What is a New Vehicle Efficiency Standard?
A New Vehicle Efficiency Standard (or fuel efficiency standard), incentivises car companies to supply new cars that use less fuel per kilometre. Under a New Vehicle Efficiency Standard, each vehicle manufacturer has a set average CO2 target for the vehicles they produce, which they must meet or beat. Over time, the CO2 target is lowered and in order to continue to meet or beat the target, companies must provide more choices of fuel-efficient, low or zero emissions vehicles.
The target is applied nationally on average. Suppliers can still sell any vehicle type they choose but they’ll need to sell more fuel-efficient models to offset any less efficient models they sell. If suppliers meet or beat their target, they’ll receive credits. If they sell more polluting cars than their target, they can either trade credits with a different supplier, make it up over the next two years, or pay a penalty. For example, if a supplier generates debits in 2025, it will be able work in 2026 to generate credits to offset those debits.
When will Australia have a New Vehicle Efficiency Standard?
Almost every advanced economy has implemented a New Vehicle Efficiency Standard except for Russia and Australia. Under the Government’s plan, an Australian New Vehicle Efficiency Standard is expected to come into effect from 1 January 2025, and will have Australia ‘catch-up’ to comparable markets, including the United States, by around 2028.
How much money will motorists save?
Under the Government’s plan:
- New vehicles will use less fuel per kilometre. An average new vehicle purchaser in 2028 would save $5,710 over five years.
- Over the life of a vehicle, the Government’s policy will provide around $17,000 in savings per new vehicle.
The fuel saving potential is greatest for those living in regional Australia, where average driving distances are longer. For example, by 2028, the average driver in the Macedon Ranges, Victoria that uses a new car with lower emissions could save around $2,000 a year in fuel costs.
How much reduction in emissions will the Government seek to achieve through the New Vehicle Efficiency Standard?
The Government’s proposal is for an ambitious but achievable NVES which would allow Australia to ‘catch up’ to comparable markets such as the United States by around 2028.
The Government’s preferred option will deliver a reduction of 369 million tonnes of CO2 by 2050 – this is equivalent to the last six years’ worth of total emissions from light vehicles in Australia – and close to 100 million tonnes of CO2 abatement by 2035.
By implementing a Standard there will be an estimated $143 billion in financial benefits. This includes $108 billion in fuel savings and in excess of $5 billion in health benefits from a reduction in air pollution.
Will a NVES increase the price of cars?
No. There is no evidence to suggest that a New Vehicle Efficiency Standard will increase vehicle prices. In jurisdictions that have had a New Vehicle Efficiency Standard in place for some time (around 50 years in the case of the US and Canada), real-world evidence has not shown an increase in price for consumers in the cost of cars.
Instead, a New Vehicle Efficiency Standard encourages suppliers to import more fuel-efficient vehicles, be they petrol, diesel or electric. This saves drivers money on fuel, and ensures that a greater number of more fuel-efficient, low and zero emission vehicles will become available in the second-hand vehicle market in coming years.
Bringing a wider range of new and more efficient petrol, diesel, hybrid and electric vehicles to market will cost vehicle suppliers more than business as usual, but no one is forced to buy a more expensive option that doesn’t work for them. For people who do want to be able to spend more up front to save over time, new vehicle efficiency standards will help make those choices available.
Will a New Vehicle Efficiency Standard impact my existing car?
No. The New Vehicle Efficiency Standard only applies to new vehicles. Over time, new vehicles will filter into the second-hand market, improving the efficiency of Australian vehicles overall.
Will I still be able to buy a ute or 4WD that can tow my trailer and boat?
Yes. A New Vehicle Efficiency Standard allows suppliers to choose how they meet the emissions reduction target. In other countries with a New Vehicle Efficiency Standard, 4WDs and utes are still widely available. Even though the EU market has a stringent standard in place, vehicle models such as the Toyota Hilux and Landcruiser and Ford Rangers continue to be sold. The situation is similar in the US, where Ford Rangers, Toyota 4Runners, Tacomas and Tundra utes are available today.
As technology improves, vehicles will continue to transition to more efficient, low or zero emission technology.
Will a New Vehicle Efficiency Standard ban vehicle models?
No. A New Vehicle Efficiency Standard would not ban any vehicle models. A New Vehicle Efficiency Standard is about giving Australians more choice of fuel-efficient, low and zero emission vehicles.
A New Vehicle Efficiency Standard allows car companies to choose how they meet the emissions reduction target, by providing incentives to provide a fair share of their lowest emission vehicles to Australia. Large vehicles and utes remain top selling vehicles in markets with long-standing standards, like the US.
How will people in regional and remote areas benefit from a New Vehicle Efficiency Standard?
A New Vehicle Efficiency Standard will help deliver savings to those Australians who use more fuel. Typically, people living in regional Australia drive further than those in the metropolitan areas, and tend to buy more fuel as a result. Average new car buyers in regional and remote areas travel longer distances and will have fuel savings up to 20% higher than buyers in major cities.
The move to more efficient vehicles is already happening. Why do we need more regulation?
The New Vehicle Efficiency Standard is about improving the fuel efficiency of all new cars – be they petrol, diesel, electric or hybrids. Currently vehicle suppliers are sending their best, most efficient vehicles to other countries. On average, new passenger cars in Australia use 20% more fuel than in the US.
The Government’s plan is to introduce a New Vehicle Efficiency Standard that gets the best deal for everyday Australians. That means that global manufacturers will need to comply with Australia’s laws – and they will need to send us the same advanced fuel-efficient technology that they send other countries.
For Australians who want to purchase EVs but currently can’t afford them, standards will encourage car companies to bring more affordable options. For example, while there are around 150 electric and plug-in hybrids available in the US, there are less than 100 on the market in Australia. In particular, we want to encourage manufacturers to bring more affordable EVs to Australians. Right now, there are only three battery EVs in Australia for under $40 000.
Is there enough charging infrastructure to support more electric vehicles?
In the US about 80% of EV charging is done at home, almost always overnight.1 This means every garage and carport with a power point is a charging site.
Many EV owners choose to install a home EV charger ‘wall box’ which brings faster charging speeds and additional functionality including the ability to schedule charging to take advantage of home solar generation or off-peak electricity rates.
The Government is expanding the rollout of public charging infrastructure through the $500 million Driving the Nation Fund and the National EV Charging Network – a network of EV charging infrastructure installed at 117 sites on major highways every 150 kms.
As at the end of 2023, there were around 800 ultra-fast charging locations now operating nationwide, supporting 2000 fast and ultra-fast charging plugs – an increase of over 70% in a year. The Commonwealth, state and territory governments are ramping up investment in public charging infrastructure. These investments are expected to bring another 1,000 fast charging locations online in the next 12-36 months.