REC: Phase-out of Leaded Gasoline: Conclusions and Recommendations (6.1)

6. Conclusions and Recommendations


Phase-out by 2003?	All the SILAQ countries intend to phase out leaded gasoline by the year 2003. The countries either have specific phase-out plans already in place, or are in the process of drafting national strategies in this field appropriate to their current conditions. An overview of the situation presented in this report shows that even though in some cases it may be difficult to meet the planned deadline, the phase-out is technically and economically feasible.

Phase-out by 2003?

All the SILAQ countries intend to phase out leaded gasoline by the year 2003. The countries either have specific phase-out plans already in place, or are in the process of drafting national strategies in this field appropriate to their current conditions. An overview of the situation presented in this report shows that even though in some cases it may be difficult to meet the planned deadline, the phase-out is technically and economically feasible.

CASE STUDIES: Sweden and Finland
Sweden has been selling only unleaded gasoline since 1994. The phase-out was achieved as a result of a combination of various policy measures. The lead phase-out process started with the gradual reduction in the maximum permitted content of lead in gasoline, which was reduced from the initial 1.2 g/l in the 1970's to the current 0.15 g/l. Tax incentives were introduced in the mid-eighties, and tax differentials were gradually increased to compensate for the necessary investment costs and higher operating costs. The requirement for the installation of catalytic converters on all new cars was introduced in 1989. However, to ensure the proper operation of older types of engines, a lead-free gasoline with a sodium-based lubricating additive was introduced into the market in 1992. Interestingly, the refinery which developed the additive based on its own initiative gained a significant competitive advantage over its competitors. Economic incentives were used effectively in Sweden because of the existence of several refineries and a strong competitive environment, as well as the high turnover of vehicles. The phase-out of leaded gasoline in Finland was achieved through a tax differentiation scheme and the use of unleaded gasoline by cars that would normally have used leaded gasoline. The latter was possible through the introduction of lubricating additives. Finland also introduced strict requirements for catalytic converters which created a strong need for the removal of lead from gasoline. Other Nordic countries, Germany and Austria have adopted similar approaches. The experiences of these countries show that the introduction of lubricating additives and the use of unleaded gasoline in different types of cars are the key requirements for the successful rapid phase-out of lead from gasoline.

CASE STUDIES: Sweden and Finland

Sweden has been selling only unleaded gasoline since 1994. The phase-out was achieved as a result of a combination of various policy measures.

The lead phase-out process started with the gradual reduction in the maximum permitted content of lead in gasoline, which was reduced from the initial 1.2 g/l in the 1970's to the current 0.15 g/l.

Tax incentives were introduced in the mid-eighties, and tax differentials were gradually increased to compensate for the necessary investment costs and higher operating costs.

The requirement for the installation of catalytic converters on all new cars was introduced in 1989. However, to ensure the proper operation of older types of engines, a lead-free gasoline with a sodium-based lubricating additive was introduced into the market in 1992. Interestingly, the refinery which developed the additive based on its own initiative gained a significant competitive advantage over its competitors.

Economic incentives were used effectively in Sweden because of the existence of several refineries and a strong competitive environment, as well as the high turnover of vehicles.

The phase-out of leaded gasoline in Finland was achieved through a tax differentiation scheme and the use of unleaded gasoline by cars that would normally have used leaded gasoline. The latter was possible through the introduction of lubricating additives. Finland also introduced strict requirements for catalytic converters which created a strong need for the removal of lead from gasoline. Other Nordic countries, Germany and Austria have adopted similar approaches.

The experiences of these countries show that the introduction of lubricating additives and the use of unleaded gasoline in different types of cars are the key requirements for the successful rapid phase-out of lead from gasoline.

6.1 Key Issues Needing to Be Addressed

	The key factors noted by the SILAQ countries needing to be addressed when drafting a successful phase-out strategy included the: Ability of domestic refineries to supply unleaded gasoline; Feasibility of using unleaded gasoline by local vehicles, and; Awareness of the public as to the applicability of unleaded gasoline.

The key factors noted by the SILAQ countries needing to be addressed when drafting a successful phase-out strategy included the:

Ability of domestic refineries to supply unleaded gasoline;
Feasibility of using unleaded gasoline by local vehicles, and;
Awareness of the public as to the applicability of unleaded gasoline.

CASE STUDY: Denmark
Denmark was one of the first West European countries to have phased out lead completely. At the beginning of the process, it operated three refineries. However, one was closed while the remaining two, somewhat different in size with production at 95 and 65 thousand barrels/day, were considered small by West European standards. The refineries were relatively simple, with no FCC facilities, and underwent similar modifications. The Danish refineries suffered only minor problems when the lead reduction process began in Denmark in 1982, since all fuel qualities could be blended from the RON98 reformate produced. The refineries increased reformer severity resulting in a RON100 reformate when the unleaded RON98 gasoline was introduced in 1989. However, this had the adverse effect of lowering output, increasing the wear on the catalyst reformer, and reducing intervals between overhauls. Initially, in order to ensure the availability of RON98 unleaded gasoline for the fraction of the vehicle fleet that needed it, MTBE was purchased and added (Danish refineries cannot produce MTBE themselves), since increasing reformer severity was not enough to produce RON 98. To comply with future benzene legislation, and to ensure greater flexibility in production, Danish refineries acquired isomerization units enabling the production of high octane gasoline with a low benzene content. This action now also prepares the refineries for new European Union legislation to be introduced in the year 2000. The phase-out of lead had little effect on the distribution costs. Storage tanks and pumps formerly used for leaded gasoline were converted for use with low-lead or unleaded gasoline. Alternative pump nozzles were installed for unleaded gasoline. Since 1994, only unleaded gasoline has been used in Denmark, with only one quality of fuel produced at the refineries. The same gasoline is offered to cars with soft valve seats. However, a potassium-based anti-valve seat recession additive is added while filling gasoline tankers at the refineries. The Danish oil companies report no complaints from customers relating to valve seat recession since introducing unleaded fuel in Denmark. Source: COWI

CASE STUDY: Denmark

Denmark was one of the first West European countries to have phased out lead completely. At the beginning of the process, it operated three refineries. However, one was closed while the remaining two, somewhat different in size with production at 95 and 65 thousand barrels/day, were considered small by West European standards. The refineries were relatively simple, with no FCC facilities, and underwent similar modifications.

The Danish refineries suffered only minor problems when the lead reduction process began in Denmark in 1982, since all fuel qualities could be blended from the RON98 reformate produced. The refineries increased reformer severity resulting in a RON100 reformate when the unleaded RON98 gasoline was introduced in 1989. However, this had the adverse effect of lowering output, increasing the wear on the catalyst reformer, and reducing intervals between overhauls.

Initially, in order to ensure the availability of RON98 unleaded gasoline for the fraction of the vehicle fleet that needed it, MTBE was purchased and added (Danish refineries cannot produce MTBE themselves), since increasing reformer severity was not enough to produce RON 98. To comply with future benzene legislation, and to ensure greater flexibility in production, Danish refineries acquired isomerization units enabling the production of high octane gasoline with a low benzene content. This action now also prepares the refineries for new European Union legislation to be introduced in the year 2000.

The phase-out of lead had little effect on the distribution costs. Storage tanks and pumps formerly used for leaded gasoline were converted for use with low-lead or unleaded gasoline. Alternative pump nozzles were installed for unleaded gasoline.

Since 1994, only unleaded gasoline has been used in Denmark, with only one quality of fuel produced at the refineries. The same gasoline is offered to cars with soft valve seats. However, a potassium-based anti-valve seat recession additive is added while filling gasoline tankers at the refineries. The Danish oil companies report no complaints from customers relating to valve seat recession since introducing unleaded fuel in Denmark.

Source: COWI

Financing Conversion The information collected on the major constraints to lead phase-out show that the lack of finance constitutes a significant barrier in the SILAQ countries, particularly in Bulgaria and Romania, and to some extent in Poland. Modernization of existing refineries in order to switch to the production of unleaded gasoline is technically and economically feasible, especially since most refineries are the more complex Type 2 and Type 3, but the process requires significant investment.
However, accessing funds is not an overwhelming obstacle. For instance, in March 1998, the European Investment Bank extended a loan of ECU 125 Million to the Hungarian main oil refinery, owned by MOL Rt. The loan, with a 15-year maturity period, will cover approximately half of the required investment costs of the necessary technical upgrades. With a proper mix of tax incentives and stricter regulations, refineries will have to look more actively for the necessary funding. To this end, it will be necessary to improve the ability of refineries to attract investors.

Vehicle Fleets Another obstacle to the phase-out of lead in gasoline is the structure of vehicle fleets, which in the SILAQ countries are characterized by a fairly high average age, low turnover rates, and a relatively high share of vehicles with soft exhaust valve seat engines, which are generally believed to require lead lubrication.
As for the latter concern,commercially available alternative lubricants not based on lead already exist. Some countries have already introduced gasoline with potassium or sodium-based lubricants (e.g., Slovakia's phase-out, or Aral in Hungary), and experiences with these have been successful. Moreover, there is evidence that many cars previously thought to need leaded gasoline can operate using unleaded gasoline.

CASE STUDY: Slovakia

The success of the Slovak Republic in the fast phase-out of lead from gasoline was facilitated by a number of related policy initiatives introduced at an early stage. The process of lead content reduction in gasoline produced at the Slovnaft Refinery occurred in three stages:

The period to 1988; production of unleaded gasoline began with technological improvement and a resulting reduction in lead content from 0.25 g/l in 1986 to 0.15 g/l in 1989;
1989-1991; further development oriented to more complex crude oil processing with the aim of maximizing output and increasing the production of unleaded gasoline;
The period following 1992; the creation of conditions that saw the exclusive production of unleaded gasoline in 1992, and the installation of a unit for the isomerization of light naphtha (C5-C6 hydrocarbons). The octane number was raised from RON 70 to RON 84, without any increase in the aromatic content in gasoline.
At the beginning of the lead phase-out process, the main factor preventing the increased consumption of unleaded gasoline was the state of the car vehicle fleet in the Slovak Republic. The only possible solution was the application of an adequate additive, and as a result, the additive ANABEX® 99 was developed by Slovnaft VURUP. The availability of this additive transformed the UNI series of unleaded gasoline into a universal gasoline for the whole car fleet. Simultaneously, conditions established in Slovakia (from the beginning of 1995) permitted the distribution of unleaded gasoline only. The relatively smooth and complete transition process to unleaded gasoline was accomplished thanks to the use of a universal gasoline type suitable for a mixed car fleet. The success of this strategy was essentially a result of the combination of an incentive policy and a far-reaching information campaign.


Financing Conversion	The information collected on the major constraints to lead phase-out show that the lack of finance constitutes a significant barrier in the SILAQ countries, particularly in Bulgaria and Romania, and to some extent in Poland. Modernization of existing refineries in order to switch to the production of unleaded gasoline is technically and economically feasible, especially since most refineries are the more complex Type 2 and Type 3, but the process requires significant investment. However, accessing funds is not an overwhelming obstacle. For instance, in March 1998, the European Investment Bank extended a loan of ECU 125 Million to the Hungarian main oil refinery, owned by MOL Rt. The loan, with a 15-year maturity period, will cover approximately half of the required investment costs of the necessary technical upgrades. With a proper mix of tax incentives and stricter regulations, refineries will have to look more actively for the necessary funding. To this end, it will be necessary to improve the ability of refineries to attract investors.
Vehicle Fleets	Another obstacle to the phase-out of lead in gasoline is the structure of vehicle fleets, which in the SILAQ countries are characterized by a fairly high average age, low turnover rates, and a relatively high share of vehicles with soft exhaust valve seat engines, which are generally believed to require lead lubrication. As for the latter concern,commercially available alternative lubricants not based on lead already exist. Some countries have already introduced gasoline with potassium or sodium-based lubricants (e.g., Slovakia's phase-out, or Aral in Hungary), and experiences with these have been successful. Moreover, there is evidence that many cars previously thought to need leaded gasoline can operate using unleaded gasoline.

CASE STUDY: Slovakia
The success of the Slovak Republic in the fast phase-out of lead from gasoline was facilitated by a number of related policy initiatives introduced at an early stage. The process of lead content reduction in gasoline produced at the Slovnaft Refinery occurred in three stages: The period to 1988; production of unleaded gasoline began with technological improvement and a resulting reduction in lead content from 0.25 g/l in 1986 to 0.15 g/l in 1989; 1989-1991; further development oriented to more complex crude oil processing with the aim of maximizing output and increasing the production of unleaded gasoline; The period following 1992; the creation of conditions that saw the exclusive production of unleaded gasoline in 1992, and the installation of a unit for the isomerization of light naphtha (C5-C6 hydrocarbons). The octane number was raised from RON 70 to RON 84, without any increase in the aromatic content in gasoline. At the beginning of the lead phase-out process, the main factor preventing the increased consumption of unleaded gasoline was the state of the car vehicle fleet in the Slovak Republic. The only possible solution was the application of an adequate additive, and as a result, the additive ANABEX® 99 was developed by Slovnaft VURUP. The availability of this additive transformed the UNI series of unleaded gasoline into a universal gasoline for the whole car fleet. Simultaneously, conditions established in Slovakia (from the beginning of 1995) permitted the distribution of unleaded gasoline only. The relatively smooth and complete transition process to unleaded gasoline was accomplished thanks to the use of a universal gasoline type suitable for a mixed car fleet. The success of this strategy was essentially a result of the combination of an incentive policy and a far-reaching information campaign.

Increasing Use of Catalytic Converters Another rationale to phasing out lead from gasoline is the introduction of the requirement for the mandatory fitting of catalytic converters (which can only be installed for engines using unleaded gasoline). A review of existing studies and the available information on the lead phase-out process in the EU and other West European countries shows that requirements for catalytic converters (implemented on a EU-wide level in 1993) help to gradually increase the market share of unleaded gasoline, although this development was further supported by the use of appropriate tax incentives. However, for the SILAQ countries, with low vehicle turnover rates, the impact of the requirement for converters alone is not sufficient to significantly increase the market share of unleaded gasoline, and the process needs to be driven by other policy components. Among other things, an appropriate tax differentiation system will have to be introduced to ensure that the higher manufacturing cost for unleaded gasoline is not reflected by the higher pump price of unleaded gasoline at the gas station.

Awareness Raising Awareness raising measures will have to be widely used to overcome the lack of information among the public as to a vehicle's ability to use unleaded gasoline. This is particularly important for that segment of the vehicle fleet which can use both leaded and unleaded gasoline. Mass media information campaigns and brochures available at gasoline stations and vehicle technical control centers are possible means to raise awareness to the rationale and benefits from the phase-out of lead in gasoline.

Further Studies Based on the findings presented in this Report, further steps will have to be taken the SILAQ countries in the following areas:

Public information and outreach campaigns concerning the use of unleaded gasoline in older types of cars;
Awareness raising regarding the health benefits of lead phase-out;
Exchanges of experience with other countries phasing out leaded gasoline;
Needs assessments for the development and use of non-lead lubricating additives;
Research into the feasibility of the use of unleaded gasoline in cars with soft exhaust valve seats;
Ensuring access to the necessary financing schemes and sources for refinery modernization;
Technological development of refineries;
Introduction and enforcement of vehicle emissions and gasoline standards;
Introduction and modernization of the control system for the periodic technical inspection of vehicles;
Implementation of the requirement for the fitting of cars with catalytic converters and other pollution-control devices;
Development of production and distribution systems for improving the supply of unleaded gasoline and lubricating additives;
Implementation of policy incentives (e.g., taxes, pricing) to increase the market share of unleaded gasoline and accelerate complete phase-out of leaded gasoline;
A requirement for the phase-out of lead in negotiations during the privatization of refineries.
To implement some of these actions, the assistance of government and public organizations from within the EU and other industrialized countries, such as the US or Japan, will be sought.


Increasing Use of Catalytic Converters	Another rationale to phasing out lead from gasoline is the introduction of the requirement for the mandatory fitting of catalytic converters (which can only be installed for engines using unleaded gasoline). A review of existing studies and the available information on the lead phase-out process in the EU and other West European countries shows that requirements for catalytic converters (implemented on a EU-wide level in 1993) help to gradually increase the market share of unleaded gasoline, although this development was further supported by the use of appropriate tax incentives. However, for the SILAQ countries, with low vehicle turnover rates, the impact of the requirement for converters alone is not sufficient to significantly increase the market share of unleaded gasoline, and the process needs to be driven by other policy components. Among other things, an appropriate tax differentiation system will have to be introduced to ensure that the higher manufacturing cost for unleaded gasoline is not reflected by the higher pump price of unleaded gasoline at the gas station.
Awareness Raising	Awareness raising measures will have to be widely used to overcome the lack of information among the public as to a vehicle's ability to use unleaded gasoline. This is particularly important for that segment of the vehicle fleet which can use both leaded and unleaded gasoline. Mass media information campaigns and brochures available at gasoline stations and vehicle technical control centers are possible means to raise awareness to the rationale and benefits from the phase-out of lead in gasoline.
Further Studies	Based on the findings presented in this Report, further steps will have to be taken the SILAQ countries in the following areas: Public information and outreach campaigns concerning the use of unleaded gasoline in older types of cars; Awareness raising regarding the health benefits of lead phase-out; Exchanges of experience with other countries phasing out leaded gasoline; Needs assessments for the development and use of non-lead lubricating additives; Research into the feasibility of the use of unleaded gasoline in cars with soft exhaust valve seats; Ensuring access to the necessary financing schemes and sources for refinery modernization; Technological development of refineries; Introduction and enforcement of vehicle emissions and gasoline standards; Introduction and modernization of the control system for the periodic technical inspection of vehicles; Implementation of the requirement for the fitting of cars with catalytic converters and other pollution-control devices; Development of production and distribution systems for improving the supply of unleaded gasoline and lubricating additives; Implementation of policy incentives (e.g., taxes, pricing) to increase the market share of unleaded gasoline and accelerate complete phase-out of leaded gasoline; A requirement for the phase-out of lead in negotiations during the privatization of refineries. To implement some of these actions, the assistance of government and public organizations from within the EU and other industrialized countries, such as the US or Japan, will be sought.

REC * PUBLICATIONS * PHASE-OUT OF LEADED GASOLINE * CONCLUSIONS AND RECOMMENDATIONS