What it takes

What it takes

Fuel economy isn't just good economics

VERY crudely, the less fuel the vehicle consumes, the less it emits. Regulators across the world look at this problem in two ways one, they directly regulate fuel economy; two, they set standards for green house gas (ghg) or co₂ emissions to address climate change, which indirectly regulates fuel economy. Countries like Japan, China and the us have set fuel economy standards that aim to get more miles per unit of fuel and reduce co₂. The European Union has set targets for co₂emissions reduction. California in the us has decided to set standards for greenhouse gas emissions.

Energy security concerns during the 1970s spurred the us to begin fuel economy regulations for vehicles.Subsequently, commitments made under the 1997 Kyoto Protocol to reduce ghg emissions to avert climate change, led other industrialised countries to design strategies to improve fuel efficiency. Since then, nine regions have implemented regulations that cover a very high proportion of the global vehicular fleet, markets and manufacturers.

Among the developing countries, only China has set fuel economy standards. It is also driven by concerns over its energy security.

The Pew Centre, a Washington, dc-based think-tank, hascompared all the different global fuel economy standards. It found that the European Union and Japan have the most stringent standards in the world. The us and Canada are the most lax. What is worth noting for the developing countries is that China has set fuel economy standards tighter than those prevailing in the us, California, Canada, and Australia (see graph The global best and worst ).

Experience the world over shows fuel economy regulations need proper crafting. Lax standards or exemptions to bigger vehicles, for instance, encourage gas guzzlers.

In the us, suvs meet lower standards than cars. A rise in their numbers has meant a decline in the fuel economy there. The us also fails to regularly update standards that reflect new technologies.

But not diesel
Because it is not clean

Fuel efficiency is not a single step tango. Several trade-offs need to be considered so that increased emissions do not offset gains from efficiency. The use of diesel is one such instance.

In India, cheap prices have set off a mad rush for diesel cars. The lack of policy to make diesel cars pay for environmental costs has spurred the boom. The 2006 Union budget is good indication. It made the link between tax cuts and small diesel cars more explicit. While granting tax cuts to the small car segment, the government defined 'small car' as one of length not exceeding 4,000 mm, with an engine capacity not exceeding 1,200 cc for petrol cars and 1,500 cc for diesel cars. The latter, more relaxed, limit allowed in large numbers of mid-segment diesel cars. Diesel car prices got slashed by about Rs 12,000 to Rs 25,000. According to information from siam the market share of diesel cars has rocketed over 30 per cent. Other estimates say that it is expected to be as high as 50 per cent by 2010. In Delhi alone, diesel cars have increased by 425 per cent between 1996 and 2006.

This increase in the use of diesel vehicles threatens to jeopardise public health seriously. Air quality in Indian cities is at risk and diesel technology, even with the current 'best' Indian technology is highly polluting. A 2004 World Bank supported study assessed and attributed pm_2.5--the tiny and deadly particulate that is indicted for health impacts in selected Indian cities--pollution to different sources. This study shows that, depending on the season, diesel contributes as much as 61 per cent of pm_2.5 in Kolkata, 23 per cent in Delhi and 25 per cent in Mumbai.

Yet another study, conducted by Mario Camarsa of the uk- based Enstrat International Ltd, shows that in Bangalore diesel vehicles contribute as much as 40 per cent of the total no_x emissions.

The nub of the problem
Diesel cars are ostensibly more fuel-efficient. And that explains their demand. But these cars are also much more polluting than petrol cars.

Japan and California have a two-pronged strategy to deal with the fuel economy and emissions trade-off. On the one hand, they have ordered strict emission standards, forcing carmakers to undertake technology innovations that eliminate both particle mass and numbers by nearly 99 per cent in diesel vehicles. On the other hand, their tough fuel economy standards are compelling vehicle manufacturers to innovate to produce more fuel efficient and clean vehicles. Standards set in California and Japan are now forcing the pace of technological innovation in the world. The aggressive steps at both levels have forced markets in both countries towards a wide variety of technology options, including hybrid electric vehicles.

In Japan, there are not just fuel economy standards for cars; it also is the only country to have fuel economy standards for heavy vehicles. The standards are based on different weight-classes of vehicles. This is the only country to have set fuel economy standards for heavy duty vehicles. In each class the fuel economy level of the top runner or best model is the target for the rest in the same class. The current targets broadly imply 23 per cent improvement in petrol vehicles and 14 per cent in diesel cars by 2010 over current levels.

Japan's 2009 emission norms for diesel vehicles are one of the toughest. Says Takao Onoda, energy expert at the International Energy Agency in Paris, "If the local pollutant is a problem, it should be dealt with more stringent local pollutant regulation. Japan did so, and now diesel light duty vehicles are a 'dying species' in the country."

Likewise, California, has enacted separate ghg standards. These standards, if enforced, would require manufacturers of light duty vehicles to meet fleet wide average targets for greenhouse emissions. These standards will reduce greenhouse gas emissions by 30 per cent in 2016 over current levels.

California has also set the toughest fuel neutral standards, equally stringent standards for petrol and diesel cars. This effectively blocks entry of current level of diesel technology.

Similarly, China has designed its fuel economy regulations in a way that effectively discourages big diesel vehicles the limit values for the bigger classes are more stringent, and a narrow price differential between diesel and petrol removes the incentive for diesel. It's also tightening emission standards.

Absence of fuel economy standards and weak emission norms do not address the fuel economy and emissions dillema in India. Norms currently in force here are Euro III in 11 cities and Euro II elsewhere they allow diesel vehicles to emit more particulate matter and nitrogen oxides (no_x) than petrol cars. Even Euro IV standards, currently in force in Europe, allow diesel cars to emit three times more no_x than petrol cars.

Europe lags behind the global best standards.The us Tier II standards for commercial vehicles, for instance, are approximately 80 per cent tighter than Euro IV norms for comparable vehicles. They are 90 per cent tighter for no_x and 60 per cent tighter for pm than even the proposed Euro V limits, which will come into effect in 2008. As far as emission standards are concerned, the us and Japan are ahead of Europe, while India is lagging behind it. Can India learn and act?

Voluntarism doesn't work
Policy for fuel efficiency has been slow in India. In 2004, the government's auto-fuel policy asked companies to 'voluntarily' declare their vehicle's fuel economy. But as this was never enforced, companies have shied away from even this. Carmakers do not disclose their fuel economy in their brochures or vehicle specifications. They only announce it in advertisements, to score brownie points over competition. There is no data or certification to back their claim. Instead, they rely on the data from on-road tests by various auto magazines. So consumers are forced to take ill-informed decisions.

Now again, some moves are afoot. The draft report of the Working Group on Petroleum and Natural Gas Sector for the 11^th five year plan (2007-12) has recommended tough average fuel economy standards to increase vehicle efficiency across the new fleet. It has proposed current fuel economy standards should be averaged for each category and set. Thereafter, they may be increased by 8 per cent per year during the 11^th Plan and 5 per cent beyond the end of 11^th Plan. The average fuel economy of all new cars, commercial vehicles and two-wheelers would increase by about 45 percent by 2012.

But the industry says that fuel efficiency would be difficult to calculate and difficult to maintain given the road conditions. They are worried that consumers will hold them responsible. So, no standards they say. Leave it to the market. But the market is often distorted and does not work 'perfectly'.

Managing mobility

Pushing fuel efficiency, even beyond the proven limit, isn't enough. Sufficiency, not just efficiency, will be the answer

THIS is the second challenge energy insecurity has thrown up. Strike at the very root. Get rid of excess vehicle miles travelled, control sheer indulgence in personal mobility, or cars. Governments around the world are framing policies to push commuters to use buses, subways, trains, bikes, or even walk to dampen the insatiable need for energy, free up road space from congestion and clean up the air.

A policy paper, Transport, Energy, and Global Climate Change available to the German federal ministry for economic cooperation and development shows energy consumption in motorised individual passenger traffic could be up to 10 times higher than a city, which has a well-organised, demand-oriented public transport system. The same holds for greenhouse gas emissions. It cites a recent study of 52 cities, mainly in developed countries, showing a strong correlation between modal split in cities and emissions (see graph Re-public).

India could well take this to heart. The International Energy Agency (iea) estimates a 100 per cent difference in oil use and carbon dioxide emissions in a future scenario dominated by travel in high quality bus systems, as opposed to one dominated by private vehicles in Delhi. Even the dirtiest bus, iea weighs in, emits far less co₂ per passenger km than other vehicles. The developed world, particularly Europe-despite its obsession with cars-has begun to rebuild its public transport agenda to enhance fuel savings and reduce co₂ emissions.

In India's key metro cities public transport still meets a large share of commuting demand--88 per cent in Mumbai, 76 per cent in Kolkata, 70 per cent in Chennai, and 62 per cent in Delhi. But fiscal regulators at the Centre and in states have not understood this inherent strength. Tax policies are so distorted that public transport is made to bear a disproportionately high tax burden. A 2004 World Bank estimate shows that the total tax burden per vehicle kilometre is 2.3 times higher for public transport buses than cars in Indian cities. The annual road tax a bus pays in Delhi is higher than the one-time road tax a car pays in any given year. In Pune, the state government has recently pushed in a new passenger tax on public buses, to bail out the state exchequer from fiscal deficit. But the toll to be charged on roads has been dropped because of opposition.

For the forthcoming budget, conflicting proposals for the excise taxes on buses have been reported. On the one hand, the ministry of heavy industries and public enterprises has proposed a 16 per cent excise duty on the manufacture of bus and truck bodies, to ensure encoded safety norms for these are adhered to. At present, the bus chassis is charged at 16 per cent excise. If the bus body is fabricated separately there is no excise charged on it. Most agencies prefer to purchase a chassis and get the body fabricated separately, to end up paying the excise tax of 16 per cent and education cess of 2 per cent. This industry wants to bring the fabricators into the tax net. On the other hand, the finance ministry is reportedly also considering exempting buses from taxation. This would definitely boost quality bus transportation.

Change is possible
A growing body of evidence testifies to the scale of change that is possible to reduce energy impacts of mobility (see box Take a bus). Other governments have also begun to account for congestion costs while planning fiscal measures, a measure completely ignored in India. The cost of traffic congestion alone represents nearly 3 per cent of gdp in oecd countries and even higher in Asian countries--4.4 per cent in Korea and 6 per cent in Bangkok. Recognition of these costs also compels these governments to find market based solutions to influence commuting choices and offset these costs.

Results are impressive. In Singapore, electronic road pricing, introduced in 1988, has reduced traffic in targeted areas by around 13 per cent and increased average traffic speed by up to 20 per cent. This system generates phenomenal revenue per year. Similarly, an area licensing scheme that regulates entry into central business districts has reduced traffic volume by 50 per cent there, despite travel demand tripling over the last 25 years. In London, the central London congestion charging scheme has successfully reduced traffic in the central London charging zone by up to 16 per cent and congestion by up to 30 per cent. In Stockholm a six-month trial of road pricing ended in July 2006, with a referendum, held two months later, on implementing a permanent scheme. Overall, 51 per cent of residents of the Stockholm area voted in favour of a permanent scheme; in Trondheim, Norway, a road pricing system operating between 1991 and 2005 has reduced traffic by up to 10 per cent.

Policy interest in mobility management to address energy, congestion and pollution linkages is growing worldwide. In December 2006, the uk government accepted an important study on the long term link between transport and the uk's economic productivity, growth and stability. It advises the uk government to adopt a sophisticated policy mix to meet both economic and environmental goals. The objective should be to get the prices right, especially congestion pricing on the roads, and environmental pricing across all modes. This is the most explicit policy document that highlights economic imperatives of congestion; will government take note?
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