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China's Fuel Standards
International Oil Daily (29 Oct 2004)

CHINA: As its vehicle fleet grows at breakneck speed in major urban areas, China is facing huge socio-economic and environmental costs from pollution created by fuel emissions.

Many of the 20 million vehicles on the road are reportedly still at Euro 1 standards, producing some three times as much carbon monoxide and four times as much hydrocarbon and nitrogen oxides compared with cars in Europe.

To reduce pollution across the country, Beijing has set an official deadline of July 2005 for both diesel and gasoline to meet new standards modeled on Euro 2 specifications, with tighter standards based on Euro 3 due to be enforced by 2010, a Sinopec official said at a recent conference in Beijing.

Beijing itself will have Euro 3-style standards in place by 2005, in time for the Olympic Games in 2008. Chinese refineries are said to be scrambling to meet the Euro 2 standards, carrying out upgrades and modifications to supply the market.

China uses the Euro standards as a reference for its own rules. Emission standards for diesel will vary slightly for different industries depending on their classification. Diesel is divided into auto diesel, general light diesel used in agriculture and manufacturing, and marine fuel oil.

"We expect to complete our upgrading by Nov. 10 to meet the new Euro 2 standards. However, many other refiners in the country are still working on their upgrading," an executive from China's largest refiner, Sinopec subsidiary Zhenhai Refining and Chemical, told International Oil Daily.

Refining costs are expected to rise to supply Euro 3 standard transport fuels, as are retail prices. It is unclear exactly how this might affect demand, as Beijing still has price controls on fuel prices.

Chinese car ownership has grown by 80% over the past four years, encouraged partly by subsidies that make fuel cheap by international standards -- gasoline prices are roughly one-third of those in major European cities -- and partly by growing affluence (IOD Oct.22,p6).

China's per capital disposable income grew 7% in the first nine months of this year to $850, and transport expenditure rose 40% year on year, according to the latest figures from the National Bureau of Statistics.

According to local reports, municipal environmental protection agencies in Shanghai and Beijing found that 90% of the air pollution in urban cities is caused by fuel emissions. The World Bank predicts that air pollution could curb China's gross domestic product by as much as 5% due to resulting medical costs and reduction in labor productivity. One government official says that Beijing has a real social crisis on hand as a result of rising vehicle numbers and poor emission controls.

Early this month, the Guangdong Development and Reform Commission, representing one of China's largest urban areas, said it is launching a new initiative giving automakers incentives to manufacture vehicles using natural gas, and for existing car owners to convert their fuel, to reduce air pollution in Guangzhou and Shenzhen.

If successful, the initiative would be extended to the entire Pearl River Delta. The main deterrent for vehicles to switch from conventional fuels is the limited number of natural gas refueling stations.

Copyright 2004 Energy Intelligence Group, Inc.
International Oil Daily

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