Craig Newland, Canberra-based director of policy and research of the Australian Automobile Association, sat down with Fleet News Group reporter Caroline Falls for this illuminating interview on fuel efficiency and fuel emissions standards at the 2023 Australasian Fleet Managers Association (AfMA) conference. The conversation has been edited for clarity and brevity.
Caroline: How do you describe the fuel efficiency standard in one sentence, or in a nutshell?
Craig: It’s a means to put pressure on the market to reduce emissions and provide incentives for manufacturers to do that.
Caroline: Why did the government defer detail on the fuel efficiency standard? It put out a clear base electric vehicle strategy, and then it said, we’re going to bring in a fuel efficiency standard, but we haven’t got the details yet?
Craig: Correct. So the consultation last year on the national electric vehicle strategy, included a question on whether we ought to have a fuel efficiency standard. When the strategy was released in April, the answer was ‘Yes, we ought to have one,’ and they’re working on developing it. And then they’ve gone to a consultation phase, I would say the consultation is fairly early. It’s an open question — What elements should we have in the standard?
Caroline: Your presentation today laid out just how complex a question the whole thing is. But before I get into the complexity, tell us how will a fuel efficiency standard affect supply of EVs in Australia?
Craig: So essentially, Australia is competing for supply of EVs with others whose markets if they have fuel efficiency standards in place, and generally they do, then they will be prioritised because there are financial incentives with either carrots or sticks for vehicle brands to prioritise for those markets.
Caroline: So introduction of a fuel efficiency standard in Australia will help level the playing field?
Craig: When we’re trying to get access to vehicles that are currently being prioritised elsewhere, yes, by making ourselves match what the others are doing in terms of incentivisation.
Caroline: Mostly the strategy at the moment is pretty much just about the passenger end of the market, why is that?
Craig: The fuel efficiency standard is only for light vehicles. The other constraint is fuel quality. The fuel quality for diesel is sufficient to support Euro 6, the fuel quality for petrol is not.
Caroline: Okay, so because Euro 6 predominantly combats toxic Noxious emissions and heavy vehicles use diesel, then it’s the petrol end of the market, or the passenger segment, that needs urgent address, and you’re saying we need to do something about fuel quality as well?
Craig: Correct, because vehicles coming from the overseas market will already be low CO2 and Euro 6, so if we want that car to come straight here, we have to have the fuel to support it.
The problem with low fuel quality is that if you operate a Euro 6 vehicle on fuel that won’t support it, you get no function; the fuel doesn’t support the car, and the car may go into limp mode. But the catch is the vehicle will come with both Euro 6 and low CO2 technology. If we only want one of those and not the other and the fuel quality won’t support Euro 6, then the brands will have to do something to manage that issue.
Caroline: Okay, so if we haven’t got the correct fuel to support the low emissions technology light vehicles, how can OEMs bring them in and meet fuel efficiency standards?
Craig: Exactly right. We’d actually like to see the whole lot: fuel quality, noxious emissions and fuel efficiency standards done as a package. That will make most sense. Our view is that a package of measures that addresses all three would be far more sensible, it would also better handle the issues associated with calculating costs and benefits.
So for example, if you look just at fuel quality, if you want to improve fuel quality, there is a cost. But the benefit actually arises from the vehicle standard. So unless you do both together, you won’t be able to calculate a benefit itself from fuel quality improvement. It’s an enabler for noxious emissions standards. And so you have to do the two of those together to look at both the costs and the benefits.
Caroline: I like how you invoked a sales weighted average in your presentation here earlier today. Can you explain that again, and it really goes back to the first question.
Craig: The principle that a fuel efficiency standard is trying to address is making the entire light vehicle fleet more fuel efficient or lower CO2 emission. And in order to allow flexibility that you can still buy a higher emitting vehicle, if that’s what you need. The principle of sales weighted volume is actually what characterises the entire fleet. And then you would want to reduce that number.
And that’s this whole point of not saying, ‘Oh, well, you can’t have any big cars anymore. You can’t have any internal combustion is anymore,’ or trying to narrow down the types of vehicles to specific types. It’s technology neutral that allows options and allows brands to work within that with whatever products they’ve got to be able to meet the requirement that, on average, the fleet gets greener.
Caroline: You presented some graphs and charts with mass and averages, for example, showing that average mass of the Australian fleet vehicle was around about 1,700 kilograms, and how they emit an average of 181 grams per kilogram. How is that going to trend? Is it going to reduce over time, is that something we can explain?
Craig: That figure of 181 grams per kilometre of CO2 is from 2016 and has reduced in the interim, so the fleet has become more efficient. In terms of mass, I don’t know what the current mass is, but the figure that was in there, and that’s across the entire light fleet was 1,700 kilograms and I think that we’re probably going to drift slightly higher on that.
It’s my guess, because EVs are generally heavier. But some of that change in mass is driven by buying preferences and people tending to buy more SUVs and light commercial vehicles as a percentage of sales. That will also somewhat drive CO2 numbers up.
But overall, the technology improvements have meant that the CO2 number is coming down. And that’s a natural reduction. But what the standard is designed to do is to accelerate that, and then you’ve got this balance to strike between pushing brands beyond business-as-usual trajectory to get greater reductions in CO2 and more supply of new technology and low-emission vehicles to our market. But not putting in a target that is so stringent that it can’t be met, either by technology or by consumer buying preference.
Caroline: Last question, so your deep dive into the complexity of fuel efficiency standards, also covered discussion of OEMs potentially trading credits, for example, Tesla and Polestar, will have zero emission vehicles which they may potentially get credits for and be able to sell to higher emitting OEMs.
Craig: In Australia, that decision is yet to be made about whether that trading ability will be permitted, but it is permitted in the standards overseas. And those companies already make money out of trading with brands that are otherwise not able to comply with their requirements. So it is a reality that’s already happening, whether it happens here or not is up to the government to decide.
