Oil industry loses ground in Auto/Oil agreement

EC Environment Ministers have agreed to tighten proposed Directives on fuel quality and vehicle emissions - but are heading for a clash with the European Parliament which favours even stricter standards. The move is a major set-back for the oil industry, which claims that measures to reduce sulphur levels in fuel will yield only marginal improvements in air quality at significant added cost.

Last summer, the European Commission proposed Directives on fuel quality and new car emission limits to come into force in 2000 (ENDS Report 257, pp 41-43 ). Both stemmed from the Auto/Oil programme, a joint initiative with the oil and motor industries to identify cost-effective ways of meeting agreed air quality standards across most of the EC by 2010.

The car industry was unhappy with the outcome, complaining that it would bear the brunt of the ECU 5.5 billion annual cost while the oil industry had got off lightly (ENDS Report 258, p 37 ).

After "long and difficult" discussions at the Environment Council on 19-20 June, Ministers reached unanimous agreement on both Directives - including a significant tightening of the Commission's proposals on fuel quality.

One notable development was that the new UK Government adopted a significantly "greener" stance than its predecessor. Environment Minister Michael Meacher backed the early introduction of low-sulphur fuels and medium-term indicative targets on fuel quality:

  • Fuel sulphur limits: This has proved the most contentious aspect of the proposals. The Commission put forward limits on the sulphur content of petrol and diesel of 200ppm and 350ppm, respectively, to apply from 2000.

    Before the Council, the Dutch Presidency proposed a much stricter standard of 50ppm for both fuels. The European Parliament and Scandinavian countries - and in the UK, the Royal Commission on Environmental Pollution and the Environmental Industries Commission - have backed this lower limit. However, southern Member States opposed any tightening of the Commission's proposal.

    Ministers agreed a compromise of a 150ppm sulphur limit for petrol to apply from 2000. A derogation of up to three years is available to Member States which can show that this would cause "severe socio-economic problems". Ministers retained the Commission's 350ppm limit for diesel.

    However, the Council also agreed "indicative specifications" of 50ppm to apply to petrol in 2005, and to be phased in for diesel from that year. It expects the Commission to confirm or modify these limits by mid-1999 in the light of findings from the Auto/Oil II programme, now being set up to examine the need for tighter fuel and vehicle standards in 2005.

    Lower levels of sulphur in fuels reduce emissions of fine particulates and improve the durability of catalytic converters in petrol cars. Equally important, de-NOx catalysts for diesel vehicles are expected to function properly only at low sulphur levels. Ministers intend the indicative fuel quality targets for 2005 to reinforce indicative vehicle emission limits proposed by the Commission for that date, enabling industry to plan for the introduction of de-NOx technology.

    Europia, the oil industry's trade body, was "disappointed" with the outcome. "The political views that drove the unnecessary tightening of the fuel proposals do little or nothing for air quality," it claimed, "but add approximately 60-70% to the costs" - from ECU 11.5 billion to about ECU 20 billion. Europia also maintains that it is "premature" to indicate fuel quality for 2005 in advance of the results of the Auto/Oil II programme.

    But the industry may face a further tightening of fuel specifications. In April, in the face of strong lobbying from oil companies, the European Parliament adopted much tougher limits for sulphur in diesel of 100ppm in 2000, and 50ppm in 2005. MEPs also agreed limits for sulphur in petrol of 50ppm in 2000, and 30ppm in 2005.

    The draft Directives come under the co-decision procedure, which gives Parliament and Council equal legislative powers. Direct "conciliation" negotiations between them are now likely - and the final texts will almost certainly be tougher than the Council's current position.

    Europia accused MEPs of "disregarding three years of sound research underpinning the Auto/Oil programme." The Commission's proposals would suffice to meet the Auto/Oil air quality targets, it says. Parliament's overall package of amendments would increase the total cost to the oil industry from ECU 11.5 billion to around ECU 60 billion, Europia claimed, so that "refinery closures would result and that would mean increased dependence on imports of automotive fuels."

    However, a coalition of European environmental groups has accused the industry of "scaremongering". Some refinery closures are already expected as a result of overcapacity, and while the industry's profit margins have been pared to the bone, this is largely a result of intense competition to reduce pump prices.

    The industry has also been accused of crying wolf over the costs of removing sulphur from fuel. In February, the Swedish and Finnish Environment Ministers circulated a joint study on the "advantages" of cutting fuel sulphur content by 2000. Both countries already have strict fuel quality standards. In Sweden, 90% of petrol sold contains only 10ppm sulphur.

    The study was carried out by consultancy Arthur D Little (ADL), which also produced cost estimates and technical work underpinning the Auto/Oil programme. ADL concluded that the cost of cutting diesel sulphur content to 50ppm was 55% less than the Auto/Oil estimate, while the cost of reducing sulphur in petrol to 30ppm was 17% less. ADL says that the lower costs stem from improved desulphurisation technology, unexpectedly high production of low-sulphur North Sea crudes and moves towards increased jet fuel production.

    ADL also concluded that the Commission's proposed fuel sulphur limits would "inhibit" the introduction of direct injection petrol engines - claimed to reduce fuel consumption by up to 35%. And low-sulphur diesel is needed to permit the introduction of de-NOx catalysts and retrofitting of oxidation catalysts and particulate traps.

    Europia responded by attacking ADL's findings as "highly speculative" and "unprofessional". It complained that "90% of the consultant's argument on costs is based on estimates that have not been checked with those who do have the relevant expertise." But its attempts to discredit the study failed to prevent it making a significant impact on the debates in the European Parliament and Council.

  • Other fuel quality issues: Ministers agreed to reduce the maximum benzene content of petrol in 2000 to 1%, compared to the 2% proposed by the Commission. In the UK, the main benefit of the proposal, which mirrors that put forward by the Parliament, is likely to be a reduction in benzene levels in air near petrol stations.

    The Council also set a limit on aromatics in petrol of 42%, compared to 45% proposed by the Commission. An indicative limit of 35% was agreed for 2005.

    Ministers confirmed the Commission's proposal to ban the marketing of leaded petrol in the EC from January 2000. But they extended from two to five years the possible derogation for countries in which a ban "would result in severe socio-economic problems or would not lead to overall environmental or health benefits." The ban will not affect the use of leaded petrol distributed through special interest groups for use in old vehicles such as "classic cars", but sales must not exceed more than 0.5% of total petrol sales.

    Finally, Member States would be permitted to require that fuels sold in areas with special air quality problems should meet more stringent specifications than set by the Directive.

  • Vehicle emission limits: The Council did not change any of the Commission's proposed limit values for 2000 or indicative values for 2005.

    However, a cold temperature emissions test was agreed to take effect from 2000. This is expected to give "a significant and cost-effective reduction" in hydrocarbon and carbon monoxide emissions. Minor changes were also made to the requirements for on-board diagnostic systems and enforcement of "in-use compliance" via the type approval system.

    Finally, a compromise was agreed on the controversial issue of tax incentives. Ministers agreed to allow such incentives to spur early compliance with emission limits before they enter into force in 2000, and after that for vehicles which meet the indicative limits for 2005.

  • Light commercial vehicles: In February, the Commission issued a draft Directive aimed at reducing emissions from light commercial vehicles, also based on the results of the Auto/Oil programme.

    The proposal covers car-derived commercial vehicles, vans up to 3.5 tonnes, cars over 2.5 tonnes or with more than six seats, and off-road vehicles. Emission limits would take effect from January 2000 for lighter vehicles, and one year later for other vehicles.

    The limits would cut emissions of NOx, hydrocarbons and carbon monoxide from petrol vehicles by 30-40% compared to the levels set in a 1996 Directive which came into force at the start of this year. Emissions from diesel vehicles would be reduced by around 40% for CO and particulates, 20% for NOx and 65% for hydrocarbons. On-board diagnostic systems would also be introduced.

    The Commission has also proposed indicative targets for 2005 corresponding to a further halving of emissions from the 2000 level.

    Other promised measures flowing from the Auto/Oil programme, covering emissions from heavy duty vehicles and periodic roadworthiness tests, are still awaited.

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