‘Curtain-raiser’ analysis in The Energy

As the Government seeks to mould transportation policy in the light of the transition and a war in Iran, it must build and maintain trust that will serve individual, community and national interests

This evening we’ll see a second term government, with unprecedented parliamentary majorities, deliver a budget response to the “hard new world” facing Australia abroad and the hard life facing many Australians at home.

In this context, the Government faces many hard decisions. Even considering just the narrow scope of decarbonising transport, the Government has at least five consequential and controversial issues to contend with: subsidies for electric vehicles (EVs), subsidies for EV charging infrastructure, network pricing for behind-the-meter and rapid EV charging, road user charges for EVs, and fuel excise.

Each of these is part of the bigger question: how do all Australians receive an equitable share of the benefits and carry an equitable share of costs of the transition to a clean transport system?

In addressing this question, it is worth reflecting upon the experience of decarbonising Australia’s electricity system. In particular, the importance of building and maintaining people’s trust in the transition as a project that serves individual, community and national interests, with equitably distributed costs and benefits.

This trust has been undermined by the real and/or perceived inequities between regional communities that host coal power stations and transmission lines and inner-city consumers; as well as between the ‘solar haves’ and ‘solar have-nots’, whose difference in experience has only grown with the incentivised roll-out of batteries.

Electrifying transport

Turning to specific transport decarbonisation policies, the first issue – of incentivising EV uptake through Fringe Benefit Tax (FBT) exemptions – has already been announced ahead of the budget. This exemption will remain in place for until the end of March 2027, before being gradually phased out. This policy had been criticised as heavily biased to higher earners, and while the government noted that uptake has been highest outside of the inner cities, directing more than $1.4 billion to the top two tax brackets doesn’t pass the pub test for equity.

The Government has plenty of alternatives it could explore to counterbalance the FBT policy. Subsidising the electrification of taxis and buses would, for example, serve other parts of society and have high economic, environmental and fuel security benefits due to these vehicles’ high utilisation rates.

EV chargers

The second policy issue relates to expanding kerbside charging infrastructure for EVs. This infrastructure is critical for making EVs attractive, especially to those who don’t have access to off-street parking and those who rent or live in apartments. The Government has previously committed $40 million to support the growth of kerbside charging networks. This amount, humble compared to the billions spent on FBT exemptions, could be bolstered to expand the communities to whom kerbside charging would make EVs an option.

However, the issue of kerbside charging poses policy and regulatory challenges regarding who — between EV drivers, taxpayers and electricity consumers — should pay for this infrastructure. The Government’s subsidy program proposes taxpayers cover up to 30 per cent of costs, with electricity consumers covering the remainder through network charges. It furthermore proposes that commercial charging providers be allowed to cherrypick favourable sites, which risks pushing the costs to maintain the less favourable but still critically important sites  onto taxpayers and electricity consumers, without the cross-subsidisation of more profitable sites.

Network tariffs

The third policy issue pertains to how EV drivers should contribute to the upkeep of the electricity networks they use to charge. When charging at home or at work (or elsewhere ‘behind-the-meter’), EV drivers can avoid paying network fees by charging directly from rooftop solar. With EV charging adding a decent fraction of households’ energy consumption, this significantly increases the advantage of being a ‘solar have’, rather than a ‘solar have not’.

In response, the AEMC recently proposed to increase the fixed network charges paid by every customer. While it is commendable for the AEMC to advocate for equity (which its modelling suggests this reform would deliver), the volume of opposition highlights that distributional issues are not well suited to technocratic solutions, but require political leadership to justify the trade-offs across interest groups.

Another example of where this applies is the debate around how EV drivers should pay for the network when using fast-charging stations. Are demand tariffs the appropriate way of recovering the costs of these chargers’ bursts of high power consumption?

Road user charges

A fourth issue for policymakers is how to implement road-user charges. These charges are a way for EV drivers to contribute to state and federal budgets (notionally for road maintenance) in the absence of paying fuel excise. Once again, the delicacy is around the timing and magnitude of charges, so as to balance incentives for EV uptake with equitable cost distribution.

Fuel subsidies

Lastly, there is the issue of fuel excise itself. On the one hand, the Government is seeking to soften the blow to everyday Australians of the fuel price surges driven by the attacks on Iran; even if circumstances may ultimately require a reduction of fuel consumption. On the other hand, the Government is resisting pressure to place a cap on the Fuel Tax Credit scheme, which enables businesses to claim back the fuel tax they pay on diesel.

These credits were the 16th largest single expense in the 2025/26 budget, with an estimated cost of $10.8 billion. The proposal to cap diesel tax refunds at $50 million per company, per year – backed by Fortescue and IEEFA – would apply to around 18 of Australia’s biggest companies in mining – not farmers, fishers, small miners or truck drivers – and would boost the government budget by billions of dollars each year (and incentivise electrification).

For these five policy issues, and the question of Australians’ inclusive and equitable participation in the decarbonisation transition, this budget comes at a critical moment. The costs of inaction, of staying exposed to the volatility and precarity of fossil fuel supplies is indisputable and omnipresent, meanwhile the availability and attractiveness of clean alternatives is widely recognised and supported. But  there is a grave risk of losing the social license for the transition due to perceptions from voters that it isn’t benefiting all Australians, that its costs and benefits are being distributed inequitably, and/or that there is a lack of trust in the transparency with which trade-offs are being made.

None of the five policy issues have clear-cut answers. They each call upon the Government to make appropriate judgements – on each issue and the suite as a whole. But it is clear that the Government must communicate each decision with transparent reasoning and expected consequences. This is foundational to trust, and, as Chilli Heeler explained to her daughters Bluey and Bingo, “if there’s no trust, none of this [the world] is possible…  no roads, no power lines.”