Developing Fuel Quality Roadmaps in Asia Presented by Bert Fabian, Transport Specialist Kong Ha, Chairperson Cornie Huizenga, Head of Secretariat CAI-Asia Automobile Fuel Quality Workshop 22 August 2006 Manila, Philippines Sustainable Urban Mobility in Asia A CAI-Asia Program

Background This is the result of CAI-Asia and the Oil Industries’ Dialogue for Cleaner Fuels in Asia The dialogue was launched in a meeting in Singapore on 21 July 2003, which included representatives from - Bangchak Petroleum Public Company, BP, ChevronTexaco, ExxonMobil, Indian Oil Corporation, Pakistan State Oil, Petron Corporation, PTT Public Company Ltd, Shell, Showa Shell Sekiyu K. K., Singapore Petroleum Company, Thai Oil Company Limited Adoption of Singapore Statement kicked of the Dialogue http://www.cleanairnet.org/caiasia/1412/articles-58710_singapore.pdf, and was followed by the formulation of a detailed ToR for a document on Roadmaps for cleaner fuels and vehicles in Asia The draft document was presented and discussed in a regional workshop in ADB on May 2006 The full draft document and proceedings of this workshop is available online at http://www.cleanairnet.org/caiasia/1412/article-70655.html

Fuel Quality Roadmaps in Asia Rationale: Support the development of roadmaps for Cleaner Fuels and Vehicles in Asia

Integrated Approach Fuels and vehicles are part of an overall, wider, air quality context AQM efforts will usually also include activities aimed at reducing emissions from stationary sources and area sources Emission reduction from mobile sources will also have to include I/M and transport demand oriented measures The absence of detailed emission inventories and source apportionment studies should not prevent Asian countries from developing cleaner fuel roadmaps Fuels and vehicles are an integrated system

Build on existing plans and strategies Certain individual countries have already decided on their future fuel specifications: Thailand, Euro 4 equivalent fuels by 2010 Korea, Singapore, Taipei,China and Hong Kong already have Euro 4 Fuels or will have them shortly ASEAN- Ministry of Economy, Trade and Industry (Japan) Economic and Industrial Cooperation Committee (AMEICC) Working Group on Cleaner Fuels has called for non binding commitment for Euro 2 in 2006 and Euro 4 in 2010-2012 Partnership for Cleaner Fuels and Vehicles (PCFV) has adopted an objective of 50 ppm for sulfur levels in gasoline and diesel by 2010 for Asian countries Individual refiners have started the production of cleaner fuels or are planning for it, such as Reliance in India and Petron in the Philippines

Fuel Specifications (1) Fuel quality does not only influence emissions but also drivability, engine wear and fuel efficiency Supportive research for fuel specifications has been well established and generally there is no need for Asian countries to replicate such research Asian countries should implement all fuel parameters as defined in fuel specifications linked to European emission specifications Asian countries with warm climate can apply variation in RVP In some cases the adoption of a comprehensive set of fuel properties will delay the introduction of cleaner fuels substantially. In such cases the option to reduce sulfur first may be considered

Fuel Specifications (2) Leapfrogging from Euro 2 to Euro 4 emission standards makes good technical and financial sense Some Asian countries where air pollution from transport is severe should consider Euro 5 standards Asian countries with large domestic refining capacity can consider applying US flexibility principle. Importing countries should not do so. Fuel quality monitoring is essential, especially where different fuel standards exist in the same country

Timing of Introduction of Cleaner Fuels Technology for fuel improvement is well established and can be applied in Asia on a no-risk basis Euro 4 vehicle technology well established in Asia Maximum lead time to move to Euro 4 or stricter is 4-6 years but in many cases can be shorter Import of Euro 4 fuels can be considered pending the construction or modification of refineries to shorten the lead time for introduction of cleaner standards Refinery expansion in Asia should be based on Euro 4 or stricter standards

Cleaner Fuels and In-use vehicles Main driver for cleaner fuels are new vehicles, there is an impact on in-use vehicles as well but more research required on the impact of cleaner fuels on in-use vehicles Cleaner fuels, especially with less than 50 ppm sulfur allow for retrofit of gross polluting diesel vehicles: Technology is established now and pilot projects have demonstrated impact Current cost levels justify focus on retrofit of high use fleet vehicles Phasing-out remains to be the best alternative approach when dealing with gross polluting vehicles

Introduction Scenarios Uniform introduction across country: Advantages in terms of AQ impact provided specifications are strict enough High short term costs to refining sector Avoids misfueling Flexibility provision for special markets (off-road and stationary) Prioritized introduction in selected cities: Can be considered for large countries, e.g. India and China Requires availability segregated fuel marketing and distribution system Price differential whereby cleaner fuel should be cheaper Fuel quality monitoring important to ensure misfueling Harmonized standards across Asia: Security of availability of cleaner fuels Reduction in complexity for the vehicle industry

Facilitation of Introduction of Cleaner Fuels Fuel Quality regulations, combined with emission standards should be the backbone of any policy or strategy on cleaner fuels Government policy to accelerate production or uptake of cleaner fuels: Public outreach and consensus building Combination of tax and pricing policies Temporary incentives can be used to speed up acceleration of market uptake of cleaner fuels Cost for producing cleaner fuels needs to be passed on to consumer: Controlled pricing, still prevalent in some Asian markets precludes the opportunity to pass on costs Increasing Asian markets are being deregulated opening up the possibility to pass on costs

Role of the International Development Community Many countries in Asia have a limited administrative and monitoring capacity, this has hampered the introduction and implementation of cleaner fuel standards. Development organizations can and should consider assistance for: Further awareness raising on importance of cleaner fuels as part of an integrated AQM strategy Capacity building for regulators to formulate, implement and monitor fuel quality improvement strategies and legislation Financing of refinery upgrading or new construction through loans or partial guarantees

Context for the Philippines The government must quickly move to institutionalize Euro 2 standards for fuels and vehicles A clear roadmap needs to be put in place for the implementation of stricter new and in-use vehicle emissions standards and higher quality fuel Strengthen efforts to coordinate activities of concerned government agencies and consultations with other stakeholders