Achieving net zero emissions requires decarbonised energy systems: when it comes to transport, fuel efficiency standards are the first step to getting us there 08 September 2022
By Victoria Townsend
Australia has one of the lowest rates of electric vehicle (EV) sales in the developed world. Last year, they comprised just two per cent of new car sales. And perhaps unsurprisingly, our transportation sector is the country’s third largest source of emissions, and due to population growth, is on track to be our largest by 2030.
Yet we are one of the only high-income countries in the world without a fuel efficiency standard, a crucial lever to encourage EV uptake. According to the American Council for an Energy Efficient Economy’s (ACEEE) latest international scorecard (which ranks the 25 largest energy-using countries across energy efficiency measures), we’re at the back of the pack, placing third to last with regards to energy efficiency of transport. Fuel efficiency standards cover 80 per cent of the global car market, which means, as one of the only remaining markets where they can be sold, we’re being sent the world’s least efficient vehicles.
Last month at Australia’s first national EV summit, climate and energy minister Chris Bowen announced that the government is exploring fuel efficiency standards to decrease carbon emissions from transportation and increase EV sales. A fuel efficiency standard is something the EEC has been a proponent of for many years, so I was excited to see the government finally take a strong stand. But it’s crucial that the momentum continues, and ‘exploring’ a fuel efficiency standard, becomes ‘implementing’.
The week prior to the EV summit, the Grattan Institute held a webinar with experts across the industry to make the case for emissions standards and discuss how they could be implemented. The webinar built on the Institute’s 2021 report, The Grattan car plan: practical policies for cleaner transport and better cities, and included voices from Grattan, Climateworks Centre, and the automotive industry. Below are some of my takeaways from the event.
The webinar, moderated by Marion Terrill, Director of the Grattan Institute’s Transport and Cities Program, featured Ingrid Burfurd, Senior Associate of Grattan’s Transport and Cities Program; Helen Rowe, Impact Manager of Climateworks Centre’s Transport Program; and Tony Weber, Chief Executive of the Federal Chamber of Automotive Industries. Each of the speakers provided their perspective on how an emissions ceiling (or ‘standard’) for cars might work in Australia and the potential challenges to implementing such a regulation.
We have several policy options to decarbonise transport – why go with an emissions ceiling?
Ingrid Burfurd, co-author of The Grattan car plan, kicked off the conversation by providing an overview of the policy options available to the Australian Government to drive down emissions from cars and light vehicles, which currently account for 11 per cent of the country’s emissions. These include:
- Regulatory policies, such as sales targets for EVs;
- Subsidies for the purchase of EVs; and
- Adopting an emissions ceiling.
Weighing the costs and benefits of these three approaches, she argued that an emissions ceiling – i.e. placing a limit on the average emissions from vehicles sold from any given manufacturer in Australia, commonly achieved by minimum fuel efficiency standards – would be the most effective way to drive down emissions, through the creation of incentives for manufacturers to supply EVs to Australia.
Helen Rowe of Climateworks Centre said that based on government projections, the country is on track for 26 per cent of new car sales to be EV by 2030, significantly trailing the 50 per cent EV sales target necessary within Climateworks’ Decarbonisation Futures 2°C warming scenario (and far behind the 76 per cent needed in the 1.5°C warming scenario, which would keep us in line with our Paris Agreement commitments). Though some states have aligned with the 50 per cent sales target – including the ACT, NSW, Queensland and Victoria – the Commonwealth Government needs to step up its policies to encourage EV uptake. Given that a large part of the problem in terms of transitioning to EVs in Australia is the lack of supply available, the adoption of an emissions ceiling would incentivise manufacturers to supply EVs to Australia.
Industry perspectives – the risks of going too hard, too fast
Tony Weber provided perspective from industry, agreeing that government needs to set a hard emissions ceiling for new cars being sold into Australia, but pushing back on the tight timeline for transitioning to zero emissions vehicles laid out by Ingrid and Helen. Weber noted that the members of the Federal Chamber of Automotive Industries had set voluntary carbon targets for themselves in 2020 in the absence of any federal legislation, as the industry recognised the need for action to reduce emissions. He argued that though a government emissions target is necessary in order to send a signal to manufacturers to begin supplying EVs to the country, the ramp up period must be long enough to allow for the investment in charging infrastructure to take place, and incorporate the same frequent review periods as the voluntary carbon target the FCAI had set to account for changes in the automotive market – including consumer purchasing trends and cost changes for batteries and emerging technologies.
But aren’t EVs expensive?
Everyone recognises EVs have a higher up front cost than internal combustion engine (ICE) cars, but the Electric Vehicle Council estimates total cost of ownership (accounting for up-front and running costs over the lifetime of owning the vehicle) will reach parity in Australia this decade. Most experts recommend an emissions ceiling, or minimum fuel efficiency standards, as the best approach as these mechanisms acknowledge the tension between the ambition of Australia’s net zero goals, and the amount consumers are prepared to pay to support their achievement. Specifically, an emissions ceiling allows manufacturers to reach the emissions target at least cost, slowly tapering down the emissions intensity of their vehicles over the initial years while EVs transition to cost parity with ICEs. This enables immediate emissions savings, and supports a smooth transition to more intensive emissions cuts as EVs become less expensive over the next decade.
Doing something is better than nothing
As Helen Rowe highlighted, right now Australia “doesn’t even have an oar in the water” – the government needs to really ramp up momentum to decarbonise transport, and minimum fuel efficiency standards are the way to do this, and something that we should all get behind.
This post originally appeared on Victoria's LinkedIn, here.