Australians are being promised more choice for fuel-efficient cars and electric vehicles under the Albanese government’s mandatory pollution caps, which it claims will save drivers $1000 in fuel a year, triggering a political fight over the future of utes and the cost of climate action to households.

The long-awaited fuel efficiency standard applies only to new car sales and limits the average emissions of a carmaker’s overall fleet of vehicles sold each year, measured in grams of CO₂ per kilometre.

It is designed to encourage them to sell either more efficient petrol cars or electric vehicles, and companies must pay a penalty of $100 for each gram per kilometre they exceed the caps.

The government says the fuel efficiency standard will encourage carmakers to bring more fuel-efficient petrol vehicles to sell in Australia, which are currently sold in other markets that already have fuel efficiency limits in place. It says manufacturers will also bring more electric vehicles (EVs) to Australia for the same reason.

However, the opposition has revived memories of the Morrison government’s 2022 election campaign claim that federal Labor’s policies to promote electric vehicle sales would “end the weekend”.

Opposition climate change and energy spokesman Ted O’Brien and opposition Transport spokeswoman Bridget McKenzie said on Sunday that the government’s policies to limit cumulative vehicle emissions could raise the cost of utes so high that they would be unaffordable.

“Fears from industry representatives today that the government’s heavy-handed approach will drive utes off Australian roads is of deep concern,” they said in a statement.

Former prime minister Scott Morrison said in April 2019 that electric vehicles could not tow boats or travel far enough to reach camping spots.

“[Former Labor leader] Bill Shorten wants to end the weekend when it comes to his policy on electric vehicles,” Morrison said.

A saving of $1000 a year by 2028

The government released its preferred design for the new standard on Sunday, allowing just one month for consultation. Transport Minister Catherine King and Climate Change and Energy Minister Chris Bowen said they plan to legislate their “ambitious” policy as soon as possible ahead of its commencement on January 1 next year.

Bowen branded the opposition’s claims “laughable” and said Australia risked becoming a dumping ground for old inefficient models without a new standard. Pollution caps would drive carmakers to bring to Australia a greater range of more efficient models that are currently being sold in major international markets, he said.

Australia, along with Russia, is the last advanced economy to impose a fuel efficiency standard. The policy has been applied to most major car markets for decades, covering about 85 per cent of the global car sales.

“The real question for Mr O’Brien and Senator McKenzie is why aren’t they on the side of Australian motorists?,” Bowen said.

King and Bowen stressed that they anticipate a fuel efficiency standard would not impact existing vehicles but cut average petrol costs by $1000 a year by 2028.

“The standard increases choice. It doesn’t dictate what sort of car or ute people can buy, but will mean you have a wider range of modern and cheaper-to-run vehicles,” King said.

The government’s pollution caps aim to match the US by 2028, requiring car markers to lower average vehicle emissions across their fleets by 61 per cent by 2029. This figure must fall from 141 grams of CO₂ per kilometre in 2025 to 58 grams in 2029.

Australia has one of the world’s highest emissions per kilometre travelled, with an average 170 grams of carbon dioxide per kilometre travelled – 20 per cent higher than the US, 15 per cent higher than in New Zealand and 40 per cent higher than the European Union.

‘More options to choose from’

Electric Vehicle Council chief executive Behyad Jafari praised the policy, which he said would result in a wider choice of zero emissions car models in Australia.

“Australians clearly want to drive electric vehicles and these standards will give them more options to choose from.”

Australian Automobile Association managing director Michael Bradley said the government must ensure vehicles remain affordable, and called on the government to release modelling including its forecasted fuel bill savings.

“The government should be commended for pursuing this regulatory change. However, it must be transparent about the three scenarios presented, the winners and losers they each create, and their respective positive and negative impacts upon the price and availability of different vehicles.”

The fuel efficiency standard is crucial for the Albanese government to meet its climate targets to cut emissions 43 per cent by 2030 and reach net zero by 2050.

EVs currently comprise 8 per cent of new cars sold in 2023 and this figure will need to boom to reach nearly 100 per cent by 2035, given most cars sold stay on the road for 15 years and Australia has pledged to eliminate transport pollution by mid-century.

Transport generated 466 million tonnes of emissions in 2023, and the government’s standard is forecast to cut that figure by 100 million tonnes by 2035.

The Climate Council welcomed the government’s policy as an important step to decarbonise the transport sector.

“By giving Australians better choice of cleaner, cheaper-to-run cars, a strong fuel efficiency standard will cut household costs and clean up our air,” said Climate Council chief executive Amanda McKenzie.

Uber Australia managing director Dom Taylor backed the government’s policy, which he said would help the company achieve its goal to eliminate emissions from its drivers by 2040.

“It’s encouraging to see the government propose a fuel efficiency standard that will catch Australia up to its international peers and have a meaningful impact on the country’s emissions targets.

“This is great news for Australia, as our data shows an EV on rideshare can have four times the emissions-reduction impact compared to private ownership.”

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