Next year car suppliers must report the amount of CO2 the vehicles they import to New Zealand emit and meet targets set by the Government to try and reduce transport emissions.
The Clean Car Import Standard was announced as part of Labour's manifesto during the 2020 election campaign, and after winning a huge majority, the Labour Government is forging ahead with its climate promises.
"We're moving quickly to introduce a Clean Car Import Standard to reduce emissions and Kiwis' fuel costs," Transport Minister Michael Wood said on Thursday, adding that legislation will be passed this year and the standard will begin in 2022.
"The Import Standard will prevent up to 3 million tonnes of emissions by 2040, mean more climate-friendly cars are available, and will give families average lifetime fuel savings of nearly $7000 per vehicle.
"The Government will also consider options for an incentive scheme to help Kiwis make the switch to clean cars. The Government will have further announcements on our plan to reduce transport emissions in the coming months."
How will it work?
The Clean Car Standard is a CO2 target for light vehicles, defined as vehicles with weight of no more than 3.5 metric tons, so most sedans, vans, SUVs and utes.
The standard aims to progressively lower the CO2 emissions of vehicles entering New Zealand, with progressive annual targets introduced each year to help suppliers slowly adjust to the 105 grams of CO2 per km (g/km) target in 2025.
It works by averaging, so vehicles exceeding the CO2 target can continue to be brought in so long as they are offset by enough zero and low emission vehicles, such as electric vehicles (EVs) and hybrids.
The standard will be put in place next year and suppliers will have to start reporting CO2 data, but they will not be penalised for not meeting their targets.
Charges will apply when suppliers miss their targets once 2023 rolls around. By 2024, the Government will review penalties and the 2025 target, and set targets for the future.
Progressive annual targets
Will there be exemptions?
The new rules will not apply to vehicles intended for military operational purposes, nor will it apply to agricultural vehicles and equipment primarily used on farms, such as tractors, mowers and harvesters.
Vehicles with historic value will also be exempt, as well as any cars constructed before January 1, 1919. Vehicles constructed after that date and are at least 40 years old on the date they were registered or licenced will also be excused.
How will importers be supported?
Waka Kotahi, the NZ Transport Agency, will develop an online tracking and forecasting tool to allow importers to see how their CO2 accounts would be affected if they purchase particular vehicles in international auctions.
The tool would also help importers complying on a fleet-basis by allowing them to monitor how their fleet's average CO2 emissions are tracking, against their fleet targets.
Flexibility will be given for the industry by allowing them to bank, borrow and transfer. Banking will allow suppliers to carry over any overachievement of their CO2 targets to offset the following three years.
Borrowing will allow suppliers to miss their targets for one year as long as they can make it up the following year, while transferring allows them to transfer overachievement f their CO2 target to one or more suppliers.
Why is this needed?
New Zealand is only one of two countries in the OECD without a vehicle CO2 standard, the other nation is Russia. Australia's vehicle industry has implemented its own vehicle standard.
The average vehicle in New Zealand has CO2 emissions of around 171 g/km. New Zealand cars and SUVs alone average 161 g/km, compared to 105 g/km in Europe. In 2017, the most efficient vehicle models on our market had, on average, 21 percent higher emissions than their counterpart models in the UK.
The 2025 target of 105 g/km was already achieved by Japan in 2014 and by Europe in 2020. On average, New Zealanders pay 65 percent more in annual vehicle fuel costs than people in the European Union, even though Europe's petrol prices are higher.
A conservative estimate of benefits and costs prepared by the Ministry of Transport indicates that the standard would be a cost effective way of reducing emissions. The value ranges from $248 million to $836 million.
The benefits in fuel savings and CO2 reductions are in the order of $160 to $344 from every tonne of CO2 avoided through the standard.
The Motor Industry Association says it welcomes constructive policies that will lead to an increased rate in the reduction of CO2 emissions, but fears the 2025 target will come around too quickly for suppliers to keep up.
"The speed at which we must reach the average target of 105 grams of CO2 per km is the most aggressive and severe in the world. No other country has ever had to face a 40 percent rate of reduction in five years that we now must meet."
What else is the Government doing?
The Clean Car Import Standard will be introduced along with an agreement in principle to mandate a lower emitting biofuel blend across the transport sector, which has been welcomed by Air New Zealand.
"While we see hydrogen-powered or electric aircraft as viable options for our domestic and short haul network, being able to access Sustainable Aviation Fuels at a competitive price will be very important for us when it comes to decarbonising our long haul operations," CEO Greg Foran said.
The Government is also committing $50 million to help councils fully decarbonise the public transport bus fleet by 2035, to help meet New Zealand's 2050 carbon neutral target.
"Transport makes up our second highest amount of emissions after agriculture, so it's important we reduce emissions from our vehicle fleet," said Prime Minister Jacinda Ardern.
"Tackling climate change is a priority for the Government and remains a core part of our COVID recovery plan. We can create jobs and economic opportunities while reducing our emissions, so it's win-win for our economy and climate."