Car efficiency regulations incoming: Volvo has it covered

Australia’s New Vehicle Efficiency Standard (NVES) aims to massively reduce carbon emissions from cars, vans and utes while cutting fuel bills.

It will mean carmakers have to meet minimum levels of fuel efficiency, which in turn means fewer harmful emissions – and for those driving combustion engine cars, fewer trips to the petrol station.

From 1 January 2025, it is intended that NVES emissions thresholds will be applied across each manufacturer’s range of vehicles, starting next year at 141 grams of CO2 per kilometre (g/km) for new passenger cars and SUVs, and 199g/km for vans.

Each year, the target gets steeper, so that the average CO2 emissions each manufacturer has to meet or beat gets lower. The timeline is short, aiming to reduce emissions by circa 60 per cent over five years to reach 58g/km for cars and SUVs and 81g/km for vans.

Any manufacturer that misses their targets must either pay a penalty – pretty steep at $100 per gram of CO2 over the limit – or buy those credits from manufacturers that come in under the allowed CO2 target.

So a manufacturer selling a lot of heavier, inefficient vehicles – gas guzzlers – will need to balance those out across its range by selling more fuel efficient hybrid or electric vehicles (which have zero tailpipe emissions). Or they will have to buy credits from rival manufacturers with a cleaner fleet footprint.

**Emissions buster**

Federal government analysis suggests NVES will save the average motorist $1,000 a year in fuel by forcing manufacturers to bring more fuel-efficient cars to Australia and $17,000 over the life of the vehicle.

By 2050, it calculates the policy will cut carbon emissions by 369 million tonnes. There is a cost to the policy – $46.49bn over 25 years – but the benefits, mainly fuel savings plus emissions, reduced vehicle maintenance and health benefits, are calculated at $142.95bn. In other words, the payback is calculated to be three times the cost.

Either way, the government says if it does nothing, transport will become the Australia’s largest source of CO2 emissions within six years – and Australians will be footing an additional $107.6bn fuel bill.

The policy is long overdue, given Australia lags almost all major economies on vehicle efficiency. New cars in Australia on average use 20 per cent more fuel than those in the US – which has had an efficiency standard in place for years. Worse still, combined CO2 emissions from Australia’s passenger vehicles are circa 50 per cent higher than the average of the world’s major markets.

Because other markets have higher efficiency standards, it means manufacturers tend to send their lowest emissions cars to countries that do not. That means Australia becomes a ‘dumping ground’ for less efficient models, compounding the problem and locking-in harmful emissions for years to come.

The New Vehicle Efficiency Standard is designed to put a stop to that. But it has led to pushback from manufacturers likely to take a financial hit because they will not be able to immediately hit the thresholds. They fear having to hike prices on less efficient models, which will make them less competitive, which in turn has led to no small amount of lobbying.

**Cleaner future**

While many carmakers support the policy’s introduction, others say it gives them little time to prepare, making significant penalties unavoidable.

Car industry association the Federal Chamber of Automotive Industries (FCAI) has urged a softer start and steeper finish to the new rules. It has warned government’s preferred policy option will cost billions and add thousands of dollars to the list price of some vehicles as manufacturers factor-in the cost of buying credits or paying penalties.

As a result of the FCAI’s stance, some carmakers – such as Tesla and Volvo stablemate Polestar – have cancelled their membership.

Volvo Car Australia fully supports the new emissions standard. The company has committed to sell only fully electric vehicles in Australia by 2026 – which means all of its models from that point will have zero tailpipe emissions. The company therefore will not have to factor-in additional costs of non-compliance – and sales across the range are already more than a third pure electric vehicles, balancing out Volvo’s heavier consumption models.

**Tipping point**

This year Volvo Car Australia’s ambition is to go beyond 50 per cent pure electric sales. Meanwhile, use of batteries in mild hybrids and plug-in hybrids significantly increases fuel efficiency while lowering emissions, giving further headroom.

There are doubtless challenges for carmakers and retailers as a result of the new legislation – but globally this is the direction of travel. Volvo firmly believes there is no long-term future for cars with internal combustion engines.

The New Vehicle Efficiency Standard brings the electric future one step closer for Australia.

A step change in public charging infrastructure investment would bring it closer still.