Environment Minister John Frydenberg has told press this morning that a report overnight of a so-called 'carbon tax' on cars is a beat-up.
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  • Government steps back from proposed future vehicle emissions standards
  • Environment minister describes press coverage overnight as a beat-up
  • Industry pushes case for plans that include commitment to improved fuel quality, consideration of market mix

“This story is a beat-up,” he said in an interview with ABC radio. “It’s about as likely as Elvis coming back."

He said the government is focused on reducing fuel costs for families, "and that is something we'll continue to consult on," but no decisions have been made.

The minister's comments come on the heels of a draft of proposed new fuel efficiency standards, produced by the Department of Infrastructure and Regional Development, that would potentially see prices increase dramatically for vehicles that do not meet the target figure. In the current market, that is the majority of vehicles sold in Australia.

The proposed standard, which was distributed to industry on Monday and appears to have been largely disowned in the hours since, would require all new vehicles sold in 2025 to contribute to a fleet CO2 emissions average equivalent to 105 grams per kilometre (g/km) on the current approved test cycle.

This would occur over a four-year 'phase in' period from 2022, at which point 65 per cent of new cars sold would need to meet the target.

According to the Australian government's Green Vehicle Guide (GVG), the national average CO2 emissions for a new light vehicle sold in Australia was 188g/km.

The proposed standard would also adopt the Worldwide Harmonised Light Vehicles Test Procedure (WLTP), which the UN is expected to take on as the basis for measuring vehicle efficiency by the end of 2019. The draft notes that because WLTP standard is more rigorous, vehicles registering 118g/km would be equivalent to 105g/km on the current standard.

So that car makers could still offer larger vehicles with higher emissions, the standard's targets would be applied through a 'limit curve' on a sales-weighted average basis, meaning that brands would need to offset the sale of vehicles that exceed the limit with sales of vehicles that sit beneath the limit curve.

To ensure compliance, all distributors would be required by 2020 to report all light vehicle sales by category, mass and WLTP efficiency, in an annual report at the end of each calendar year.

A credit and debit system would also be established, with sales of vehicles over or below the applicable target curve leading to the accrual of either credits or debits.

"For example, the sale of 1000 vehicles with a CO2 value 2g/km under the ‘target value’ defined by the limit curve would accrue 2000g/km credits," the draft reads. Likewise, "[...] the sale of 1000 vehicles with a CO2 value 1g/km over the target defined by the limit curve, would accrue 1000g/km debits."

Surplus credits would be carried forward or backwards, to offset debits accrued in either the previous or next three years.

A financial penalty of $100 would apply if the distributor is unable to offset debits within the new three years, and penalties would also apply for distributors that do not comply with the annual reporting requirement.

For most brands to stay on the right side of the curve in Australia's new-car market would take a herculean effort, with the current top sellers in the most popular segments producing well in excess of the target fleet emissions average.

The Toyota Corolla's CO2 range is between 96 to 162g/km, with that lower-end figure coming courtesy only of the low-selling Corolla Hybrid. The Mazda 3's CO2 range is 129 to 153g/km, while the hugely popular Ford Ranger 4x4 and Toyota HiLux 4x4 utes are in the 180 to 280g/km range.

It is these proposed financial penalties that brought concerns that the price of many popular cars could increase by more than $5000.

If that were to come about, the new standard could actually have a reverse effect on the national car fleet from that hoped for with the draft, potentially leading vehicle owners to hold onto their existing vehicles - less advanced and efficient than new models coming onto the market - far many years more. Australia's national car fleet has a current average age of 10 years.

Speaking with CarAdvice today, Mercedes-Benz Australia communications manager David McCarthy said the "the industry wants to reduce emissions, we all want to," but the proposed target would be near impossible to meet if the government does not at the same time take steps to improve the quality of Australia's fuel, which he described as being of a third-world standard.

“We have some of the worst fuel in the world, Frydenberg has more or less admitted to that,” McCarthy said. Improving our fuel quality "would be key" to achieving any meaningful improvement in vehicle emissions.

He added that, at the same time, Australia's love for SUVs and utes must be taken into consideration.

"While the full ramifications of this proposed standard are still being assessed, our view is that it would severely impact on the work, utility and lifestyle options of Australian consumers by adding thousands of dollars in emission “penalties” to the current price of an average one-tonne light commercial or medium-sized SUV," McCarthy said.

"The make-up of the mix of our market needs to be taken into consideration when developing an emissions standard as our market mix is considerably different to a lot of other markets."

McCarthy said the industry has been "consulting closely" with government to arrive at a plan that would best balance the needs of industry and consumers with the nation's environmental responsibilities.

But, after 18 months of discussion, "the industry firmly believes this high target is unrealistic and ill-considered".

McCarthy, who, along with Mercedes-Benz Australia president and CEO Horst van Sanden, is also a key representative for the Federal Chamber of Automotive Industries, noted the below points as being crucial in the consideration of any viable standard.

  • The 2030 Paris target endorsed by Government for the reduction in worldwide greenhouse gas emissions.
  • The need for a comprehensive package that included fuel standards and pollutant emission standards.
  • The need to maintain consumer choice, as Australian consumer predisposition to purchase heavier vehicles such as light commercials and Sports Utility Vehicles because of specific buyer requirements (towing requirements, automatic transmissions, load carrying, the needs of the mining and agricultural industries, long distance travel, air conditioning).
  • The necessity for feasible and attractive incentives to shift consumer choice toward more expensive new technology, lower emitting vehicles such as electric vehicles.
  • Appropriate introduction timing to take into consideration not only the vehicle industry, but also the government processes to develop the necessary legal and administrative processes and the oil industry’s ability to deliver higher quality 95 RON low sulphur petrol.

Introducing more affordable electrified vehicles to market would potentially help to keep brands 'in credit' with the proposed standard, but the uptake of ultra-green cars is unlikely to increase if they can not be made more compelling to buyers - either through range and price improvements or, as is common elsewhere in the world, through government-driven cost incentives and more widespread infrastructure.

Indeed, research by the government suggests the proposed standard distributed on Monday would require 26 per cent of new vehicles sold in Australia to be electric (9.5%) or hybrid (17.8%) vehicles.

So far in 2017, VFACTS-recorded sales of electric vehicles sits at 93 - an almost trivial figure in the face of the above needs, although nonetheless an improvement on the 49 EVs sold in the same period last year. In 2016, fewer than 250 EV sales were recorded by VFACTS.

And, as global Renault Nissan boss Carlos Ghosn told press recently: “I don’t think, today, that there is anything that would lead us to think that Australia is going to see electric cars [in mass numbers anytime soon]. Usually electric cars take off when there is a country policy about supporting zero-emission transportation."

Still, for all of the above reasons, and certainly in response to press coverage overnight and this morning, the government appears to have quickly stepped back from the proposed standards.

"Certainly no decisions have been made in that regard at all," Prime Minister Malcolm Turnbull told reporters in London today.

It looks safe to assume at least one decision has been made: return to the drawing board.