Vehicle emissions standards Australia - What are the new rules and how do they work?

January 1, 2025 will be an important date for anyone that drives a car, ute, SUV or any type of motor vehicle in Australia.

That date will mark the introduction of the New Vehicle Efficiency Standard (NVES), the Federal Government’s attempt to cut harmful new vehicle emissions as part of its wider climate change policy.

But what is the New Vehicle Efficiency Standard? Well, let us provide all the information you need to know and how these new vehicle emission rules will impact you.

What is the vehicle emission standard in Australia?

Australia has lagged behind the rest of the developed world in terms of vehicle emissions, and the introduction of NVES is seen as a way to help speed up the adoption of cleaner, more fuel-efficient vehicles after years of delays.

Before the NVES takes effect on January 1, Australian vehicles will need to meet what is known as the ‘Euro 6d’ emission standards from December 1, 2024.

However, these regulations have been enforced in Europe since 2021, putting Australia several years behind one of the world’s largest car markets. These rules will apply to every new car sold from that date and then from 2028 all vehicles on sale, even those already in the market, will need to comply.

What are emissions?

Vehicle emissions are pollutants that are released into the atmosphere from the exhaust systems of motor vehicles - whether it be cars, utes, trucks, buses or motorcycles. Emissions are byproducts of burning fuel - primarily petrol and diesel - inside an internal combustion engine.

Some of the most common emissions include carbon dioxide (CO2), carbon monoxide (CO), nitrogen oxides (NOx) and particulate matter (PM). 

Why are vehicle emissions important?

Scientific evidence indicates that vehicle emissions contribute to air pollution, especially in urban areas, and have environmental and health impacts.

This is why governments are looking to cut emissions as it will improve the climate as well as reduce medical issues that stem from pollution. 

How is the vehicle emission standard determined?

The New Vehicle Efficiency Standard is focused on cutting carbon dioxide (CO2) by incentivising carmakers to introduce more fuel-efficient and less polluting vehicles into the Australian market. 

As the government’s own NVES website states: “Each vehicle manufacturer has a set average CO2 target for the vehicles they produce, which they must meet or beat. Over time, the CO2 target is lowered and in order to continue to meet or beat the target, companies must provide more choices of fuel-efficient, low or zero emissions vehicles.”

At the moment there is little incentive, beyond consumer demand, for a carmaker to introduce a new low emission vehicle if it cannot be competitively priced. This is what has held back the widespread adoption of electric vehicles in Australia, as they are more costly and therefore less popular.

However, under the NVES manufacturers will be given ‘credits’ if they manage to meet or beat their CO2 target, which the government hopes will accelerate the introduction of more electric and hybrid models.

The idea, broadly speaking, is that a brand that sells a lot of diesel utes will need to find ways to offset those with more low emissions alternatives.

How is it upheld?

If a carmaker will not or cannot meet the NVES target (set at 141gCO2/km for passenger vehicles and 210gCO2/km for light commercials in 2025) they will have fines levied at them.

At present that is set at $100 per gram over the target per vehicle. Credits will be applied at the same value, but in reverse, earning credits for going under those figures.

Manufacturers will be able to trade credits to brands that are struggling, so an all-electric brand will be able to sell its credits to a rival that builds more petrol and diesel models.

How are vehicle emission standards in Australia similar and/or different relative to other parts of the world?

The vehicle emissions standards Australia has run under in recent years has been well behind the rest of the developed world. For example, Euro 6d emissions standards became law in Australia on December 1, 2024, but were introduced in Europe in January 2021. In fact, Europe has already moved onto the stricter Euro 6e protocol in September 2024.

Are there going to be new vehicle emission standard/s coming into play in Australia? What is expected to happen? What will the consequences be?

The Federal Government made several concessions to the automotive industry between its initial plans for NVES and its final targets. This will give car manufacturers more time to comply after Australia had fallen behind the rest of the world.

It also allowed for vehicles such as the Toyota LandCruiser and Ford Everest to be classified as ‘light commercial’ vehicles rather than passenger cars so they only have to meet the higher target.

The expectation is that car brands will look to diversify their fleet in the short-term, as widespread adoption of electric vehicles has simply not occurred nor is it expected in the near-future. Instead, expect to see fewer diesel models and more hybrid and plug-in hybrid options from the bigger brands.

All-electric carmarkers such as Tesla and Polestar will be well-placed to generate credits and then sell them onto others in need.

The broader hope from the government is that NVES will encourage more fuel-efficient models, which will become more affordable as they sell in higher volumes and this will in-turn help motorists save money on their fuel bills.

Whether that is what really happens or not, only time will tell…