The Government has adopted a carrot and stick approach to consumer decarbonisation. Subsidies to ease the financial pain of an electric vehicle (EV) and home energy retrofits, and increased carbon taxes to discourage fossil fuel use. A sensible and wise policy to encourage and reward behaviour change, on the face of it at least.
Sensible and wise if you have the money to buy a new car or shell out for very expensive home improvements. Not so smart if you can’t afford these things and are stuck paying ever-higher carbon taxes for fuels you don’t really want to use. And to add insult to Kafkaesque injury, your carbon taxes are probably paying for the subsidies for the people who can already afford these things.
And the subsidies may not be making all that much of a difference in any case. As Pinergy chief executive Enda Gunnell puts it: “A grant of €5,000 is not a factor when making a €130,000 buying decision. The grant may be relevant at the lower end of the market, but an internal combustion engine car is still cheaper to buy than an EV.”
There is some room for policy change in that area, according to Robert Costello, managing director, infrastructure and government with KPMG in Ireland. "To date, government incentives have been focused on reducing the cost of purchasing an electric vehicle with some subsidy for at-home charging. However, there are other policy measures that should be considered to increase take up. One of the areas of biggest impact is the provision of public charging infrastructure. The Government can facilitate this in a number of ways. For example, offer EV charging concessions using publicly owned spaces in towns and cities or create a subsidy fund to help incentivise targeted investment."
Barriers
EY Ireland head of sustainability Stephen Prendiville also sees a case for a policy rethink. He also believes we may be looking at the barriers to EV purchase through the wrong lens. “It comes down to the same ones as for internal combustion engine. Do you really want a new car? It’s beaten into a lot of us not to buy a new car that depreciates so much the day you drive it out of the showroom. Get scratched and bumped around town and in supermarket car parks and so on. It’s not really the barriers of new technology and charging and so on, but the barriers that are there already. Even if they could afford it, some people never buy a new vehicle. We need to get to a stage where there is as strong second-hand market for EVs.”
But to get there we may need changes on the policy side. “There are lots of cars out there which were registered in the 1990s,” Prendiville points out. “People are still driving the oldest and worst offending cars because they can’t afford new ones. But the policy is to help you if you can afford it. Imagine a scenario where the Government paid people to give up their 1990s cars. That would be a payment for the carbon reduction rather than a penalty for it.”
This would see current policies being turned on their head. “We design policies to encourage to improve individual behaviours rather than collective effort,” he continues. “We have had sin taxes on lots of things like alcohol and cigarettes. CO2 emissions are bad for all of us, and we need a collective rather than an individual response. It’s almost a case of skipping to the last step in the process and go beyond carbon taxes to much bolder initiatives. We’ve almost got to get to the position where we buy EVs for people in order to get them to get rid of their 1990s cars.”
Gunnell believes the funding issue for home retrofits could be addressed by Government. “Domestic solar installations can have a 20-year payback,” he notes. “That’s too long. The sort of savings delivered by retrofitting won’t be enough to repay a loan over a normal term of five years or so. We need a national solution to this, and energy suppliers can play a role as well. The State could provide long-term loans to homeowners. The loans could be repaid through the energy bill. The bill wouldn’t increase because of the savings made and the State gets the carbon benefit in the short term.”