‘Diesel bans’ should be in force in no less than seven German cities by the first half of next year. They follow measures introduced in Paris and Oslo in 2017, while London will see the introduction of its Ultra-Low Emissions Zone from April 8, 2019, which targets both gasoline and diesel use.
However, despite widespread use in the media, the term ‘ban’ is a misnomer. These regulations do not ban diesel and their impact on oil product demand will be very limited. They are restrictions on the use of older diesel engines, and they often apply to specific routes rather than being city-wide, as in Germany, or come into force only when air pollution breaches set standards, as in Oslo.
They should also not be confused with proposed bans of new sales of internal combustion engines, where the timescale for implementation is much further off. These proposals will depend on alternative modes of road transport being economically viable at that time.
What is significant is the driving force behind these regulations. It is not climate change but air pollution.
When taken in combination, a clear regulatory pincer movement is developing. At the front end, the immediate policy offensive is driven by urban air pollution as a consequence of ever greater use of internal combustion engines and urbanisation. Further out, the motivator is the potential harmful effects of climate change.
The primary impact will be on the technology choices of vehicle buyers. These ‘bans’ will impact the speed and timing of the energy transition in the transportation sector by accelerating the pace of fleet renewal – but only where viable alternatives exist.
In the first instance, there will be a trend towards more efficient lower emission gasoline engines, but electric and natural gas-fuelled vehicles will also benefit. Where viable, the uptake of alternative transport modes will be quicker than expected.
Urban air pollution has been a primary driver of environmental regulation in China, where the pollution is visible to the eye and felt upon the lung. The effects of European air pollution, predominantly very small particulates and nitrogen dioxide, are not immediately visible.
Air pollution concerns are also high in India and other countries suffering from severe traffic congestion. In 2016, the majors of Mexico City, Paris, Athens and Madrid all pledged to ban diesel engines from their cities by 2025.
Now, however, it is the courts that are forcing action from governments which have spent years dragging their feet -- not over the setting of air quality standards but the enforcing of them. Environmental organisations have focussed on the gap between standards and performance, and are playing a key role in bringing infringements to the notice of the legal system.
In India, the Supreme Court last year finalised its order on the use of Compressed Natural Gas (CNG) buses in Delhi, setting a precedent for urban transport across the huge and populous country. Although the infrastructure does not currently exist to comply with the ruling, fines were also imposed on diesel bus operators not meeting emissions standards.
This was the culmination of a process that started in 1998. Essentially it prioritises and enforces the use of CNG in the absence of sufficiently low emission diesel engines, enshrining in law both the polluter pays principle and citizens’ right to clean air.
This ruling, in conjunction with subsidies provided under the FAME program (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles) and longer-term climate change goals, explain the sudden burst in electric bus deployment in India.
A single bus trial started in 2014 in Bangalore, followed by six other cities, before 25 e-buses were deployed on the Himalayan Rohtang pass to Manali and four in Mumbai in late 2017. But from 29 in 2017, the number of e-buses on India’s roads is estimated to have risen to 530 this year, according to data from the country’s Urban Mass Transit Company Ltd. In July, Delhi approved the acquisition of 1,000 e-buses, delivery of which is expected to start in second-quarter 2019.
Europe gets legal
A very similar and nearly as glacial process appears to be reaching a crescendo in Europe, stemming from the extensive and prolonged promotion of diesel in Western Europe from the mid-1990s and the EU’s Ambient Air Quality Directive (AADQ) of 2008.
The European Environment Agency’s 2018 Air Quality in Europe report, like its predecessors, showed that concentrations of particulate matter continue to exceed EU limits in large parts of the region. The annual limit for nitrogen dioxide was exceeded at 12% of all reporting stations, 88% of which were traffic stations.
The AADQ sets current air quality standards, but enforcement has been weak, and, as in India, it has gradually moved from the purview of government to the courts.
In April 2017, the European Court of Justice (ECJ) handed down a ruling against Bulgaria increasing the European Commission’s capacity to address air pollution standards infringements. This set an EU precedent and the Commission earlier this year finally referred six EU countries – France, Germany, Hungary, Italy, Romania and the UK – to the ECJ.
The AADQ states that where air quality standards are exceeded governments must draw up an air quality plan, “so that the exceedance period can be kept as short as possible.” France, Germany and the UK are being brought to book over nitrogen dioxide, while the other three were referred over high levels of particulate matter.
Meanwhile, in February, Germany’s highest administrative court in Leipzig ruled that ‘diesel bans’ were legal. In combination with the AAQD’s “short as possible” requirement and the ECJ’s February 2017 ruling, restrictions on diesel engines have become the primary short-term means of complying with the strictures of the AAQD, hence their proliferation in German cities, the implications of which run EU-wide.
The longer-term option, which dovetails with climate change policies, is the decarbonisation of urban transport. And, again like India, Europe has seen a burst of e-bus deployment. E-buses took 10% of new European bus sales in 2017, nearly eight-fold higher than the proportion of EVs in passenger car sales.
Sales jumped from 530 in 2016 to 1,246 in 2017 and there has been a rash of new orders in 2018, which will see e-bus fleets expand over the next few years. For oil demand, the significance of e-buses is the heavy diesel use they displace in comparison with passenger car EVs.
For the moment, e-buses are being deployed only in urban and suburban settings rather than being used for long-distance coach travel, owing to a lack of range and recharging infrastructure. In Europe, the total number of buses is estimated at just over 800,000, but the urban bus fleet is much smaller at just over 70,000.
In India, the urban bus fleet, perhaps surprisingly, is smaller still, although the potential demand is huge. The India office of the UITP (Union Internationale des Transports Publics) estimated at end-2016 that there were only 30,000 buses serving India’s congested city areas. According to the government, India has only a tenth of the buses it needs. China has six buses per 1,000 people, while India has four buses per 10,000 people, according to Transport Minister Nitin Gadkari.
As a result, while e-bus penetration in Europe will add to relatively short-term diesel demand displacement, it will not do so on the scale of China. In India, the real impact will be the degree to which e-buses and CNG curtail future oil demand growth as the country meets the growing mass transport needs of its vast population.
If the choice, as looks likely, is electricity and CNG over diesel, India will achieve a small but significant shift in the future oil intensity of its transport system. It is also likely to need plenty of imported LNG.