Advisor Flags Subsidies For HV Industry To Reach Net Zero

A key Federal Government policy advisor has conceded the heavy vehicle industry will need both direct and indirect financial support to manage the transition to net zero.

In a keynote presentation at TruckShowX, Ian Porter, First Assistant Secretary, Data, Research, Strategy and Net Zero within the Department of Infrastructure, Transport, Regional Development, Communications and the Arts, says the Government may “potentially” provide subsidies to support investment in either modifying or replacing existing “kit”, especially for smaller carriers operating on razor-thin profit margins.

Notably, the Federal Budget included $1.5 million over two years from 2024-25 to undertake a regulatory impact analysis of the costs and benefits of introducing mandates or other demand-side measures for low carbon liquid fuels.

“The Government will need to help [the transport industry decarbonise]. We are going to have to find way between [Government and industry] to thread that needle,” he says.

“Especially at the smaller end that could involve support, subsidies to add to the capacity [of industry] to modify existing kit or replace it.”

Porter, speaking in a session moderated by Warren Clark, the CEO of TruckShowX Industry Partner NatRoad, revealed the Government may also look at financial support for the creation of a low-carbon liquid fuels industry, which he sees as the most obvious pathway for decarbonising an industry which is on track to become Australia’s biggest-emitting sector by 2030.

As a starting point, this week’s Federal Budget included $20.9 million over four years from 2024-2025 for further consultation on incentives to support the production and demand for low carbon liquid fuels including development of a Guarantee of Origin scheme; plus $6.7 billion over 10 years for a $2 per kilogram Hydrogen Production Tax Incentive for renewable hydrogen produced from 2027.

He says the Government’s transport and infrastructure net zero roadmap, set to be released for consultation shortly, will outline three “pathways” to for the industry: electrification for small, short-haul trucks; low-carbon liquid fuels; and, longer-term, hydrogen for bigger, long-haul vehicles.

“All are likely to play key roles … but we accept that low-carbon liquid fuels will be important going forward [in terms of decarbonising the existing fleet] and we need to work with industry to keep those costs down,” he says.

Porter adds that Government also has a key role to play in other “enabling issues”, including charging and refuelling infrastructure and upgrading roads to handle heavier low- and zero-emissions trucks.

“We are working closely with states and territories who control most of the policy levers [in these areas],” he says.

Clark agrees the Government needs to set aside “substantial funds” to help operators make the transition.

L-R: Ian Porter and Warren Clark at Australia’s largest-ever transport decarbonisation event TruckShowX

“The real thing for our industry is that the profit margins are so tight that operators can’t take on the extra cost. They can’t pay three times the current cost of a vehicle or several times the current cost of fuel,” he says.

“Government needs to set aside substantial funds to help smaller operators make the transition.”

In a recent submission to a Federal House of Representatives inquiry into the transition to electric vehicles, NatRoad called on Government to establish a $3.5 billion fund to assist the heavy transport industry to transition to low- and zero-emissions trucks.

“Trucking industry revenue is being squeezed by higher costs, with profit margins declining over the last five years to be just 2.3 percent, while overall industry profit is down by 7.4 percent,” he says.

“We’re pro-decarbonisation as a sector, but we’re also realistic about the day-to-day running costs of heavy vehicles, especially during a cost-of-living crisis. While alternative fuels and energy, including electric vehicles, have massive emission reduction potential, they currently come at a high-cost premium.

“The bottom line is that combining the electric heavy vehicle cost barrier with a limited industry ability to pay, there’s likely to be a delay in our sector’s transition to lower emissions.”

NatRoad’s Decarbonisation Industry White Paper calls on the Federal Government to set up a $3.5 billion Clean Transport Fund, with a mix of loans and direct incentives, to bring forward the road freight transition.

Clark says the US and European experiences have demonstrated that financial incentives are critical to early adoption of EVs and alternative fuels for heavy vehicles.

“Make no mistake – moving to EVs where they are suitable for the freight task will bring down operating costs, that’s why we support decarbonisation,” he says.

“But the Australian Government also needs to deliver a strategy and funding for developing low emission truck recharging and refuelling infrastructure.”

Read the NatRoad submission here.