Australia’s federal tax exemption for electric vehicles (EVs) is proving to be a powerful catalyst for reducing transport emissions, with a notable 0.4 per cent decrease recorded in 2025 compared to the previous year. This reduction is largely attributed to the increased adoption of electric and hybrid cars, which accounted for 13.1 per cent of total car sales in the past year.
Impact of EV Adoption on Emissions
While a 0.4 per cent reduction might seem modest, it signifies a substantial shift in emissions trends, particularly given that transport emissions have shown the most significant growth across sectors when benchmarked against pre-COVID levels. The latest National Greenhouse Gas Inventory, which measures carbon emissions for the year ending September 2025, highlights this context.
Rising Emissions in Specific Transport Sub-sectors
The inventory reveals that emissions from road transport diesel consumption rose by 11.4 per cent, and domestic aviation saw an 8.4 per cent increase. These figures contributed to an overall 2.1 per cent rise in transport emissions compared to 2019.
Offsetting Increases with EV Sales
Conversely, emissions from petrol cars have decreased by 10.2 per cent below pre-COVID levels. This decline is a direct indicator of the growing influence of electric vehicle adoption, a trend strongly supported by the federal Electric Car Discount.
The Role of the Electric Car Discount
Rohan Martin, CEO of the National Automotive Leasing and Salary Packaging Association (NALSPA), emphasized the discount’s crucial role. “The Electric Car Discount is proving its worth – it’s the biggest driver of EV uptake in Australia and is a key force behind the transport emission reductions we’re now starting to see,” Martin stated.
The Electric Car Discount policy removes the fringe benefit tax on EVs priced below the luxury car threshold, currently set at $91,387 for fuel-efficient vehicles. This incentive allows individuals purchasing EVs through novated leases to achieve substantial savings, amounting to thousands of dollars. However, it’s important to note that hybrid vehicles were excluded from this scheme in April of the previous year.
Discount’s Influence on Consumer Choice
Martin further elaborated on the discount’s accessibility, noting, “Half of all new EVs sold in Australia today are with the help of the Electric Car Discount. Many everyday working Australians living in the outer suburbs simply wouldn’t be making the switch to electric cars without the discount.”
He stressed that this incentive, alongside a potential vehicle efficiency standard, is vital for generating the demand necessary to meet Australia’s transport emission reduction targets. “The Climate Change Authority says half of all the light vehicles sold over the next decade must be electric if Australia is to meet its 2035 emissions target,” Martin added.
Australia’s EV Adoption Pace
While Australia has made significant strides in EV adoption, with more than one in ten new cars sold now being electric, the country still lags behind the global average of one in four. Martin concluded, “Australia has come a long way with EV uptake in a short amount of time, but catching up with the rest of the world will require sustained effort and the policies to match.”
Electricity Sector Drives Down Emissions
Beyond the transport sector, significant emission reductions have also been observed in the electricity sector, down by 3.1 per cent. This improvement is largely due to the increasing dominance of large-scale renewable energy sources over coal and gas power generation, coupled with the exceptional performance of rooftop solar systems.
The electricity sector remains the largest contributor to national emissions, accounting for one-third of the total. However, the continuous expansion of renewable energy infrastructure is making a tangible impact on overall emissions figures.
Regional Emission Reductions
Within the east coast’s National Energy Market (NEM), emissions saw a 3.7 per cent decrease. This figure is expected to rise as the data does not yet incorporate emissions data from November onwards, a period when renewables significantly outpaced traditional energy sources in both the NEM and Western Australia during the summer months.
Government Response and Future Outlook
Minister for Climate Change and Energy, Chris Bowen, remarked that the report validates the nation’s progress towards its climate goals. “Our commonsense approach, which includes Cheaper Home Batteries, more cheaper, cleaner energy and more choice of cheaper to run cars, is working to drive down emissions across the economy,” he stated.
Bowen expressed confidence in meeting climate targets if current policies are maintained and efforts are amplified. He cautioned, however, that progress could be jeopardized by opposition policies that might increase energy costs and pollution by hindering renewable energy deployment and relying on older, less reliable coal-fired power plants. “The Coalition’s energy plan will cost Australians more,” he added.
Phasing Out Gas in Stationary Energy Use
Another area of notable progress is in stationary energy emissions, which encompass emissions from gas and diesel used in manufacturing, mining, residential, and commercial sectors. This category saw a 1.7 per cent decline.
This reduction is partly due to the decarbonization of the metals manufacturing industry and, significantly, the successful phasing out of natural gas in households. This success is attributed to state-led policies aimed at transitioning away from fossil fuels in residential and commercial properties. States such as the ACT, Victoria, and New South Wales have implemented policies to phase out gas use in various applications, both to cut emissions and to conserve gas supplies for essential industrial uses.
Furthermore, a decrease in Liquefied Natural Gas (LNG) exports has also contributed to the reduction in stationary gas emissions.