Fuel standards backflip reflects political reality

The Albanese government’s anticipated backtrack on the severity of fuel efficiency standards designed to promote the take-up of electric vehicles by making other options more expensive is a welcome bow to common sense. More worrying, it is further confirmation that Climate Change and Energy Minister Chris Bowen is not closely enough attuned to the difficulties being experienced in other parts of the world over the introduction of proscriptive measures in the name of reducing greenhouse gas emissions. Australia is a latecomer to the new vehicle standards and the federal government says its plans have been based on what is happening overseas, principally in the US and Europe.

Up until last week, car buyers were being told the new standards simply were a mirror of what was happening in the US. But the nation’s peak motoring body, the Australian Automobile Association, called out Mr Bowen on the detail. The AAA said it supported greater fuel efficiency standards but the US Environmental Protection Agency’s emission standards excluded heavier pick-up trucks while Mr Bowen’s proposal did not. Neither did Australia’s proposal include a long list of exemptions that made it easier for carmakers in the US to meet the standards. And the emissions calculations in the US and Australia were not comparable because of the way they were collected.

Last week the US had to water down its new standards, extending the time frame by which 60 per cent of new vehicles must be battery-operated by five years. Meanwhile, policymakers in Europe have been facing a similar problem, with the take-up of electric vehicles slower than expected and carmakers fearful of what overambitious targets would mean for them. In September, British Prime Minister Rishi Sunak delayed the transition to electric vehicles, including a program to phase out petrol and diesel cars by 2030. Under the new rules, which align better with what is happening in Europe, carmakers still face a fine of £15,000 ($28,990) for each non-electric vehicle sold over the quota. Mr Bowen’s proposed fuel efficiency standards include similar penalties, which is why the AAA says: “Prices of electric vehicles will need to be reduced to incentivise more buyers to purchase them, whereas internal combustion engine vehicles will need to be disincentivised through increased prices.”

For Anthony Albanese, the risk is a full-blown revolt by motorists who will find it more difficult and expensive to buy and drive the vehicles that are currently the most popular. For evidence of this, consider the diplomatic pressure being applied by Thailand and Japan, both suppliers of a high number of dual-cab utes and SUVs that will be penalised by the new rules. The likely outcome is that established carmakers will be forced to subsidise the imports of vehicles produced by electric-only carmakers in China.

Concerns over vehicle standards come as the federal government is forced to concede that its 2022 election promise to cut electricity bills by $275 a year is unlikely to be delivered. Also unlikely is the prospect of the government meeting its legislated 2030 greenhouse gas emissions target that will require 82 per cent of electricity to come from renewable energy sources.

None of this should have come as any surprise had Mr Bowen been focused on the difficulties being faced elsewhere. The outlook remains challenging and there is still time for the Albanese government to catch up. It should start by studying why overseas wind projects are being paid billions of dollars not to produce electricity when they are curtailed during times of high supply. Is this also something long-suffering Australian taxpayers and electricity users can look forward to in the future?