1 Vehicle fuel efficiency standards for Australia WHY, WHAT AND WHEN?
2 2 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? Executive Summary Key Points Transport is the second largest greenhouse polluter in Australia, releasing over 80 million tonnes of greenhouse pollution annually. New cars purchased in Australia are approximately 41 percent more polluting than new cars purchased in the European Union. The average rate of fuel consumption in Australian vehicles has hardly changed since Within the OECD Japan, South Korea, the USA and European Union all have mandatory standards for vehicle fuel efficiency, and China joins these nations with its own stringent fuel consumption regulations. Australia has no mandatory fuel efficiency standards, and is lagging behind the pack. Australian made vehicles are typically large and inefficient. Almost 75 percent of Australian made vehicles are sold into government or corporate vehicle fleets. Australian motorists prefer to purchase smaller, more efficient vehicles and therefore look towards foreign made cars. The NRMA-commissioned Jamison Group found in 2008 that fuel efficiency standards for vehicles could save the average motorist over $700 a year in fuel costs. Through introducing strong mandatory vehicle fuel efficiency standards, Australia could become a leader in efficiency and manufacturing while making big cuts to our greenhouse pollution from transport, securing Australia jobs and helping the average Australian family slash hundreds of dollars off their fuel bills each year. Recommendations 1. That the Australian Government introduce a mandatory vehicle fuel efficiency standard to achieve a fleet average of 5L per 100km (114g/km) for all new cars sold in Australia by This is in line with world s best practice in Japan and the European Union. Further, the Australian Government should also seek to: 2. Adjust all taxes and subsidies in relation to vehicle manufacturing, importation and sales to encourage the uptake of fuel efficient vehicles, while actively discouraging fuel inefficient vehicles. 3. Ensure strong, on-going incentives for the local manufacture of fuel efficient vehicles. 4. Commit to prioritising the purchase of low emissions vehicles for its fleet, and 5. Advocate state governments introduce a sliding scale for car registration and stamp duty fees that includes a concession for new fuel efficient vehicles and a levy on new inefficient and heavy vehicles.
3 3 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? Introduction The transport sector is the second largest greenhouse polluter in Australia. It releases over 80 million tonnes of greenhouse pollution into our atmosphere each year 1. Ensuring sustainable transport options such as public transport, cycling and walking that are more accessible and reliable is vital to reducing emissions from our transport sector, and will assist in strengthening our communities and saving money for working families through reducing private vehicle use. saving to Australian families. Environment Victoria believes the federal government should implement a mandatory vehicle fuel efficiency standard to achieve a fleet average of 5L per 100km (114g CO2/km) for all new cars sold in Australia by 2015, in addition to other measures that will ensure emissions reductions from our vehicle fleet. This paper provides more detail on how and why this should be done. However, it is not reasonable to assume that these alternate transport modes will be practical for all people at all times. Given that most families will continue to rely on private car travel at least some of the time, the Federal Government has a responsibility to make sure that those cars are as efficient as possible. Fuel efficiency is repeatedly cited as some of the low hanging fruit of climate change action - i.e. one of the more painless and obvious ways to reduce our greenhouse emissions. Despite this, Australia is yet to take the necessary steps to ensure these easy savings of greenhouse emissions are achieved. In tough economic times there are many actions the government can take to both reduce our greenhouse emissions and save consumers much needed dollars for the family budget. Analysis conducted by the NRMA-commissioned Jamison Group in 2008 found compulsory fuel consumption standards could save the average motorist over $700 a year in fuel costs. As petrol prices continue to rise, so too will this potential
4 4 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? Australia s vehicle fleet - a snapshot There are over 15 million motor vehicles on the road in Australia, of which passenger vehicles account for 78 percent 2. In the year ending October 2007, more than 215 billion km were driven on Australian roads, which is the equivalent of travelling to Pluto and back 25 times 3. Passenger vehicles accounted for 73 percent of the total distance travelled, and consumed nearly 16 million L of fuel 4. In relation to fuel consumption, the Federal Chamber of Automotive Industries advises that in 2009 new Australian made passenger vehicles averaged 218g of carbon dioxide (CO2) per km, or put differently, 9.6L of fuel to travel 100km 5. This is approximately 41 percent higher than for new passenger vehicles in the European Union. Australia s existing vehicle fleet in 2007 had an average fuel consumption of 11.5L per 100km 6. By a large margin, the most popular car segment in the country is the small, more fuel efficient car 7. The Australian car manufacturing industry focuses on medium to large cars, and their sales - in the order of 75% - are reliant upon procurement preferences for Australian-made cars in fleet purchases, such as those by various levels of government. This traditional procurement preference is competing with other policy objectives. For example the recent Victorian Transport Plan commits the Government to mandatory carbon emissions targets for State Government fleets whilst still maintaining the Government s policy of buying locally manufactured vehicles 8. Australian motorists demonstrated preference for small and fuel efficient cars has meant that they have been forced to purchase imported vehicles in the absence of local alternatives. If government procurement were altered to support purchase of vehicles that are both fuel efficient and locally made it could accelerate product shifts in local manufacturing and bring on-line greater consumer choice. Australia s existing vehicle fleet presents a particular challenge for reducing emissions, given that many of the cars on the road today will continue polluting for years to come. However, to create the transition towards a more sustainable and efficient vehicle fleet, Australian governments should first look to improve the efficiency of new vehicles entering the market. This will ensure that the new vehicles we introduce to the vehicle fleet offer solutions to the challenges of climate change and higher petrol prices. These vehicles will eventually filter through to the second hand car market, ensuring that low-income demographics will have access to more efficient (and affordable) vehicles that those currently available.
5 5 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? But aren t cars becoming more fuel efficient? The average efficiency of the Australian vehicle fleet has not changed significantly since figures were first collected in Whilst there has been a trend towards compact design for electronic goods and IT, cars have stagnated or moved in the opposite direction- even increasing their petrol input and pollution output. In 1963 the average rate of fuel consumption for Australia s fleet of passenger vehicles was 11.4L to travel 100km, in 2007 it was 11.5L per 100km 9. Why is this so? Since the advent of the personal vehicle, car manufacturers have striven to improve their product to attract more buyers. These improvements have resulted in the engines working more efficiently, but these fuel efficiencies have been lost due to more power being required for air conditioning, power windows/steering, entertainment systems, or to carry a heavier weight - e.g. four wheel drive. In addition the proliferation of freeways has reduced the fuel efficiency of cars - more fuel is used if you drive at 110km/h than if you drive at 70km/h 10. The introduction of the Green Car Innovation Fund by the Federal Government was a good start towards greening the Australian car manufacturing industry and helping manufacturers move towards more efficient vehicles. Further, the commitment by the Victorian Government to purchase up to 2,000 of the new Toyota Hybrid Camrys (developed with assistance from the fund) over the next two years is also very welcome as it provides a market for new more efficient vehicles in Australian fleets and indicates to manufacturers the potential direction of future purchasing decisions by government. However much more can and needs to be done. Governments and industry are very aware of the challenge that the move towards smaller, more efficient vehicles by Australian motorists creates for the Australian manufacturing industry. In fact, the federal government Department of Innovation, Industry, Science and Research notes on its website that: While the sector has enjoyed strong growth in export markets, (notwithstanding 2009) its share of the domes c market has fallen from 30.2 percent in 2002 to 15.7 percent in This is indica ve of a long term consumer trend towards smaller, lower fuel consump on cars and, to a lesser degree, towards SUVs. This is away from the larger cars tradi onally produced in Australia. The future success of the local manufacturing sector will be largely determined by its ability to respond to these challenges 11. To date in Australia there has not been a stick or carrot significant enough to drive the manufacture and purchase of cars that use significantly less fuel - but the government can change that.
6 6 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? What s the rest of the world doing? Within the OECD Japan, South Korea, the USA and European Union all have mandatory standards for vehicle fuel efficiency, and China joins these nations with its own stringent fuel consumption regulations. Japan and the European Union are widely accepted as the world leaders in fuel efficiency standards. Japan has a mandatory emissions limit of 125g/ km for passenger cars by 2015, and will have reached 130g/km by Its standards, which are allocated into sixteen weight-based categories, are supported by stringent measurement and penalties for non-compliance. The European Union has a mandatory emissions limit of 130g of CO2 per km for passenger cars, which is also based on a weight curve and reinforced with monetary penalties for non-compliance. The target is to be phased in with 65 percent of each manufacturer s newly registered cars complying by 2012, rising to 75 percent in 2013, 80 percent in 2014, and 100 percent from 2015 onwards. The EU has also announced a 95g/ km target for 2020, with precise details of the plan to be established by the beginning of Chinese regulations require a fuel consumption standard of 5.6L per 100 km for passenger vehicles 13, and China is reportedly drafting plans for the standard to be improved this year 14. Meanwhile, in 2009 the United States government announced an increase in the fuel efficiency standards for passenger vehicles for the first time in 24 years - from 2011 a mandatory efficiency standard will be in place, resulting in a new car standard of approximately 6.6L per 100km by 2016, which is a 30 percent reduction in vehicle emissions on today s standards 15. Despite being measured in different ways - L per 100km, km per L, g of CO2 per km - two things are certain, all of the above schemes are mandatory and all are achieving more than we are in Australia. But countries around the world are not just implementing vehicle fuel efficiency standards in their attempt to slash transport greenhouse emissions. They have recognised that in order to make mandatory fuel efficiency standards more effective, secondary measures that stimulate demand for fuel efficient vehicles are required. In April 2009 Japan s top selling car, for the first time, was a hybrid. This performance was repeated the following month. Key to the hybrid s success was subsidies and tax cuts for fuel efficient vehicles which were a part of Japan s stimulus package 16 ; however tax reduction incentives for fuel efficient vehicles have existed in Japan since The taxes are based on the gross weight and engine displacement of vehicles, when purchased and registered, which promote the purchase of lighter vehicles with smaller engines - saving consumers in the realm of US$4000 over the life of the car. Meanwhile if motorists own a hybrid in the UK their road tax bill will be just 15, but if they have a 4WD it will be 400 under a system that has been in place since This model has been further
7 7 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? improved in the UK as of April 2010, with the introduction of a new first year rate that could be as much as 950 for the most polluting cars 18. This acts as a larger disincentive for inefficient vehicles at the point of purchase. China also has in place progressive taxation laws directed at both automakers and consumers, which reduces the cost of selling and purchasing vehicles with smaller engines. In China today, fuel efficient vehicles are subject to a 1 percent sales tax whilst sports cars and 4WDs attract a 40 percent sales tax 19. In the US the Gas Guzzler Tax, enacted in 1978, is assessed on new passenger cars that do not meet the required fuel economy standards 20. By making fuel efficient vehicles more financially attractive to customers through measures such as those mentioned above, demand for fuel efficient vehicles would be stimulated. In return this would further push the supply side to produce vehicles that meet the required targets. As with all public policy, carrots and sticks used in the right way can reward the positive and penalise the negative. When applied to the laws governing vehicle fleets, they can steer that fleet to becoming far more fuel efficient.
8 8 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? Where does Australia currently stand on vehicle fuel efficiency standards? To date Australia has relied on voluntary agreements with the car industry. In 2003 a vehicle fuel efficiency target was agreed between the industry and the federal government to reduce fuel consumption in new vehicles to 6.8L per 100km by However shortly after, the industry altered its testing arrangements triggering a review of the target that was never finalised. The industry has since relaxed the target to 222g of CO2 for new vehicles by The Australian industry is currently on track to meet this new industry set voluntary target, with new vehicle purchases in 2009 reaching 218g/km (equivalent to 9.6L per 100km under the new testing). While a direct comparison between the two targets cannot be made due to the altered testing arrangements, it is understood by industry experts that the new target falls well short of the original 22. Further, this industry set voluntary target is far behind vehicle efficiency standards elsewhere. For example, in 2008, Australia s carbon emissions from new passenger cars were 41 percent higher than the European Union 23. The story regarding the Australian manufacturing industry is just as concerning. In 2008, the average emissions from Australian-made vehicles were 267g/km (equivalent to 11.7L per 100km) 24. In 2009 Federal Transport Minister Anthony Albanese indicated his support for laws to ensure a minimum standard for fuel efficiencies 25. In July 2009 COAG announced they will complete a Regulatory Impact Statement to assess the costs and benefits of possible voluntary or mandatory vehicle emissions standards 26 which is due in The inclusion of voluntary standards within the research parameters is concerning, as their continual failure over more than two decades has ensured Australia remains behind the best of the world. Since October 2008 all new cars sold in Australia have been required to display the fuel consumption, in L per 100km (for urban and non-urban driving), and the number of grams of carbon dioxide emitted by the vehicle per km. While this consumer information is useful (and could be improved with the addition of a star-ratings system) it is no substitute for mandatory standards for vehicle emissions.
9 9 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? How can Australia become one of the world leaders? Australia is lagging behind and we need to catch up with the best in the world. It is clear that voluntary standards do not work. In 2008 the International Energy Agency recommended that governments introduce mandatory over voluntary fuel efficiency standards in order to achieve significant energy savings in the transport sector 27. Mandatory standards that ensure minimum fuel efficiency for cars in Australia are a simple, effective and pain free way the Government can reduce our greenhouse pollution. It is imperative that concrete steps are taken now to achieve these simple gains, so we can move forward to more difficult areas of the economy where savings must also be found if the Government is to achieve even its 60 percent by 2050 reduction in Australia s greenhouse pollution. Of course the beauty of fuel efficiency standards is that there are several other benefits - they will help families cope with higher petrol prices, reduce our dependence on oil, and ensure that our car manufacturers remain competitive in the international market. In addition the technologies are well established, continually improving and available today. Environment Victoria is urging the Federal Government to immediately phase-in mandatory fuel efficiency standards that will bring us in line with Japan and the EU by Australia can become one of the world leaders by ensuring these standards are strong, set a clear direction for manufacturers to ensure simplified compliance, and are free from loopholes. The Jamison Group, convened by the NRMA, advocate mandatory standards in staged increments to 2015, when a standard of 5L per 100km (114/km) or better be required Environment Victoria believes that the Federal Government should adopt this standard. Additionally the Government should withdraw all subsidies, incentives, taxes and duties identified in the Henry Tax Review that work to discourage fuel efficient vehicles or alternatives to car travel, and support those measures which encourage the production, importation and purchase of fuel efficient vehicles. All government taxes, subsidies and incentives involving car manufacturers should act to move the industry towards the production of small, fuel efficient cars and away from large, fuel inefficient cars; whist tariffs on imported vehicles should be based on a sliding scale which reflects their fuel efficiency. In this way Australian jobs are protected, and we ensure a transition towards a clean, locally manufactured vehicle fleet. The Australian Government can lead the way by setting a clear timeline for their procurement policy to shift towards a preference for fuel efficient vehicles over those made in Australia, whilst encouraging companies to do likewise with their fleets. Providing a clear timeline allows the car manufacturing sector the time to adapt their product to that which is in demand in Australia - small and fuel efficient vehicles. The Green Car Fund is an excellent example of a policy that drives the right greenhouse
10 10 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? outcomes whilst protecting Australian jobs - but more needs to be done. Australia s climate change response requires decisive action on proven systems and technologies that will reduce our greenhouse emissions. A mandatory fuel efficiency standard to achieve a fleet average of 5L per 100km for all new cars sold in Australia by 2015 should be enacted.
11 11 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? Recommendations Environment Victoria believes the Australian government should: Introduce a mandatory vehicle fuel efficiency standard to achieve a fleet average of 5L per 100km (114g/km), for all new cars sold in Australia by 2015 The Jamison Group, convened by the NRMA after their Alternative Fuel Summit in 2006, proposes Australia adopts mandatory standards in staged increments to 2015, when a standard of 5L per 100km or better be required. This is in line with world s best practice in Japan and the European Union. Adjust all taxes and subsidies in relation to vehicle manufacturing, importation and sales to encourage the uptake of fuel efficient vehicles, while actively discouraging fuel inefficient vehicles Remove perverse incentives related to fuel inefficient vehicles. Introduce a sliding scale linked to fuel efficiency for all taxes and duties. Commit to prioritising the purchase of low emissions vehicles for its fleet Actively encourage other levels of government and the private sector to follow suit the Victorian Government commitment to purchase up to two thousand of the new Camry Hybrid vehicles over the first two years of production, combined with support for Toyota through the Green Car Innovation Fund ensured a ready market for the introduction of the Camry Hybrid in Advocate state governments introduce a sliding scale for car registration and stamp duty fees that includes: A concession for new fuel efficient vehicles. A levy on new inefficient and heavy vehicles- by introducing both concessions and levies simultaneously, registration and stamp duty concession schemes can be revenue neutral for governments. Ensure strong, on-going incentives for the local manufacture of fuel efficient vehicles The Green Car Fund is an excellent example of a policy that drives the right greenhouse outcomes whilst protecting Australian jobs - but more needs to be done.
12 12 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? References 1 Alternative_Fuels_report_July_2008.pdf?cpssessionid=SID-D920B3F7-6A5E17B1 pg /6006BF6A6CC2F525CA2574B20020D2AB?OpenDocument Australian Government, Department of Innovation, Industry, Science and Research (2010). Outlook for the Automotive Manufacturing Industry Fact Sheet, accessed at innovation.gov.au/section/aboutdiisr/factsheets/pages/ OutlookfortheAutomotiveManufacturingIndustryFactSheet.aspx Jamison Group (2008), A Roadmap for Alternative Fuels in Australia: Ending our Dependence on Oil, pg. 26. Available at mynrma.com.au/cps/rde/xbcr/mynrma/jamison_group_alternative_ Fuels_report_July_2008.pdf?cpssessionid=SID-3D48BA9C-420E79D President-on-national-fuel-efficiency-standards/. The President announced a fuel efficiency standard of 35.5 miles per gallon (mpg) to be achieved by One mpg is equal to km per L. Therefore 35.5mgp is equivalent to 6.6L per 100km ee5q 17 transportintheuk,and briefings/snbt pdf, pg pdf, pg Ibid 23 National Transport Commissions (November, 2009). Carbon Emissions from New Australian Vehicles, pg. iv. 24 Ibid, pg. 21.
13 13 I VEHICLE FUEL EFFICIENCY STANDARDS FOR AUSTRALIA I WHY, WHAT AND WHEN? cfm#energy 27 Transport/5-Vehicle_Fuel.pdf accessed
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