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Environmentally Friendly Fuels for Vehicles

8.20 p.m.

Lord Dubs rose to ask Her Majesty's Government what steps they are taking to encourage the use of vehicles powered by environmentally friendly fuels.

The noble Lord said: My Lords, I welcome the opportunity to discuss the fuels used by vehicles and the effect that they have on both air quality and climate change. I believe that these issues are generally well-known and understood. It is my contention that the Government are doing well but could do a little better. That is the premise of the debate.

The Government have already set up the cleaner vehicles taskforce, which will soon publish a further report with recommendations for the Government. I thought that its previous report in August 1999 was good, but how much of it is being acted upon? We have the policies, but we are moving too slowly and other countries may be getting ahead of us.

I welcome, as elements in government policy, the air quality strategy, the Energy Saving Trust's powershift programme, the climate change programme and the DTI's foresight vehicle and advanced fuel cell programme. I hope that the successful candidate for Mayor of London will agree to consider the issue as important and decide that it is far better to use a carrot

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than just a stick and provide incentives for cars and other vehicles which use environmentally friendly fuels and want to come into the City of London.

I believe that the use of fuels can influence not just noise levels but emissions such as carbon dioxide, benzene, carbon monoxide, particulates, sulphur dioxide, oxides of nitrogen and ozone. There are several types of environmentally friendly fuel. Some can be used immediately in existing vehicles while others have high conversion costs. We as a country should not be backing only one system, but should be examining the various systems and seeing which turn out to be the best.

There are four basic approaches. First, there are reformulations of petrol and diesel; for example, lead-free petrol, low benzene petrol, ultra-low sulphur diesel and ultra-low sulphur petrol. Secondly, there are alternative fuels of which there are two main types: liquid petroleum gas and compressed natural gas. Thirdly, there are the electric options: batteries and fuel cells. Fourthly, there are the hybrids: the use of petrol and LPG, or the use of petrol and an electric battery together in one vehicle.

The electric battery has a constraint on the distance which can be travelled before it is recharged. Fuel cells do not have that constraint, but they have another difficulty; that is, the high cost of manufacture. Developments have taken place. For instance, a company called ZeTek Power has developed a zero emission taxi which was first unveiled in July 1998. Furthermore, trams and trolley buses represent an environmentally friendly option. The costs of producing some of the vehicles which can use LPGs, electricity and so forth, are high. The people who want to use them say that prices would fall if we could achieve economies of scale.

Several vehicle manufacturers are developing their own approach to green vehicles and there are therefore many different solutions. I am grateful to those which have written to me with their suggested way forward. For example, Toyota has developed a vehicle called Prius. It is a hybrid using petrol combined with an electric motor and it is the first mass-produced hybrid car in the world. It will be sold in the UK within four or five months. Peugeot believes that diesel is the best way forward. Vauxhall believes that the fuel cell is eventually the way forward, but that in the meantime more should be done to encourage LPG in duel fuel vehicles using gas and petrol. It believes that LPG could be an important way forward, but there are high costs of conversion. Of course, there are insufficient refuelling points for people who have converted. The ZeTek company is developing fuel cells which can be refuelled with hydrogen and I understand that the operation takes just five minutes. However, charging an electric battery car can take several hours, if not the whole night.

Regrettably, because of lack of government backing or that of other agencies, ZeTak is building a factory in Cologne after scrapping plans to build in Ramsgate, Kent. However, I understand that it is talking to Rover at Longbridge, so perhaps with some Government encouragement there will be a way forward.

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There are other examples of good practice. Safeway has a fleet of natural gas powered vehicles. Honda is moving in that direction. A factory in Ballymena, Northern Ireland, makes electric buses. Camden has a 16-seater community bus in which I have travelled. It takes people to old people's day centres or disability day centres and has a range of 200 miles. The battery can be charged overnight and therefore journeys can be planned. I understand that Westminster City Council has a fuel cell van for use in parks.

Nevertheless, I believe that we are slipping behind other countries. I visited Rome some time ago and saw in the city centre small electric buses taking people on shorter journeys in that area. As regards LPG, other countries are way ahead of us. The Netherlands has 400,000 LPG vehicles; Italy has 1 million; France has 150,000; and according to industry estimates we have about 15,000 LPG and CNG vehicles. It was earlier estimated that, given the right policy framework, there was a potential market in this country of 500,000 LPG vehicles by 2003. I fear that that looks unlikely.

I now turn to the suggestions that I want to make to the Government. The first concerns a range of duties and charges. I welcome the fact that in the Air Quality Strategy for England, Scotland, Wales and Northern Ireland the Government said:

    "central government has a role to play in providing the overarching regulatory and fiscal framework that promotes cleaner, more efficient vehicles and fuels".

I believe that there are a number of ways forward. For example, why not allow cars which use the most environmentally friendly fuel--and by that we would mean electric cars--to park free of charge on sites where parking is allowed? I understand that Westminster City Council has such a scheme, although I have never seen the details. There are also opportunities within vehicle excise duty and fuel duty--and within congestion charges if they are introduced--to balance the situation more in favour of vehicles which are environmentally friendly.

Some of the changes are short-term and others will take longer. We might in the short term have to do more to develop those changes which can be made quickly and then concentrate on those which will take longer. Therefore, my second suggestion is that there should be a differential to support the introduction of low sulphur petrol. Next March, the Chancellor intends to introduce a 1p differential, which I believe is too low. The take-up of cleaner vehicles by the bus industry is somewhat constrained by the fuel duty rebate and I wonder whether a greater incentive could be given to the use of cleaner fuel.

However, there are serious problems when petrol stations want to sell LPG; they must obtain planning permission, which can take a long time. Can anything be done to help them? I also believe that the Government, local government and the public sector as a whole can set an example. I wonder how much the Government are doing by using some of the environmentally friendly vehicles. Even the use of ultra-low sulphur diesel would be a step forward as the change can be made easily. I believe that there is a need for a long-term commitment--say, five years--in order

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that any tax or duty advantages can become part of the system to encourage manufacturers and customers to make a change. For example, it would be useful if there were a longer-term duty differential between LPG and diesel. I believe that it would be right to reduce the duty on products such as LPG to the EU minimum. There is a need for capital allowances where vehicles must be converted and also a need to install refuelling points. Here, I refer to LPG but the same applies also to other fuels. We need to look at greater vehicle excise duty concessions, including those for company cars, for environmentally-friendly vehicles.

I wonder what the Government are doing with regard to fuel cell research and other research in the UK. What is being done to encourage the location of manufacturing plant here? I do not want to see all those developments take place simply in other countries. Presumably, whereas the EU exercises constraints on subsidies to motor car manufacture, there would be fewer such constraints on research spending. I wonder what the Government can do to help in that direction over and above what is already taking place. I have already referred to Rover at Longbridge, and I wonder whether more could be done to encourage this type of research there.

I turn to a suggestion which arose in the Cleaner Vehicles Task Force report with regard to grading vehicles. Perhaps all vehicles could be graded, say, from A to E in terms of their greenness and their beneficial effect on the environment, rather as white goods in shops are graded A to E. Then, benefits in terms of free parking and nil excise duty, and so on, would be possible.

Finally, I believe that the proposals that I have mentioned should be accompanied by publicity. Again, that was recommended by the Cleaner Vehicles Task Force. It is only right that where a public vehicle uses an environmentally-friendly fuel, that should be writ large on the sides of the vehicle so that people know that that is happening and that the Government are setting an example and, indeed, developing the environment. Therefore, many things can be done. I know that some are being done already. However, I believe that they could be speeded up and I should like to see more energy and enthusiasm behind the initiatives. I hope that the Government will respond along those lines.

8.31 p.m.

Lord Lucas: My Lords, I am enormously grateful to the noble Lord, Lord Dubs, for giving us the opportunity to have this debate. As several noble Lords will know, I have an interest to declare as a director of ZeTek Power, to which the noble Lord, Lord Dubs, has already referred. It is a company which makes fuel cells, some of which end up in vehicles. Therefore, in parts my speech will be biased, but I hope also in parts well informed. I am sure that the Minister will be wise enough to separate the two and respond accordingly.

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This debate asks the Government to encourage the use of vehicles powered by environmentally-friendly fuels. Why should the Government do that? For the foreseeable future, the vast majority of vehicles will continue to be powered by good old petrol and diesel, and environmentally-friendly fuels will remain restricted to a small number of vehicles. They will, as it were, be a flea on the elephant of the great vehicle industry. It is far more important for most of us that the emissions from the elephant are controlled than that we should have a few more fleas on it.

At first sight, it is not obvious why the Government should do a great deal, and perhaps that is why this and past governments have not done a great deal. There is a strong public wish to see something done and there has always been a cosmetic level of support for natural gas and other technologies. I believe that the Government have always understood the need to participate in this kind of public exercise in order to encourage the automotive companies and others to take seriously the need to improve their own act in reducing, as it were, the elephant's emissions. In that, I believe that over the long term the Government have succeeded.

However, I believe that there is another strong reason why the Government should wish to move further in the direction suggested by the noble Lord, Lord Dubs; that is, the probable creation of a very substantial set of new industries in this area. I believe that the recent events at Longbridge and the possible future events at Dagenham should have brought home to us all the danger of not being the country where a large industry is based and of having reached the position where we are not at the research and manufacturing heart of those industries. Thus, when jobs come to be shed and when reorganisation takes place, it is our workers and our industry that suffer.

It is important that we should take measures now to ensure that new industries are based here. We are doing that in a Bill already before this House with regard to e-commerce--a little late but, none the less, welcome. We should be doing that in the industries which will, with good fortune, come to exist in the area of environmentally-friendly fuels.

There are two important things that the Government can do to help: first, regulation; and, secondly, practice. Regulation is, of course, the stick with which they can beat people into doing what they want. However, it is also a hurdle which is placed in the way of anyone who tries to develop a new product or a new service in this country. As the noble Lord, Lord Dubs, pointed out, many hurdles stand before people who try to produce environmentally-friendly vehicles and who work on environmentally-friendly fuels. Complicated regulations surround vehicle production on anything but the tiniest scale.

As yet, there has been no great government effort to get out there and find what the industry needs by way of new regulations. Inevitably, new questions will be raised, particularly when electric vehicles become common in any form. First, they will be silent. You can no longer rely on the noise of an approaching car to

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warn you not to step out into the road. Secondly, they will probably be a potent source of electrical interference. These matters need to be considered well in advance. One cannot wait until companies are producing hundreds of such vehicles a year, then step in and say, "Halt. We need five years to consider what is going to go on here".

If we want to encourage these industries to develop here and if we want to encourage the big North American companies which are leading some areas of fuel cell research, for example, to base some of their operations here, we need to provide the type of environment where their initial products will be welcomed. That means that we must get going now on ensuring that, as the noble Lord, Lord Dubs, said, the right regulations on vehicles and on planning permission for refuelling stations are put in place.

There is also a need to become involved in practice; that is, to ensure that the Government encourage in their own activities the use of those vehicles. As the noble Lord, Lord Dubs, said, Westminster has purchased a fuel cell van from ZeTek. Others in the local authority area may well follow, but as yet government have taken no action. While there is no distribution infrastructure for the fuels used by those vehicles and, naturally, they remain considerably more expensive than petrol vehicles, it is very important that the tax policy on those fuels none the less offers an advantage to users of the fuels.

This is the type of situation which we should like to find in this country. It is one which exists in Germany and in the United States. The welcome given there to those new technologies is of an order of magnitude greater than that available in this country. That is the fundamental reason why, having tried for several years to obtain government support for building a factory in this country, in a few short months we have found ourselves in the heart of the hydrogen infrastructure and government-funded research infrastructure in the Ruhr and hope shortly to be in a similar position in New York.

It would be wonderful if this country would wake up to the opportunities that exist. Even John Brown of BP recognised in his Reith Lecture that the hydrogen economy is coming. Of course, hydrogen is not an energy source; it is merely an energy carrier. However, it is the most likely convenient energy carrier for the medium-term future when we are beginning to rely on all kinds of different potential sources of energy. There is a big infrastructure to be developed. Hydrogen can be environmentally friendly in its production and is certainly environmentally friendly in its use. Like the Internet, we are at a very early stage when there are many opportunities, many companies and many ideas which will turn out to be failures. However, it is important that enough of them should arise here so that some of the successes also occur here.

Fuel cells are by no means the only technology. Microturbines, Sterling engines and all sorts of other things are happening, none of which seem to be receiving significant support from this Government. There are all sorts of sub-technologies associated with

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fuel cells: reformers, capacitors, batteries, electric control systems, material science, to mention a few, all of which would be enormously helped if there was a growing industry in fuel cells in this country. In addition, there are all sorts of spin-offs of fuel cells for end users which, should they be developed to a point where they are more commercial than they are at the moment, would make a great impact on transport, refrigeration, buildings and all sorts of other industries.

We are very well placed in this country, with a host of small engineering companies and a long tradition of engineering excellence, to make use of developments in the area of environmentally friendly power sources, if the development takes place here, so that those small companies can on their own doorstep become involved with the originating companies and the expertise, rather than having to wait for some big American company to import the finished product.

It would be very nice to see, for instance, the Government's Powershift project having more room in it for fuel cells. It does not at the moment seem to. Most of the money goes to natural gas, which is finite. In my opinion, what appears to be happening, namely picking winners, is not the right way to go about this. As the noble Lord, Lord Dubs, said, it is important to encourage as many alternatives as possible. We are in a ferment of opportunity. All sorts of things are happening. It is impossible to tell which technology will turn out to be right at the end of the day. There are so many different alternatives. There is so much to be done in all of them. It is important not to pick the winner but to hold the race here, so that the winning takes place in this country for the benefit of our citizens.

The noble Lord, Lord Whitty, is a Minister in the Department of the Environment, Transport and the Regions. All three areas are involved in this subject. The environment is obviously involved; transport, for the benefits that this new industry could bring to our whole transport industry; the regions, because, when it comes to clean air, the benefits of environmentally friendly fuels happen locally. One of the great observations that I bring back from Germany and the United States is that it is regional enthusiasm, the enthusiasm of the City of Cologne, the enthusiasm of the City of New York, that makes things happen. Concentrating these matters too much in central government seems in this country to have a stultifying effect. I hope that the noble Lord will encourage his Ministry to learn from this and that we might see a greater degree of delegation to enable innovative councils to make things happen in this country.

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