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Crucial moves on cutting car and truck emissions

Rod Oram digs into the detail of the Clean Car Standard and the Clean Car Discount policies announced this week.

At last we have the first policy proposal from government that will help us to significantly cut our greenhouse gas emissions, the cause of our climate crisis. It has taken more than 15 years of battling through dysfunctional politics and public apathy to get us here. Meanwhile our emissions kept rising.

Some people might protest the Emissions Trading Scheme paved the way. Yes, it could have had incentivised reductions. But it was rendered useless by the National-led government through its nine years in office.

So, the first real piece of policy is the Clean Car Standard and Clean Car Discount announced this week by associate transport minister Julie Anne Genter. Together, they could cut emissions by some 5 million tonnes between 2020 and 2041, while reducing fuel bills by some $2.4 billion based on net present value, the Government estimates, a benefit-to-cost ratio of three to one.

This is utterly crucial because reducing road transport emissions is by far the biggest, most practical and most economic action we can take in our enormous challenge of meeting our international climate commitments.

Our emissions from road transport increased by 93 percent from 1990 to 2017, with light vehicles contributing two-thirds. Meanwhile, our total emissions over that period rose 23 percent.

But we can cut our passenger vehicle emissions by 65-75 per cent by 2030 by accelerating the shift to zero emission vehicles, improving fuel efficiency of petrol and diesel vehicles and increasing vehicle occupancy from 1.5 to 2 people, analyst Paul Winton demonstrates in his work.

Such a shift would cut emissions by 14 million tonnes, which would be almost half the 31 mt of emission reductions we have to achieve across the economy by 2030. This would put us on target for meeting our goal of net zero emissions by 2050. That’s what humankind has to achieve if we are to keep the rise in global temperature to no more than 1.5c.

“Maybe in a world of hard solutions, road transport is the easiest one,” Winton writes in his companion article to this column. He describes, for example, the massive acceleration in car companies’ commitment to electric vehicles. The latest forecasts say they will be cost competitive with petrol and diesel cars by 2022.

The Government’s policy proposals this week were broadly welcomed by the motor vehicle sector. But there were a lot of negative and embarrassingly ill-informed comments from organisations that clearly hadn’t bothered to pick up even the gist of the proposals. The two biggest complaints were rural and low-income people would have fewer choices of vehicles and they’d be subsiding well-off townies’ purchase of electric cars.

Both propositions are completely wrong. Rural users will still have a wide range of utes to buy but the policy proposals will incentivise car importers to improve the fuel efficiency of them, and thus reduce the running costs.

More affordable, longer range electric cars will become practical for rural users over the next few years. And fuel-efficient hybrid utes and vans are coming too. Toyota for example, has committed globally to hybrid, electric or hydrogen versions of all its models by 2025. Great Wall, the Chinese vehicle maker, is promising an electric ute soon, with Tesla and others close behind.

As for low income households, many of them already highly conscious of fuel efficiency when they buy their cars. Thus, seven of the top 10 models of cars they already buy will attract price discounts when those cars are imported. The Government will subsidise them from the fees it will impose on imports of cars and other light vehicles with high fuel consumption and thus high emissions.

Prioritising fuel efficiency

The key to the proposals is the introduction in 2021 of a fuel efficiency standard for the first time in New Zealand. Currently we, Australia and Russia are the only three developed countries without one. As a consequence, our current light vehicle fleet averages only 9.5 litres per 100km, compared with 8.6 l in the US, 6.2 l in Japan, 5.8 l in the UK and 4.9 l in the EU. Thus, the petrol cost here for 11,000 km a year averages $2,007 compared with $1,213 in the EU and $995 in the US, where petrol is half the price of here.

The lack of a standard here also results in imports of some models of new vehicles which are less fuel efficient than variants of the same models the makers sell in other countries, the Government’s briefing document on its proposals show.

To incentivise importers to offer more efficient, and thus less polluting, new and used cars, the Government is proposing a fuel standard of 105 grams of C02 emission per kilometre, averaged across all imports by 2025, compared with 180 grams currently. Yet, we’ll still be well behind the rest of the world. Japan’s average was already 105 grams in 2014 and the EU is planning on 80 grams by 2025.

Crucially, though, the standard will be adjusted by weight. So, in 2025, for example, at the top end of the scale a ute or SUV weighing more than 2.2 tonnes would have s standard of 141 grams. For example, Ford’s sales are dominated by its Ranger utes. It would still offer plenty of those but it would have to make them more fuel efficient or pay a fine. At the bottom of the scale a car weighing under a tonne would be 80 grams.

Importers will be assessed each year on the vehicles they sell. If they fail to meet the emissions standard for their mix of vehicles, they will be fined $100 per new vehicle for each gram of CO2 their actual average was adrift of their standard and $50 per gram on used imports.

These penalties are lower than those in, for example, the EU and Australia, reflecting the reality imports here are very small scale and therefore have less buying power with vehicle markers.

And there will be plenty of options for importers. For example, an importer of high emitting vehicles could pool those with, say, an importer of electric vehicles to reduce its overall liability.

To stimulate the demand for low emissions vehicles, the Government will offer discounts of up to $8,000 per electric vehicle in 2021, the first year of the scheme. This will reduce to $4,200 in 2028. Low emissions petrol and diesel cars will attract smaller discounts, which likewise will reduce over time.

Conversely in in 2021, vehicles over 181 grams per km will attract a fee of $2,000, rising to $3,000 for those over 251 grams, such as a Range Rover or Toyota Land Cruiser. The top end of fees won’t rise, but lesser fees will be phased in over following years, so at the bottom of the scale by 2028 a vehicle with emissions in the 121-130 gram range would cost $500.

This suite of incentives and penalties is modest compared with many other countries. For example, Norwegians are offered much larger rewards for buying EVs; and in many other countries using such schemes the fees on petrol and diesel cars are annual ones, not a one-off at the first registration, as will be the case here.

While our modest scheme is insufficient to fulfil Winton’s ambitious analysis, it will at least encourage more people to make better decisions about which vehicles they buy. Perhaps over time, the public will accept improvements in the scheme to incentivise an even faster shift in the fleet so we achieve our emissions reduction potential..

This scheme, though, has an even greater importance. Hopefully, it will help people become more conscious across all their choices, and more willing to take action to help New Zealand achieve its utterly critical climate commitments.

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