National Fuel Quality Standards Regulation Impact Statement 1 ...

1 Introduction
National Fuel Quality Standards
Regulation Impact Statement
The transport sector is the single largest contributor to urban ambient air pollution. It is
also one of the largest contributors to national greenhouse gas emissions. The nature of
the problem is such that an integrated strategy, coordinating action across a number of
different areas, is required to address the issue.
The major policy directions for dealing with pollution and greenhouse gas emissions
from vehicles are: to reduce their use, to clean up their emissions and to make them more
fuel efficient. In Australia, three interrelated strategies are being implemented to ‘clean
up’ vehicle emissions. Vehicles are required to meet effective emission standards when
they first enter the market, they will be required to continue to meet effective emission
standards while they are in use; and they will be provided with the cleanest, economically
viable fuels on which to operate.
New vehicle emission standards, harmonising Australian standards with international
vehicle emission standards, were gazetted in December 1999. The quality of fuel in
Australia has been a key constraint to the introduction of new vehicle emission standards.
Emerging vehicle engine and emission control technologies, needed to meet the new
standards and help achieve reductions in fuel consumption, are affected by the quality of
the fuel used.
The Government has already made a number of policy decisions that have a direct
bearing on the future management of fuel quality. The Measures for a Better
Environment (MBE) package, announced by the Prime Minister in May 1999, included a
commitment to reduce sulfur content levels in diesel fuel, and foreshadowed sulfur
content and octane changes to the composition of petrol. The Downstream Petroleum
Products Action Agenda, approved by Cabinet and released in November 1999, advised
of the Government’s intention to have fuel specifications implemented on a national
basis. In December 1999 Cabinet directed the Minister for the Environment and Heritage
to develop Commonwealth legislation to implement national fuel standards.
2 THE PROBLEM - WORSENING URBAN AIR QUALITY AND INCREASING
GREENHOUSE GAS EMISSIONS
Transport is the most significant contributor to ambient air pollution in urban Australia,
with vehicles estimated to contribute up to 70% of total urban air pollution (NSW EPA,
1999). Motor vehicle emissions are key sources of lead, carbon monoxide and nitrogen
dioxide. They are also the major source of photochemical smog (‘ozone’) precursors.
With the exception of particles, petrol passenger vehicles are the major transport source.
Heavy diesel vehicles are also a significant source of nitrogen oxides (NOx). The diesel
fleet is the major transport source of particles, contributing up to 80% of vehicle
produced particles in major cities (NEPC, 1998).

Table 2.1 Contribution (%) of motor vehicles to air emissions in major Australian
cities
Carbon monoxide
(CO)
Hydrocarbons
(HC)
Oxides of nitrogen
(NOx)
Particulates
(PM)
70-95% 40-50% 70-80% 10-50%
Source: Coffey Partners, 1996
Recent research (Carnovale et al, 1991; James, 1994; RTA, 1994; Ballantyne, 1995;
NSW EPA, 1996c; AATSE, 1997; WA DEP, 1997) indicates that unless further action is
taken to improve the management of transport emissions, air quality is likely to decline in
the medium to long term. The principal causes will be population growth, urbanisation
and increased use of motor vehicles.
High levels of air pollutants have been shown to result in a wide range of adverse health
effects including respiratory effects, ranging in severity from coughs, chest congestion,
asthma, to chronic illness and possible premature death in susceptible people.
As shown in Table 2.2, the transport sector contributed about 16% of national greenhouse
gas emissions in 1998. Transport sector emissions rose by 18% during 1990-98. Road
transport is the largest contributor to transport emissions and makes up 14% of total
national emissions. The average rate of increase in road transport emissions over the
period 1990 to 1998 was about 2% per annum. Passenger cars contributed 9% of national
emissions, or 57% of total transport sector emissions in 1998.

Table 2.2 Greenhouse gas emissions from the transport sector in 1998
Sub-sector
Cars and
wagons
Light
commercial
CO2-e emission
Mt
Share of Transport Sector
%
40.95 56.4 8.98
9.11 12.5 2
Medium trucks 2.77 3.8 0.61
Heavy trucks 10.5 14.5 2.3
Buses 1.28 1.8 0.28
Motorcycles 0.21 0.3 0.05
Road Total 64.81 89.3 14.22
Transport total 72.61 100 15.93
National total 455.9 - 100
From NGGI 1998
2.1 URBAN AIR QUALITY
Share of National Total
%
Australia is one of the most highly urbanised countries in the world, and air pollution is a
significant issue for the community. Surveys of community attitudes have found that
environmental issues are of major concern to the public, with air pollution a key ongoing
concern (NRMA, 1996a; NSW EPA, 1994; Clean Air 2000, 1997; ANOP, 1993). While
the 1996 Australian State of the Environment Report (SoE, 1996) found that the air
quality in the cities and towns of Australia was quite good by international standards,
relatively high concentrations of pollutants are experienced in our larger cities (NEPC,
1997).
Australian national ambient air quality standards were established for the six criteria
pollutants in 1998 (see Table 2.3 below). Of these, the pollutants of current concern are
nitrogen dioxide (NO2), ozone (O3), fine particles (PM10) and, to a lesser extent, carbon
monoxide (CO).

Table 2.3 National ambient air quality standards
Pollutant
Averaging
Period
Maximum
Concentration
Carbon monoxide 8 hours 9.0 ppm
Goal within 10 years
(Max allowable
exceedences)
1 day a year
Nitrogen dioxide 1 hour 0.12 ppm 1 day a year
Photochemical oxidant (as
ozone)
Sulfur dioxide
1 year 0.03 ppm None
1 hour
0.10ppm 1 day a year
4 hours 0.08ppm 1 day a year
1 hour
1 day
1 year
0.20ppm
0.08ppm
0.02ppm
Lead 1 year 0.05 µg/m 3
Particles as PM10 1 day 50 µg/m 3
Source: NEPC, 1998
1 day a year
1 day a year
none
none
5 days a year
Concern has also recently been expressed in relation to increased ambient concentrations
of `air toxics'. These are pollutants that occur in relatively small volumes (compared with
criteria pollutants) but are considered hazardous to health or the environment. Motor
vehicle emissions have been estimated to contribute up to 80% of benzene, 57% of
toluene, 76% of butadiene, 64% of formaldehyde, 42% of polyaromatic hydrocarbons
and 57% of xylene in urban environments (EPA Victoria, 1999).
2.1.1 Health effects of urban air pollution
Ambient air quality standards are set at levels to protect the more susceptible members of
society, and significant breaches of these standards represent undesirable impacts on
community health. The most common pollutants discharged to the air are oxides of
nitrogen (NOx), carbon monoxide (CO), hydrocarbons (HC), sulfur dioxide (SO2), and
fine particles (including lead). These pollutants are largely produced by the combustion

of fossil fuels. Another significant pollutant in major urban areas is ozone (O3), a
secondary pollutant formed in sunlight by chemical reactions between NOx and reactive
hydrocarbons.
The adverse health effects, and current ambient concentrations/trends of those pollutants
with a strong linkage to motor vehicles are briefly discussed below (Grant et al, 1993;
Sivak, 1993; NEPC, 1997; NSW EPA, 1996b; Vic EPA, 1994).
Carbon monoxide (CO) Carbon monoxide is a colourless, odourless and tasteless gas
that, in high concentrations, is poisonous to humans. In sufficiently high concentrations
and long exposures, CO interferes with the blood’s capacity to carry oxygen. Exposure at
lower levels can have adverse effects on individuals with cardiovascular disease.
Exceedances of CO standards still occur in Australia’s larger cities, but the number of
events has reduced considerably over the past 10 years. The general consensus is that the
current CO levels are not of significant concern and will continue to decrease (SoE,
1996) as tighter vehicle emission standards come into effect.
Nitrogen dioxide (NO2) Nitrogen dioxide is a pungent acid gas. In the atmosphere it
may irritate respiratory systems, exacerbate asthma in susceptible individuals, increase
susceptibility to cardiovascular disease symptoms and respiratory infections, and reduce
lung function. As a precursor to photochemical smog, it also contributes to effects
associated with ozone.
The NSW Health Department’s Health and Research Program (HARP) examined the
health effects of urban air pollution (Hensley, 1996; Morgan et al, 1998). The HARP
study estimated that days of high NO2 levels were associated with: a 7% increase in
hospital admissions for cardiovascular disease; a 5% increase in childhood asthma
admissions; a 3% increase in adult asthma admissions and a 5% increase in chronic
obstructive pulmonary disease admissions.
While the number of breaches of the current NO2 standard have been low in recent years,
the formation of NO2 in the atmosphere (from nitric oxide in vehicle exhaust) is strongly
affected by seasonal weather conditions. This has lead to a number of reports concluding
that there are no clear trends in NO2 levels (NSW EPA, 1996b, Coffey Partners, 1996).
For example, in Melbourne, while the number of exceedences is low, analysis of the peak
data at the 98 percentile level (a reliable indicator of trends) concludes that a clear
downward trend is not apparent in 1 hour average NOX or NO2 data (Coffey Partners,
1996).
Ozone (O3) Ozone is a gas with strong oxidising properties. Health effects attributed to
ozone include irritation of eyes and airways, exacerbation of asthma symptoms in
susceptible people, increased susceptibility to infection, and acute respiratory symptoms
such as coughing. Ozone also has adverse effects on vegetation and other materials.
The national 1 hour ozone standard (0.10ppm) is exceeded on an annual basis in
Melbourne, Sydney Brisbane and Perth. Adelaide also experiences some exceedences of
the standard. By international standards, the maximum 1 hour ozone concentrations

ecorded in Sydney and Melbourne are comparable with cities such as Toronto, San
Diego, Philadelphia and Atlanta, and exceed those in London.
Until recently, breaches of the standard in most Australian cities have declined steadily.
However, adoption of the more stringent World Health Organisation 1 hour goal
(0.08ppm) would indicate a significantly higher number of recorded exceedences, and a
worsening upward trend. For example, in Sydney the number of exceedences in 1994,
based on 0.12ppm, 0.10ppm and 0.08ppm goals, were 2, 12 and 25 days respectively
(NSW EPA, 1996a). A 1 hour standard of 0.08ppm is the current goal in Western
Australia, and has been identified by NSW as a long term objective (NSW EPA, 1996b).
Fine particles (also referred to as particulate matter or PM) Respirable particles,
those with a diameter of less than 10 µm (PM10), are a particular health concern because
they are easily inhaled and retained in the lung. Almost all of the particles in diesel
exhaust are less than 1 µm in diameter (Concawe, 1998), and diesel particles also adsorb
unburnt hydrocarbons and other potentially carcinogenic organic compounds such as
polycyclic aromatic hydrocarbons. The International Agency for Research on Cancer has
concluded that diesel exhaust is a probable human carcinogen (California Air Resources
Board 1994), and the California Air Resources Board has proposed that diesel exhaust be
classified as a toxic air contaminant (California Air Resources Board, 1998).
Although the mechanisms are not clear, epidemiological studies in the US and elsewhere
consistently show a relationship between particles and a range of respiratory,
cardiovascular and cancer related morbidity and mortality (Concawe, 1996; Ballantyne,
1995; NEPC, 1997). The NSW HARP study estimated that
particle pollution contributed to nearly 400 (2%) premature deaths in Sydney each year
between 1989 and 1993. The study also estimated that days of high particle
concentrations were associated with a 3.5% increase in hospital emissions for
cardiovascular disease, a 3% increase in chronic obstructive pulmonary disease hospital
admissions, and a 3% increase in heart disease admissions in the elderly.
Measurements of PM10 in urban areas indicate that levels are well below current US EPA
standards, but can exceed Californian standards, with annual average levels being around
25 to 40 µg/m 3 and peak 24-hour average levels around 90 to 110 µg/m 3 . Particle
concentrations vary with season, higher values occurring in the autumn/winter months. In
areas where wood smoke from domestic fires dominates, particle levels higher than 150
µg/m 3 (as a 24-hour average) have been recorded on occasion.
2.2 GREENHOUSE GAS EMISSIONS
Scientific evidence points to a discernible human influence on global warming and
climate. There has been a 30% increase in the amount of carbon dioxide in the
atmosphere since the beginning of the industrial revolution, mostly arising from burning
fossil fuels. The earth's temperature has increased during the same period and is now
warmer than at any time during the last 420,000 years.
There are also other effects on climate such as decreasing number of days with frost and
changes to the frequency and intensity of el nino episodes. Though the complex

interactions with the terrestrial and marine ecosystems are not fully understood, the
changing climate is affecting these systems. The long-term impacts of increased levels of
greenhouse gas emissions include:
- rising sea levels, causing flooding of low-lying areas, significant impacts on coastal
ecosystems and other damage;
- shifting climatic zones (and thus ecosystems and agricultural zones) towards the polar
regions;
- new climatic stresses affecting forests, deserts, rangelands and other ecosystems leading
to adverse impacts on biodiversity;
- changes in rainfall patterns, with decreases in rainfall expected for many regions of
Australia leading to changes in water supply and agricultural productivity; and
- effects on infrastructure and human health with consequential impacts on the insurance
and finance industries.
Under the Kyoto Protocol to the United Nations Framework Convention on Climate
Change (as agreed in December 1997 and signed by Australia on 29 April 1998),
Australia is committed to a target for national greenhouse gas emissions of 8% above
1990 levels by 2008-12. This represents about a 30% reduction against current business
as usual projections of greenhouse gas emissions for the period 2008-12.
The 1998 National Greenhouse Gas Inventory indicates that from 1990 to 1998 national
transport emissions grew by 18%. In 1998 the transport sector was the third largest
contributor to national greenhouse gas emissions, with about 16% (72.6 Mt) of
Australia’s net emissions. Road transport is the largest contributor to transport emissions
(89%) and makes up 14% of total national emissions. Emissions from passenger vehicles
predominate, but light commercial vehicles are a fast growing source. Passenger cars
contributed 9% of national emissions, or 57% of total transport sector emissions in
1998.The outlook for greenhouse gas emissions from the transport sector continues to be
of serious concern. Without reduction measures, emissions from the transport sector are
predicted to increase by 38% above 1990 levels by the year 2010.
2.3 GOVERNMENT INTERVENTION
Government intervention is necessary because of the mechanism used to manage
tailpipe emissions. Mandatory vehicle emission standards are established as
Australian Design Rules (ADRs) under the Motor Vehicle Standards Act 1989. The
gazettal of new, tighter emission standards effectively requires vehicle
manufacturers to adopt new vehicle and emission control technologies. Existing
Australian fuel quality is a constraint to the effective functioning of many of these
new technolo
Government intervention will ensure that any fuel standards are applied equally in respect
of imports as well as domestically produced petroleum fuels and are compatible with

elevant international or internationally accepted standards to ensure that competition and
trade are not impeded.
3. OBJECTIVES
3.1 PRIMARY OBJECTIVE
An objective of Government health and environment policy is to reduce the adverse
effects of motor vehicle emissions on urban air quality, human health, and enhanced
greenhouse effect. 3.2 SECONDARY OBJECTIVES
The Government also has as objectives: a) the harmonisation of Australian vehicle
emission standards with international standards; and b) the national availability of
petrol and diesel of appropriate quality to allow the effective adoption of new
vehicle engine and emission control technologies.
These Government objectives are outlined in three policy statements: Safeguarding the
Future: Australia’s Response to Climate Change(1997), Measures for a Better
Environment (1999); and the Downstream Petroleum Products Action Agenda (1999).
The Prime Minister’s 1997 statement, Safeguarding the Future: Australia’s Response to
Climate Change sets out an Environmental Strategy for the Motor Vehicle Industry. The
objective of the strategy is threefold - to enhance the environmental performance of the
automotive industry; to reduce air pollution and improve the health of our cities; and to
reduce greenhouse gas emissions. The adoption of new and emerging vehicle engine and
emission control technologies is central to Government objectives with respect to the
improved management of both noxious and greenhouse gas emissions.
The Measures for a Better Environment package was announced by the Prime Minister in
May 1999 as part of the New Tax System for Australia. It consists of a series of
initiatives, many of them directed at the transport sector, to improve the management of
noxious (air pollutant) and greenhouse gases. It establishes a timetable for the
introduction of internationally harmonised vehicle emission standards and foreshadows
changes to the composition of transport fuel. Diesel specifications identified in Measures
for a Better Environment include a minimum standard of 500ppm sulfur in road transport
fuel from the end of 2002 and the introduction of a "mandatory fuel standard of 50ppm
(through a NEPM, equivalent legislative device or by use of the definition in the diesel
fuel credit scheme) in 2006". It also noted the requirement for high octane and low sulfur
levels in petrol. High-octane petrol enables higher thermal efficiencies to be achieved,
while low sulfur content is essential for the deployment of advanced fuel efficiency
technologies, such as direct injection, both of which help achieve reduced fuel
consumption.
The Measures for a Better Environmentpackage also introduced the Alternative Fuels
Conversion Program designed to facilitate the conversion or purchase of heavier
commercial vehicles and buses operating on compressed natural gas (CNG) and liquified
petroleum gas (LPG); and the Diesel and Alternative Fuels (Grants) Scheme designed to
maintain the relative equivalence of diesel and alternative fuel prices after July 2000.
While the alternative fuels program does not relate directly to measures designed to

enhance the quality of conventional fuels, they are clearly associated with Option 5 of
this statement, which is based on a wider use of alternative fuels.
The Downstream Petroleum Products Action Agenda was released in November 1999.
The Agenda identifies the Government’s strong preference for the development of
nationally consistent fuel specifications, noting that there are "clear competition benefits
from having a nationally consistent approach to fuel standards". It also advises that the
Government will ensure that fuel specifications apply and are enforced equally to imports
and domestically produced fuels.
4 ANALYSIS OF OPTIONS
This section outlines the seven potential options for reducing vehicle emissions, and
improving the quality of petrol and diesel fuel in Australia;
Option 1 - Business as Usual
Option 2 - Industry Agreements Option 3 - State Regulation
Option 4 - National Environment Protection Measure
Option 5 - Wider use of Alternative Fuels
Option 6 - Limiting Vehicle Travel
Option 7 - Commonwealth Regulation
Each option has been evaluated using the following criteria:
* provision of a nationally consistent approach to fuel quality standards;
* consistency with preceding Government policy decisions on this matter;
* assurance that appropriate fuel is available in line with the timetable for the
implementation of new vehicle emission standards ADRs; and
* no restriction on competition and trade.
4.1 BUSINESS AS USUAL (Option 1)
Fuel quality in Australia is currently largely unregulated. The introduction of unleaded
petrol in 1985 (to support the introduction of new emission control technology needed to
meet the emission standards specified in ADR 37/00) saw the majority of States and
Territories introduce limited regulations addressing petrol composition in terms of lead
content.
Fuel standards have, however, been developed for diesel and petrol by Standards
Australia. They are AS 3570 - Automotive Diesel, and AS 1876 - Petrol. These
‘standards’ have no legislative basis, but are rather industry guidelines whose main
purpose is to specify compositional requirements that are consistent with engine
development and reliable vehicle operation. As such, they cannot be considered to

address environmental issues (ie the reduction of harmful emissions from the use of the
fuel) except indirectly. The Australian Standards address a number of fuel properties not
generally considered significant in terms of emissions management, while omitting others
known to be significant in this respect. In addition, these standards do not deal adequately
with fuel specifications required for the deployment of advanced engine and vehicle
technologies that would facilitate the delivery of reduced fuel consumption by vehicles.
4.1.1 Advantages and disadvantages
The current system does not provide for national consistency in terms of fuel
composition. The actual properties of petrol and diesel fuel produced by each Australian
refinery differ between refineries and, to a variable extent, from the specifications in the
Australian Standards (Appendix 1). Little information is available on the quality of
imported fuel.
In 1998, Environment Australia commissioned Coffey Geosciences Pty Ltd to undertake
a Review of Fuel Quality Requirements for Australian Transport to inform the process
for developing fuel quality standards. The Review modelled the air quality outcomes (in
terms of emissions reductions) from a range of scenarios, including a Business as Usual
(BaU) option. It found that there would be substantial improvements in air quality over
time from harmonisation with European fuel standards. For some pollutants, reductions
of up to 60% in emissions are predicted over the BaU option for the period 2000 to 2020.
Modelling results showed clear differences in emissions reductions over time from the
vehicle fleet between BaU (Scenario 1) and increasing compliance with Euro fuel quality
standards (Scenarios 2-6).
For example, under the BaU scenario, emissions of fine particulate matter are estimated
to decrease by 10% as the current ADRs take effect, and then to increase again from 2010
as diesel vehicle use grows. In relation to oxides of nitrogen, the projected improvement
in emissions under BaU is estimated as a 17% reduction between 2000 and 2010 as the
ADRs take effect, while compliance with Euro standards gives estimated reductions of
approximately 34% for the same period.
The investment necessary on the part of the existing Australian refineries to meet tighter
fuel specifications varies considerably, but is in all cases significant. The majority of the
refineries, whose profit margins are already reduced due to the state of the global market,
are unlikely to voluntarily undertake the investment necessary to produce low sulfur fuels
within the timeframe set by the new vehicle emission standards ADRs.
The announcement by the Commonwealth Government of the Measures for a Better
Environmentinitiative, which foreshadowed changes to the sulfur content of petrol and
diesel, has led to a number of States introducing or proposing to introduce State-specific
fuel quality legislation. This has already taken place in Western Australia and
Queensland. As noted earlier this appears likely to result in different standards in
different jurisdictions. There are associated competition problems with this approach -
raising effective barriers for refiners and importers to interstate markets and raising
compliance costs.

Summary
A business as usual approach will not provide for a nationally consistent approach to fuel
quality standards. The lack of national standards would also result in Government policy
decisions set out in the Measures for a Better Environment tax package not being
implemented.
Furthermore, the option does not guarantee that the appropriate fuel will be available in
line with the timetable for the implementation of new ADRs, and the uptake of Statespecific
legislation has the potential to restrict competition and trade across jurisdictions.
INDUSTRY AGREEMENTS (Option 2)
A Memorandum of Understanding (MoU) concerning the vapour pressure of petrol is
currently in place between the NSW Government and NSW based refiners and importers.
(The vapour pressure of petrol is an important element in controlling photochemical
smog or ozone.) This arrangement appears to have operated satisfactorily, and to have
been an important component of the local air quality management strategy.
The Measures for a Better Environment initiative included a number of actions to
promote the early introduction and use of low sulfur diesel before the introduction of
mandatory standards. One of these measures was identified as "negotiation with the oil
majors on the early voluntary introduction of diesel at 500 ppm in urban areas in 2000, on
a best endeavours basis".
It was proposed that this measure could be met through the development of a national
MoU between the Commonwealth and State and Territory governments and domestic oil
refiners and importers. Consultations with all stakeholders were undertaken and a draft
MoU was prepared. After seeking legal advice, however, the oil majors advised that they
were not able to enter into the proposed MoU due to potential competition problems. As a
result a number of States proceeded to develop State-specific legislation.
4.2.1 Advantages and disadvantages
There is evidence that voluntary agreements between government and industry can be
used to address specific air quality issues associated with fuel composition. It has,
however, not been possible to adopt this approach on a national basis, and to expand it to
cover a wide range of different fuel quality parameters, due to concerns on the part of the
industry itself.
Such agreements have substantial benefits in that industry effectively self-regulates -
thereby reducing administrative and compliance costs. It is not possible, however, for the
Commonwealth to guarantee fuel quality under such an arrangement. There are valid
concerns on the part of vehicle manufacturers (and consumers) that there is no certainty
that they will be able to obtain the quality of fuel required for the efficient operation of
new generation vehicles. Emission control technologies can be permanently disabled
through the use of fuel that does not meet specific compositional requirements. For
example, sulfur content levels in both petrol and diesel are extremely significant in this
respect.

There are also potential competition problems. These may arise when producers either
decline to be party to such an agreement, or choose, on occasion, to operate outside the
agreement with respect to one or more specific fuel parameters.
The uncertainty inherent in such arrangements has prompted a number of States to
consider State-specific legislation. As noted earlier in relation to Option 1 there are
competition problems associated with this approach.
Summary
Voluntary agreements will not ensure a nationally consistent approach to fuel quality
standards or the availability of appropriate fuel required for compliance with the new
ADRs. As for Option 1, there are potential trade and competition problems associated
with the approach.
STATE AND TERRITORY REGULATION (Option 3)
Almost all the States and Territories currently have some form of fuel quality regulatory
regime. In the majority of cases this is currently limited to the lead content of petrol.
However, the announcement by the Commonwealth of proposed fuel changes under the
Measures for a Better Environment initiative has led to a number of States introducing or
proposing to introduce State-specific fuel quality legislation.
Queensland and Western Australia have already introduced such legislation, and South
Australia has foreshadowed new legislation. Their proposals are outlined below.
4.3.1 Queensland
The Queensland Government gazetted new fuel quality regulations under the
Environment Protection Act in July 2000. The regulations require Queensland oil refiners
to produce fuel with the following specifications:
* sulfur levels in diesel fuel to 500 ppm by from 15 July 2001 and remove lead from
petrol by March 2001;
* from 5 July 2000 maximum levels for MTBE, ETBE and TAME to be 0.5% by
volume;
* from 1 July 2000, the six monthly average benzene content of petrol to not exceed 3.5%
by volume;
* from 15 November 2000, maximum levels for Reid Vapour Pressure (RVP) (ranging
from 78 kpa in 2000 to 69 kpa in 2002) for both fuel producers and wholesale distributors
according to climate requirements.
4.3.2 Western Australia
Fuel quality specifications have been regulated in Western Australia from December
1999, under the Environmental Protection (Diesel and Petrol) Regulations 1999, as part
of Western Australia’s Environment Protection Act 1986. The regulation specifies a

500ppm limit on the sulfur content of diesel from 1 January 2000. The following
specifications (as maximum concentrations) have been set for petrol:
Specifications for supplies in 2000 (maximum levels)
Hydrocarbons:
Aromatics 48.0% v/v
Benzene 2.0% v/v
Oxygenates:
Methyl tertiary-butyl ether (MTBE) 0.10% v/v
Lead: 13mg/L
Specifications for supplies in 2002 (maximum levels)
Hydrocarbons:
Aromatics 42.0% v/v
Benzene 1.0% v/v
Olefins 18.0% v/v
Oxygenates:
Methyl tertiary-butyl ether (MTBE) 0.10% v/v
Lead : 5mg/L
Sulfur: 150 mg/kg.
4.3.3 South Australia
South Australia is currently developing State-specific legislation based on the US
Predictive Model. The South Australian EPA advises that the proposed legislation will be
based on a combination of the US EPA Predictive Model and California EPA cancer
potency factors. They note that this approach enables a comparison of fuels based on air
toxics performance. South Australia is using an outcomes based approach which involves
generating the exhaust emissions (and some evaporative emissions, e.g. during refuelling)
of certain toxic compounds and then calculating an ‘Air Toxics Index’ using potency
factors from the California Air Resources Board for each of the compounds.
While the South Australian Air Toxics Index is based on the Californian model it has
been modified using the Port Stanvac refinery petrol as the base fuel for modelling. Some
members of the refining industry have stated that the configuration of the Port Stanvac
refinery is such that an Air Toxics Index based on its fuel could be very difficult for
another refiner to meet.

South Australia suggests that the predictive model is more effective in addressing South
Australia’s airshed issues. South Australia argues that the implementation of their
standards via the predictive model is necessary to ensure that South Australian air quality
is maintained. The South Australian model allows for adjustments, which they believe
makes compliance easier.
The proposed legislation is scheduled to come into effect in the second half of 2000.
4.3.4 Advantages and disadvantages
State-specific legislation has the potential to result in different standards for each
jurisdiction. This may give rise to competition issues, by creating barriers for refiners and
importers to interstate markets and raising compliance costs.
There are clear competition benefits from having a nationally consistent approach to fuel
standards. If a State’s specifications are unique and align with the production capability of
local refiners, such local refiner(s) will obtain a degree of protection, as any trans-shipped
cargoes from other States, or imported cargoes, will need to be produced specially for the
unique State-specifications, and this is likely to be expensive.
Furthermore, not all States may regulate fuel quality which would have implications for
vehicle technology for cross-border traffic. Fuel of an appropriate quality needs to be
available in all States and Territories to ensure adequate supply of the low sulphur and
high octane fuels required for advanced emissions control technology.
There is also a requirement to ensure equal protection for all Australians from toxic
emission from the transport sector. If one State does not implement fuel quality
standards, it could become a dumping ground for lower quality fuel and experience
considerable increases in emissions and air pollution.
Summary
The use of State regulations will not provide for a nationally consistent approach to fuel
quality standards. The outcome of such an approach would also result in Government
policy decisions set out in the Measures for a Better Environment tax package not being
implemented.
The use of State-specific regulations will not ensure the nationwide availability of fuel
quality required to enable the introduction of new ADRs, and State-specific regulations
will also potentially restrict competition and trade.
4.4 NATIONAL ENVIRONMENT PROTECTION MEASURE (Option 4)
The National Environment Protection Council (NEPC) is empowered, on the basis of a
two thirds majority vote by its members, to make national environment protection
measures (NEPMs) that automatically become law within each State and Territory in
accordance with the legal framework of each jurisdiction. The objectives of the National
Environment Protection Council Act 1994 are to provide equivalent environmental

protection to all Australians wherever they live and to ensure that markets are not
distorted by environmental decisions.
The efficiency of the current NEPM development and implementation processes are
being reviewed and a major review of the NEPC Act, which is scheduled to commence in
late 2000, will consider the effectiveness of NEPMs as a national approach to achieving
environmental objectives.
It is important to note that NEPMs are a costly and time consuming process. A NEPM
may take approximately 2 years to develop and a further 2-3 years to implement, and the
development process is likely to cost in total, including jurisdictional costs, in the order
of $1 million or more. The resources required to develop and implement NEPMs has
been a particular issue of concern for States and Territories and presents a possible barrier
for their participation in the development process and particularly the implementation of
NEPMs, especially for the smaller jurisdictions like Tasmania and the Northern Territory.
The Council can develop and make a NEPM but implementation is outside the Council’s
jurisdiction under the Act and is achieved through State and Territory legislation. It is
apparent from those NEPMs that have already been developed that States can seek and
achieve exemptions based on regional environmental differences. A good example of this
is the exemption in the Queensland legislation of Mt Isa from the Ambient Air Quality
NEPM. There also tends to be a "lowest common denominator approach" to the
development of NEPMs and resulting "national" standards, in an attempt to try and gain
consensus from all jurisdictions.
4.4.1 Advantages and Disadvantages
While NEPMs have been effective in implementing other policies, a NEPM for national
fuel quality standards is not a viable option for several reasons.
In terms of NEPM development, a State or Territory may achieve exemptions based on
regional environmental differences, and may also cease to be a participating member of
the Council at any stage. Such actions would limit the ability to implement nationally
consistent standards, particularly as each jurisdiction not only varies considerably in its
capacity to meet tighter standards, but also in the levels of investment required by
industry to upgrade plants in order to produce cleaner fuels.
In terms of timeframes, the time line specified by Measures for a Better Environment
would not be achieved in light of the time required for the NEPM development process.
The development of a NEPM is considered a lengthy process and State processes for
obtaining whole-of-government positions and approvals have the potential to delay the
process further.
With respect to the actual standards set, if States and Territories have divergent views
then it would be difficult to form a consensus on national standards under a NEPM as
only a two-thirds majority vote is required to pass the Measure.

Summary
A NEPM for national fuel quality standards is not considered a viable option to ensure
that nationally consistent standards are in place in the required timeline for the
introduction of the new Australian Design Rules (ADRs) for motor vehicle emissions.
Following the NEPM path would significantly delay the process and provide no real
assurance that States would not provide exemptions in their legislation based on regional
environmental differences. This approach may produce an outcome which is inconsistent
with preceding Government policy decisions, and competition and trade will be restricted
if variation in standards occurs between jurisdictions.
4.5 WIDER USE OF ALTERNATIVE FUELS (Option 5)
Alternative fuels provide an opportunity for reducing emissions of greenhouse gases and
air pollutants by altering the mix of exhaust gases. The promotion of alternative fuels
may have environmental benefits, but a focus on the adoption of such fuel does not
address the current and future ADRs, which will remain highly dependent on petrol and
diesel fuel.
Furthermore, there is a finite, although increasing, capacity to run more of the fleet which
currently use petrol and diesel fuel on alternative fuels. The most significant options are
liquefied petroleum gas (LPG) and compressed natural gas (CNG).
LPG is already widely used in urban areas, particularly by high mileage vehicles such as
taxis, and its application to date is mainly in vehicle types normally configured for petrol
fuels. Recent testing on modern petrol-engined vehicles, and equivalent vehicles running
on LPG, concluded that the LPG-fuelled vehicles do not offer significant environmental
benefits over the petrol-engined vehicles (FORS, 1997). Recent work in the UK and
Europe indicates however, that heavy duty vehicles designed to run on LPG can have a
very good emissions performance compared to diesel (Le Cornu and Day, 1998).
Other evidence, such as the Australian Greenhouse Office’s (AGO) preliminary
alternative fuels life-cycle analysis indicates that LPG performs well in heavier vehicles
in respect of a number of greenhouse and other vehicular emissions.
CNG has very limited use at the moment, and its greatest potential would appear to be as
a diesel substitute in commercial vehicles operating out of a common refuelling point.
The use of CNG is becoming more common in urban bus fleets (in Perth, Adelaide,
Sydney and Brisbane for example). As a substitute for diesel fuel, it offers significant
benefits in reductions of PM emissions over diesel engines but, according to BTCE,
unless engine settings and emissions controls are adequate, NOx emissions +from CNG
fuelled vehicles may be higher (BTCE, 1994). In contrast, the AGO’s life-cycle analysis
found that CNG delivered a very good performance in respect of NOx provided vehicles
are adequately maintained and their performance monitored. However, the very limited
nature of the CNG vehicle refuelling network is a major barrier to wider adoption. The
bulkiness of CNG fuel tanks and high capital cost for conversions can also limit its
appeal to transport operators. These factors are being addressed through the
Commonwealth’s alternative fuels program.

4.5.1 Advantages and Disadvantages
The uptake of LPG and CNG is largely limited to urban areas, particular engine types and
vehicle fleets. As outlined above, there are a number of major logistical barriers to the
wider adoption of alternative fuels, and as such, alternative fuels are not considered a
viable options (at this stage) to achieve the objectives in the required timeframe.
The Commonwealth Government currently exempts both LPG and CNG from fuel excise
as a means of encouraging their development as alternative fuels. The Government is not
able to mandate the use of specific fuels, as it would be contrary to competition
principles. As indicated above, the alternative fuels network has a limited capacity to
supply the fleet, and thus the use of alternative fuels, in itself, is not sufficient to deliver
significant reductions in total emissions from the road vehicle fleet.
Summary
The increased use of alternative fuels has the potential to reduce emission from motor
vehicles. The Government has in place a number of policy options to encourage the use
of alternative fuels, such as the CNG Infrastructure Program, the Alternative Fuels
Conversion Program, the Diesel and the Alternative Fuel Grants Scheme (which
maintains the relative price of LPG and CNG compared to diesel), and the favourable
excise treatment of LPG and CNG.
However, the current capacity for switching to alternative fuels is limited, and their
consideration as an option to achieve a national approach for fuel quality standards is not
practicable at this stage. Should a significant transition to alternative fuels be achieved in
the future (as the Commonwealth’s alternative fuels program seeks to achieve), then
alternative fuels use will have a greater impact on improved environmental outcomes.
Alternative fuels will probably have a neutral or positive impact on competition and
trade. However, the relatively limited current penetration of alternative fuels in the
Australian market means that at present they have limited value in addressing
environmental concerns.
While the proposed national fuel quality standards focus on petrol and diesel, it is
envisaged that standards for alternative fuels would be considered for inclusion at a
future date under the proposed framework legislation.
4.6 LIMITING VEHICLE TRAVEL (Option 6)
In order to address transport sourced urban air pollution and greenhouse emissions, there
is ultimately a need to deal with the underlying issue of increasing vehicle travel,
particularly as the emission and fuel consumption reductions achievable from
technological improvements to vehicles and fuels become progressively smaller.
Mechanisms to limit vehicle use include fiscal policies (to reflect true costs of transport),
transport planning, traffic management (Auto-Oil, 1995) and travel demand management.

4.6.1 Advantages and Disadvantages
Management mechanisms to limit vehicle travel are more relevant for transport
emissions, rather than fuel quality per se. While these mechanisms will have an important
place in stabilising and reducing transport air emissions, they are beyond the scope of the
objectives specified for this Statement.
Summary
Mechanisms to limit vehicle travel are not directly related to fuel quality. They do not
ensure the fuel quality auto manufacturers require to meet ADRs on emission standards
and improve fuel efficiency of vehicles, and are therefore unable to meet the assessment
criteria outlined at the beginning of this section.
4.7 COMMONWEALTH REGULATION (Option 7)
Commonwealth legislation will provide the framework for a national fuel standards
regime with the levels for each of the parameters in petrol and diesel set in regulations
under the Act. It is proposed, subject to any time constraints, that the framework
legislation will be in place by the end of 2000.
The primary legislation will also enable standards to be set for other fuels to be specified
by regulation in the future (e.g. alternative road transport fuels such as LPG, biodiesel, or
marine and aviation fuels), if this becomes a priority for the Government.
The primary legislation will contain the following elements:
a) a regulation making power to permit setting standards for fuels;
b) provisions creating offences relating to the supply of fuel that does not meet standards
specified in the regulations;
c) monitoring and enforcement provisions, setting out record keeping and reporting
requirements imposed on suppliers and providing authority for the Commonwealth to
sample, monitor and enforce the fuel quality requirements; and
d) administrative arrangements for granting of exemptions from the standards where this
is in the public interest or in specified circumstances, for example to meet the
requirement of different climatic conditions.
The legislation will apply equally to fuel importers and domestic refiners. It will regulate
the quality of fuel along the entire chain of supply, so that importers, domestic producers,
distributors, wholesalers and retailers will be held accountable for fuel quality under the
Act.
The intention of the legislation is not to dictate the composition of fuel, but rather to
establish standards for certain fuel parameters. The regulations will specify, for each fuel
type, the level at which a particular fuel parameter, for example sulfur content, will be set
and the timeframe by which the parameter standard must be met.

The Commonwealth proposal for fuel standards sets out a timeframe including the
following key dates:
* for diesel
- harmonisation with Euro 2/3 diesel fuel specifications by 1 January 2002 ; and
- harmonisation with Euro 4 diesel fuel specifications before 1 January 2006.
* for petrol
- harmonisation with Euro 2 petrol specifications (Euro 3 for sulfur content) by 1 January
2002;
- harmonisation with Euro 3 petrol specifications by 1 January 2005 (Euro 4 for sulfur
content); and
- harmonisation with Euro 4 petrol specifications by 1 January 2008/2010.
These dates are based on the timeframe for the introduction of new United Nations
Economic Commission for Europe ("Euro") vehicle emissions standards as specified in
the new ADRs gazetted in 1999. They are intended to ensure that the required fuel is
available for the introduction of the ADRs and that sufficient lead-time is available to
refiners to make the necessary investment to produce the fuels.
Summary
The introduction of Commonwealth legislation would provide the national consistency
necessary for the introduction of fuel quality standards to avoid competition problems
and ensure that fuel of the appropriate quality is widely available in Australia in line with
the timetable for the introduction of the new emissions control technology. The
introduction of the legislation is also in line with preceding Government policy decisions
on fuel quality.
4.8 COMPARATIVE ASSESSMENT
Commonwealth legislation is the only option which satisfies all of the specified
assessment criteria, that is, it
1. provides a nationally consistent approach to fuel quality standards;
2. is consistent with preceding Government policy ;
3. can ensure that appropriate fuel is available in line with the timetable for the
implementation of new ADRs; and
4. does not restrict competition and trade.
Appendix 2 summarises the effectiveness of each option against the selection criteria.
Options 6 and 7 on wider use of alternative fuels and limiting vehicle travel have not

een included as they are not considered viable options at this stage to achieve the
objectives in the required timeframe.
5. IMPACT (COSTS AND BENEFITS) OF PREFERRED OPTION
This assessment of the costs and benefits of the preferred option addresses the impact of
the framework legislation proposed for regulating national fuel quality standards.
Regulations specifying the actual standards for various fuel parameters will be developed
under the framework legislation later in 2000. A separate Regulation Impact Statement
will address the regulations.
A Commonwealth proposal for the fuel parameter standards was outlined in three
discussion papers released in May 2000 for a two-month public comment period. In the
absence of a final recommendation for fuel quality standards, this proposal is used as the
basis for estimating the costs and benefits of the preferred option.
This section briefly recounts the preferred option, summarises and outlines the costs and
benefits of the option and addresses the impacts on affected parties.
5.1 OUTLINE OF THE PREFERRED OPTION
The preferred option is to set national fuel quality standards by means of Commonwealth
regulation. The legislation will provide the framework for a national standards regime
with the levels for each of the parameters in petrol and diesel specified in regulations
under the Act.
As described in section 4.7, national fuel quality standards will:
- apply equally to importers and domestic refiners;
- introduce from 2002 the fuel quality standards required by vehicles complying with the
new ADRs (see timetable under section 5.5.2);
- be monitored and enforced along the fuel chain of supply;
- be consistent across the nation, allowing exceptions in specified circumstances, for
example to meet varying climatic conditions.
5.2 SUMMARY OF ASSESSMENT
In summary, the analysis of costs and benefits found that there would be considerable
health and environmental benefits from moving to cleaner fuel standards, with an overall
net benefit to Australia. The analysis estimated the net health benefits from the
introduction of high fuel standards to be between $1577M and $2180M. This assessment
is not altered by the potential macroeconomic impact of higher fuel prices, which would
only be transitory before market forces re-balance the impacts.
The analysis is outlined in the Table 5.1 below. Option D corresponds to the fuel
standards and timetable proposed for discussion by the Commonwealth.

Table 5.1: Net Benefits of adopting higher fuel standards (NPV $ million 1999)
OPTION A B C D
Petrol (Cars)
Diesel (Trucks)
COSTS
NSW EPA estimates
Euro 2 in
2002
Euro 2 in
2002
Euro 2 in
2002
Euro 3 in
2005
Euro 3 in
2002
Euro 3 in
2002
Euro 3 in
2002
Technology and hardware 662 810 807 na
Fuel reformulation 1,084 1,287 na
Certification 70 70 70 na
Review estimates
Capital and operating costs na 848 na
Total costs 732 848 - 1,964 2,164
AIR QUALITY BENEFITS
(avoided health costs)
Euro 3 in
2005
Euro 4 in
2008
Euro 3 in
2002
Euro 4 in
2006
1,230 -
1,833
1,230 -
1,833
Hydrocarbons 80 630 892 > 849
Nitrogen dioxide 409 1,071 1,409 > 1,361
Carbon monoxide 38 217 341 > 318
Particulates 324 884 882 > 882

Total benefits 851 2,802 3,524 > 3,410
Benefit/Cost ratio 1.16 1.41 - 3.26 1.63
NET BENEFITS 119 798 - 1,914 1,359
>1.86 -
>2.77
1,577 -
2,180
Notes: Adapted from NSW EPA (1999) and Review Report (2000). Option A based on
EPA scenario 1, Option B based on EPA scenario 5 and Review Scenario 2, Option C
based on EPA scenario 3, Option D based on Review Scenarios 3 and 4 with benefit
estimates based on EPA scenarios 3 and 5. All figures in Present Values discounted at 7%
over 20 years. Figures may not add due to rounding.
5.3 COSTS OF THE PREFERRED OPTION
The costs of implementing national fuel quality standards under Commonwealth
regulation are borne mainly by the refining industry and consumers. Impacts on all
parties are outlined in greater detail below.
The Review of Fuel Quality Requirements for Australian Transport March 2000 (known
as the Fuel Quality Review) commissioned by Environment Australia and undertaken by
Coffey Geosciences Pty Ltd provides the best available estimate of the costs of the
proposed new fuel standards to the refining industry. However, as outlined in Section
5.5.2, due to the differences between the Commonwealth proposal and the scenarios
analysed in the Fuel Quality Review, the costs are likely to be overestimated. The cost of
Option D given in Table 5.1 is overestimated because it includes investment already
made by one refiner. It is envisaged that the fuel quality standards for petrol and diesel
will fall somewhere between the levels modelled under scenarios 3 and 4 of the Fuel
Quality Review - not full harmonisation with Euro 4 fuel standards as estimated below.
The Review estimated that costs to the refining industry of full harmonisation with Euro
4 fuel standards would be:
- $1320 million (M) in capital investment over the period to 2008 ($185M on average per
refinery); and
- $136M pa in operating costs, an average of $17M pa per refinery from 2005.
These estimates equate to column D of Table 5.1 but have not been discounted to
incorporate Net Present Values as presented in the Table.
Allowing a capital charge at 20% per annum, the average extra capital plus operating
costs for local refining of Euro 4 fuels would be 1.5c/l for Euro 4 diesel and 1.1c/l for
Euro 4 petrol. Under the Commonwealth proposal, Euro 4 diesel would be produced from
2005/6 and full specification Euro 4 petrol would be produced, at the earliest, from 2008.

It is probable that these increased costs of production would be passed on to consumers
as increased fuel prices. It is expected that any fuel price changes would be experienced
in the 2005 to 2008 period, given the proposed tighter sulfur specifications from 2005.
Economic analysis conducted as part of the Fuel Quality Review, using a General
Equilibrium Model, estimated that a 1% increase in fuel prices would cause minor
economic impacts such as an increase in the Consumer Price Index (less than 0.02%) and
a fall in real wages (0.08%). It should be noted that this level of price increase currently
occurs under fluctuating fuel prices caused by changes in the cost of crude oil.
5.4 BENEFITS OF THE PREFERRED OPTION
The benefits of Commonwealth regulation to implement national fuel quality standards
flow from avoided health costs occasioned by improvements in urban air quality resulting
from reduced pollutant emissions. Although difficult to quantify, the flow on benefits
would include reduced greenhouse gas emissions over the longer term.
It is estimated that from 2000 to 2019, avoided health costs will amount greater than
$3,410M. The analysis does not include other benefits such as investment opportunities,
visual amenity, export potential, or avoided infrastructure damage. The inclusion of
estimates for these effects would increase the overall benefits.
This assessment is based on work performed by the NSW Environment Protection
Agency, which formed the basis of the Regulation Impact Statement on New Australian
Design Rules for Control of Vehicle Emissions, December 1999. The NSW EPA work
draws on a number of Australian and overseas studies including the Victorian Transport
Externalities Study conducted by the Victorian EPA and the Bureau of Transport and
Communications Economics, the National Environment Protection Measure on Ambient
Air Quality, and assessments by the World Health Organisation and the US Environment
Protection Authority.
The benefit estimates associated with the NSW EPA data were gained through the use of
the dose-response technique. This approach examines the relationship between an
increase in one or more pollutants and the number of individuals in the population who
are affected, and the severity of this impact. A monetary value of this physical impact is
then estimated with reference to data on the cost of medical treatment and the cost to
employers of lost worker productivity through illness and associated lost working time.
Australian cost data are used where possible, with international studies used for
comparisons and to provide the dose-response functions for some pollutants.
Air pollutant emissions
The Fuel Quality Review found that there would be substantial reductions in pollutant
emissions following harmonisation with European emissions and fuel standards (Euro 3
and then Euro 4). For some pollutants, reductions of up to 60% in emissions were
predicted over a 20-year period from 2000.

Table 5.2 gives the estimated reduction in emissions over time for the major pollutants of
concern under Scenario 4 modelled in the Fuel Quality Review, which has been taken as
the indicator of the costs of implementing the Commonwealth proposal.
Table 5.2: Reductions in emissions under Scenario 4
Pollutant
Emissions Reduction %
2000 - 2010
Hydrocarbons 20 - 25 29
Oxides of Nitrogen 34 69
Particulate Matter (PM10) 25 33
Benzene 51 72
Carbon Monoxide 45-51 66
Greenhouse gas emissions
Emissions Reduction %
2000 - 2020
The Fuel Quality Review assessed changes to transport-sourced greenhouse emissions
and changes to greenhouse emissions from more intensive refining operations.
Greenhouse gas emissions over the long term are expected to be lower as a result of
improved fuel quality specifications associated with national fuel quality standards,
relative to the business-as-usual scenario.
Emissions from road transport are estimated to increase by 24% under business as usual
(Scenario 1) for the period 2000 to 2010, and by only 15% over the same period for the
other scenarios (Scenarios 2-6). The 9% improvement in the latter estimate is predicated
on the assumption that the Government expectation of 15% improvement over businessas-usual
National Average Fuel Consumption (NAFC) target would be achieved in 2010.
Setting and achieving a challenging NAFC target in 2010 forms part of the
Environmental Strategy for the Motor Vehicle Industry, which was announced in the
Prime Minister’s 1997 statement Safeguarding the Future.
Improved fuel parameters will help achieve improved fuel efficiencies, which would
facilitate setting and achieving better NAFC targets. This in turn will translate to
greenhouse benefits. The fuel parameters key to better fuel efficiencies are high-octane
petrol, which enables higher thermal efficiencies to be achieved, and low sulfur content,
which is essential for the deployment of advanced fuel efficiency technologies, such as

direct injection. It is claimed that direct injection technology is capable of improving fuel
consumption by about 10%. Improved fuel quality in respect of other parameters would
also promote optimal engine performance, thereby contributing to better fuel efficiencies.
Legislated fuel quality enhancements would provide the certainty required for the
deployment of advanced engine and vehicle technologies by automotive manufacturers
and its uptake by consumers.
In the case of emissions changes from refinery operations, an assessment of incremental
refinery emissions suggested increased greenhouse emissions associated with the
production of improved fuel quality. Increased energy consumption will result from
direct fuel burning in process furnaces, carbon rejection to make hydrogen and by remote
electricity generation. Although emissions by refiners are expected to increase (around
2.1 million tonnes per annum CO2 equivalent) in association with the production of
improved fuel quality, these are expected to be offset by lower emissions in road
transport. Lower emissions are expected to continue over the longer term beyond 2010.
5.5 IDENTIFICATION OF AFFECTED PARTIES
The parties that will be affected by the introduction of Commonwealth legislation
regulating fuel quality standards are:
* state/territory government agencies; * refining industry; * fuel importers and
distributors; * fuel retailers;
* automotive industry; and * consumers.
An assessment of the potential impact on each party is provided below, based on the fuel
specifications proposed for discussion by the Commonwealth in Setting National Fuel
Quality Standards Paper 2: Proposed Standards for Fuel Parameters. The actual impact
on each of the parties will depend on the final set of fuel standards specified in the
regulations under the proposed legislation. A summary of the impacts is provided in
Appendix 3.
5.5.1 IMPACT ON STATE/TERRITORY GOVERNMENT AGENCIES
Jurisdictions have indicated in principle support towards a national approach to fuel
quality. A key concern for State and Territory Government agencies is the proposal that
Commonwealth legislation for national fuel quality standards will override State-specific
legislation on fuel quality. As outlined under section 4.3, Western Australia, Queensland
and South Australia are implementing their own fuel quality legislation.
Some States have indicated that they do not want to see a worse environmental outcome
in their airsheds as a result of Commonwealth standards that are less stringent than those
they have already imposed. Western Australia, for example, has regulated a level of 1%
benzene from 2001, whereas the Commonwealth has proposed a level of 3% be
introduced in 2002 and then 2% in 2005. However, levels of benzene in ambient air are
generally not an issue in Australia where levels are below the limit recommended by the
World Health Organisation ie 5 ppb.

As it is proposed that the Commonwealth fund enforcement and monitoring costs for
national fuel quality standards, it is envisaged that these costs in the jurisdictions would
be reduced once the Commonwealth legislation was introduced. States and Territories
would no longer incur this expenditure for their State-specific standards and it is likely
that the assistance provided by them for the Commonwealth process would be
reimbursed.
There is concern in the jurisdictions that Commonwealth standards will result in the
closure of some refineries. The impact of tighter standards on the refining industry is
discussed below.
5.5.2 IMPACT ON THE REFINING INDUSTRY
The Downstream Petroleum Action Agenda acknowledges that the Australian petroleum
refinery industry is in crisis. As currently structured, its high costs make it internationally
uncompetitive. The industry’s profitability is currently low and declining, having more
than halved in recent years, and yet it urgently needs to be able to fund investment to
meet the Government’s timetable for new fuel specifications. Significant restructuring
and investment is also required to enable industry to compete with large scale, low cost
refineries in Asia.
The Action Agenda acknowledge that even though the industry currently faces many
challenges, the oil industry is committed to improving air quality, particularly in
Australian capital cities.
Significant investment will be required by the refining industry to meet tighter fuel
standards. Australia’s eight major refineries have different configurations as a result of
different investment decisions and, therefore, different capacities to meet the fuel
specifications. The major investment costs are associated with reducing the fuel sulfur
content of diesel and the benzene content of petrol, and increasing the octane rating of
petrol while reducing its aromatic content.
The cost to the industry will vary depending on the timing of the introduction of the
standards and the combination of parameter levels proposed. The final costs to industry
will be known when the actual fuel standards are finalised later in 2000, and individual
refinery strategies to meet the standards are decided.
Depending on the final fuel standards implemented under Commonwealth regulation, and
given the current world downturn in the refining industry, one or more refineries may
contemplate closure. Shell has already announced that its Clyde refinery in NSW may
close before 2006, when the production of Euro 4 diesel (with 50 ppm sulfur content)
becomes mandatory. Shell is currently considering its position in the light of the
Government’s proposed fuel standards.
A comprehensive analysis of the potential costs to the refining industry of a number of
fuel quality scenarios was undertaken by the Fuel Quality Review. The fuel quality
standards proposed for discussion by the Commonwealth include a slightly different
timetable for the introduction of Euro 3 and Euro 4 for some parameters, compared to

that modelled in the Fuel Quality Review. The comparison for those parameters requiring
significant refinery investment is outlined in the Table 5.3 below.
Table 5.3: Fuel parameters requiring significant refinery investment
Fuel Parame
ter
Year of
Introduction
Commonwealth
Proposal
Fuel Quality Review
Scenario 4
Petrol Sulfur 2002 150 ppm 500 ppm (Euro 2)
Diese
l
2005 50 ppm 150 ppm (Euro 3)
2008 30 ppm* 50 ppm (Euro 4)
Benzene 2002 3% Not specified
Aromati
cs
2005 2% 1% (Euro 3)
2002 45% Not specified
2005 42% 42% (Euro 3)
2008 38%* 35% (Euro 4#)
Olefins 2002 18% Not specified
Sulfur 2002
2005 16% 18% (Euro3)
2008 - 14% (Euro 4#)
2005/6 50 ppm
* These proposed standards are indicative only.
500 ppm (From 1 January
2002)
500 ppm (By end 2002)
50 ppm (From 1 January
2006)

# Euro 4 for petrol has yet to be formally defined. These estimated levels were provided
to Coffey Geosciences by the Australian Institute of Petroleum
Despite differences to the Commonwealth proposed fuel standards, Scenario 4 from the
Fuel Quality Review provides the best available estimate of the potential costs to the
refining industry of Commonwealth regulation of national fuel standards. Some costs,
particularly those associated with Euro 4 standards for olefins and aromatics (not
included in the Commonwealth proposal) are overstated.
The capital investment cost to refiners of achieving Euro 4 standards under Scenario 4 of
the fuel Quality Review is $1320 million (M) above what is already planned. At one
refinery, a substantial proportion of the investment required to achieve Euro 4 diesel and
petrol is already committed in existing programs. Excluding this refiner, capital
investment per refinery averages $185M.
Under Scenario 4 operating expenditure would increase by a total of $136M pa for the
production of Euro 4 fuels, an average of $17M pa per refinery.
Allowing a capital charge at 20% per annum, the average extra capital plus operating
costs for local refining of Euro 4 fuels would be:
* Euro 4 Diesel 1.5 c/L
* Euro 4 Petrol 1.1 c/L.
The potential overstatement of costs due to levels of stringency not involved in the
Commonwealth proposal include:
* $100M capital expenditure and 0.2c/l to achieve 1% benzene compared to 3%; and
* $170M capital expenditure and 0.9c/l operating costs at two refineries for achieving
14% olefins compared to 16%.
In addition, technological advances for refinery production processes may generate
savings in the cost of production that may drive down any increase in the price of fuel.
However, the actual impact on prices to consumers will be dependent on the companies’
handling of any cost savings.
5.5.3 IMPACT ON FUEL IMPORTERS AND DISTRIBUTORS
Importers
In order to ensure the availability of higher quality fuels for use in road transport
throughout Australia, it is necessary to establish clear, attainable standards that do not
discriminate between domestic fuel producers and importers. The national standards will,
therefore, provide a level of consistency for importers, enabling them to supply the same
fuel throughout the country.
The impact on independents and importers (Burmah, Liberty Oil, Gull Petroleum,
Woolworths Petrol Plus, etc) will vary depending on readily available supply in the

egion. It would appear that Euro 2 and 3 specifications are readily available or will be
from 2001, but supply of Euro 4 at this point in time is restricted to export orientated
refineries in India and South East Asia. Euro 4 will not be introduced into Europe until
2005, when it is expected that this fuel will be more widely available.
While higher quality fuels are in limited supply, the cost of obtaining them will be greater
than that of sourcing fuel of the current quality sold in Australia. Information about the
likely cost increases to importers is limited.
Distributors
Distributors purchase fuel from the major refining companies and, increasingly, from
importers, and then transport it to regional service stations and fuel depots as well as
primary producers and mining companies. There are currently about 200 large
distributors that represent 40% of product distribution in Australia with 90% of this to
regional areas.
Commonwealth legislation regulating fuel quality will also provide national consistency
for distributors. Consultation with the Australian Petroleum Agents and Distributors
Association (APADA) has indicated that distributors are very supportive of the
introduction of national standards. APADA pointed out that State boundaries are not
observed in fuel distribution and some distributors traverse three States. State-specific
legislation is, therefore, an issue of concern for distributors as it would increase their
compliance costs.
The main issue for distributors resulting from the introduction of Commonwealth fuel
quality legislation would be the potential requirement for additional investment if extra
storage tanks were needed to ensure any fuel mixing did not occur. This would be a
requirement if the number of grades of fuel increased, but that is not envisaged in the
Government’s proposal.
5.5.4 IMPACT ON FUEL RETAILERS
The impact on fuel retailers will relate mainly to ensuring that they receive only fuel that
meets the specified standards, that any forecourt additives for sale have been approved
under the legislation and that they keep the appropriate records and paperwork.
Some of the small fuel retailers, particularly in rural and remote areas have limited or no
storage and dispensing facilities for premium unleaded petrol (PULP). This could
potentially cause some difficulties when PULP becomes the standard fuel. However, it is
anticipated that the facilities used for leaded petrol may be replaced with PULP when
leaded petrol is phased out in 2002.
5.5.5 IMPACT ON THE AUTOMOTIVE INDUSTRY
The most significant impact of Commonwealth fuel quality legislation on the automotive
industry will be the certainty it provides in ensuring that fuel of the appropriate
specifications will be widely available in Australia. This is essential to enable
deployment of the advanced emissions control technology to meet tighter emissions

standards and advanced engine and vehicle technology to achieve improved fuel
efficiency. The Federal Chamber of Automotive Industries (FCAI) is in favour of
mandatory enforceable national fuel standards.
An issue raised by the FCAI relates to the simultaneous availability of 91 RON and 95
RON fuels. The industry is concerned about potential misfuelling of Euro 3 vehicles
(designed for 95 RON fuel) with 91 RON fuel and resultant complaints from consumers
should unsatisfactory engine performance result. However, little data is available on the
likely rate of misfuelling. Some vehicle manufacturers detune their vehicles to run on 91
RON fuel. Both misfuelling by consumers and detuning by manufacturers contribute to
reductions in fuel efficiency and therefore increases in greenhouse gas emissions.
5.5.6 IMPACT ON CONSUMERS
As indicated in Section 5.5.2 above, the Fuel Quality Review estimated that the
introduction of Euro 4 petrol by 2008 and Euro 4 diesel by 2006 would result in an
increase in the cost of fuel production of 1.1c/l for petrol and 1.5c/l for diesel. It is
probable that these costs would be passed on to consumers as increased fuel prices.
However, for new vehicle owners, improved vehicle technology combined with high
quality fuel will lower fuel consumption, leading to potential savings.
Economic analysis conducted as part of the Fuel Quality Review, using a General
Equilibrium Model, estimated that a 1% increase in fuel prices would cause minor
economic impacts such as an increase in the Consumer Price Index (less than 0.02%) and
a fall in real wages (0.08%). It should be noted though, that this level of price increase
currently occurs under fluctuating fuel prices caused by changes in the cost of crude oil.
Large populations of urban dwelling consumers will benefit from the reduction in
pollutant emissions and resultant improvement in air quality outlined in Section 5.4.
6. CONSULTATION
The process for developing national fuel quality standards commenced with the Fuel
Quality Review. The final report from the Review was released in March 2000. Three
discussion papers were then released in early May 2000 for a two-month public comment
period with submissions requested by 30 June 2000. The papers present the
Commonwealth’s proposal for fuel standards and are entitled:
1. Summary Report of the Review of Fuel Quality Requirements for Australian
Transport;
2. Proposed Standards for Fuel Parameters (Petrol and Diesel); and
3. Proposed Model for Standards Implementation.
Fuel Quality Review
In order to assess the potential impacts of new fuel quality specifications on all
stakeholders, including Australian refineries, vehicle manufactures and consumers, and

taking into account the objectives of the regulators, it was necessary to obtain a high level
of cooperation from stakeholders.
During April and May 1999, the Review Team consulted with a broad range of
stakeholders including many within government, the automotive industry and the
petroleum industry, to solicit views on future fuel quality scenario development.
The stakeholder consultation process commenced with the circulation of a letter to the
stakeholders, informing them that a series of scenarios was to be developed to represent
the range of likely changes in fuel quality over the next ten years. Comment was sought
from the stakeholders regarding the key issues to be considered in the fuel quality
scenarios.
Written responses were received from 28 stakeholders. A Coffey representative also
attended meetings with 30 of the major stakeholders, including State government
agencies, petroleum companies and motor vehicle manufacturers. The stakeholder
consultation process continued throughout 1999, with the stakeholders providing
comment on the draft scenarios, particularly in relation to the incorporation of the Prime
Minister’s commitments under the Measures for a Better Environment tax package
agreement.
The main issues identified by the stakeholders for consideration in the development of
the scenarios included:
* Air quality and the Ambient Air National Environment Protection Measure (NEPM).
More stringent new vehicles emission standards were seen as an essential strategy to
combat the detrimental air quality effects that would arise from projected growth in
vehicle kilometres travelled and assist with achieving and maintaining compliance with
the ambient air quality standards specified in the NEPM;
* Greenhouse commitments. Stakeholders considered that improvements in vehicle fuel
efficiency are important in helping to meet Australia’s commitment to the greenhouse gas
emission targets set in the Kyoto Protocol;
* Emissions standards harmonisation;
* The government’s expectation of a 15% improvement over business-as-usual in the
national average fuel consumption (NAFC) by 2010;
* The increasing demand for high octane petrol following the introduction of more
stringent emissions standards. Government agencies were concerned that this would put
pressure on refiners to increase benzene, aromatics and olefins in order to achieve higher
pool octane. Refiners were concerned that limits on these compounds would substantially
increase the investment required to make higher octane petrol. The use of octane
enhancement additives was also raised as an issue with potential impacts on the
environment and fuel efficiency performance. The increase in greenhouse gas emissions
from refineries through production of higher octane petrol was also seen as an important
issue for consideration in the development of fuel quality scenarios;

* The possibility of supplying dual grade ‘city/country’ diesel, with low sulphur diesel
supplied in the major city areas and higher sulphur diesel supplied in the country areas
for an interim period; and
* Incentives for the promotion of green fuels suitable for use in transport and switching
of vehicles to such fuels.
Commonwealth’s proposal for national fuel quality standards
As part of the consultation process for developing national fuel quality standards, the
Commonwealth held face to face meetings with stakeholders in the jurisdictions during
May and June 2000. The main objective of these meetings was to provide an opportunity
for stakeholders to discuss the proposals presented in the discussion papers and any
issues of concern relating to the proposed standards or the process for implementing
them.
The Commonwealth team consisted of representatives from Environment Australia,
Australian Greenhouse Office, Department of Industry, Science and Resources, and the
Department of Transport and Regional Services. An Interdepartmental Committee
representing other relevant Commonwealth Government departments was also consulted
during development of the Commonwealth legislation and proposed fuel quality
standards.
The main issues arising from this consultation process include:
* The proposal that Commonwealth legislation will override any inconsistent State
regulations. Western Australia, Queensland and South Australia have introduced or will
be introducing State-specific legislation where some standards, e.g. for benzene, are more
stringent than the standard proposed by the Commonwealth. They have indicated quite
strongly that they do not want to see Commonwealth standards result in a worse
environmental outcome in their jurisdictions.
* Concern has also been expressed that the timing for the introduction of fuel standards
will close some refineries which would also have implications for dependent industries,
e.g. the petrochemical industry.
* The timing of the introduction of fuel standards to facilitate the new emissions control
ADRs. The Commonwealth proposes introducing standards for technology enabling
parameters 12 months in advance of the mandated date for the new ADRs. as specified
under Measures for a Better Environment. The automotive industry has indicated that
Euro 3 vehicles will be introduced during the 12 months leading up to the mandated date.
It will, therefore, be necessary to ensure that appropriate fuel is available during this lead
up time. On the other hand, the refining industry have concerns that this cuts into time
available for the investment needed to upgrade plant and in gaining the necessary
approvals from their companies.
* In relation to timing, the refining industry has also indicated that once new diesel plant
is established to produce 50 ppm sulfur, the old plant will then be converted for 50 ppm
sulfur petrol. Therefore, the Commonwealth’s proposal for the introduction of 50 ppm

sulfur for both petrol and diesel at the same time will be difficult as 6 months will be
required for conversion of plant for 50 ppm petrol after the new diesel plant is
operational.
* The availability of 91 RON and 95 RON fuels at the same time. The FCAI have
expressed concern about the potential for misfuelling of 95 RON vehicles with 91 RON
fuel and resulting maintenance and servicing problems. They want financial incentives to
encourage uptake of 95 RON. The FCAI believe that a competitive disadvantage will
arise for manufacturers of 95 RON vehicles if 91 RON fuel is cheaper because it will
encourage consumers to buy 91 RON vehicles.
* The AIP have requested that a Euro 2 equivalent standard, based on their current
refinery exchange standards, be introduced in 2001 to address petrol substitution issues.
There has also been a general view that operational, as well as environmental, aspects
should be covered by the one instrument. Other stakeholders saw the merit of this view
for 2001.
* The use of pool averaging as compared with flat limits as a way of providing flexibility
for refiners to achieve standards for some parameters, e.g. olefins and aromatics which
affect octane levels.
* Financial incentives to encourage the production of cleaner fuels necessary for the
effective operation of new emissions control technology.
* There has been extensive discussion about the use of additives to enhance octane levels
and their operability and environmental implications. These include MTBE, MMT,
ETBE and biofuels including ethanol.
7. CONCLUSION AND RECOMMENDED OPTION
As demonstrated above, Commonwealth legislation regulating fuel quality standards
would provide the national consistency required to avoid competition problems and trade
barriers that will result from State-specific fuel quality regulations. It is the only option
available that will ensure standards are implemented in time to facilitate the effective and
efficient performance of new emissions control technology necessary to meet tighter
emissions standards implemented through new Australian Design Rules for motor
vehicles. Commonwealth fuel quality legislation capable of mandating fuel specifications
nationally will ensure that fuel of specifications that are essential for the optimal
operation of vehicles will be widely available in Australia.
The Commonwealth Government has clearly stated goals and objectives relating to
improving air quality and reducing toxic and greenhouse emissions from the transport
sector. These goals and objectives will not be met unless cleaner fuels are mandated in
Australia. Commonwealth legislation is the only cost effective option available to ensure
objectives are met in the required timetable.
In implementing fuel standards, the requirements and expectations of the automotive
industry need to be balanced carefully with the production capabilities of the refining
industry and the significant investment that will be required if they are to produce cleaner

fuels. The Commonwealth proposal has been developed in close consultation with both
industries and all stakeholders to ensure the best possible outcome for all Australians and
is recommended as the most viable option for achieving the Government’s objectives.
8. IMPLEMENTATION AND REVIEW
The preferred option, ie the Commonwealth’s proposal for national fuel quality standards,
would be implemented under primary legislation that provides the machinery for
establishing a national fuel quality standards regime. It is proposed that the actual
standards for each of the petrol and diesel parameters would be set in regulations under
the Act. This would provide the necessary flexibility to amend the standards quickly or to
deal with other fuel quality issues as they arise without having to go through the lengthy
process required to amend the legislation.
Under the legislation, statutory independent review will be required two years after the
first set of standards comes into effect, i.e. January 2002, and thereafter every five years.
From January 2002, the Minister will be required to present an annual report to the
Parliament that describes compliance with the legislation, prosecutions made under the
legislation and any other relevant actions, such as whether any regulations were made
under the legislation.
It is not envisaged that compliance will result in paper burden costs in the production and
supply chain as existing record keeping processes, if operated effectively, should be
sufficient. There may only be a requirement that the quality of these processes be
improved to ensure that sufficient records are kept and that they are accurate.
Effectiveness of the Commonwealth’s proposal for national fuel quality standards will be
measured in a number of ways. These include the availability of cleaner fuel to
consumers, measured reductions in emissions compared to business as usual projections,
and the effectiveness of the new advanced emissions control technology.
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______ (1996) Sustainable Energy Policy for Australia, Commonwealth of Australia,
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______ (1997) Motor vehicle emission regulations and fuel specifications in Europe and
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______ (1996a) Communication from the Commission to the European Parliament and
the Council on a future strategy for the control of atmospheric emissions from road
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______ (1996b), Proposal for a Directive on the Quality of Petrol and Diesel Fuels, in
Europe Energy No 476, 26 September 1996
______ (1997) Resolution on the communication from the Commission to the European
Parliament and the Council on a future strategy for the control of atmospheric emissions
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FORS (1997) LPG In-service Vehicle Emissions Study - Supplementary Report No.1 to
Motor Vehicle Pollution In Australia Report, report prepared by the NSW Environment
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May 1997.
Grant, L.D., Graham, J.A., Kotchmar, D.J. & Tilton, B.E. (1993) Health effects of motor
vehicle related criteria air pollutants, International workshop on human health and
environmental effects of motor vehicle fuels and their exhaust emissions, Sydney
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the Health and Urban Air Quality in NSW Conference, NSW Department of Health and
NSW EPA, Sydney, 3-4 June 1996.
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WA Department of Transport, Nedlands, WA.
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Clean Air and Buses, Seminar Presentation, Canberra, July 1998.
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Fuelled Vehicles, Washington, DC September 1996.
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Admissions in Sydney, Australia, 1990 to 1994, Amercian Journal of Public Health,
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environmental knowledge, skills attitudes and behaviour of the people of NSW, NSW
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Hunter, NSW Government Green Paper, Chatswood, NSW.
______ (1996b) Developing an Air Quality Management Plan for Sydney, the Illawarra
and the Lower Hunter, Chatswood, NSW.
______ (1996c) Metropolitan Air Quality Study: Outcomes and Implications for
Managing Air Quality, NSW.

______ (1998) Action for the Air: the NSW Government’s 25 Year Air Quality
Management Plan, February 1998.
______ (1999) Preliminary Economic Analysis of Adopting New Vehicle Emission
Standards, Economics and Environmental Reporting Branch, NSW EPA, April 1999.
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Australia’s Response to Climate Change, 20 November 1997
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Changes to the Goods and Services Tax (GST) including Measures for a Better
Environment, Costing of Commonwealth and States Measures, 31 May 1999.
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Queensland Department of the Environment, February 1998.
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Pollution and Health - the Facts, Canberra, 10 November 1997.
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______ (1999) Air Emissions Inventory - Port Phillip Region.
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Department of Environmental Protection, Perth, November 1996

APPENDIX 1
Table A3.1 Australian diesel - product characteristics summary - 1998
Fuel parameter
Sample size
(n)
Standard
deviation
Mini
mum
Maxi
mum
Avera
ge
Ash, mass % 49 0.001 0.000 0.010 0.001
CFPP, deg C: Summer 37 2.174 -7 2 -1
CFPP, deg C: Winter 53 0.643 -5 -2 -4
Cetane Index 2031 3.287 43.0 64.0 51.4
Cloud Pt, deg C: Summer 756 3.021 -18 14 4.7
Cloud Pt, deg C: Winter 510 2.673 -6 14 1
Copper strip, 3h @ 150C 1238 1a 2a 1a
Density, @ 15C, kg/L 2036 0.0087 0.8122 0.8731 0.8462
Distillation:
50% recov’d, deg C 1447 5.813 233.1 300.0 277.7
90% recov’d, deg C 2036 8.194 257.0 379.7 334.4
95% recov’d, deg C 1324 7.728 318.5 384.2 352.8
Flash Pt, PM, deg C 2032 6.845 59.0 105.0 79.7
Oxidation Stab., 4/48h, mg/L 48 4.782 0.0 18.0 3.4
10% Distillation residue, % mass 56 0.0215 0.0000 0.1400 0.0437
Water & sediment, % mass 769 0.0096 0.0000 0.0500 0.0092
Sulfur, % mass 2035 0.081 0.01 0.55 0.13
Viscosity @ 40C, cSt 54 0.283 2.18 4.00 3.24
Source: Australian Institute of Petroleum, 1999

Table A3.2 Regular unleaded petrol (ULP) - product characteristics summary -
1998
Fuel parameter
Sample
size (n)
Standard
deviation
Mini Maxi Aver
mum mum age
Benzene, %volume 1252 0.717 0.30 5.00 2.58
Colour 1197
Copper strip 3H @ 50°C 944 1A 1B 1A
Density @15°C kg/L 1633 0.007
Distillation
0.701
1
0.761
4
Purpl
e
0.735
0
10% evap, deg C 1668 3.163 29.1 56.5 46.0
50% evap, deg C 1668 5.135 63.9 110.0 86.3
90% evap, deg C 1668 7.496 129.0 185.0 155.1
FBP, deg C 1690 10.945 152.3 232.8 197.0
Evap @ 70°C, vol % 1522 3.913 18.3 47.0 34.3
Existent gum, mg/L 63 3.631 0.0 34.0 3.9
Induction period, min 51 202.083 240 1440 >400
Lead, mg/L 1577 0.473 0.00 6.00 1.40
Motor octane number 1314 0.431 81.6 86.8 82.5
Research octane number 1666 0.592 90.3 95.0 91.6
Phosphorus, mg/L 53 0.112 0.00 0.70 0.38
Sulfur, % mass 1106 0.10 0.000 0.200 0.015
Volatility
RVP, kPa, January 122 2.868 61.0 81.0 71.9

RVP, kPa, February 115 4.309 49.5 93.0 72.7
RVP, kPa, March 141 3.079 64.5 86.3 76.0
RVP, kPa, April 138 3.562 68.2 87.7 78.8
RVP, kPa, May 107 8.762 69.4 94.0 84.1
RVP, kPa, June 134 5.087 70.4 96.8 86.1
RVP, kPa, July 130 5.222 66.2 98.0 85.6
RVP, kPa, August 127 5.333 62.0 95.0 84.9
RVP, kPa, September 129 5.007 64.0 90.7 80.8
RVP, kPa, October 136 4.527 61.4 89.2 77.0
RVP, kPa, November 136 4.398 55.0 88.7 73.1
RVP, kPa, December 144 3.126 59.0 84.0 70.9
Aromatics, % volume 212 5.240 10.2 45.0 27.3
Olefins, % volume 32 7.706 0.0 37.8 17.1
Total number of batches: 1690. Total refinery
throughput: 12218 ML
Source: Australian Institute of Petroleum

Table A3.3: Premium unleaded petrol (PULP) - product characteristics
summary - 1998
Fuel parameter
Sample
size (n)
Standard
deviation
Mini Maxi Aver
mum mum age
Benzene, %volume 152 0.637 1.30 5.00 3.29
Colour 149
Copper strip 3H @ 50°C 131 1A 1B 1A
Density @15°C kg/L 211 0.0072
Distillation
0.722
5
0.771
8
Yello
w
0.747
5
10% evap, deg C 203 3.951 37.0 62.6 47.9
50% evap, deg C 203 4.789 89.0 147.9 102.5
90% evap, deg C 203 5.570 131.5 181.0 155.9
FBP, deg C 214 8.480 163.0 232.5 198.3
Evap @ 70°C, vol % 211 3.411 11.5 35.5 25.4
Existent gum, mg/L 49 3.659 0.0 38.0 7.9
Induction period, min 36 63 600.0 1100.
0
Lead, mg/L 214 0.523 0.00 3.00 1.12
Motor octane number 197 0.668 82.9 88.4 85.5
Research octane number 211 0.580 95.0 98.4 96.1
Phosphorus, mg/L 32 0.173 0.00 0.70 0.08
Sulfur, % mass 193 0.010 0.000 0.100 0.012
Volatility
RVP, kPa, January 21 5.080 64.0 95.8 76.1
480

RVP, kPa, February 14 3.100 51.0 96.1 77.3
RVP, kPa, March 13 2.684 72.0 85.5 80.2
RVP, kPa, April 19 2.868 66.0 89.3 83.3
RVP, kPa, May 18 3.278 70.0 96.0 84.7
RVP, kPa, June 21 3.758 9.3 100.0 87.9
RVP, kPa, July 17 6.914 72.0 98.0 85.1
RVP, kPa, August 12 8.940 61.3 98.0 79.8
RVP, kPa, September 18 7.214 58.5 92.3 78.1
RVP, kPa, October 19 2.634 50.5 92.0 77.0
RVP, kPa, November 19 7.060 66.0 88.0 78.2
RVP, kPa, December 23 3.752 60.0 81.0 71.3
Aromatics, % volume 32 5.494 22.9 50.0 35.7
Olefins, % volume 9 6.916 7.8 28.9 17.0
Total number of batches: 214. Total refinery
throughput: 640 ML
Source: Australian Institute of Petroleum

APPENDIX 2: Summary of Assessment of Regulatory Options
Assessment
criteria
1. Provides a
nationally
consistent
approach to
fuel quality
standards.
2. Is consistent
with
preceding
Government
policy
decisions on
this matter
3. Ensures
that
appropriate
fuel is
available in
line with the
timetable for
the
implementatio
n of new
ADRs.
5. Does not
restrict
competition
and trade.
Option 1.
Business as
Usual
State specific
legislation
creating
competition
problems and
trade barriers.
Some States or
Territories
without any
standards.
Inconsistent with
preceding
Government
policy decisions.
Would not meet
timetable under
BAU. Not all
States would
regulate.
Appropriate fuel
not produced by
all refineries.
Option 2:
Industry
agreements
Tend to favour
refinery
capabilities
within a
jurisdiction. Not
enforceable.
Would not meet
objective in a
consistent way.
Inconsistent
with preceding
Government
policy decisions.
Favours
refinery
capabilities
within a
jurisdiction.
Investment
necessary would
not occur in
time.
State specific
Industry
legislation
agreements with
currently being
specific states
implemented will
could cause
restrict
competition
competition and
problems.
trade.
Option 3: State
Regulation
Regulations differ in
each State creating
competition
problems and trade
barriers. Some states
will not regulate.
Inconsistent with
preceding
Government policy
decisions.
Not all jurisdictions
would introduce
regulations in time.
State specific
legislation favours
local refining
industry capabilities.
Timeframe would
not be met.
State specific
legislation will
restrict competition
and create trade
barriers.
Option 4: NEPM
Implementation
through State
legislation.
Possible for State
specific factors to
be incorporated.
States can pull
out of process.
Would not
achieve
consistency with
preceding
Government
policy decision
on the fuel
quality,
NEPM
development
process too slow.
Timetable would
not be met.
May assist in
achieving a
national
approach,
however,
conditions
relating to state
legislation could
create barriers.
Option 7:
Commonwealth
legislation
Would apply
uniformly across
the jurisdictions
and provide
national
consistency.
Commonwealth
proposal is
consistent (and
driven) by
preceding
Government
policy decisions.
Proposed
timetable for
introduction of
standards will
ensure
appropriate fuel
is available for
new ADRs -
incorporated in
objectives.
Will ensure
uniform national
standards and
avoid competition
problems -
overrides state
regulations.

Appendix 3: Summary of Costs and Benefits
COSTS
Compliance
Socioeconomic
Environmental
BENEFITS
Compliance
Socioeconomic
Environmental
States and
Territories
Commonwealth
legislation will
override
inconsistent
standards in the
jurisdictions.
Potential closure
of local refineries
- implications for
dependent
industries eg
petrochemicals.
Concern about
worse
environmental
outcome from less
stringent standards
States and
Territories
Reduced
monitoring and
enforcement for
State agencies.
Improved health
and reduced
associated costs.
Level playing
field for industry.
Decrease in
emissions from
road transport.
Refining Industry
Average capital
investment per refinery
of $185M. An increase
in operating
expenditure of $17M
per refinery.
Possible closure of
refineries and related
industries - potential
job losses. Note that job
loses may occur
through restructuring,
separate from the fuel
quality standards
process. Timing issue
for investment
approvals etc.
Potential for increased
greenhouse gas
emissions at refineries.
Refining Industry
Consistent approach to
fuel standards
nationally Reduced
compliance costs in the
long-term. Certainty for
future investment
Avoided competition
problems and trade
barriers - level playing
field. More viable
industry.
Cleaner fuels -
improved public
profile.
Fuel importers &
distributors
Comprehensive and
accurate record
keeping procedures.
Potential for
increased storage
costs for
distributors.
Small increase in
the price of fuel
distributors
purchase from
major refiners.
Fuel importers &
distributors
Reduced
compliance costs
due to national
uniform standards.
Certainty of future
requirements.
Protection from
unscrupulous
operators that
adulterate fuel -
damaging business
and reputations.
Reduced
adulteration of fuel
causing harmful
toxic effects.
Fuel
retailers
Comprehensi
ve and
accurate
record
keeping
procedures.
Small
increase in
the price of
fuel
purchased
from
distributors.
Fuel
retailers
Consistent
approach.
Reduced
compliance
costs.
Reduced
evaporative
emissions at
the pump and
less
adulteration
of fuel.
Automotive
Industry Consumers
Misfuelling
issue if 91 &
95 RON fuel
is available
at the same
time.
Potential
competitive
disadvantage
Increased
fuel prices at
the pump -
diesel - 1.5c
per litre
petrol - 1.1c
per litre
Potential for
increased
refinery
emissions.
Automotive
Industry Consumers
More
efficient
operation of
vehicle
technology -
reduced
emissions.
Appropriate
fuel available
for new
ADRs
Effective
emissions
control
technology -
reduced
emissions.
More
efficient
operation of
vehicles -
improved
fuel
economy.
Avoided
health costs.
Net health &
environment
al benefits
between
$1577M &
$2180M.
Improved air
quality -
substantial
reductions in
emissions.
Improved
health.

APPENDIX 4
LIST OF STAKEHOLDERS
* ACT Department of Urban Services
* AGL
* AIR
* Australian Automobile Association
* Australian Competition & Consumer Commission
* Australian Institute of Petroleum
* Australian LPG Association
* Australian Natural Gas Vehicles Council
* Australian Petroleum Agents & Distributors Assoc.
* Australian Service Station Association
* BP Australia
* Burmah Fuels
* Burn Bank Consulting
* Caltex Australia
* Commercial Vehicle Industry Association
* Commonwealth Department of Industry Science & Resources, Petroleum Division
* Commonwealth Department of Industry, Science and Resources, Automotive Industry
Section
* Commonwealth Department of Transport and Regional Servicese
* Australian Greenhouse Office
* Conservation Council of WA
* CSIRO
* Department of Environment & Heritage, Qld
* Department of Environment & Land Management, TAS

* Department of Environmental Protection, WA
* Department of Infrastructure, Energy and Resources, Tasmania
* Department of Lands, Planning & Environment, NT
* Department of Natural Resources, Victoria
* Department of Transport, Queensland
* Dept. of Transport, Tasmania
* Department of Transport, WA
* Department of Transport & Works, NT
* Department of Transport, the Arts & Urban Planning, SA
* Environment Protection Authority, NSW
* Environment Protection, Dept of Urban Services, ACT
* Environment Protection Authority, Victoria
* Federal Chamber of Automotive Industries
* Federal Office of Road Safety
* Federation of Automotive Products Manufacturers
* Gull Petroleum WA
* Iain Cameron Consultancy
* Liberty Oil Pty Ltd
* Minerals & Petroleum Dept of Natural Resources & Environment, Victoria
* Minerals Council of Australia
* Mobil Oil Australia
* Motor Traders Association of Australia
* National Environmental Consultative Forum
(C/- Tasmanian Conservation Trust, Inc)
* National Farmers Federation
* National Road Transport Commission

* NRMA
* NSW Cabinet Office
* Premiers Departments
* Road Transport Forum
* Roads & Traffic Authority - NSW
* Shell Australia
* Society of Automotive Engineers
* Sustainable Energy Group
* The Treasury
* Victorian Farmers Federation
* VicRoads