| April 19, 2023

Smart Energy Council Recommendations for Robust Fuel Efficiency Standards

The Smart Energy Council urges the Federal Government to introduce strong mandatory fuel efficiency before the end of 2023. Fuel efficiency standards drive efficiency improvements in vehicle fleets internationally, lowering fuel use and carbon emissions and increasing the uptake and availability of electric vehicles.

 

Benefits of fuel efficiency standards:

  • More electric vehicle models – Australia currently has less access to the range of electric vehicle models available in other markets. Car manufacturers and suppliers prioritise countries with mandatory fuel efficiency standards when supplying electric models, to avoid paying penalties. Meanwhile, Australia has become a dumping ground for inefficient and polluting cars because of our lack of penalties. Mandatory fuel efficiency standards will incentivise the supply and sale of electric vehicles to the Australian market, including cheaper models.
  • Cheaper fuel bills – More efficient vehicles use less fuel to travel the same distance. Fuel efficiency standards will mean cheaper fuel bills for many Australians. The Ministerial Forum on Vehicle Emissions estimated that fuel efficiency standards would save motorists over $500 a year on fuel costs by 2025. Since that time, fuel costs have increased substantially.
  • lower carbon emissions – Transport is one of the biggest and fastest growing sources of carbon emissions in the country. By 2030, transport is projected to be Australia’s highest emitting sector. Fuel efficiency standards will reduce the emissions intensity of light duty vehicles including cars, vans and utes – the biggest contributors to transport emissions in Australia. This is absolutely necessary if Australia is to have any chance in reaching its targets of 43% emissions reduction by 2030 and net-zero emissions by 2050.
  • Better fuel security – Australia currently imports over 90% of its petrol and diesel. Around three quarters of that is consumed by the transport sector and over half is consumed by road transport alone. Mandatory fuel efficiency standards will decrease the need for imported fuel, and encourage the supply of electric vehicles – that can run on domestic renewable electricity, not imported fossil fuels.

 

The longer these standards are delayed, the greater the emissions reduction task and the longer Australians will have to wait for better electric vehicle supply and cheaper fuel bills. If the Government had introduced fuel efficiency standards in 2016, Australia would have saved more than $6 billion in fuel costs, and avoided 4000 megalitres of imported fuel and nine million tonnes of greenhouse gas emissions – similar to the emissions footprint from domestic aviation. There is no time for further delay.

The Smart Energy Council recommends the following, to ensure Australia enacts ambitious standards.

 

Fuel efficiency standards must: 

 

Be introduced be introduced before the end of the year:

  • Commit to introduce standards by the end of 2023 with the aim of aligning Australia with international best practice. This will provide certainty to industry that strong standards are imminent.
  • Consider a phase-in period, where penalties for non-compliance are waived during the first year of the scheme’s operation – similar to the approach taken in New Zealand. This allows suppliers and manufacturers time to prepare, given vehicle orders are placed in advance.
  • Limit any consultation to the specific design of the standards, setting the terms of reference to designing fuel efficiency standards that reduce vehicle emissions at a rate consistent with achieving Australia’s emissions reductions targets.
  • Utilise existing resources and feedback to expedite the implementation process, including the work of the Ministerial Forum on Vehicle Emissions, submissions to the National Electric Vehicle Strategy, and existing standards, namely the New Zealand Clean Car Standard.

 

Be strong and ambitious:

  • Catch Australia up to New Zealand, the United States and Europe by 2030 at the latest, in terms of fleet-average CO2 emissions for new vehicles. To achieve this, consider adopting the same targets as New Zealand’s Clean Car Standard or following the International Council for Clean Transportation’s world-class standards-aligned pathway.
  • Be reviewed and updated at least every 5 years to ensure targets remain ambitious and aligned with Australia’s emissions reductions targets and the global decarbonisation task.
  • Include strong penalties, including a financial penalty that significantly exceeds the cost to suppliers and manufacturers of complying with the standard. The financial penalty should be applied per non-compliant vehicle per unit (gCO2/km) over the target, and be roughly in line with penalties in the US, Europe and New Zealand. Non-financial penalties could be considered, including the suspension of vehicle type approvals (which allow a vehicle model to be provided to the Australian market in unlimited volume), mandatory public announcement of non-compliance, and exclusion from Government fleet purchases.
  • Recognise that strong standards are necessary to meet emissions reductions targets and electric vehicle sales projections. Additionally, recognise that if emissions reductions do not occur in the road transport sector, a heavier burden will be placed on more difficult to abate sectors such as the farming, manufacturing and construction industries.

 

Have integrity: 

  • Use the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) rather than the New European Driving Cycle (NEDC) to better reflect real world driving conditions and minimise the gap between real-world emissions and the test-cycle/reported emissions.
  • Limit the use of technology multipliers or ‘super credits’. In the case that off- cycle credits and super credits are used, ensure:
    • A true emissions value is made publicly available, showing the fleet-average emissions intensity without the use of off-cycle credits and super credits.
    • A cap on the overall emissions reductions claimable for off-cycle technologies.
    • A publicly available list of claimable off-cycle technologies with assigned CO2 values based on strong evidence of actual emissions reductions in the Australian driving context.
    • Supercredits are limited to zero emissions vehicles, not made available to hybrids or plug-in-hybrids.
    • A phase-out date for the use of super-credits is set no more than 5 years from the scheme’s implementation.
  • Make emissions data publicly available and managed by the Federal Government. Collecting, tracking and publicly disclosing emissions data should be carried out independently from industry. The use of compliance flexibilities (credits, borrowing, banking and trading) should be made clear alongside the reported emissions intensity value.
  • Provide information and education to suppliers and manufacturers. The standards should be backed-up by comprehensive information and support for suppliers and manufacturers, helping them to navigate the new standards and systems.

 

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