Ireland has to achieve a transformation of its private car fleet if the State is to meet its climate targets. A lot more of us need to be driving electric vehicles. Under national targets, around 850,000 electric private cars need to be on Irish roads by 2030.
However, there are only around 125,000 now and in the first 11 months of this year electric vehicle (EV) sales fell by 24 per cent on 2023 levels, apparently damaged by range anxiety and gaps in the national charging infrastructure. There was a pickup in the monthly figures for November. But big questions hang over the transition. So what can the State do to encourage the adoption of EVs?
A rethink of government supports to households is needed, according to a new paper from researchers at Trinity College Dublin, including professor in transportation Brian Caulfield and Agnieszka Stefaniec, Robert Egan and Keyvan Hosseini
It finds that the incentives in place means EVs are still not affordable to a sufficient number of households to get anywhere near the 2030 targets.
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On one side, the blanket grants support households that do not need it, while on the other they do not give enough help to the majority of middle and lower earners, many of whom would face unaffordably high loan repayments, particularly for larger family vehicles.
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The central point of the paper is that supports need to be sufficient, need to relate to household income and that policy needs to target a move to smaller EVs which are more affordable while also being more climate-friendly.
There are a range of supports and incentives in place to encourage people to buy EVs. The headline measure is a €3,500 grant for a battery-powered electric vehicle (BEV) – reduced from €5,000 last year. This applies on cars valued at between €18,000 and €60,000.
EVs also qualify for a low annual motor tax rate of €120. There is also a €300 grant for the installation of a home charger. And BEV private cars qualify for relief on vehicle registration tax of up to €5,000 on cars valued at up to €40,000. (A lesser relief applies on cars valued between €40,000 and €50,000, with no relief above €50,000).
Ireland will not meet its EV targets – a vital part of reducing overall transport emissions – using flat subsidies
This relief is due to apply up to the end of next year. There are also substantial savings on running costs, particularly for those with home chargers who can avail of cheaper night-time electricity rates.
The Sustainable Energy Authority of Ireland estimates that annual running costs can be as much as 74 per cent lower than a similar diesel car.
The TCD research looked at the finances for households, based on them taking out a loan to buy the car – as most would do – and assessing the impact of this on the household finances. This was to judge how many were below a reasonable “affordability threshold”.
It looked at four main scenarios involving small- and medium-sized sports utility vehicles (SUVs) – valued at around €30,000 and €49,000 respectively – and three- and five-year loan repayment periods.
Other scenarios were also examined, involving purchases of second-hand cars – the market here for EVs remains underdeveloped at the moment – and for the expected fall in EV prices over the coming years. Already some lower-priced models are starting to come on to the market.
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Monthly repayments can be high on loans for medium-sized SUVs in particular and thus unaffordable for many.
At one end of the income spectrum, the study found that EV subsidies “lead to a disproportionate allocation of resources towards wealthier segments of society”.
At the other end, around 38 per cent of Irish households could not afford even a small-sized EV on a loan with the longest available repayment period of five years, it found.
Even if prices of EVS dropped, the figure would still be a sizeable 31 per cent. This means, the researchers found, that without substantial price reductions of increased subsidies, meeting the targets with medium-sized EVs “will remain unlikely”.
However, for smaller SUVs, monthly repayments remain below a key threshold of €236 per month, “making them more viable for a larger portion of the population”.
As the paper points out, smaller EVs are also more environmentally friendly, requiring fewer resources to produce, generating less waste and weighing less.
The research found that the €5,000 grant level in place up to last year “would enable the necessary number of households to afford small-size EVs, but the current grand limits affordability, requires households to take out longer-term loans and means many will have less to spend on other essentials”.
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The paper suggests that a differentiated subsidy scheme, varying by income level and household size, is the answer, directing resources to those who need it and making EVs – especially smaller ones – more generally affordable by giving a bit more to lower-income households.
It identifies particular problem areas in urban towns, where many will find EVs unaffordable, and also remote rural areas, where 80 per cent of trips typically rely on cars.
More than 500,000 households in remote rural areas need particular support, it states, and this could pay off via significant emission savings.
Ireland will not meet its EV targets – a vital part of reducing overall transport emissions – using flat subsidies, the paper states, suggesting that subsidy rates could be differentiated based on four criteria – household income, household size, geographical location and the type of EV purchased, focusing on smaller cars.
Incentivising the move to EVs is just one part of the complex series of issues facing the new government in the drive to cut transport emissions.
The departure of the Green Party has left question marks over policy in this area and rural Independent TDs in talks with government may look for assurances on diesel and petrol prices, on which higher levels of carbon tax are due to be imposed each year.
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It is also not clear what impact the shape of the new administration will have in areas such as public transport and walking and cycling infrastructure. And the climate plan also rests on the availability of greater levels of “green” electricity, including a big step-up in wind-power provision.
In the years ahead, success will also have a price for the exchequer, which currently gains from tax on fossil fuels and polluting cars. IFAC, the budget watchdog, has estimated the annual loss by 2030 at some €2.5 billion annually due to the losses in excise duties, VAT, motor tax and vehicle registration tax (VRT).
Government research papers – such as the Tax Strategy Papers published by civil servants before the budget, have looked at charging drivers for road use, or introducing congestion charges in areas with heavy traffic.
Equalising diesel excises with higher petrol ones has been routinely suggested but never acted on. Not surprisingly, these issues did not feature in the election debate.
But encouraging the move to EVs and replacing the tax lost by doing this will be big issues for the State over the term of the next government.
