Stronger standards for new vehicles would cut greenhouse gas emissions and reduce costs at the bowser, according to an Australia Institute report released on Monday.

But vehicle dealers say emissions standards must be achievable and governments should not ignore the auto industry in the debate.

The Australia Institute found $5.9 billion in fuel costs would have been saved, and emissions equivalent to a year's worth of domestic flights avoided, if robust fuel efficiency standards had been adopted in 2015.

Much of Europe - and Australia's ACT - will ban petrol and diesel cars by the 2030s.

Critics fear the current "weak" standards would limit choices for climate-savvy Australian drivers in a market where demand for electric vehicles (EVs) is outstripping supply.

"If we want to see larger and more frequent shipments of EVs to Australia, government should ignore the weak standards some in industry are lobbying for," Electric Vehicle Council chief executive Behyad Jafari said.

Cars in Australia had a 15-year average life span, upping the pressure to act now or lock in internal combustion engines for longer and fail on net zero, he said.

Fuel efficiency targets require manufacturers to pay a penalty for exceeding carbon emissions targets set for the average of new vehicles they sell.

Tougher standards could create a stronger incentive to sell enough low-emission and zero-emission vehicles to avoid raising their average.

Australian Automotive Dealer Association chief executive James Voortman said the industry supported an emissions standard, but it needed to be realistic and not unduly punish consumers or result in motorists holding on to their older vehicles for longer.

"We keep hearing calls for Australia to implement vehicle emissions standards which are in line with those that exist in the US and Europe," he said.

"It is a fact that such standards have been in place in the US and the EU for well over a decade, allowing those countries an appropriate and achievable transition period."

Mr Voortman said in both the US and Europe, emission standards were also complemented by generous incentives for consumers to go hybrid or electric.

"Australia is a very small right-hand drive vehicle market in global terms, and it is situated at the end of a long and complex supply chain," he said.

"These factors need to be taken into account when developing a vehicle emissions policy which is fit for purpose."

For its part, the vehicle industry's peak body, the Federal Chamber of Automotive Industries, wants the current voluntary standards to continue.

Voluntary rules have been in place since the 1970s and a new industry-led emissions standard was introduced in 2020 for passenger cars and SUVs, which the federal government could opt to carry over into a new regime.

Australia Institute spokesman Richie Merzian said efficiency standards were a "widespread and modest" mechanism used by governments to ensure new cars were less polluting.

In 2018, the average carbon dioxide intensity for new passenger vehicles in Australia was 169.8 compared with 129.9 in the United States, 120.4 in Europe and 114.6 in Japan, the report says.

Almost two in three Australians (65 per cent) support the introduction of national fuel efficiency standards in line with those in Europe, according to the institute.

And as the fuel excise cut ends next month, policymakers could save motorists in the long term with a new standard, Mr Merzian said.

Australian Associated Press