Fuel efficiency norms for vehicles

The domestic sales of passenger vehicles has nearly doubled from 2004-05 to 2010-11, from 7.8 million to almost 15.5 million, as per the statistics of the Society of Indian Automobile Manufacturers. The fastest growing among various automobiles is passenger cars, which has risen from just over one million in 2004-05 to over 2.5 million in 2010-11. It is estimated that by 2020, the number of passenger cars manufactured and sold in India would rise to 5.5 million. This would inevitably enhance demand for oil.

The domestic production capacity of crude oil in India is approximately 34 million metric tonnes, as against consumption of 140 million metric tonnes. India imports approximately 80 per cent of its petroleum requirements, a significant part of which is used for road transport. In the recent past, the quantity of oil imported, its cost and the share of transport fuels (gasoline, diesel and aviation turbine fuel or ATF) in the petroleum basket, are all steadily increasing.

FUEL ECONOMY NORMS

In a scenario where nations are increasingly constrained by oil supply shocks as well as its price volatility, the need to lower India's dependence on petroleum is compelling. This is because as per the estimates of the Planning Commission, oil consumption is likely to grow from 133 million metric tonnes in 2006 to 250 million metric tonnes by 2020.

The fact that the import reliance will continue implies that such unconstrained demand growth will have an adverse effect on India's energy security, as well as on the affordability of the fuel. While there are efforts by the government to augment sources of oil, there is a need to usher in policies and measures that could moderate the rising demand. Fuel efficiency standards for vehicles is one of the most important policy tools that could achieve the goals of moderating the rising consumption of fuel, providing monetary savings for vehicle owners, as well as reducing Green House Gas (GHG) emissions from the sector.

Fuel efficiency standards are in vogue in most of the developed countries and have been introduced in China recently. Most of these standards are in the form of mileage of the vehicles, usually expressed in km per litre, making it easy to understand for the consumers. In EU, these standards are expressed in terms of carbon dioxide emissions, the more efficient vehicles having lower emissions.

It is estimated that approximately 20-25 per cent of savings in fuel is possible by implementing these standards for new vehicles. In 2030, efficient cars could reduce demand for petroleum products by more than 50 million metric tonnes, which at the current price, would result in savings of precious foreign exchange of $5 billion annually. The recent report of the Expert Committee on Low Carbon Growth Strategy estimates that annual increase in fuel economy norms by 2-3 per cent could also result in GHG emission mitigation of 24 million tonnes of carbon dioxide every year.

The issue of introducing fuel economy norms for vehicles has been engaging the attention of policymakers in India for some time now. It has been mired in the complexity of the issue, ranging from a plethora of vehicle categories and use of different varieties of fuel (diesel, gasoline, CNG). To elucidate this point further, fuel efficiency of a small vehicle will always be better with that of an SUV, due to the difference in weight of the two. Moreover, economies from a diesel-driven vehicle will be better than its petrol counterpart in the any vehicle class. These make one simple standard across the fleet of vehicles difficult, if not impossible.

Evidently, a standard-setting exercise is vastly different from that of household electrical equipment, given the high level of standardisation of output and use of electricity to run the equipment. The fuel efficiency norms for vehicles, therefore, need to respond to the diversity in sizes and types of vehicles, as well as their fuel sources.

The norms must balance the public policy goals of reducing the overall consumption of fuel, with the market demand for different vehicles. It must also stimulate innovations in the industry by creating demand for efficient vehicles, thereby promoting hybrid vehicles. It must also note that different standards for different vehicle classes could lead to avoidable uncertainty for both the industry as well as the consumers.

STAR LABELLING

Bureau of Energy Efficiency (BEE) has recently uploaded a consultation document on fuel efficiency of vehicles, which seeks to integrate all the complexities in an easy-to-comprehend standard for all classes of passenger cars. The standard takes into consideration the average fuel efficiencies of the existing stock of cars, the mileage of the most efficient car in each weight class, and normalises it by the weight. This policy innovation ensures that the standards are not unduly skewed, and are mindful of the patterns in the market.

In order that these standards are easily understood by the consumers, which is an important element in driving demand for efficiency, BEE proposes a label that looks very similar to the ones it has successfully used for appliances like refrigerators and air conditioners. The label denotes the efficiency level of the car by following the STAR approach. The label that is proposed is below:

The label introduces another innovative approach by placing the efficiency slider just below the STARS. While the STARS on the top denote the normalised efficiency of the car expressed in terms of km per litre, the slider indicates the position of the car vis-à-vis the other vehicles in the class. Thus, it provides the consumer, for instance, buying a mid-sized car, information on the fuel efficiency of the model that he/she is considering, in addition to making them aware of the other vehicles in the mid-sized segment and their levels of fuel efficiency.

The mileage that will be indicated on the label will be normalised by using standard conversion factors between various fuels. Further, the standards will be made more stringent with a period of time, and in a few years, could be at par with the best standards globally. Also, initially the programme is intended to cover passenger vehicles. In the next phases, commercial vehicles and transport vehicles could also be included.

If the success of the labelling programme in household appliances is any yardstick, fuel efficiency standards and labels are likely to be well received. This is because the Indian consumer is extremely conscious of the mileage and operating costs of the vehicle. This is due to the fact that affordability of fuel in India, which is a measure of the cost of fuel as a proportion of per capita income, is approximately 15-20 times more than in the US or EU.

Energy efficiency as a policy tool came to prominence in the aftermath of the first oil shock in 1973. The developed countries started integrating energy efficiency in policymaking in all sectors after the second oil shock in 1979. The northward pattern in Indian oil prices, therefore, makes it expedient for the Government to usher in fuel efficiency standards and labels.

(The author is Programme Officer, OzoneAction Programme, United Nations Environment Programme, Bangkok. The views are personal.)

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