What are vehicle emission standards in Australia?

Vehicle emission standards are government-enforced requirements that aim to restrict the amount of pollutants emitted by new vehicles sold in Australia.

What is the New Vehicle Efficiency Standard?

The New Vehicle Efficiency Standard (NVES) became law on 1 January 2025 (enforceable from 1 July 2025). It is designed to cap the average carbon dioxide emissions of new passenger and light commercial vehicles being sold in Australia.

It puts the onus on car manufacturers to meet an average emissions target across their entire new vehicle fleet. In practice, it works through a system of targets, tradeable credits, and penalties.

In simple terms, if a manufacturer sells vehicles below its emissions target, it earns credits (called units) which it can then 'bank' for when it sells a vehicle exceeding the average, or on-sell to other manufacturers that may be exceeding their emissions limits.

Those manufacturers with an average emissions tally above their set limits face steep fines. In this way, the federal government aims to incentivise manufacturers to supply more efficient vehicles to the Australian new car market.

Other noxious emissions

As well as the NVES, Australia limits other tailpipe pollutants, such as nitrogen oxides, carbon monoxide, and particle matter, based on European regulations. These have progressively tightened for new vehicles although new standards do not apply to existing vehicles.

How has the NVES worked so far?

The federal government has deemed the NVES to be successful, reporting in February 2026:

• around two-thirds of all regulated vehicle suppliers came in under their fleet emission targets
• there was a net surplus of NVES units, marking the start of a tradeable unit market
• around 12% of vehicles covered by the NVES during the reporting period and 88% were traditional or hybrid vehicles
• sales of low-emission and zero-emission vehicles strongly increased during 2025

What are the sales of electric vehicles (EVs) in Australia?

Electric vehicles (EVs) in Australia have gone from being a niche part of the market to accounting for one in five of all new vehicles sold as at May 2026.

The uptick in EV sales was already pronounced before the outbreak of the conflict in the Middle East in February 2026, putting pressure on fuel prices and seeing more car buyers turn to electric vehicles.

The graph below gives a snapshot of EV sales in Australia:

What are the top-selling new car brands in Australia?

Here is the top 10 selling car brands (as at May 2026):

_{*Denotes noted EV brands; other brands may offer some EV, PHEV, or hybrid models}

_{Source: Federal Chamber of Automotive Industries (FCAI)}

EV sales continue to skyrocket

As a whole, EV sales were up 111.6% year-on-year while plug-in hybrid (PHEV) sales were up 202.3%.

Conventional hybrids (using a combination of combustion engine and small, self-charging battery) continued to outsell PHEVs.

Combined, EVs, PHEVs, and hybrids accounted for 46.4% of all new vehicle deliveries in May 2026.

See also: 'Green' cars in Australia: EVs, PHEVs, costs and loan rates

Has introducing emission standards lowered the price of EVs?

In short, the introduction of the NVES, combined with government tax incentives, is attributed with boosting EV availability and lowering overall running costs in Australia.

However, it's fair to say EV prices have mostly been driven down by increasing global competition with the entry of more EV brands on the market. In many cases, EVs have reached price parity with comparable petrol vehicles.

Here's how EVs have become more affordable:

• More choice: The NVES provides an incentive for manufacturers to send their lower-emission and more affordable vehicles to Australia. The total number of EV models since the NVES is about 150, up from between 70-99 (combination of EVs, PHEVs, and hybrids) previously.
• New manufacturers: New manufacturers, such as BYD, have created lower entry-level price points in the EV market.
• Government incentives: Both federal and state governments offer targeted incentives and discounts that lower costs for car buyers choosing EVs (although the federal government is winding back its Electric Car Discount from 2027).

Lower car loan interest rates

Car buyers seeking EV, PHEV, or hybrid vehicles may qualify for 'green car loans', subsidised by the federal government's Clean Energy Finance Corporation. Each lender has its own definition of what constitutes a 'green' vehicle purchase.

In practical terms, it can see those choosing lower-emission vehicles qualify for car loan interest rates that are around 0.5 to 1% lower than standard interest rates.

See also: Should you sell your car before fuel prices climb higher?