Targets must ‘strike right balance’
The clean car standard (CCS) is a crucial tool in our industry’s efforts to decarbonise and reduce future carbon dioxide (CO2) emissions from our light fleet.
It specifically targets the supply of light vehicles imported, pivotal in our collective mission for a greener future.
Here’s how it works. The CCS sets annually strengthening targets that require a progressive reduction in CO2 emissions for models supplied to the New Zealand market.
Vehicles earn credits or incur charges depending on whether they are above or below the target emissions at point of importation.
Overall annual achievement is managed through the mix of vehicles imported, credit trading with other “like” importers and or paying any applicable penalties.
In theory, it’s simple – import enough low-emissions vehicles (LEVs) to offset higher-emitting models and ensure the overall achievement of the CO2 target.
The reality, however, is much more complex for the industry to manage because achieving the targets hinges on balancing supply and demand for suitable LEVs.
With the removal of the clean car discount at the end of 2023 and recent introduction of road-user charges on electric vehicles (EVs), demand for EVs has plummeted. Consumer preferences have shifted towards higher-emitting mild hybrid and vehicles with internal combustion engines.
As a result, importers now face the considerably more difficult and daunting task of balancing overall CO2 target achievement or significant financial consequences if targets aren’t achieved.
Ultimately, the policy’s effectiveness hinges on aligning demand and supply, a scenario not currently in play in any form.
A recent review of the CCS completed only a couple of weeks ago couldn’t have come at a better time for the industry. With the support of our light-vehicle members, the MIA created an industry forecast through to 2029 as part of our contribution to this review.
Further detailed modelling and analysis revealed that our current CO2-mandated targets, and policy settings for 2025, 2026 and 2027, are too stringent and economically prohibitive for the entire industry. They require adjustment.
This wasn’t a complete surprise. The industry had previously raised concerns about the level of ambition and pace of decarbonisation that had been “baked into” the 2026 and 2027 targets.
Our current emissions targets for those two years are the most ambitious set globally.
New Zealand’s ability to realise that level of ambition and target achievement was never supported by industry. The ambition to set targets ahead of key global manufacturing markets, such as Europe and the US, to lead globally – in stringency – is outrageous.
The reality is we are a tiny automotive market, both a technology taker and destination market. We are also somewhat geographically disadvantaged from an international shipping perspective.
It’s unreasonable to expect New Zealand to achieve more stringent CO2 targets and “get ahead” of leading source manufacturing markets, especially considering we aren’t offering subsidies and incentives for marques or consumers like other leading jurisdictions. Targets at this level of ambition set up both the policy and industry to fail.
The MIA recommends and requests the CCS’ targets, policy settings and flexibility mechanisms be reset because of this review.
Further, we have requested future CO2 targets strike the right balance, and consider the full range of economic, social and environmental factors to ensure policy success and overall achievement. This is important because getting our targets right is integral to ensuring a thriving industry.
CO2 targets must be set at levels that seek to balance and mitigate key risks associated with achieving them while ensuring the availability, affordability and mix of vehicles that everyday Kiwis need remain freely available to the market.
Ideal targets are those developed in collaboration with the industry with demonstrated achievability at overall industry level. They are progressively strengthened – aligned with technology product offering improvements – and head in the right direction toward our future decarbonisation goals.
To achieve this, we need to accept our targets will initially trail some global leaders but be set at levels that align with other similar markets.
We aren’t weakening or falling behind in our decarbonisation commitments. Instead, by embracing an approach that more closely resembles a marathon and not a sprint, we can ensure our industry can thrive, vehicle availability and affordability aren’t threatened, and we ultimately catch up with global leaders and considerably close the gap in CO2 target achievement by 2029-30.
This article first appeared in the June edition of Autofile magazine
