Image Source: Union of Concerned Scientists

Introducing standards to make Australia’s cars use less fuel would be a win-win policy for the environment and for motorists’ hip pocket. Senators from across the Federal Parliament agree.

The final report from the Senate Select Committee on Electric Vehicles, released last month, recommended that Australia implement a fuel efficiency standard for new cars.

Fuel efficiency standards cap the average CO2emissions of all the new cars sold by each car company in Australia. This cap reduces fuel use, as cars need to be more efficient to generate lower CO2emissions.

Australia needs policies to reduce emissions from transport. Transport is one of the fastest growing sources of emissions in the Australian economy, with the Federal Government estimating that emissions from transport will grow by 9 per cent from 2018 to 2030.

Fuel efficiency standards would reduce emissions from passenger transport, and help turn around growing emissions from the transport sector.

Standards will be important in meeting Australia’s targets under the Paris Agreement.

The fuel efficiency standard proposed by the Federal Government in 2017 would save 12 million tonnes of CO2emissions each year by 2030.

This is close to the entire annual emissions of Origin Energy’s Eraring Power Station, and is 10 per cent of what’s needed to reach Australia’s overall 2030 target of a 26 to 28 per cent reduction in greenhouse gas emissions compared to 2005 levels.

At the same time as reducing emissions, fuel efficiency standards would also save motorists money on fuel. The Government’s proposed standard would encourage the sale of more efficient vehicles, saving each motorist more than $500 a year in fuel in 2025, and building to a net economic benefit of $935 million in 2030.

As noted by the Climate Change Authority, improving the efficiency of vehicles represents one of the most cost-effective emissions reduction opportunities for the Australian economy.

Australia is falling behind on fuel efficiency

Fuel efficiency standards are widespread, and international evidence shows they are effective in reducing emissions and improving efficiency for cars.

Standards cover 80 per cent of new light vehicles sold globally – including in the United States, Canada, Mexico, China, India, the European Union and Saudi Arabia.

The lack of standards here means that Australia’s cars are already less efficient than in many other countries, and this gap is set to widen.

Weaker fuel efficiency standards bring smaller benefits for emissions and fuel savings

To access the full benefits of a fuel efficiency policy, Australia needs to implement a strong standard. In 2016, the Federal Government initially put forward three different options for a standard, and later proposed to adopt the strongest option.

If the Government scales back its ambition and instead implements the weakest option, this will erode the emissions reductions and fuel savings from the policy.

Instead of saving $500 a year on fuel by 2030, motorists will only save around $240. And rather than reducing emissions by 12 million tonnes in 2030, the weaker standard would only reduce emissions by 5 million tonnes.

The extra 7 million tonnes of emissions reductions would need to be found elsewhere in the economy: from the electricity sector, industry, agriculture or carbon forestry, which may be harder and more costly to achieve.










The best option is to align fuel efficiency standards with the Paris Agreement

The best option for setting a strong fuel efficiency standard is to develop standards in line with the goal of achieving net zero greenhouse gas emissions in Australia by 2050.

Under the Paris Agreement, which Australia has committed to, all countries need to achieve net zero emissions in the second half of this century. Across the Australian economy, different sectors have different capacity to contribute to this goal.

ClimateWorks modelling shows that the transport sector can contribute strongly, with the ability to reach close to zero CO2emissions by 2050. Aligning Australia’s fuel efficiency standards with this goal would provide the automotive industry with the certainty to plan ahead for the decarbonisation of the fleet.

Looking beyond the transport sector, the concept of a sector-specific forward trajectory towards lower emissions is now on the Australian policy agenda.

On 4 February this year, state and territory energy ministers announced their plan for “zero energy (and carbon) ready buildings”.

The plan includes a commitment to regularly review and strengthen energy efficiency standards for new buildings, and for these standards to be confirmed several years in advance.

A similar approach could be adopted for fuel efficiency standards, setting a long-term goal of zero emissions, with regular review and strengthening of interim standards.

Near zero emissions passenger transport by 2050 is an achievable goal

There are a growing number of electric vehicles available on the Australian market, and electric vehicles are expected to be the same price as equivalent petrol and diesel vehicles in the mid-to-late-2020s.

However, additional policy support will be needed to get on track for zero emissions transport. For example, energy consultant

Energeia modelled electric vehicle uptake in Australia, and found that despite reaching price parity in the 2020s, electric vehicles will not achieve the level of uptake required for net zero emissions transport unless further policies are implemented.

Strong fuel efficiency standards aligned with the goal of net zero passenger transport by 2050 could help to accelerate electric vehicle uptake in Australia.

Fuel efficiency standards are calculated as a cap on the average emissions intensity of all the new cars a car company sells, with electric vehicles counting as zero emissions. This encourages car companies to sell more electric vehicles to help them to meet the standard.

More electric vehicles in Australia would also deliver better outcomes for health, by reducing air pollution, and could potentially also generate jobs in advanced manufacturing in Australia.

Fuel efficiency standards represent an important and cost-effective opportunity to reduce Australia’s transport emissions.

Strong fuel efficiency standards should be implemented without delay, and should be aligned with a long-term goal of net zero emissions in the transport sector.

This will save motorists money at the fuel pump, and help Australia to meet its Paris Agreement commitments at the same time.

Sarah Fumei is a project manager at ClimateWorks Australia

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