in 2019 is likely to equal nearly 90pc of the scheme's total spend to date."

Despite this it advises that the proportion of new vehicle sales that are EVs "will need to rise aggressively" to meet targets set by Environment Minister Richard Bruton.

For their report, officials looked at a number of international comparisons and propose that the Government drives the price of fossil fuel cars upwards rather than subsidise EVs.

"Evidence suggests that EV take-up is higher in countries such as the Netherlands and Norway where taxation for high-emission cars is significantly higher than for low-emission cars."

Another suggestion is to reduce supports for EV purchases over time as cheaper models come onto the market.

Mr Donohoe is expected to announce a number of changes to the motor tax system in his upcoming Budget, including the introduction of a new way of calculating VRT based on advanced technology for measuring emissions.

Irish Independent

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