February 14, 2017

Is Europe falling out of Love with Diesel Fuel?

POV, 2017, Diesel Fuel, Europe

by Elizabeth Kershaw, Client Success Manager for Europe

Emissions scandals, diesel car bans in Europe’s capitals, proposals for changes to tax regimes – what is happening to the once revered diesel fuel in Europe?

Answering that question means looking back to the beginning of the love affair, and why Europe became so enamoured with diesel fuel in the first place.

In the mid-1990s, diesel vehicles made up only 10% of the overall market. Championed as a more environmentally friendly fuel because it produced less carbon monoxide and carbon dioxide per km than petrol, diesel quickly captured the attention of European governments looking to meet their Kyoto CO2 commitments. The governments’ infatuation with diesel ushered in 20 years of favourable tax incentives on both diesel vehicles and the fuel itself, leading to an explosion of diesel vehicles across the continent. Today, diesel vehicles make up over 50% of the overall market, with some countries even more heavily weighted, such as France, where 80% of passenger vehicles are now diesel.

SO WHY THE SUDDEN LOSS OF AFFECTION FOR DIESEL FUEL?

While diesel undoubtedly had an impact on carbon dioxide emissions, other concerns have begun to surface. The effect of nitrogen oxide and particulates emitted from the exhaust of diesel vehicles are raising serious concerns about air pollution and the impact on public health. Diesel vehicles are increasingly being viewed as a problem rather than a solution – an ironic twist for a fuel once hailed as the knight in shining armour to take on climate change.

But the air pollution issues attributed to diesel fuel are being taken seriously. The recent decision in Oslo, Norway to temporarily ban all diesel vehicles from its roads to alleviate air quality issues is a clear sign of how public authorities are beginning to act decisively to penalise diesel vehicles. Other major world cities are also taking action. Paris, Madrid, Athens and Mexico City have pledged to ban diesel vehicles altogether by 2025. Paris and other French cities are going so far as to trial the use of vignettes to categorise a vehicle’s degree of pollution in order to apply selective emission bans. No diesel vehicles are included in the top two cleanest bands. Across Europe, the tax breaks and incentives that once favoured diesel are now being reviewed and punitive tax measures for diesel are being mooted.

Where does this leave diesel fuel?

It is clear that diesel is having a difficult moment. Consumer faith in diesel’s green credentials were dealt an additional blow by the emissions scandal in 2015, beginning with Volkswagen and spreading to other manufacturers. European governments that initially created such a favourable environment for the development of this fuel are now clearly rethinking their stance. But changes will probably not come without some resistance. With one in every two passenger vehicles in Europe being diesel-much higher in some countries like France and Spain-changes in taxation and punitive actions on diesel, such as bans, will need to be carefully planned and managed. These actions are likely to affect consumer choices, but European refiners will feel the impact as well. Having already invested heavily to increase their production capacity of diesel to meet the increasing demand, European refiners will undoubtedly try to resist any wholesale switch away from diesel fuel.

So while diesel vehicles may not be disappearing from our roads just yet, we may well see a rebalancing towards more gasoline vehicles, as well as a growing shift towards alternative fuels, such as electricity and hydrogen.

What are your thoughts on the future of diesel fuel in Europe?

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