Labor’s new fuel efficiency plan already under threat

The PM’s new fuel efficiency standards plan applying softer rules for larger SUVs and 4WDs could be scuttled by the Coalition and Greens.

Climate Change Minister Chris Bowen unveils the Albanese government’s revamped fuel efficiency standards plan at Parliament House on Tuesday. Picture: Martin Ollman / NCA NewsWire

Anthony Albanese’s new fuel ­efficiency standards plan applying softer rules for some larger SUVs and 4WDs could be scuttled by the Coalition and Greens over competing concerns it will drive up consumer costs and fail to accelerate electric vehicle take-up.

After Transport Minister Catherine King and Climate Change Minister Chris Bowen unveiled Labor’s revamped New Vehicle Efficiency Standard, leading carmakers could not guarantee vehicle costs and choice would not be impacted under the transport pollution crackdown.

Facing pressure to overhaul its preferred NVES model announced last month, the Albanese government on Tuesday revealed a range of larger family cars would be categorised as light commercial vehicles and subject to a “smoother emissions trajectory”.

Ahead of legislation being tabled in parliament on Wednesday, the Coalition and Greens threatened to block the NVES and are likely to send the government’s bill to a Senate inquiry.

The Coalition and Greens teamed up unsuccessfully in the Senate last month to demand the government release secret $750,000 ACIL Allen modelling underpinning its fuel efficiency standards plan.

Mr Bowen and Ms King are seeking to push through legislation by June ahead of the NVES commencing in 2025.

After negotiations with stakeholders and concerns over IT systems, the government will delay its credit-trading scheme and penalties regime until July 1 next year. After the US softened its fuel ­efficiency rules last week, the government has eased the emissions trajectory pace for light commercial vehicles, which now include the Toyota LandCruiser and Prado, the Isuzu-Mu-X, Mitsubishi Pajero, Nissan Patrol and Ford Everest.

Standing alongside Ms King and Mr Bowen, Toyota Australia chief executive Matthew Callachor welcomed Labor’s concessions but warned it “remains a very big challenge” to achieve the fuel efficiency targets.

Asked about price impacts on Toyota models, Mr Callachor said the Japanese motoring giant was focused on offering Australians “practical, capable and affordable vehicles”.

“We were looking for something that was ambitious, but also would bring Australians along on the journey. And, as I said, that does leave a challenge, a significant challenge,” Mr Callachor said.

Motoring groups said the government’s commitment to a 2026 review was critical and must be used as a marker to further water down the NVES if required.

The NVES approved by federal cabinet on Monday night – following weeks of fierce criticism from motoring groups, farmers and trading partners over Labor’s original proposal – slashed projected emissions intensity reduction for new light commercial vehicles from 60 to 50 per cent by 2029. Headline emissions limits for trucks, vans and select 4WDs have been increased across every year between 2025 to 2029.

The fuel efficiency plan heavily favours EV manufacturers, including Tesla and Polestar, which will dominate the NVES credit-trading scheme. Car suppliers that exceed a final emissions value of zero, based on emissions and weight of a vehicle, will be penalised and fined $100 per grams/kilometre of carbon dioxide. Companies struggling to meet emissions standards can trade credits with competitors to offset their fleet emissions.

Industry experts have said Elon Musk’s Tesla is expected to earn around $200m from trading credits to conventional vehicle manufacturers seeking to meet the government’s caps. Tesla made around $US1.8bn from credit revenue in the US last year.

The government has also adjusted the “break point” recognising heavier vehicles emit more. EVs, which are heavier than conventional vehicles, will be able to earn additional credits.

Ms King said the NVES would deliver more than $95bn in fuel savings for Australians by 2050.

“With no action, we know that transport emissions are expected to become Australia’s largest source of direct emissions by 2030; 60 per cent of transport emissions come from the cars that we drive,” Ms King said.

“We are proposing to reduce those emissions by half. This is an Australian standard for Australian consumers and Australian conditions.”

The NVES supports Labor’s 43 per cent 2030 emissions reduction pledge and yet-to-be-announced 2035 target by delivering “cumulative abatement of 20 million tonnes to 2030, 80 million tonnes to 2035 and 321 million tonnes by 2050”.

Mr Bowen said the NVES meant “Australian motorists are no longer at the back of the queue … no longer treated as second-class citizens”.

After the Coalition attacked Labor’s initial proposal as a “family car and ute tax”, opposition transport spokeswoman Bridget McKenzie said “we will not support a policy that increases the cost of buying cars in the middle of a cost-of-living crisis”.

Senator McKenzie said the government and automakers who appeared alongside Ms King and Mr Bowen must provide guarantees to Australians on vehicle costs and choice.

“This was a tax on the family car, this is a tax on the family car, and it will be a tax on the family car. The Coalition stands firmly with families, farmers, tradies, and small-business owners on this,” Senator McKenzie said.

Greens leader Adam Bandt said the watering down of the NVES and Labor’s offshore gas and PRRT deal-making with the Coalition put at risk their support for the fuel efficiency plan.

“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,” Mr Bandt said.

Australian Automobile Association chief executive Michael Bradley said the government must explain how the NVES would “affect Australian consumers via their future vehicle choices and prices”.

“Transparency and openness on impacts will be critical if the government is to succeed in delivering durable change that can provide long-term certainty,” Mr Bradley said.

Federal Chamber of Automotive Industries chief executive Tony Weber said he had concerns about “the impending challenges facing industry and motorists”, and urged the government to release modelling that “forms the basis for their policy”.

Motor Trades Association of Australia chief executive Matt Hobbs said no group “got everything they wanted” but the NVES changes made the policy workable. He conceded it would be “tough” to make the policy work, particularly in 2028 and 2029, and said the 2026 review must be used to reassess the regime if required.

Smart Energy Council chief executive John Grimes said the NVES was “imperfect but vital”, and urged the parliament to urgently pass the government’s legislation.

Mr Grimes said the council was disappointed the plan had been weakened “to include some SUVs in the light commercial vehicle category, with the emissions reduction trajectory also weakened”.