Japan to tighten rules on tax incentives given to fuel-efficient cars

Japan to tighten rules on tax incentives given to fuel-efficient cars

The Japanese government announced plans to tighten the tax breaks for fuel-efficient vehicles.

Currently, 90% of new cars sold in Japan qualify for “eco-car tax incentives.” The proposal is to tighten the rules by next spring and to reduce the coverage to only 70% of new cars. Vehicles would have to operate at roughly 20 kilometre (km) per litre of fuel at a minimum to qualify for the tax incentive, which is equivalent to the average fuel efficiency standards to be instituted in Japan in fiscal year 2020.

The provisions will be included in the tax reform package being compiled by the Liberal Democratic Party’s tax-research commission and will apply to the motor vehicle tonnage tax levied during periodic, legally mandated inspections.

The tax incentive will be extended, however, for two years beyond the original expiration date of April 2017, the Nikkei reported.

Starting May 2017, the tax incentive will apply to vehicles that exceed by 10% or more the fuel efficiency standards set in fiscal 2015, which calls for an average of 17 km per litre. That will stay in effect for a year and include about 80% of new cars. The 2015 fuel economy standards will no longer be considered for tax breaks starting in May 2018.

The percentage of cars receiving full tax exemptions is also expected to decline in stages, from 40% to around 30%.

The requirements will also tighten on reductions for the annual vehicle tax levied on green cars, with the share of qualifying new vehicles dropping to 50%.

The aim is to unify standards applying to regular vehicles and mini-cars and to only give tax incentives to vehicles that are at least 10% more fuel-efficient than fiscal year 2020 standards.

Four world capitals are banning diesel vehicles from 2025

The mayors of four major cities – Mexico City, Madrid, Paris and Athens – have pledged to ban Diesel vehicles from their streets by 2025.

The mayors signed an "Air Quality Declaration" at the C40 Mayors Summit, which is being held in Mexico City. They also stated they would promote walking and cycling as well as encourage the use of alternative vehicles.

Air pollution is a major problem around the world, with the World Health Organization (WHO) stating that around 3 million deaths every year are linked to people's exposure to outdoor air pollution. In 2012 the International Agency for Research on Cancer – part of the WHO – classified Diesel engine exhaust as "carcinogenic to humans."

"Mayors have already stood up to say that the climate change is one of the greatest challenges we face," Anne Hidalgo, the mayor of Paris, said in a news release.

"Today, we also stand up to say we no longer tolerate air pollution and the health problems and deaths it causes – particularly for our most vulnerable citizens," Hidalgo, who is also the new chair of the C40 Cities Climate Leadership Group, added.

"Big problems like air pollution require bold action, and we call on car and bus manufacturers to join us."

The mayor of Athens, Giorgos Kaminis, did not hold back in stating his ambition for the city. "Our goal is to ultimately remove all cars from the centre of Athens in the years to come," he said.

In other environment news, on Thursday the chief executive of Royal Dutch Shell told Reuters that the company was planning to connect part of its executive bonuses to greenhouse gas emissions.

"We have linked executive remuneration in the past to energy intensity and next year we are going to make it even more specific to the CO2 footprint metrics associated with these energy efficiencies," Ben van Beurden told Reuters.

Other cities in Europe are evaluating the situation and are likely to follow suit. On 21-Feb 2017 Stuttgart, the capital and largest city of Baden-Wuerttemberg in Germany, announced that Diesel cars not meeting the latest emission standards will be banned from as early as 2018.

EU: Germany's Stuttgart set to ban some Diesel cars from city centre

Stuttgart, home to Germany's Mercedes-Benz and Porsche , said on Tuesday it will ban from next year Diesel cars which do not meet the latest emissions standards from entering the city on days when pollution is heavy.

Only around 10 percent of Diesel cars in use on German roads at the start of 2016 conformed with the "Euro 6" standard, which is the latest EU anti-pollution rule.

Engines which adhere to the standard produce fewer nitrogen oxide fine particle emissions, which cause respiratory disease.

Diesel emissions are in particular focus following the Volkswagen scandal involving cheating mechanisms in some of its cars which made them appear less polluting than they actually were during routine testing.

Particulates often exceed thresholds set by the European Union in at least 90 German towns, including Stuttgart, which is particularly affected because it is in a valley.

Germany has already been sued by the EU for exceeding those thresholds for more than a maximum of 35 days per year.

Exceptions to the ban in Stuttgart, which is the capital of the state of Baden-Wuerttemberg and governed by a coalition of the environmental Greens and Chancellor Angela Merkel's conservatives, could be granted for goods vehicles.

The regional government has also been sued by the German environmental organization Deutsche Umwelthilfe (DUH) for failing to do enough to tackle pollution.

As well as Diesel exhaust emissions, oil-fired heaters, chimneys and tire abrasion also contribute to the particulates problem, which is exacerbated by certain weather.

The World Health Organization (WHO) said last year that outdoor air pollution in both cities and rural areas was estimated to cause 3 million premature deaths worldwide per year in 2012, due to exposure to small particulate matter which cause cardiovascular and respiratory disease and cancers.

Institute for Health Metrics and Evaluation (IHME) and the Health Effects Institute (HEI): State of Global Air

While there have been improvements in some parts of the world, particularly in the U.S. and EU, the same is not the case in the rest of the world. HEI and IHME estimate that an estimated 92% of people live in areas where PM concentrations exceed the World Health Organization’s Air Quality Guidelines, and that trend is expected to continue and even worsen. Transport is a big part of the problem.

This week IHME and HEI released the State of Global Air 2017 with a report and an interactive database at the link above where you can search for and compare ozone, PM and health effects data by country. The figure below shows how ozone and PM stack up against other global risk factors for deaths in 2015. Ambient PM ranked number five, while ozone ranked 33. PM was connected to cardiovascular diseases, cancer, and lower and chronic respiratory diseases.

The organizations note that most of the world’s population lives in areas where air quality is unhealthy, even in the West. PM concentrations exceed the World Health Organization’s Air Quality Guideline of 10 µg/m3. Global population-weighted PM2.5 concentrations increased by 11.2% from 1990 (39.7 µg/m3) to 2015 (44.2 µg/m3). Since 2010, the increase was somewhat more rapid. The highest concentrations of population-weighted average PM2.5 in 2015 were in North Africa and the Middle East, due mainly to high levels of windblown mineral dust.

At the country level, population-weighted average concentrations in 2015 were highest in Qatar (107 μg/m3), Saudi Arabia (106 μg/m3), and Egypt (105 μg/m3). The next highest concentrations appear in South Asia (especially northern India and Bangladesh) and Southeast Asia, eastern China, and Central and Western sub-Saharan Africa, due to combustion emissions from multiple sources, including household solid fuel use, coal-fired power plants, agricultural and other open burning, and industrial and transportation-related sources.

Populous countries with the lowest population-weighted concentrations of PM2.5 include, in decreasing order, Russia, Indonesia, the European Union, Japan, Brazil, and the U.S. Concentrations in all these locations have declined slightly since 1990 and, with the possible exception of Japan, appear relatively stable over the last 10 years. The disparities among these large countries have grown substantially over time. Less-polluted locations have become cleaner, while PM2.5 concentrations have increased in the more polluted locations. As a result, the group says, what was a 7-fold range in average population-weighted concentrations among these countries in 1990 increased to a 10-fold range in 2015.

From 1990 to 2015, population-weighted ozone concentrations increased by about 7% globally, the group says. This trend reflects a combination of factors, including increased emissions of ozone precursors such as nitrogen oxides, coupled with warmer temperatures, especially at mid-latitudes in rapidly developing economies. Among the world’s 10 most populous countries and the European Union, the largest increases (14% to 25%) in seasonal average population-weighted concentrations of ozone over the last 25 years were experienced in China, India, Pakistan, Bangladesh, and Brazil. However, in the U.S., estimated population-weighted ozone concentrations have decreased by about 5% since 1990 and, in the EU, by about 2% since 2000, driven by air quality management programs.

ACFA found this interesting article on the futurefuelstrategies.com website on 16-Feb 2017. More details and other references are available online.

Singapore announces plan to charge carbon tax on polluting industries by 2019

Photo courtesy of Singapore MoT.

Singapore plans to implement Southeast Asia’s first carbon tax, Finance Minister Heng Swee Keat announced in his budget speech in Parliament on 20-Feb, saying it is “the most economically efficient and fair way” to reduce greenhouse gas emissions. Revenue collected from the carbon tax will fund measures to help industries cut their emissions further.

Singapore is the world’s 26th largest carbon emitter per capita despite its small land area. Japan has a national carbon tax along with some regional emissions trading markets. Both South Korea and New Zealand have national emissions trading. China has several regional trading markets and is planning to launch the world’s largest national carbon market this year.

Singapore aims to reduce emissions intensity, or emissions per dollar of GDP, by 36% below 2005 levels by 2030. The carbon tax will also help Singapore achieve its Paris Agreement goals.

“This may also spur the creation of new opportunities in green growth industries such as clean energy,” Heng said.

Singapore will charge companies between SGD10 to 20 (USD7.04-14.08) per tonne starting 2019 for releasing into the atmosphere six greenhouse gases – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6).

Singapore’s National Climate Change Secretariat (NCCS), which worked on the proposal for a carbon tax, explained that a carbon tax was a more practical solution for carbon pricing given the small size of the Singapore market. The NCCS is part of the Strategy Group within the Prime Minister’s Office.

Next month, the government will start consultations with the general public and industry stakeholders.

Neste evaluates investing in US renewable Diesel production

Renewable Diesel producer Neste Corp. is evaluating investment in new production capacity in Singapore and the U.S., the company revealed in its financial statements release.

“Neste will continue to implement its global renewables growth strategy,” stated Matti Lievonen, Neste president and CEO. “The demand for renewable products is expected to continue growing globally.”

The company says its renewables capacity increase program will include debottlenecking of existing production capacity from 2.6 million tons (approximately 810 million gallons) to 3 million tons (936 million gallons) by 2020, and building new capacity.

“We are currently evaluating the feasibility of options to invest in new production capacity,” Lievonen said. “The options under review include locations in the U.S. and Singapore.”

The announcement comes on the heels of Neste’s most profitable year yet with renewables, and speculation whether the new U.S. administration and Congress will extend the lapsed $1 per gallon blenders tax credit as-is or reform the incentive to only benefit U.S. product. The U.S. tax credit has expired five times since 2010 and has been extended four times.

“For the first time [our renewable products division] had the largest full-year profit contribution, which reflects the continuing strategic transformation of the company,” Lievonen said, adding that the renewables segment recorded a full-year comparable operating profit of €469 million. “Our sales volumes reached 2.22 million tons (approximately 686 million gallons), only 2 percent below the previous year, despite of the scheduled major turnaround implemented at the Rotterdam refinery in the second quarter. A slightly higher share of the sales volume was allocated to the North American market compared to 2015. In the U.S. market, the EPA finalized increased volume mandates for biomass-based Diesel for 2017 and 2018 in November 2016. Feedstock optimization continued, and the share of waste and residue feedstocks was successfully expanded to 78 percent of total renewable inputs in 2016. Acquisition of a new feedstock pre-treatment facility in the Netherlands will further enhance our capability to process lower quality wastes and residues.”

Lievonen referenced particularly attractive markets around the world, including Norway and California. “Norway has set a biofuel target in traffic growing from 7.5 percent in 2017 to 20 percent in 2020,” Lievonen said. “California continues to be an important market for Neste. Sales volumes of the renewable Diesel delivered as 100 percent to end-users are expected to continue growing from 15 percent in 2016 to 25 percent of the total renewable sales volumes in 2017. The vegetable oil market is expected to remain volatile, and we aim to expand the use of lower-quality waste and residue feedstock further. The completed acquisition of the new feedstock pre-treatment and storage facility in the Netherlands will support this goal.”

London to introduce vehicle pollution tax by October

London will start charging a Toxicity Charge, or T-Charge, on cars, vans, mini-buses, buses, coaches and heavy goods vehicles (HGVs) that do not meet Euro 4 vehicle emissions standard. Up to 10,000 of the oldest, most polluting vehicles are expected every weekday to be potentially liable for the new emissions levy.

The GBP10 (USD12.45) T-Charge will be applied during the same 7 am to 6 pm weekday hours as the existing GBP11.5 (USD14.32) congestion tax, and could mean some vehicle drivers could end up paying GBP21.50 (USD26.77) per day to drive in central London.

Drivers will be able to use an online tool to check whether their vehicle will be affected by the new levy, which goes into effect on October 23, 2017.

Air pollution in London is a public health crisis, according to the Mayor’s office. Currently, more than 9,000 Londoners die prematurely each year as a result of long-term exposure to air pollution.

“It’s staggering that we live in a city where the air is so toxic that many of our children are growing up with lung problems,” Mayor Sadiq Khan said. “If we don’t make drastic changes now we won’t be protecting the health of our families in the future.”

“The T-Charge is a vital step in tackling the dirtiest diesels before I introduce the world’s first Ultra Low Emission Zone as early as 2019.”

No items found.
In other news...
In Focus
Rising energy prices: Possible consequences for transportation fuels and clean fuels

In this issue of In Focus, we look at the potential impact of the recent oil and energy price rally on gasoline demand and our industry. Governments around the world are considering various measures to combat the looming energy crisis, mainly caused by the Russian invasion of Ukraine.

In Focus
Indonesian Institute of Energy Economics (IIEE) Study: Cleaner Fuels for a More Sustainable Future

In this ‘In Focus’ newsletter we would like to focus on the “Cleaner Fuels for a More Sustainable Future” study published by the Indonesian Institute of Energy Economics (IIEE) in 2021. The study forms part of a larger research study titled “Strategy to Fulfil Fuel Supply in Indonesia to Comply with Euro 4 Vehicle Standards” conducted by the IIEE last year, which identified three major issues as reasons for the delay in the rollout of the plan and made some recommendations on how to tackle the issues. The Asian Clean Fuels Association contributed to the study.

In Focus
Mobility in Asia at the crossroads

In this ‘In Focus’ newsletter we would like to draw our readers’ attention to a joined opinion statement issued by Clean Air Asia (CAA) and the Asian Clean Fuels Association (ACFA), in which both organizations highlight their observations and express their concerns related the use of coal to fuel Asia’s energy demand.


The ACFA Update

Give your inbox a top up of the latest news on clean fuels