Indigenous groups will also get a greater say about offshore gas projects as part of a Labor-Greens deal.

The Albanese government backflipped on fast-tracking environmental approvals for gas projects in return for the Greens’ support of fuel standards.

As part of the arrangement, the Greens agreed to support changes to the petroleum resource rent tax, ensuring all three bills would clear the Senate.

The fuel changes, to take effect from January, would seek to reduce emissions for passenger cars by 61 per cent by 2029, while emissions from light commercial vehicles such as utes would be cut by 35 per cent.

Labor argued the changes were overdue given light vehicles produced 11 per cent of carbon emissions and said the standards would help meet a target of a 43 per cent cut in total emissions by 2030.

The laws bring Australia into line with other nations with similar standards.

Transport Minister Catherine King said the laws would mean more choice for customers buying new cars.

“This is about making cars more efficient right across the board, whether they’re petrol, diesel, hybrid or an EV,” she told parliament on Thursday.

“The standard is right for Australia and has been developed with Australian car users in mind.

“The standard will deliver Australians a choice of more cars and save Australians thousands of dollars at the bowser.”

Greens leader Adam Bandt said he would have liked the fuel efficiency standards to have gone further but his party would not stand in the way.

“The Greens have killed Labor’s gas fast-track bill,” he told reporters.

“This is a win for climate, a wine for First Nations’ voices, a blow to the gas corporations.”

Penalties and credits under the standard will not apply until July 2025, six months after the law takes effect, and a $60 million fund will be established for electric vehicle chargers in car dealerships.

“This law will see Australia slash climate pollution from one of our biggest sources, steering the transport sector towards a cleaner future,” Climate Council chief executive Amanda McKenzie said.

“We look forward to seeing the positive impacts this important change will have on our hip pockets, our health and our environment.”

“It would have been a free kick for multinational gas companies and would have undermined the Albanese government’s own climate policies, including the reformed safeguard mechanism,” they said.

Australian Energy Producers chief executive Samantha McCulloch, who represents oil and gas companies, criticised the political deal.

“Australia’s long-term energy security and net-zero transition requires investment in new gas supply,” she said.

“The Greens cannot be allowed to hold Australia’s energy and economic security to ransom.”

The federal opposition accused the government of stifling parliamentary debate and warned the fuel efficiency standards would increase the cost of new cars.