The reduction of known, harmful elements in petroleum-based fuels, in the case of gasoline, such as sulphur, benzene, aromatics and olefins using clean fuel components (like MTBE) is a proven path to cleaner fuels. Actual experience in the U.S., EU and Japan indicates that the refining process technology is mature and accessible. There is a cache of experience in installation and integration of new processes in existing refineries. Experience with the production, blending, distribution and quality monitoring of cleaner fuels and tools to optimize refining operations are also available.
In most of developing Asia, however, the benefits which can be derived from regulating fuel attributes and standards have not been maximized. Even though there are no technical or scientific obstacles to hinder the production of fuels that meet stricter fuel standards, refinery economics continue to dominate.
Part of Asia's clean fuels challenge is that the majority of the refineries in the region are not equipped to handle the complex refinery processes to produce clean fuels. The capital investments for infrastructure upgrades can be daunting and prohibitive for the smaller refineries. For government-owned refineries, such capital investments are in direct competition with other social expenditures for limited government funds. In competitive markets, some projects may be viewed to be not financially viable.
The lack of harmonized fuel standards as well as the varying vehicle profiles in the region adds another degree of complexity to refinery design; refiners are challenged to make investment decisions that will capture the biggest piece of the fuel market in Asia in the short to medium term.
That said, these investments decisions have the benefit of past experiences in the U.S. and Europe, which spent 30 years refining its fuel strategy and the entire transportation ecosystem. The refining technology needed to produce cleaner fuels that meet Euro IV and above standards is well understood and has been widely implemented in practice. The costs of the technology are well defined and supported by a variety of engineering and construction services related to refinery modifications. Developments in refining technology over the years have also helped to reduce capital costs.
From a policy perspective, a clearly articulated fuel policy backed by strong political cum legislative commitment and a pragmatic yet comprehensive approach will provide the oil and automobile industries a clear direction to move forward.
Experience worldwide shows that a well-thought out fiscal boost through tax and pricing incentives can accelerate the use of cleaner fuels and their uptake in the fuels market. Governments in Asia have to justify using public funds to pursue cleaner fuels, especially in recent years of economic difficulty. The crux is to not compromise commitment to long-term sustainability for short-term agendas; transitional policy biases will undermine the chances of long-term success of a country's clean fuel strategy.
The North Asian countries have demonstrated that the U.S. and European experience can be replicated given sufficient political will and focus. Having moved through the stages of lead removal for gasoline, imposition of volatility controls and introduction of oxygenates such as MTBE as well as the reduction of sulphur, benzene, olefins and aromatic content, and in the case for diesel with cetane number, distillation end point, density, poly aromatics, these countries are now considering additional composition controls and also introducing renewable and/or alternative fuels (primarily biofuels).
The primary challenge for these countries in the more advanced phase of the evolution of fuel quality programs is to not be distracted by the potential of renewable and alternative fuels and lose sight of the clean fuel strategy that has served them well in the past two decades. At least for the foreseeable future, the two will need to co-exist until a balance is struck.
Clearly alternative fuels come with their unique set of challenges. Cost efficiencies and large-scale application are the key obstacles most, if not all, alternative fuels face. At present, biofuels appear to have made the most headway in Asia. However, biofuels have in all current cases required subsidies from governments to ensure economic viability.
Advocates maintain that biofuels can help reduce dependency on oil imports and lower greenhouse gas emissions, support the agricultural sector, and revitalize rural landscapes in both developed and developing countries. In contrast, opponents argue that biofuels compete with food crops for land, water, and agrichemicals, do not deliver cost-effective carbon emissions reductions, demand a disproportionate amount of subsidies and incentives, and negatively impact biodiversity. Others highlighted concerns with lower energy content, net negative energy balance, potential increased emissions in VOCs and NOx and vehicle performance issues.
A few Asian countries have in place biofuel policies and targets. However, the successful implementation of these mandates remains a challenge as the countries deal with resource limitations especially in feedstock sufficiency.