PUBLISHERS PODIUM

 

New Fuel Economy Standards
You may or may not have heard or become aware through the mainstream media that the current government is proposing new fuel economy standards and that they appear quite draconian on the face of it. But - there's no need to panic or to aggravate the very people who are working alongside us towards accomodating our special and specific needs. Right now LVVTA is working alongside government and is a long way towards a viable and workable solution for our miniscule segment and that's great news.....

Here's the in-depth report from LVVTA....

 

The Real Fuel Economy Challenge  

 

 

You may have heard of fuel economy challenges that take place each year.  Years ago, it was the Mobil Economy Run.  The events are low-key, involve driving with a different kind of skill, and can result in some good publicity for the vehicle manufacturers whose products do well.  The real fuel economy challenge however, with stakes so high that if theres not a reasonable outcome some enthusiasts will shift overseas to live because of it, is right here, right now and it involves all of us.

 

As a result of a new government initiative, the New Zealand motor vehicle enthusiast is facing the second biggest challenge of our transport legislation history. And the impact will be felt far wider than only with the enthusiasts; also caught up in this potential web are thousands of other New Zealanders who need a large vehicle to safely tow a boat, or horse-float, or race car. 

 

The Vehicle Standards regulations challenge 

 

In the early 90s, the Transport (Vehicle Standards) Regulations 1990 were introduced into New Zealand, which, had they been handled by the motor vehicle hobby incorrectly - or not at all  would have spelt the end of building and modifying cars in New Zealand as we know it. Fortunately, as history tells us, a group of people, principally led by the New Zealand Hot Rod Association, negotiated a deal with the Ministry of Transport, the result of which established the beginnings of the low volume vehicle system that now, two decades down the track, allows us the freedom to build and modify as we choose, providing that a very high level of safety is threaded throughout everything we do. The challenge was met, and is now largely forgotten as our low volume vehicle system, which has been developed and driven by the Low Volume Vehicle Technical Association (LVVTA), is an accepted part of our lives. The LVV system is on relatively safe ground these days, as it has evolved to such an extent that its now recognised as - from the point of view of both the hobbyists and the government - the best in the world. 

 

The environmental age 

 

But thats ancient history.  Were now in a new age.  Vehicle safety will always be a significant part of the Ministry of Transports agenda, but increasingly, their focus is shifting toward the environment.  The New Zealand Government has obligations to the Kyoto Protocol; an agreement made between many of the planets nations with the objective of cleaning up our industrial, vehicular, and other emissions, to make the world a better place to be in for our grandchildren.  This obligation by our government has led to the beginnings of air quality emissions management for the New Zealand vehicle fleet.   

 

You know about the first part of it; a new Land Transport Rule came into effect this year (dealing with harmful vehicle exhaust gas emissions) to prevent the entry of any cars into our fleet that dont meet recognised emission standards. And really, this is no problem.  The effect of the emissions rule is minimal for vehicle enthusiasts; essentially we can no longer import vehicles older than late-1990s.  This, of course, doesnt apply to classic vehicles, which are those defined as being older than 20 years of age.  So, apart from not being able to import an R32 Nissan Skyline, or any vehicle considered to be desirable built between a decade spanning 1988 and the late 1990s, were really not greatly affected.  And even for those vehicles, the new Special Interest Vehicle (SIV) category will probably resolve the problem for genuine vehicle enthusiasts.  For our scratch-built and engine-swapped vehicles, LVVTAs LVV Air Quality Emission Standard provides a practical and reasonable solution that will allow the continuance of our hot rod/sports car/kit car hobby, provided that our vehicles are well-tuned. 

 

Reducing the fleets fuel consumption 

 

The real problem is this: There are many ways for a government to reduce greenhouse gas emissions, some of which are already in place. One way which is a very simple way is to simply reduce the amount of fuel being burned by our vehicle fleet. If less vehicles are on the road, then less emissions are being spat into the environment. Hence the governments big push on walking, cycling, and public transport. Another way to reduce the amount of emissions being emitted is to have each vehicle that is used on the road consume less fuel. If everyone drove a Holden Barina instead of a Holden Senator, less fuel would be burnt, with a corresponding reduction in emissions being emitted. Simple.

            So, that is the path that is being currently pursued by a government group known as the Land Transport Environment and Safety Group, who have, over the past months, been setting out ideas by which a reduction in overall fuel consumption can be achieved throughout the national vehicle fleet. This group has been developing some proposals, which resulted in the release during January 2008, of a discussion paper for public comment called Improving the fuel economy of vehicles entering the New Zealand fleet. 

 

The content of the discussion paper 

 

The discussion paper explains how the Land Transport Environment & Safety Group have been looking at ways of reducing the vehicle fleets fuel economy into the future future in this context, should be seen as within the next ten years.  The thrust of the paper is to set out the options that the group has identified, by which the fuel economy of the national vehicle fleet can be improved for the future, based around providing disincentives to the car-buying public from buying gas guzzlers.  In a nutshell, the project is about coming up with a way of providing average mums and dads with some additional incentives to buy a small fuel-efficient vehicle instead of a gas-guzzler.  The eventual legislation will apply to both new and used vehicles, and it may come as no surprise that the disincentives are financially-based.

            Its important to understand that when or if  this regime is introduced, it will apply only to those vehicles imported into or first registered in NZ, after a specified date. The SS Commodore, deuce coupe, Lotus 7, or Nissan Skyline in your garage, is safe.

 

How the proposal works 

 

Heres how the proposal is intended to work.  The discussion document put forward three possible options, each of which is to apply a financial penalty for any vehicle that uses more than a specified amount of fuel.  The method of measurement, by which the calculation process will occur, is grams of carbon dioxide (CO2) per kilometer travelled.  There is a direct correlation between fuel burnt and grams of C02 emitted, so grams of carbon dioxide (CO2) per km travelled is an alternative to measuring by way of litres per 100 kilometres travelled, which allows all types of fuels, including electricity, to be compared against each other. 

            Its worth noting at this point that the concept the government is working towards is not unique.  Many other countries are imposing some form of gas-guzzler tax on vehicles that use more fuel than the average commuter.  The US Government has been applying this to the vehicle manufacturers for decades under what is known as Corporate Average Fuel Economy (CAFE) regime.  Japan has had a similar scheme since about 2000, and Europe will replace its voluntary system with a legislated one later this year. 

 

How the figures stack up 

 

A very fuel-efficient vehicle think Honda Jazz and the like - will produce 150 grams of CO2 per km travelled (g CO2/km). The Standard that the government proposes is to set the average fuel economy of vehicles entering the fleet at 170g CO2/km by 2015. Simple arithmetic tells us that the Jazz has a cushion of 20g CO2/km better than the standard (170g minus 150g), so its on safe ground. However, this also means, conversely, that any vehicle that emits more than 170g CO2/km might be penalised for each gram over and above 170g. One of the proposed penalty rates is $100 per gram. Therefore, if a vehicle emits 230g CO2/km  think V6 Toyota Camry and the like the penalty will be (simple arithmetic again) 230g (emitted by the Camry) minus 170g (the standard) equals 60 excess grams. Multiply each of the 60 excess grams by $100 each, and youve got a $6000 penalty.  

 

This is payable at the time of entry certification, and it will be effectively built into the cost of the vehicle.  The only good news to offer at this point is that this is a one-off cost. 

            If we apply the same mathematical process to a 2005 6.0 litre Commodore, we will see that the Commodores assigned figure of 303g CO2/km comes out at a penalty figure of $13,800, and the assigned figure of 348g CO2/km for a 2005 5.4 litre Falcon is $17,800.  Dont forget, that still applies if the vehicle is 8 years old and has depreciated to less than its penalty rate!  A 1980s Roll Royce, for example, worth, say $20,000, would, on this basis, incur a penalty rate of $43,500! 

            The bad news is that this is only one of the three options, and the effect of the other two options, especially for larger vehicles, is considerably worse. A vehicle, for example, with an output of 400g CO2/km (thats 17.5l/100km or 16 MPG in the old money), will work out at, in the best scenario  in what is referred to as the vehicle fuel economy standard scheme , at a $23,000 penalty. The discussion document also put forward two other options. One is referred to as the tradable credit scheme and the other is an option proposed by the new car industry called the industry code of compliance. These have quite different costs and penalties, but could, under some circumstances have even higher penalties. 

 

How the three different schemes work 

 

Heres a look at how the three different options work, based on a vehicle that emits 400 grams of C02 per km travelled. 

            Under the vehicle fuel economy standard scheme, its a straight-forward process as described previously; the vehicle will incur a penalty of 400g.  It is proposed that the standard would reduce from 210g CO2/km in 2009 to 170g CO2/km in 2015.  Used here for the sake of simplicity, weve applied the worst case scenario of 170g CO2/km for the example.  400g minus 170g (the standard), leaves a figure that exceeds the 170g standard by 230g, which when multiplied by $100 per gram equals $23,000. 

            Under the tradable credits scheme, it is proposed that all vehicle importers would either receive credits or be required to present credits to the amount by which the vehicle was over or under the standard. The owner of the Jazz in the first example would get 20 credits for being under the standard. He can then trade them on an open market, however we dont know how much they will cost. It might be $1 a gram or it might be $100 a gram. However, the proposal put forward an upper limit on the costs, meaning that if the vehicle did not have credits, the maximum penalty that could be applied to that vehicle will be $200 for every gram that exceeds the 170g standard. When multiplied by the worst-case scenario of $200 for each of the 230 grams over the standard, the penalty will be $46,000. However, if the market price (set in an auction using something like Trade Me), was only $10 per gram, then it would only cost $4,000 under this option it depends on the market. LVVTAs view is that we have to bank on the worst-case scenario, so potentially at least - $46,000 it is, under this option. 

            Lastly, under the industry code of compliance scheme, while the penalties for a small excess over the standard  result in a comparatively minimal penalty, because of the exponential nature of the structure of the scheme (calculated over the vehicles life), a significant excess over 170g (such as for a vehicle which emits 400 grams) results in an even greater final figure; a penalty of 230g difference multiplied by 150,000 kilometres equals 34,500,000 grams, or 3450 tonnes, which when multiplied by $15 per tonne, equals $51,750.

            The whole affair is quite confusing, and part of the reason for it being so, is that (a) the government is sensitive to regimes such as this being seen by the voters as another tax, and (b) the different options are provided primarily for the consideration of the industry (new and used imports), which makes it harder for us to view the proposal from the point of view of an individual vehicle enthusiast. 

 

What about old vehicles? 

 

One of the biggest concerns that LVVTA identified during their study of the proposal in February was that no exemptions to the rule were proposed for old vehicles.  Another of the biggest concerns was this; if a vehicle has no fuel economy status assigned to it, the vehicle automatically defaults to a 400 gram penalty.  Thats why the figure of 400g has been used in some examples.  Only a vehicle manufacturer or registered laboratory can assign a vehicles fuel economy status.  There are no registered laboratories for this purpose in New Zealand (nor are there ever likely to be), and only very modern vehicles actually have a fuel economy status assigned to them, as this is not something that vehicle manufacturers have recorded and made available until very recently.   

            This means, quite simply, that any vehicle more than a handful of years old, no matter how fuel-efficient it might or might not be, would, under the January discussion paper, have to be assessed on the basis of 400g CO2/km.  Likewise all scratch-built vehicles will fall into the same 400g default penalty.  Therefore, even your 1600 cc kit car, or freshly-imported Hillman Imp or 2CV Citroen, will be up for $23,000, $46,000, or $51,000, depending on which of the proposals (if any) are ultimately adopted. 

 

LVVTAs submission to the Ministry of Transport 

 

Given the significant concerns this spells out for New Zealands motor vehicle enthusiasts, not to mention those who tow and carry big loads, LVVTA made a lengthy submission to the Ministry of Transport on the discussion document in March.  Prior to developing the LVVTA submission, Tony Johnson, CEO of LVVTA, met with senior officials within the MOT during January and February, in order to gain a full understanding of the implications of the proposal. 

            In its submission, amongst other comments and suggestions, LVVTA proposed exemptions to the rule for scratch-built vehicles, classic (20-year old) vehicles, and any vehicle that qualifies as a Special Interest Vehicle.  A lot of supporting information was provided within the LVVTA submission, focusing on points including the comparatively minor annual mileage travelled by enthusiast vehicles, the tiny proportion of the fleet that they represent, and the impact on safety that could occur by forcing people to carry and tow loads with vehicles that are not man enough for the job.  A point made by LVVTA in their submission was that in the case of many vehicles imported into New Zealand, the penalty imposed would exceed the total cost of purchasing the vehicle, shipping it to New Zealand, the GST and port charges, and the entry compliance costs.   

            That rusty old Roller worth $20K could owe you $110,000, if instead of incurring a penalty of $43,500 for the vehicle fuel economy standard scheme, the penalty of $87,000 for the tradable credits scheme penalty system were chosen, or the penalty of $90,000 for the industry code of compliance scheme were to be applied.  A 10 year-old plain-Jane Dodge Ram/Chevrolet Silverado/Ford F-series pickup that someone might wish to import for the purpose of safely towing a heavy trailer or carrying a heavy load is another interesting subject; - such a vehicle that one might purchase for $10,000 USD, could end up costing, by the time shipping, GST, port charges, right-hand drive steering conversion, and compliance costs are applied, in the region of $35,000.  That total figure could then, depending on which of the three fuel economy penalty proposals are applied, come out with a grand total of $55,000, $75,000, or $80,000. 

            As a point of comparison, Washington state in the USA is proposing a penalty tax of $600 for any vehicle that exceeds 362 grams of CO2 per mile travelled, while New York state is proposing a scale of penalties, with the highest applicable penalty being $2,500. 

            By comparison to those American states, the overall situation, as at April this year, looked fairly bleak. 

   

Further meetings in July and August 

 

During August, Tony Johnson of LVVTA met with three senior Ministry of Transport officials, to assess where the ministrys thinking lay, having completed the public consultation process, and having considered the issue further since the release of the discussion paper in January.  Tony already has a very good relationship with the ministry people concerned John Saker and Iain McGlinchy in particular - from working with them on other issues over the years, and he holds John and Iain in very high regard.  That, for certain, is an excellent starting point.

 

LVVTA raised a point that, despite the discussion paper being intended for public consumption, the whole issue seemed to be the Governments best-kept secret of the decade. The Ministry agreed that they too had been surprised by the lack of uptake and comment on the paper only 22 submissions had been forwarded to them (a spectacularly low number of submissions for such a significant subject), and it now seems that there might have been a glitch with the notification of the existence of the discussion paper. If, therefore, you didnt receive notification of the documents existence and would have expected to, there will most likely be another opportunity as the ministry goes through the public consultation process again some time in the foreseeable future. 

            The meeting went well, and Tony reports that whilst there are still some issues for the enthusiasts and large vehicle users which will require further discussion, some of the major issues appear to be resolved. The ministry agreed in principle with some areas of the LVVTA submission, the most notable being their agreement to exempt old vehicles (either based on 20 years of age or pre 1990). Either way, that part of the problem which would have affected one of the biggest target groups seems to be sorted.

            The ministry is still unsure at this stage as to how to treat Special Interest Vehicles, and scratch-built low volume vehicles.  

 

Likely costs under latest thinking 

 

Another significant improvement in the overall situation is that the ministry now acknowledges that applying the 400 grams of CO2 per km travelled penalty for all vehicles without a fuel economy status assigned to it is not the most reasonable approach to take, and they are now working on a sliding scale proposal, that is based on engine size. 

            Of the three options in the January discussion paper, the tradable credits scheme appears to be the preferred option.  How this will out work in dollar terms is very difficult to know.  Economists have advised the ministry that tradable credits might (as at year 2015) trade for around $25 per g CO2/km .  If this were to be the case, at $25 g CO2/km , the maximum price (at year 2015) at, for example, 427g minus 170g (the standard) would equal $6,445.  This would result in a still very high, but much more realistic figure, than the earlier figures of $23,000, $46,000, or $51,000 for a vehicle assessed at 400g.  Better still, because of the sliding scale approach, it would mean that a 2 litre-powered scratch-built sports car (without a fuel economy status assigned to it) would therefore incur around a $3000 penalty, instead of being set at the same blanket 400g figure. 

            LVVTAs interim response to the ministry was that, as enthusiasts, we dont wish to be at the mercy of economists estimates, which may prove realistic, but may also prove to be miles away, particularly if tradable credits are not as plentiful as assumed to be.  Obviously, there is much more discussion required in this area. 

 

What happens next? 

 

Currently, any rule is a long way off, as there are currently no powers with which to enact this new rule.  The ministry is presently seeking agreement from Cabinet to amend the principle legislation, the 1998 Transport Act, in order to enable this rule to proceed.  LVVTA has been told that Cabinet may or may not agree to this; a lack of unity even conflicting opinion  apparently exists within Cabinet on this whole subject.  The Cabinet meeting is expected in September.  If Cabinet approves the Transport Act amendment and Fuel Economy Rule development, it may be that the ministry are instructed to proceed with the current plan, or it could be that the process has to be started again, following a different direction.  Even under proceed with current plan instructions, it will take up to two years to amend the Transport Act.  During this two-year period, there will be plenty of opportunity for full discussion and consultation between the ministry and all those who want to have a say on the fuel economy strategy.

 

What should we do in the meantime? 

 

So do we, as enthusiasts and affected vehicle owners, need to launch a full-scale attack on these Government people, and lobby our MPs, and awaken the media?  No we dont.  It would seem that most of the problems stem from a lack of understanding on the part of the original authors, rather than any deliberate intention to shaft us, and we also need to remember that the discussion document was just that – a document that outlined some options that the government was thinking about, of which any or none could form the final solution.   

            Now that the implications of the documents content have been bought to their attention, the ministry representatives are giving the hobby, through LVVTA, their full co-operation.  Even if the ministrys initial proposals in the discussion document were extreme, the officials that LVVTA are working with are acting professionally, fairly, and reasonably, and with courtesy and competence.  As long as that continues, LVVTA wishes to extend the same courtesies in return, and work toward something that is sensible and reasonable, that both the government and the hobby can live with, as we have done so many times before over the past 18 years of working together.   

            If at any point during the negotiations, LVVTAs view changes, or it cannot bring about a sensible outcome, you will most certainly be made aware of it within these pages.  For now, sit tight and dont panic.  Well keep you informed of the progress of our second greatest challenge.  

 

 

End. 

 

 

 

Sidebar:

 

Ever since a report in 2002 that showed that up to 399 people a year were dying prematurely form the effects of air pollution, the government has been tightening the standards for harmful exhaust gases. This has led to the beginnings of air quality emissions management for the New Zealand vehicle fleet, and the government is now moving towards reducing levels of greenhouse gas emissions. Although people often assume that there is a link between the greenhouse gas emissions (eg CO2) and the emissions of “harmful” exhaust gases (eg carbon monoxide, NOx and particulate matter), technically there is little connection between the two types of emissions, and this has lead to a separate policy response to the two issues.  This is because although both types of emissions are produced by the burning (or incomplete burning) of fuel, the harmful emissions are largely dealt with by technology in the exhaust systems of the vehicles. It is therefore quite possible to have very clean exhaust gases from a very fuel-thirsty large 4WD (if it has a suitable exhaust catalyst on it) and very dirty emissions from a very fuel-miserly 50CC two-stroke motorbike if it has no emissions treatment. 

 

 

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