The Albanese government has made key concessions to the manufacturers of utes by agreeing to soften the emission reduction targets that will apply to the popular vehicles in return for the adoption of environmentally beneficial technology.

The concessions, which will mimic in effect a credit scheme that applies in the United States by rewarding manufacturers for additions such as environmentally friendly air conditioning gases, are designed to prevent a political backlash to the proposed New Vehicle Efficiency Standards (NVES).

There has been widespread industry concern that the nation’s top-selling cars – predominantly utes and four-wheel drives – could be priced out, or forced out, of the market by the steep emissions reduction trajectory before comparable and affordable low-emissions alternatives are available.

Also under the changes, which were approved by the federal cabinet on Monday, heavy SUVs that share the same chassis and drive trains as utes, such as the Isuzu MUX, the Ford Everest and the Toyota Landcruiser, will be reclassified as light commercial vehicles and subject to less onerous emissions reduction targets.

Under the original proposal by Energy and Climate Minister Chris Bowen and Transport Minister Catherine King, these SUVs would have been classified as passenger vehicles. That would have made them subject to much stricter emissions caps, meaning they would have been phased out much more quickly than the ute equivalent.

It is understood there will be no concessions to the passenger vehicle class.

The government first flagged concessions two weeks ago and has been consulting with the industry on what Mr Bowen called “sensible” changes. Last week’s announcement by US president Joe Biden to soften his own policy in response to industry complaints gave Albanese more latitude to move.

“That consultation is very close to a conclusion,” Mr Bowen told parliament on Monday. “We have looked at the United States as part of that.”

Shadow treasurer Angus Taylor taunted Mr Bowen in parliament, saying he’d been “rolled”.

Last week, Prime Minister Anthony Albanese’s office became involved in negotiations.

What the policy means for manufacturers

Under the policy, which begins on January 1, 2025, each manufacturer will have to ensure the fleet of new vehicles they import into Australia meets an annual emissions cap. There will be one cap for smaller passenger cars and another for light commercial vehicles (LCV), such as utes.

The caps will be lowered each year until 2029.

Manufacturers can offset the emissions of their dirtier cars, such as diesel utes, by selling more electric and low-emission vehicles, or by buying credits from those who beat the cap, such as EV maker Tesla.

The industry has warned that the emission reduction trajectory of more than 60 per cent over five years, or 12 per cent a year, was too steep, especially for the LCV class.

In the United States, the scheme Australia is supposed to mimic grants credits for a number of technological innovations. These were not part of the original proposal by Mr Bowen and Ms King.

Under their concessions, credits will not be granted per se, but the annual emissions caps will be adjusted to take into account the adoption of such technologies as cleaner air-conditioning gas, and adjustable ride heights that make a vehicle more aerodynamic and, thus, more fuel efficient.

Despite the concessions, the Coalition will vote against the policy on the principle that motorists should not be made to pay for the choices of others.

Support from the Greens?

The Greens, who support an NVES as a tool to help Australia meet its economy-wide emissions reduction targets, said last week they would not vote for the policy if the government went ahead and did a deal with the Coalition on a separate bill to streamline the environmental approvals of large gas projects.

But Greens leader Adam Bandt appeared to soften that stance on Monday, saying “we’ll see” when it comes to the vote on the NVES, even if Labor does a deal on gas approvals with the Coalition.

Push for change in offshore gas regulation

Mr Bandt’s softening coincided with a fresh push from Labor to win over Greens support for the offshore gas regulation change.

The government’s original regulatory changes, which are part of a broader bill to improve workplace safety on offshore projects, would give Resources Minister Madeleine King authority to approve and regulate projects without duplicating environmental protection laws.

In a move to placate anti-gas activists and Greens, Labor on Monday said it would add an amendment that would require the involvement of both Ms King and Environment Minister Tanya Plibersek in the process.

A spokesperson for Ms King said if there is a disagreement between the two ministers, the regulations would still be made by the Resources minister, but the regime would snap back to the existing one that forces companies to seek separate environmental approvals through the Offshore Petroleum and Greenhouse Gas Storage Act and the Environment Protection and Biodiversity Conservation Act.

“Therefore, the Minister for Environment retains the right to effectively snap off the existing streamlining arrangement in place,” he said.

“The bill is not and was never intended as an exemption for the resources sector to nature positive reforms. Nature positive will require the regulator NOPSEMA to adopt the National Environmental Standards in future.”

Labor’s bill faces a rocky road through the Senate once the legislation goes through the lower house, as soon as Tuesday.

Opposition resources spokeswoman Susan McDonald said Labor’s proposed solution undermines the original intent of Labor’s changes, which the Coalition is inclined to support.

“Despite finally securing bipartisan support for offshore gas reform that the Coalition has been demanding for 18 months, Labor has slapped away the hand of bipartisanship at the last minute, crumbling to Greens pressure and moving amendments that watered down these urgent reforms to secure Australia’s energy future,” Senator McDonald told The Australian Financial Review.

“It is disappointing to see the Environment Minister empire-building by seizing control of the Resources Minister’s decisions, standing ready to block gas projects in order to secure Greens votes in her Sydney electorate.”

“This incompetent Labor government has failed time and again to do the basics and deliver the certainty and stability our resources industry needs to continue creating jobs and prosperity for all Australians.

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