Australian Government finally commits to a date, for fuel efficiency

The Australian government has announced it will introduce legislation for a New Vehicle Efficiency Standard (NVES) “as soon as possible” with the standard to come into effect by 1 January 2025.

The release of the NVES marks a momentous shift in Australia’s climate policy and puts its major cities on a path to lower emissions, cleaner air and healthier communities.

After more than a decade of campaigning and advocacy by think tanks, environmental groups, health professionals and many others in the electric vehicle community, Australia now has a timeline for an effective new vehicle efficiency standard, which will have a profoundly positive impact on the health and wellbeing of all Australians into the future.

In a joint media release Minister for Climate Change and Energy Chris Bowen and Minister for Transport Catherine King announced the release of the government’s “preferred model” for the New Vehicle Efficiency Standard while opening up another round of public consultations which will run until March 4.

The government’s 86 page Cleaner, Cheaper to Run Cars: The Australian New Vehicle Efficiency Standard – Consultation Impact Analysis lays out why vehicle efficiency standards are so important and the three policy options the government is considering.

“Because of a lack of action on an Efficiency Standard, Australian families are paying around $1000 a year more than they need to be for their annual fuel bill – the Albanese Government is delivering long-term cost-of-living relief to fix that for new vehicles and put money back in people’s pockets.” said Minister Bowen in the joint statement.

“We’re giving Australians more choice to spend less on petrol, by catching up with the U.S– this will save Australian motorists $100bn in fuel costs to 2050.”

New Vehicle Efficiency Standards incentivise car manufacturers and ensure all new cars they sell meet benchmarks for efficiency. Manufacturers can still sell vehicles with heavy emissions, but they must offset these sales with sales of low or zero emission vehicles.

Vehicle manufacturers must keep the average efficiency of all vehicles they sell in Australia below the efficiency target for a given year or pay stiff penalties. This means if a company wants to sell models that produce more emissions per km than the target, it also has to sell enough models with efficiency ratings below the target to bring its entire new vehicle fleet average below the target.

Australia and Russia are currently the only two developed countries without fuel efficiency standards. Given transport contributes around a fifth of Australia's greenhouse gas emissions, fuel standards will be necessary to reach net zero.

In North America and Europe, where NVES have already been introduced, drivers have maximum choice of vehicles to buy, including the best and most efficient new vehicles on the global market.

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

“This announcement from the federal government, when legislated, will give Australians a greater choice for the cars they want and put money back in their pockets through lower fuel bills."

In its preferred model, the Australian standard will align with the US standard by 2028 which the government says will save Australians about $1000 per vehicle per year. Passenger cars in the US are currently on average 31% more efficient than in Australia and utes are 24% more efficient.

The new Australian standard will apply to new passenger and light commercial vehicles.

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Clean energy and climate groups welcome the new standard

While the final design of the NVES is not yet clear, climate and clean energy groups have welcomed the announcement of the government’s preferred model.

The Smart Energy Council, which hosted the National Electric Vehicle Summit in late 2022 where the government first committed to fuel efficiency standards, has hailed the announcement a “Big win for all Australians”.

“Australians are paying far too much for petrol, having been forced to drive much less efficient cars than any other developed country. This must, and will, change.” said John Grimes, Chief Executive of the Smart Energy Council following today’s announcement.

“New Vehicle Efficiency Standards could be the most important policy to slash Australia’s soaring transport emissions in history and if the Albanese Government adopts the most ambitious approach, we will see greater emissions reductions even earlier.”

“The Smart Energy Council urges the Albanese Government to increase its ambition and meet and beat the United States’ standard by 2026.”

Whilst the Electric Vehicle Council has welcomed the Government's release of its position, it says the journey does not end with this announcement.

"We have seen previous standard proposals derailed through misinformation and scare campaigns," the Council said in a statement. "It is important the government's proposal is supported over the coming weeks to ensure it remains ambitious and is legislated as soon as possible."

Despite the broad endorsement of the new standard, there has been some criticism that the policy doesn’t incentivise manufacturers to sell smaller cars and in fact could do the opposite. In the impact analysis, the government proposes a target adjustment method that takes vehicle weight into consideration for both passenger and light commercial vehicles.