Attachments
Cabinet papers

Climate Change Policy: Options for Controlling Vehicle Entry – Fuel
Economy Standards (15pp)

Climate Change Policy: Overview of Progress Towards Reducing
Transport CO2 Emissions (12pp)
Cabinet Minutes

Climate Change Policy: Options for Controlling Vehicle Entry: Fuel
Economy Standards (3pp)
 Climate Change Policy: Overview of Progress Towards Reducing
Transport CO2 Emissions (3pp)
1
Office of the Associate Minister of Transport
Office of the Minister of Transport
Office of the Minister Responsible for Climate Change Issues
The Chair
Cabinet Business Committee
Climate Change Policy: Options for Controlling
Vehicle Entry – Fuel Economy Standards
1.1 Proposal
1. This paper outlines options to reduce greenhouse gas emissions from the
transport sector through measures to improve the fuel efficiency of vehicles
entering New Zealand. It looks specifically at options to regulate for minimum
thresholds for fuel economy for both new and used vehicles when they first enter
the New Zealand fleet.
2.
Four policy options for fuel economy standards are discussed in this paper,
following international best practice. We propose that no further work be done on
the option of a minimum energy performance standard applying per vehicle; and
that officials work with industry to present options for a sales-weighted standard
and report back in November 2006. An age restriction is also considered in the
paper and will be reported back to Cabinet in November under the harmful
emissions programme. To assist a range of policy initiatives, it is recommended
that immediate consideration be given to the mandatory collection of vehicle fuel
consumption data.
3. This paper is the second of two transport-related papers. It accompanies a
companion paper “Climate Change Policy: Overview of Progress towards
Reducing CO2 Emissions”. Both papers respond to Cabinet’s direction for
officials to provide further analysis on options to reduce greenhouse gas
emissions in the transport sector [CAB Min (05) 20/10 and CAB Min (06) 18/8
refer].
Executive summary
4. New Zealand is a technology taker with respect to its vehicle fleet, and is directly
influenced by technological improvements in other countries. Unlike for safety
standards, there are currently limited controls or incentives affecting the uptake of
fuel-efficient vehicle technology into the New Zealand fleet. Introducing fuel
economy standards based on international best practice is thought to be one way
of improving both the quality of the New Zealand fleet and providing CO 2
reductions.
5. The policy interventions for fuel economy controls outlined in this paper establish
a means to work with the motor industry to improve the fuel economy of vehicles
over time, and provide a foundation from which other policy interventions can be
built to ensure durable, long-term CO2 reductions.
2
6. Present market dynamics along with existing policies and initiatives such as the
2006 Vehicle Emissions Rule, the recently launched Fuel$aver website,
mandatory vehicle labelling, and the proposed biofuels mandatory sales
obligation are mechanisms that should be leveraged to provide short-term, least
cost CO2 reductions.1 The effect of these interventions has yet to be felt.
7. In developing fuel economy standards for new and used vehicles entering the
fleet for the first time, officials have identified four options for consideration:
a) setting minimum fuel economy standards per vehicle (a vehicle equivalent to
a minimum energy performance standard which applies to some appliances);
b) establishing average sales-weighted standards for vehicles entering the fleet;
c) putting in place an age restriction on used imports; and
d) the mandatory collection of fuel economy information for all light vehicles
entering the fleet.
8. Minimum energy performance standards focus on prohibiting vehicles with poor
fuel economy from entering the fleet. Research shows that a relatively small
proportion of the overall fleet is likely to be affected with limited impact on
reducing CO2 emissions during the first commitment period of the Kyoto Protocol
(2008 – 2012). Minimum energy performance standards have not been the
preferred approach in other jurisdictions and it is concluded that a minimum
energy performance standard would not be an appropriate, nor effective
mechanism for improving fleet fuel efficiency. It is recommended that no further
work be undertaken.
9. A New Zealand sales-weighted standard would seek to incentivise improvement
across the fleet as a whole as all new entrants into the fleet, both new and used
imported vehicles, would contribute to achieving the standard. The setting of a
target may have value as a strategic goal for the transport sector. Salesweighted targets are used in Japan for fuel economy, and in the European Union
through CO2 emissions rates.
10. If a sales-weighted standard was further considered, the practicalities of
implementing any such standard would need to be carefully worked through with
industry. Issues such as agreements with the vehicle importing industry,
penalties for non-compliance, public information and education, and incentives
would need to be developed. Officials recommend further work is carried out with
industry to determine what those practicalities might be and whether or not they
are surmountable.
11. In regard to an age restriction, there is a clear relationship between vehicle age,
its related engine technology, and the level of harmful exhaust emissions. Given
the significant benefits of restricting vehicles with older technology types, the
programmed report-back to Cabinet in November 2006 on the use of harmful
emissions standards will include consideration of an age restriction at point of
import [EDC Min (06) 13/9 refers].
12. Underpinning any plausible policy intervention is the need for accurate and timely
information. Since January 2005, Land Transport New Zealand has been
collecting fuel economy information of new and used vehicles manufactured from
The companion paper “Climate Change Policy: Overview of Transport Contributions to Reducing CO2
Emissions” outlines a wide range of initiatives including significant investment in Auckland infrastructure
and public transport – all of which will contribute to reduced CO2 emissions.
1
3
2000 onwards. This has been done through section 7(1)(e) of the Transport
(Vehicle and Driver Registration and Licensing) Act 1986, through an amended
“Application for Registration” form.
13. Information currently collected does not include those imported vehicles
manufactured before 2000. In order to have a comprehensive understanding of
the fuel economy of the New Zealand light vehicle fleet, and provide a platform
for other policy initiatives, the fuel economy of all vehicles imported must be
collected. This legislation is intended for the supply of non technical information
for registration purposes, and is unable to prescribe detailed requirements around
fuel consumption information. So far, however, this provision has enabled
capture of information suitable to monitor the fuel economy of vehicles entering
the fleet, and for listing fuel economy information on the Fuel$aver website.
14. In order to enact incentives which may impose a higher compliance cost (such as
labelling or fuel economy standards), or may reduce whole-of-life vehicle
ownership costs, legislation for collection of information needs a greater level of
robustness, transparency, and technical detail. The Motor Industry Association
has also expressed dissatisfaction at the inability to cite New Zealand legislation,
which creates difficulties in obtaining information from manufacturers' head
offices overseas.
15. This information will enable better monitoring and reporting of fuel efficiency,
support the CO2 modelling work by the Ministry of Economic Development and
underpin the mandatory vehicle labelling programme committed to by the Energy
Efficiency and Conservation Authority. A consequence of this action is likely to
be that there will be a decrease in the importation of vehicles manufactured prior
to 2000.
16. It is recommended that the policy focus for improving vehicle fuel economy of
vehicles entering the fleet proceed as follows should be:
a) proceed immediately with developing a mechanism to require all vehicles
entering the fleet to have comparable fuel economy information from a
recognised source;
b) improve the current information systems to enable real-time monitoring and
reporting of current market trends and vehicle fuel economy outcomes;
c) work with the motor industry to present options for a regulated sales-weighted
standard and report back in November 2006.
1.1.1 Background
17. Including the programmes and initiatives outlined in the companion paper
(Climate Change Policy: Overview of Progress Towards Reducing Transport
CO2 Emissions), a range of targeted incremental policy initiatives is needed to
form the foundations for long term durable reductions from transport derived CO 2
emissions. This paper considers one such initiative.
18. The 2005 Review of Climate Change Policies indicated there were no obvious
single “big win”, low cost CO2 emissions reduction opportunities from the
transport sector in the short-term, but suggested a number of initiatives where
important incremental gains could be made over the long term. As a first step,
policies that could influence the future of the light vehicle fleet were considered,
reflecting the large contribution that they make to emissions.
4
19. Vehicle CO2 emission rates are directly related to the amount of fuel used by
vehicles. Therefore, improvement in the technical efficiency of a vehicle (or fuel
economy) is an important component of the overall effort to reduce CO 2
emissions from transport.
20. Policy initiatives that will be reported to Cabinet under the climate change
transport work programme in 2006/07 include [CAB Min (06) 18/8 refers]:
a) options for vehicle import controls for fuel economy standards; and
b) options for economic instruments to incentivise individual behaviour change
towards low emission fuel and vehicle use; progress developing a fleet
operators’ commitment programme (including driver training); and
opportunities for offset schemes (planting trees to offset transport carbon
dioxide emissions).
21. The focus of this paper is on the first of these report backs. The discussion in
this paper needs to be considered within the broader context outlined in the
companion paper “Climate Change Policy: Overview of Progress towards
Reducing CO2 Emissions”.
1.1.2 Fuel economy controls in other countries
22. Policies or controls to improve vehicle fuel economy are mostly found in countries
where there is a vehicle manufacturing base. A common approach is the
establishment of target “sales-weighted” fuel economy averages. A salesweighted average is designed to achieve an overall average fuel economy
outcome, but allows vehicle manufacturers flexibility in terms of the range of
vehicles they can produce and the relative fuel economy of each.
23. In the United States, the Corporate Average Fuel Economy standard sets a
sales-weighted average for the whole fleet, with penalty payments for noncompliance by vehicle manufacturers. In Japan, sales-weighted class targets are
specified for 2010, with a vehicle class defined by weight. Manufacturers then
have the ability to meet class targets by a mix of higher and lower efficiency
vehicles, and with some ability to earn credits which can be carried over into
subsequent
years.
Korea
has
recently
set
class-weighted targets based on engine size. In the European Union the target is
specified as an all-vehicle average CO2 emission rate.
24. In Australia a voluntary national average fuel consumption target was established
in 2003 of 6.8 l/100km for petrol passenger cars by 2010. Further negotiations
were to occur to align the target with new test procedures for measuring and
reporting fuel consumption and CO2 emissions in accordance with the Australian
standard ADR 81/01. Targets for other light vehicles including Sport Utility
Vehicles were also to be set. These negotiations have yet to be finalised.
25. Progress toward improving fuel economy has been significant, particularly in
Japan and the European Union. The Japanese target is the equivalent of a
22.8% improvement in fuel economy from 1995 - 2010, averaged across the size
classes. Most major Japanese vehicle manufacturers are currently reporting
compliance or near compliance with the 2010 target levels.
26. From 1995 – 2008 the European Union has targeted a 25% reduction in 13
years. Achievement by 2003 was 11.9%. The European route to date has relied
5
heavily on increasing fuel economy and reducing CO2 emissions through diesel
technology, with over 50% of new cars sold now being diesel fuelled.
27. The exception to these approaches is China and Taiwan. These jurisdictions
have introduced phased–in mandatory minimum fuel economy standards for all
new vehicles. In China the standard is specified by vehicle weight class, with
variations to account for fuel types and vehicle transmission options.
1.1.3 Vehicle fuel economy in New Zealand
28. New Zealand is a technology taker with respect to its vehicle fleet. In 2005,
230,000 cars were imported of which 152,000 (66%) were ex-overseas registered
cars (averaging about 8 years old), and 78,000 (34%) were new. In June 2005
the total number of registered cars in the fleet was 2,220,000, with the registered
fleet numbers having increased by about 70,000 in that year. That suggests an
average retention time in the fleet of about 15 years – probably nearer 20 years
for a vehicle purchased new, and typically 10-15 years for a used import.
29. The extent to which we can improve the core fuel economy of the fleet depends
on 1) the rates of improvement occurring overseas from the manufacturing
jurisdictions from which we source our vehicles 2) the choice and suitable quality
of vehicles made available in New Zealand, and 3) the buying patterns and
vehicle replacement choices made by consumers.
30. In assessing the points above, it should be noted that New Zealand’s primary
source of vehicles is Japan, with Korea, Australia and the European Union being
the main secondary sources. Over the last decade therefore, based on the
standards established in those jurisdictions, the overall technical fuel efficiency of
the vehicles imported into New Zealand has potentially been on a pathway of
improvement. However, potential improvements have been negated by the
increasing size and weight of vehicles in the fleet, as noted by the two graphs
below.
6
Engine Capacity : Used Imports entering the light fleet
(excluding motorcycles)
100000
75000
< 1350 cc
< 2000 cc
50000
< 3000 cc
< 4000 cc
> 4000 cc
25000
0
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
LIGHT FLEET - Average Engine Capacity
(excludes motorcycles)
2400
CC
2200
2000
Entire Fleet
NZ New
Used Imports
1800
200001
200007
200101
200107
200201
200207
200301
200307
200401
200407
200501
31. Other measures such as the Frontal Impact Rule have also been perceived as
creating incentives for larger mass vehicles. However the effect of the Frontal
7
200507
Impact Rule on people’s buying patterns is not clear. Evidence suggests that the
trend in larger Sport Utility Vehicles (SUV’s) imported into New Zealand is a trend
similarly experienced internationally. A breakdown of vehicles registered as
Class MC (predominantly Sport Utility Vehicles) shows an increase in New
Zealand new Sport Utility Vehicles rising from 26 % in January 2003 to 81% in
June 20062.
32. Second, vehicle suppliers offer a wide range of vehicle options for sale in New
Zealand. The recent advent of low sulphur diesel has overcome a barrier that
had previously prevented a number of high efficiency diesel car options being
sold.
33. Third, until recently lower fuel prices and the availability of cheaper used imports
encouraged drivers to buy larger cars and Sports Utility Vehicles (included in the
Motor Vehicle Registry under 'cars'). There are also quite large variations in fuel
economy between vehicles of similar size and class, and with low fuel prices,
relative vehicle fuel economy was not a high priority for many vehicle purchasers.
As noted in the companion paper “Climate Change Policy: Overview of Progress
towards Reducing CO2 Emissions”, there are signs of changing purchasing
patterns under the pressure of higher oil prices. There are also initiatives
presently under development such as vehicle fuel economy labelling which offer
further scope to influence buyer behaviour by focusing on fuel economy and
improved discernment by purchasers of differences in fuel economy.
Options for Controlling Vehicle Entry – Fuel Economy Standards
34. Four options have been examined:
a) setting minimum fuel economy standards per vehicle imported (a vehicle
equivalent to a minimum energy performance standard which applies to some
appliances);
b) establishing average sales-weighted standards for vehicles entering the fleet;
and
c) putting in place an age restriction on used imports; and
d) the mandatory collection of fuel economy information for all light vehicles
entering the fleet.
35. These options can work either individually or as packages and are not mutually
exclusive. In addition, work is underway to consider the use of economic
instruments and pricing mechanisms to incentivise individual behaviour around
vehicle choices and reduce greenhouse gas emissions. This is the subject of a
report back in November 2006.
36. In looking at the fuel economy standards set by the European Union and Japan, it
is possible to estimate the savings from the technological gains of vehicles
coming into New Zealand from those jurisdictions. The graph below (Fuel
Economy Rates) shows that if New Zealand was to regulate a weighted standard
There is a common misperception that all SUV’s are Class MC, however, this is not the case. Some
vehicles colloquially defined to be SUV’s, such as Ford Explorer, Ford Escape, RAV4’s, and Kia come in
two wheel drive options and therefore these models are not Class MC, and they are required to meet
the same requirements as general passenger cars. For the application of transport legislation, New
Zealand does not categorise SUV as a vehicle class and therefore it does not apply specific standards
to SUV’s.
2
8
that tracked along a similar line, there is an estimated fuel economy gain of 12%
by 2020. Table 2 shows the percentage savings and associated value of these
estimated reductions.3
Fuel economy rates
10.0
9.0
8.0
litres per 100km
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1995
2000
2005
2010
2015
Japan - actual l/100km
NZ - actual & projection l/100km
NZ - current baseline assumptions l/100km
2020
2025
2030
EU ~l/100km
Japan/EU - Projection
Table 1: Estimated CO2 emissions reductions from sales weighted standard that
tracks standards in other jurisdictions
Five year time periods
2008-12
2018-22
2023-27
Fleet fuel savings %
4%
7%
11%
12%
CO2 emissions (Mt)
1.3
2.4
4.0
4.5
$21m
$39m
$63m
$72m
Value at $15.92/t ($m)
A)
2013-17
Minimum Fuel Economy Standards
37. The main benefit of establishing a minimum fuel economy standard is to ensure
that ‘poor performers’ are excluded from entering fleet – it sets a bottom line of
achievement. However, in considering this option for New Zealand a number of
issues have been encountered as follows:
38. Data quality – there are currently major gaps in the database for pre-2000 used
imported vehicles which would pose challenges around the robustness of a
regulation that sought to exclude these vehicles from entry.
39. Vehicle/engine size differentiation – minimum fuel economy standards would
require some form of size and/or class differentiation between vehicles.
Overseas there are at least three ways in which vehicle size is recognised, with
use of vehicle weight and engine size being the most common, and there would
be complications determining the most appropriate for New Zealand.
3
A number of simplifying assumptions have been made in presenting this information including an
assumption of no ‘takeback’ of fuel economy savings, or of ‘class creep’ where technological efficiencies
enable consumers to shift to a larger vehicle while maintaining existing fuel economy rates.
9
40. Prohibitions under a minimum fuel economy standard – a minimum fuel
economy standard would restrict consumer choice, with the more stringent the
standard the greater the number of vehicles affected. A preliminary analysis
undertaken suggests a number of high profile brands and makes (of new
vehicles) might be excluded even with a fairly non-aggressive standard. While
these vehicles may have relatively high fuel consumption, many also have
desirable features such as high levels of safety. Prohibiting such vehicles may
have some undesirable downsides.
41. Waivers and concessions – various waivers and concessions are likely to be
required. In so doing, care needs to be taken that the rules and processes do not
become cumbersome and subjective. Care also needs to be taken that rules and
processes are set in such a way as to avoid perverse policy outcomes. For
example, it is possible that importers of vehicles might ensure they are not
'caught' by the minimum thresholds by choosing to import vehicles which just
qualify for the next class up, leading to increased vehicle size over time.
42. Minimum fuel economy standards and incentivising ongoing improvement
– in assessing consumer and importer behaviour under a minimum fuel economy
standard-type rule, a significant concern is that it would likely have the effect of
just focusing on a small proportion of the overall imports (and some of the focus
would be on how to avoid the rule), rather than providing an incentive to improve
the fuel economy of all vehicles entering the fleet.
43. CO2 impact – preliminary calculations suggest a very modest level of CO2
savings during the first Kyoto commitment period (2008-12 incl.). Partly this is
because any policy focused on new fleet entrants takes many years to have full
effect. However, longer term savings cannot be confidently predicted because it
is highly likely that over time many high fuel consumption vehicles would have
been withdrawn anyway simply through product replacement cycles and market
pressures.
44. Overall, it is concluded that a minimum fuel economy standard would not be an
appropriate, or a particularly effective, mechanism for improving fleet fuel
economy. It is recommended that no further work be undertaken.
B)
Fleet Sales-Weighted Standard
45. Of the two options for a fuel economy standard, this option offers the most benefit
with least cost. It also presents an opportunity to constructively work with
industry.
46. The main benefits of a fleet sales-weighted approach are that the incentive to
improve fuel consumption is spread across all vehicles (because all contribute to
achieving the standard(s)), flexibility is provided to the industry to respond in
customer-focused and innovative ways, and choices continue to be provided for
consumers. The main considerations of such an approach are as follows:
47. Establishing the standard - setting an appropriate regulated standard for New
Zealand may need to reflect changes over time in the global vehicle fleet. As a
general rule, imported vehicles show improved fuel efficiency over time; the
range of more fuel efficient vehicle options is expanding, and consumers are now
showing some change in their buying patterns. Some of the gains a standard
might be expected to achieve may occur naturally through the market.
10
48. Industry agreement - New Zealand’s dual vehicle import stream (new and used)
has created a very different industry structure for each stream. New imports are
primarily focused through the Motor Industry Association which has around 32
members. In contrast, there are currently 3,200 registered licences for car
importers/sales, of whom around 1,800 are significant dealers.4
Given this
diversity, the ability to bring all streams into an integrated and consistent
approach will be challenging.
49. Achieving compliance – establishing a regulation that requires the vehicle
industry to achieve a sales-weighted fleet average standard will require
consultation with the vehicle importing industry, the development of including
penalties for non-compliance, and public information and education.
50. CO2 impact – it is difficult at this stage to differentiate between CO 2 reductions
via a regulated standard compared with what might happen under market forces
and the impact of measures already in progress (such as vehicle labelling). If the
target was set to achieve a similar rate of improvement to that occurring overseas
(i.e. about 1.5-2.0% per annum net improvement in new vehicles entering the
fleet), the overall reduction in CO2 emissions in the first Kyoto commitment period
is estimated at 0.3-0.4Mt or 2.5 % of total transport emissions5, which represents
a value of CO2 emissions reductions of approximately $5-6million. However, it
must also be appreciated that the main benefit of establishing a standard/target
tends to be longer term, and beyond just the Kyoto Protocol’s first commitment
period.
51. Overall, it is concluded that establishing a fleet sales-weighted standard would
have strategic benefit. In order to achieve this and to be able to monitor
progress, current information gaps need to first be addressed. (Note, it is
recommended below that a means be established to enable the capture of fuel
economy data for all vehicles entering the fleet). In addition, a workstream to
establish an appropriate standard and to work with industry to determine
appropriate forms of achievement and compliance mechanisms is recommended.
52. Given the strategic benefit of a fleet sales-weighted standard, and opportunities
“lock-in” fuel economy gains, we therefore recommend officials continue working
with industry and develop options for a regulated sales-weighted average for
report back in November 2006.
C)
Age Restriction on Used Imports
53. Restricting the age of used imports entering the fleet has been widely promoted
by the Motor Industry Association as being a simple mechanism that will enable
the efficient transfer of improved vehicle technology from other jurisdictions into
the New Zealand fleet, consistently over time. There are significant benefits for
air quality, safety and public health of restricting vehicles with older technology
types.
54. Without further analysis, officials cannot recommend an age restriction on used
imports entering the fleet be considered solely for the purposes of controlling fuel
economy. A report to Cabinet by end of November 2006 on investigations into
4
pers. com Motor Trade Association
5
Noting that total transport emissions in 2004 were 14.1Mt CO 2
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harmful emissions standards will include consideration of an age restriction on
imported vehicles [ EDC Min (06) 13/9 refers].
D)
The Mandatory Collection of Fuel Economy Information
55. Mandatory collection of fuel economy information has two policy outcomes.
Firstly, data collection allows for establishment of trends and assessment of
policy interventions. Secondly, there would be a default restriction on vehicles
entering the fleet that cannot provide the required data.
56. Since January 2005, Land Transport New Zealand have been collecting fuel
economy information of new and used vehicles manufactured from 2000
onwards. This has been done through section 7(1)(e) of the Transport (Vehicle
and Driver Registration and Licensing) Act 1986, through an amended
“Application for Registration” form.
57. Information currently collected does not include those imported vehicles
manufactured before 2000. In order to have a comprehensive understanding of
the fuel economy of the New Zealand light vehicle fleet, and provide a platform
for other policy initiatives, the fuel economy of all vehicles imported must be
collected. So far, however, this provision has enabled capture of information
suitable to monitor the fuel economy of vehicles entering the fleet, and for listing
fuel economy information on the Fuel$aver website.
58. The difficulty is that the present legislation is intended for the supply of nontechnical information for registration purposes, and is unable to prescribe detailed
requirements around fuel consumption information. It is therefore recommended
a more robust mechanism be developed.
59. This information will also enable real time monitoring and reporting of fuel
efficiency, support the CO2 modelling work by the Ministry of Economic
Development and underpin the mandatory vehicle labelling programme that has
been committed to by the Energy Efficiency and Conservation Authority.
60. The collection of fuel economy information is one of the ‘building block’ initiatives
that will enable future policy interventions to reduce CO2 emissions, and it is
recommended that officials develop a rule, or equivalent, to require the
mandatory collection of fuel economy data.
1.1.4 Automotive Industry Comment
61. Ministry of Transport officials have sought feedback with automotive industry
representatives on the minimum fuel economy standard per vehicle and salesweighted options for improving imported vehicle fuel economy.6
62. The industry representatives considered any form of regulation for fuel economy
to be unnecessary given the prevailing market forces. Instead, the industry
representatives considered that educating and informing the consumer were the
most effective mechanisms to achieve the desired policy outcomes. For
6
The Ministry of Transport held a workshop for industry representatives on 18 August 2006. Industry
representatives included: Gordon Shaw (JEVIC), Mike Noon (AA), Nick Hill (MTA), Trevor Burling
(MTA), David Vinsen (IMVDA), Perry Kerr (MIA), John Leighton (President MIA), Mark Rounthwaite
(Toyota).
12
instance, they referred to opportunities for ‘locking in’ the current benefits through
public awareness campaigns, building on the existing information on the
Fuel$aver website and the vehicle emissions ‘Choke the Smoke’ campaign.
63. Industry representatives did, however, agree on the need to develop a land
transport rule that captured fuel economy data from all vehicles entering the fleet.
Officials perceive that there is an opportunity to develop the policies further on
these issues, in part through gaining a better understanding of the practicality
issues referred to by the industry.
64. Some industry representatives, for example Motor Industry Association (MIA),
have expressed support for age restrictions. They perceive this as a simple and
effective measure. Conversely restrictions are not widely supported by industry
representatives whose business primarily focuses on the importation of secondhand vehicles.
65. The automotive industry agreed to work closely with officials to develop transport
climate change policies, building on the stakeholder engagement work already
being undertaken by the Ministry of Transport. It was agreed future consultation
would be encompassed around broader environmental objectives, with
workshops combining discussions on fuel efficiency, age restriction, biofuels,
mandatory vehicle labelling, and the development of standards to control harmful
exhaust emissions.
1.1.5 Conclusions and recommended approach
66. Current market conditions have been effective in providing some CO2 reductions
outside of government intervention. The vehicle import industry is reporting a
significant shift in consumer purchasing patterns towards smaller, more fuel
efficient vehicles. This is supported by information from the 2006 Motor Vehicle
Registry. These reductions have been driven primarily by the increasing fuel
prices and not by the need to greenhouse gas emissions. A disadvantage in
relying on the market in this way is the volatility of the fuel price and uncertainty
over its future price path. Moreover, if the fuel price remains stable at current
levels, consumer behaviour is likely to absorb the costs over time through other
household budget adjustments. The expected effect of relying solely on market
forces is diminishing fuel efficiency returns, and this strengthens the case for
regulatory intervention of some kind to achieve the policy objectives to reduce
emissions.
67. While the precise net CO2 gains from minimum standards for fuel efficiency at the
point of import are not known, the case to take action in this area to improve the
fuel efficiency of the vehicle fleet is strengthened by the wider benefits gained in
the areas of air quality, costs saving and safety. All options outlined in this paper
are expected to provide some gains in the short-term and develop important
building blocks for ongoing improvements in fuel efficiency over the New Zealand
vehicle fleet. In addition, given the very nature of the vehicle fleet, in which
change is expected to occur incrementally over time, a longer-term perspective is
both required and underpins a strong case for early action now.
68. A priority at this stage is improving data collection and increasing monitoring of
the fleet to a high level of quality and timeliness. The capture of fuel economy
data from all vehicles entering the New Zealand fleet underpins any policy
intervention in this area, including mandatory vehicle labelling.
13
1.1.6 Consultation
69. The following agencies were consulted in relation to this paper: the Ministry for
the Environment, Treasury, the Ministry of Economic Development, the Ministry
of Agriculture and Forestry, the Ministry of Foreign Affairs and Trade, the Ministry
of Transport, the Ministry of Research, Science and Technology, Te Puni Kōkiri,
and the Energy Efficiency and Conservation Authority. The Department of Prime
Minister and Cabinet was informed.
1.1.7 Financial implications
70. There will be financial implications of developing a regulatory mechanism to
ensure the collection of fuel economy information for all vehicles entering the
fleet. Officials propose that the costings of any mandatory collection of fuel
economy information are assessed within the transport initiatives for climate
change to be considered as part of the Economic Transformation theme for 07/08
Budget.
1.1.8 Human rights implications
71. This paper has no human rights implications.
1.1.9 Legislative implications
72. This paper requires a statutory instrument for the mandatory collection of fuel
economy information.
1.1.10 Regulatory impact and business compliance cost statement
73. There is no impact and business compliance cost statement required by this
paper.
1.1.11 Gender implications
74. This paper has no gender implications.
1.1.12 Disability perspective
75. This paper does not require a disability perspective
1.1.13 Publicity
76. There is no publicity planned for this specific paper although it does form part of
the wider climate change publicity and consultation strategy and there is a high
level of interest in climate change policy matters. It is proposed that this paper be
publicly released with appropriate withholdings.
1.1.14
Recommendations
77. It is recommended the Committee:
1. Note that this paper is a companion paper to the “Climate Change Policy:
Overview of Progress towards Reducing CO2 Emissions” and is part of a
wider group of initiatives that directly and indirectly reduce transport CO 2
emissions;
14
2. Note that New Zealand is a technology taker with respect to its vehicle
fleet, and is influenced by technological improvements in other countries;
3. Note that measures to reduce greenhouse gas emissions from the
transport sector deliver significant co-benefits in terms of enhanced air
quality, health, energy security, cost savings and resilience to
international oil price fluctuations
4.
Note that policy interventions for fuel economy outlined in this paper
establish a means to work with the motor industry to improve the fuel
economy of vehicles over time and as such provide a foundation from
which other policy interventions can be built to ensure durable, long-term
CO2 reductions;
5. Agree that no further work should be done at present on the option of
minimum fuel economy standards per vehicle;
6. Direct officials to work with industry to present options for a regulated
sales-weighted standard and report back in November 2006;
7. Note that in view of the significant benefits in restricting vehicles with
older technology types, the programmed report-back to Cabinet in
November 2006 on the use of harmful emissions standards will include
consideration of an age restriction [EDC Min (06) 13/9 refers].;
8. Direct officials to consider the appropriate means, which may require a
rule, to enable the mandatory collection of fuel economy information for
vehicles entering the fleet;
9. Agree that this mechanism be developed in such a way as to
accommodate the reported differences in fuel economy between new and
used vehicles entering the New Zealand fleet;
10. Direct officials to report back on costings, to introduce mandatory
collection of fuel economy information, as part of the transport initiatives
for climate change to be considered as part of the Economic
Transformation theme for 07/08 Budget; and
11. Agree to the public release of this report by Ministers, with appropriate
withholdings.
Hon Judith Tizard
Associate Minister of Transport
Hon Annette King
Minister of Transport
Hon David Parker
Minister Responsible for Climate Change Issues
15
Office of the Associate Minister of Transport
Office of the Minister of Transport
Office of the Minister Responsible for Climate Change Issues
Chair
Cabinet Business Committee
Climate Change Policy: Overview of Progress Towards
Reducing Transport CO2 Emissions
1.1.15 Proposal
1. This paper summarises existing climate change initiatives to reduce greenhouse gas
emissions in the transport sector and seeks Cabinet agreement for areas of further
work, in particular the development of a New Zealand Vehicle Fleet Strategy. The
paper also identifies a number of other transport initiatives, that while not motivated
by climate change drivers, deliver climate change benefits.
2. This paper is the first of two transport-related papers. It accompanies a companion
paper “Climate Change Policy: Options for Controlling Vehicle Entry – Fuel
Economy Standards”. Both papers respond to Cabinet’s direction for officials to
provide further analysis on reducing greenhouse gas emissions in the transport sector
[CAB Min (05) 20/10 and CAB Min (06) 18/8 refer].
1.1.16 Executive summary
3. The paper discusses how transport sector initiatives can help government achieve its
climate change objectives of reducing greenhouse gas emissions. It provides the
context for ongoing work, and future report backs on specific transport policy
initiatives, as identified in CAB Min (06) 18/8. The focus of discussion in this
paper, as with its companion paper, is the light vehicle fleet.
4. The transport sector relies on fossil fuels in the form of petroleum products, mainly
petrol and diesel. As a result, the sector is a significant contributor to greenhouse
gas emissions and hence a focus for climate change policies. This is particularly so
given that technological solutions to reduce emissions are available in the transport
sector, more than other sectors of the economy (for example, agriculture).
Greenhouse gas emissions from transport are predominantly in the form of carbon
dioxide, the quantity of which is in direct proportion to the quantity of fossil fuel
consumed.
5. Around 86% of New Zealand’s oil consumption is used in the transport sector. Over
the next 25 years the forecast under “business as usual” models, with current policy
settings, is for national transport energy use (and related carbon dioxide emissions)
to grow by about 1.4% per year (approximately 35% to 2030), as shown in the graph
below from the 2006 New Zealand Energy Outlook, with road transport accounting
for about three-quarters of this demand growth.
16
6. Reducing transport emissions will therefore require a concerted effort, including
doing what we are doing more efficiently (such as increasing the fuel efficiency of
the vehicle fleet), encouraging modal shift (for example, through public transport
and walking to school programmes), and removing barriers to and promoting new
fuels and technologies (for example, biofuels and vehicles fuelled by electric
batteries).
7. Reducing emissions from transport can be seen in the wider context of the
government's economic transformation agenda. This includes maintaining mobility
for people and goods, and effective delivery of transport services, both of which
remain important for social interactions, economic growth, and general quality of
life. Economic transformation includes the objectives of decoupling fossil fuel use
(and greenhouse gas emissions) from economic growth. Work underway in transport
contributes directly to the economic transformation themes of “world class
infrastructure” and “environmental sustainability” [CAB min (06) 31/3 refers].
8. Significant benefits accrue from actions that reduce the use of fossil fuels in the
transport sector. These are wider than simply climate change benefits. Less reliance
on fossil fuels can lead to healthier, less congested urban areas and create more
energy-efficient systems. Running vehicles more efficiently and reducing fuel
consumption saves New Zealanders money. Reducing fuel consumption and
developing local sources of biofuels makes New Zealand more resilient to
international oil price fluctuations and potentially strengthens local economies as
alternative energy sources develop. In part, because of the wide range of cobenefits, transport initiatives to reduce greenhouse gas emissions make good sense
for New Zealand to pursue.
9. One way of achieving these expected benefits is to focus on changing present
transport behaviours. This includes, for instance, the vehicles we buy, the fuels we
use and form of travel we use, and in the medium-term, where we choose to live and
work. Information on the options available and the consequences of choices can
drive behaviour change. More importantly, behavioural change can be facilitated
through the provision of alternatives such as public transport and more fuel-efficient
vehicles. Progress to drive behaviour change has been made with the launch of the
Fuel$aver website which allows purchasers to compare fuel consumption for some
new and used vehicles, and a commitment to develop mandatory vehicle point-of-
17
sale fuel economy information. Ongoing work on school travel plans has also
highlighted that programmes are most successful where they are relevant to local
circumstances and backed up with support.
10. There are a number of important linkages in transport, for example between air
quality, safety, congestion, energy security objectives and the efficiency of the
vehicle fleet. Climate change objectives for transport and energy are under
consideration at present through the New Zealand Energy Strategy. Decisions in
climate change on the use of pricing mechanisms to influence appropriate transport
behaviour must be consistent with any future pricing mechanisms for managing
greenhouse emissions, should New Zealand decide to move in this direction.
11. A priority for further action, recognising the contribution of the vehicle fleet with
respect to New Zealand’s energy use and consequential greenhouse gas emissions, is
to develop a New Zealand vehicle fleet strategy.
1.1.17 Background
12. New Zealand’s transport system reflects its small population which is distributed
over two main islands with a combined length of 2,000 kilometres. A significant
amount of trade occurs through shipping and air transport, building on early port
settlements. Our towns generally developed alongside motorised transport, allowing
for greater distances between home and destinations. The transport system
underpins the country’s economic prosperity by enabling the movement of people
and goods and providing connections to international markets in the world economy.
However, the negative impacts of transport on environmental and human health are
increasing.
13. New Zealand has one of the highest rates of car ownership in the world. The rate of
car ownership per capita in New Zealand has increased from 220 cars per 1,000
people in 1961 to currently around 627 cars per 1,000 people.7 The cars have also
tended to get “bigger”, as measured by engine size.
14. New Zealand roads carry about 37 billion vehicle kilometres of traffic every year.
The movement of freight, in particular, is driven by a healthy economy. Freight
movements and associated fuel use increase with GDP growth. Transport usage
measured by Road User Charges is growing at about 1.4% for each 1% growth in
GDP.8 In comparison, real GDP in other countries is growing at a faster rate than
heavy freight kilometres.
15. The national rail network totals approximately 4,000 kilometres. Urban rail networks
exist in Wellington and Auckland and provide approximately 15 million passenger
trips annually, of which approximately 10 million trips are in Wellington and 5
million in Auckland.9 10
16. The majority of New Zealand’s exports are shipped by sea (over 99 % by volume)
with the majority of this carried by about 30 overseas shipping companies operating
out of 13 commercial ports.
7
Dravitzki, V Lester, T., Walton, D. (2006). Transport Trends in New Zealand 1960-2005 Proceedings of the
Canadian Transport, Research Forum in Quebec, May 30th, 2006 and Stats NZ and Motor Vehicle Registration
Statistics.
8
Projection of New Zealand’s Freight Growth by 2020 (TERNZ 2006)
9
ONTRACK Brief to the Minister of Transport in May 2006.
10 Trans Metro in Wellington attributes a 7% rise in patronage over 2006 to increased fuel prices.
18
17. While the maritime sector dominates New Zealand’s exports and imports; virtually
all passenger travel to and from New Zealand is by air. There were 4,287,702
passenger arrivals into New Zealand in the year ended June 2006, an increase of 32
percent since the year ended March 2001. Of the total arrivals, 56 percent consisted
of overseas visitors and 44 percent returning New Zealand residents. This growth has
contributed to a tourism industry that is now supporting nearly one in ten New
Zealand jobs. The impact tourism has on New Zealand’s transport infrastructure and
services should not be underestimated.
18. The New Zealand Energy Outlook to 2030 estimates that 86% of New Zealand’s oil
consumption is now in the transport sector and road transport made up 87% of that
total (2004). Transport energy use has grown rapidly over the past three decades with
land transport dominating. In 2004, road transport was identified as having a major
influence on the trend in New Zealand’s greenhouse gas emissions in the key
category trend analysis (New Zealand’s Greenhouse Gas Inventory 1990-2004).11
Air transport has also grown rapidly.
19. Over the next 25 years the forecast under “business as usual” models with current
policy settings is for national transport energy use to grow by about 35%, with road
transport accounting for about three-quarters of this demand growth. The transport
sector is anticipated to have the largest energy demand and the largest growth in
absolute terms. CO2 emissions are expected to increase similarly. There is a direct,
linear relationship between fossil fuel consumed and CO2 emissions.
20. There are uncertainties, however, driven largely by future oil prices. In the latest
report on the Balance of Projected Emissions (Ministry for the Environment June
2006) projections of “most likely” transport sector emissions during the first
commitment period of the Kyoto Protocol (2008-12) have been reduced by an
average of 0.55Mt/yr CO2 compared with December 2005 projections, primarily
driven by expectations of continued high oil prices. The report notes that the
increase in the assumed oil price in the June 2006 report, compared with oil prices
assumed in the May 2005 report, is the equivalent of a carbon charge of about $150/t
CO2.
21. Price increases to date have already elicited behavioural responses, with transport
fuel use having declined by 0.8% for the period 2004-05.12 This is likely to be due
mainly to people economising on their driving trips and distances, as recent shifts in
vehicle purchasing behaviour will not yet be evident in total fuel consumed. 13 Data
from the Motor Vehicle Registry indicates a swing in 2006 to smaller, more fuel
efficient vehicles, including motorcycles.
1.1.18 Transport, Economic Transformation and Climate Change
22. Transport is important for economic transformation and our quality of life. There are
a number of environmental and public health consequences that result from meeting
our access, service and mobility needs. The challenge is to reduce our CO 2
emissions from fossil fuels while continuing to improve the quality of life of New
Zealanders and facilitating economic growth.
11
Emissions from transport totalled 14.3Mt CO2 equivalent in 2004 and had increased during this time by 5.5Mt
CO2 equivalent (61.6%) from the 8.9Mt CO2 equivalent emitted in 1990.
12 Ministry of Economic Development New Zealand Energy Greenhouse Gas Emissions 1990 – 2005 (June 2006)
13
Motor Trade Association June 2006 Article: using their classification, year to date, "the Micro [vehicle] class is
up 13%, the Light class up 17%, Medium class down 1%, Large is down 26%, Sport down 45%, Prestige up 31%,
Luxury up 27%, Large Passenger Vehicles down 17%, and SUV’s down 5%".
19
23. With this in mind there are significant co-benefits to reducing our reliance on fossil
fuels and reducing CO2 emissions including:
a) improving oil security through reducing transport reliance on imported fossil
fuels;
b) reduced fuel costs if vehicles are more fuel efficient;
c) facilitating economic and regional development opportunities by developing and
employing technology to facilitate economic transformation, particularly in fuels,
logistics, and consumer behaviour;
d) improving the surrounding environment by reducing harmful emissions;
e)
supporting changes in societal behaviour that benefit health, for example
supporting objectives for reducing obesity and encouraging programmes such as
‘Push/Play’; and
f) improving New Zealand’s environmental image at home and off-shore.
24. In order to facilitate reductions of CO2 emissions from the transport sector, a range
of policy interventions can be used to form the foundations for long-term sustainable
economic and social transformation. These transport policy building blocks work
towards economic and social transformation by:
a) moving towards the real costs of transport being recognised and borne by the
user;
b) encouraging development and uptake of alternative fuels such as biofuels and
electricity (the latter in the form of battery technology);
c) improving the quality of the vehicle fleet through developing appropriate
consumer labelling, controls at the point of entry into the fleet, incentivising the
purchase of fuel efficient vehicles and early retirement of vehicles past their
useful or economic life;14
d) encouraging integrated transport and land-use development through improved
urban design that reduces congestion and single-occupancy vehicle travel;
e) advancing government leadership in its own transport purchasing and use
policies; and
f)
improving the quality of data collected to enable effective monitoring.
25. At a strategic level, reducing greenhouse gas emissions from transport requires
lowering the energy demand required to meet our current and future transport needs
– that is making the way people and goods are transported more energy efficient and
increasing the use of alternative energy sources.
26. Enhanced passenger transport patronage in urban areas can provide a significant
reduction in fuel consumption and greenhouse gas emissions. The fuel required to
transport each bus patron is around a third of that used in private cars.
14
This is especially important in some urban areas where the levels of particulate emissions are at or near
maximum permitted levels. Reducing harmful emissions, a co-benefit of reducing fuel use, has known
environmental and economic benefits.
20
1.1.19 Summary of Policy Initiatives Delivering Climate Change Benefits
(directly or indirectly)
27. Since the review of climate change policy in 2005, a number of transport measures
have been initiated to assist in the reductions of transport CO2 emissions and
positively change the behaviour of transport users. While not all measures have been
driven primarily by climate change policy needs, all deliver reductions in greenhouse
gas emissions. The measures can be grouped as follows:
a) pricing of transport activities and fuels;
b) networks and transport infrastructure (covering all modes);
c) travel behaviour change/ Travel Demand Management;
d) energy sources (including fuels);
e) vehicle efficiency.
A) Pricing of transport activities and fuels
28. The Ministry of Transport is currently scoping economic initiatives to incentivise
appropriate behaviours around purchase and use of vehicles for a positive climate
change effect.15 The initiatives under consideration pursue two avenues for reducing
road transport CO2 emissions:
a) opportunities to transfer some levies (such as Accident Compensation
Corporation) currently collected and redistribute them across Fuel Excise Duty
and Road User Charges rates so that on a revenue-neutral basis fixed costs
decrease with a commensurate increase in the variable cost of using vehicles; and
b) incentivising
the
purchase
of
fuel
efficient
vehicles
through
registration/relicensing fees and/or subsidies, or additional charges on new and
used vehicles entering the fleet.
29. Work on the Auckland Road Pricing Evaluation study in 2005 found that road pricing
(directly charging for road use) in Auckland to control congestion could also reduce
CO2 emissions by up to one per cent of the total national transport CO2 emissions.
Ministers are currently considering public submissions on road pricing in Auckland.
B) Networks and transport infrastructure (covering all modes)
30. Government’s economic transformation agenda identifies a number of interconnected themes that can assist in transforming the New Zealand economy [CAB
Min (06) 7/22 refers]. One of those themes, ‘world class infrastructure’ is linked
closely with the other agenda themes, namely growing globally competitive firms,
establishing Auckland as an internationally competitive city and environmental
sustainability (which includes climate change). World class infrastructure is
considered an enabler of growth and the theme emphasises the importance of the
services that infrastructure provides rather than just the inputs (such as capital assets).
Efficient infrastructure services can improve productivity and provide opportunities
15
These initiatives will be reported back to Cabinet in November 2006.
21
for agglomeration so firms and cities can maximise their potential, as well as
contribute to further CO2 reductions.
31. It should be noted that use-related funding for roading is necessary for an optimal
network. However, to ensure gains in CO2 emission reductions, appropriate pricing
regimes are also an important means to encourage changes to the transport fleet.
32. In addition to roading infrastructure investment, Government has also committed in
the 2006/07 financial year, $301 million to funding public transport and re-purchased
the nation's rail tracks16. Additionally, the Crown funds ONTRACK directly through
a commitment of $600 million over the next four years for renewal and upgrading of
the Auckland rail network ‘below track’ infrastructure. These initiatives are part of
the national transport infrastructure development. Increases in funding for passenger
transport, along with improvements to the way passenger transport is funded, have
increased passenger transport patronage. Between 1999/2000 and 2005/06 it is
estimated that passenger boardings increased by 68% in Christchurch, by 43% in
Auckland and by 23% in Wellington, with an estimated 49 million car trips being
replaced.17
33. Auckland developed a new Regional Land Transport Strategy in late 2005. This
strategy recognises that the level of public transport in Auckland is only half that of
comparable cities such as Perth, Western Australia; Portland, Oregon or Calgary,
Alberta. The new Auckland strategy proposes to double public transport patronage
over the next ten years, and whilst the primary motivation for this increase is reducing
traffic congestion, it will also reduce private car fuel consumption by an estimated 52
million litres of fuel per year by 2016. The affordability of this strategy is currently
the subject of the Auckland Transport Strategic Alignment project, but there is
already general agreement that the policy direction is broadly appropriate.
C) Travel Behaviour Change / Travel Demand Management
34. The Ministry of Transport is currently initiating work which will help articulate more
clearly to the New Zealand transport sector how Travel Behaviour Change initiatives
can be progressed in the wider context of Travel Demand Management initiatives.
This will require the Ministry to find ways to actively coordinate activities across the
transport sector and indeed wider government, for example the Ministries of Health,
Education, and Social Development.
35. The Ministry is currently working with a number of non-transport government
agencies in the development of access and mobility policy, including the Ministries of
Health, Education and Housing, the Energy Efficiency and Conservation Authority,
and the Office for Disability Issues. Initiatives such as the Walking School Buses and
the Auckland School Travel Plan programme (managed by the Auckland Regional
Transport Authority) have been successful in getting cost effective changes in
behaviour with safety, health and climate change benefits.18
16
The 2006/07 National Land Transport Programme has allocated $136 million to passenger transport community
services, $5.24 million to social services and $159.77 million to passenger transport infrastructure. Included in
this amount is a commitment of $66.83 million for continuation of the Northern Busway in Auckland. The
allocation for passenger transport services increased by 16% compared with 2005/06.
17
For example, the Auckland Regional Transport Authority estimate the replacement of 28.8 million car trips in
2005. Assumptions of 10km trip length and 10litre/100km fuel economy gives CO2 reduction in the order of
0.1Mtonnes.
18
It is estimated that 98,000 litres of fuel (230 tonnes of CO2) will be saved in the Auckland region by the
walking school programme over 2006. The School Travel Plan programme was established as a two year pilot
22
36. Other energy reduction co-benefits can come from the New Zealand Police vehiclespeed enforcement (for safety management), and also driving behaviour that avoids
rapid deceleration and acceleration. Fuel consumption increases dramatically past
100km per hour.19 Speed management programmes have reduced the average open
road speed from 104 km/h to 97 km/h.
project with $1.5 million of central government funding through the Auckland Sustainable Cities Programme. By
mid 2006 100 schools had joined the programme and 23% of the region’s school enrolment is involved.
19
Energy Efficiency and Conservation Authority (2001) Econodrive
23
D) Energy sources (including fuels)
37. The Government has recently considered the release of a discussion document for
public consultation on the proposed biofuels sales obligation. The proposed policy for
the biofuels sales obligation requires that any firm which first purchases, or obtains
petrol or diesel from a New Zealand manufacturer or by importation must also sell
biofuels. The proposed obligation levels start at 0.25% in year one (2008) and
increases to 2.25% in steps by year four (2011): 2.25% amounts to approximately 5
petajoules or around 140-200 million litres20. These levels may be revised following
consultation and in any event do not preclude voluntary sales of biofuels above the
obligation. Measures such as the existing excise duty relief for ethanol may assist in
this. Levels beyond 2012 are subject to a review of the implementation of the
obligation in 2010. Biofuels that can be used to meet the obligation are those that
directly replace petrol and diesel.
38. The introduction of the biofuels sales obligation represents an opportunity to reduce
CO2 emissions of up to 1.027 million tonnes of CO2 between 2008 and 2012. At a
carbon price21 of $15.92 per tonne CO2 this represents $16.4 million that would be
saved by the Government in respect of its Kyoto Protocol commitments. While the
sales obligation sets a minimum percentage, it could be expected that level of biofuels
will be higher than mandated once the infrastructure and legislative framework are in
place.
39. Energy sources generally for transport will be considered as part of the development
of a New Zealand Energy Strategy. This will include looking at long-term
opportunities around use of electricity for transport as well as more immediate
opportunities for biofuels. A report back on the draft strategy is scheduled for
October 2006.
E) Vehicle efficiency
40. Govt3 is a Ministry for the Environment led, ‘walk the talk’ programme that
encourages government agencies to demonstrate leadership in improving the
sustainability of their activities across the following areas;22
a) procurement of office consumables and equipment;
b) waste minimisation and recycling;
c) transport; and
d) buildings.
41. The Ministry for the Environment and the Ministry of Transport are working to
achieve
reductions in both fuel consumption and greenhouse gas emissions
through the
implementation of workplace travel plans and improved fleet
procurement and management practices.
20
This range reflects the different calorific values of the target being met entirely from bioethanol
through to entirely from biodiesel.
21
This figure has been provided by The Treasury and represents the updated price of carbon which will be
included in the Crown accounts as part of the 2006 September Fiscal Update.
22
Govt³ is an Ministry for the Environment led programme aimed at encouraging 47 government agencies to
improve the environmental, social and economic sustainability of their activities.
24
42. Following initial research that identified scope to improve the fuel economy and
reduce emissions from government vehicle fleets, a project has been jointly
developed by the Ministry of Transport and the Ministry for the Environment based
upon offering all Govt3 signatories with fleets of over 50 vehicles the opportunity to
have a free fleet check audit undertaken. This project is due for completion by June
2007.
43. Land Transport New Zealand is collecting fuel consumption figures for light
vehicles entering the fleet. In May 2006 the Ministry of Transport publicised this
information through the launch of the Fuel$aver website. The site allows purchasers
to compare the fuel consumption of new or used Japanese vehicle models, and
calculate vehicle fuel costs. The Energy Efficiency and Conservation Authority has
allocated $200,000 to a promotional campaign around the Fuel$aver website for the
2006-2007 year.
44. The Energy Efficiency and Conservation Authority is developing a mandatory pointof-sale fuel consumption labelling scheme for light vehicles. The scheme intends to
cover both new and used vehicle sales so that as many fleet entrants as possible are
included. There is currently imperfect information on fuel economy, as information
is not gathered for used Japanese vehicles manufactured prior to 2000, and
information for Japanese used vehicles and new vehicles has so far proven noncompatible. The Authority has indicated that it may resolve issues around the
limited and inconsistent information and that a labelling scheme could be in place by
1 August 2007.
1.1.20 Linkages with
mechanisms
the
New
Zealand
Energy
Strategy
and
pricing
45. The transport response to climate change is linked to a range of other departmental
work programmes. These include the New Zealand Energy Strategy and the
National Energy Efficiency and Conservation Strategy. The objectives of reducing
emissions, improving security of supply, and cost effectiveness cannot be achieved
unless these cross government policies align to promote sensible short-term action
and avoid poor decisions on long-term investments.
46. In order to secure durable, ongoing CO2 reductions, a longer-term strategic approach
is required. For transport, this is being developed through the New Zealand Energy
Strategy. The Energy Strategy, of which use of transport energy is an important part,
takes a longer-term approach to reducing transport energy demand and looking at
supply options. A report back, led by the Ministry of Economic Development, is
scheduled for October 2006.
47. Decisions on longer-term climate change policies are likely to influence long term
CO2 reductions in the transport sector. As noted in the paper “Climate Change
Policy: Overview and Strategic Direction”, a critical assumption for climate change
policy is that New Zealand needs to prepare for a probable long-term (post-2012)
international environment in which a price applies to, or a cost is attached to,
greenhouse gas emissions. If the Government chooses to introduce a price for
emissions into the economy for the period post-2012 (for example through an
emissions trading regime), this will impact on future policy development in
transport. The use of pricing mechanisms to influence appropriate transport
behaviour needs to be consistent with any future broad pricing mechanisms in the
New Zealand economy for managing greenhouse gas emissions.
25
1.1.21
The vehicle fleet: multiple objectives
48. Discussion on climate change highlights the opportunity to improve the quality and
efficiency of the New Zealand vehicle fleet, and to diversify the energy sources
utilised. In order to achieve long term, durable CO2 emission reductions, it is
important to consider the whole vehicle life cycle – from first registration, through to
disposal – as well as the mix and quality of vehicles in the fleet. Quicker adoption of
new vehicle technology occurs when fleet turnover times shorten, and new
technology brings with it air quality and safety benefits. In order to optimise the
different policy outcomes, it is recommended that individual policy interventions be
developed within the context of a broader ‘vehicle fleet strategy'. This need to
consider multiple objectives is embedded in the New Zealand Transport Strategy
which includes objectives around safety, access and mobility, public health,
environmental sustainability and economic development. Consideration of the
benefits of a fleet strategy is recommended.
1.1.22 Consultation
49. The following agencies were consulted in relation to this paper: the Ministry for the
Environment, Treasury, the Ministry of Economic Development, the Ministry of
Agriculture and Forestry, the Ministry of Foreign Affairs and Trade, the Ministry of
Transport, the Ministry of Research, Science and Technology, Te Puni Kōkiri, and
the Energy Efficiency and Conservation Authority. The Department of Prime
Minister and Cabinet has been informed.
1.1.23 Financial implications
50. This paper has no financial implications.
1.1.24 Human rights implications
51. This paper has no human rights implications.
1.1.25 Legislative implications
52. There are no legislative implications of decisions sought by this paper.
1.1.26 Regulatory impact and business compliance cost statement
53. There is no impact and business compliance cost statement required by this paper.
1.1.27 Gender implications
54. This paper has no gender implications.
1.1.28 Disability perspective
55. This paper does not require a disability perspective
26
1.1.29 Publicity
56. There is no publicity planned for this paper although it does form part of a set of
wider climate change policy papers, for which publicity may be sought. As there is
a high level of interest in climate change policy matters, we propose that this paper
be publicly released with appropriate withholdings.
1.1.30 Recommendations
We recommend that the Committee:
1. Note that the paper “Overview of Progress Towards Reducing Transport CO2
Emissions” responds to Cabinet's direction to provide further analysis on options to
reduce greenhouse gas emissions in the transport sector; [CAB Min (06) 18/8 refers];
2. Note that while the transport sector continues to rely on fossil fuels in the form of
petroleum products it remains a significant contributor to New Zealand's greenhouse
gas emissions and hence a focus for climate change policies;
3. Note that transport utilises 86% of New Zealand’s oil consumption, with road
transport making up 87% of that total;
4. Note that over the next 25 years the forecast under “business as usual” models, with
current policy settings, is for national transport energy use and greenhouse gas
emissions to grow by about 35%, with road transport accounting for about threequarters of this demand growth;
5. Note that transport energy use is expected to have the largest energy demand and the
largest energy demand growth in absolute terms compared to other sectors by 2030;
6. Note that a number of existing transport initiatives, such as travel demand
management and travel planning initiatives, support for public transport,
development of fuel economy labelling at point-of-sale, the recently announced
visual exhaust emissions test, work towards a biofuels sales obligation, and
programmes to encourage leadership in fuel economy in the public sector deliver
greenhouse gas emissions reductions benefits, and that these initiatives will be
pursued;
7. Note that technological solutions and behaviour change can substantially reduce
emissions in the transport sector more readily than in some other sectors of the
economy such as agriculture;
8. Note that measures that reduce greenhouse gas emissions from the transport sector
deliver significant co-benefits in terms of enhanced air quality, health, safety, energy
security, cost savings and resilience to international oil price fluctuations;
9. Note that measures to reduce greenhouse gas emissions from the transport sector can
increase the supply and demand for fuel-efficient vehicles, and improve the
efficiency of vehicle use;
10. Note that progress to influence demand for more fuel-efficient vehicles has been
made with the launch of the Fuel$aver website which allows purchasers to compare
fuel consumption for some new and used vehicles;
27
11. Note that reducing emissions from transport requires awareness of the wider context
of economic transformation and for transport this means understanding the
relationship between air quality, safety, congestion, energy security objectives and
the quality of the vehicle fleet;
12. Note that the New Zealand Energy Strategy provides an opportunity to develop a
longer term strategic approach for transport energy, which brings together climate
change and energy security objectives;
13. Note that Cabinet is considering a variety of climate change policy initiatives as
identified in CAB Min (06) 18/8, and this includes the specific transport initiative
covered in the accompanying paper “Climate Change Policy: Options for
Controlling Vehicle Entry – Fuel Economy Standards”;
14. Note that the Ministry of Transport is to report back to Cabinet in November 2006
with options for transport policy initiatives that use pricing mechanisms to reduce
greenhouse gas emissions;
15. Note that the Ministry of Transport is to report back to Cabinet in November 2006
on options to reduce harmful emissions standards, including restricting vehicle age at
point of import;
16. Direct officials to report back to Cabinet in November with analysis of the extent to
which existing transport initiatives and policy measures under consideration could
reduce greenhouse gas emissions from business-as-usual levels, for the period 20082012 and beyond;
17. Note that a Vehicle Strategy can bring together vehicle safety, air quality and
greenhouse gas emissions initiatives under a coherent framework to aid long-term
policy planning for the New Zealand vehicle fleet;
18. Agree that the Ministry of Transport develop a Vehicle Fleet Strategy to better
assess how climate change benefits can be delivered alongside initiatives delivered
under the New Zealand Transport Strategy and establish criteria to assess the relative
priority of those initiatives;
19. Agree that the proposed Vehicle Fleet Strategy should take account of the evolving
climate change policies [CAB Min (06) 18/8 refers] in addition to the strategic
direction set by the New Zealand Energy Strategy;
20. Direct officials to report back to Cabinet in March 2007 with a proposed Vehicle
Fleet Strategy;
21. Agree to the public release of this report by Ministers, with appropriate
withholdings.
28
Hon Judith Tizard
Annette King
Associate Minister of Transport
Transport
Hon
Minister of
Hon David Parker
Minister Responsible for Climate Change Issues
29
CAB 100/2002/1
Consultation on Cabinet and Cabinet
Committee Submissions
Certification by Department
Departments consulted: The attached submission has implications for the following departments whose views
have been sought and are accurately reflected in the submission:
.........................................................................................................................................................................
.........................................................................................................................................................................
Departments informed: In addition, the following departments have an interest in the submission and have been
informed:
.........................................................................................................................................................................
Others consulted: Other interested groups have been consulted as follows:
.........................................................................................................................................................................
1.2
1.2.1
Signature
Name, Title, Department
1.3
Date
/
2
/
Certification by Minister
Ministers should be prepared to update and amplify the advice below when the submission is discussed at
Cabinet/Cabinet committee. The attached submission:
2.1
Consultation at 
Ministerial level 

Consultation
with 
Government MPs

Consultation
at 
Parliamentary level

2.2
Signature
did not need consultation with other Ministers
has been the subject of consultation with the Minister of Finance
[required for all submissions seeking new funding]
has been the subject of consultation with the following Minister(s) .............
……………………………………………………………………………………
does
not need consultation with the government caucuses
……………………………………………………………………………………
………………………………………………….
has
been or will be [specify which] the subject of consultation with the
following government caucuses:

Labour caucus

Progressive Coalition caucus
does not need consultation at parliamentary level
has been or will be [specify which] the subject of consultation with the
following other parties represented in Parliament:
...........................................................................................................................
Date
2.3 Portfolio
/
/
30
Most submissions to Cabinet and Cabinet committees are relevant to departments other than the
initiating department. It is important for the quality of decision making that all interested
departments are involved in developing a submission. Departments should consider the schedule of
interests of all departments in chapter 11 of the Cabinet Office Step by Step Guide for every
submission for which they are responsible. Particular attention should be paid to the need to consult
the departments listed below, which have a broad “horizontal responsibility”.
The Cabinet Office will reject submissions if the necessary consultation does not appear to have
taken place.
Department
2.3.1.1
Issues on which they must be consulted
Crown Law Office
Proposals having legal implications for the Crown
Ministry of Consumer Affairs
All policy proposals likely to affect the economic welfare of
consumers
Ministry of Foreign Affairs and All proposals having implications for New Zealand's external
relations, trade policy and international legal obligations
Trade
Ministry for the Environment
All proposals having significant environmental implications
Ministry of Maori Development
All proposals with implications for Maori, as individuals,
communities or tribal groupings, with particular focus on
reducing inequalities, and Treaty of Waitangi issues
All proposals with implications for Pacific peoples as
individuals and communities with particular focus on reducing
inequalities
(Te Puni Kokiri)
Ministry of Pacific Island Affairs
Parliamentary Counsel Office
Proposals for legislation or amendments to legislation
Department of the Prime Minister All policy proposals which are likely to have implications for
& Cabinet
the government as a whole, or for the coordination of the
activities of two or more departments
Ministry of Research, Science and All proposals having implications for science policy or funding,
Technology
or which might be significantly influenced by scientific or
technological input
Office for Senior Citizens, All matters relating to the well-being of older people
Ministry of Social Development
State Services Commission
All proposals with an impact on organisational structures, chief
executive accountability or departmental performance
specification and industrial relations in the state services
The Treasury
All proposals having economic, financial or fiscal (expenditure
or revenue) implications
Ministry of Women's Affairs
All proposals that relate to the economic and social status of
women, especially Maori women
Ministry of Youth Affairs
All proposals dealing with issues of concern to 12-25 year olds
31
Climate Change Policy: Overview of Progress Towards Reducing
Transport CO2 Emissions
On 2 October 2006, the Cabinet Business Committee (CBC), having been authorised by
Cabinet with Power to Act [CAB Min (06) 36/6]:
Background
1
noted that on 23 May 2006 Cabinet:
1.1
directed officials from the Ministry of Transport to engage with the transport
sector on climate change policy options including investigating fuel efficiency
standards (based on world’s best practice) and raising the minimum
requirement for imported petrol and diesel vehicles through the use of “harmful
emission” standards;
1.2
agreed that reports be made to the Cabinet Policy committee (POL) on the
whole-of-government climate change work programme, including, amongst
other things, reports on transport measures by 31 August 2006 and further
transport measures by 30 November 2006;
[CAB MIN (06) 18/8]
2
noted that the paper under CBC (06) 235 responds to this direction;
Impact of the transport sector
3
noted that while the transport sector continues to rely on fossil fuels in the form of
petroleum products it remains a significant contributor to New Zealand’s greenhouse gas
emissions and hence a focus for climate change policies;
4
noted that transport utilises 86% of New Zealand’s oil consumption, with road transport
making up 87% of that total;
5
noted that over the next 25 years the forecast under ‘business as usual’ models, with
current policy settings, is for national transport energy use and greenhouse gas emissions
to grow by about 35%, with road transport accounting for about three quarters of this
demand growth;
6
noted that transport energy use is expected to have the largest energy demand and the
largest energy demand growth in absolute terms compared to other sectors by 2030;
Current initiatives
7
noted that:
7.1
a number of existing transport initiatives deliver greenhouse gas emissions
reductions benefits, such as travel demand management and travel planning
initiatives, support for public transport, development of fuel economy labelling
at point-of-sale, the recently announced visual exhaust emissions test, work
towards a biofuels sales obligation, and programmes to encourage leadership in
fuel economy in the public sector;
7.2
these initiatives will be pursued;
32
8
noted that technological solutions and behaviour change can substantially reduce
emissions in the transport sector more readily than in some other sectors of the economy,
such as agriculture;
9
noted that measures that reduce greenhouse gas emissions from the transport sector
deliver significant co-benefits in terms of enhanced air quality, health, safety, energy
security, cost saving and resilience to international oil price fluctuations;
10 noted that measures to reduce greenhouse gas emissions from the transport sector can
increase the supply and demand for fuel-efficient vehicles and improve the efficiency of
vehicle use;
11 noted that progress to influence demand for more fuel-efficient vehicles has been made
with the launch of the Fuel$aver website, which allows purchasers to compare fuel
consumption for some new and used vehicles;
12 noted that reducing emissions from transport requires awareness of the wider context of
economic transformation and, for transport, this means understanding the relationship
between air quality, safely, congestion, energy security objectives and the quality of the
vehicle fleet;
13 noted that the New Zealand Energy Strategy provides an opportunity to develop a longer
term strategic approach for transport energy, which brings together climate change and
every security objectives;
Future options
14 noted that Cabinet is considering a variety of climate change policy initiatives [CAB
Min (06) 18/8] including the specific transport initiative covered in the accompanying
paper under CBC (06) 236, Climate Change Policy: Options for Controlling Vehicle
Entry: Fuel Economy Standards [CBC Min (06) 17/18];
15 noted that the Ministry of Transport will report to POL in November 2006 with options:
15.1
for transport policy initiatives that use pricing mechanisms to reduce
greenhouse gas emissions;
15.2
to reduce harmful emissions standards, including restricting vehicle age at point
of import;
[CAB Min (06) 18/8]
16 directed officials to include in the report referred to in paragraph 15 an analysis of the
extent to which existing transport initiatives and policy measures under consideration
could reduce greenhouse gas emissions from business-as-usual levels for the period
2008-2012 and beyond;
A Vehicle Fleet Strategy
17
noted that a Vehicle Fleet Strategy can bring together vehicle safety, air quality and
greenhouse gas emissions initiatives under a coherent framework to aid long-term
policy planning for the New Zealand vehicle fleet;
33
18
agreed that the Ministry of Transport develop a Vehicle Fleet Strategy to better assess
how climate change benefits can be delivered alongside initiatives developed under the
New Zealand Transport Strategy and establish criteria to assess the relative priority of
those initiatives;
19
agreed that the proposed Vehicle Fleet Strategy should take account of the whole of
government climate change work programme [CAB Min (06) 18/8], in addition to the
strategic direction set by the New Zealand Energy Strategy;
20
directed officials to report to POL in March 2007 with a proposed Vehicle Fleet
Strategy;
21
noted that the Associate Minister of Transport, Minister of Transport and Minister
Responsible for Climate Change Issues propose to publicly release the report under
CBC (06) 235, with appropriate withholdings;
22
noted that the Associate Minister of Transport indicates that consultation is not
required with the government caucuses or other parties represented in Parliament.
34
Climate Change Policy: Options for Controlling Vehicle Entry: Fuel
Economy Standards
On 2 October 2006, the Cabinet Business Committee (CBC), having been authorised
by Cabinet with Power to Act [CAB Min (06) 36/6]:
Background
1
noted that on 23 May 2006 Cabinet:
1.1 directed officials from the Ministry of Transport to engage with the
transport sector on climate change policy options including
investigating fuel efficiency standards (based on world’s best
practice) and raising the minimum requirement for imported petrol
and diesel vehicles through the use of “harmful emission” standards;
1.2 agreed that reports be made to the Cabinet Policy Committee (POL) on the
whole-of-government climate change work programme, including,
amongst other things, reports on transport measures by 31 August
2006 and further transport measures by 30 November 2006;
[CAB Min (06) 18/8]
2
noted that on 23 August 2006, the Cabinet Economic Development
Committee (EDC):
2.1 invited the Minister for Transport Safety, the Associate Minister of
Transport, and the Minister Responsible for Climate Change Issues,
to report to EDC by 30 November 2006 on:
2.1.1 the climate change implications of the Land Transport Rule:
Vehicle Exhaust Emissions 2006;
2.1.2 whether there is a need for an age restriction on imported
vehicles, given the improvement of emission standards in
recent years;
[EDC Min (06) 13/9]
3
noted that the paper under POL (06) 236 is a companion to the paper under
POL (06) 235 Climate Change Policy: Overview of Progress Towards
Reducing Transport CO2 Emission [CBC Min (06) 17/17] and is part of a
wider group of initiatives that directly and indirectly reduce transport CO2
emissions;
Measures to reduce greenhouse gas emissions from the transport sector
4
noted that New Zealand is a technology taker with respect to its vehicle fleet,
and is influenced by technological improvements in other countries;
35
5
noted that measures to reduce greenhouse gas emissions from the transport
sector deliver significant co-benefits in terms of enhanced air quality, health,
energy security, cost savings and resilience to international oil price
fluctuations;
6
noted that policy interventions for fuel economy outlined in the paper under
POL (06) 236 establish a means to work with the motor industry to improve
the fuel economy of vehicles over time and as such, provide a foundation from
which other policy interventions can be built to ensure durable, long-term CO2
reductions;
Options
7
noted that a minimum fuel economy standard would not be an appropriate, or
particularly effective, mechanism for improving fleet fuel economy;
8
agreed that no further work should be done at present on the option of
minimum fuel economy standards per vehicle;
9
noted that establishing a fleet sales-weighted standard would spread the
incentive to improve fuel consumption across all vehicles, provide flexibility
to the industry and choices to consumers;
10
directed officials to work with industry on options for a regulated salesweighted standard;
11
noted that significant benefits can be realised through restricting the import of
vehicles with older technology types;
12
directed officials to consider options for an age restriction on used imports
entering the New Zealand vehicle fleet;
13
noted that mandatory collection of fuel economy information would allow for
the establishment of trends and assessment of policy interventions, and would
provide a default restriction on vehicles entering the fleet for which data
cannot be provided;
14
directed officials to consider the appropriate mechanism, which may require a
rule, to enable the mandatory collection of fuel economy information for
vehicles entering the fleet;
15
agreed that this mechanism be developed in such a way as to accommodate
the reported differences in fuel economy between new and used vehicles
entering the New Zealand fleet;
16
noted that in September 2006 EDC authorised the release of a discussion
document which proposes that oil companies be required to sell a minimum
percentage of biofuels in transport fuels [EDC Min (06) 15/6];
36
17
directed the Ministry of Transport to consider import restrictions on vehicles
unable to accept minimum thresholds of biofuel blends and report to POL by
March 2007;
18
directed officials to proceed with urgency toward introduction of further
measures to improve the fuel economy of the New Zealand vehicle fleet,
which may include a sales-weighted target, differential pricing or age
restrictions;
Next steps
19
agreed that the further work referred to in paragraphs 9 – 15 be included in
the reports to POL and EDC in November 2006 referred to in paragraphs 1.2
and 2.1;
20
directed officials to report on costings to introduce mandatory collection of
fuel economy information, as part of the transport initiatives for climate
change to be considered as part of the Economic Transformation theme for
Budget 2007/08;
21
noted that the Associate Minister of Transport, Minister of Transport and
Minister Responsible for Climate Change Issues propose to publicly release
the report under CBC (06) 236, with appropriate withholdings;
22
noted that the Associate Minister of Transport indicates that consultation is
not required with the government caucuses but will be required with other
parties represented in Parliament.
Nick Markwell
Secretary
37