Fuel Standard (Petrol) Determination 2001 and the Fuel Standard (Automotive Diesel) Determination 2001

Regulation Impact Statement
Environment Australia, 2001

4. Options

This RIS analyses two options for national fuel quality standards. The initial proposal for the standards was presented in a public discussion paper released for consultation in May 2000 and is discussed as Option 1 below . After analysis of the 35 submissions received and further consideration of the issues raised, the Commonwealth prepared a revised set of fuel standards which was released to key stakeholders in September 2000. Option 2 is based on the Commonwealth's revised position with a number of further amendments to the standards which were incorporated to address issues raised by fuel importers. These two options by fuel type (petrol and diesel) and by fuel parameter (characteristic) are summarised in Table 1 below. The Euro 2, 3 and 4 standards are also shown in Table 1, for comparison.

The options presented address only those 'environmental' parameters that have been identified as having a direct impact on emissions or new vehicle emission control technologies. There are a number of other parameters in both petrol and diesel which directly affect the efficient operation of the engine and, if not controlled, could lead to engine malfunction. These parameters are being addressed in a separate Commonwealth process for developing 'operability' standards for petrol and diesel.

In considering options for introducing fuel standards, the Commonwealth examined European Union fuel standards (known as Euro 2, Euro 3 and Euro 4) with a view to harmonising new Australian fuel standards with international standards. However, a set of guiding principles was incorporated to ensure that any standards proposed were applicable to the Australian context. These guiding principles are:

  1. Fuel standards are intended to manage those fuel qualities/parameters that are known to have the potential to impact adversely on the environment.
  2. Fuel standards should be compatible with relevant international or internationally accepted standards in order not to impede competition and trade.
  3. Fuel standards are intended to be mandated and implemented on a national basis. In particular, fuel standards that are technology enabling must apply nationally. Local environmental circumstances may, however, dictate variation within the national standard to achieve environmental outcomes.
    • Consideration will be given to State by State establishment of fuel standards that address airshed specific environmental conditions, however, in such cases a national standard will be determined as a default.
  4. Fuel standards will apply to, and be enforced equally in respect of, imports as well as domestically produced petroleum fuels.
    • Fuel standards must not impede competition, either between Australian refiners, or with imported refined product.
  5. Fuel standards that directly address environmental or health issues will be determined on the basis of Australian-specific requirements. In such instances, harmonisation with European specifications may be neither necessary nor desirable.
  6. The timetable for the introduction of new fuel standards will be based on Australian requirements. Harmonisation, in terms of timing, will not be based on European or any other regional timetable, except where there is a previous policy decision to this effect or the standard is technology enabling and the need for such harmonisation is clearly demonstrated.
  7. Consideration will be given to setting standards that provide, as far as possible, flexibility in terms of compliance.
    • Flexibility provisions must not impede competition or trade; and
    • flexibility provisions must not add significantly to legislative/regulatory complexity or implementation/enforcement costs to Government.

The two options were assessed in light of three principal selection criteria. The suite of standards recommended would need to, as far as possible:

  • provide harmonisation with international standards ie 'Euro' standards;
  • satisfy the objectives of the seven guiding principles ( to ensure that any fuel standards selected were appropriate for the Australian context; and
  • provide a balance between environmental objectives and the capacity of the refining industry to supply cleaner fuels.

Table 1: Proposals for fuel quality standards compared with Euro fuel standards

PETROL
Parameter Euro 2, 3 and 4 Option 1 Option 2
Sulfur 1993: 500 ppm (Euro 2)
2000: 150 ppm (Euro 3)
2005: 50 ppm (Euro 4)
All grades:
1 Jan 2002: 150 ppm
1 Jan 2005/6: 50 ppm
1 Jan 2008: 30 ppm
ULP:
1 Jan 2002: 500 ppm
PULP:
1 Jan 2002: 150 ppm
LRP:
1 Jan 2002: 500 ppm
All Grades:
1 Jan 2005: 150 ppm
Research octane number (RON) 1993: 95 RON (min) (Euro 2, 3) 1 Jan 2002
ULP 91 RON (min)
PULP 95 RON (min)
As for Option 1
Motor octane number (MON) 1993: 85 MON (min) (Euro 2, 3) 1 Jan 2002
ULP 81 (min)
PULP 85 (min).
No standard proposed.
Reid vapour pressure 1993: 8 classes specified
(Euro 2)
2000 60 kPa min (Euro 3)
2005: 55 kPa min (Euro 4)
All Grades
1 Jan 2002: 67kPa
(Default standard only where States/Territories do not regulate.)
No standard proposed.
Distillation (FBP) 1993: 215°C max (Euro 2): 2000: 210°C max (Euro 3) 1 Jan 2005: 210°C (max) As for Option 1
Olefins 1993: No standard for E2: 2000 (Euro 3):
ULP:21% max
PULP: 18%
All grades:
1 Jan 2002 18% max by vol
1 Jan 2005 - 16% max by vol
All grades:
1 Jan 2004 - 18% pool average over 6 months with a cap of 20%.
1 Jan 2005 - 18% max by vol
Aromatics 1993: No standard for E2: 2000: 42% max (Euro 3)
2005: 35% max (Euro 4)
All grades:
1 Jan 2002: 45% max by vol
1 Jan 2005: 42% max by vol
1 Jan 2008/10: 38% max by vol.
All grades:
1 Jan 2002: 45% pool average over 6 months with a cap of 48% 1 Jan 2005: 42% pool average over 6 months with a cap of 45%
Benzene 1993: 5% max (Euro 2)
2000: 1% max (Euro 3)
All grades
1 Jan 2002: 3% max by vol
1 Jan 2005: 2% max by vol
All grades
1 Jan 2006: 1% max by vol
Lead 1993: 0.013 g/L max (E2)
2000: 0.005 g/L max (E3)
2005: 0 g/L max (E4)
All grades
1 Jan 2002: 0.013g/L (max)
1 Jan 2005: 0g/L
All grades
1 Jan 2002: 0.005g/L (max)
Oxygen content 1993: No E2 standard
2000: 2.7% m/m max (E3)
All grades
1 Jan 2002: 2.7% (max) by mass
All grades
1 Jan 2002: 2.7% (max) by mass (no ethanol)
Phosphorus No Euro standard set No standard proposed ULP and PULP
1 Jan 2002: 0.0013g/L (max)
Octane enhancers See table 5    
DIESEL
Parameter Euro 2, 3 and 4 Option 1 Option 2
Sulfur (max) 1993: 500 ppm (Euro 2)
2000: 350 ppm (Euro 3)
2005: 50 ppm (Euro 4)
1 Jan 2002: 500 ppm
1 Jan 2006: 50 ppm
1 Jan 2008: 30 ppm
31 Dec 2002: 500 ppm
1 Jan 2006: 50 ppm
1 Jan 2008: To be revisited in 2002
Cetane Index 1993: 46 (min) (Euro 2)
2000: 46 (min) (Euro 3)
2005: 52 (min) (Euro 4)*
1 Jan 2002: 47 (min) index
1 Jan 2006: 50 (min) index
1 Jan 2002: 46 (min) index
Density 1993: 820-860 kg/m3 (E2)
2000: 845 kg/m3 max (E3)
1 Jan 2002: 820 to 850 kg/m3
1 Jan 2006: 820 to 845 kg/m3
1 Jan 2002: 820 to 860 kg/m3
1 Jan 2006: 820 to 850 kg/m3
Distillation T95 1993: 370 (max) (Euro 2)
2000: 360 (max) (Euro 3)
2005: 340 (max) (Euro 4)*
1 Jan 2002: 360°C (max)
1 Jan 2006: 350°C (max)
1 Jan 2002: 370°C (max)
1 Jan 2006: 360°C (max)
Polyaromatic hydrocarbons (PAHs) 1993: No Euro 2 standard
2000: 11% m/m max (E3)
2005: 4% m/m max (E4)*
1 Jan 2006: 11% m/m (max) As for Option 1
Ash and suspended solids 1993: 100 ppm max (E2)
2000: 100 ppm max (E3)
1 Jan 2002: 100 ppm (max) As for Option 1
Viscosity No Euro standard 1 Jan 2002: 2.0 to 5.0 cSt @ 40°C 1 Jan 2002: 2.0 to 4.5 cSt @ 40°C

* These values are indicative only and have not yet been set. They were agreed by the consultants together with Australian Institute of Petroleum (AIP) members as reasonable choices in the absence of formal specifications for the purposes of modelling under the Fuel Quality Review.

4.1 Option 1 - Preliminary Commonwealth Position

The Commonwealth's preliminary position was released as Discussion Paper 2: Proposed Standards for Fuel Parameters (Petrol and Diesel) as part of a series of three discussion papers released in May 2000 to facilitate consultation on the setting of national fuel quality standards. The preferred Commonwealth approach in the preliminary position was developed on the basis of harmonisation, over time, with the United National Economic Commission for Europe (UNECE) fuel specifications and the set of guiding principles referred to in section 4 above.

As Table 1 shows, Option 1 for diesel would provide:

  • diesel fuel specifications by 1 January 2002; and
  • harmonisation with Euro 4 diesel by 1 January 2006.

For petrol, it would ensure:

  • harmonisation with Euro 2 petrol specifications by 1 January 2002;
  • harmonisation with Euro 3 petrol by 1 January 2005; and
  • harmonisation with Euro 4 petrol by 1 January 2008/2010.

The report of the Review of Fuel Quality Requirements for Australian Transport (Fuel Quality Review) which was undertaken by Coffey Geosciences Pty Ltd, provided a valuable set of information in developing the Commonwealth's initial proposal.

4.1.1 Advantages and disadvantages

A number of aspects of the Commonwealth's initial proposal for fuel quality standards caused considerable concern for stakeholders, particularly the proposed sulfur and benzene levels. This concern related mainly to the refining industry's capacity to meet the proposed standards in the timeframe specified in light of the significant investment that would be required.

Importers also expressed concern that the standards would limit the supply of fuel from the Asia-Pacific region and proposed the use of pool averaging for olefin levels in petrol to provide some flexibility in meeting the standards. They also raised concerns about the implications of banning the use of MTBE as an octane enhancer which is used widely by Asian refineries to meet octane requirements.

On the other hand, other stakeholders expressed concern about the standards not being tight enough and referred to the health effects of benzene and also sulfur levels required for the effective operation of new emissions control technology. Particular concern was expressed by those State environment agencies that have already introduced standards, about the potential for Commonwealth standards to override more stringent State-specific standards resulting in a worse environmental outcome in these jurisdictions.

This option would provide earlier harmonisation with Euro 3 fuel standards and the tighter specifications would facilitate the early introduction of new emissions control technology. However it would have an adverse impact on the domestic refining industry's capacity to provide fuel that meets the specified standards. The proposed timetable for the introduction of sulfur and benzene standards in 2002 would result in insufficient time for the required investment to upgrade plant and could ultimately threaten supply from domestic refineries.

Further technical advice and an improved understanding of the effects of fuel on engine operation also revealed that some of the standards proposed under this option were not appropriate eg standards for motor octane number (MON) in petrol and cetane number in diesel.

4.2 Option 2 - Revised Commonwealth Position

In light of stakeholder feedback and further clarification on a number of technical issues, the initial proposal for the standards was further considered by the Commonwealth Steering Committee and a number of the standards were revised. Not all the standards have been revised as there was general agreement to the initial proposal for some parameters (eg polyaromatic hydrocarbons, and ash and suspended solids in diesel).

In general terms the revised position (Option 2) harmonises:

  • petrol standards with Euro 2 in 2002 and Euro 3 in 2005; and
  • diesel standards with Euro 2 in 2002 and Euro 3 in 2006 (except for sulfur in diesel which harmonises with Euro 4 in 2006).

Exceptions to this approach occur where:

  • standards have been set to lock in air quality gains already achieved by current industry performance;
  • flexibility is required in the transitional period (2002 to 2005/6); and
  • Australian market needs differ from those in Europe eg there is less of a demand for premium unleaded petrol (PULP) in Australia than in Europe.

4.2.1 Advantages and disadvantages

Option 2 places fewer demands on the refining industry in that, with the exception of sulfur content of diesel in 2006, it does not require the adoption of Euro 4 standards. It nevertheless manages the parameters required to facilitate the introduction of Euro 3 petrol vehicle emissions standards in 2005 and Euro 4 diesel vehicle standards in 2006. At the same time, it accommodates existing State legislation already in place to ensure that environmental gains from more stringent standards are not lost (for example, the Western Australian regulation reducing Benzene levels in petrol to 1% v/v from January 2001).

This option, however, will result in a slower reduction of harmful emissions than would have been achieved with the more stringent standards proposed under Option 1. While the Government's primary objective in mandating fuel quality standards is to reduce the adverse effects of motor vehicle emissions on urban air quality, human health and to reduce greenhouse emissions, there needs to be a reasonable balance with what the local refining industry can actually achieve.

While the Downstream Petroleum Products Action Agenda has acknowledged that rationalisation of the Australian refining industry would assist in making the industry more economically viable and internationally competitive, it is important to ensure that regulating fuel quality on a national basis does not result in the premature closure of refineries before rationalisation can occur.

Option 2 nevertheless requires a greater reduction in benzene emissions in 2006 and locks in current Australian capability to produce low olefin petrol from 2005. While there will be additional costs to importers in sourcing the cleaner fuels, it is considered that these impacts are balanced by the additional investments required by domestic refiners to meet the standards. In order to allow importers additional time to finalise current contracts and renegotiate future petrol supplies that meet the standards, the timing for the introduction of the olefin and MTBE standards was extended to 2004.