Energy and Climate are Hot: NGVs are Not ... but they could be!

Welcome to the second of a four part discussion and analysis on legislative and regulatory initiatives being undertaken by European Union policy makers, written especially for NGV Global.  

PART 2

THE EUROPEAN POLITICAL AGENDA: CHALLENGES & OPPORTUNITIES FOR NGVS

There are no less than six different legislative initiatives currently in debate in Brussels that have an impact on natural gas and biomethane as a vehicle fuel.  Debate on each of these initiatives has been lively, and decisions being made in the upcoming months could have a wide-ranging impact on the European perception about and markets for natural gas and renewable biomethane. 

On Wednesday 23 January 2008 the European Commission President José Manuel Barroso presented the energy and climate package to a specially convened plenary session of the European Parliament. The comprehensive and ambitious package was based on an agreement among heads of European governments who called on the European Commission to develop policy proposals to achieve:

• Reduction of carbon emissions by at least 20% (or 30% if a global agreement on emissions is reached);
• Increase of 20% in energy efficiency ;
• 20% share of renewables in overall energy consumption; and
• 10% biofuel component in vehicle fuel.

President Barroso told Parliament that the energy and climate proposal was “the most complete package of measures in the world”.  Mr. Barroso had two political messages. The package would allow the EU to “lead the way” on climate change issues while continuing to compete effectively in the world economy. At the same time, the package would demonstrate to EU citizens that Europe was able to tackle the large issues and shape global policy in an area that affects daily life.

The package presented proposals for:

• An expanded emissions trading system (ETS) covering more emissions and allowing firms in one EU country to buy allowances in any other Member State.  The transportation sector is not included in the ETS but member states will be requested to adopt policies and measures to lower emissions such as traffic management, shifts away from carbon-based transport, taxation regimes, the promotion of public transport, biofuels, as well as urban and transport planning.
• An emission reduction target for industries not covered by the ETS (e.g. buildings, transport, waste) so that everyone is contributing;
• Legally enforceable targets for increasing the share of renewables in the energy mix – the targets will reflect each country's individual needs and its potential;
• New rules on carbon capture and storage and on environmental subsidies; and
• New guidelines on state aid for environmental protection.

For the transport sector, each member state will be assigned a minimum, binding objective of 10% of the overall consumption of petrol and diesel to come from biofuels by 2020.  Addressing concerns over the sustainability of biofuels, Mr.Barroso said that the proposal set up a comprehensive and sustainable certification procedure for biofuels to ensure the sustainability of the production.  In fact, a definition of ‘sustainable’ is yet-to-be established and it remains to be seen if such a methodology can be: 1) developed; 2) implemented; and 3) enforced.

The European Commission is hoping that in March 2008 EU leaders will endorse the plan and make financial commitments as well.  This includes support for a Strategic Energy Technology Plan (SET Plan) that includes a Joint Technology Initiative for fuel cells and hydrogen, valued at about €450 million through 2013 as well as a plan for CO2 capture, transport and storage.  By Spring 2008 a second strategic energy review is anticipated.

There will be a variety of places within this large plan for NGVs, but at the moment there is little specific mention of the NGV option.  Thus, the legislative playing field is wide open and it is a matter of targeting specific elements in the plan – such as the promotion of low-carbon transportation technologies – in order for NGVs to be firmly included within the large energy and climate package.

( Reference: Decision on the effort of Member states to reduce their green house gas emissions to meet the Communities reduction commitments up to 2020; COM 20082008/19 final, 23/1/2008)


Community Strategy to Reduce CO2 Emissions in Passenger Cars and Light Commercial Vehicles (COM 2007/856 final, 19/12/2007)

One of the most contentious elements in the general energy initiatives is the mandate for automobile industry to reduce CO2 emissions levels in its entire range of light duty passenger and commercial vehicles to 130 grams per kilometer.  Initially set at 120 g/km to be achieved by 2012, intensive lobbying by the car industry resulted in the Commission stepping back the requirement to 2015 and moving to 130 g/km, presuming that the additional 10 g/km can be made up through ‘complementary methods’ such as improved driving habits, better tires, and other related non-technical measures.

A proposal to charge auto manufacturers penalties for non-compliance within the specified time-frame has, not surprisingly, met with fierce resistance by the car industry.  But a system of providing redeemable credits for vehicles achieving low CO2 levels also has been discussed.  Such a ‘carrot’ to accompany the financial penalty ‘stick’ would apply to low CO2 vehicles such as those using hydrogen, fuel cells or plug-in systems.  NGVs were not specifically mentioned, however, if a credit system were introduced they likely would apply. 

The NGV industry previously has advocated CO2 credits for an NGV of zero grams per kilometer to apply toward the CO2 reduction requirements. So far, General Motors is the only car company publicly advocating such credits.  In a private conversation with a representative of the European Automobile Manufacturer’s Association (ACEA) Clean Fuels Consulting was told that the idea of credits has not yet been widely considered by the industry but that, perhaps, leadership from automakers such as GM might open them to advocating such a position.  Clean Fuels Consulting raised this same issue to Commissioner of the Environment Stavros Dimas at a meeting of the Automobile and Society in Brussels.  Unfortunately for clean fuel vehicles, the approach advocated by the Commissioner was oriented more toward raising the tax on fuel as well as other price mechanisms designed to encourage consumers to purchase smaller, more efficient cars. 

There will be a huge amount of discussion and debate about how to structure and implement the CO2 reduction requirements over the next seven or more years.  Since NGVs are low CO2 emitters  -- 20-25% less than the comparable petrol vehicle – there is a lot of room to work with both the vehicle manufacturers and government, particularly at the European level. 

End of Part 2 - See Part 3 next week.