Draft New Vehicle Efficiency Standard revealed

LONG-AWAITED fuel efficiency standards released in draft form by the federal government over the weekend have been cautiously welcomed by the automotive industry, environmental groups and other stakeholders.

A trio of options ranging from conservative to ambitious are presented – the Albanese government indicating a preference for the middle ground – with a month-long public consultation window provided to establish an accepted model before tabling the legislation before the middle of 2024.

The new standard is expected to come into effect on January 1, 2025 and the government-preferred option aims for a 12 per cent reduction in the average annual emissions intensity of new passenger and light commercial vehicles sold in Australia each year by 2030.

Under the proposed New Vehicle Efficiency Standard for Australia, importers will be required to supply more economical options to motorists, meeting targets set on the average emissions per kilometre for all new vehicles sold.

Importers whose vehicles fall below the set limit will achieve credits, while those who go above the set limit will either be made to purchase credits from other importers or pay a fine.

The government’s preferred middle-ground standard has drawn criticism from several automotive industry groups for its ambitious emissions reductions in the ute and large SUV segments, the nature and popularity of which pose technological challenges if they are to comply within the allotted timescale.

According to the government, the measures aim to prevent Australia from becoming a “dumping ground” for inefficient vehicles, bringing the country in line with others including China, the European Union, New Zealand, and the United States.

It says that on average, Australian passenger cars emit 20 per cent more CO2 than their counterparts in the United States.

Australia and Russia are the only advanced economies to remain without such a standard.

Under the proposal, new vehicle emissions could fall by as much as 62 per cent by the end of the decade. GoAutounderstands the standard will apply to new passenger and light commercial vehicles, with heavy commercial vehicles excluded from the plan.

It comes following responses from approximately 2700 Australian organisations and individuals who responded to the government’s first consultation on the standard in April and May of last year.

The three New Vehicle Efficiency Standard models – under development for over a year – are now available to view at cleanercars.gov.au and Australians have until 11:59pm on March 4 to raise any concerns that stem from the proposed standards.

Federal climate change and energy minister Chris Bowen said the measures could save Australians around $1000 per vehicle, per year – or as much as $5710 over five years – by ensuring more vehicles are imported with the latest engine and design technologies to lower fuel bills.

“This is about ensuring Australian families and businesses can choose the latest and most efficient cars and utes, whether they’re petrol and diesel engines, or hybrid, or electric,” said Mr Bowen.

Federal transport, regional development and local government minister Catherine King said the preferred model ensures achievable change by aligning our fuel efficiency standards with those seen in the United States, describing it as providing “the optimal cost benefit outcomes for Australian car buyers”.

The federal opposition issued a statement describing the New Vehicle Efficiency Standard as a “heavy-handed approach (that) will drive utes off Australian roads”.

"There is a risk Labor's scheme will be just another subsidy for the rich and large corporations with fleets, while the benefits remain out of reach of low and middle-income families and the nation's tradies," said the Coalition statement.

Ms King claimed that the proposed standard “doesn’t dictate what sort of car or ute people can buy but will mean you have a wider range of modern and cheaper to run vehicles”.

However, there are some in government that say the proposed standard does not go far enough.

Independent senator David Pocock said the standard needs to be more ambitious, and that it risks continuing to damage the environment.

“I want to see these new standard implements as soon as possible and call on the government to bring forward the slated commencement date of 1 January 2025 to 1 July 2024, with a six-month test period during which penalties do not apply,” he stated.

“Anything less ambitious than what is being proposed will increase the cost of transport and do further damage to our climate.”

Mr Pocock’s views were echoed by the Electric Vehicle Council of Australia (EVC) which was supportive of the government’s proposal but said it needs to be legislated as soon as possible.

“Because previous federal governments failed to introduce New Vehicle Efficiency Standards, some car manufacturers have treated Australia as a dumping ground for their most inefficient models,” said EVC chief executive Behyad Jafari.

"Within a few short years it will mean the average family will not have to spend as much on imported petrol, which we know is hugely volatile on price.

“Motorists will still have the choice to buy what they want, but they will be offered much better options to choose from.”

Climate Council CEO Amanda McKenzie also supported the standard as a win for those facing cost-of-living pressures, while also helping to clear the air.

“By giving Australians (a) better choice of cleaner, cheaper-to-run cars, a strong fuel efficiency standard will cut household costs and clean up the air,” she said.

Independent climate councillor and energy expert Greg Bourne echoed Ms McKenzie’s views, saying the move would “benefit all Australians – no matter what type of new car they are buying”.

He also pointed out that those with long commutes or living in regional areas are “hurt the most by high and rising petrol bills”. 

“They’ll also see the biggest benefits from getting access to a wider range of affordable lower and zero emissions vehicles that are cheaper to run.”

The Federal Chamber of Automotive Industries (FCAI) said it too was encouraged by the government’s proposed New Vehicle Efficiency Standard, saying the model ensures the affordability and mobility needs of Australian consumers have been considered.

“There is a shared commitment from industry and government to combat climate change by ensuring zero and low-emission vehicles are accessible and affordable to all Australian consumers,” said FCAI chief executive Tony Weber.

“Most important is that Australian families and businesses can continue to access the style of vehicle that suits their needs for work and recreation.”

Referring specifically to the three options delivered by the government, Mr Weber said the industry would take time to study the potential impacts on consumers and the industry.

“On the surface, the targets seeking a 60 per cent improvement in emissions are very ambitious, and it will be a challenge to see if they are achievable taking into account the total cost of ownership,” he added.

“The preferred option suggests that Australia considers adopting the type of targets that are currently in place in the United States.

“The targets in that country are supported by significant financial incentives yet the discussion paper makes no reference to any additional incentives to support the uptake of low emission vehicles.

“There is a great deal of further analysis to do, and we look forward to continuing to work with the government on the development of a standard that is right for Australia and supports Australian consumers.”

But there are stronger opponents to the proposed standard who suggest the move goes too far, too soon.

The Australian Automotive Dealer Association (AADA) says details of the impact statement suggest there will be consequences for vehicle choice moving forward that stand to impact consumers and dealership alike.

“This impact statement is very technical and considers a number of options, but the government has stated that is has a preferred option of reducing the emissions by more than 60 per cent for passenger and light commercial vehicles in just five years,” outlined AADA chief executive officer James Voortman.

“On the surface, this is an incredibly ambitious target which will be difficult to achieve especially for utes and large SUVs. This could have consequences for affordability and vehicle choice.

“Other countries have reduced new vehicle emissions over a much longer time frame, with credits built into their standards. They have also offered generous incentives universally available for consumers to buy low emissions vehicles – the government’s preferred option could not be more different,” he warned.

“We are concerned that this policy goes too far, too fast, and that consumers will be the big losers, as will local automotive businesses. We will study this impact statement to understand the findings and consult with our members – Australia’s more than 3000 new car dealers.”

The Australian Automobile Association (AAA) agreed with the sentiment put forth by the AADA, saying there are winners and losers from all three of the proposed scenarios.

“The government should be commended for pursuing this regulatory change,” said AAA managing director Michael Bradley.

“However, it must be transparent about the three scenarios presented; the winners and losers they each create; and their respective positive and negative impacts upon the price and availability of different vehicles.

“The AAA encourages the government to release its modelling so the millions of Australians to be affected by this change can understand exactly what it means for them.”

The Motor Trades Association of Australia (MTAA) gave the proposal “seven out of 10”, with MTAA CEO Matt Hobbs pointing to the automotive sector’s consensus around a mandatory standard.

“The argument is just about the fine details,” he said.

“Some adjustments are needed in the early years, especially in the treatment of utes. I am confident we can work with the government to ensure they get a perfect mark.”

This week’s news follows new fuel quality and noxious emissions standards tabled by the Albanese government in December 2023. These measures are expected to save Australians some $6.1 billion in health and fuel costs by 2040.

The standards will increase access to cleaner and more fuel-efficient vehicles and strengthen the country’s fuel security while at the same time realising lower greenhouse gas emissions from within the transport sector.

Applicable from December 2025, the fuel quality changes are expected to lower noxious emissions from light vehicles.

The first change will reduce the level of aromatic hydrocarbons to a maximum of 35 per cent in 95 RON (premium) unleaded petrol. Existing 91 RON (standard) and 98 RON (ultra-premium) petrol and diesel will be unaffected.

It is projected that motorists will see an increase in $8 per annum from the proposed changes when operating a standard passenger vehicle running on 95 RON unleaded. Light commercial vehicle operators can expect an increase of $13 per annum.

The Albanese government says the cost is “more than offset by the benefits of this initiative”, including the importation of more fuel-efficient vehicles and in projected health savings.

The second part of the proposed change will align the previously announced reduction of sulphur allowed in all grades of unleaded petrol with the start date of the new aromatics limited. It is expected this move will simplify the transition for fuel suppliers and consumers.

The changes will also allow Australia to adopt the Euro 6d noxious emissions standard and remove “almost 18 million tonnes of greenhouse gas emissions from the transport sector by 2050”.

A YouTube video outlining the proposed New Vehicle Efficiency Standard is available here.

Transportation sector CO2 emissions by country*:

*In million metric tonnes of CO2 equivalent. Data supplied based on 2022 figures courtesy statista.com