Frequently asked questions on fuel efficiency standards

Read our answers to frequently asked questions on fuel efficiency standards.

What are fuel efficiency standards?

Fuel efficiency standards set a limit on the total average CO2 emissions target across all light vehicles sold by each supplier. Suppliers are liable for fines if the vehicles they sell exceed the limit. The standards improve over time, which lowers greenhouse gas emissions from new vehicles. In other countries with fuel efficiency standards, allowances are made for heavier or larger vehicles, so that consumers can still access the range of vehicles they need for work and leisure.

Fuel efficiency standards only apply to new cars sold—they will not apply to the cars consumers already own and operate today. Introducing fuel efficiency standards will mean that vehicle suppliers have strong financial incentives to bring their most efficient new petrol and diesel cars to sale in Australia, and encourage more sales of electric vehicles (EVs) and hybrids.

While broad design approaches of fuel efficiency standards are well known around the world, these need to be customised to local conditions. For this reason, we are designing an Australian fuel efficiency standard, which will learn from best practice around the world, while recognising Australia's unique circumstances.

How will a fuel efficiency standard help ordinary Australians?

The global automotive industry is transitioning to low and zero-emission vehicles and it's important we play our part and unlock access to modern vehicles that are cleaner and cheaper to run.

Fuel efficiency standards aim to make vehicles on the roads more efficient, reduce transport emissions and increase the range of fuel-efficient and EV models available to buy. But a transition to low and zero-emission vehicles also means that ordinary Australians will be able to save on fuel.

Why are fuel efficiency standards important for the environment?

It is important we reduce emissions from light vehicles. Transport accounts for around 19% of Australia's greenhouse gas emissions, while cars and other light vehicles contribute around 12% of Australia's greenhouse gas emissions.

Australia is one of the few industrialised countries not to have a fuel efficiency standard. Over 85% of cars sold worldwide are subject to a fuel efficiency standard, including the United States, the European Union, New Zealand, China, Japan, Brazil, India, Canada, South Korea, and Mexico.

As a result, on average, passenger cars in Australia emit 40% more than the European Union, 20% more than the US and 15% more than New Zealand. This means Australians pay more every time they need to fill up at the bowser.

How do fuel efficiency standards improve consumer choice?

At the moment, Australians do not have the same choice of cleaner cars that consumers in the United States, the European Union and New Zealand have. This is partly because Australia lacks the necessary incentive in the form of a fuel efficiency standard for suppliers to provide the Australian market with its fair share of hybrid, plug-in hybrid and EVs.

In 2022, Australians could choose from 15 types of EVs (battery EV and plug-in hybrid EV) below $60,000, compared to 51 models available in the United Kingdom. Across all prices, current estimates are that Australians can choose from 70 models of EV whereas in Europe, 227 models of EV were available at the end of 2022.

As a result, EV uptake in Australia is considerably slower compared to other countries at approximately 3.8% of vehicle sales in 2022, compared to 13.3% of all vehicles sold in the December 2022 quarter world-wide. Over 10.6 million EVs were sold around the world in 2022.

Importantly, fuel efficiency standards apply on average. This means the utes and 4‑wheel drives that Australian's love can continue to be sold, while providing strong incentives to manufacturers to provide the latest fuel saving technology to internal combustion engine models and a fair share of EVs to Australians. And while there are already some models on the market, it also means vehicle suppliers will have even better incentives to develop electric utes, SUVs and 4‑wheel drives.

Overseas, when fuel efficiency standards have been introduced, it has led to more choice for consumers. It means there is a real financial incentive for vehicle suppliers to sell better, more fuel-efficient light vehicles.