1. Calor Gas Ltd. is a major supplier of the environmentally friendly road fuel gas, LPG. LPG is officially recognised as a "green" fuel in the UK. LPG now fuels most of the Government's Car and Despatch Agency vehicles. John Prescott, Secretary of State for the Environment, Transport and the Regions welcomed the change as a "Clear message to motor manufacturers and fuel suppliers that we need to make sure that our transport needs reflect our need to protect the environment" (17 November 1997). There is a healthy market for LPG in countries with a favourable policy framework—there are 400,000 LPG road vehicles in Holland, 1 million in Italy, 350,000 in the USA and 330,000 in Australia. In France, there are tax exemptions for buses, taxis and company cars running on LPG—there are expected to be 150,000 LPG vehicles on the road by the end of 1998. The world-wide market consists of 4 million vehicles running on LPG. By the end of 1998, there will be only 7,780 LPG vehicles in the UK; the UK lags behind in the move to this environmentally friendly fuel. The White Paper reiterates support for road fuel gases but there remains an "implementation gap" between policy aims and achievement of those aims. Specific examples of how advances towards those aims could be made are explained below.

  2. The White Paper addresses air quality problems, reiterating the outline of the National Air Quality Strategy—NAQS (page 124ff). There is a promise of a revised NAQS by the end of 1998. The NAQS has acknowledged "policy gaps"—current policies are insufficient to reduce SO₂ and NO₂ to target levels. We feel that the contribution which LPG could make to filling these policy gaps has not been acknowledged. Government measures, fiscal and otherwise, to encourage use of road fuel gases have not yet proved robust enough to create a viable significant self-sustaining market. Further measures, not necessarily involving lost revenue, are required to stimulate road fuel gas consumption. Calor will make an appropriate Budget submission.

  3. "UK Environmental Accounts 1998" published by the Office of National Statistics highlighted certain "sustainability gaps" between the current level of consumption of natural capital and the environmentally sustainable level of same. The output of pollutants contributes to the consumption of natural capital. There are, for instance, sustainability gaps for CO and PM₁₀ in Belfast; benzene and NO₂ in London; and, SO₂ in Belfast and Liverpool, LPG could contribute, then, to resolving "policy gaps" and "sustainability gaps" given its good emission profile on CO, PM₁₀, SO₂ and NO₂. We hope that the revised NAQS will begin to fill the policy gaps by factoring in, for the first time, the potential contributions road fuel gases could make.

  4. Chapter 4 discusses the contribution which duty differentials on fuels can make to environmental improvements. Paragraph 4.123 specifically mentions the encouragement given to road fuel gases by freezing their duty levels.

  5. MarketLine International's report this year—"UK Alternative Fuel Vehicles"—estimated a potential UK LPG vehicle parc by 2003 of 524,066. "The fleet sector is expected to be the starting point for the growth and development of alternative fuel vehicles in the UK car parc" (ibid. Page 82). It is important that the overall policy package to encourage LPG is guaranteed to last at least five years so that fleet owners have the confidence that their investment will not prove to be nugatory because of arbitrary Government action. An earlier surge towards LPG in the 80s halted because of a Government decision to raise duty levels on the fuel.

  6. The point about clear and stable Govnerment policy appears to be recognised as the quotes below would indicate, but as yet no Government commitment has been given to maintain the policy stance for at least five years:

  "The Government considers that it has set in place a substantial package of measures, particularly the commitment on the duty differential, which should provide certainty to users and suppliers of road fuel gases" (Treasury Supplementary Memorandum to the Environment, Transport and the Regions Select Committee, June 1998).

  "How and what Governments tax sends clear signals about economic activities that they believe should be encouraged or discouraged . . . People want a clear message. I think it is the obligation of Govnerment to deliver that clear message" (Dawn Primarolo MP, Financial Secretary, 29 April 1998, giving evidence to the ETR Select Committee). This is a point also made by the Royal Commission on Environmental Pollution 20th Report (paragraph 8.23).

  "Transparency. . . leads to increased certainty about Government policy-making and its impact on the economy, so that people and businesses can plan for the future with greater confidence" (HM Treasury Pre-Budget Report, November 1997).

  7. Chapter 4 also holds out the prospect of incentivising cleaner emissions by VED concessions. Calor Gas welcomes any such concessions but would point out that it is not necessarily the smallest cars which are relatively speaking the least polluting (paragraph 4.125 refers).

SUMMARY

  A. The potential contribution which the environmentally friendly fuel, LPG, could make to identified policy and sustainability gaps has not been factored into the NAQS; Government measures to encourage LPG have not yet been robust enough to cause the market to move towards its potential of over 500,000 LPG vehicles by 2003.

  B. The greatest potential for a shift towards vehicles and a cleaner environment lies amongst fleet operators. Fleet operators will need the assurance of a stable Government policy framework for at least five years before they are willing to risk large-scale investment. Government should be prepared to give that commitment.