Michael Wood
Auckland, January 29, 2024
The Clean Car Discount programme has been one of the most measurably effective emission reduction policies that New Zealand has implemented.
Since introduced by the Labour government in 2022, sales of low and zero-carbon-emitting vehicles have boomed after sluggish growth in preceding years. New Zealand has shifted from being one of the worst-performing markets for EVs in the world to being one of the best-performing markets, right up there with the European leaders.
In August 2023, about 61% of imported vehicles sold were low or zero emissions.
Critically, the Discount scheme has made not just EVs more affordable for Kiwi motorists, but also hybrid vehicles which are a key part of the transition, and available in bigger quantities at a lower price.
Contrary to some misconceptions, the biggest selling vehicles receiving a Discount have not been highly-priced EVs, but much more modestly priced EVs and hybrids like the Nissan Leaf and the Toyota Aqua.
The effect on emissions has been significant, which was the main policy goal.
Reducing emissions
The average CO2 emissions of vehicles entering the New Zealand market have declined from 176 grams per tonne before the scheme, to 120 grams as of July.
This is a massive decline in just over a year when previous annual declines due to increased vehicle efficiency had generally been in the 5-10 grams per year range. This adds up a lot as more vehicles enter the fleet. When the Discount was set up it was estimated that it could reduce New Zealand’s carbon emissions by 3-6 million tonnes by 2035. If the current momentum is maintained that range will be easily exceeded.
The Clean Car Discount scheme works by making clean cars cheaper, and more polluting cars more expensive. This incentivises consumers to buy lower-emitting vehicles that are cheaper to run over their lifetimes – reducing emissions and petrol bills.
Just as importantly, the scheme has helped to shift the vehicle market. A number of significant importers have reported that having a mandated Discount scheme enables them to secure more clean vehicles from their parent companies, who allocate limited supply to different countries. Whereas New Zealand used to miss out, supply has increased dramatically with the Discount in place.
A Doctrinaire approach
Despite this demonstrable success, the coalition government abolished the scheme on 1 January of this year. Contrary to normal processes they refused to have a full analysis of the costs and benefits of the scheme completed before they made this decision.
We now know why – recently released information from officials shows that abolishing the Clean Car Discount will cost New Zealand hugely in the years ahead. By delaying the transition to clean vehicles, New Zealand will have to spend considerably more on expensive fossil fuels from insecure supply chains.
If the government had been smart, and a bit more pragmatic they could have had a win here. Having campaigned strongly against the part of the scheme that levied a charge on highly polluting utility vehicles, they could have simply removed this component and let the rest of the successful programme carry on.
Unfortunately, under the current Transport Minister, a doctrinaire approach won out, meaning that clean cars will become more expensive at exactly the time we need more of them. This policy move will also leave a huge hole in New Zealand’s emissions budget. Increasingly Kiwis expect their governments to take meaningful action on climate change, but this alongside other measures from the new government will take us backwards.
Labour’s Clean Car Discount scheme was effective, and popular and kept us on track with our international obligations. If the government really were serious about evidence-led policies to reduce carbon emissions, they would have taken a more pragmatic approach.
Michael Wood is a former Minister of the Crown and was a Member of Parliament elected from Mt Roskill from December 2016 to October 2023.
