Countries 20 years ago were just beginning to consider the impact of transport, in particular fuels and vehicles, on their respective environments, especially air pollution and congestion mitigation. The U.S., Canada, EU and Japan had already introduced fuel quality improvements such as the reduction of sulfur in gasoline and diesel and stringent emission standards for light-duty vehicles (LDVs). Very few countries had in place fuel economy standards, and there were no GHG standards. In fact, there were no specific climate change-related transport policies really in place.
Moreover, there were few countries that had set heavy-duty vehicle (HDV) emission standards and none that had set them for HDV fuel economy. Japan was the first country to set HDV fuel economy standards in 2005. Many other countries were just beginning to phase out leaded gasoline and that was the extent of their involvement in transport-related environment policymaking. Electric vehicles (EVs) were a pipe dream.
There was some ethanol blending in the U.S. and especially Brazil, while biodiesel was beginning to be blended on a larger scale in the EU. There was very little biofuels blending elsewhere in the world and there were no advanced biofuels — another pipe dream. Car bans and restrictions on a city and even nationwide basis would have been unthinkable.
But now, here we are in a more complex world with more EVs (and different types of them), more biofuels, more different kinds of fuels and much more attention on fuels regulation in general. Figure 1 shows a “rough” evolution or progression of global fuels regulation beginning in the 1980s through today.
Figure 1: “Rough” Evolution of Global Fuels Regulation, 1980s-2010s
So much has changed. Many more countries are setting both LDV and HDV emission and fuel economy/GHG standards and improving fuel quality, primarily by reducing sulfur in diesel. Concurrent with setting tougher fuel economy standards, some countries are promoting EVs with fiscal incentives and/or with actual mandates, similar to California’s Zero Emission Vehicle (ZEV) program. Ethanol blending, while still dominant in the U.S. and Brazil, has spread to other countries while biodiesel blending has grown in the EU, U.S. and parts of Asia.
A number of countries have set renewable transport
obligations without specifying a particular biofuels type or mandate. Others have now set requirements specifically
for advanced biofuels, now that some of these companies are beginning to scale
up and commercialize. Several have set or are setting low carbon fuel programs.
Finally, for the first time, cities and even countries are calling for a ban or
limitation on the internal combustion engine vehicle (ICEV) in favor of the ZEV,
public transport, walking, cycling and ride sharing.
Looking collectively at the countries setting the foregoing policies, I would like to highlight the following trends that I’m seeing emerge:
Fuel Quality ― Gasoline and Diesel Sulfur Reduction: Over 35 countries at or below 10 ppm representing
70% of global gasoline consumption while over 40 countries are now at or below
10 ppm representing 63% of total global diesel consumption. Countries will
continue to improve fuel quality with the focus on sulfur reduction, though
some have focused on other parameters as well. This is a key focus area for
many African countries which have very poor fuel quality with diesel sulfur
levels above 5,000 ppm and where air pollution, notably PM, is a serious
Vehicle Emission Standards: 43 countries now have vehicle emission standards
for LDVs above Euro III covering about 80% of the vehicle market.
LDV Fuel Economy/GHG Standards: Only four governments 10 years ago had introduced
mandatory GHG emission and/or fuel economy standards: China, Japan, South
Korea, and the U.S. Today these countries plus Brazil, Canada, the EU, India,
Mexico, Saudi Arabia and South Korea, and the U.S. have established such
standards. All are among the top 15 vehicle markets worldwide representing
nearly 80% of new LDVs sold globally. Another 43 countries plan to set fuel
economy standards, many in Africa. Future Fuel Outlook members
can read more about LDV fuel economy regulation globally
HDV Fuel Economy/GHG Standards: The U.S., Canada and China have implemented
multi-phase programs that grow in stringency over time. New standards are being
implemented in India for the first time
and take a different approach than other countries that is reflective of
the HDV fleet make up in the country. Meantime, the EU institutions are in the
process of setting HDV fuel economy/GHG standards for the first time and they
could be far more reaching than what has been implemented in other countries to
date. When the EU implements its standards, 57% of the HDV market will be
covered. Members can read more about HDV fuel economy regulation globally
Biofuels Mandates Generally: 34 countries have set specific mandates requiring
biofuels blending (either ethanol, biodiesel or both); 42 countries have set
renewable transport (which could include biofuels as well as electricity). Most
of these countries are in the EU with targets that take effect in 2020.
Mid- and Higher-Level Biofuels Blends: Brazil, Paraguay and Thailand, which has had
higher level ethanol blends (E20-25+) in the market for years. This month
Finnish government announced a 30% biofuels target to take effect in 2030. Norway
has planned to move to E20. The U.S. EPA is working on a regulation that will
be finalized this year to allow E15 blending. While implementing E10 has been a
stretch, India nevertheless aspires to E20. Several African countries have
contemplated higher ethanol blends. Future Fuel Outlook members can read more about these programs here.
Advanced Biofuels: The EU’s REDII policy follows the U.S. Renewable Fuels Standard
(RFS2) program in setting a specific target for advanced biofuels, but caps 1G
biofuels at 7%, a global first. Several
member states are beginning to transpose those targets into legislation. Members
can read more about REDII here.
Low Carbon Fuel-Type Programs: California, and now Brazil and Canada, have or are
implementing such programs. The EU recently revised its Renewable Energy
Directive (REDII) program. California and the EU recently extended their
respective programs to 2030. Members can read more about these programs here.
The REDII contemplates low carbon synthetic fuels, such as those produced by
LanzaTech. The California LCFS has encouraged new, low carbon intensity (CI)
fuels such as renewable natural gas (RNG or biomethane) and renewable diesel
(HVO), neither of which were commercialized 20 years ago. In fact, RNG is one
of the fastest-growing low carbon fuels in California. Electrofuels (also known
as e-fuels or Power to X fuels) are being investigated, particularly in the EU,
as a diesel substitute. Other synthetic fuels can be produced from gas flaring,
for example. There are other types of advanced biofuels in various stages of
These New Fuels Will Proliferate: I believe this will be the one trend that will continue and that we’ll see different types of fuels across a range of different transport modes driven by climate and air pollution concerns. In fact, the ultimate fuel mix will vary by country. For example, and just to provide an illustration to contemplate further (this is not a projection!!), we could see fuel mixes in the LDV and HDV fleet as shown in Figure 2 in the next 15-20 years. I did not include other fuels, such as natural gas, or alternative fuels such as methanol, but those fuels will no doubt be part of the growing fuel matrix complexity as well. This creates both opportunities and challenges for the affected industries. In any event, the bottom line is that the fleet will not fully electrify by 2030-2035 (and even afterward), but the public policy pressure to remove fossil fuels will continue. That will continue to drive the search for alternatives.
Other Transport Modes: We are beginning to see fuels regulation and/or new fuels not just in road transport but in aviation and shipping as well. Alternative fuels are part of the International Civil Aviation Organization’s (ICAO’s) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The number of offtake agreements for alternative jet fuel are increasing. I count at least 10 such agreements to date, though there are probably more. Moreover, the industry’s attention this year is on the International Maritime Organization’s (IMO’s) sulfur regulation, which requires 0.5% m/m to take effect next year. While that has parts of industry in a tizzy and created a consulting cottage industry, the real ball game in my view is when IMO starts its decarbonization effort under its Initial Strategy, released last year. Members can read more about the IMO’s Initial Strategy here.
The Rise of ZEVs: Twenty-one countries have specific policies in place currently to support the growth of the ZEV market including actual mandates and targets (e.g. China, South Korea, California and nine other U.S. states), financial incentives and/or fleet procurement requirements. This is the biggest change in the last 18 months. In addition, 10 countries have pledged under the EV30@30 Campaign organized by the Clean Energy Ministerial to pursue the collective objective of 30% EV sales by 2030. Members can read more about ZEV policies and market issues here.
For the first time, cities and even countries are calling for a ban or
limitation on the ICEV in favor of the EV, public transport and ride sharing.
That trend has continued since I first began tracking it in 2016. To date 12
countries have announced a ban on the sale of ICEVs and most of those policies
take effect in 2030. Curiously, China is the only country without a specific
ban date. Some of these policies are unclear on whether they apply to hybrid
vehicles. In addition, another 19 cities have introduced bans or restrictions
on ICEVs. Finally, 27 cities have signed C40’s “Fossil Free Declaration“. Members
can read more about ICEV bans here.
Tammy Klein is a consultant and strategic advisor
providing market and policy intelligence and analysis on transportation fuels
to the auto and oil industries, governments, and NGOs. She writes and advises
on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels
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