A Review of International Initiatives to Accelerate
the Reduction of Sulphur in Diesel Fuel
5. Concluding Observations from the Case Studies
Measure of Choice - At least 11 OECD
jurisdictions have implemented or announced the use of economic
instruments in order to accelerate the introduction of low sulphur
diesel fuel. The case studies examined show that these measures
have been very successful. In each of the cases the economic instrument
is backstopped by a regulated requirement taking effect at a later
date.
Cost to Government- For two of the four
case studies, the measures were designed to be revenue neutral with
minimal cost of administration. The UK's measure was not, but needs
to be considered in the context of the associated annual fuel price
escalator.
Getting the Price Right - Pricing for
an economic instrument in advance of a regulation seems to be a
case of encouraging refiners to advance spending of capital costs
that would ultimately be incurred by all refiners to meet the regulation.
The UK and Danish example are the most instructive in this respect.
Projecting and Assessing Benefits - Communicating
the human health and environmental benefits as well as measuring
impacts are important components of designing the introduction of
a measure. Denmark's air quality testing and the UK's assessment
of environmental benefits of budget measures go a long way in showing
the public benefit of tax differentials. Such measures to encourage
the early introduction of low sulphur diesel might otherwise be
construed as an economic benefit to refiners.
Emission Reductions Reported or Projected
- The UK projected that its fiscal measures to encourage the early
introduction of low sulphur diesel fuel would reduce particulates
by 21% and by up to 2% of NOx emissions.
- Denmark has projected a 13% reduction in fine particulates based
on the use of 50 ppm diesel growing to 26% reduction once all
city buses use this quality of fuel.
- Finland has reported emission reductions better than those achieved
in the use of reformulated gasoline - therefore, the only comparison
available is based on those results - carbon monoxide down by
10-20%, hydrocarbons by 5-10% and evaporation emissions by 13-17%.
- Germany projects the benefits of its measure to include reduced
emissions of NOx, CO, SO2 and CO2 emissions reduction of 20-25%
from its current fleets along with a projected 4% reduction in
fuel consumption.
Infrastructure - Distribution of two
qualities of fuel may lead to cost and verification issues when
attempting to accelerate reduction of sulphur in diesel.
Timing - An economic instrument can produce
a rapid market shift in particular when the consultative process
leading to its introduction is effective.
Duration – All jurisdictions plan to
keep the economic instrument in place until the regulation kicks
in.
Voluntary Initiatives - Industry voluntary
initiatives may create a market advantage for companies positioning
themselves as leaders (BP Amoco). However, the longevity of the
measure and verification of its effectiveness may be problematic.
Voluntary leadership may not be adequate to motivate refiners to
move in advance of regulation.
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