Who is for and against the fuel efficiency standard including credits for low-GWP refrigerants?

Between April 19 and May 31, 2023, the Australian federal government received a remarkable 2700 responses to the proposed implementation of a Fuel Efficiency Standard (FES) from a diverse range of sectors, including the vehicle industry, climate groups, consumers, think tanks, unions, regional Australians, and individuals. 

The proposed FES would enforce penalties on auto-makers if the average CO2 emissions of their passenger and light commercial vehicles exceeded predetermined limits.

As one of the few remaining industrialised nations without such a standard, the adoption of a FES is considered vital for Australia to reach its net zero emissions goal by 2050.

The FES seeks to incentivise auto-makers to supply vehicles with lower CO2 emissions and promote the adoption of cleaner technologies, including those used in hybrid and electric vehicles as well as high-efficiency internal combustion engines.

Part of the consultation explored the possibility of “bonus credits” for the use of innovative powertrains, such as hydrogen, and technologies that effectively reduce the global warming potential (GWP) of vehicles in real-world conditions, including low-GWP air-conditioning refrigerants like R1234yf.

At present, European Union (EU) manufacturers have the chance to acquire “bonus credits” through various means.

One such approach involves the allocation of “off-cycle” credits, which are awarded for vehicle features that contribute to fuel efficiency and emission reduction, such as ventilated seats or efficient headlights. These credits are termed “off-cycle” because they are not evaluated through conventional emission test procedures.

Furthermore, auto-makers in the United States have the opportunity to earn “refrigerant credits” by utilising low-GWP air-conditioning refrigerants in their vehicles.

While these off-cycle credits may have a relatively modest impact individually, when combined, the EU currently allows them to offset a vehicle’s emissions rating by up to seven grams of CO2 per kilometre driven.

The inclusion of refrigerant credits in the recent FES consultation gave rise to debate, as it raises two significant questions:

• Should an Australian FES include credits for using low-GWP air-con refrigerants, and if so, for how long should this credit be available?
• Could the issue of high-GWP refrigerants be better dealt with by another policy or legislative framework?

Supporters for the inclusion of refrigerants argue that it is essential to consider the complete lifecycle emissions of vehicles, which includes accounting for refrigerant leakage. 

They contend that by integrating refrigerants into the standard, auto-makers will be incentivised to use more environmentally friendly refrigerants and implement improved systems to prevent leakage.

Opponents argue that refrigerants are already addressed through the phase-down of hydrofluorocarbon (HFC) gases, which began in January 2018, so additional regulations within the FES are unnecessary.

During the FES consultation period, various online published responses shed light on the complexity of the issue and offered insightful feedback from those for and against refrigerant credits, as well as those who maintained a neutral stance.

A positive of this consultation process is that it has encouraged careful consideration regarding the potential inclusion of refrigerants in the FES and raised the profile of greenhouse gas emissions other than CO2.

The government has said it plans to publish its preferred model for the FES, along with a comprehensive impact analysis, before the end of this year.

FOR:

Nissan Australia: “A/C credits are an effective method of incentivising OEMs to introduce carbon reducing technology which is otherwise not required. A/C Credits should be available until significant market penetration is achieved. Any mandating of low global warming potential refrigerants risks restricting vehicles from certain regions being sold in Australia.

Given the diversity of vehicles offered in Australia, we cannot rely solely on sourcing vehicles from one region (e.g. Europe).”

Japan Automobile Manufacturers Association (JAMA): “JAMA requests that credits for such air conditioning refrigerants be included. With regard to the period of credit applicability and in view of Australia’s being a party to the Montreal Protocol, JAMA considers that no credits will be required after the switchover of refrigerants is completed.”

Federal Chamber of Automotive Industries (FCAI): “The phase down of Low Global Warming Potential refrigerants is a very long-term process and not directly applicable to vehicle fuel efficiency. It is controlled by a different Commonwealth Government Department from that responsible for the FES.

“However, it is a complementary issue which can be incentivised through the FES, effectively increasing the uptake of LGWP refrigerants in advance of their phase down under the Montreal Protocol. This would add some complexity to a FES in recording and monitoring refrigerant use. FCAI reduced this complexity in the FCAI industry-led CO2 standard by averaging refrigerant use across each vehicle category and applying that average across the standard for each category.

“Government should include provisions that allow credit for the adoption of Low Global Warming Potential air conditioner gases but not necessarily lower the emissions target as a result.“

Mazda Australia: “Include credits for Low Global Warming Potential refrigerants. Allow trading of credits between manufactures.”

AGAINST: 

Greenpeace: “Off-cycle and air conditioning refrigerant gas credits should not be used in an Australian FES. Their technical complexity, and the historical record of car manufacturers engaging opaquely with regulators, creates an unnecessary risk of non-compliance. Many of the technologies that might be eligible for credits are included in modern vehicle designs by default, and so providing credits for them would not help achieve the objectives of the FES.”

International Council on Clean Transportation (ICCT): “Refrigerants with low global warming potential are widely available and in use in mobile air conditioning applications. We therefore recommend banning the use of high global warming potential refrigerants instead of weakening the CO2 reduction effort of an FES by providing credits for using a technology that is already established in the market.”

Tesla Motors Australia: “Tesla does not support the inclusion of off-cycle credits in an Australian standard. Off-cycle credits dilute the efficacy of standards and are being phased out in other standards around the world for this reason.

“Off-cycle credits increase complexity, decrease transparency, and threaten CO2 outcomes. If off-cycle credits are included, the CO2 target should be adjusted downward accordingly. Accelerate the phase out of high global warming potential (GWP) refrigerants and do not include them in a FES.

“High GWP refrigerants should simply be banned. Hydrofluorocarbons are already being phased out in Australia pursuant to Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 and these gases have no place in modern vehicles or vehicle standards.”

The Australian Electric Vehicle Association (AEVA): “Emissions associated with refrigerants are negligible in comparison to those due to vehicle propulsion. Regardless, some refrigerants still have a significant global warming potential (GWP) and their use continues to be tightly monitored. AEVA’s preference would be to encourage low GWP refrigerants through mechanisms other than the FES. If refrigerants are already well regulated through the Montreal Protocol, it need not be included in this scheme.”

Australian Industry Group (AI Group): “While there is a case for the inclusion of a broad range of vehicle emissions reduction opportunities in a FES, the existing national policy framework for synthetic greenhouse gases complicates the issue.

“The Ozone Protection and Synthetic Greenhouse Gas Management Act underpins Australia’s phasedown of high-global warming potential refrigerants, as committed through the Kigali Amendment to the Montreal Protocol. Supply of these gases is limited and will decline over time. 

“In this overarching context, it would appear that narrower mechanisms to discourage particular applications of these gases may not achieve overall reductions in emissions; if there is less demand from the automotive sector, more quota would be available for economy-wide supply of these gases. On this basis it is probably best not to incorporate credits for low GWP refrigerants in the FES”

Transport Energy Emission Research (TER): “TER therefore suggests that the use of credits in the FES should be prevented, whenever possible. Instead we would suggest an inversion of the credit approach. The FES could adopt a debit approach (penalties) for cases where car manufacturers are not using proven and established best practice regarding fuel efficiency in new vehicles. This would set a base from which car manufacturers can improve even further.”