Memorandum submitted by the UK Petroleum
Industry Association (UKPIA)
The UK Petroleum Industry Association (UKPIA)
represents nine companies engaged in oil refining and marketing
in the UK. Our member companies supply most of the transport fuels
and other oil related products used in the UK. As such, we have
a major interest in the topic of reducing carbon from transportparticularly
road transportand welcome the opportunity to respond to
the Committee's consultation on this important issue.
Our more detailed responses are confined to
those questions where we have specific knowledge or expertise.
UKPIA's views can be summarised as follows:
UKPIA believes that the UK's energy
policy should continue to be based on maintaining a reliable UK
energy system meeting all three pillars of sustainability-economic,
environmental and socialwith clear targets underpinned
by a framework for their achievement. Policy objectives should
not be dominated by any one of these pillars and should also avoid
"picking winners". Sound science should be a cornerstone
of this policy to ensure goals are met cost effectively.
The oil industry believes that due
to their low cost, on-going availability, and ease of use petrol
and diesel will remain the dominant road transport fuels globally
to 2030 and beyond, a view that is shared by the International
Energy Agency in their forecasts of future energy use.
The Government has set a challenging
target for the UK to reduce its emissions of carbon dioxide in
2050 to 60% of the 1990 level, with reductions coming from across
all sectors. For road transport, the contribution is expected
to be 2-4 million tonnes carbon/year by 2020, or about 5 to 10%
of expected emissions, to be derived largely from a combination
of improved vehicle efficiency, biofuels and a modest change in
The oil industry believes that the
Government's targets should be achieved by deploying the most
costeffective options first. This will ensure that the
UK remains competitive by meeting its targets at the least cost
and develops the technology that is most likely to be taken up
by other countries, so creating opportunities for UK business.
The industry takes seriously, and
is closely involved in meeting, the challenge of reducing greenhouse
gas emissions. For road transport, public, commercial and domestic
sectors, savings are likely to come from a range of options, including
new technology, bioenergy, renewables, increased energy efficiency
and changes in consumer behaviour.
The oil industry is currently working
towards meeting the Government's target of replacing 5% of road
fuels by biofuels by 2010 under the Renewable Transport Fuels
Obligation (RTFO), which they estimate will save one million tonnes
carbon/year. This will require time and significant investment
by the industry at refineries and in the supply/distribution chain.
The oil industry is actively developing
and/or deploying new technology which will reduce emissions of
greenhouse gases such as biofuels, wind, solar, carbon capture
and storage, hydrogen and also fundamental research. Energy efficiency
is also being improved in our operations for example by installing
gas fired CHP in our refineries. This is backed by active participation
in groups like the Low Carbon Vehicle Partnership and policy guidance
from studies such as the Concawe/Eucar/JRC well-to-wheels study
of different alternative fuels.
The aviation sector presents different
challenges by virtue of the international scope of the industryrequiring
global co-operation to reduce emissions and change international
treaties/agreementsstrongly growing consumer demand and
no ready alternative to existing fuels utilised.
Q1 What progress has the Department for Transport
(DfT) made against key carbon reduction targets?
Public Service Agreements (PSAs) link the allocation
of public expenditure to published targets with the aim of defining
clear, long term goals to underpin the attainment of Government
The DfT's current set of PSA targets for the
period 2005-08 was published in the Spending Review 2004 and took
effect from 1 April 2005. DfT's responsibility (either solely
or jointly with other departments) for road transport targets
to reduce greenhouse gas emissions
to 12.5% below 1990 levels in line with the UK's Kyoto agreement
move towards a 20% reduction in carbon
dioxide emissions below 1990 levels by 2010, through a range of
measures including energy efficiency and renewables. (PSA 7both
the above jointly with DEFRA & DTI)
These targets were also linked to sustainability
In addition, the Powering Future Vehicles Strategy
launched in 2002 set some challenging targets for buses and passenger
cars. For passenger cars the target was:
that 10% of new passenger vehicles
sold by 2010 emit CO2 emissions of less than 100g CO2/km
(equiv to 75 mpg)
The PFV Strategy envisaged a combination of
methods to achieve the target, including new vehicle technology
and lower carbon fuels.
In terms of progress, CO2 emissions
from road transport have increased by less than 10% since 1990
despite an increase in the number of vehicles registered and an
increase in kilometres driven of over 20% (Sources: DTI and DfT).
This has largely been achieved as a result of increased vehicle
efficiency reflecting a move to diesel powered vehicles within
the car (PLG) fleet (37% of new car sales in 2005-source: SMMT).
Overall average emissions of new passenger cars
in the UK has improved from around 192g CO2/km in 1995
to 171 in 2005 (11% improvement) but with a marked contrast between
the business sector and the privately owned sector over the last
A significant factor in the shift to more efficient
vehicles in the business sector has been company car taxation
linking tax liability to CO2 output. Although the DfT
is responsible in part for measures to help meet Government targets,
past experience shows that fiscal measureseither including
an element of incentive or a "stick"have a marked
influence on consumer behaviour. A range of measures are available
to back up policy targets and direction, including taxation and
Vehicle Excise Duty.
A number of measures through different organisations
has been initiated but delivery might be better served by a more
cohesive approach and clearer responsibility for meeting public
and private sector targets, whilst at the same time giving consistent
signals to consumers.
The powering Future Vehicles target that 10%
of new passenger vehicles sold by 2010 emit CO2 emissions
of less than 100g/km is likely to be missed unless new policies
are introduced. The target would require in the region of 240,000
cars to be sold meeting this standard by 2010. In 2004 less than
500 cars were sold meeting this target.
Although Transport Energy programmes (Powershift)
have helped raise awareness of available options and given modest
grant assistance, the impact has been slight. Influencing consumer
attitudes is difficult and although the new car CO2
labelling scheme in showrooms, promoted by car manufacturers and
the LowCVP, should raise awareness, the evidence points to environmental
considerations remaining a low priority for many car buyers. The
increase in oil prices over the last two years may start to have
an effect but it is clear that influence through duty measures
to underpin policy objectives, remains unpopular with voters and
thus a sensitive issue for Government.
Q2 Are the DfT's carbon reduction targets
underpinned by a coherent strategy across its full range of activities?
Government/DfT's policies cover:
Improving vehicle efficiencyEU
voluntary agreement and its future extension.
Renewable Transport Fuels Obligationto
add 5% biofuels to petrol and diesel, the current maximum limit
in European fuels standards. DfT has also requested the European
Commission to work with CEN to increase the level of biofuels
that can be added to petrol and diesel without invalidating vehicle
Supporting the development and introduction
of cleaner vehicle technologies.
Encouraging the new LowCVP car efficiency
Hence the policies cover all the major optionsviz
improving vehicle efficiency, reducing the carbon content of fuels
and influencing consumer behaviour.
However in some cases, eg the targets in the
Powering Future Vehicles Strategy, there are no specific policies
in place that will deliver the target. DfT's expectation is that
the average fuel consumption of the fleet will fall to the point
that the target will be met but progress to date suggests that
it is unlikely to happen.
Although there have been a number of initiatives
designed to encourage the take up of lower carbon vehicles and
fuels, this does not amount to a coherent strategy. This is exemplified
by the reaction to the announcement of the DfT's road pricing
study in 2005 which had a muted reception from those organisations
expecting such a scheme to also be used to reduce carbon emissions.
Consistent, clear policy underpinned by a framework
for delivery targeting the most cost-effective methods of reducing
emissions of greenhouse gases rather than specific sector targets
would undoubtedly assist in meeting the Government's overall target
for CO2 reduction in the most cost-effective way. Ideally,
this should be backed by a lead department taking responsibility
for delivery. For the transport sector, DfT is best placed to
take a lead.
Such an approach would give clarity and consistency
both to consumers but above all to the business sector which needs
to make the investment and implement many of the changes required
to deliver lower emissions.
Q3 Does the current balance of expenditure
between DfT's objectives adequately reflect the environmental
challenges it faces?
The environmental challenges should be met by
greater emphasis on clearer policy signals from Government. These
should be consistent across sectors and longer-term in nature,
to avoid the risk of short-term measures and incentives that have
no sustainable impact on behaviour or technology once removed.
The Transport Energy programmes (£29 million
for 2005-06 financial year) should be used to underpin these policy
objectives, by assisting with "seed corn" funding for
specific projects and activities.
The necessity to submit these programmes for
EU Commission approval in line with the rules on state aid provision,
and the subsequent delay in approval, has seriously affected the
distribution of funding.
However the delay has highlighted the need for
funding to be aimed at projects that, if successful, can continue
without on-going DfT funding. This demonstrates the need to focus
on cost-effective, sustainable measures that are most likely to
succeed in the long term.
Q4 What, realistically, could the DfT achieve
by 2010 and 2020 in terms of reducing transport-related carbon
emission and the role that demand management should play in doing
The task of reducing carbon emissions from road
transport is a major one and the timescale for doing so relatively
tight given the time needed to develop and then introduce new
technologies into the fleet, particularly for vehicles.
On fuels, the Government has announced the Renewable
Transport Fuel Obligation (RTFO) requiring a road fuels biofuel
content of 5% by 2010. DfT estimate this could reduce CO2
emissions from road transport by up to 1 million tonnes of carbon
per year (out of a total of 33 mtec/a). The actual wells to wheels
reduction depends on the source of the biofuel (see chart below)
and is much smaller than the potential reduction from improving
vehicle fuel economy.
WELLS TO WHEELS GREENHOUSE GAS EMISSIONS
|Fuel||Wells to Wheels Greenhouse Gas Emissions g CO2 equivalent/km
|Ethanol (95/5) from sugar beet||193
|Ethanol (95/5) sugar cane (Brazil)||188
|Source: Concawe/JRC/Eucar 2005||
Demand management can be implemented through a variety of
direct methods including fiscal methods such as duty or VED, and
road pricing or measures to encourage car sharing schemes, travel
planning, better information and making alternative means of travel
more attractive. The development of the road pricing is at an
early stage with pilot projects planned for 2008, so cannot be
counted upon to make a contribution by 2010. Other measure could
start to have an interim impact.
In the meantime, improvements in vehicle efficiency and influencing
consumer purchase patterns will potentially have the largest effect.
Under the voluntary agreement between the EU and car manufacturers,
they are aiming to meet a target for the average new car sold
in the EU of 140g CO2/Km by 2008-09. The UK market,
like Germany, Sweden, etc, prefers larger cars and so has lagged
behind the EU average with UK emissions still at the 171g/Km level
in 2005. If this rate of progess were maintained, this would indicate
a level of close to 160g/km by 2010. In the longer term, there
is greater scope for introduction of new vehicle and fuel technologies
to achieve the EU aspiration 120g CO2/Km target some
time after 2012. The impact on overall emissions would be highly
dependent on how quickly new technology enters the vehicle fleet.
Q5 What specific steps should the DfT now take to reduce
road transport carbon emissions and congestion over the next decade?
Influencing consumer behaviour both in terms of the type
of vehicle purchased, the amount it is used, passenger load factors
and driving style, remain major challenges.
A range of measures should be employed, including education
and fiscal, to bring about a move to more fuel efficient vehicles
and more efficient driving styles and usage.
Encouraging a shift in transport mode will require public
transport alternatives that are more attractive to consumers in
terms of cost and convenience. In real terms motoring costs have
reduced by 2.4% in the last five years whilst bus and rail charges
have increased by 1.8% (source: CFIT). However, motorists value
the convenience and security of car travel and will pay a premium
Congestion is closely linked to demographics, GDP growth
and planning considerations. The latter can be influenced in part
by better integrated policies linking proximity to home, work
and shops, although the problems in many towns are inherited over
decades. Solutions thus tend to be long term in nature.
Although congestion charging is a possibility on the busiest
of roads, this is likely only to redistribute demand during the
day, or on to other routes, rather than reducing overall demand
for travel, which is relatively inelastic.
In the longer term, alternative fuels could play a larger
role and the oil industry is working to demonstrate the most promising
technologies including hydrogen and more efficient biofuels.
Q6 Whether the targets set out in the Powering Future Vehicles
strategy were adequate and what progress has been made against
them since 2002?
The response under question 2 outlines the very limited progress
made to date in meeting the targets. Although there is availability
of vehicles meeting the criteria, it is a relatively niche market
for essentially the smallest cars. New policies/initiative will
be required if these targets are to be met.
There also appears to be limited consumer appetite for these
vehicles since most consumers are seeking vehicles that meet the
needs of their lifestyle rather than one with the lowest CO2
emissions. Additionally, emphasis should be upon the CO2
emissions rather than the technology of the vehicle so that consumers
are able to make more informed choices.
Revised targets for lower CO2 emissions in the
most popular vehicle segments might be an alternative target in
bringing down emissions as it would be addressing a larger pool
of vehicles. However it would still not address the pool of cars
consumers have to choose from which is set at a European level
and not a UK level.
Ideally, such a move should be underpinned by measures encouraging
consumers in the direction of the most efficient vehicles in the
Q7 What organisations and funding sources are involved,
whether there is adequate co-ordination between them, and whether
the overall funding available and spent in support of the strategy
is adequate in view of the environmental challenges the DfT is
The DfT and DTI are the main departments with responsibility
for the development of lower carbon vehicles and fuels, with input
from DEFRA on some aspects of renewable fuels and HM Treasury
on fiscal measures.
Action programmes, funding and research are carried out by
a number of bodies including:
Low Carbon Vehicle Partnership.
Energy Saving Trust (advice & funding to consumers).
The Carbon Trust (advice & funding to industry
on carbon saving).
DTI funded research into low carbon and hydrogen
fuel cell technology.
EU programmes eg CUTE which funded the three London
Academia and consultants reports on specific topics.
Industry's own research.
The availability of Government funding is limited hence it
seems unrealistic to expect the schemes to stimulate major change
in the market for lower carbon vehicles/fuels.
Funding therefore should be focused on the most cost effective
return for reducing carbon, aimed at specific CO2 emission
reduction targets rather than a particular technology or fuel.
Above all there must be confidence in the continuity of grant
schemes for both companies and consumers alike.
Thank you for the opportunity to contribute to this important