By Tanzila Khan and Zifei Yang

The Australian Government recently conducted a public consultation on national electric vehicle (EV) strategy and sought inputs on introducing mandatory national vehicle fuel efficiency standards for new light-duty vehicles (LDVs). This is a key step and we applaud the government for taking it. Adopting fuel efficiency or carbon dioxide (CO2) emission standards will help promote EV sales and help Australia to catch up with leading vehicle markets in combating climate change.

Can Australia run like the wind? It has to, according to our recent analysis. Stringent standards are crucial if there’s going to be a chance of achieving Australia’s economywide net-zero carbon emissions target for 2050.

Our working paper modeled the impact of various policy scenarios that correspond with standards of differing stringency, and we evaluated the resulting CO2 emissions trajectories for the on-road LDV fleet from 2019 through 2050 with standards implemented starting in 2024. As shown in Figure 1, we found that only the most ambitious pathways that include world-class standards can almost fully decarbonize Australia’s on-road LDV fleet by 2050. Implementing such standards starting in 2024 could reduce well-to-wheel CO2 emissions from the LDV fleet by 94%–95% in 2050 compared to 2019.

two line graphs; the one on the left shows tank-to-wheel emissions and the one on the right shows well-to-wheel emissions.

Figure 1. Estimated CO2 emissions under six policy scenarios for Australia’s LDV stock from 2019 to 2050.

There are important differences between the scenarios. In addition to a business-as-usual “Baseline” scenario without any standards, we considered a scenario aligned with the existing Federal Chamber of Automotive Industries’ (FCAI) voluntary CO2 emissions targets (the yellow lines). The State Aligned scenario in light green corresponds to existing state-level EV targets in Australia and the dark green lines are aligned with the U.S. 2026 standard. The two scenarios that bring the most emissions reductions are the EU Aligned one (light blue), which is aligned with the EU 2025–2035 standards, and the World Class scenario (dark blue), which reflects a combination of world-leading ambitions including New Zealand’s standards for 2025, California’s zero-emission vehicle (ZEV) mandate by 2030, and the European Union’s proposed Fit for 55 standard of 0 gCO2 per km by 2035, which implies 100% market share of battery electric vehicles. As you can see, each of these scenarios can lead to very different futures for the LDV fleet.

State-level governments in Australia have thus far been more active than the federal government in setting EV targets and enacting policies to support EV uptake. Five out of eight Australian states that account for 87% of national LDV sales have set targets for 100% EV sales by 2035–2036. We found that a national fuel efficiency standard that aligns with the existing state-level EV sales targets would reduce the well-to-wheel CO2 emissions by 84% in 2050 compared to 2019 level. That’s a sizeable chunk, but it would also result in 165 Mt more CO2 emissions from 2019 to 2050 than the World Class scenario.

The FCAI scenario would reduce emissions by only 35% in 2050 from the 2019 level. Not only is this pathway inadequate for LDV decarbonization, but it could also allow backsliding of internal combustion engine vehicle (ICEV) emissions if national EV sales growth aligns with the aggregated state-level targets. As Figure 2 illustrates, if the national EV sales share reaches 45% in 2030, in line with the aggregated state-level EV sales targets, the average ICEV emissions would only need to be about 200 g/km to meet the FCAI 2030 target; this level is 10% higher than the 2019 level. Allowing such backsliding of ICEV emissions runs the risk that Australians might bear increased fuel costs from purchasing less-efficient and higher-emitting vehicles.

Top panel shows the fleet-average emissions and ICEV-only emissions under the FCAI targets as a line chart and bottom panel is a bar chart showing EV sales share percentage in 2019, 2023, 2025, and 2030.

Figure 2. National EV sales shares aggregated from state-level EV sales targets for selected years and concurrent FCAI fleet-average and ICEV emissions.

There are other weaknesses in the voluntary CO2 emission targets set by the FCAI, the representative organization for all automotive companies importing LDVs in Australia, in 2020. As a voluntary process, there is no mechanism to assess compliance and auto companies are not subject to any penalties for noncompliance. There is no government data collection and no tracking, monitoring, or disclosing of the performance of auto companies or their use of the generous compliance flexibilities included in the FCAI’s approach.

The FCAI has called on the government to adopt these voluntary targets and the compliance methods as the mandatory standard for Australia’s LDV fleet. But the FCAI targets are not nearly stringent enough and cannot take Australia anywhere close to full LDV decarbonization.

The three most ambitious policy options, the U.S. Aligned, EU Aligned, and World Class scenarios, have similar targets of around 110 gCO2/km by 2025 but larger differences in the 2030 standard stringency level. The targets for 2025 all yield emissions reductions of about 20% compared with the pre-standard 2023 level, and that largely influences the emissions trajectories and leads to similar trajectories toward almost full decarbonization in 2050. Nonetheless, due to the more gradual increase in stringency from 2025 to 2035, the U.S. Aligned and EU Aligned scenarios could lead to 33 Mt and 9 Mt more CO2 emissions, respectively, from 2019 to 2050 than the World Class scenario.

Drafting the best possible standards is important. For one thing, LDVs alone account for 12% of Australia’s total greenhouse gas emissions. Additionally, Australia is one of the few major markets that does not yet have any mandatory fuel efficiency or CO2 emission standards, and that shows up in sales figures. In 2021, the EV share of new LDV sales in Australia was only 2%, far less than the EU average of 17% and the global average for major markets of 9%.

Therefore, when Australia decides to run on fuel efficiency or CO2 emission standards, it should run fast. Aligning with world-class standards as early as possible is critical, and that means a stringent fleet-average CO2 emissions target of 110 gCO2/km on the New European Driving Cycle by 2025, 50 gCO2/km by 2030, and 0 gCO2/km by 2035.

This article has been sourced from the International Council on Clean Transportation and can be accessed here