Fuel economy standards: a non-starter

Just when the country was hoping for a final decision on fuel economy standards for passenger cars it has been delayed again. After four years of wrangling the concerned ministries of power and transport are still indecisive as the car industry continues to put pressure for weak standards. The buck has been passed on to the Prime Ministers’ Office for the final go.

The official deliberation on the standards has remained under wraps for a long time. Only in the face of public pressure the two ministries–Ministry of Power and the Ministry of Road Transport and Highways–opened the proposal for public consultation. But the consultation paper ‘Passenger Car Fuel Economy Labeling and Standards’ that was released by the Bureau of Energy Efficiency for public comments late last year drew serious criticism for being too little, too late. There are reports of a revised document with slightly improved targets. But it is still under wraps.

Delay in announcing and implementing the fuel economy standards for 2015 and 2020 can seriously jeopardise energy security and climate mitigation plans especially given the unprecedented growth in car sales. Crude oil prices are peaking again and this can hurt India tremendously as it imports nearly 80 per cent of its crude oil needs. According to the International Energy Agency cars will be one of the primary drivers of energy demand in the transport sector in the coming decades.

The Bureau of Energy Efficiency (BEE) under the Ministry of Power is setting the standards and the Ministry of Road Transport and Highways is responsible for implementing them.  The new standards are being set as corporate average fuel consumption (CAFC) standards. These will be set in terms of fleet average carbon-dioxide emissions target that will be sales weighted for all the new cars sold in a year. CO2 emissions depend directly on the amount of fuel burnt. The targets will be set for 2015 and 2020.

What’s wrong?

The original proposal if not changed will turn the clock back. In 2010, the Indian car industry had already achieved average fleet fuel consumption levels of 6 litre per 100 km. But the application of the proposed standards to available data for car sales and fuel economy show that the proposed standards are asking the car industry to come down to only 5.73 litre per 100 km in 2015, and to 5.14 litre per 100 km in 2020. This means less than 1 per cent reduction per year until 2015 and 2.2 per cent reduction thereafter until 2020.

The industry has already achieved a better rate of improvement than those proposed by the standards. The assessments made by New Delhi based non-profit, Centre for Science and Environment, show that between 2007 and 2010, the car industry has already improved its average fuel economy from 6.53 litre per 100 km to 6 litre per 100 km in 2010 – an improvement of 2.8 per cent a year. Then why are the proposed standards asking the car industry to meet a target of only 0.8 per cent improvement between 2010 and 2015 and 2.2 per cent between 2015 and 2020. The government has clearly capitulated under pressure from the car industry to create a lax margin for bigger and more inefficient cars.

Some carmakers will get away by not doing anything at all for the first few years. Estimates from available data show that some of the car majors in India like Tata Motors and Hyundai are well within the proposed standard line and will not have to do anything for five years. Over 10 years, they will have to achieve approximately only 1 per cent improvement.  Maruti Udyog Ltd will have to improve by about 2 per cent over 10 years.

The standards will barely allow any fuel savings. The draft proposal has stated that if nothing is done about regulating fuel economy, car fuel consumption will increase from 9 million metric tonne in 2010 to 25 million metric tonne in 2020. Yet India’s own standards are so weak that fuel savings will be negligible–only 3 million metric tonne by 2020: just 12 per cent savings. But if the car industry is made to achieve a minimum of 2 per cent improvement a year, the car fuel consumption can be halved by 2020.

Without substantial improvement India will slide behind all major car producing countries by 2020–even behind US and China. India, by an act of policy, is aiming to finish as the worst in the world despite starting with one of the best baselines than most other vehicle producing countries in 2010.

India has already begun with a much better fuel economy baseline than most other vehicle producing countries. But with the proposed targets, India will finish behind all of them in 2020. India will show up very poorly in the ongoing international climate negotiations if its fuel economy target worsens than that of the US and China despite starting at a level better than them today. This will make a mockery of the National Climate Action Plan of the Prime Minister’s Council.

Comparison of emission (CO2gm/km) target in key vehicle producing regions
Countries	2010	2020
European Union	145	95
United States	187	121
China	179	117
Japan	130	105
India	141	122 (original proposal)

It will be humiliating if public policy allows such slow improvement in CO2 emissions and fuel savings from the luxury consumption of cars. This is not acceptable either under the principles of climate justice or that of energy security.

There is no reason why India cannot narrow the gaps with the target that Europe has set for 2020. The average weight of the European car fleet today is 1,300 kg and has average CO2 emissions of about 145 gm/km. In fact India is more advantaged as the average weight of Indian cars is still 1,050 kg with an average CO2 emission of 141 gm/km now– better than Europe. If Europe can therefore propose a target of 95 gm/km in 2020, India should at least be below 105 gm/km in 2020.  This can be easily achieved with 2.5 per cent to 3 per cent improvement a year. 

During 2008 and 2010, not only the car sales have increased, but also the average weight of the new car fleet has increased by 5 per cent and the average engine size by about 6 per cent.  Due to these trends the fuel economy in terms of km/litre during the same period has stagnated and even declined by 1 per cent.  This is unacceptable when the country is rapidly motorising and reeling under energy crisis.

In fact, 2009 McKinsey report on India has estimated that if India improves fuel economy by even 15 per cent by 2015 then the country will save 29 million tonnes of CO2 in 2030. This translates into 10.3 million tonnes of oil equivalent which at 100 dollars per barrel works out to be 7.8 billion dollars of savings in 2030 alone. If this fuel savings is linearly increased from 2010-2030, the total fuel savings can be approximately 100 million tonnes of oil equivalent, and the cumulative dollar savings around 78 billion dollars. Thus, any further delay can cost hugely to the nation.

Industry scowls

Even this weak proposal is being opposed by the car industry. It has listed all kinds of excuses including bad roads and lack of uniform fuel quality across the country to plead for diluted targets. It has also not agreed to independent monitoring and penalty for violation.

Most of these excuses do not stand. In fact, the attempt in the proposal to have a second line and a weaker standard if uniform fuel quality is not available across the country has drawn scathing criticism from the global energy watchdog, International Energy Agency (IEA). It has reacted to the proposal saying, “In terms of fuel quality, it is not aware that the use of Euro III fuel would in any way compromise the ability to improve fuel economy, it should be fully compatible with virtually all major technologies.  If the Indian auto industry believes otherwise they should provide a detailed assessment of which technologies are affected and why.”

The provision of two targets–a tighter target with Euro V fuel quality nationwide and a more lax target without it–is a very bad practice and scientifically untenable. There should be only one stringent standard for 2020. Indian market already has popular high selling car models (i10, i20, Alto, Verna and many more in different weight classes) that have achieved better fuel consumption levels than both the proposed targets for 2020. Even the best of hybrids can operate on Euro III fuels. It is another matter that the country must have Euro V compliant fuel quality by 2020 to meet the public health challenge.

The IEA has further stated that it appears that for companies with average vehicle weight around 1,000kg (which is the industry average) the proposed 2015-16 standard of around 5.7 litre/100km or roughly 135 gmCO2/km  is very close to today’s level, so will not push much change.  The target for the heavier vehicles is tighter.

Enforcement worries

It is worrying that while India is adopting corporate average fuel consumption (CAFC) standards, there is no official system in place for independent tracking of sales of all vehicle models. This makes it difficult to estimate annual calculation of the sales weighted corporate average fuel consumption standards to ensure compliance. The entire compliance strategy will depend on self reporting by the industry. There is a conflict of interest.

The proposal must have a section on monitoring and reporting of the data for implementation of CAFC. This should specify the format for the manufacturers to report the data. Specify the executive system for independent recording of information on vehicle registration in all the states. The Central government should create and maintain a central registry on the requisite data that is publicly available.  The central registry of data in Europe is in public domain. Detailed rules for reporting and scrutiny should be specified. CAFC implementation should not depend only on self reporting by the car industry.

BEE will have to organise independent testing for verification of the industry claim. The BEE is already empowered to carry out suo moto tests for all other labeling programme to verify compliance. Any deviation for the cars will compromise the integrity of this provision. The regulatory document should clearly define the magnitude of the penalty for the car companies for non-compliance. This should be an effective deterrent. 

Due to lack of transparency and awareness this crucial piece of regulation, needed to tackle energy crisis, has fallen victim to industry politics. This initiative can be ruined if inter-ministerial indecisiveness is not addressed immediately.


 

Report: State of the World 2014: the world is shifting into gear on fuel economy

Report: Policy pathways: improving the fuel economy of road vehicles

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