While markets may be famously antipathetic to regulation, when it comes to new sectors, government regulation is often central in shaping the direction of a new industry and getting it off the ground.
Industries and sectors need certainty to plan for the future.
They need to get a measure of the competition, they need to be sure of offtake partners, they need to understand the specification standards they’re building to and the tariffs to expect, as well as what incentives and subsidies they can count on to offset costs and labour hire. Critically, they also need finance.
Regulation helps define all these parameters – and governments have the potential to be industry kingmakers in this space. As usual, so do the markets.
In this article we look at the regulatory environment governing electric vehicles in Australia:
- Demand-side factors
- Regulations to drive change
- Operating in a global market
- Tracing a carbon footprint through the supply chain
- Financier-driven change
- Jobs in Australia
Demand-side factors
The electric vehicle industry has long been touted as the answer to global pollution, but here in Australia it has been notoriously slow to take off. Spotting EVs – let alone charging stations – out on the open road, makes for a pretty boring game of I Spy.
“The lack of choice and supply is driven by the reality that Australia is an unattractive market for EV manufacturers,” said Chris Jones of the Australian Electric Vehicle Association.
“While other nations offer incentives, set emissions regulations for vehicles and generally support the transition to EVs, Australia has no such program at a national level – although some states are making good moves, particularly NSW, ACT and Tasmania.
“Manufacturers won't bother selling their products in a difficult market like Australia, if there's a more willing market down the road.”
The issue is one of critical mass, which hasn’t been reached here. “Simply seeing more EVs on the roads makes people feel they aren't fringe anymore, they are an option, and folks are increasingly choosing to buy an EV as their next car,” Jones said.
Regulations to drive change
For Jones, the most pressing issues are the availability of models and therefore price competitiveness, the lack of a federal plan for electrification of transport and limited charging infrastructure.
The AEVA has a long policy wish list to charge up the EV industry in Australia, which includes the implementation of a vehicle emissions standard, which is long overdue, according to Jones.
“We need to compel manufacturers who want to sell cars in Australia to make their products achieve better than 100 grams of carbon dioxide per kilometre,” he said. “And of course, most electric vehicles smash this.”
Governments also need to purchase EVs as part of their fleet car arrangements. “Not only will it reduce the departmental emissions,” Jones said. “It creates a viable second-hand market without distorting the value of the market.”
And the issue goes beyond cars, to passenger and freight rail. “There's no reason our entire eastern seaboard can't be electrified and powered by an increasingly renewable electricity grid.”
In a vast country like Australia, EVs simply won’t take off without a viable charging infrastructure between our towns and regional centres. This means improving grid strength in some places, which might best be done with renewable energy and grid-scale battery packs. “Being able to travel long distances effortlessly is an important element of driving change,” said Jones.
He thinks other regulatory instruments, like the fuel excise, are critical to driving behaviour change towards the widespread adoption of EVs in Australia. He sees a market for battery recycling right here in Australia, too.
Operating in a global market
For Phil Hoskins, managing director of natural graphite mining company Evolution Energy Minerals Limited, it’s important for suppliers of critical battery minerals to recognise that they operate in a global market.
“Australian miners operate in a global environment and have global financing and global customers and we need to be cognisant of that,” said Hoskins.
“The US and European regulatory environments are further down the path, and more prescriptive, than Australia.
“Some time ago, Europe identified that the raw materials used in lithium-ion batteries would become critical.
“They understood that one of the big challenges of this century would be building a large battery capacity, and understanding and facilitating the supply chains that would feed it.”
Australia has also designated graphite, along with several other battery raw materials, as a strategic critical mineral – but Europe goes much further.
European jurisdictions have sought to take a regulated approach as part of the European green deal, which includes a commitment to zero carbon by 2040 as the overarching objective, and within that, regulations that include a battery passport, which certifies the supply-chain pedigree of the product.
Tracing a carbon footprint through the supply chain
Geopolitics play a part in supply chain self-regulation. China is heavily involved in battery processing at present, so Australian miners have the option to continue to sell to China.
But this may not be an option for much longer, with the concept of traceability taking off for European end-users such as Volkswagen. Companies may need to reduce their exposure to heavily polluting processes – and this represents an opportunity as much as a challenge.
“It’s about sustainable ex-China supply, and being able to discern the life-cycle carbon footprint and general sustainability of a product right back through the supply chain to the raw materials,” said Hoskins.
“There’s a clear opportunity for companies who do things the right way to become a supplier of choice to the European market.”
Financier-driven change
Financiers in particular are observing very high environmental, social and governance standards when it comes to debt finance for mining companies.
“Obviously financiers are looking at certain commodities, and those commodities that are moving towards decarbonisation of the planet are experiencing a phenomenal run at the moment,” said Hoskins. “There are entire funds set up just to chase those raw materials.”
When it comes to ESG issues, and particularly a sustainable supply chain, these debt financiers are setting out to ensure they won’t walk into thorny issues.
Jobs in Australia
The challenge for Australia is to capture a greater portion of the downstream value inherent in the EV market – to become a manufacturer of EV components as well as a producer of the raw materials.
“We need to move beyond being a country blessed with the mineral wealth that we have and becoming competitive in that technology space, which I think the mining industry is already trying to do,” Hoskins explained.
“Whether that happens in Australia is funding dependent and about whether it’s financially sustainable as well.”
There are signs of activity in this space. Hoskins cites debt facilities being signed by Export Finance Australia for companies like Ecograf Limited and Renascor Resources to conduct downstream graphite processing into battery anodes.
“This is a very important part of the future, and more Australian jobs will flow from it,” he said.
The AEVA’s Chris Jones agrees. “Australia is a world leader for the production of minerals used in the manufacture of batteries, and yet we continue to import the end products.
“There is no reason we cannot manufacture battery packs right here."