Opinion
The New Vehicle Efficiency Standard appears to be good news. But climate policy fatigue is well and truly alive and risks a smooth energy transition.
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When viewed in isolation, the New Vehicle Efficiency Standard is a positive for our net-zero ambitions, and phasing it in over five years to catch up to the US (not exactly known for driving small fuel-efficient cars) doesn’t sound too onerous either. And if we were to trust the government estimates, then every dollar of cost borne by this policy change will lead to $3 of benefit in fuel costs and the like over time.
But is it too much of a good thing? Are we risking long-term success by introducing too much change too quickly?
In a perfect world we can walk and chew gum at the same time.: But can introduce the Safeguard Mechanism, the Capacity Investment Scheme, a New Vehicle Efficiency Standard and more all at the same time? Bloomberg
Cutting emissions from the transport sector is essential. Transport emissions make up around 21 per cent of Australia’s total emissions and despite our national commitment to reduce emissions by 43 per cent by 2030 (relative to 2005 levels) – transport emissions are expected to hit record levels of 63 metric tonnes of CO2-e this year.
However, a recent announcement by federal National Party leader David Littleproud that Australia has reached a saturation point for industrial-scale renewable energy capacity is a clear sign the risk of climate policy fatigue is well and truly alive.
Our analysis suggests greening the grid must be the first priority if we’re to encourage a smooth transition to a decarbonised economy. Greening the grid will have the biggest direct impact on our emissions by turning off heavy-emitting coal-fired generators. What’s more, access to cheap, reliable, green electricity is also one of the most attractive ways for facilities covered by the Safeguard Mechanism to reduce their emissions. Finally, a shift to electric vehicles will have a significantly greater impact on the environment if the electricity used is green rather than brown.
In a perfect world we can walk and chew gum at the same time. Or more pertinently, we can introduce the Safeguard Mechanism, the Capacity Investment Scheme, a New Vehicle Efficiency Standard and more all at the same time. After all, for the latter, the weight-adjusted limits is a nice policy nuance that means you’re not asked to swap your Ford Ranger for a Ford Fiesta; rather, for a Ranger that emits less.
However, we know it’s not so easy. In particular, our analysis shows we’re struggling to green the grid quick enough.
The task ahead is formidable – the government plan is to quintuple our wind power generation between now and 2035, and that’s not to mention ambitious plans for pumped hydro, solar and batteries.
Construction sector capacity constraints, development approvals across various levels of government and the challenge of gaining a social licence to build from regional ute-driving communities is slowing our uptake of renewable energy.
Adding fuel to this fire in the form of a “ban on utes” – irrespective of the actual policy intention – is likely to slow things down further in the short term.
Of equal concern is the risk of policy fatigue in the short term leading to policy uncertainty in the medium term. We have a history of climate policy uncertainty in Australia and it’s one of the biggest hurdles in the way of supercharging additional private sector climate investment.
Enforcing the New Vehicle Efficiency Standards from January 2025 – the start of the next election year – will add fuel to a campaign deriding climate change action and could ultimately set us back to where we started.
In a vacuum, the New Vehicle Efficiency Standard makes sense to announce, particularly when you’re the last developed country except for Russia to do so.
But we would be better off focusing our efforts on one thing at a time to increase the chance of success in the long term.
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