Australians will have more options for cleaner and cheaper cars under a proposal that will align the nation with most other major economies.
Fuel efficiency standards unveiled at the weekend are expected to save new car owners about $1000 a year from 2028 and end Australia's reputation as a dumping ground for dirty cars.
Under the new rules which will mimic those in the United States, the car industry will need to balance sales of dirtier, fuel-hungry cars against low or zero-emission vehicles, or face fines.
The proposal sets Australia on an ambitious course to cut total new passenger vehicle emissions by 60 per cent by 2028.
That is part of an effort to catch up to the US standards, which were first introduced in the 1970s.
The new standard applies only to new car sales, and not second-hand cars.
Federal Transport Minister Catherine King said the standards don't mean utes, or other favourites such as SUVs, will be banned.
"This is of course all about choice for consumers, making sure that people have the choice to have the most efficient vehicles in our marketplace available to buy," she said.
Nationals leader David Littleproud said regional areas needed the "tools of the trade" required to keep communities operating and called for a common sense approach.
Cross bench senator David Pocock said there was scope for the government to consider reaching the US standards earlier than 2028, suggesting the local scheme begin in July.
"Anything less ambitious than what is being proposed will increase the cost of transport and do further damage to our climate," the ACT senator said.
The NRMA, which backs Australia following the US scheme, believes the nation cannot continue down the path of voluntary targets.
Greens leader Adam Bandt said his party would keep pushing to make electric cars cheaper, as the government's proposal makes its way through parliament.
The government's preferred model, would also save lives, pediatric neurologist and independent MP Monique Ryan said.
"These standards are a significant public health victory," she said.
While underlining a shared commitment to reducing emissions, manufacturers highlighted differences to the US scheme.
If legislated, the standards are expected to benefit all new car buyers.
The average saving from 2028 is estimated at $1000 per vehicle annually and $17,000 over the life of the vehicle, the government discussion paper says.
Regional and rural drivers could save up to twice that due to longer distances travelled.
While Liberal Senator Dave Sharma said Australia's vehicle fleet should become cleaner, the Labor government needed to ensure consumers would be provided with choice and affordability.
