Jennifer Hewett
January 25, 2018
AFR
Despite Josh Frydenberg’s enthusiasm about the future of electric vehicles, it’s the future of petrol-fuelled cars that will have more immediate impact on the drive to get cleaner, more efficient vehicles onto Australia’s roads.
Yet Australia is stuck with its own national brake on the pace of change. That’s largely because this country still uses much dirtier fuel than most of the rest of the world. Indeed, Australia is ranked 70th in terms of fuel quality because of the relatively high percentage of sulphur permitted.
That not only means more noxious gases and pollutants emitted from vehicle tail pipes. It also impedes the push to reduce carbon emissions from cars using the most modern fuel efficient technology in order to help meet Australia’s Paris target by 2030.
As well as environmental benefits, community health benefits from using cleaner fuel are substantial. But making all this add up financially and politically still turns out to be more complicated than it seems.
The obvious answer – quickly slashing the sulphur level currently permitted in petrol to ten parts per million like most of the rest of the developed world – comes with a catch.
The oil companies running Australia’s remaining four domestic refineries argue that forcing them to upgrade their old technology and equipment too quickly and dramatically would be uneconomic for them and costly for consumers.
The obvious risk – certainly obvious to the Turnbull government – is that one or all of them could instead choose to close what are already aged, relatively small operations in Australia.
That would mean importing all refined petroleum products from bigger, cleaner and more efficient refineries overseas rather than just the current 60 per cent.
This might make economic sense. But such an option won’t be welcomed by any Australian government apprehensive about the political impact of announcing further cuts in local refining capacity and in manufacturing jobs.
So now the political argument is focusing on negotiating trade- offs – especially how quickly and how far to push regulatory changes on the refining industry as well as the car industry.
That’s the background to the government’s just released draft regulatory impact statement looking at a range of options and timeframes – from 2022 to 2027 – to improve Australia’s fuel standards.
In essence, this requires cutting sulphur levels back to 10 parts per million rather than the 150 parts per million currently permitted in Australian petrol.
The refineries, naturally, want the later deadline of 2027, insisting this also makes it more feasible to keep costs down by scheduling the changes to fit natural major maintenance cycles usually conducted every five years or so.
The longer such change is delayed, however, the harder it becomes to meet the 2030 commitment to reduce emissions from cars as well as to curb pollution and noxious gases like sulphur dioxide and nitrogen dioxide that are harmful to health.
Although there’s more disagreement about the direct link between cleaner fuel and carbon emissions, many car manufacturers say lower fuel quality leads to problems of reliability making them reluctant to sell higher performance cars here. And they can get away with it.
One result of the lack of any Australian regulatory standard on vehicle carbon emissions, for example, is that the most fuel-efficent Toyota Corolla sold in Australia is 18 per cent less effective than the UK equivalent.
Urban Infrastructure Minister Paul Fletcher tells The Australian Financial Review that the government is conducting a “thorough and careful process” considering the three related issues of fuel quality, fuel efficiency and the release of noxious gases.
But this process is hardly a fast moving vehicle itself – despite radical changes in the world of international transport and the rate of improvement elsewhere.
A “Ministerial Forum on Vehicle Emissions” including Fletcher and Frydenberg – was soon established by a new Turnbull government in October, 2015. But attempting to balance the different demands of industries and of consumer and environmental groups has proven time-consuming and politically sensitive.
The auto industry warned last year that the draft recommendations for reducing CO2 emissions were unrealistic and would increase car prices. “Consultation” is continuing. But it’s much harder to finalise this without also deciding on the timetable for improving fuel quality to the standards common in other countries.
This has now become the last problem of the three to be addressed with a regulatory impact statement . Submissions are due by March with the minister saying firmly no decision has yet been made.
“All of this is about arriving at a fact based understanding of the perspectives off relevant parties in advance of it being considered by Cabinet and the party room later this year,” Fletcher said.
So far at least, at only 0.035 per cent of the current fleet, electric vehicles are still driving around the edges of that argument.
Follow us: @FinancialReview on Twitter | financialreview on Facebook
Subscribe to our free mailing list and always be the first to receive the latest news and updates.