Main content area

Executive summary

The Future Fuels and Vehicles Strategy sets out how the Australian Government will support a technology-led approach to reducing emissions in the transport sector.

Global demand is driving the world’s largest vehicle manufacturers to develop new low emission vehicle technologies for a rapidly evolving market. Sales of low emission vehicles continue to increase in Australia as new models come to market. Since the release of the discussion paper in February 2021, there has already been a 20% increase in the number of battery electric, plug-in hybrid and hybrid vehicles available in Australia (see Appendix A).

The Australian Government has now made available $2.1 billion for low emission vehicle and future fuel technologies. The government will continue to partner with industry to invest in enabling battery charging and hydrogen refuelling infrastructure for road transport to give Australian consumers and business confidence to purchase low emission vehicles that work for them.

Australian industry can draw on our natural resources and skilled workforce to capture the benefits and opportunities of this rapidly evolving market. Capturing opportunities in electric vehicle and battery storage supply chains could create tens of thousands of jobs in Australia by 2030 (Future Battery Industries CRC 2021).

This significant government investment is already sending a strong signal to the market that Australia is ready to adopt more low emission vehicle technologies. Recent significant private sector announcements, such as BlackRock’s investment in Australian electric vehicle charging network JOLT, demonstrate we are getting it right through our technology-led approach (Changarathil 2021).

Outcomes are also being seen in the market, with Australians already being confident to make the choice to switch to new technologies. The growth of electric vehicle sales in Australia is on the rise, with sales in the first 6 months of 2021 being 26% higher than in the whole of 2020. Battery electric and plug-in hybrid vehicles hit a record 8,688 sales in the first half of 2021, representing 1.57% of the total light vehicle market (Electric Vehicle Council 2021). Registrations of electric vehicles surged, almost doubling to 23,000 registrations from 2020 to 2021 (ABS 2021). Hybrid sales almost doubled in 2020, increasing from 31,191 vehicles in 2019 to 60,417 vehicles (FCAI 2020).

Automotive industry innovations mean global manufacturers are well placed to improve the cost of new technology so it is competitive with existing alternatives. As battery electric vehicles reach price parity, estimated to be around the middle of this decade for light vehicles (McKinsey 2019), it will become even easier for consumers to choose these new technologies.

The government is taking targeted action to support commercial investment and consumer uptake of low emission vehicles and future fuels. This approach is consistent with the role of government set out in Australia's Long-Term Emissions Reduction Plan and the Low Emissions Technology Statement 2021. Together with this Future Fuels and Vehicles Strategy, the government is prioritising enabling infrastructure and grid readiness, allowing industry to focus on technological improvements to reach price parity. This infrastructure rollout will also increase consumer confidence. 

The government will leverage more private sector investment by focusing on 4 streams of key infrastructure and technology investment with an expanded $250 million Future Fuels Fund:

  • public electric vehicle charging and hydrogen refuelling infrastructure
  • heavy and long distance vehicle fleets
  • light vehicle commercial fleets
  • household smart charging.

Further investment in battery charging and hydrogen refuelling infrastructure will also be encouraged through the development of a new Emissions Reduction Fund method.

The Australian Government will champion and bring forward a package of priority market reforms to state and territory energy ministers to ensure the electricity grid is EV-ready. This list of reforms will grow as new issues emerge and will initially include the following priorities:

  • exploring network tariff reform to identify additional opportunities to encourage charging behaviour and infrastructure rollout that will support optimal grid operation
  • incentivising the use of smart chargers in households
  • tasking the energy market bodies to partner with governments on grid integration matters.

By working with the states, territories and industry on these reforms, the government will integrate these new technologies into our energy networks in a way that benefits all consumers.

The government will also ensure consumers can access reliable, easy-to-understand information on low emission vehicles, helping consumers make informed choices about the vehicle that is right for them. The expansion of the government’s Green Vehicle Guide will include comprehensive information about new light vehicle technology available in Australia.

Through the government’s approach, it is estimated that:

  • emissions will be reduced by over 8 Mt CO₂-e by 2035
  • charging infrastructure will be deployed in over 400 businesses, 50,000 households and over 1,000 new public access fast charging stations
  • convenient access to public fast charging will be enabled for up to 84% of the population (over 21 million people)
  • over 2,600 new jobs will be created  
  • health costs of around $200 million will be avoided out to 2035
  • electricity network upgrade costs of $224 million will be avoided by 2030 
  • create the environment for there to be 1.7 million electric vehicles on the road by 2030.

What we heard from our consultation

In February 2021, the Australian Government released the discussion paper. The discussion paper sought views on the government’s proposed approach to support the uptake of low emission vehicle technologies, promote private sector deployment of enabling battery charging and hydrogen refuelling infrastructure and enable consumer choice.

The feedback we received has informed this strategy, which builds on existing government investment and the actions of Australians already choosing low emission vehicle technologies.

The feedback indicated broad support for the government’s approach. It also highlighted the need for more investment in infrastructure to meet the needs of Australians and ensure the impacts on the electricity grid are planned and well managed.

'Further investment in infrastructure will provide overseas automobile manufacturers’ confidence that there will be a growing market for their vehicles in Australia.'

– Evie Networks

Feedback highlighted the high upfront costs of low and zero emission vehicles and the need to address regulatory and market barriers to increase their uptake.

Some feedback called for the government to provide subsidies or tax concessions to reduce the current price gap between conventional and low emission vehicles. However, reducing the total cost of ownership through subsidies would not represent value for the taxpayer, particularly as industry is rapidly working through technological developments to make battery electric vehicles cheaper. The Australian Taxation Office will investigate issuing updated guidance for businesses on the tax treatment of low emission vehicles to provide clarity for fleet purchasing.

A larger range of competitively priced low emission vehicles is expected to become available in the Australian market (see Appendix A). Battery electric and plug-in hybrid electric vehicles are projected to make up 30% of annual new passenger and light commercial vehicle sales in Australia by 2030. This translates to over 1.7 million battery electric and plug-in hybrid vehicles on Australian roads by 2030 (Commonwealth of Australia 2021a). By enabling this increased uptake, the expanded Future Fuels Fund is expected to reduce emissions by 8 Mt of CO₂ equivalent by 2035.

Technology-led plan

Long-Term Emissions Reduction Plan

The Future Fuels and Vehicles Strategy forms part of the government’s Long-Term Emissions Reduction Plan (the plan) to act in a practical, responsible way to deliver net zero emissions by 2050 while preserving Australian jobs and generating new opportunities for industries and regional Australia.

The plan is guided by 5 principles that will ensure Australia’s shift to a net zero economy will not put industries, regions or jobs at risk. The Future Fuels and Vehicles Strategy is an example of those 5 principles in action:

1. Technology, not taxes

The strategy focuses on providing choice in technology and creating the right enabling environment through infrastructure and regulatory reform, not forcing people out of the car they want to buy through bans or taxation.

2. Expand choices, not mandates

The strategy empowers consumers and businesses to buy a future fuel technology when it is right for them. By implementing important infrastructure co-funding through the $250 million Future Fuels Fund and ensuring the grid is EV-ready, we will support Australians to make informed choices.  

3. Drive down the cost of a range of new technologies

In our partnership with industry, the government will work with the private sector to drive costs down for hybrid, electric, hydrogen and bio-fuelled vehicles. Industry is best placed to accelerate the technology development needed to reach price parity, but the government will continue to co-fund innovative R&D (for example, for new technologies like hydrogen) and roll out the necessary supporting infrastructure.

4. Keep energy prices down with affordable and reliable power

Our world leading investment in solar PV and work on integrating renewables means we are well placed to ensure the grid is EV-ready through market reform. We will apply the lessons learnt from the rapid uptake of rooftop solar, which will save consumers an estimated $224 million in avoided network costs. Our reforms will make sure the lights stay on, bills remain affordable and everyone can reap the benefits of electric vehicles. 

5. Be accountable for progress

We will be accountable to consumers by ensuring they have the information needed to make informed choices. For example, consumers will have access to more information through updates to the Green Vehicle Guide and the new heavy freight information hub.  

Transport emissions will continue to be fully accounted for in Australia’s ongoing emissions reporting.

Technology Investment Roadmap

The Technology Investment Roadmap is the cornerstone of Australia’s Long-Term Emissions Reduction Plan. Under the roadmap, the Low Emissions Technology Statement 2021 recognises the beneficial impact low and zero emission vehicles can have by prioritising electric vehicle charging and hydrogen refuelling as enabling infrastructure.

The Future Fuels Fund and other complementary initiatives will invest in enabling battery charging and hydrogen refuelling infrastructure. The government’s investment will contribute to the plan by enabling the deployment at scale of electric vehicles and other emerging transport technologies. This will support consumer choice while reducing emissions, improving health outcomes and increasing fuel security.

The Future Fuels and Vehicles Strategy complements other technology-led government policies, including the:

  • Technology Investment Roadmap
  • Modern Manufacturing Strategy
  • National Hydrogen Strategy
  • forthcoming Bioenergy Roadmap
  • ongoing work through both the Energy Ministers Meeting and Transport and Infrastructure Ministers Meeting.

Together, these strategies, along with work being progressed by states and territories, will enable Australia to scale up quickly and deliver the strongest economic and emissions reduction outcomes.

Battery prices are falling

Battery costs are the main contributor to the price premium for battery electric vehicles. Integral to electric vehicles reaching price parity with conventional vehicles is a reduction in the cost of manufacturing lithium-ion batteries as a result of industry innovation.  

Figure 1 shows how the price for lithium-ion batteries has dropped by over 89% since 2010 and is expected to fall to half of the current price by 2030 (BNEF 2021a).

As the price of battery electric vehicles reaches parity with some conventional vehicles in this decade, Figure 2 shows how global demand for electric vehicles is expected to drive growth in lithium-ion battery production (BNEF 2021a). The IEA (2021) notes that announced planned production capacity for lithium-ion batteries in vehicles equates to roughly 3,200 GWh by 2030, which will be sufficient to meet this expected demand. It will be important to continue to monitor global supply chains to ensure there are no constraints, especially in the case of high growth demand scenarios, as tightening of supply could impact on model availability and costs across the globe (BNEF 2021b). 

Figure 1: Global average lithium-ion battery cost[1]

Graph showing the decline in lithium-ion battery price over time. Batteries cost around $900 per kWh in 2010 and are on a decreasing trend to be under $50 per kWh by 2035.

Figure 2: Annual lithium-ion battery production[2]

Graph showing the increase in lithium-ion battery production over time. Production is expected to increase exponentially from around 300 GWh per year in 2020 to around 4,500 GWh per year by 2035.

Strategy at a glance

Infographic summarising the Future Fuels and Vehicles Strategy. Text description follows. Text description follows

Future Fuels and Vehicles Strategy

Our vision is to create the environment that enables consumer choice, stimulates industry development and reduces emissions. We are guided by three principles:

  • Partnering with the private sector to support uptake and stimulate co-investment in future fuel technologies
  • Focusing on reducing barriers to the roll out of future fuel technologies, not taxes
  • Expanding consumer choice by enabling informed choices and minimising costs of integration into the grid.

We are focusing on 5 priority initiatives in partnership with the private sector to address barriers and provide confidence to consumers to choose the vehicle that is right for them.

These initiatives will be delivered with $2.1 billion committed by the Australian Government through:

  • Australian government departments
  • Australian Renewable Energy Agency
  • Clean Energy Finance Corporation
  • Clean Energy Regulator.

Charging and refuelling infrastructure where it’s needed

Provide convenient access to fast charging and refuelling options in partnership with industry, including through the $250 million Future Fuels Fund.

Early focus on commercial fleets

Unlock opportunities for business and commercial fleets to invest in low emission vehicle technologies, improve productivity and stimulate the second-hand market.

Improving information for motorists and fleets

Improve information to give business and consumers the confidence to invest in low emission vehicle technologies that best suit their needs.

Integrating electric vehicles into the grid

Ensure the grid is EV-ready and that all consumers benefit from increased uptake of electric vehicles by leading reforms through energy ministers.

Supporting Australian innovation and manufacturing

Create new jobs, increase skills and stimulate local and regional economies by supporting innovation and manufacturing.

See underpinned by government investment for a breakdown of the $2.1 billion Australian Government commitment.

Our principles

This strategy is guided by 3 principles:

  1. Partnering with the private sector to support uptake and stimulate co-investment in future fuel technologies.
  2. Focusing on reducing barriers to the rollout of future fuel technologies, not taxes.
  3. Expanding consumer choice by enabling informed choices and minimising costs of integration into the grid.

Priority initiatives and objectives

The government is focusing on 5 priority initiatives to create an environment that promotes consumer choice, stimulates industry development and reduces emissions.

Decorative

Electric vehicle charging and hydrogen refuelling infrastructure where it is needed

Objectives:

  • Leverage private sector investment in charging and refuelling infrastructure to address public ‘charging blackspots’ and demonstrate hydrogen refuelling infrastructure through the $250 million Future Fuels Fund
  • Incentivise transport emissions reductions, including additional investment through the Emissions Reduction Fund (ERF)
  • Ensure access to charging and refuelling infrastructure that effectively integrates with the grid and meets the needs of business and households
  • Design actions and investments that can complement those made by other levels of government
Decorative

Early focus on commercial fleets

Objectives:

  • Help businesses and consumers access the latest transport technologies that suit their requirements, including heavy and long distance vehicles
  • Support businesses to have access to technologies that reduce operating costs, increase productivity and help them meet their customers’ needs
Decorative

Improving information for motorists and fleets

Objectives:

  • Give consumers access to useful information when buying a vehicle to ensure it is right for them
  • Provide information about the effectiveness of low emission vehicles, including for heavy-duty vehicle technologies and alternative fuels
Decorative

Integrating battery electric vehicles into the electricity grid

Objectives:

  • Ensure the electricity system is EV-ready – prepare for the large-scale uptake of battery electric vehicles while remaining reliable and affordable for all Australians
  • Support the deployment of emerging charging technologies that promote grid security and unlock additional value for consumers and electricity market participants
Decorative

Supporting Australian innovation and manufacturing

Objectives:

  • Encourage Australian innovation in transport technologies and future fuels production capability to continue creating local jobs
  • Support Australia’s high-value critical minerals mining and manufacturing capability to capture export markets through the government’s Modern Manufacturing Strategy

Underpinned by government investment

Building on strong foundations and partnering with industry

With the release of this strategy, the Australian Government has now committed $2.1 billion to partner with industry to support uptake of low and zero emission vehicles.

This includes investment totalling close to $360 million by 2026 for projects and programs focused on new vehicle technologies and future fuel development, through the Australian Renewable Energy Agency (ARENA).

Since its inception, the Clean Energy Finance Corporation (CEFC) has made available over $1.3 billion via its co-finance programs with major banks and non-bank lenders for low emission vehicle uptake and related projects. In addition, the CEFC has directly invested more than $450 million in projects and funds that will contribute to reducing emissions in the transport sector.[3]

Other government commitments include a $5 million grant to the Australian Clean Energy Electric Vehicle (ACE EV) Group to support domestic battery electric vehicle manufacturing and a vehicle-to-grid trial. The government is also investing in an upgrade to the Green Vehicle Guide and undertaking a number of studies to better understand transport fuel demand and ensure Australian electricity grids are ready for electric vehicles.

The estimated impacts of the expanded $250 million Future Fuels Fund include:

Infographic showing 4 impacts. Text description follows

Figure 3: Expected impacts of Future Fuels Fund investments

Over 8 Mt to 2035 CO₂-equivalent of abatement

Over 2,600 new jobs total over 3 years from 2021–22

Close to $200 million in health cost savings to 2035

$224 million in electricity network upgrade costs avoided by 2030

The Australian Government is also investing in sectors that couple with the transport sector, including $464 million for the Clean Hydrogen Industrial Hubs program, which can include hydrogen-powered transport elements.

Footnotes

  1. Derived from BNEF data to 2035 (BNEF 2021a, chart 259)
  2. Derived from BNEF data to 2035 (BNEF 2021a, chart 258)
  3. Figures as at 30 June 2021 (latest data published)