Laws that would force car makers to cut their carbon emissions are a step closer to reality, but the government still doesn’t have a pathway for them to pass parliament.
Car makers would be made to cut their carbon emissions each year by ensuring the fuel economy of the new cars they sell, when averaged out, meets an increasingly stringent CO2 limit — or else face heavy penalties.
The first draft of those laws was met with hesitancy by some car brands, as well as an opposition campaign that the laws would be a “tax on utes” that would push up the price of cars.
On Tuesday, the government quite literally won the auto industry to their side, being flanked by executives from Toyota, Hyundai and Tesla as they announced a compromise to weaken the proposed emissions standards.
As Motor Trades Association boss Matt Hobbs said, it was a deal landed after six weeks and 40 meetings with car makers.
Greens say pick a lane in climate negotiations
But the Greens are warning the government not to assume they will give the climate laws a free pass through parliament.
The party maintains that an unrelated bill on gas project approvals poses a genuine barrier to its support for vehicle efficiency laws.
That’s because the Greens claim the gas legislation will enable the government to fast-track several gas projects in the pipeline, and the emissions those would produce eliminate any gains made by the New Vehicle Efficiency Standard.
Greens leader Adam Bandt said there was little point negotiating on the standard when other programs would undermine it.
“We offered to pass Labor’s vehicle emission standards, even though we thought they should go further, if Labor stopped working with the Liberals to try and fast-track gas projects,” Mr Bandt said.
“It makes no sense for the Greens to work with Labor on vehicle emissions standards that gradually reduce emissions over 25 years if Labor’s deal with Peter Dutton undoes all that with a single giant gas project.
“Labor needs to choose who they want to work with on climate.”
Independent senator David Pocock, whose support would also be needed for the bill to pass and who had argued for the start date to be brought forward, said he was considering the details of the bill.
“Australians have been paying the price in higher fuel costs for decades from the lack of any fuel efficiency standard,” Senator Pocock said.
“It is disappointing to see the policy ambition watered down but the worst possible outcome would be the status quo of no fuel efficiency standards at all.”
Shadow Transport Minister Bridget McKenzie said the “minor” concessions would not do enough to avoid driving up the price of cars, and it remains an “aggressive car tax”.
Relaxed standard buys time for car makers
The New Vehicle Efficiency Standard basically creates a system where car makers are penalised if they fail to reduce their emissions.
Under the policy, an emissions ceiling is set for passenger vehicle sales and a separate, less stringent target is set for light commercial vehicle sales — larger cars with significant towing capacity like utes and vans.
If a car brand’s sales on average fail to get below that ceiling, it must either buy credits from other car makers who beat the target, or pay a fine.
The scheme sets up a $100 penalty for every gram of CO2 per kilometre that a car maker’s fleet exceeds the limit by each year (though it would typically buy credits at a cheaper rate to avoid the penalty).
That incentivises the car makers to sell more of their most fuel-efficient vehicles and EVs, and invest in cutting the emissions of their cars in the longer term.
But because Australia has been one of the only countries without a standard for so long, it is playing catch up.
The federal government wanted to catch up to the United States standard by 2028 — which would require achieving the same emissions reductions from car makers in three years that they would achieve in the US over 11 years.
The industry warned it was too hard and too fast, and that without sufficient time they would be forced to pull certain cars from sale or jack up prices.
So the government has agreed to ease the limits for light commercial vehicles, where it is most difficult for car makers to improve efficiency affordably while keeping towing capacity and other technologies utes and vans are often bought for.
Toyota’s Australian chief executive Matthew Callachor said on Tuesday the path forward would still be tough, but it was workable.
For Toyota, as an example, its current Hilux ute would now accrue credits in 2025 before creating debits in future years, and its Land Cruiser would only fall short by 25 grams in the first year rather than almost 100g, after the government agreed to reclass it and several other vehicles out of the stricter passenger category into light commercial vehicles.
With the targets being made easier to meet, Toyota and other car makers will also have more credits up their sleeves to cover shortfalls in future years, requiring a less rapid shift in their production pipelines.
Mr Callachor rejected the Coalition’s attack lines that the scheme was a “ute tax”, but he would not say that the changes would be enough to avoid price increases on vehicles altogether.
Despite relaxing the standard, the government projects it will still abate about 80 to 90 per cent of the forecast carbon emissions reductions in the original plan.
That would amount to at least 12 megatons of CO2 abated over the years to 2029, with the legislation also including a mechanism to ratchet down the targets further if the government desired.
The response from electric vehicle companies such as Tesla and environment groups has been largely positive, deeming it a “solid compromise” that will help to bring Australia forward from the back of the pack on car emissions.
The government now hopes it will be able to convince the parliament to compromise, too.