As part of the plan, the federal government will introduce a fuel efficiency standard, working with the industry to finalise details in coming months, Energy Minister Chris Bowen said.
Apart from Russia, Australia was the only developed country to either not have or be developing fuel efficiency standards, which encourage manufacturers to supply more electric and zero-emission vehicles.
Transport is the third-largest source of carbon emissions in Australia, already one of the world's biggest emitters on a per capita basis. The initiative will help cut the country's emissions by at least three million tonnes of carbon by 2030 and over 10 million tonnes by 2035, Bowen said.
Last year, Australia's centre-left Labour government flagged that it had plans to introduce new regulations targeting vehicle carbon emissions to increase sales of electric cars, as it looks to catch up with other developed economies.
"Fuel-efficient and electric vehicles...