Gas Fuel for Motor Vehicles

HL Deb 22 March 1999 vol 598 cc1124-38

1.54 a. m.

Lord Steel of Aikwood rose to ask Her Majesty's Government what steps they will take, in the interests of the urban environment, to encourage the growth in use of gas fuel for motor vehicles.

The noble Lord said: My Lords, when I tabled this Question I was assured by the powers that be in my own Whips' Office and elsewhere that it would probably come on before half-past six. In my naivety I thought that meant half-past six last night, not half past six in the morning. But here we are discussing this rather important issue at two o'clock in the morning. That is partly because we had a Statement earlier and partly because of the very important debate we had on European matters. Bearing in mind the agreement reached by the House recently on the report of the Procedure Committee that Members taking part in a set debate should at least stay for the winding up speeches, I have noticed that at least two Members—there may have been others—who made lengthy speeches indicated that they had no intention of staying. It seems to me that the alternative on these occasions is to withdraw one's name from the List of Speakers in the interest of the proceedings of the House, but there we are. I feel particularly sorry for the Minister who is to reply, the noble Lord, Lord Whitty, who must be feeling very uncomfortable with his recent injury and at being kept up at this late hour. I apologise on behalf of others for that inconvenience.

A little noticed part of the Chancellor's Budget was a tax reduction of 29 per cent. on road fuel gas while, as everybody knows—particularly those who were in central London today—other fuels suffered a whacking increase. There was an increase of 4.25 pence a litre on leaded petrol; 3.79 pence on unleaded petrol; ordinary diesel went up 6.14 pence; and ultra low sulphur diesel by 2.79 pence. In answer to my Question, I suppose the Government would argue that the Budget is itself encouragement for the use of road fuel gases in motor vehicles.

I must admit that my interest in this topic is very recent. Like most noble Lords, I have been concerned at the unhealthy pollution of the air in our cities. One has only to cross the road in Parliament Square from the building which I used to inhabit, which is the Commons' external office building to the main Chamber, to get a very high dose of poisonous fumes. Apart from the unhealthy nature of that pollution we are also increasingly aware of the cumulative effect of global warming.

It was only when I went with the all-party motor industry group on a recent visit to Buckingham Palace where the Royal fleet of motor cars have been pioneers in gas conversion, that I discovered how far behind the United Kingdom is compared with other countries. For example, Italy heads the league table with 1.4 million gas-fired vehicles on its roads. Australia has nearly half a million, North America 440, 000; Argentina has 400, 000 and the Netherlands 360, 000. Even little New Zealand has 25, 000 gas-fuelled vehicles on its roads. Unless the Minister has a new figure, Britain lags well behind any of these with only 3, 500 vehicles. So it cannot be said that, whatever steps successive governments have taken so far, they have had any major effect.

There are problems in advocating the use of gas-fuelled vehicles. The main one is the present costs. It takes over £3, 000 to convert the average private car or van to use gas as well as ordinary fuel. I commend three manufacturers and in particular Vauxhall Motors and close behind, Ford and Volvo who offer dual fuel installations from new at a rather lower cost of under £2, 000. The Government offer environmental grants towards these extra costs and they are used mainly by fleet owners. The cost for each individual vehicle is still substantial and the money which the Government offer in the way of environmental grants is cash limited. The two measures which the Government are taking are the tax on the fuel itself plus the grants. As I say, from the comparative figures internationally it is quite clear that the combination of tax incentive and grants is not enough.

A second problem in the use of gas is the amount of storage space taken up by the extra gas tanks. Most vehicles on the roads of Britain today are equipped to run on gas, petrol or diesel at the flick of a switch. On huge machines such as refuse collectors that does not matter, but the average private car can lose up to half its boot space—not everybody has Rolls Royces the size of Her Majesty's. The solution of course is to have vehicles running solely on gas with storage replacing the space occupied by the fuel tanks. I noticed that the Duke of Edinburgh has just taken delivery of a new taxi cab fuelled solely by gas for use in London to replace his dual-fuel one.

That brings me to the third and main problem and the reason why I tabled this debate; namely, the lack of filling stations. It is a chicken and egg dilemma. Owners will not buy gas-fuelled vehicles until there are enough retail outlets for refuelling them; and manufacturers will not provide outlets for refuelling until there are enough vehicles to use them. That is why it is up to the Government to break that difficult cycle.

I urge the Government to introduce legislation, or at any rate to encourage local authorities and other public operators to require buses and taxis in our major cities, to replace existing vehicles with gas-fuelled ones. That would automatically result in far more refuelling sites and a great reduction in city pollution. London has nearly 20, 000 taxi cabs, plus all the belching buses. Those taxi cabs, I understand, are replaced at the rate of roughly 20 per cent. each year so that, if such a measure were undertaken, they would be replaced in around five years' time entirely by gas-fuelled taxi cabs. All our major cities would benefit. For example, Edinburgh has some 1, 200 taxies. That is not pie in the sky. In Japan almost all taxis in the entire country are gas-fuelled and the city of Vienna has been using gas-fuelled buses for three decades without a single mishap, and now its entire fleet of 400 buses runs on gas.

My noble friend Lady Thomas of Walliswood will outline some of the steps taken by the Liberal Democrat-controlled council in Sutton. The fact is that some local authorities have pushed forward by using gas-fuelled vehicles themselves. Much more could be done, not just with buses and taxis but with those agencies which are directly controlled by the Government; for example, the Post Office and the police authorities. And what about the Government car pool? I know that a start has been made, but it would be interesting to hear the latest figures from the Minister.

I have not mentioned in this debate and deliberately have not dealt with the question of electric vehicles; their technology is still uncertain. But the technology for the use of gas is already proven and widely used internationally. However, one problem on which I should like to hear the Minister concerns the choice between the two different gases. LPG is currently the most viable alternative fuel for everyday vehicles because CNG requires the storage of gas at higher pressures and current tank technology requires the use of heavily pressurised tanks for CNG. The range in that is more limited in comparison to LPG. On the other hand, it may be that the CNG available resources are stronger and it would be helpful if the Government could give some kind of policy guidance or direction on that issue.

On 23rd December last the Government issued their response to the Royal Commission on Environmental Pollution's 20th report, and agreed with the commission about the benefits of gas as a road fuel. But the question is: what are they constructively going to do about it to change these appallingly low figures? It would be in the interests of the nation's health if they were to make further moves. Gas produces 48 per cent. less carbon monoxide than petrol; 78 per cent. less oxides of nitrogen than diesel; 87 per cent. less particulate matter than diesel; and 20 per cent. less carbon dioxide than petrol. The use of gas could cut global warming overall by 9 per cent. compared with diesel and by 17 per cent. compared with petrol. For the sake of the health of us all, the Government need to take more urgent measures to encourage its use.

2.6 a. m.

Baroness Thomas of Walliswood

My Lords, I am grateful to my noble friend Lord Steel of Aikwood for raising a subject not often discussed in your Lordships' House, even in the context of frequent general transport debates. I spent last Friday and Saturday in Liverpool and Manchester, studying their traffic control plans and actions.

In Manchester, a large light railway system has been introduced and the hope is that it will be extended. Liverpool is moving into the contracting process for a rather less expensive method of rapid transit-guided buses. Both systems are designed to tackle pollution or congestion by transferring journeys from cars to another mode and have proved quite successful—certainly in the case of Manchester.

Gas-fuelled or electric-powered cars are a totally different way of tackling not just air pollution but noise pollution. My noble friend referred to the efforts made in Sutton to promote zero-emission vehicles. That borough has used its own purchasing power to create a market for gas-fuelled vehicles. Sixty vehicles are either in use or soon will be, ranging from small vans to refuse collection vehicles and welfare buses.

The success of that borough and of other boroughs and cities in Europe that are contributing to the Zeus project is evidenced by the reducing price of some vehicles for conversion to gas power. The proportion of the Sutton fleet that is fuelled by natural gas is about 37 per cent. When more replacements have been made, that will rise to 40 per cent. next year and to 47 per cent. in 2002. The borough is making itself into an exemplar of how to change a fleet from one type of fuel to another.

The cost to the local authority has been rendered acceptable by the grants it has received. The programme supports the council's policy aim of reducing the environmental impact of local traffic and is supplemented by the installation of a gas refuelling station that is said to be the largest in the country. My noble friend referred to the necessity of introducing vehicles and refuelling stations at the same time. That project and the financial support for it has been made possible by the Zeus project, which has secured funding from DG7 and contributions from the Energy Saving Trust in this country. Zeus involves cities and towns throughout Europe. Margareta Olofsson, the vice-mayor of Stockholm, described the project at a conference in Brussels last June. She said: Zeus is a demonstration project comprising the activities of eight European cities in buying, using and evaluating zero and low-emission, low-energy vehicles … Zeus focuses on the role that cities can play in facilitating a shift from private, fossil-fuel based transportation to cleaner, more energy-efficient transport … Zeus includes a number of different fuels and vehicle types, from buses to small cars, to pedal power to passenger vehicles, to waste and other specialty vehicles. We have natural gas, both CNG and LPG, electric vehicles, ethanol and RME". The city of Bremen is, interestingly, comparing the various national policy frameworks for achieving environmentally friendly transport, including such matters as fiscal regimes, clean air policies and traffic regulations.

Clearly the Chancellor's reduction of tax on vehicle gas in the Budget is part of a national policy stance. I should be interested to hear—as I think would many others who will be able to read it tomorrow—if the Minister could tell us more about the specifics of the policy approach which lies behind this initiative. For example, what estimates has the DETR made of the relative contribution of a wider use of low or zero emission vehicles to reducing pollution from vehicles compared with other policy options such as the ones in Liverpool and Manchester? What goals and targets do the Government have in relation to the wider use of such vehicles? What additional mechanisms might encourage their wider adoption?

It is clear that the local authorities involved with the Zeus project see themselves as major players in creating a market in low emission vehicles. Do the Government also accept such a role for national government? On the lines of questions asked by my noble friend, how far have the Government taken their own programme of vehicle replacement by zero and low emission vehicles?

I have on a number of occasions expressed my conviction that it is not enough to rely just on local authorities to take all the initiatives and the risks and to initiate the new programmes that will lead eventually to a more environmentally friendly transport system. It is for government to lead. The Government indicated their general willingness to do so in their White Paper. I hope that tonight, in respect of gas-fired vehicles, the Minister will be able to enlighten us as to how the Government see themselves pursuing this lead in practice.

2.12 a. m.

The Earl of Winchilsea and Nottingham

My Lords, I, too, am grateful to my noble friend for introducing this topic, which seems to be often and strangely overlooked in the UK, in sharp contrast to many other countries around the world.

The use of natural gas, either LPG or CNG already in use in this country as a fuel for vehicles, is lamentably and laughably low. There are some highly commendable exceptions such as Royal Mail and the Gas Board, and indeed some government cars are being run on it. I am delighted to hear about the London Borough of Sutton. However, public service vehicles lag way behind.

Some noble Lords will know of my longstanding connection with the licensed taxi trade. Both the manufacturers of dedicated taxis in the UK—London Taxi International in Coventry, and Metrocab in Tamworth—have undertaken extensive research into this important subject. This has resulted in considerable engineering developments being made by both of them, and this continues. I spoke to the person at Metrocab who has been working on this project since its inception, Stephen Ferris, and he told me that Metrocab has been working closely with the Ford Motor Company on a two-litre petrol/LPG engine for some time, and it is available now for installation in its taxis on the production line. As my noble friend said recently, it delivered a gas-powered taxi to Buckingham Palace for use by Prince Philip as his regular car.

London Taxi International has looked at both the natural gas possibilities, LPG and CNG, and has had one of its taxis plying for hire on the streets of London for years running on LPG with the tank stored in the boot. It delivered me to your Lordships' House one day. But it is the only one. It would seem from what I have been told by Metrocab that it makes much more sense for cars, vans and taxis to run on LPG rather than CNG because of the time it takes to fill the tank, always supposing you can find a garage that has this facility. Apparently it takes less time to fill a tank with LPG than it does to fill a taxi tank with diesel, but it takes far, far longer to fill the same size tank with CNG. I was also told that the achievable mileage on a tankful of either gas is not quite what it would be with diesel or petrol because the tank can only be filled to 80 per cent of its capacity due to gas expansion.

However, this should not be a major worry to potential operators providing the many advantages of natural gas are encouraged and advanced. Steps could be taken now to achieve this. First, we need to create the market place for the encouragement of natural gas as a viable alternative fuel. Surely every garage forecourt should have an LPG filling point; surely LPG should carry no tax whatsoever and not just marginally less than diesel, as I believe is the present case. That is a negative approach instead of a positive one; a stick to beat rather than a carrot to wave.

Perhaps it could be said that vehicles of all types running on natural gas can do so better and more economically in metropolitan areas rather than in rural districts because of the much longer distances involved. But, wherever they run, surely they must be given the very highest of incentives by the Government. Surely if the Government are serious about doing something about our damaged environment—I believe they are— what could be a better way of showing it than giving their support to this as a matter of urgency.

For many years I have been receiving in my post publications from London Transport called London Lines and On The Move. I am sure other noble Lords are familiar with them. Never have I seen in any of them even a passing reference to natural gas as a possible fuel for any of its buses. I wonder why this is so. The publications are full of articles entitled "Into the Millennium; The Future of London's Buses", which talk about the grand plans it has, but there is not a mention anywhere about natural gas. Not only do I think this astonishing, but very alarming.

I can understand the difficulty of using natural gas on double-decked buses because where does one put the large fuel storage tanks required? They certainly could not go on the roof as they do elsewhere in the world where they are used on single deckers. But they certainly could be used to great effect on the large numbers of single-deck buses operating in London and elsewhere at present.

This brings me to the city of Atlanta in the USA. I go there two or three times a year and I have noticed that it runs considerable numbers of its buses on natural gas. I spoke to its bus procurement officer on Friday to find out what I could. He told me that it has a total of 750 buses in its fleet; 118 run on CNG and it has a further 82 on order with the manufacturers, Nu-Flyer of Winnipeg, Manitoba, which has another factory in the USA at Minnesota. So heavy is the demand for these buses, and so successful are they, that there is a two-year waiting list for them. MARTA—which stands for Metropolitan Atlanta Rapid Transit Authority—is so delighted with them that it is seriously thinking whether instead of splitting its order for 206 new buses between 82 gas-powered and 124 diesel-powered it should not go for all 206 being gas-powered. As all its buses are single-deckers, the fuel tanks are on the roof and are filled when the vehicle returns to the depot at the end of its shift. The operating costs for CNG and diesel buses are about the same but gas-powered buses cost 40, 000 to 50, 000 dollars more than the conventional ones. However, this is reduced by a massive 80 per cent., the amount which is covered by the Federal Government in Washington, which leaves MARTA only liable to cover 20 per cent. of the total outlay, not just 20 per cent. of the additional costs. So for each bus powered by CNG which it orders, it has to find only 65, 000 dollars, or roughly £40, 000, in total itself. Surely this is the yellow brick road that we should be travelling down as well.

If we are to continue to enjoy the luxury of having our own individual transportation tin box at our instant disposal, we must be prepared to pay the environmental price. We have not begun to do that. By this I do not mean charging the motorist more in taxes than he already pays. I mean the lead being taken by the Government in aggressively encouraging the use of natural gas as a vehicle fuel. Whatever we do needs to be done quickly. Otherwise it will simply be too late to save our tottering environment.

2.20 a. m.

Lord McNair

My Lords, like my two noble friends who have just spoken, I am grateful to my noble friend Lord Steel for raising this important matter. I should also like to draw attention to the stellar performance on these Benches on this matter.

My personal experience of LPG goes back to the 1970s when I had a Ford Popular engine running a three-phase generator which I attached to a propane cylinder. It was a simple conversion and it worked very well. So I have my personal recommendation to add to the words of my noble friends.

When I decided to speak in the debate, I contacted Shell because I wanted to find out whether a massive conversion of buses to LPG would unbalance the production and supply of LPG and other petroleum products. It appears that that is unlikely. Sixty-two per cent. of our LPG comes direct from the gasfield where it is found in conjunction with methane, which itself requires enormous compression to liquify and thus is not so suitable for the application we are discussing tonight. But 3 to 4 million tonnes of LPG are exported from the United Kingdom annually and would be available for use in buses in this country. The balance of 38 per cent of the UK's production of LPG is produced in refineries where it represents about 5 per cent. of the total contents of the barrel. There is in fact huge scope for increasing the production and consumption of LPG. That certainly has the support of Shell, but I have not spoken to other oil companies.

The Budget was good for LPG in general, but apparently not so good for bus operators in particular. The reason for this, which I think I understand, is that, although the rebate on the duty on LPG is 100 per cent., the problem is that in terms of volume per calorific value it is a much lighter fuel than even low sulphur diesel and so operators of LPG-powered buses find themselves still at a disadvantage vis-à-vis diesel buses. In Germany, the government have recently introduced an adjustment of fuel duty that slants the figures favourably in the direction of LPG.

I am told that there are between 400 and 500 LPG-powered buses in the European Union, but at present only two in the United Kingdom. We are lagging behind, but not for long I hope. At Watford, Arriva has ordered seven LPG-powered buses and London and General has ordered three. Several have been ordered for Scotland.

What is needed by the bus operators from government is rather more enthusiastic capital support for changing over from diesel to LPG. Daf has produced an 8.6 litre spark ignition engine which is a modification of an existing diesel engine. Since diesel engines operate at a much higher compression ratio than petrol engines, a spark ignition engine using a diesel engine block should prove to be very reliable and long lasting.

I shall be interested to hear what the Minister has to say and to see what the Government will do in answer to my noble friend's Question.

2.25 p.m.

Lord Redesdale

My Lords, I begin by thanking my noble friend for initiating this debate, even at this late hour. It is one of the few debates in which I have taken part in which I can be so friendly with all those who have spoken before me. Most of those concerned about this issue are speaking from these Benches.

My interest in natural gas vehicles was sparked as a result of my membership of the Science and Technology Committee and the report that we produced on low emission vehicles. It seemed that the only realistic solution for low emission vehicles in the short term had to be natural gas. The recent reduction in tax on gas fuels in the Budget is most welcome. It indicates that the Government have recognised the merits of gas fuels in reducing vehicle pollution.

It is important to define gas fuels natural gas as the gas that we receive through the mains into our home. Liquid petroleum gas (LPG) comes as a by-product from the petrol refining process. Natural gas in vehicles can take two forms: compressed natural gas and liquefied natural gas (LNG). I should declare an interest as I am currently president of the Natural Gas Vehicle Association. However, I assure the Minister that it is a non-pecuniary position.

I distinguish between LPG and natural gas because there are different levels of emissions, performance, availability and costs. LPG is mainly used in the conversion of petrol engines, and can show improvements in emissions over petrol. The fuel in natural gas vehicles, on the other hand, has a high octane rating—100 to 125—and is low in volatile organic compounds, making it ideal for reciprocating engines and thus an appropriate fuel for vehicle and engine manufacturers to optimise reductions in emissions.

It is appropriate to consider natural gas as the third global fuel, alongside petrol and diesel for worldwide usage. It is the most realistic and practical solution to reducing vehicle pollution, as was pointed out by my noble friend Lady Thomas, and is available worldwide.

Before turning to the environmental benefits, perhaps I may explain the other benefits of a strong home market for natural gas vehicles. With some 1, 200, 000 natural gas vehicles now in operation, the worldwide growth in such vehicles is expected to exceed 25 million over the next 15 years. Will British industry be in a position to compete—I put that question to the Minister— considering the difficulties that the British motor manufacturing industry is facing? I refer, for example, to the present position of Rover.

UK manufacturers and development centres have more than demonstrated the advanced technology that is present here in the UK. Yet by comparison with countries such as Germany, Sweden, Italy, the United States and Japan, the number of natural gas vehicles on the road is very small. For British technology and industry to compete in this new and expanding global market, there need to be economies of scale resulting from greater uptake at home.

The development work in this industry has continued to produce significant improvements. The cost of vehicle and refuelling infrastructure is high. That is due in part to the sophistication of the technologies and to diseconomies of scale.

An evaluation undertaken in January this year by an independent test house on manufacturers' warranted vehicles compared diesel, LPG and natural gas. The results again demonstrated the very significant reductions in emissions and the contributions that NGVs make to improving air quality and to a reduction in global warming.

Such is the level of reduction in emissions from passenger cars to heavy goods vehicles and buses that NGVs are capable of achieving considerably lower emissions than any other fuels and are well within those proposed in the Euro 4 standards for 2005. It means that we can have that level of improved air quality now. It is interesting to consider what would be the reduction in NOX and particulates in London's atmosphere if all the taxis and buses were converted today.

I mentioned earlier the high cost of entry for natural gas vehicles and refuelling stations which I believe must be addressed in the way the Government provide incentives to encourage greater take-up of NGVs. The economics are not yet right for the natural gas vehicle; therefore attention needs to be given to establishing the cost benefit of NGVs based on emissions., business opportunities and reduced balance of payments, for example. An appropriate differential over other fuels is needed and, sustainable over a period of time, will help to encourage investment in their use and for the vehicle manufacturers to do likewise.

Setting the fuel duty for natural gas at the EU minimum for a sustained period of five years would be a significant recognition of the major contribution NGVs will make to improving air quality. One of the problems I foresee is that in the future we will be using a lot more natural gas vehicles, but unfortunately due to the hesitancy of the Treasury in producing the economic incentives for taking up the technology, the UK will lag behind. That will have a detrimental effect on the people who live in London, in urban areas, especially those who suffer from asthma.

2.30 a. m.

Earl Attlee

My Lords, I am grateful to the noble Lord, Lord Steel of Aikwood, for asking this fascinating Unstarred Question. I am glad that he widened it to include CNG and LNG. I am only sorry that we are not joined tonight, or rather this morning, by his noble friend Lord Ezra who has in the past been active in promoting this technology. Indeed, it was the noble Lord who encouraged me to attend a conference organised by the Natural Gas Vehicles Association. It is an organisation now being graced by the presidency of the noble Lord, Lord Redesdale.

The noble Lord, Lord Steel, raised the problem of the lack of gas filling stations. While I am extremely sympathetic and attracted to gas vehicles, I am not sure that I would like to follow the noble Lord's route of compulsion to run certain vehicles on gas. I believe that it would be far more preferable to lay down exactly what pollution limits, including noise limits, would apply to certain vehicles. The limits may become tighter and tighter as technology improves. The Euro 1, 2 and 3 are good examples of this process and the noble Lord, Lord Redesdale, referred to Euro 4.

I am not convinced that it is wise for the Government to differentiate between the three main gas fuels, other than to set emission limits applicable to all gas-powered vehicles.

As many noble Lords have rightly observed, the taxation environment in which gas-powered vehicles operate is as important as their benefit to the environment in which they operate. The Chancellor, in his recent Budget Statement, reduced the duty on gas for CNG, LNG and LPG and we welcome it. The signals that the Government send out and their reception by operators are important. I share the view of the noble Baroness, Lady Thomas, regarding the need to encourage private operators and not just the public sector. But can the Minister say whether the rate of duty is now at the EU minimum and if not, how much duty would the Chancellor be forgoing if it were?

Another important component of the signal to operators is the differential between fuel costs when taking into account fuel duty, VAT and fuel consumption. Operators of vehicles and filling facilities need to be sure that this differential will be maintained for the whole life cycle of the vehicle or filling station equipment. That point was made by the noble Lord, Lord Redesdale, and others.

One of the major advantages of gas-powered vehicles is their much lower emissions of particulates, CO2 emissions and, most importantly, noise. I think that particularly for urban operations, it is important to remember that the emissions, including noise from diesel engines on start up from cold, are nowhere near as good as for gas engines.

Many noble Lords have concentrated on cars or car-derived vans, but I have been speaking to manufacturers and operators of larger vehicles. Enthusiasm and experiences appear to be mixed. What is clear is that vehicles built to run on gas by an original equipment manufacturer (OEM) are much more reliable than a conversion. OEMs will make a judgment as to whether to offer a gas-engined option if they are certain about the lifecycle costs to which I have already referred. The noble Earl, Lord Winchilsea, referred to an OEM (Ford Motor Company) offering an original fit.

The maximum benefits of gas will be obtained from use in urban and return-to-base operations, which obviously obviates the need for a petrol tank as well. Unfortunately, the economic benefits arising from lower duty rates may not be compelling because of the low mileages that these vehicles cover. Thus, the lower running costs may not repay the extra investment required for gas. Therefore, encouragement needs to be given by the vehicle excise duty regime. That point was covered in the consultation document, Reform of Vehicle Excise Duty to Ensure a Cleaner Environment. The noble Lord, Lord Redesdale, explained why government policy is important to exporters in our manufacturing industry. I support his comments in that regard.

What is the view of the Minister as to the appropriate balance between the encouragement of gas-powered vehicles through VED, fuel duty and VAT? Does he agree that the arrangements overall should be tax-neutral? Alternatively, does he have available some other mechanism to offset the higher capital costs of a gas-powered vehicle?

The Unstarred Question of the noble Lord, Lord Steel, is important. It is unfortunate that it could not be taken at a more convenient time, as he had hoped. I look forward to the Minister's reply to the noble Lord's suggestion about compulsion to choose gas for certain vehicles.

2.37 a. m.

The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty)

My Lords, like the noble Earl, Lord Attlee, and the noble Lord, Lord Steel, all of us hoped that this debate could have taken place earlier. The first line of my speech refers to this as a timely debate. In a macro sense that may be true but in a micro sense it does not really feel like it. Nevertheless, I thank the noble Lord, Lord Steel, for introducing this interesting debate and pay tribute to the level of expertise and commitment demonstrated by noble Lords who have contributed to it. We are all very much aware that air pollution and how we deal with it is today a central issue of public concern. This Government are heavily committed to improving the quality of the air we breathe. As soon as we were elected we endorsed the national air quality strategy but on the basis that it would be reviewed at the earliest opportunity with a view to delivering it more quickly.

It is true that road transport is responsible for a significant proportion of air pollution, especially in urban areas. Over 90 per cent. of all London's carbon monoxide emissions and three-quarters of benzene emissions come from road transport. Road transport, in particular diesel vehicles, are also responsible for a significant proportion of pollutants for which objectives will be most difficult to meet, in particular nitrogen dioxide and particulate matter. Even the significant emission reductions arising from the introduction of tighter emission standards will not be sufficient to meet the objectives for these pollutants at all levels. That is why the Government are very keen to encourage the early introduction of cleaner vehicles. We envisage road fuel gases such as LPG and CNG having an important role to play in reducing emissions. Those fuels clearly offer significant environmental benefits. Gas-powered vehicles can also considerably reduce particulate emissions and, to a lesser extent, emissions of nitrogen oxides. In addition, as the noble Baroness, Lady Thomas, indicated, they are quieter than diesel and petrol vehicles.

It was for all these reasons that the Chancellor introduced in the Budget a 29 per cent. reduction in the duty on road fuel gases, it having been frozen in his previous two Budgets. This cut, coupled with the real increase in diesel duty also announced in the Budget, means that the differential in favour of gas vehicles has never been greater. Indeed, that differential is now the biggest in Europe. As the noble Earl, Lord Winchilsea, indicated, it is not a marginal difference.

Earl Attlee

My Lords, the reason that the differential is the greatest in Europe is simply because our diesel fuel is at a very high rate. But that is a minor point. Can the Minister confirm whether we are at the EU minimum for duty on gas fuels?

Lord Whitty

My Lords, the position at present is that we are at 15p. The minimum is 6.8p in sterling, so we are not at the minimum. But that is not the point. The point is indeed the differential. The noble Earl is correct. As we heard today, we are committed to increasing the price of diesel and seek to achieve a greater efficiency in road transport. That is part of a total strategy. It is true, therefore, that fuel prices in this country at present are somewhat higher than elsewhere because we are perhaps more committed than other governments to using fiscal measures to ensure reduction of pollution. The differential between diesel and gas fuel is an important feature. The differential is important. It is not possible, as the noble Earl, Lord Winchilsea, suggested to put it at a nil rate because of the European directive. But the differential matters.

These measures should send a clear signal to fleet operators, oil companies and retailers and motor manufacturers about the Government's belief in the viability of a sustainable road fuel gas market in this country.

Nevertheless, despite all the advantages of gas fuelled vehicles referred to by the noble Lord, Lord Redesdale, and others, LPG and CNG are not the only show in town. There are other fuels and new vehicle technologies which potentially offer significant environmental benefits, especially in the longer term. The emerging hybrid electric and fuel cell vehicle technologies are one example. Technological development in this area recently has been rapid, with hybrid electric production models already entering the market in some parts of the world. These vehicles offer not just air quality and noise benefits, but crucially they have substantially lower CO2 emissions than conventionally powered vehicles, a factor which is becoming increasingly important in relation to achieving Kyoto targets.

It is also true that there have been further advances in conventional fuel and vehicle technologies—they will come on stream in the not too distant future—so that we have cleaner, more efficient vehicles, using conventional fuels in the market place. For example, we are already seeing the considerably cleaner ultra low sulphur diesel becoming the more standard fuel and being sold at forecourts across the country as a result in part of the introduction of duty differential in its favour. And the environmental performance of conventionally powered vehicles is likely to be improved with even tighter emission standards for new vehicles introduced at European level beyond 2005.

That is why the Government's objective is not to prescribe particular fuels or vehicle technologies. As the noble Earl, Lord Attlee, indicated, the aim is to set stringent environmental goals and then support all those technologies which can meet those goals in a cost effective way. There is not one solution to all our environmental problems. One fuel or vehicle technology may be appropriate for one situation; another may be appropriate for a different situation.

The key to creating a sustainable market for cleaner fuels and better vehicle technology involves our supporting moves in a wide range of different situations. That is why my department has been funding Powershift, a programme designed to establish sustainable markets for alternative fuelled vehicles across Britain. That programme helps private and public sector fleets with the additional purchasing costs of gas powered vehicles among others. Over 1, 000 alternative fuelled vehicles have now been purchased with the assistance of Powershift grants. My colleague, John Reid, the Minister of Transport, announced last October that the programme will go forward. The focus of the programme will remain on supporting gas powered vehicles. But as this market becomes more sustainable, it is anticipated that in future there will be a shift towards sustainable markets also for electric: vehicles, hybrid electric, and, eventually, fuel cell vehicles.

A number of questions were asked about how far we can go in converting fleets and how rapidly the public sector in particular should move. Questions were asked also about the relative benefits of CNG and LPG in the gas fuel area. The general position is that CNG is better for larger vehicles, and LPG vehicles can be refuelled more quickly and therefore are better suited, as the tax example indicated, to light duty vehicles such as cars and vans.

It is true, as the noble Lord, Lord Steel, made clear at the beginning, that our market has developed more slowly in that area than it has in many other countries. That is partly because the beneficial tax regime has been in place for a shorter period of time. As the Chancellor indicated, it requires a sustained period of fiscal signals for that to be built up.

However, on the latest DVLA estimate, there are 9, 000 gas-powered vehicles in the UK, although the noble Lord indicated that the figure was 3, 500. There are a significant number of electric vehicles, although they are still mostly milk floats. That is not exactly the cutting edge of technology, but nevertheless we are getting there.

In terms of the public sector, several noble Lords referred to the London Borough of Sutton, even in the absence of the noble Lord, Lord Tope. The London Borough of Sutton is one of a number of councils which have committed themselves to alternative fuels. That includes the London Borough of Southwark, which has electric and gas-powered vehicles and vans. In the City of Coventry I recently drove an electric car which is being acquired for the city's fleet. Just to make the matter completely trans-party, Westminster City Council is also involved with those projects. So there is quite a commitment on the part of local authorities. Although this was slow getting off the ground, it is now moving quite rapidly.

As regards central Government, 33 cars have already been purchased and there are another 22 on order. It is not a viable option to convert existing cars, but as they are being replaced the balance is being shifted increasingly onto gas-fuelled cars. The largest departmental fleet—the Department of Social Security—announced just last week that it would be purchasing more than 200 new LPG vehicles this year. All departments are looking at those options.

The noble Lord, Lord Steel, mentioned police authorities. Humberside Police is planning to convert 450 police cars to LPG and there are also moves in Hampshire and some other police authorities.

As regards London buses and taxis, the situation is not so clear-cut. It is true that gas vehicles offer environmental benefits but there are benefits also in improving the technology in relation to conventional fuels. For example, taxis running on ultra low sulphur diesel and fitted with oxidation catalysts may also offer similar environmental benefits at a lower cost than conversion to LPG. All London buses now use ultra low sulphur diesel and many older buses are being re-engineered to improved emission standards.

Nevertheless, we understand that London Transport is having trials of gas-powered buses in some areas of London. No doubt the balance of technologies will achieve a substantially cleaner fleet for London Transport very soon.

Therefore, we have a range of commitments in the public sector and elsewhere and a range of technologies in relation to which we wish to use fiscal and other measures to develop. Noble Lords are correct to say that the infrastructure does not exist at present and there are serious problems as regards developing that infrastructure. We are looking at that aspect as well as the vehicle aspect of introducing those new technologies.

We have established a cleaner vehicles taskforce which is considering what further measures are needed. We are expecting the first report of that taskforce later this spring. It is sure to make some key recommendations in that area.

The Government have already indicated commitment to road fuel gases by cutting the duty on them in the Budget and by giving greater certainty to the market through initiatives such as power shift.

By committing ourselves to reducing pollution across the board and supporting the various different fuel and vehicle technologies which achieve that, we have indicated our intention to pursue this as a high priority as part of our transport policy. However, it is not just a matter for government, nor just for the public sector. It is also important that government locally and nationally, the manufacturing industry and the operating industry, continue to work together to ensure that we take full advantage of all the new technologies to achieve the environmental benefits we all desire.

I thank noble Lords for their contributions to the debate. If there are any points I have not covered I shall attempt to do so in writing. I think it is probably about time that we packed up for today. Nevertheless, once again I thank the noble Lord, Lord Steel, for initiating the debate.

House adjourned at eleven minutes before three o'clock.