The "real world" emissions of up to 200 popular vehicles will be tested and compared to promises from automakers in a $14 million scheme designed to ensure consumers are not being misled.
The Real-World Testing Program, announced on Wednesday, will be run by the Australian Automobile Association over four years and funded by the federal government.
The first results of vehicle testing are expected to be released next month.
The scheme follows a AAA investigation into 30 vehicles that found tailpipe emissions often exceeded estimates, and after Volkswagen was caught using software to evade pollution tests for some of its vehicles.
Prime Minister Anthony Albanese announced the program, along with Transport Minister Catherine King and Energy Minister Chris Bowen, after committing funds in the 2022 budget.
Ms King said the program would give consumers greater confidence when choosing between cars.
"The vehicle models currently being tested include small and medium SUVs which account for around one quarter of new car sales in Australia, so I look forward to seeing these first testing results being released in coming weeks," she said.
AAA Managing Director Michael Bradley said the program was designed to help buyers make informed decisions to suit their budgets and environmental concerns without relying on information supplied by the manufacturer.
"Australian car buyers have for too long been misled regarding their vehicle's fuel consumption and environmental performance," Mr Bradley said.
"This program will deliver Australians truth in advertising and drive down demand for cars that over-promise and under-deliver."
The program will examine up to 200 cars, utes and vans at the AAA's Geelong facility, using tests based on those used by the European Commission.
The vehicles will be tested on a 93km route around the Victorian town on urban streets, rural roads and motorways.
The results, to be published at realworld.org.au, will feature details of the vehicle's fuel consumption, carbon dioxide emissions, and noxious tailpipe emissions such as nitrogen that affect air quality.
A pilot test run by the AAA in 2017 found only three out of 30 vehicles tested met fuel consumption estimates provided by manufacturers, but the group exceeded estimates by an average of 23 per cent.
Tests showed one plug-in hybrid vehicle used more than twice the amount of petrol advertised even when its battery was fully charged.
In 2015, Volkswagen was caught out evading emission testing by the US Environmental Protection Agency using software that recognised when its diesel vehicles were being assessed.
The emissions scandal reportedly cost the automaker more than $52 billion in penalties and settlements.
Australia's new vehicle-testing results will come in addition to laboratory test data available online in the Green Vehicle Guide.
