The federal government has relented to pressure from car manufacturers and the Opposition and watered down its planned fuel efficiency standard, particularly as it applies to larger vehicles.

A draft model for a fuel efficiency standard was unveiled by the Labor government in February, outlined an aim to achieve a 60 per cent reduction in average new car emissions by 2029.

The fuel efficiency standard will set a cap on the average emissions per kilometre for new cars sold for each manufacturer in Australia, with this to increase the availability of affordable electric vehicles.

Australia and Russia are currently the only developed nations to not have such a standard in place.

After revealing the draft model preferred by the government, Labor has been consulting with relevant stakeholders over the last month.

The fuel efficiency standard has been welcomed by environmental and EVs groups but opposed by the Opposition and some car manufacturers.

Following this consultation, Minister for Infrastructure, Transport, Regional Development and Local Government Catherine King, and Minister for Climate Change and Energy Chris Bowen announced on Tuesday that some changes would be made to the standard before it is introduced to Parliament on Wednesday.

These changes include switching the categorisation of a limited number of four-wheel drives, such as the Toyota Landcruiser and Ford Everest, from passenger cars to light commercial vehicles, meaning they are subject to less stringent fuel efficiency standards.

The government will also be “smoothing the emissions trajectory” for these light commercial vehicles, which are in line with changes recently announced by US President Joe Biden for America, and adjusting the weight-based relative emissions limit, known as the break point, in recognition that heavier vehicles emit more.

The final modification is a stage implementation of the policy, with the standard to come into effect as planned at the start of next year, but the credits scheme and fines system to not start until 1 July 2025.

“We have consulted widely and for some time to get the model right for Australia, one that does increase choice, it reduces emissions, it is sustainable and effective and realises fuel savings for consumers,” King said in a statement.

“You will still be able to buy the vehicles you know and love. But there will be more options of more efficient vehicles available in the Australian market.

“This is an Australian standard for Australian consumers and Australian conditions.”

Industry support

The government ministers announced the modifications to the standard in a press conference featuring representatives from Toyota, Hyundai, the Motor Traders Association, the Electric Vehicle Council and Tesla, indicating widespread industry support for the new approach.

During the press conference, Toyota Australia boss Matthew Callachor said that the changes still “leave a…significant challenge” but that the fuel efficiency standard is not a new car tax, an attack line that has been adopted by the Opposition.

Despite this, the Opposition continued to label the fuel efficiency standard as a new tax on Tuesday, and said it still plans to vote against the legislation despite not having seen it yet.

The planned fuel efficiency standard to be introduced to Parliament will aim to reduce emissions from new passenger vehicles by more than 60 per cent by 2030, and roughly halve the emissions of new light commercial vehicles in the same period.

This will be “good for the hip pocket and good for the environment”, the government ministers said, and will catch Australia up to most comparable economies by the end of the decade.

“The standard will give car makers an incentive to send us their most efficient vehicles, while ensuring Australians have access to the range of vehicles they need for work and leisure,” the minister said in a statement.

According to former competition watchdog chief Allan Fels, electric vehicles in Australia cost $9,025 more than they should, with New Zealanders on average paying 41 per cent less for the same car than Australians.