Improving the efficiency of new light vehicles

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Commonwealth of Australia 2016, Improving the efficiency of new light vehicles is licensed by the Commonwealth of Australia for use. under a Creative Commons Attribution 4 0 International licence with the exception of the Coat of. Arms of the Commonwealth of Australia the logo of the agency responsible for publishing the. report content supplied by third parties and any images depicting people For licence conditions. see http creativecommons org licenses by 4 0 au, This report should be attributed as Improving the efficiency of new light vehicles Commonwealth. of Australia 2016, The Commonwealth of Australia has made all reasonable efforts to identify content supplied by. third parties using the following format Copyright name of third party. Disclaimer, The views and opinions expressed in this publication are those of the authors and do not. necessarily reflect those of the Australian Government. While reasonable efforts have been made to ensure that the contents of this publication are. factually correct the Commonwealth does not accept responsibility for the accuracy or. completeness of the contents and shall not be liable for any loss or damage that may be. occasioned directly or indirectly through the use of or reliance on the contents of this publication. Glossary of Terms 5,Executive Summary 7,Introduction 10.
1What is the Problem 12, 1 1 Transport fuel use and greenhouse gas emissions are increasing 12. 1 2 Fuel use and emissions are increasing despite improved efficiency 13. 2Why is Government Action Needed 18, 2 1 Improving light vehicle efficiency can help meet emissions targets 18. 2 2 Improving light vehicle efficiency improves energy productivity 18. 2 3 Government action could help address market failures 19. 2 4 Other countries have successfully improved vehicle efficiency 20. 3What Policy Options Are Being Considered 22,3 1 Objectives of Government action 22. 3 2 Technology focused measures do not restrict consumer choice 22. 3 3 Possible Options to improve vehicle efficiency 23. 3 4 Australia is unlikely to fully benefit from standards in other countries 24. 3 5 Minimum efficiency requirements for fleet purchasing 26. 3 6 Voluntary fuel efficiency standard 27,3 7 Legislated fuel efficiency standard 28. 3 7 1 Three targets have been evaluated 29,3 7 2 Implementation of a standard 29.
4What are the likely net benefits of each option 31. 4 1 Benefits fuel cost and greenhouse gas savings 32. 4 1 1 Changes in average vehicle efficiency 33,4 1 2 Fuel Savings 34. 4 1 3 Greenhouse Gas Reductions 35,4 2 Costs vehicle production and other costs 36. 4 2 1 Capital costs 36,4 2 2 Other costs 38, 4 3 All three targets evaluated produce a net benefit 39. 4 4 Under a range of scenarios there is still a net benefit 40. 4 5 Adopting a standard will increase regulatory burden 41. 5Consultation 42,5 1 Previous Consultation 42,5 2 Consultation Plan 42. Appendix A Implementing a fuel efficiency standard 43. A1 There is no internationally consistent approach 43. A2 What could be regulated 43,A3 How could efficiency be measured 43.
A4 How could a sales weighted average target be applied 44. A5 If an attribute based standard is adopted what attributes could be used to determine. manufacturer targets 47, A6 How could targets be applied to different vehicle types 49. A7 How could targets be phased in from 2020 to 2025 57. A8 What other incentives could a standard adopt to encourage supply of more efficient. vehicles under a standard 58,A9 Which entities could be required to comply 65. A10 Should all entities be subject to the same requirements 66. A11 What penalties could be applied if entities failed to comply 67. Appendix B BITRE Benefit Cost Analysis 68,Appendix C Consumer fuel savings 92. C1 Fuel savings for consumers include fuel taxes 92. C2 Fuel savings will depend on distances travelled and fuel prices 93. C3 Additional production costs may be passed on to consumers 95. C4 Payback periods will depend on a range of factors 96. References 98,Glossary of Terms,AAA Australian Automobile Association. ABS Australian Bureau of Statistics,ADR Australian Design Rule.
BAU Business As Usual, BITRE Bureau of Infrastructure Transport and Regional Economics. BCR Benefit Cost Ratio,CCA Climate Change Authority. CO2 Carbon Dioxide, CO2 e Carbon Dioxide equivalent in terms of global warming potential. DIIS Department of Industry Innovation and Science. DoE Department of the Environment,DoEE Department of the Environment and Energy. DPMC Department of the Prime Minister and Cabinet, EC European Commission governing body of the European Union.
EU European Union,EV Pure Electric Vehicle,FCAI Federal Chamber of Automotive Industries. 4WD Four Wheel Drive,GDI Gasoline Direct Injection. g km grams of carbon dioxide emitted per kilometre. GHG Greenhouse Gas,GVG Green Vehicle Guide,HFCV Hydrogen Fuel Cell Vehicle. ICCT International Council for Clean Transportation. IEA International Energy Agency,LCV Light Commercial Vehicle. LPG Liquefied Petroleum Gas,Mt Megatonne,NEDC New European Drive Cycle.
NEPP National Energy Productivity Plan, NHTSA United States National Highway Traffic Safety Administration. NPV Net Present Value Net Benefit,NTC National Transport Commission. OCE Office of the Chief Economist,PC Productivity Commission. PHEV Plug in Hybrid Electric Vehicle electric vehicles with an internal combustion. engine as an auxiliary power source,ppm parts per million. RIS Regulation Impact Statement,SCC Social Cost of Carbon.
SUV Sports Utility Vehicle,2WD Two Wheel Drive,UK United Kingdom. US United States, US EPA United States Environmental Protection Agency. US OMB United States Office of Management and Budget. WLTP Worldwide Harmonised Light Vehicles Test Procedure. Executive Summary, As part of a global response to climate change the Australian Government has internationally. committed to reduce our greenhouse gas emissions by 26 28 per cent below 2005 levels by 2030. Fossil fuels such as petrol and diesel are the principal fuel source for road vehicles in Australia. The fuel burnt by light vehicles currently contributes ten per cent of Australia s greenhouse gas. emissions or 57 million tonnes per annum As Australia s population and economy grows so will its. light vehicle fleet which will increase fuel usage and emissions Even with the current improvement. trend in vehicle efficiency the growth in the light vehicle fleet would add an estimated 8 million. tonnes of greenhouse gas emissions and estimated 5 billion in energy costs to the economy per. annum by 2030, Australia s light vehicle fleet is less efficient than many other countries In 2015 the average. efficiency of new light vehicles sold in Australia in grams of carbon dioxide CO2 emitted per. kilometre was 184g km 175g km for passenger vehicles cars and sports utility vehicles SUVs. and 229g km for light commercial vehicles vans and utilities By way of comparison the average. efficiency of new light vehicles sold in the European Union EU in 2015 was 120g km for. passenger vehicles cars and SUVs and 168g km for light commercial vehicles Light vehicles sold. in the United States US which are larger on average and have fewer diesel options than. Australia were estimated to have achieved an average efficiency of 183g km in 2014 1 157g km. for passenger cars and 222g km for light trucks SUVs and light commercial vehicles. These differences in efficiency are influenced by a variety of factors Key amongst them is that. approximately 80 per cent of the global light vehicle market including the US EU Canada Japan. China South Korea and India have adopted mandatory fuel efficiency standards These standards. aim to drive improvements in vehicle efficiency at a faster rate than could otherwise be expected. from market forces alone, While fuel efficiency is valued by consumers these benefits tend to be less immediate and tangible.
than other considerations such as vehicle price size and performance Fuel efficiency standards. that are in place in markets that supply light vehicles to Australia may help improve the efficiency of. the same vehicles sold in Australia however these improvements are likely to be smaller in the. absence of an incentive for manufacturers to supply their most efficient models and variants to. Australian consumers For example a comparison of the most efficient variants of top selling. passenger vehicle models offered in Australia found the best performing variants sold in Australia. were about 27 per cent worse on average than the most efficient model variants offered in the UK. A government fleet purchasing policy and a voluntary industry target were examined as options to. improve the fuel efficiency of Australia s vehicle fleet They were found to be unlikely to deliver. significant improvements above and beyond the business as usual trajectory The Australian. Government s capacity to influence the average efficiency of new vehicles through an efficient. vehicle fleet purchasing policy is minimal given it comprises less than 0 1 per cent of the broader. Australian vehicle fleet Any such fleet purchasing impacts would be strongly dependent on other. government and private fleets adopting similar policies. A voluntary target negotiated with manufacturers is unlikely to be effective as manufacturers and. consumers lack a shared interest in optimising social outcomes and manufacturers would be. unable to pass on increased manufacturing costs to consumers when in competition with. manufacturers who choose not to adopt a voluntary target. Three different fleet average efficiency targets were considered for the year 2025 105 119 and. 135 grams of carbon dioxide emitted per kilometre travelled gCO2 km A target of 105g km would. broadly align Australia with the EU targets for 2020 21 and the overall US target for 2025. The Bureau of Infrastructure Transport and Regional Economics undertook a benefit cost analysis. for each of the three proposed fleet average efficiency targets phased in from 2020 The main. benefit identified in the analysis was a reduction in fuel costs to the economy of 10 8 27 5 billion. Additional benefits would arise from a cumulative reduction in greenhouse gas emissions of 25 65. Latest comparable data available for the US at the time of publishing. million tonnes by 2030 and 91 231 million tonnes by 2040 The main cost was the additional. production cost of supplying vehicles incorporating technologies required to meet the proposed. targets These costs are more than offset by fuel savings with all three targets producing a net. benefit ranging from 5 8 13 9 billion and a benefit cost ratio between 1 86 1 97. Table E1 summarises the results of the analysis which shows that the benefits exceed the cost. under all three possible targets A B and C As fuel savings exceed the production cost under all. three targets the cost of abatement under a fuel efficiency standard is negative that is Australia. saves 48 70 52 60 for every tonne of CO2 avoided,Table E1 Estimated Benefits and Costs by 2040. Options Target A 105gCO2 km Target B 119gCO2 km Target C 135gCO2 km. phased in from 2020 phased in from 2020 phased in from 2020. to 2025 to 2025 to 2025, Fuel Savings 27 5 billion 19 7 billion 10 8 billion. Greenhouse gas 2 7 billion 1 9 billion 1 0 billion. reduction benefit 65Mt by 2030 46Mt by 2030 25Mt by 2030. 231Mt CO2 by 2040 164Mt CO2 by 2040 91Mt CO2by 2040. Total savings 30 1 billion 21 6 billion 11 8 billion. Total costs 16 2 billion 11 2 billion 6 billion, Net benefits 13 9 billion 10 4 billion 5 8 billion. Benefit Cost Ratio 1 86 1 93 1 97, Cost of Abatement 48 70 tonne 52 00 tonne 52 60 tonne. Sensitivity tests were also conducted on the Target A scenario to consider the implications of. different assumptions such as production cost fuel price discount rate and carbon price These. tests found that under a range of possible scenarios Target A would still deliver a net benefit. At a retail fuel price of 1 30 per litre it was estimated that an average motorist purchasing an. average performing passenger vehicle in 2025 could save between 237 and 519 per year in fuel. costs For an average performing light commercial vehicle purchased in 2025 it was estimated that. an average motorist could save between 182 and 666 per year in fuel costs Table E2 provides. a summary of the estimated fuel savings under all three possible targets. Excludes taxes such as excise and GST which are considered transfers in a BCA. Additional production cost minus fuel savings divided by tonnes of CO2 avoided by. Table E2 Possible consumer fuel savings in 2025 456. Possible consumer fuel saving in 2025 at a fuel price Target A Target B Target C. of 1 30 litre 105gCO2 km 119gCO2 km 135gCO2 km, Average performing petrol passenger vehicle travelling 519 399 237.
16 100km per annum, Average performing light commercial vehicle travelling 666 383 182. 21 700km per annum, In addition to the targets which reflect the magnitude of improvement required the design of the. standard can also affect the cost of meeting a standard and the range of vehicles manufacturers. supply to Australia The manner in which a standard is implemented needs to be considered. carefully including so as not to limit the range of vehicles manufacturers can offer to Australian. Australia s light vehicle fleet is less efficient than many other countries In 2015 the average efficiency of new light vehicles sold in Australia in grams of carbon dioxide CO 2 emitted per kilometre was 184g km 175g km for passenger vehicles cars and sports utility vehicles SUVs

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