News

Government must re-examine all costs of emissions regulations

29.8.2016

The Australian Automobile Association (AAA) has called upon the Federal Government to re-explore all costs and benefits associated with proposed vehicle emissions regulations.

New analysis by the Centre for International Economics (the CIE) calls into question the Government’s stated assumption that tougher CO2 regulations will have no negative impact on consumers as the fuel savings will cover the additional upfront cost of more fuel efficient vehicles.

The CIE analysis commissioned by the AAA shows that, like any other regulatory intervention, a mandated CO2 standard brings consumer costs, as well as greenhouse and consumer benefits.  These costs could include not only a higher vehicle purchase price and increased fuel prices, but the loss of attributes valued by Australians such as vehicle size, carrying capacity, and engine power.

AAA Chief Executive Michael Bradley said: “Previous Environment Minister Greg Hunt claimed[i] that while improving fuel efficiency could mean higher upfront costs for car buyers, the average car owner could recover these costs through fuel savings.

“The CIE analysis indicates the modelling upon which this claim relies doesn’t fully take into consideration the potential higher costs to consumers of more refined fuels and the loss of vehicle attributes.

“The CIE analysis makes it clear these are real costs that would be paid by consumers, and as such they ought to be considered to ensure Australia arrives at the least-cost and fairest abatement system possible.

“The AAA supports the consideration of a vehicle CO2 emissions standard as part of a package of measures to meet Australia’s greenhouse reduction targets. But abatement must be achieved at the lowest cost to the economy and those costs must not fall unfairly on motorists.

“It is also important to note that the Government cannot regulate what it currently cannot measure. Before any regulation of emissions is introduced, the Government needs to fulfil its obligation to measure actual vehicle emissions in Australia and not simply rely on laboratory testing performed in other nations and in some cases, by car manufacturers.

“The Volkswagen scandal has highlighted the need for far greater scrutiny of laboratory testing, which is why the AAA continues to advocate for local, independent emissions testing that can determine the difference between real-world and laboratory results,” Mr Bradley said.

The AAA has been working with the CIE to undertake an analysis of various light vehicle emission abatement options being considered by Government, and specifically, the introduction of mandatory CO2 emissions standards.

A critical component of this benefit-cost analysis is fuel.  The AAA continues to urge the Government to establish clearly what fuel types would be required to support the regulatory changes under consideration by the Ministerial Forum on Vehicle Emissions.  If the introduction of emissions regulations mean that higher fuel specifications are also required, then the higher price of these fuels must be factored into the regulation impact statements (RIS).

“Only last week, the AAA released Australia’s first Transport Affordability Index, which showed the average Australian family is spending in the order of $17,000 a year to cover its transport needs.

“Badly designed and implemented regulations could see consumers needlessly and unfairly pay even more of their household budget for transport.

“The AAA believes a range of complementary measures to reduce vehicle emissions and running costs need to also be considered by the Government. These include the abolition of import taxes and restrictions that could help to make newer, cleaner, safer cars more affordable.”

The full report can be found at http://www.aaa.asn.au/reports/   

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