In Focus
August 2023

Australia launched its first Fuel Efficiency Standard programme in April 2023

In this ‘In Focus’ newsletter we would like to draw our readers’ attention to the latest developments in Australia's efforts to address fuel efficiency standards and embrace cleaner transportation. In April 2023, the Department for Infrastructure, Transport, Regional Development, Communications, and the Arts (DITRDCA) launched its first-ever strategy programme on fuel efficiency standards, inviting input and feedback from the public and international community.

In its dossier, the department introduces the objectives of the Fuel Efficiency (CO2) Standard to the Australian consumer as follows:

·       Reducing transport emissions to improve air quality for individuals and their families.

·       Providing consumers with more choices when purchasing vehicles.

·       Saving money at the petrol pump by decreasing fuel consumption. (Editor’s note: Industry data shows that new cars sold in Australia use on average 35% more fuel than new cars in the European Union, around 20% more than in the United States)

DITRDCA also highlighted that most developed countries around the world have introduced fuel efficiency standards. Australia is being left behind, because it has not introduced a fuel efficiency standard. (Editor’s note: Apart from Australia, Russia is the only other developed country which does not have fuel efficiency standards).

Current situation

The Federal Government will implement the Euro-6 emission standard for new trucks and buses in Australia, which will be phased in over 12 months starting from 01-Nov 2024. Introducing Euro-6 will mean manufacturers must add the advanced safety and fuel-saving technologies to Australian models. This will help improve safety outcomes and contribute the country’s emissions reduction targets. These standards are already in place in the Europe, and equivalent standards also apply in other industrialised countries, including the US and Japan.

The Euro-6 emission standard sets a legal requirement for vehicle manufacturers to average CO2 emissions below 98g/km. For petrol engines, the standard notably introduces a limit in emissions for carbon monoxide of 1.0g/km, for total hydrocarbon emissions of 0.10g/km, for non-methane hydrocarbon emissions of 0.068g/km and for nitrogen oxides of 0.06g/km. For diesel engines, the limits in emissions for carbon monoxide is 0.50g/km, and 0.17g/km for hydrocarbons and nitrogen oxides.

Fuel quality standards

Apart from not having fuel efficiency standards, ACFA had pointed out in previous newsletters that requirements for fuel quality in Australia also lagged behind international standards. China, India, South Korea, Japan and other countries in Asia as well as Europe, Canada and the US have enforced significantly stricter fuel quality regulations.

Australia has previously delayed the full introduction of Euro-5 and Euro-6 fuel quality standards. Emission standards were also left untouched on claims that costs for the auto industry will rise, which would ultimately lead to significantly higher car prices.

Currently running on fuel standards similar to Euro-3/Euro-4, with exceptions for aromatics and Sulphur content and other parameters in place, the previous government announced in 2019 the implementation of Euro-5/Euro-6 fuel quality standards for the year 2027 only after reaching a compromise agreement with the local refining industry. The news at the time was widely greeted with disappointment by clean fuel advocates, while others, like Europe and China, are already preparing today for the introduction of the Euro 7 fuel quality standards.

However, in 2021 as part of the “Locking In Australia’s Fuel Security” programme, the government introduced its plan advance the 2027 Fuel quality upgrade schedule to the end of 2024, which was eventually ratified in 2022 together with generous support programme for country’s only two refineries, the Ampol refinery in Lytton (Queensland) and the Viva Energy refinery in Geelong (Victoria).

By 15-Dec 2024, all gasoline grades at Australian service stations must have a maximum Sulphur content of 10 parts per million. This applies to 91 RON, 95 RON, 98 RON and E85 unleaded fuel.

While diesel fuel in Australia has already been limited to 10ppm Sulphur previously, 95RON and 98RON premium unleaded petrol has been limited to a maximum of 50ppm Sulphur since 2022. 91RON regular unleaded has till date a permitted Sulphur level of 150ppm.

Current emission readings

In their Fuel Efficiency Standard paper, the Department for Infrastructure, Transport, Regional Development, Communications and the Arts refers to that the transport sector in Australia accounts for 19% of total emissions, being the country’s 3rd largest source of emissions. Passenger cars and light commercial vehicles alone contributed 60% of the transport emissions and over 10% of Australia’s total emissions.

Without further intervention, the transport sector is projected to be Australia’s largest source of emissions by 2030.

It is estimated that the programme will help reduce Australia’s emissions by at least 3m MT of carbon by 2030, and more than 10m MT by 2035.

The National Electric Vehicle Strategy

The government has also unveiled its National Electric Vehicle Strategy as part of the "Fuel Efficiency Standard: Cleaner Cars for Australia" initiative, pointing at electric vehicles as one of the key steps to reducing transport emissions. The strategy paper states that switching to EVs

•         can reduce Australia’s emissions

•          can help reduce air pollution

•          has far-reaching health and environmental benefits.

In its report, the government department emphasizes that 82% of Australia’s electricity will be generated from renewable energy sources by 2030 and that EVs powered by this electricity will contribute to achieving the country-wide emissions reduction target of 43% below 2005 levels by 2030 and net zero emissions by 2050. However, the report does not provide any information on the expected market penetration of electric vehicles.

Australia’s new Labour-government has already cut taxes on EVs through its Electric Car Discount programme, which provides >20% savings a year on electric vehicles. This has promoted EV sales by 2.5 times this year versus 2022, albeit starting from a very low base of less than 4% of the total car sales in 2022.

This, in itself, presents an important point, which needs to be taken into account. Even if EV sales in Australia will continue to grow at above average rates, it will take time to penetrate the market and fully replace conventional combustion engine vehicles, as seen in other regions and markets as well when initial interest retreats or when subsidy schemes are reduced or phased out. Quality improvements to conventional and hybrids cars as well as on fuel specification requirements are at present more important, providing an immediate impact and improvement to air quality and CO2-reductions, helping the country to achieve its ambitious goals efficiently and in a cost-effective way.

ACFA’s contribution to the Australian Fuel Efficiency Standard programme

As such, the Asian Clean Fuels Association has submitted its feedback and suggestions to the Australian government by supporting the programme and strategy and highlighting additional steps, which can be taken for the years ahead to achieve the best possible outcome for the country.

In its contribution, ACFA congratulated the authorities on their fuel efficiency standard initiative and their plans to reduce CO2 emissions and move towards cleaner modes of transport, but also raised some additional concerns related to emission standards and fuel quality issues.

Among those, ACFA shared its view that the use of cleaner fuels is one of the most compelling answers to improving air quality on a prevalent and immediate basis.

Based on research and experience obtained from other markets, implementing a minimum requirement of 95 Research Octane Number (RON) and eliminating the 91RON standard is one successful measure to reap the maximum environmental benefits. Improved engine performance, reduced knocking, and better combustion efficiency will also contribute to lower fuel consumption and savings for the consumer.  

Beyond this, ACFA raised the point that encouraging the use of higher RON fuels can benefit hybrid vehicles as well in their endeavours to optimize fuel efficiency. By using higher RON gasoline, the combustion engine in hybrid vehicles can operate more efficiently, optimizing the overall fuel economy and reducing emissions.

Improving the fuel quality by implementing a minimum 95 RON grade and phasing out the 91 RON grade will provide immediate environmental benefits, while the full transition to EVs will take a longer time. Higher octane standards are being sought by the Worldwide Fuel Charter and most developed economies already require a minimum octane rating of 95RON.

Australia's commitment to fuel efficiency standards and clean energy transition signifies a critical step toward a sustainable and eco-friendly future. By embracing advanced emission standards and promoting cleaner fuels, the country can significantly reduce emissions and improve air quality. Concurrently, the National Electric Vehicle Strategy offers a promising pathway to further environmental progress. With ACFA's valuable input, Australia is poised to achieve its ambitious goals efficiently and cost-effectively, making a positive impact on both the environment and its citizens' well-being.

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