Regulatory approaches to increase fuel efficiency and lower carbon emissions from vehicle fleets are commonplace internationally. Fuel efficiency standards (sometimes referred to as CO2 emissions standards) have been adopted in around 80% of the global light vehicle market. Fuel efficiency standards regulate the efficiency of new vehicles sold. They involve a fleet average efficiency target, where manufacturers pay a penalty for exceedance of that target (based on the average of the new vehicles they sell). Manufacturers can sell vehicle models with emissions performance above the target but must also sell low emissions/high efficiency models to meet the average and avoid penalty.

This paper argues that the introduction of mandatory fuel efficiency standards in Australia would bring a number of benefits. Standards would help reduce Australia’s transport emissions, which account for 18% of Australia’s emissions and are rising. They would also save motorist money on fuel costs, reduce the need for imported oil in Australia, and encourage vehicle manufacturers to supply electric and efficient models to the Australian market.