Select Committee on Merits of Statutory Instruments Twenty-Fifth Report


Motor Fuels (Composition and Content) Regulations 2007 (SI 2007/1608)

Letter from the Chairman to Stephen Ladyman MP, Minister of State, Department for Transport

I am writing as Chairman of the Lords Committee on the Merits of Statutory Instruments. Yesterday the Committee gave preliminary consideration to the Motor Fuel (Composition and Content) (Amendment) Regulations (SI 2007/1608). Although we note and commend the extensive consultation process and the attempts to achieve the objective by a means other than regulation (viz section 7 of the Explanatory Memorandum), we were puzzled by the effect of these Regulations.

The Regulations correctly implement an EU Directive which requires changes to super unleaded fuel to decrease the sulphur content. The Regulatory Impact Assessment informs us that this will benefit the Environment by reducing the amount of oxides of Nitrogen (NOx) by 3.0ktonne and airborne particulate matter (PM) by 0.2 ktonne (overall saving the monetarised equivalent of £11 -16m). However due to the increased energy being used in processing the fuel the levels of Carbon Dioxide (CO2) released will increase significantly, the estimate being in the range 53.82Mt - 371.9 Mt CO2 (equivalent to £16 - £112 m in monetarised terms). This represents a significant overall increase in emissions which seems perverse in legislation designed to improve the environment.

We understand that the Directive was promulgated on the basis that it would encourage the use of Petrol Direct Injection engines but that the market for such cars has not progressed as anticipated. Could you please clarify the reasons for this?

We assume that other Member States are experiencing similar difficulties and would like to know why the Department has not asked the European Commission to defer the implementation of the Directive until the advanced engine technology which this measure is designed to complement is more widely available or the net outcome to the environment will be less damaging.

We are currently minded to draw this instrument to the special attention of the House but before reaching a final view, the Committee would welcome further explanation on the points set out above.

20 June 2007

Letter from Stephen Ladyman MP, Minister of State, Department for Transport, to the Chairman

Thank you for your letter of 20 June about the above regulations. You raise concerns about the impact of the regulations on CO2 emissions.

As you know the regulations implement aspects of EU Directive 2003/17/EC. Some background to this Directive may be useful to understand the current situation. The main driver for sulphur-free petrol was to enable maximum CO2 savings on lean burn Petrol Direct Injection vehicles. Sulphur-free diesel offers CO2 benefits on Diesel Particulate Filter equipped vehicles and enables certain local pollutant emissions control technologies. The Commission originally proposed that sulphur-free petrol and diesel should be available from the beginning of 2005 and that all road fuel should be sulphur-free by 2011. In making this proposal they noted that a staged introduction was necessary in order to avoid refinery CO2 impacts outweighing vehicle CO2 and air quality emissions benefits, while new technology vehicles were still being introduced into the market.

Several Member States and the European Parliament wanted the proposed dates brought forward by up to 4 years. The UK did not support this since our analysis suggested that this would result in increased CO2 emissions in the short term. The 2005 (availability) and 2009 (full market penetration) dates finally agreed represented a compromise between the various parties.

As you know, contrary to expectations, Petrol Direct Injection vehicles have not yet achieved significant market penetration. This is largely due to the costs of this technology and the fact that the fuel economy benefits delivered on the vehicles that were brought to market were lower than expected. Consequently consumer uptake was limited and most manufacturers did not roll out the technology across many models. However vehicle manufacturers and independent technical consultants still expect petrol direct injection engines to be commonplace in the next generation of vehicle models.

In implementing the Directive's requirement that sulphur-free fuel be made available we have taken account of the limited availability of Petrol Direct Injection vehicles and we only sought to switch Super grade petrol (4.5% of petrol sales) to sulphur-free. This limits the increase in refinery CO2 emissions to very low levels. The majority (95-97%) of the increased refinery emissions estimated in our RIA is in fact due to sulphur-free diesel. Unfortunately the UK fuel distribution network can only accommodate a single grade of diesel. Consequently it is not economically viable to make sulphur-free diesel available in small quantities alongside existing ultra-low sulphur diesel. To put the CO2 increase in context I should point out that it equates to only 0.04 - 0.3% of UK road transport emissions and, as noted in the RIA, we are confident that the actual figure will be towards the bottom end of this range.

You question why the Department has not raised the issue of increased CO2 emissions with the European Commission and sought a delay to the implementation dates in the Directive. In fact the Commission were already tasked with reviewing this under Article 9(1)(a) of the Directive. This obliges them to review the implementation date for sulphur-free diesel specifically in order to avoid an overall increase in CO2 emissions. The Commission's recent Impact Assessment (SEC(2007) 55) includes such a review, concluding that there was no reason to delay the dates. Key factors in reaching this conclusion were the air quality benefits brought about by sulphur-free diesel, the anticipation that it will deliver CO2 savings on Diesel Particulate Filter equipped vehicles (which will become commonplace from 2009) and the fact that refinery CO2 increases now appear to be lower than originally anticipated. They also felt that a chicken and egg situation existed, with automotive manufacturers being reluctant to bring new technology vehicles to market until sulphur-free fuel was available to enable optimisation of fuel economy.

In practice, to delay the implementation dates, the Commission would have to come forward with a proposal to the European Council and Parliament, which would take up to 2 years to negotiate and a further year to transpose.

By the time this could be achieved Diesel Particulate Filter equipped diesels will be commonplace, and significant numbers of Petrol Direct Injection vehicles should also be available, according to industry projections*.

I trust that this answers your questions.

25 June 2007

*Additional information on industry projections from the Department for Transport

A number of manufacturers have either introduced Petrol Direct Injection (PDI) engines in the last couple of years or publically announced their imminent launch. This includes Peugeot-Citroen, Mini, BMW, Mercedes, VW, Audi, Skoda, Toyota and Ford. In some (but not all) cases PDI introduction is at present limited to larger engines which do not constitute a large part of vehicle sales. However it is common practice for new technologies to be rolled out on larger, more expensive vehicles prior to implementation across the vehicle size range. One major vehicle manufacturer has indicated that they expect an aggressive ramp up in production such that by 2012 the majority of their petrol vehicle sales would be PDI.

An estimate of PDI uptake (from last year) produced by an independent automotive industry consultancy (Ricardo Consulting Engineers) indicates a rapid increase in the next couple of years to 10% of all EU engine production. Note that the petrol/diesel market split in the EU is roughly 50/50 so 10% of all engines correspond to around 20% of all petrol engines being PDI.

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