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The federal government is calling its New Vehicle Efficiency Standard proposal a ‘win, win, win’ deal – for consumers, the cost of living and the climate. By Kurt Johnson.

Federal government unveils New Vehicle Efficiency Standard

Anthony Albanese and Chris Bowen standing beside a silver car.
Minister for Climate Change Chris Bowen with Prime Minister Anthony Albanese.
Credit: AAP Image / Lukas Coch

On Sunday the federal government released the New Vehicle Efficiency Standard (NVES), a proposal that would introduce limits on vehicle emissions averaged across automotive manufacturers’ fleets, beginning on January 1, 2025, but stepping up targets to eventually bring Australia into line with standards in the United States by 2028.

The proposal distils 2700 submissions from the public, lobby groups and organisations. “This is required because almost every advanced economy has implemented a New Vehicle Efficiency Standard except for Russia and Australia,” explained Transport Minister Catherine King. “The US, for example, has been doing it for 50 years.”

The response has been a broad chorus, mostly welcoming, with voices of varying enthusiasm from climate advocates, electric vehicle groups, the NRMA and the Motor Trades Association of Australia. Volkswagen Group Australia went so far as to say “Australia will be a better place for its auto market no longer being an international outlier”.

More restrained was the chief executive of the Federal Chamber of Automotive Industries, Tony Weber, a critic of emissions standards. His group, which represents Toyota and Hyundai, has been accused of pressuring the government to weaken standards, which it denies. Weber says the chamber “accepts the standards” but regards the time line as too ambitious. “We can do it,” he says. “But at what price?”

The opposition has also criticised the proposal. The shadow minister for infrastructure, transport and regional development, Bridget McKenzie, warned that “some auto manufacturers may choose to withdraw from supplying the Australian market instead of being forced to purchase credits off their competitors or pay fines to the Australian government”.

The credits to which she refers are an option within the proposal for manufacturers with a fleet average below the limit to earn credits they can sell to other importers to offset emissions.

Politically, the proposal is a clear attempt by the government to please groups with divergent interests, to promise a three-way win: for the climate, for those struggling with the cost of living and for motorists.

It’s a bold move given the failure of any previous government to implement efficiency standards, despite consideration of the issue dating as far back as 2008. More than once the discussion has opened another front in the climate wars, most recently with Scott Morrison’s claim electric vehicles would “end the weekend”.

Even attempts within the Coalition to introduce policy failed, including the Turnbull government’s 2016 report “Improving the efficiency of new light vehicles”, which considered European standards for cars. The policy contributed to the demise of Malcolm Turnbull’s leadership.

This time, the government is bracing for more of the same. At the proposal’s announcement, Minister for Climate Change Chris Bowen predicted “a few scare campaigns”. Still, he promised a “win, win, win”. Each of these wins is worth interrogating, as they represent the government’s tactic to walk a narrow line avoiding previous pitfalls.

First, the climate. Transport emissions have grown 22 per cent since 2005, due in large part to an increase in both the number of cars and the average emissions from each car. The NVES is placed as key to achieving net zero by 2050, as increases in transport have cancelled reductions elsewhere. “Australia’s transport emissions are rising faster than any other sector,” says Climateworks Centre transport program impact manager Helen Rowe, adding that this proposal represents a “critical first stop on the road to aligning the nation with global best practice”.

Bowen’s second “win” is positioned to confront the moment’s most critical political issue, one that will likely be key in the next election: the cost-of-living crisis, closely linked to rising fuel prices. According to the Australian Automobile Association, the average Australian household spends more than $100 a week on fuel. The government is framing the increase in efficiency as a way Australians can save, promising by 2028 more efficient cars could save $1000 a year in fuel.

The third “win” spruiked by Bowen confronts a more slippery issue for the government. This plays on the sense that a reduction in emissions will limit the lifestyle and consumer choices of Australians. Pre-empting this, Bowen promised the proposal would deliver “more choices for Australians as to the range of … cars that they get access to”.

Tony Weber dismisses this, saying Australia’s market is already marginal because of its requirement for right-hand-drive vehicles. The only other major markets with this requirement are Britain and Japan, both preferring a very different vehicle type. Australia’s preference is closer to the US in terms of market demand.

According to Weber, by having to produce electric and internal combustion engines, manufacturers lose their economies of scale, driving up prices. “If you push the technology frontier to places it had never been before,” he says, “it is very expensive.”

Yet manufacturers such as Volkswagen Group have already embraced the proposal enthusiastically, announcing Volkswagen, Audi and Skoda would introduce new EV variants in 2024 – “as many as 11”, a spokesperson said.

These will be mostly smaller cars, not the SUVs and utes that have been the highest-selling vehicles over the past few years. Affecting the type of cars available in the Australian market can make the government vulnerable to the claim it is out of touch. According to the chief executive of the Electric Vehicle Council, Behyad Jafari, a central part of countering this perception has been the government’s choice of using the US as the market to match by 2028. “The USA is not as strong [on emissions] as Europe, for instance, or even New Zealand, but it’s a big country,” he says. “People drive big utes there. We drive big utes.”

In the US, the preference for bigger vehicles does not necessarily mean more emissions. Comparing Australia with US standards, Jafari explains “their top-selling car nationally is the Ford F-150 – that’s about twice the size of the [Toyota] HiLux and the [Ford] Ranger that we have here, plus they have better efficiency than we have”.

The other question is if there is infrastructure to support EVs, particularly in rural Australia, where owning a larger diesel ute or SUV is not necessarily about lifestyle but rather a necessity for its range, off-road capability and carrying capacity. The National Farmers’ Federation is still formulating a response to the proposal, but Greg Bourne of the Climate Council says “infrastructure is being built”, adding “states and territories and the federal government have a role in the big spaces between two remote towns or peri-urban towns … So that people don’t get range anxiety.”

Bourne, a former head of BP Australasia, has dealt with the automotive lobby for decades. He interprets their resistance to sudden change this way: “They did not want the boat ever rocked. They lobbied against bringing in unleaded petrol.”

Both Bourne and Jafari have identified a shift in the conversation this time around, however. “I think the conversation has progressed,” says Bourne. “When Scomo said ‘It’ll ruin the weekend’ and ‘a Tesla can’t tow a caravan’ and then very next day there’s a picture of a Tesla towing a 747, eventually people can see through the bullshit.”

Tony Fairweather, chief executive of SEA Electric, a company that upgrades commercial internal combustion engines in vehicles to electric and that relocated its head office to the US due in part to the lack of government support for EVs here, welcomed the announcement. He says there is more to do, however. “It subsequently concerns me as to how long Australia will take to introduce effective policy on the commercial vehicle segment to eliminate highly polluting (and particulate emitting) large diesel engines that dominate our cities.”

Still, before expanding the proposal, the government needs to pass it into law. That will determine whether Australia will catch up or continue as an international laggard.

This article was first published in the print edition of The Saturday Paper on February 10, 2024 as "Pedal to the levels".

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