Govt Updates Clean Vehicle Standard to Lower Costs and Boost Efficiency

The changes, announced by Transport Minister Chris Bishop, are designed to ease compliance pressures on importers and reduce the likelihood of added costs being passed on to car buyers.

The Government has introduced major updates to the Clean Vehicle Standard (CVS) to provide vehicle importers with more flexibility in meeting annual carbon dioxide (CO2) reduction targets, while ensuring New Zealanders continue to gain access to affordable, fuel-efficient vehicles. The changes, announced by Transport Minister Chris Bishop, are designed to ease compliance pressures on importers and reduce the likelihood of added costs being passed on to car buyers.

How the Clean Vehicle Standard Works

The Clean Vehicle Standard was introduced to gradually lower the carbon footprint of New Zealand’s vehicle fleet. It works on a credit and penalty system: importers who bring in large numbers of low-emission vehicles earn credits, while those who import higher-emission vehicles incur charges.

If importers fail to meet their targets, the costs are often transferred to consumers through higher vehicle prices. Conversely, if targets are met, charges are avoided, helping keep prices lower. The Government says the latest refinements will improve the system’s practicality and fairness, while aligning with New Zealand’s climate commitments.

Key Changes to the Standard

The Land Transport (Clean Vehicle Standard) Amendment Bill (No 2), which passed its first reading in Parliament today, introduces several important changes:

• Credit Trading Between Importers: Credits can now be transferred between new and used vehicle importers, making the system more adaptable. To reflect the greater lifetime fuel savings of new vehicles, importers will require two credits from used vehicles to offset the charge for one new vehicle.

• Extended Credit Lifespan: Credits will now remain valid for four years, instead of three, giving importers a longer window to manage their obligations.

• Year-to-Year Flexibility: Importers will be allowed to offset charges from one year by importing and selling more low-emission vehicles in the following year if market conditions improve. This “carry-over” approach aims to smooth out fluctuations in vehicle supply and demand.

• Moving Away from Weight-Based Targets: Previously, vehicle weight was a major factor in setting CO2 targets, based on the assumption that heavier vehicles generally emitted more. However, the rise of hybrids and electric vehicles (EVs) has disrupted this link, making the weight-based system less relevant. Future CO2 targets will no longer be adjusted by vehicle weight.

Why Flexibility Matters

Minister Bishop emphasized that flexibility is crucial, as importers have limited control over global supply chains and consumer demand. Events such as manufacturing delays, shipping disruptions, or sudden shifts in consumer preference can all affect import volumes.

“These improvements to the Standard will give importers more flexibility in how and when they comply with the targets,” Bishop said. “Flexibility is critical given importers have little control over market factors such as supply and demand conditions.”

The Government expects that these updates will ultimately benefit consumers by encouraging a wider supply of cleaner, more fuel-efficient vehicles without unnecessarily increasing purchase costs.

Benefits for Consumers and the Environment

By refining the Clean Vehicle Standard, the Government aims to ensure Kiwis have more options when purchasing vehicles that are cheaper to run and environmentally sustainable. Greater availability of low-emission vehicles—both new and used—means drivers can save significantly on fuel costs while contributing to emissions reduction goals.

The updated framework also ensures New Zealand stays aligned with international efforts to decarbonize transport, while recognizing local market realities.

Legislative Path Forward

The changes are currently progressing through Parliament, with bipartisan recognition of the importance of reducing transport emissions. Once enacted, the new rules will provide a more balanced and workable system for both importers and consumers.

The Clean Vehicle Standard remains a cornerstone of New Zealand’s climate strategy, and the Government is positioning these reforms as a way to strengthen the balance between affordability, efficiency, and emissions reduction.