Emissions standards on cars will save Australians billions of dollars, and help meet our climate targets

The cheapest way for Australia to cut greenhouse gas emissions is to put a cap on car emissions. It would be so cheap, in fact, that it will save drivers money.

According to analysis from ClimateWorks, the toughest proposed standard would help Australia achieve about 6% of its 2030 emission reduction target, and save drivers up to A$500 each year on fuel.

The federal government is looking at policy options to meet Australia’s 2030 emissions target of 26-28% below 2005 levels. Last year it established a ministerial forum to look at vehicle emissions and released a draft Regulation Impact Statement for light vehicles (cars, SUVs, vans and utilities) in December.

There is no reason for the government to delay putting the most stringent emissions standard on cars.

Cars getting cleaner, but not in Australia

Australia currently does not have carbon dioxide emission standards on light vehicles. CO₂ standards work by improving the overall efficiency of the vehicle (the amount of CO₂ emitted per kilometre). These are different from fuel quality standards, which regulate the quality of fuels used by vehicles, and noxious emissions standards, which monitor a car’s emissions of noxious gases and particulates.

Currently, CO₂ emission standards cover over 80% of the global light automotive market. The lack of standards here means that Australia’s cars are less efficient than in many other countries, and this gap is set to widen.

In 2015, the average efficiency of new cars sold in Australia (in grams of CO₂ emitted per km) was 184g per km. In the European Union, the average efficiency of new cars was 120g per km for passenger vehicles and 168g per km for light commercial vehicles (such as vans used as couriers). In the United States – the spiritual home of the gas-guzzler – it is 183g per km and set to improve to 105g per km in 2025.

Australia’s cars account for about 10% of Australia’s greenhouse gas emissions, which are set to grow to 2030 if the market is left to its own devices.

Helping meet Australia’s climate target

In our submission to the draft Regulation Impact Statement, we confirmed that if the most stringent proposed target (105g per km) were introduced as proposed from 2020 to 2025, it would deliver 6% of Australia’s 2030 emissions reduction target. This would save A$49 per tonne of CO₂. Although there would be some costs in introducing the scheme, it would save A$13.9 billion by 2040 overall.

This saves an extra additional 41 million tonnes of CO₂ by 2030, 140 million tonnes by 2040, and an extra A$8.1 billion overall by 2040 compared with the least stringent proposed target (135g per km by 2025).

However, we found that a two-year delay would add an extra 18 million tonnes of CO₂ to the atmosphere, or 2% of the government’s 2030 carbon budget.

Any reductions not achieved in vehicle emissions will need to be made up in other sectors, or purchased through international carbon permits, most likely at a higher cost.

Savings on fuel and health

The most stringent target delivers A$27.5 billion in total fuel savings by 2040, A$16.7 billion more than the least stringent standard.

The draft regulations show that for an average car this is equal to a saving of A$197-295 a year for a driver doing 15,000km per year, and A$328-493 for a driver doing 25,000km per year.

To put this in context, based on 2012 household energy costs data, this would cut household energy costs by up to 10%, with even greater savings for low-income households.

But a two-year delay of the most stringent standard would also result in new car owners paying an extra A$4.9 billion in fuel costs by 2030, and an extra A$8.3 billion to 2040.

The reduction in fuel use will also potentially reduce air pollution, resulting in better health outcomes.

The most stringent standard will save deliver 2.6 times as much fuel as the least stringent standard, so should reduce health costs by a similar proportion. However, the introduction of emissions standards would need to occur in a way that does not increase noxious emissions such as nitrogen oxides.

No reason to delay

Given the enormous benefit of a more stringent standard, the government should also investigate an even more ambitious target.

Our research shows a standard of 95g per km by 2025 will deliver even greater benefits and is technically feasible based on achievements in other markets. The EU is aiming for this level by 2020.

While we also support improving fuel quality to reduce noxious emissions, research by the International Council on Clean Transportation (ICCT) shows that we do not need to improve Australia’s fuel quality standards before the introduction of standards to improve the overall efficiency of the vehicle.

Similarly, despite discrepancies between on-road and in-lab performance of vehicles as seen in the Volkswagen emissions scandal, a standard will still provide significant savings to consumers and the environment.

Standards alone are not the silver bullet. We’ll need a range of other measures to support emissions standards on cars to help improve efficiency and build consumer awareness of fuel-efficient vehicles.

With Australian car manufacturing due to cease by the end of 2017, it is an ideal time to ensure that new cars bought into Australia are the most efficient available. This will set us on the path towards lower vehicle emissions while reducing costs for motorists and improving health.