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Cleaner, Cheaper to Run Cars: The Australian New Vehicle Efficiency Standard

Announcement date
27 March 2024

Link to announcement 
New Vehicle Efficiency Standard Bill 2024 

Problem being addressed
Australia and Russia are among the only advanced economies without a new vehicle efficiency standard (NVES) so Australians spend more on fuel and have fewer choices of cleaner, cheaper-to-run cars.
The primary problems that Government is trying to solve is how to:

  • save Australians money on fuel;
  • reduce carbon-dioxide (CO2) emissions from new cars; and
  • stimulate the supply of more fuel-efficient, low and zero emission vehicles into the Australian market.

Cleaner, cheaper-to-run cars will support achievement of the emissions reduction targets established under the Climate Change Act 2022 and Australia’s updated Nationally Determined Contribution (NDC) under Article 4 of the Paris Agreement.

A NVES works by imposing a limit on CO2 (measured in grams per kilometre or CO2 g/km) each year across the fleet of vehicles that a supplier brings into the country. Each year the limit is reduced, so the standard becomes more stringent.

Compared to the status quo (no policy change), the Impact Analysis (IA) considers three broad options for a NVES and, informed by these options, a ‘Best Option’.
Option A – Slow Start.  An NVES starting slow and with a broadly equivalent rate of decline as the United States (US).
Option B – Strong, ambitious and achievable.  An NVES that seeks to catch up with the US around 2028 and then match the stringency of the US standards, while not seeking to go beyond those standards.
Option C – Aggressive.  An NVES that catches up with the US around 2026 and then brings forward US targets for 2029-2031 to the Australian NVES in 2028 and 2029.

Best Option - A strong, ambitious and achievable NVES that retains key design elements of Option B while substantively aligning with the standard proposed in the US. Two CO2 targets, one for passenger vehicles and sports utility vehicles (SUVs) and a higher target for utes, vans and some 4WD vehicles.

Assessed Impact Analysis outcome
Good Practice

Assessment comments
The analysis in the IA is of a good quality overall. In particular, the IA includes a comprehensive overview of the recent, and final, phase of consultation and how it informed adjustments to the ‘Best Option’.

Regulatory burden
The Department estimates the average annual compliance cost for the ‘Best Option’ is $150,000 for each small volume vehicle supplier (27 entities supplying less than 5,000 vehicles per year) and $400,000 for each higher volume vehicle supplier (26 entities supplying more than 5,000 vehicles per year).

OIA assessment of the Impact Analysis
Good practice
Attachment File type Size
Certification Letter docx 56.1 KB
Certification Letter pdf 1.37 MB
OIA Assessment Letter docx 267.4 KB
OIA Assessment Letter pdf 246.62 KB
Impact Analysis docx 3.11 MB
Impact Analysis pdf 2.48 MB