The release of the government’s New Vehicle Efficiency Standard (NVES) marks a momentous shift in Australia’s climate policy and puts its major cities on a path to lower emissions, cleaner air and healthier communities.
After more than a decade of campaigning and advocacy by think tanks, environmental groups, health professionals and many others in the electric vehicle community, Australia now has a timeline for an effective new vehicle efficiency standard, which will have a profoundly positive impact on the health and wellbeing of all Australians into the future.
Released over the weekend, the government’s 86 page Cleaner, Cheaper to Run Cars: The Australian New Vehicle Efficiency Standard – Consultation Impact Analysis lays out why vehicle efficiency standards are so important and the three policy options the government is considering.
The government has opened a one month consultation period on the three options, meaning the EV community, public health advocates and climate campaigners now have 30 days for a final push to get the best outcome possible.
Government lays out 3 options with “preferred” middle road
The Impact Analysis, which many EV industry insiders believe provides an excellent overview of what’s at stake, and accurately summarises public engagement and sentiment, lays out three policy options including the government’s preferred option B.
In a nutshell, the New Vehicle Efficiency Standard provides efficiency targets, measured in grams of CO2 per km, for each year for passenger vehicles (PV) and light commercial vehicles (LCV).
Vehicle manufacturers must keep the average efficiency of all vehicles they sell in Australia below the target for a given year or pay stiff penalties. This means if a company wants to sell models that produce more emissions per km than the target, it also has to sell enough models with efficiency ratings below the target to bring its entire new vehicle fleet average below the target. The target is based on the “headline target” plus or minus an adjustment based on mass (more about that later).
For given year, if a car maker’s new sales fleet average is above the target, the company pays a penalty. In the government’s preferred option, the fine is $100 per gram of CO2 above the target. If a car company sells 100,000 new vehicles in a year and those vehicles have a combined average efficiency that’s 10 grams above the target, the company will be fined $100 x 10g x 100,000 vehicles or $100 million for that year.
Government’s preferred option matches US by 2028
For passenger cars, the government’s Option B seeks to match the US target by 2028 and converges closely with the EUs 2030 target of 49.5 g/km. Option C actually cuts lower than the EU target reaching 34 g/km by 2029.
Super credits are out and hefty penalties are in
In another welcome move the government’s preferred Option B has unequivocally ruled out supercredits and off-cycle credits which many pro EV groups including the Electric Vehicle Council have been calling for.
EV industry insiders have also expressed they’re pleased to see appropriate penalties for car makers who breach the threshold. At $100 per g/km, a company that exceeds the average by 10 grams is facing penalties of $1000 per vehicle which for reference is roughly the net profit per vehicle that Toyota makes on its 10 million plus global vehicle sales.
EV community and motoring groups welcome the announcement
The policy detail has received broad endorsement.
“The NRMA welcomes the Australian Government’s announcement and we are pleased that a responsible and achievable option over time is being presented to the Australian people” Said NRMA Group CEO Rohan Lund.
“Australia could not continue down the path of voluntary targets as it left us behind when it came to choice and the NRMA is strong advocates for choice so that motorists can buy the cars they wish to drive.
“A business as usual approach meant that Australian families and businesses were not benefiting from the best technology designed to reduce fuel consumption. The NRMA’s opposition to Australians being forced to spend more money on fuel than they otherwise should have to, is well known across the country”
Electric Vehicle Council CEO Behyad Jafari congratulated the federal government on the introduction of the NVES which the EVC says promises greater choice and lower fuel bills for Australian motorists.
“By bringing Australia into line with the US and Europe, car manufacturers will now be incentivised to offer Australians their best zero and low emissions vehicles” said Jafari.
“Right now Australia is one of only two developed countries without new vehicle efficiency standards. Very soon, Russia should be on its own.” he said.
Target adjustment method sees Ford Focus penalised while credits given for Ford Ranger
Despite the broad endorsement of the new standard, there has been some criticism that the policy doesn’t incentivise manufacturers to sell smaller cars and in fact could do the opposite. In the impact analysis, the government proposes a target adjustment method that takes vehicle weight into consideration for both passenger and light commercial vehicles.
Why would the government incentivise emissions per kg increasing with vehicle mass? This would allow disproportionate total emissions from unnecessarily heavy vehicles. #auspol https://t.co/kDTcimdoMY
— Michael Brown (@MJIBrown) February 4, 2024
Outlined in chapter 4, the impact analysis provides a methodology for calculating the target adjustment for PVs and LCVs based on vehicle model weight. The adjustment method means that heavier vehicles in both categories are allowed to emit more grams of CO2 per km.
Because the proposed target adjustment is based on the entire new vehicle sales fleet for PVs and LCVs, the government has already determined the slope and reference mass for determining efficiency target adjustments.
This essentially means the efficiency target for a passenger vehicle that weighs 100kg over the PV reference mass will be the headline target plus an additional 6.6 grams. For a LCV an additional 100kg above the reference mass increases the target by 3.2 grams.
The government’s proposed options B and C provide a lower and upper limit for the adjustment slope of 1500 kg to 2000 kg for PVs and 1500 kg to 2200 kg for LCVs.
To see how this plays out for specific vehicles, David Osmond ran the numbers on two Ford models resulting in a skewed incentive structure for manufacturers to sell heavier vehicles.
An example of the absurdity.
Ford Focus Ambiente, at 1261kg & emitting 136 gCO2/km is above the allowance for passenger cars.
Ford Ranger XLS at 2.3t & 182 gCO2/km is below the allowance for light commercial vehicles.
Ford will be incentivised to sell more Rangers & less Focus. pic.twitter.com/EbJBrl10re— David Osmond (@DavidOsmond8) February 4, 2024
Looking first at a Ford Focus weighing 1261kg (462kg below the PV reference mass) with an efficiency of 136 gCO2/km:
As the Focus weight is under the lower limit of 1500kg, the mass used for the adjustment calculation is 1723kg (PV reference mass) minus 1500kg (lower slope limit) which gives 223 kg.
Multiplying the 223kg difference by the PV slope of 0.0663 gives an adjustment of 15 grams.
Using Option B’s 2025 PV Headline Target of 141 g/km and subtracting the 15 gram gives an adjusted target of 126 g/km. This means the Ford Focus is actually 10 grams over the target.
Now looking at a Ford Ranger Dual Cab XLS with a weight of 2,300 kg and 182 g/km.
Vehicle mass is over the 2,200 kg upper slope limit which means the mass used for the adjustment calculation is 2200kg (LCV upper slope limit) minus 2155kg (LCV reference mass) which gives 45 kg. Multiplying by LCV slope adjustment gives an adjustment of 1.5 grams.
Using Option B’s 2025 LCV headline target of 199 g/km plus 1.5 gives a target of 200.5 g/km for the Ford Ranger. Since the adjusted target value is 18.5 g/km above the Ranger’s efficiency rating of 182 g/km, Ford gets 18.5 grams worth of credits for every Ranger they sell.
Although this example shows the mass adjusted methodology for calculating vehicle targets can perversely incentivise carmakers to sell more larger, higher polluting vehicles than smaller more efficient vehicles, it must be noted that the upper limit of 2,200 kg on LCVs means only 1.5 grams of upper target adjustment is possible.
After a decade of advocacy, EV community has 30 days to push for best outcome
With average annual CO2 intensity reductions of 12.2% for the government’s preferred Option B and 15.5% for Option C, the NVES impact analysis signals the government is getting serious about cutting vehicle emissions.
The government says its preferred option will deliver 369 millions tonnes of abatement, $108 billion in fuel savings. At an individual level, an average new car buyer in 2028 will cut their fuel costs by around 40% compared to what they pay today saving around $1000 per year.
The legacy ICE vehicle lobby group will no doubt campaign against the government’s proposal which is why it’s vital that the pro EV and pro health community support the most progressive options by making submissions.
The government is accepting submissions on the proposed NVES options until 4 March 2024.
You can make a submission in less than 2 minutes via the government’s multiple-choice online form here.
Daniel Bleakley is a clean technology researcher and advocate with a background in engineering and business. He has a strong interest in electric vehicles, renewable energy, manufacturing and public policy.