7 Greenhouse gas intensity of petrol
and diesel fuels
| Committee's assessment
| Politically important |
| Committee's decision | Cleared from scrutiny
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| Document details | (a) Draft Commission Directive laying down calculating methods and reporting requirements pursuant to Directive 98/70/EC relating to the quality of petrol and diesel fuels; (b) Draft Council Decision laying down calculating methods and reporting requirements pursuant to Directive 98/70/EC on the quality of petrol and diesel fuels
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| Legal base | Article 7a(5) of Directive 98/70/EC, as amended
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| Department | Transport
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| Document numbers | (a) (33215), —; (b) (36388), 12009/14, COM(14) 617
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Summary and Committee's conclusions
7.1 Directive 98/70/EC requires suppliers of fuels
used within the EU to achieve a 6% reduction by 31 December 2020
in the life cycle greenhouse gas emissions per unit of energy
("greenhouse gas intensity"), but, whilst the Directive
itself establishes a method for calculating this in the case of
biofuels, a corresponding method needs to be established for other
fuels. We were told in October 2011 that a draft Commission Directive
had been prepared, which would shortly be put to the vote, and
which would lay down calculation methods and reporting requirements
relating to the quality of petrol and diesel fuels, and in particular
establish a series of separate default values for greenhouse gas
intensities representing a typical industry average value for
particular fuel sources.
7.2 However, the values set for fuel derived from
natural bitumen (oil sands) and oil shale. would have been significantly
higher than those for other crude oil sources with similar emission
levels, in addition to which the proposal would have imposed a
number of additional reporting and administrative burdens on industry,
and had been strongly opposed by the Canadian Government (since
most sand-based crude oil comes from Canada). In the event, the
vote was postponed until 23 February 2012, when it resulted in
a "no opinion", with the UK having abstained.
7.3 After much further discussion, the Commission
has now brought forward a revised proposal under which the methodology
would be based on non-disaggregated average default greenhouse
gas intensity values according to the type of fuel (ie. petrol,
diesel/gasoil, liquefied petroleum gas and compressed natural
gas), and on the EU fuel mix ("basic reporting approach").
Of the options considered by the Commission, this has been identified
as the simplest and giving rise to the least cost (since it adopts
an aggregated approach, although this is less accurate), and it
is supported by the Government as meeting the main objections
to the original proposal. We also understand that it meets the
objections previously expressed by the Canadian Government.
7.4 Although the underlying aim of reducing the
intensity of greenhouse gas emissions is of course simple and
uncontroversial, establishing a method for measuring and recording
this in respect of petrol and diesel fuels is anything but, and
the earlier attempt by the Commission (document (a)) to achieve
this gave rise to numerous difficulties which we set out in our
Report of 19 October 2011. However, the Government has said that
the latest proposal at document (b), though less accurate, is
the simplest and least cost option, and proposes to support it
when it is put to the vote in the Council next month. We understand
that it also acceptable to the Canadian Government (which had
been concerned that the earlier proposal discriminated against
fuel based on oil sands). In view of this, we are now clearing
both documents.
Full details of the documents:
(a) Draft Commission Directive laying down calculating methods
and reporting requirements pursuant to Directive 98/70/EC relating
to the quality of petrol and diesel fuels: (33215), —; (b)
Draft Council Directive on laying down calculation methods and
reporting requirements pursuant to Directive 98/70/EC relating
to the quality of petrol and diesel fuels: (36388), 14009/14 +
ADDs 1-3, COM(14) 617.
Background
7.5 On 18 October 2011, we received an Explanatory
Memorandum from the Government, enclosing an un-numbered version
(document (a)) of a draft Commission Directive, which we were
told could be put to the vote the following week. The intention
was that this would lay down calculation methods and reporting
requirements relating to the quality of petrol and diesel fuels,
and had its origins in a requirement in Directive 98/70/EC[21]
that suppliers of fuels used within the EU by road vehicles, non-road
mobile machinery, agricultural and forestry tractors and recreational
craft should achieve a 6% reduction by 31 December 2020 in the
life cycle greenhouse gas emissions per unit of energy ("greenhouse
gas intensity").
7.6 The Directive itself establishes a method for
calculating this in the case of biofuels, but requires a corresponding
method to be established for other fuels, which balances the accuracy
of measurement against the complexity of the associated administrative
requirements, whilst providing an incentive to suppliers to reduce
greenhouse gas intensities. In particular, it enables calculations
to be based on greenhouse gas intensities representing a typical
industry average value for particular fuel sources ("average
default value"), which are distinguishable from other fossil
fuels feedstock categories by virtue of their greenhouse gas intensity,
underlying physical and chemical properties, and extraction method.
7.7 This proposal would accordingly have established
a series of default values, with separate values being set for
fuel derived from conventional crude, natural bitumen (oil sands)
and oil shale, and with the values set in the latter two cases
being significantly higher than those for other crude oil sources.
However, the Explanatory Memorandum said that, even though greenhouse
emissions associated with oil sands and oil shale-derived fuel
are acknowledged to be greater than those from many other sources,
the latter include those with similarly high associated emissions,
and the Government therefore considered that singling out oil
sands and oil shale was not appropriate. It also believed that
any methodology used should account for the greenhouse gas emissions
associated with all crude sources and should be based on robust
and objective data: and it added that the proposal would be very
likely to impose a number of additional reporting and administrative
burdens on industry (including establishing a "chain of custody"
for fuel supplied).
7.8 The Government concluded by saying that it believed
that a compromise should be sought which aimed to reduce the emissions
associated with fuel whilst keeping any additional burdens to
a minimum, and that, in view of the concerns raised by Member
States, the Commission had been asked to postpone the vote. It
added that detailed consultation with industry and environmental
groups had not yet been possible, and that an Impact Assessment
would be required.
7.9 In our Report of 19 October 2011, we commented
that, given the absence of a formal proposal, the consequent lack
of detailed consultation, and of any indication of the possible
financial implications of a measure of this kind, we found it
extraordinary that the issue might be put to the vote so soon,
and that we expected the Government to do everything it could
to resist this. In the meantime, we did not feel able to clear
the document, particularly as the Government had told us that
the Canadian Government was likely to be strongly opposed to the
proposal as most sand-based crude oil comes from deposits in Canada.
7.10 In the event, the scheduled vote was postponed
until 23 February 2012, when a vote in the Fuel Quality Committee
resulted in a "no opinion", and we were informed that
the Commission would be conducting an impact assessment before
submitting a proposal to the Council. Since then, we have received
a number of letters from successive Ministers — most recently
on 31 January 2014 — updating the position.
The current document
7.11 In accordance with the relevant comitology procedure,[22]
the Commission has now submitted a new proposal to the Council.
In doing so, it considered four basic approaches, under which
the methodology would be based on:
a) the disaggregated average default greenhouse
gas intensity values by main feedstock types, with partial
disaggregation into conventional and non-conventional feedstocks
("the 2011 proposal");
b) the non-disaggregated average default greenhouse
gas intensity values according to the type of fuel (ie.
petrol, diesel/gasoil, liquefied petroleum gas and compressed
natural gas), based on either an EU or Member State fuel mix ("basic
reporting approach");
c) the greenhouse gas impact of all feedstocks
used in the EU represented with EU average or conservative default
greenhouse gas intensity values by fuel type, whilst allowing
all suppliers to report alternative, actual values ("hybrid
approach"); and
d) separate greenhouse gas intensities for individual
categories of feedstocks ("complete differentiation").
7.12 As the Commission notes in its accompanying
impact assessment, the accuracy and administrative burden of these
options varies, with (d) providing the greatest degree of disaggregation
and thus being the most accurate, but also being the most complex
and burdensome, whilst (b) would be the simplest and least cost
option (although less accurate). The proposal accordingly adopts
that approach, using an EU rather than a Member State fuel mix
(which it says would create barriers within the internal market),
and it sets out:
· a methodology for road fuel suppliers
to report on the characteristics of the fuel and energy being
supplied by them, and for Member States to report this information
to the Commission; and
· a methodology for accounting for the greenhouse
emissions from fuel/energy other than biofuel based on a series
of default values for each main fuel type (other than biofuel).
7.13 The detailed provisions are as follows:
Reporting requirements for suppliers and Member
States
The proposed methodology requires suppliers to report
on the quantity and type of fuel and energy being supplied, the
greenhouse gas intensity associated with its production, its origin
and its place of purchase. Reporting requirements are largely
based on information being collected on crude oil under existing
customs and energy legislation in the EU[23]
or in possession of economic operators; "origin" has
been defined as the feedstock trade name[24]
for crude oil; and "place of purchase" as the country
and name of the processing facility where fuel underwent the last
substantial transformation. In addition, simplified reporting
requirements have been provided for cases where finding this information
may prove difficult (i.e. products refined outside the EU) and
for small and medium size economic operators; the methodology
includes provisions allowing for multiple suppliers to report
information jointly to Member States, and the proposal contains
provisions setting out how the information collected by Member
States is to be reported to the Commission, whilst respecting
the confidentiality of suppliers.
Methodology for accounting for GHG emissions
The methodology is based on a series of default values
for each main fuel type, and these values have been developed
to reflect the estimated quantities of, and different greenhouse
gas emissions associated with, the individual categories of feedstocks
currently being supplied in the EU. A baseline for the average
greenhouse gas emissions associated with fuels consumed in the
EU in 2010, against which the required emission reductions need
to be measured, is also included, and suppliers will be able to
claim reductions associated with projects undertaken to reduce
emissions from gas flaring and venting at oil extraction sites.
The contribution from electricity consumed in electric vehicles
will be calculated based on the greenhouse gas intensity of electricity
in the individual Member States, and suppliers can also use biofuels
to help meet their obligations using the methodology already set
out in the Directive.
The Government's view
7.14 In her Explanatory Memorandum of 15 October
2014, the Minister of State at the Department for Transport (Baroness
Kramer) recalls that the draft measure submitted in October 2011
had singled out oil sands as being particularly polluting and
had proposed a complex mechanism to track individual fuel consignments.
As these aspects had attracted strong opposition from the Canadian
Government and the oil industry respectively, and there were also
concerns about the lack of information on the likely implementation
costs and the accuracy of the data employed to calculate emissions,
the UK had abstained from the vote, despite supporting the proposal's
aim of reducing greenhouse gas emissions.
7.15 The Minister says that the Government has since
actively engaged with the Commission and other Member States to
achieve a compromise solution, and that the revised approach in
the current proposal has many advantages. In particular, she reiterates
that, whilst the high energy inputs required by the extraction
process result in high greenhouse gas emissions associated with
oil sands and oil shale-derived fuel, other fuel sources —
for example, crudes from oil fields where the natural gas is not
collected but vented or flared during its extraction — have
similarly high emissions. Consequently, any methodology for calculating
the greenhouse gas intensity of fuels used in Europe under the
Fuel Quality Directive should account for the emissions associated
with all crude sources, and be based on robust and objective data,
and the Government considers that this revised proposal ensures
that oil sources are fairly treated until a more disaggregated
approach can be pursued.
7.16 The Minister also points out that, whilst the
reporting requirements are needed to ensure that the greenhouse
gas intensity of fuels used in the EU can be effectively monitored
over time, it is important to adopt the simplest option, and she
says that the requirements in the latest proposal should give
rise to minimal additional burden to industry, since the information
in question — for example, on the feedstock tradable names
(i.e. Marketable Crude Oil Names) and processing facility —
is already being collected. She adds that this approach —
which the Government strongly supports — is in line with
a recommendation of the Business Taskforce, which reported to
the Prime Minister in October 2013, on the need to minimise additional
cost to business.
7.17 On balance, therefore, she believes that the
UK has achieved a reasonable outcome to the negotiations, and
intends to vote in favour of the revised proposal, bearing in
mind that failure to secure agreement in Council would lead to
significant further delays with little prospect of achieving a
better outcome (and could ultimately lead to the Commission abandoning
the Directive altogether, which she observes would be "most
regrettable", as the greenhouse gas savings and increased
transparency on reporting offered by the proposal would be lost).
7.18 Finally, the Minister also notes that the Commission
has published an impact assessment alongside the proposal which
concludes that the option chosen gives rise to the lowest administrative
costs to industry and national authorities, and that it estimates
pump price increases as being of the order of 0.02 pence per litre.
She says that her own Department's estimate is slightly higher,
but still "moderate". Thus, if there is an effective
system for purchasing upstream emission reduction (UER) credits
which suppliers choose to operate, pump price increases would
be between 0.04-0.24 pence per litre: where suppliers cannot (or
choose not to) use such an approach, costs are estimated at 0.5-1.1
pence per litre, but the Minister considers this unlikely, given
that under the proposed measures suppliers would be able to claim
credits for the majority of UER projects being undertaken.
7.19 The Minister says that a vote in Council is
expected to take place in November, and that the proposal will
be adopted unless the Council rejects it by qualified majority.
In parallel, the newly elected European Parliament has until early
February 2015 to complete its scrutiny of the revised proposal.
Previous Committee Reports
Forty-third Report HC 428-xxxviii (2010-12), chapter
7 (19 October 2011).
21 As amended by Directive 2009/30/EC. Back
22
Regulatory procedure with scrutiny in accordance with Article
5a of Council Decision 1999/468/EC. Back
23
2964/95 and 2454/93. Back
24
Typically referred to as Marketable Crude Oil Names (MCON), a
classification grouping oil fields according to the oil characteristics,
primarily its density and sulphur content. Back
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