Green for Europe 

The main impact on the lubricants sector is expected to be through the review of the Energy Tax Directive. Lubricants are currently included in the directive at a zero rate, as they are typically not expended by the application, unlike fuel. 

The Union of the European Lubricants Industry is leading the policy work on the review of the Energy Tax Directive. UEIL’s position is to retain the status quo in having lubricants included in the directive but at the zero rate, which is a precedent already accepted by European policymakers. Any change to this could impact the price of lubricants throughout the bloc.

Lubricants may also be affected by a proposed carbon border tax, introduced to harmonize pricing between products made by manufacturers based inside the EU and those outside. This may affect imports of finished lubricants, additives or base oils into the EU, although the impact of imports from countries with existing free-trade agreements, such as Japan, Singapore or South Korea, is less certain.

Acting as a carbon shield, the carbon border tax would be introduced from 2021, based on average prices in the EU emissions trading system – currently around €25 per metric ton – and designed to be a disincentive to those exporting countries that have more lenient climate policies and thus cheaper production costs. There would also be rebates for domestic production for export. As an anti-dumping measure, the tax would level the playing field between domestic and foreign producers. Any application of tax also has the potential to increase domestic consumer prices as increased costs are passed down the supply chain to the end user.

French President Emmanuel Macron has already proposed an energy tax at higher rates than the tabled EU-wide carbon border tax. According to the French Economic Observatory, the average French household’s carbon footprint is 24.5 tons per year, 37 percent of which comes from goods imported from outside the bloc that are currently not subject to a carbon tax. In total, the OFCE estimates that France could make up to €3 billion in revenue from the border tax. It would also cost taxpayers three times less than Macron’s previously proposed climate-energy levy and lead to consumers substituting imported products for domestically produced equivalents without an appreciable impact on the household budget.  

The European Automobile Manufacturers’ Association launched the EU auto industry’s “10-point plan to help implement the European Green Deal,” in which the 16 major automobile manufacturers set out how carbon emissions can be further reduced in the most effective way. ACEA believes that carbon-neutral road transport is possible and can be achieved by 2050, but it will require significant and lasting change over the next few decades.

According to ACEA, there is an urgent need for a dense network of passenger car and commercial vehicle charging points and refueling stations, to be rolled out across the EU to support the deployment of alternatively powered vehicles. The data shows that the EU needs to move from close to zero public truck charging points to 90,000 over the next decade. For road freight transport in particular, “We urgently need Europe to introduce binding commitments for the deployment of at least 37,000 charging points, 50 hydrogen filling stations and 750 LNG stations suitable for heavy-duty vehicles already by 2025,” said Henrik Henriksson, chairman of ACEA’s commercial vehicle board and CEO of Scania.

The cost impact of infrastructure for alternatively powered vehicles will be huge, while  many EU countries will be dealing with the lasting impact of Covid-19. Alongside the challenge for governments, original equipment manufacturers will have to fund significant investment in new technology for zero-emission vehicles, whilst forecasting a decline in volume sales. The average age of vehicles on Europe’s roads is steadily increasing, exacerbated by the lingering impact of the 2008 recession, low economic growth, Brexit uncertainty and now coronavirus. New low-emission technologies are expensive and are likely to remain so as further innovation is required. But if OEMs pass these costs onto consumers, the uptake of new vehicles is likely to be delayed further. 

Individual government incentive schemes could have a major impact on users of both passenger cars and commercial vehicles. In the United Kingdom, for example, the scrappage allowance offered by London’s transport authority assists smaller companies in updating their vehicles to meet low emission zone standards. Up to £7,000 is available to small businesses that scrap older vans and replace them with a Euro 6 vehicle, or up to £9,500 if an electric vehicle is chosen. London’s Mayor Sadiq Khan also announced plans to help heavy goods vehicle operators upgrade to less polluting vehicles. Details are still being finalized, but it is expected to be a grant of around £15,000 for each polluting truck, up to a maximum of three vehicles.   

Still, lubricants have a role to play in helping to solve the emissions issue and are themselves not the problem. They support energy efficiency, the reduction of emissions and conservation of fuel.

Andrew Goddard is chairman of VLS, an association established to validate and verify the technical specifications and performance claims made on lubricant products.