REC: Phase-out of Leaded Gasoline: Policy Measures and Instruments (5.4)

5. Policy Measures and Instruments (continued)

5.4 Current strategies for the phase-out of lead in the SILAQ countries


Western Experience	Several West European countries (i.e., Austria, Denmark, Finland, Sweden and Switzerland) have already phased out leaded gasoline. Key measures adopted included the maximum permissible lead content in gasoline of 0.15 g/l, the use of tax incentives to promote market demand for unleaded gasoline, and the introduction of strict air emission standards for new cars which can only be met through the use of catalytic converters.
Policy Approaches in SILAQ Countries	The current situation in this respect in the SILAQ countries is somewhat similar. All the SILAQ countries have plans to phase out lead in gasoline by the year 2003 at the latest. The examination of the existing phase-out plans in the SILAQ countries shows that the three general policy approaches explored in the previous sections are used: A technology-based approach that relies on shifting the demand away from leaded gasoline by modernizing car technology (through the use of catalytic converters), and enforcing the mandatory use of catalytic control devices on vehicles. An incentive policy approach that uses price incentives and other policy measures to promote the use of unleaded gasoline in cars with or without catalytic converters. A rapid phase-out approach that discourages or bans the use of leaded gasoline even before catalytic converters become universally used by the entire vehicle fleet. In general, it appears that the last two approaches offer a more suitable way of dealing with vehicle-related lead exposure problems in the SILAQ countries. Bulgaria, Hungary, Poland and Slovenia have followed the incentive approach, combined with regulations reducing the lead content of gasoline, and supporting the use and import of cars with catalytic converters.
Introduction of Unleaded Gasoline	By the early 1990's, Bulgaria, Hungary, Poland and Slovakia had all introduced unleaded gasoline to the market. These countries had also gradually started to decrease the production of gasoline with high lead content, from levels that often exceeded 0.7 g/l in the early 1980's, to the current European Union standard of 0.15 g/l. These measures, taken under the auspices of government policy, led to significant reductions in vehicle-based lead emissions, general improvements in ambient air quality, and decreasing levels of human exposure. In 1996, Romania adopted a national programme for the gradual reduction of lead in gasoline, while in Slovakia, the maximum lead content of gasoline was reduced to 0.005 g/l as of September 2, 1997, thus practically banning leaded gasoline from the Slovak market. Interestingly, when no standard was applied in Slovenia to regulate the quality of oil derivatives while the country was in transition, Slovenian oil companies used the given EU standards instead. For domestic producers, a lead standard of 0.40 g/l was applied until December 31, 1995. The following section reviews in more detail the approaches used in each country. Bulgaria Bulgaria produces unleaded and leaded gasoline, although the share of unleaded gasoline in the market is small. The current maximum lead content is 0.15 g/l. Tax differentiation is applied but on a limited scale.
National Action Plan	The country is in the final stages of developing a National Action Plan. The Plan is based on the gradual phase-out scenario, and includes the following incentives and timelines: The introduction of economic incentives for consumers (and producers) related to the use of unleaded gasoline. This includes the introduction of a new regime of excise duties ensuring that the duty which is paid for unleaded gasoline is 20 percent lower than that paid for leaded grades with similar octane. (1998-1999) Restrictions on the import of cars which can not use unleaded gasoline, aiming toward their gradual phase-out (1998). The modernization/revamp of petroleum refineries (1998-2000). Information and awareness raising campaigns (1998-2000). Prohibition of the import and production of leaded gasoline (2003). Table 26 provides more detailed information on the National Action Plan presented in Bulgaria's Country Status Report and its respective targets.

TABLE 26: Approaches and Targets for the Phase-out of Lead According to the National Action Plan of Bulgaria
Approaches	Targets	Time limits

Technology based approaches	Modernization of existing refineries to increase production of unleaded gasoline in order to meet future demands. There is currently no requirement for the fitting of catalytic converters on new cars. Discussion: The level of investments necessary for the modernization of refineries are significant: around USD 60-70 million for "Neftochim," and some USD 30-40 million for "Plama." Cooperation with international financial institutions and companies is needed in order to obtain the necessary credits for the completion of this objective. Market penetration of new car technology is low. However, if Bulgaria enters into a period of economic recovery, an influx of new cars can be expected, with reduced emission characteristics	1998-2000

Incentive approaches	Introduction of a system for accelerating the phase-out policy, to include economic incentives, customs duties, taxes and fines both for producers and consumers. Discussion: In order to stimulate the production and consumption of unleaded gasoline, the excise tax for unleaded grades should be at least 20 percent less than that for leaded grades. The existing 10 percent difference barely offsets the higher costs of producing unleaded gasoline.	1998-1999

Rapid phase-out policy	Prohibition of the import and production of leaded gasoline. Discussion: Car importers must certify that engines are fit for the use of unleaded gasoline. Special legislation needs to be enacted to ensure this. A specific call for an increase in the installation and use of catalytic converters should be included in the National Action Plan.	2003

Czech Republic
A three-year modernization plan was elaborated at the end of 1996, and the strategy for the phase-out of lead in gasoline is expected to be approved shortly.
However, a major obstacle to completing the phase-out of leaded gasoline is the need for information and the improved availability of alternative valve lubricants. Limited amounts of the ANABEX additive (imported from Slovakia) are available. However, according to the Automotive Industry Association, in 1995 there were some 800,000 cars (about 25 percent of all cars) requiring lubricating additives due to their soft valve seats. Nearly all of them currently use leaded gasoline.

Plans for Modernization A ban on leaded gasoline requires the sufficient supply of unleaded gasoline with the appropriate octane number and substitute lubricating additives. However, the country is dependent on the import of high-grade unleaded gasoline as the present condition of its domestic refineries does not allow for its production. Therefore, cooperation between the government and gasoline distributors is necessary to prevent or to diminish the eventual rise of gasoline prices.
Hungary

Local Initiatives Hungary plans to phase out the production of leaded gasoline by the year 2000, despite the lack of a formally approved government program to pursue this objective. Some important steps envisaged in the process include:

The introduction of legal requirements for catalytic converters on all new cars in effect since 1996;
Granting of financial support for the equipping cars with catalytic converters. A 50 percent reduction in road tax will be applied to cars fitted with catalytic converters (the tax is currently HUF 400-800, or USD 2-4 per 100 kg weight);
Information campaigns and awareness raising measures, existent since 1992.
Domestic leaded gasoline production has been declining and is expected to cease by the year 2000.
Poland
Government plans intend to gradually phase out leaded gasoline before the year 2000. Specifically, this has so far resulted in:

A reduction in the gasoline lead content from 0.3 g/l to 0.15 g/l (1992);
Tax differentiation between unleaded and leaded gasoline (effective since 1992);
Legal requirements for the installation of catalytic converters on all new cars (effective since 1995);
Information campaigns on:

Those types of vehicles suited to the use of unleaded gasoline (1992);
The use of mixed (leaded/unleaded) fuels (1993);
New types of gasoline with alternative lubricants (1996).

Lead Phase-out in Poland Poland aims to increase its production of unleaded gasoline in order to meet future gasoline demands. The poor octane pool of Polish refineries is considered by the Polish authorities to be a major constraint for accelerating the phase-out of lead in gasoline. Additionally, the relatively old car fleet is also considered to be a significant constraint to the phase-out of lead. Catalytic converters have been required on new cars since the beginning of 1995; however, only 6.4 percent of passenger cars had been fitted with the device by 1996. Additional incentives encouraging consumers to use mixed fuels and new gasoline with lubricating additives (domestically produced or imported) would help Poland accelerate the phase-out process.
Romania

Short and mid Term Targets Romania has developed its own action plan, which includes an agreement reached among a wide number of government and public institutions, gasoline manufacturers and car producers. The country plans to gradually phase out lead in gasoline between 1997 and 2003. Specifically, this includes:

The production and distribution of gasoline with a reduced lead content of 0.32 g/l (1997-1998);
Vehicle research regarding the use of gasoline with a lead content of 0.15 g/l (to be financed by an external source) (1997-1999);
The reduction of lead content from 0.32 g/l to 0.15 g/l by modifying technology in the refinery sector (1999-2001);
The introduction of mandatory catalytic converters for imported cars (1998);
The introduction of mandatory catalytic converters for domestically produced cars (1999-2000);
The total phase-out of lead from gasoline (2001-2003).
The following two scenarios were discussed within Romania's action plan:

Slow transition, which proposes the production of gasoline with the lead content lowered from 0.5 g/l to 0.32 g/l, from the beginning of 1998. This would reduce lead emissions by 78 percent by the year 2000, compared with 1995 levels.
Fast transition, which proposes the immediate production of gasoline with a lead content of 0.15 g/l.
The first scenario was eventually adopted by the Action Plan.
Additionally, Romania aims to start manufacturing engines with catalytic converters by the turn of the century, and by the year 2001, to complete research on the engine performance of existing cars fueled with 0.15 g/l lead gasoline. Research into the production and commercialization of such gasoline will also be finished by this time and will be based on the use of external financing and technical assistance from the European Bank for Reconstruction and Development.
The mandatory use of catalytic converters on imported and domestically produced cars is planned for 1998 and 2000, respectively. Furthermore, the targets of the Romanian Action Plan include the development of economic and fiscal incentives together with improved refining technologies, and the increased distribution of unleaded gasoline.
Slovakia
Slovakia achieved a rapid, complete and relatively smooth transition from leaded to unleaded gasoline within 18 months. It is currently the only country in Central and Eastern Europe to have chosen the rapid phase-out approach.
The key milestones in the Slovakian phase-out included:

Catalytic converters required on all new cars (introduced in 1993);
Information campaigns launched (between 1990 and 1996);
The maximum lead content allowed in gasoline reduced to 0.005 g/l (adopted on September 2, 1997).
The last measure practically bans leaded gasoline from the Slovak market.
To influence consumer behavior and to facilitate the transition, the rapid phase-out approach was preceded and combined with an incentive policy approach, while different measures, such as tax differentiation schemes, to accelerate the switch to unleaded gasoline were applied.

Success Story It is remarkable that even in spite of the success of the combination of the incentive policy approach and the rapid phase-out approach, which has resulted in the total phase-out of leaded gasoline in less than two years, and a significant decrease in the levels of lead emissions, none of the other SILAQ countries have adopted similar approaches.
However, even though the characteristics of Slovakia's car fleet were not favorable to the rapid phase-out, a number of other factors helped the country in this process. First of all, a single refinery existed in the country, with a monopoly on gasoline production and sales. The refinery was modern and could easily adjust its production to provide high octane gasoline. The use of a lubricating additive provided the necessary lubrication to the high share of cars with soft exhaust valve seats.
Slovenia
The Slovenian government plans the complete phase-out of leaded gasoline by the end of the year 2000. Its achievements so far have included:

Tax differentiation between unleaded and leaded gasoline (introduced in 1991);
The mandatory installation of catalytic converters on all new cars (1994);
The adoption of the EU of 0.15 g/l standard for the lead content in gasoline (1994).

Incentive Policies Slovenia does not have enough blending facilities for producing unleaded gasoline with the VSPA additive, and therefore will have to import unleaded gasoline which already contains the additive. The government will have to implement a well-balanced incentive policy, and discussion between the government and the dealers is to take place shortly. An estimation of the number of cars with soft valve seats still needs to be carried out.

	Czech Republic A three-year modernization plan was elaborated at the end of 1996, and the strategy for the phase-out of lead in gasoline is expected to be approved shortly. However, a major obstacle to completing the phase-out of leaded gasoline is the need for information and the improved availability of alternative valve lubricants. Limited amounts of the ANABEX additive (imported from Slovakia) are available. However, according to the Automotive Industry Association, in 1995 there were some 800,000 cars (about 25 percent of all cars) requiring lubricating additives due to their soft valve seats. Nearly all of them currently use leaded gasoline.
Plans for Modernization	A ban on leaded gasoline requires the sufficient supply of unleaded gasoline with the appropriate octane number and substitute lubricating additives. However, the country is dependent on the import of high-grade unleaded gasoline as the present condition of its domestic refineries does not allow for its production. Therefore, cooperation between the government and gasoline distributors is necessary to prevent or to diminish the eventual rise of gasoline prices. Hungary
Local Initiatives	Hungary plans to phase out the production of leaded gasoline by the year 2000, despite the lack of a formally approved government program to pursue this objective. Some important steps envisaged in the process include: The introduction of legal requirements for catalytic converters on all new cars in effect since 1996; Granting of financial support for the equipping cars with catalytic converters. A 50 percent reduction in road tax will be applied to cars fitted with catalytic converters (the tax is currently HUF 400-800, or USD 2-4 per 100 kg weight); Information campaigns and awareness raising measures, existent since 1992. Domestic leaded gasoline production has been declining and is expected to cease by the year 2000. Poland Government plans intend to gradually phase out leaded gasoline before the year 2000. Specifically, this has so far resulted in: A reduction in the gasoline lead content from 0.3 g/l to 0.15 g/l (1992); Tax differentiation between unleaded and leaded gasoline (effective since 1992); Legal requirements for the installation of catalytic converters on all new cars (effective since 1995); Information campaigns on: Those types of vehicles suited to the use of unleaded gasoline (1992); The use of mixed (leaded/unleaded) fuels (1993); New types of gasoline with alternative lubricants (1996).
Lead Phase-out in Poland	Poland aims to increase its production of unleaded gasoline in order to meet future gasoline demands. The poor octane pool of Polish refineries is considered by the Polish authorities to be a major constraint for accelerating the phase-out of lead in gasoline. Additionally, the relatively old car fleet is also considered to be a significant constraint to the phase-out of lead. Catalytic converters have been required on new cars since the beginning of 1995; however, only 6.4 percent of passenger cars had been fitted with the device by 1996. Additional incentives encouraging consumers to use mixed fuels and new gasoline with lubricating additives (domestically produced or imported) would help Poland accelerate the phase-out process. Romania
Short and mid Term Targets	Romania has developed its own action plan, which includes an agreement reached among a wide number of government and public institutions, gasoline manufacturers and car producers. The country plans to gradually phase out lead in gasoline between 1997 and 2003. Specifically, this includes: The production and distribution of gasoline with a reduced lead content of 0.32 g/l (1997-1998); Vehicle research regarding the use of gasoline with a lead content of 0.15 g/l (to be financed by an external source) (1997-1999); The reduction of lead content from 0.32 g/l to 0.15 g/l by modifying technology in the refinery sector (1999-2001); The introduction of mandatory catalytic converters for imported cars (1998); The introduction of mandatory catalytic converters for domestically produced cars (1999-2000); The total phase-out of lead from gasoline (2001-2003). The following two scenarios were discussed within Romania's action plan: Slow transition, which proposes the production of gasoline with the lead content lowered from 0.5 g/l to 0.32 g/l, from the beginning of 1998. This would reduce lead emissions by 78 percent by the year 2000, compared with 1995 levels. Fast transition, which proposes the immediate production of gasoline with a lead content of 0.15 g/l. The first scenario was eventually adopted by the Action Plan. Additionally, Romania aims to start manufacturing engines with catalytic converters by the turn of the century, and by the year 2001, to complete research on the engine performance of existing cars fueled with 0.15 g/l lead gasoline. Research into the production and commercialization of such gasoline will also be finished by this time and will be based on the use of external financing and technical assistance from the European Bank for Reconstruction and Development. The mandatory use of catalytic converters on imported and domestically produced cars is planned for 1998 and 2000, respectively. Furthermore, the targets of the Romanian Action Plan include the development of economic and fiscal incentives together with improved refining technologies, and the increased distribution of unleaded gasoline. Slovakia Slovakia achieved a rapid, complete and relatively smooth transition from leaded to unleaded gasoline within 18 months. It is currently the only country in Central and Eastern Europe to have chosen the rapid phase-out approach. The key milestones in the Slovakian phase-out included: Catalytic converters required on all new cars (introduced in 1993); Information campaigns launched (between 1990 and 1996); The maximum lead content allowed in gasoline reduced to 0.005 g/l (adopted on September 2, 1997). The last measure practically bans leaded gasoline from the Slovak market. To influence consumer behavior and to facilitate the transition, the rapid phase-out approach was preceded and combined with an incentive policy approach, while different measures, such as tax differentiation schemes, to accelerate the switch to unleaded gasoline were applied.
Success Story	It is remarkable that even in spite of the success of the combination of the incentive policy approach and the rapid phase-out approach, which has resulted in the total phase-out of leaded gasoline in less than two years, and a significant decrease in the levels of lead emissions, none of the other SILAQ countries have adopted similar approaches. However, even though the characteristics of Slovakia's car fleet were not favorable to the rapid phase-out, a number of other factors helped the country in this process. First of all, a single refinery existed in the country, with a monopoly on gasoline production and sales. The refinery was modern and could easily adjust its production to provide high octane gasoline. The use of a lubricating additive provided the necessary lubrication to the high share of cars with soft exhaust valve seats. Slovenia The Slovenian government plans the complete phase-out of leaded gasoline by the end of the year 2000. Its achievements so far have included: Tax differentiation between unleaded and leaded gasoline (introduced in 1991); The mandatory installation of catalytic converters on all new cars (1994); The adoption of the EU of 0.15 g/l standard for the lead content in gasoline (1994).
Incentive Policies	Slovenia does not have enough blending facilities for producing unleaded gasoline with the VSPA additive, and therefore will have to import unleaded gasoline which already contains the additive. The government will have to implement a well-balanced incentive policy, and discussion between the government and the dealers is to take place shortly. An estimation of the number of cars with soft valve seats still needs to be carried out.

REC * PUBLICATIONS * PHASE-OUT OF LEADED GASOLINE * POLICY MEASURES AND INSTRUMENTS