The great European fuel shift?

Europe’s fuel suppliers face the prospect of a seismic shift in market dynamics, which could see consumers in their hundreds of thousands abandon the internal combustion engine altogether. [nate2b / Flickr]

Europe’s electricity industry appears to have come to terms with the reality that wind and solar power will be central to a shift away from fossil fuels, especially coal-fired power generation. Now policy makers in Brussels are swivelling the spotlight towards transport, and the biggest fossil fuel of all: oil.

Changes in policy and public sentiment are already driving a shift away from diesel to petrol cars. Now Europe’s fuel suppliers face the prospect of a seismic shift in market dynamics, one which could see consumers in their hundreds of thousands abandon the internal combustion engine altogether.

That, at least, is what European Commission Vice-President for Energy Union Maroš Šefčovič envisages. He said as much on Tuesday, at the launch of a new report examining the potential impact of a dramatic move away from oil: that he would like to see every third car running on electricity by 2030. “And we are willing to work very closely with our car manufacturers to make this happen,” he added.

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Šefčovič was speaking in Brussels at the launch of a report commissioned by the European Climate Foundation (ECF), which seeks to add to momentum driven by concerns over climate change and air quality with a clear cut economic case for moving away from oil.

The ‘Fuelling Europe’s Future‘ report was the result of a collaboration that involved, among others, the giant Renault-Nissan automotive alliance and BMW.

With 89% of the oil used in Europe imported from abroad, the study argues that replacing imports with domestically produced energy could keep an annual €49 billion circulating in the domestic economy instead of being handed to Russia and unstable Middle Eastern states.

This is based on a model where a quarter of new vehicle sales in 2030 are zero emissions vehicles (ZEVs) – plug-in, battery and fuel-cell electric vehicles – and a further quarter are fully hybridised, that is combining the above technology with a back-up internal combustion engine.

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The European Commission proposed on Wednesday (8 November) a legislative package aimed at reducing CO2 emissions in road transport and encouraging the uptake of electric cars, in an attempt to help Europe’s car industry remain competitive in the face of growing pressure from the US and China.

Economic desolation

A glance at the statistics gives an idea of the scale of the change this scenario would entail.

The EU’s number crunching wing Eurostat reckons petroleum products accounted for two-fifths (39.6%) of final energy consumption in 2015, with transport accounting for the vast majority of that. By contrast, just over one-fifth (21.7%) of energy demand was met by electricity.

Philip Summerton, director of Cambridge Econometrics, which produced the study, warned of the serious potential for collateral damage. “There are going to be some large-scale industrial communities that are really hard hit by this…either refining at the centre, or the manufacturing of traditional internal combustion engine parts,” Summerton told reporters ahead of the launch event. “Without some policy intervention, there is a very real threat of these smaller areas being economically desolated,” he added.

The fuel production and automotive sectors has reacted to this existential threat by stressing recent technological advances in internal combustion engine technology, in addition to the millions of jobs directly or indirectly dependent on them.

Fuels Europe, a trade association representing oil refiners, recently produced a study suggesting there would be no difference in the frequency of NOx and fine particulate matter levels exceeding EU limits in cities even if all sales of new diesel cars were replaced with electric through to 2030.

Fuels Europe Director John Cooper argued that EU firms lead the world in efficient internal combustion engines. “I would argue that the biggest thing Europe could do in contributing to the global climate problem is to provide very efficient cars, and it’s likely to be internal combustion engines for a very long time,” he said.

Cooper also argued that EU policy is skewed in favour of electrification at the expense of other technologies to reduce CO2 output from transport.

“Actually, the best form of storage for energy today is liquids, and they are typically hydrocarbons. Our current feedstock is petroleum, but it doesn’t have to be for the long term,” he argued. Technologies to produce advanced biofuels, fuels from green hydrogen and, eventually, electricity, to liquids already exist, he said.

“Our observation at the moment is that electrification is benefiting from about six levels of policy support to make it work, and lower-carbon liquids currently get one level of support – we think that needs something of a rethink,” Cooper said.

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EU policy on vehicle emissions is biased towards electrification, the trade association FuelsEurope argued on Monday (4 December), as it presented a study suggesting that a gradual switch from diesel to zero-emissions cars would have almost no impact on urban air quality by 2030.

This suggestion was met with a lukewarm at-best reception from the panel.

Jean-Philippe Hermine, Groupe Renault’s vice-president for strategic environmental planning, supported ongoing research into other solutions, but cautioned that it would be unwise to postpone the use of existing electric car technology in the hope of a breakthrough in other areas.

“Let’s go,” Hermine said. “We are dealing with other reasons now: air quality and climate change.”

Willem Todts, director of Transport & Environment, dismissed the idea of liquid fuels from electricity out of hand as an “incredibly inefficient” way of powering cars.

Citing a recent report commissioned by the campaign group, he said you would need the equivalent of a third of Europe’s current total power generation just to produce enough e-fuel to run just half of its truck fleet.

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Demand remains strong

What the winds of change mean for Europe’s oil refiners remains to be seen, but it is clear that even if Šefčovič’s vision for electric vehicle adoption through the next decade comes to pass – and the ECF’s report acknowledges it is contingent on massive investment in charging infrastructure – 70% of cars would still be powered by internal combustion engines in 2030.

And demand for fuel has been rising steadily. With rather less fanfare than that given to the ‘Fuelling Europe’s Future’, the European Environment Agency published in late January an annual report required under the 1998 Fuel Quality Directive, giving a detailed overview of fuel composition and consumption patterns in 2016. The headline figure was a 2.7% increase in fuel sales compared to 2015.

Moreover, diesel sales were up 3.8% year-on-year. In fact, the 257 billion litres of diesel (of which roughly a tenth is imported due to a lack of domestic refining capacity, mainly from Russia and North America) accounted for 71.8% of the fuel sold in 2016. Meanwhile, sales of petrol – of which European refiners as a whole are net exporters – held almost steady at just under 101 billion litres.

This shift towards petrol has led carmakers to warn about the danger posed by the declining popularity of diesel cars in Europe’s efforts to lower greenhouse gas emissions.

Diesel to petrol shift poses ‘serious challenge’ to CO2 reduction

Falling demand for diesel-powered cars is having a “brutal” impact on carmakers while the EU’s CO2 reduction policy is jeopardising a fragile recovery in sales, the president of the European Automobile Manufacturers’ Association (ACEA) told reporters on Wednesday (31 January).

Another important date on the Brussels political calendar for fuel producers and vehicle manufacturers is, therefore, the publication in May of the European Commission’s proposal on CO2 emissions standards for heavy duty vehicles which – unlike the recent proposal for cars and vans currently being discussed by EU lawmakers – will be the first for that segment of the transport sector.

Also on the horizon are a drastic tightening of limits of the permitted level sulphur in residual fuel oil for shipping from January 2020 which, as well as being potentially costly for shippers, will also change the relative demand for different oil products.

Speaking to EURACTIV before the publication of the ECF report, Cooper said the refining sector was flexible through necessity. “Right now we’re likely to be headed towards some possible reduction in gasoline exports, and some possible reduction in diesel imports,” he said.

It is also expected there will be a reduction in the demand for heavy fuels for shipping. “But that is likely to turn into an increased demand for distillate type fuels,” Cooper said.

“The markets will respond to what the citizens and businesses of Europe need.”

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