Memorandum by Calor Gas Limited (IT 3)
GOVERNMENT'S WHITE PAPER, A NEW DEAL FOR
1. Calor Gas Ltd. is a major supplier of the
environmentally friendly road fuel gas, LPG. LPG is officially
recognised as a "green" fuel in the UK. LPG now fuels
most of the Government's Car and Despatch Agency vehicles. John
Prescott, Secretary of State for the Environment, Transport and
the Regions welcomed the change as a "Clear message to motor
manufacturers and fuel suppliers that we need to make sure that
our transport needs reflect our need to protect the environment"
(17 November 1997). There is a healthy market for LPG in countries
with a favourable policy frameworkthere are 400,000 LPG
road vehicles in Holland, 1 million in Italy, 350,000 in the USA
and 330,000 in Australia. In France, there are tax exemptions
for buses, taxis and company cars running on LPGthere are
expected to be 150,000 LPG vehicles on the road by the end of
1998. The world-wide market consists of 4 million vehicles running
on LPG. By the end of 1998, there will be only 7,780 LPG vehicles
in the UK; the UK lags behind in the move to this environmentally
friendly fuel. The White Paper reiterates support for road fuel
gases but there remains an "implementation gap" between
policy aims and achievement of those aims. Specific examples of
how advances towards those aims could be made are explained below.
2. The White Paper addresses air quality problems,
reiterating the outline of the National Air Quality StrategyNAQS
(page 124ff). There is a promise of a revised NAQS by the end
of 1998. The NAQS has acknowledged "policy gaps"current
policies are insufficient to reduce SO2 and NO2
to target levels. We feel that the contribution which LPG could
make to filling these policy gaps has not been acknowledged. Government
measures, fiscal and otherwise, to encourage use of road fuel
gases have not yet proved robust enough to create a viable significant
self-sustaining market. Further measures, not necessarily involving
lost revenue, are required to stimulate road fuel gas consumption.
Calor will make an appropriate Budget submission.
3. "UK Environmental Accounts 1998"
published by the Office of National Statistics highlighted certain
"sustainability gaps" between the current level of consumption
of natural capital and the environmentally sustainable level of
same. The output of pollutants contributes to the consumption
of natural capital. There are, for instance, sustainability gaps
for CO and PM10 in Belfast; benzene and NO2
in London; and, SO2 in Belfast and Liverpool, LPG could
contribute, then, to resolving "policy gaps" and "sustainability
gaps" given its good emission profile on CO, PM10,
SO2 and NO2. We hope that the revised NAQS
will begin to fill the policy gaps by factoring in, for the first
time, the potential contributions road fuel gases could make.
4. Chapter 4 discusses the contribution which
duty differentials on fuels can make to environmental improvements.
Paragraph 4.123 specifically mentions the encouragement given
to road fuel gases by freezing their duty levels.
5. MarketLine International's report this year"UK
Alternative Fuel Vehicles"estimated a potential UK
LPG vehicle parc by 2003 of 524,066. "The fleet sector is
expected to be the starting point for the growth and development
of alternative fuel vehicles in the UK car parc" (ibid.
Page 82). It is important that the overall policy package to encourage
LPG is guaranteed to last at least five years so that fleet owners
have the confidence that their investment will not prove to be
nugatory because of arbitrary Government action. An earlier surge
towards LPG in the 80s halted because of a Government decision
to raise duty levels on the fuel.
6. The point about clear and stable Govnerment
policy appears to be recognised as the quotes below would indicate,
but as yet no Government commitment has been given to maintain
the policy stance for at least five years:
"The Government considers that it has set
in place a substantial package of measures, particularly the commitment
on the duty differential, which should provide certainty to
users and suppliers of road fuel gases" (Treasury Supplementary
Memorandum to the Environment, Transport and the Regions Select
Committee, June 1998).
"How and what Governments tax sends clear
signals about economic activities that they believe should
be encouraged or discouraged . . . People want a clear message.
I think it is the obligation of Govnerment to deliver that clear
message" (Dawn Primarolo MP, Financial Secretary, 29 April
1998, giving evidence to the ETR Select Committee). This is a
point also made by the Royal Commission on Environmental Pollution
20th Report (paragraph 8.23).
"Transparency. . . leads to increased certainty
about Government policy-making and its impact on the economy,
so that people and businesses can plan for the future with greater
confidence" (HM Treasury Pre-Budget Report, November 1997).
7. Chapter 4 also holds out the prospect of
incentivising cleaner emissions by VED concessions. Calor Gas
welcomes any such concessions but would point out that it is not
necessarily the smallest cars which are relatively speaking the
least polluting (paragraph 4.125 refers).
A. The potential contribution which the environmentally
friendly fuel, LPG, could make to identified policy and sustainability
gaps has not been factored into the NAQS; Government measures
to encourage LPG have not yet been robust enough to cause the
market to move towards its potential of over 500,000 LPG vehicles
B. The greatest potential for a shift towards
vehicles and a cleaner environment lies amongst fleet operators.
Fleet operators will need the assurance of a stable Government
policy framework for at least five years before they are willing
to risk large-scale investment. Government should be prepared
to give that commitment.