It was reported earlier this month that Australia’s free trade deal with Japan would mean the average price of a Japanese car will be between $750 and $1500 cheaper (depending on which analyst you believe).
Regardless of the actual figure, the news certainly grabbed the headlines and will no doubt gladden the hearts of those people in the market for a new car.
While not to downplay these savings, the Federal Government’s coup d’etat in securing the deal appears to only provide a once off upfront benefit for those purchasing new Japanese vehicles, and it also assumes that car manufacturers will actually pass on the savings to consumers.
There is actually an ongoing way for the Government to ensure all Australian motorists purchasing new vehicles can save money and that is by introducing best practice vehicle emission standards within the next two years.
Most major economies in the world currently have vehicle emission standards in place but Australia has no standard, putting us in the company of Russia, Turkey, Iran and Brazil. As a result we are spending more on fuel than we should be.
Recent analysis by Climateworks, in conjunction with Rare Consulting, found the introduction of best practice standards would provide significant benefits for consumers while also enhancing Australia’s fuel security and reducing our greenhouse gas emissions.
Climateworks’ analysis looked at introducing best practice standards for light vehicles, targeting an average performance of 95 gCO2/km by 2024 (equivalent to what the EU is targeting by 2020). This would achieve more than a 50 per cent reduction in the average vehicle’s fuel use over 10 years compared to our current average of 199 gCO2/km.
Even taking account of rising fuel prices, this would see the average driver pay less per year for fuel before 2020 than they do today, even after considering potential fuel price rises.
With best practice standards in place, the average vehicle owner driving 14,000 kilometres a year would achieve fuel savings of up to $850 a year. A fleet driver averaging about 20,000 kilometres a year would save up to $1,200 a year on fuel costs.
Even taking into account the potential additional upfront cost of a new fuel efficient vehicle, the average driver will recoup that well within the average five year ownership period (or three years for a fleet owner) and still be saving on fuel costs.
The free trade deal with Japan only delivers a one-off savings that occurs upon the purchase of a Japanese car, whereas the introduction of standards could save Australian motorists $850 to $1,200 every year on fuel costs.
It is hard to understand why a Government action to secure a one-off savings for some motorists captures the media and public attention while its failure to agree to introducing standards, that could save motorists substantially more, is largely ignored.
There is of course more to benefit from the introduction of vehicle emissions standards than simply fuel savings.
Recent work by the NRMA has identified the issues related to Australia’s fuel security and our growing reliance on imported oil. By implementing best practice standards we could reduce our forecast oil demand in 2025 by up to 15%, reducing this reliance on imported oil.
Australia has a bipartisan emissions reduction target of 5 per cent by 2020 and we need to do more if we are to achieve a 25 per cent reduction in emissions that the scientists say is needed to avoid dangerous climate change.
The introduction of best practice emissions standards could save 4 million tonnes of carbon dioxide equivalent by 2020, and almost 9 million tonnes by 2024. This is the equivalent of taking over 2 million cars off the road.
The simple regulatory measure of introducing standards would assist the Government in achieving its emissions reduction target and allow it to save the Direct Action budget allocation for other measures.
Hopefully now the free trade deal with Japan has been signed, the Government can turn its attention to introducing best practice vehicle emission standards that will substantially cut fuel costs for Australian motorists, enhance fuel security and reduce our greenhouse gas emissions at the same time.
By Scott Ferraro, Climateworks Australia, Acting Head of Engagement