Bank Australia to phase out ICE car loans

BANK AUSTRALIA says it will discontinue car loans for new fossil fuel-powered vehicles from 2025 saying that “cars are the key to climate transition”.

Speaking at the EV Summit in Canberra on Friday, Australia’s seventh-largest mutual bank said its decision will help to protect the climate and future generations and that “real climate action needs to be bold”.

According to a statement posted on Bank Australia’s website, “around 43 per cent of Australia’s transport emissions are from passenger vehicles,” and that switching to electric vehicles – despite the obvious questions that remain about the source of the electricity used to power such technology and indeed the materials utilised in the construction of EV battery packs – is, “one of the fastest contributors to Australia meeting its climate goals”.

Bank Australia said Australia needs to reach net zero carbon dioxide emissions by 2035 if it is to keep average (global) temperature increases below 1.5 degrees Celsius and that “we need to act urgently”.

The public relations spin might serve to attract buyers of new energy vehicles to Bank Australia branches, but in covering its bases, the institution says it will continue to support customers who cannot yet access a new electric vehicle by offering loans for “second-hand fossil fuel vehicles until there is a viable and thriving market for electric vehicles”.

It said it will continue to review its lending guidelines until such time as there is “a widespread availability of affordable and second-hand EVs” available in the used-car market.

In a statement, Bank Australia said it has been “thinking about the carbon impact of its car loans since 2004” when it offered its first carbon offset loan. The bank has offered discounted interest rates for loans on low emission vehicles since 2018.

“The responsible thing for us to do next is to ensure that our vehicle lending doesn’t lock our customers in to higher carbon emissions and increasingly expensive running costs in the years ahead,” said Bank Australia in a statement.

“And, of course, we have a responsibility to do all we can to protect the planet for generations to come.”

Bank Australia’s announcement comes on the back of earlier news that it would discontinue loans to organisations who conduct coal, gas or oil extraction operations or to those who generate electricity by the burning of fossil fuels.

“For several years, we’ve had a strong position on not lending to the fossil fuel industry,” said Bank Australia.

“We made this commitment in response to our customers’ desire to see us take action on climate change, and the majority of (our) customers support this position.”

The institution said it chose 2025 as the time to change its stance on loans for new internal combustion powered vehicles as it believes that “change has to happen quickly”.

It said that by taking a “leadership position” it will “provide momentum to the rapid acceleration in EV transition”.

Bank Australia chief impact officer, Sarah Courville, said the announcement would send a message to its 185,000 customers that “if you are considering buying a new car you should think seriously about an electric vehicle, both for its impact on the climate and for its lifetime cost savings”.

She said Bank Australia has been “doing its part” by running on 100 per cent renewable energy and being “carbon neutral since 2011”.

“Offsetting has played a role in Bank Australia using money as a force for good, but we know an even better way to do good for our planet is helping customers make sustainable choices that don’t require offsetting,” said Ms Courville.

“This shift in lending is the beginning of a conversation with our customers and a signal to the wider market.”

The EV Summit, which was held in Canberra this week, was organised by climate not-for-profit organisation Boundless.

It gathered leaders from the Electric Vehicle Council, the Smart Energy Council and the Australia Institute, and key political figures to focus on how to design new fuel efficiency standards for the sale of new cars.

Speaking at the summit, climate change minister, Chris Bowen, said Australia’s states and territories “must work together on a national EV strategy to drive the uptake of cleaner cars”.

Mr Bowen highlighted that only two per cent of new cars sold in Australia were low-emissions vehicles compared with a nine per cent average globally.

He said that targets surrounding CO2 emissions for light vehicles must be gradually reduced to zero until such time as there is a ban on the sale of new fossil fuel-powered cars.