T h e C h i n a S u s t a i n a b l e E n e r g y P r o g r a m 中 国 可 持 续 能 源 项 目 Advancing Cleaner Fuels in China Dongquan HE Ph.D. The Energy Foundation Manila, May

Contents 1. 1.Background 2. 2.Status & challenges in fuel quality control in China 3. 3.Ways for advancing cleaner fuels in China 4. 4.Conclusion

T h e C h i n a S u s t a i n a b l e E n e r g y P r o g r a m 中 国 可 持 续 能 源 项 目 1. Background

14.7% 24% 36% 47% 6 years 5 years 2 years 1 year Briskly growth of vehicle population Growth Speed up More private cars

Severe Air pollution from transport （以 NO x 计） NOx/SO 2 has increased which will cause urban photochemical pollution GZ BJ SZ NJ Vehicle emissions are the main sources

NOx concentration increase Beijing Guangzhou Shanghai Wuhan State Standard of Grade Ⅲ State Standard of Grade Ⅱ

Vehicle emission control in China Emission standards for new vehiclesEmission standards for new vehicles In used vehicle emission control – I/MIn used vehicle emission control – I/M Fuel standardsFuel standards Fuel economyFuel economy Fuel qualityFuel quality Alternative fuelsAlternative fuels Transportation system improvementTransportation system improvement

Year China Euro 1 Euro 2 Euro 3 Euro 4 Beijing Euro 1 Euro 2 Euro 3 Euro 4 Euro. Euro 1 Euro 2 Euro 3 Euro 4 Euro 5 The next stages of new vehicle emissions standards, Euro 3 and Euro 4 Lags behind Euro standards New vehicle emission control standards

T h e C h i n a S u s t a i n a b l e E n e r g y P r o g r a m 中 国 可 持 续 能 源 项 目 2. Status & challenges in fuel quality control in China

Current fuel quality regulations in China The following standards have been adopted nationally:The following standards have been adopted nationally:   Beijing has adopted local low-sulfur fuel standardsBeijing has adopted local low-sulfur fuel standards Focus shifted from lead to sulfur contentsFocus shifted from lead to sulfur contents

Zeolite or refractory oxide support SO 3 SO 4 H 2 SO 4 O2O2O2O2 Sulfate forms Sulfur inhibition Sulfate Poisoning SO 2 Sulfur Effects

氧化催化 Oxidation Catalyst 颗粒捕集器 PM Filter

Fuel standards ： China vs. Europe Gasoline phase 2 Gasoline phase 2 GB Diesel 指标 单位 3 号修改单 Euro-I E - II Euro-III Euro-IV 硫 mg/kg

Many countries have low-sulfur fuel plans for vehicles Many countries have a 50ppm limit ， though some have a 10ppm limit Worldwide Trends for Low-Sulfur Fuels

Current sulfur contents in Chinese fuels Gasoline Diesel

Challenges to improve fuel quality in China Large initial investment by industry and the government High demand versus high quality High monopoly industry

T h e C h i n a S u s t a i n a b l e E n e r g y P r o g r a m 中 国 可 持 续 能 源 项 目 3. Ways for advancing cleaner fuels in China

Possible roadmap for advancing cleaner fuels in China Option 1: Adopt the same level fuel quality standard the same time with the adoption of vehicle emission control standards Option 2: Adopt the same fuel level fuel quality standards 2-3 years leg behind the adoption of vehicle emission control standards Option 3: Gradually phase in cleaner fuels by city and regions

Policy instruments  Mandatory fuel quality standards  Specific requirement for sulfur  Fiscal policies and instruments Fuel pricing system reform Fuel consumption tax reform   Currently 0.25Y/LGas and 0.1Y/LDisel Differential fuel tax rate

Fuel Pricing System Reform Government (NDRC) versus monopoly industry Concern with the economic growth Local (Beijing) activities May gradually allow the fluctuant of the price

Fuel Consumption Tax Reform   Separate vehicle used fuel from other usage – especially for diesel   Differential the tax rate upon the fuel quality   Specific requirement for sulfur Current fuel consumption tax rate in China (RMB/L)

Establish Fuel Tax for Cleaner Fuel   Is considered by government for environmental and energy-saving purpose   Levy against the costumer   Easy to differential the rate thus send the signals to the market for promoting cleaner fuels

European Tax Incentives Schemes To Encourage Low-Sulfur Fuels

Conclusion   Fuel quality, especially sulfur content is critical for vehicle emission control in China   Progress is going, but not enough   Fiscal instruments should work together with mandatory standards   Fiscal instruments are useful for promoteing cleaner fuels than what required by regulation

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