5 Takeaways on Global Fuel Trends

Samantha Oller, Senior Editor/Fuels, CSP

world map digital trends

MARCO ISLAND, Fla. -- In 2017, China, India, France, Great Britain and the Netherlands announced plans or the intent to ban gasoline- and diesel-powered vehicles in the next few decades. Norway is already partway there, while Germany is weighing the prospect.

For fuel retailers in the United States, these shifts sound dramatic—but also isolated, considering the geographic distance. But Tammy Klein, principal consultant of Future Fuel Strategies, Marco Island, Fla., would argue that these days, any movement occurring around the globe in fuel and vehicles has ripple effects that can reach the United States.

“One of the big things that has changed in fuels and vehicles over the last 15 to 20 years is it’s not just a Japanese market, a European market, a U.S. market—it really is a global market,” Klein told CSP Fuels. “And these regulations, policies and standards do affect global markets, and do touch upon one another, and do influence one another much more so than they did back in the day.”

Klein spoke with CSP Fuels about her new report for the Fuels Institute, Global Initiatives: Assessing Current and Future Global Initiatives on Fuels and Vehicles. Here are five takeaways from her research on the global shifts that will ripple to U.S. shores in the coming years.

A confluence of factors

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There are a few reasons why 2017 has been a big year for countries announcing their shift away from the internal-combustion engine (ICE), Klein said. They include:

  • Air pollution. While much of the United States enjoys relatively clean air, many global metropolises are dealing with increased air pollution—especially particulate matter from diesel-powered vehicles. “You start getting into parts of Asia, some European cities, Africa, Latin America, and you’re talking three to five times or more of World Health Organization guidelines on particulate matter,” said Klein.
  • Greenhouse gas emissions. Many countries see tackling transportation-related emissions as a powerful way to meet their pledges for the Paris climate agreement.
  • Competition. Many automakers have been ensnared directly or indirectly in the diesel-emissions scandal that erupted at Volkswagen, and so are embracing electrification to differentiate themselves and clean up their industry’s name.

“Some of this is also staying ahead of the game,” said Klein. “If you look at the countries that are looking to phase out the internal combustion engine, one thing the mainstream press doesn’t talk about much is the fact that each of those countries has an auto industry. There is a competitive aspect to this issue as well.”

Judging the intent

chinese electric car

For countries announcing shifts away from fossil-fuel-powered vehicles, Klein said there are differences in how likely they are to meet their goals.

China has stated its intent to eventually allow only the sale of electrified vehicles, although it has not yet announced a specific date. Considering it is the largest automotive market in the world with about 30% of passenger-vehicle sales, such a dramatic shift would be impactful.

“If you look at some of their fundamentals, they have a real shot to not only make the EV market go but to also make good on phasing out the ICE vehicle sometime between 2030 and 2040,” said Klein. “They have the money to do it. They have ability to subsidize [the market] for a time. They have the interest because they’ve never been a really successful auto manufacturer until now.” She noted that EVs are simpler to manufacture; today, China is the No. 1 producer of EVs.

France has similar incentive to make good on its ban of ICE vehicles by 2040 and shift to electrification, especially since its two major automotive manufacturers—Peugot and Renault—have a stake in its success.

India has one of the most ambitious goals of all: Sell only EVs and hybrids by 2030. Here, Klein, who has consulted in India on fuel policy, is skeptical.

“I don’t get it and I don’t see it,” she said. “They don’t have the best track record of meeting their own deadlines. They don’t have the deep pockets that China has.”

But regardless how capable these countries may be to meet their goals, “we need to take the intent behind them seriously,” said Klein.

The U.S. market

san francisco skyline

Could the United States ever implement its own ban of ICE vehicles?

“From a national standpoint, at this particular time and definitely under this particular administration, I don’t think it’s going to happen,” said Klein. However, even though the Trump administration is withdrawing the United States from the Paris climate agreement, and is skeptical about the need to act on climate change, this does not rule out the potential for action at a state or local level.

For example, after hearing that China was considering a ban of fossil-fuel-powered vehicles, the governor of California, Jerry Brown, reportedly directed the head of the California Air Resources Board to consider the potential for a similar statewide move.

Meanwhile, various cities are weighing how to influence vehicle usage. “There’s different ways to approach it—one is parking restrictions, or changing building codes so that there aren’t so many parking spaces,” said Klein. “There are lots of ways to … get rid of the traditional car without calling it a ban.” Cities to watch for such policies include Los Angeles, San Francisco, New York City, Miami, Minneapolis, Denver and Austin, Texas, all of which are progressively active on transportation-related issues.

Fuel economy matters

biofuel ecodrive

Even if the countries meet their target date on banning ICE vehicle sales, they will have to contend with liquid transportation fuels for some time after.

“There’s still going to be a substantial legacy fleet out there of all vehicles sold before the time that are on the road that are conventional vehicles,” said Klein. “If you care about air quality and greenhouse gases, then we have to look at what’s going to fuel this legacy fleet.”

One way to address this is through fuel economy. Consider that just a decade ago, only four governments had mandatory fuel-economy/greenhouse gas emission standards: the United States, China, Japan and South Korea, according to the Fuels Institute study. Today, 10 countries—all among the top 15 vehicle markets in the world—have standards, and more are on the way.

“I see less impact in the immediate to medium term from EVs than I do from fuel economy,” said Klein. “We’re going to see a lot more countries put fuel-economy standards in place for the first time, and more countries put heavy-duty-vehicle standards in place for the first time. That landscape will point to change.”

Biofuels’ message problem

fuel pumps

While so much attention is on the potential of EVs to address greenhouse gases from transportation, the Fuels Institute study found that many countries are attempting to meet much of their emissions targets for the Paris climate agreement through greater use of biofuels.

“A lot of countries either already are or are looking to increase their biofuels blending, or put in place some program or mandate for first the time,” Klein said.

She sees several issues with greater biofuel adoption, however. For one, countries that do blend in biofuels are doing so at levels too low to truly address greenhouse gas emissions. Also, there is tremendous regulatory uncertainty—one only need look to the United States as one example, where the fate of the Renewable Fuel Standard has been in doubt for much of 2017.

This—and a general lack of communication with stakeholders and consumers about the benefits of more biofuels—has stymied faster growth worldwide, Klein said.

“If you’re going to do it, let’s be clear for the industry about what the programs are going to be, and be very clear to consumers why we are doing this so they’re connected to it,” said Klein, noting the confusion about how effective biofuels are at addressing air quality and greenhouse gas issues.

“On the EV side, one can afford to be a bit more skeptical,” said Klein. “On the biofuel side, there is quite a lot of skepticism in some quarters about how effective these programs are.”

To learn more about global initiatives that are shaping the fuel and vehicle markets, click here to download the Fuels Institute’s latest report.