By on April 11, 2011

American auto enthusiasts often bemoan the lack of diesel options offered on the US market, looking to Europe as the promised land of oil-burning efficiency. But Europe’s love affair with diesel, which has been manifested in a 50%+ diesel sales mix for years, may be coming to a close. The WSJ reports

The European Commission–which has executive powers in the European Union–will propose to levy a minimum EUR20 per metric ton of carbon dioxide emitted on products like gasoline, diesel, natural gas and coal starting in 2013. But it will also propose adjusting the existing legislation by gradually increasing a minimum levy on the energy content of diesel to bring it to the same level as that of gasoline starting in 2018

Here’s the key: in addition to basing taxes on C02 emissions, the EU tax structure shift will result in fuel taxation based on energy content rather than volume alone. Accordingly, diesel’s higher energy content means it will see a more dramatic increase in taxation levels. And this single common-sense proposal is unleashing an intense debate in Europe about energy, taxation and the future of the auto industry.

The hydrocarbon industry is one of the few European stakeholders to come out in support of the European Commission’s proposal, telling the WSJ

It is important to balance taxation for all energy sources to create a level playing field and technology neutral approach for all energy products. Taxing each energy product on its merits–its energy content and CO2 emitted while used, will encourage intelligent choices of energy products based on their efficiency rather than on their favourable taxation

After all, one of the Commision’s goals for energy tax reform is to help the European refining scheme. In order to produce enough diesel for the European market, refineries must produce excess gasoline which it then sells (at little profit) to the US.  The European auto industry, on the other hand, is much less enthused about the Commission’s proposal for a Europe-wide tax scheme. A spokesperson for the ACEA, Europe’s automaker association complains

EU manufacturers are world leaders in clean diesel technologies and have invested quite a bit in it. If the market share of diesel would now decrease, that could be counterproductive

And like all EU regulation, the potential creation of economic winners and losers with this proposal is creating political problems, pitting automaking nations like Germany against Brussels and its supporters. As the home of three automakers with a global reputation for diesel technology, Germany’s government is taking the lead in opposing the proposed energy tax reform. Economic Minister Rainer Brüderle dismisses the very notion of an increase in diesel taxes in Autobild, threatening a German veto of any such proposal. German Transport Minister Peter Ramsauerwas even more specific in thelocal.de, saying

The regulatory frenzy from Brussels must have an end. That means hands off the diesel tax. Relief through a hike in commuter tax breaks or cuts in the green tax really have to be discussed. Otherwise, motorists will revolt.

But the European Commission insists that its proposal is not intended to penalize diesel, but simply to put Europe on a single, fair energy standard. After all, as Ferdinand Dudenhöffer from the Center for Automotive Research at the University of Duisburg-Essen points out to Deutsche Welle

Because of generous diesel subsidies, nearly 48 percent of German cars and more than 60 percent of Austrian cars are powered by diesel. In Switzerland, where no such subsidy is in place, only about 20 percent of the cars run on diesel

By standardizing taxation on energy content lines, Dudenhöffer and the European Commission argue that Europe’s diesel mix will be determined by market forces across the Union, rather than by subsidies on a country-by-country basis. And, for all of Germany’s advantages in diesel technology, the current tax structure has helped its automakers ignore revolutions in gas-hybrid technologies. Besides, as EC spokesman David Boubli tells EUobserver,

big prices changes are unlikely as many national governments already set diesel taxes which are above the EU minimum.

Reacting to German news reports that the country’s diesel prices would rise, Boublil said: “The current minimum at the EU level for diesel is €330 per 1000 litres … [whereas] in Germany the current minimum is €470 per 1,000 litres.”

“The future minimum [based on Wednesday's proposals] will be closer to the current minimum than to what is applied in Germany now.”

The diesel debate is far from over, and will likely generate more controversy before it is resolved. But if the tax reform passes, Europe’s decades-long love affair with diesel could draw to a close. And since few other markets have supported diesel to the same extent, a resulting move away from diesel technology by the German automakers could radically affect the availability of diesel-powered passenger cars around the world. If Europe turns away from diesel, the world might just follow suit.

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51 Comments on “Are Europe’s Diesel Days Coming To An End?...”


  • avatar
    Educator(of teachers)Dan

    Accordingly, diesel’s higher energy content means it will see a more dramatic increase in taxation levels.
    So wait, were gonna penalize diesel cause it has MORE energy potential in a given measurement?  Seriously?  I thought U.S. politicians were stupid.

    • 0 avatar
      Philosophil

      I don’t think the main emphasis is on the efficiency of diesel per se. The higher cost seems to refer to the low rate of return on the gasoline that is produced as a ‘by-product’ as it were of diesel fuel production (so that current diesel prices don’t reflect the true cost of its production).

    • 0 avatar
      BigOldChryslers

      I thought that the US has been taxing diesel more heavily than gasoline for years, for the same reason?  Even if this is not specifically the case, diesel IS taxed more heavily than gasoline n the US, by an average of 5 cents per gallon.
       
      http://www.api.org/statistics/fueltaxes/

      • 0 avatar
        Educator(of teachers)Dan

        Oh I knew diesel was more expensive than gas.  I didn’t know it was because of heavy taxation, I just figured that diesel was more expensive to produce.  Stupid me to think that something might be based on market forces.

      • 0 avatar

        Dan, Diesel is basically barely refined crude oil, and is the least expensive fuel to produce. Mind you ULSD (ultra low sulfur Diesel) is more difficult to produce than bunker oil, but it is still a vastly simpler chemical than gasoline.

      • 0 avatar
        nikita

        Chuck, that Wikipedia article is a little misleading, as it is primarily marine fuel oriented. Here is a diagram of a representative modern fuels refinery.
        http://1.bp.blogspot.com/_dpZfkyjb7QI/SYB1TkEAcUI/AAAAAAAAASs/FG5MZ7XoXw8/s1600-h/New+Picture+%2820%29.png
        Diesel comes from several refinery streams, as does gasoline. ULSD also requires more treating, not shown.

        Dan, its not so much the cost of production as the supply/demand balance of each product. That is why diesel tends to go up in winter and down in summer due to fluctuations in heating oil demand. Also, subsidized ethanol is 10% of US gasoline blends, further distorting the market price. I think the theory behind greater taxation of diesel in the US is not energy content but the belief that big rigs do more damage to highways. Also, there is the “stick it to business, give the consumer a break” philosophy that exists in politics here.

    • 0 avatar
      carve

      Well, as bad as the fuel tax laws are in Europe, taxing per unit of energy is more sensible and less arbitrary than taxing by volume.  This way, you can compare ethanol to coal to hydrogen if you wanted.

    • 0 avatar
      psarhjinian

      Diesel is more energy dense because it has more hydrocarbons per volumetric unit (eg, gallons) than gas. It manages this by being physically denser (it weighs more for a gallon) and it requires more crude to make a gallon of diesel than a gallon of gas. 

      This, and given that gas engines are approaching diesel efficiency, is why it doesn’t make sense to encourage diesel over gas.  

      • 0 avatar
        cwerdna

        I haven’t read the entire article yet, but due to diesel’s higher carbon content, it thus causes more CO2 to be emitted when burned than the same volume of gasoline.  See http://www.epa.gov/oms/climate/420f05001.htm.
        Also, at least in the US, per http://www.eia.doe.gov/kids/energy.cfm?page=oil_home-basics, a barrel of oil when refined produces 19.36 gallons of gasoline and 10.04 gallons of diesel.  I’m unclear what European yields look like and would like to know.
         

    • 0 avatar
      M 1

      Amusing that they don’t seem to have considered reducing the taxes on gasoline according to energy-density, isn’t it? Oopsie, looks like their cash-grab is showing.

  • avatar
    Philosophil

    If this goes through it would certainly seem to put a monkey wrench into VW’s reliance on diesel to meet its fuel efficiency standards. I bet the hybrid and EV oriented researchers are chomping at the bit over this one.

  • avatar
    CJinSD

    Europeans are going to LOVE their Toyotas!

    • 0 avatar
      vento97

      Toyota, Nissan and Honda have a substantial number of Diesel automobiles available for sale in Europe,  so legislation such as this will effect them as well…

      • 0 avatar
        CJinSD

        They’ll eat their investment in dead end diesel technology, but Toyota will have a leg up on everyone with Synergy drive. It is a very mature and effective hybrid system.

  • avatar
    Fusion

    Interestingly, no one is asking for a homogenization of the taxation on oil for heating and diesel, though they are basically the same thing. Why is energy content the one and only “true and fair” taxation base when car fuels are concerned (though apparently LPG is not included in the proposal?), yet not when the same fuel is burned for another use? Why is the different taxation of electricity not put into question?
    The simple answer is – because energy content is not the only fair base for fuel taxation. Taxes on fuels have a lot more reasoning behind them than simply “paying for the energy to the government”.
     
    Also, as usual when Dudenhöffer is mentioned, ignore his part. Even Switzerland does not tax the energy, but the volume. And while they are taxing diesel and gasoline similarly (per litre), they are not the only country to do so. The UK for example is also taxing them at the same height, yet they have a diesel share of over 40%.
    The extremely low diesel share in Switzerland can be explained by several additional facts + the high price (small country -> less long roads, less motorways. More money per person, so more premium gas cars sold, etc.)

    • 0 avatar

      Wait, you’re seriously asking why they don’t radically increase the taxes on heating oil?

      Really? You can’t think of ANY reason why they wouldn’t want to do that?

    • 0 avatar
      HerrKaLeun

      with diesel you drive on a tax-paid road. With heating oil you use your own heater.

    • 0 avatar
      CJinSD

      Fusion,

      I’m just replying to say that I read your entire post and that some people have the capacity to read for comprehension before having a knee-jerk reaction that attempts to spread the ignorance of people who don’t have the capacity to read two paragraphs.

      • 0 avatar
        Fusion

        Thanks CJinSD.
         
        Of course I am not asking for a rise in taxation on heating oil. Just pointing out, that obviously, energy content is not always the one and only base for taxation. One could logically ask, why car fuels are to be taxed evenly on energy content, while heating oil, electricity (or even other car fuels like LPG) are not.
        The answer is simple – taxation has quite often a character of subsidy for certain businesses, keeping cost of living in check, ecological motivation. The (often, not always) lower tax on diesel was mainly introduced as a “subsidy” to the transport industry, but also serves as a boon to most of the european (not just german) car industry and in some opinions also is a bonus to the environment. (Mostly and especially in todays european CO2-centric perspectives). Even when adjusting for the higher energy content per volume, Diesel cars are more efficient than gasoline ones in most uses.
        Imho these are several good reasons for allowing states (remember, the diesel subsidies are the choice of the nations until now, they were not forced to do so) to set their own taxation as they like. While the “energy in certain(!) fuels should be taxed evenly, as long as it is used to power cars, but not when it is used for other reasons” argument imho is not very convincing at all…

    • 0 avatar
      rpn453

      Diesel has about 18% more energy by volume.  That means it should be capable of taking the same vehicle 18% farther, thus using and damaging the roads 18% more and justifying an 18% greater volumetric tax for the portion of the fuel tax that goes toward building and maintaining roads.
       
      Any additional taxes should, like other consumer products, simply be based on the sale price of the product and should apply equally to all forms of energy, IMO.

  • avatar
    Uncle Mellow

    A lot of European motorists with new diesel cars are having trouble with particulate filters because they are using the cars for unsuitable short journeys. They are buying diesels purely because of the favourable taxation of diesel cars.

    • 0 avatar
      krhodes1

      You seriously think that they are not buying diesels because of the favorable PERFORMANCE compared to fuel consumption?? Even here in the states, compare a BMW 335d with a 335i – very comparable acceleration and top speed, and yet in the real world the 335d goes nearly 50% farther on a gallon of fuel that only cost 10% more. The fact that diesel fuel tends to be a little cheaper than gasoline in Europe is the bonus plan.

      And I think the smaller the engine, the bigger the gain with diesel. A 100hp gasoline engine tends to be a pretty wheezy little thing that you have to rev the Hell out of to get anywhere. A similarly powerful diesel tends to be both more relaxed AND more efficient. 

      • 0 avatar
        SimonAlberta

        I agree totally with your post but I will take mild exception to the term “similarly powerful diesel” in the sense that you portray it. If a gas engine and a diesel engine both make 100 hp I would suggest they are not particularly similar because the gas engine will need around 6000 rpm to make its’ peak hp whereas the diesel may well only need 4000 rpm or even less.
         
        To compare gas and diesel engines I would think comparing peak torque figures would be more appropriate.

      • 0 avatar
        CJinSD

        In terms of performance, horsepower is the metric that matters most. Horsepower is a measure of the rate that work can be done, while torque doesn’t take time into consideration. Looking at the BMWUSA examples, the 335d really isn’t anywhere near as quick as the 335i. It is a bit quicker than the 328i. Basically, it performs about what you would expect of a heavier, 265 hp E90, no matter what the torque number is. Diesels don’t turn high engine speeds because they can’t, not because it is any sort of advantage.

      • 0 avatar
        stuki

        CJinSD,
         
        Thanks for pointing this out!
         
        As long as cars come equipped with gear boxes, HP is the metric of concern as far as performance goes, not Torque. And particularly so, when the engine in question revs as smoothly as a BMW I6. Why anyone would give this up for a tractor engine that stinks, is beyond me.
         
        The Tesla, with it’s one (or is it two by now?) forward speeds, do benefit from some torque, though.
         
        Off road vehicles operating at stall speed uphill also benefit from some torque. Comparing the diesel 4 to the gas V6 in the Euro Land Cruiser, this, and range, are the two only areas where the diesel 4 shines, except for the safety of carrying additional fuel. When used in civilization, where there are roads, freeways, limited length onramps and gas stations less than 1000 miles apart, the gas 6 is, in every conceivable way, preferable; despite torque figures being very similar, or even slightly higher for the diesel.
         

    • 0 avatar
      krhodes1

      @SimonAlberta

      I actually agree with you completely – the 100hp diesel would likely have a good bit more torque than the 100hp gas engine, and at a much lower rpm. Though turbocharging gas engines evens the playing field at the expense of fuel consumption.

      @CJinSD

      The 335D is all of 4/10 of a second slower to 60mph than the 335i, per BMWs figures. 6.0 seconds vs. 5.6 seconds. My butt dyno is not so finely calibrated as to notice the difference, either one is bloody fast. What IS very noticable is the difference in HOW that time is achieved – the 335D just whooshed forward like a big jet thundering down the runway, all quiet power as it shifts at only 5K rpm. The 335i is frantically shifting at near 7Krpm. Not that high revs are a penalty with a BMW 6, but still. Technically, a 328i automatic is only 9/10 of a second slower than the 335D, but if by your standards 4/10ths slower “isn’t anywhere near as quick” then more than twice that much slower again must be like being chained to a tree.

      At the same time, the 335D achieves 8mpg better on the EPA highway test. I can tell you from experience in Europe, the fuel consumption gulf widens considerably as speed increases – the fuel consumption of the 335D will be less than half that of the 335i at 130mph. Note that Audi has used this to great advantage to win LeMans how many times now?

      So I would say it is not that the diesel can’t rev (true though that may be) but rather that it has no need to.

      Now for a sports car, sure, I like a nice rev-happy engine (I have a pair of Alfas in my garage), but for a daily drive slogger give me that torque and fuel economy any day. Had I the choice, I certainly would have ordered my E91 in diesel.

      • 0 avatar
        CJinSD

        I was thinking of Car and Driver numbers, not BMW’s marketing figures. The 335d was 7/10ths slower than the 335i and 6/10ths faster than the 328i in the quarter mile. If not reving faster is an advantage of any engine that can’t make power over 5,000 rpm, then why is the turbo 3 liter diesel less powerful and slower than the 3 liter gasoline engine? I can only turn 85 rpm on my bicycle and I’m slower than a 335d, so I must have an even better motor than the 335d in your model.

        http://www.caranddriver.com/var/ezflow_site/storage/original/application/0dda04134deeae34dad94dcfb884a66d.pdf

      • 0 avatar
        stuki

        If the 335d actually uses less than half the fuel of the 335i at 130mph, that is indeed a good reason to go with the diesel, although I can’t say I fully understand why this should be so. Is the 335i engine so highly tuned to run efficient only at the low outputs required for 65mph cruising, that mileage collapses that much faster than the diesel once more power is required? Or is it geared so off base for 130mph travel? I just don’t get it, but I can’t say I have measured the two side by side.
         
        One thing I have noticed, is that when driving “fast”, I end up using relatively more gas in a more powerful car, simply because “fast” in the faster car means faster than in the slower car. So, unless your test was done in cruise control, don’t discount the possibility that you drove considerably more dynamic in the 335i, reaching higher speeds on the straights, only t scrub off more speeds for the turns, or when encountering traffic. Hald the time at 110 and the other half at 150, will undoubtedly use more fuel than a constant 130.
         

    • 0 avatar
      krhodes1

      @ Stuki and CJinSD

      Have either of you owned or even driven a modern high-performance diesel? If not, then I respectfully suggest that you do so before running off at the mouth on matters of which you obviously know not. I’ve owned a VW TDI, and driven the BMW 320D, 330D, and 335D fairly extensively, the 335D both here and in Europe. ’Stinky tractor engine’ indeed. 

      Gearing works both ways – monumental torque at low rpm makes very tall gearing possible while still having blistering acceleration.

      The appeal of the modern diesel is much the same as the appeal of the old big-block V8s. Effortless power, which is achieved through large quantities of torque at rpm. And those didn’t rev either. But with efficiency that a big gasoline V8 can only dream of achieving. Now that efficiency does cost, TANSTAAFL always applies. But in the long run it is a price worth paying. Relaxing, effortless performance.

      As I have mentioned, I have an assortment of high-revving little buzz bomb toys in my garage for when I want to play. For my daily driver I want efficiency and relaxation along with the performance.

    • 0 avatar
      krhodes1

      There is no real difference in performance between the 335i and the 335D. They both do 0-60 in ~6 seconds, they both are limited to 150mph in Sport Pkg trim. If anything, the 335D has the edge in acceleration at speed because that is where torque DOES matter. If you could get a 335D with a stick it would annihilate the 335i in in-gear acceleration. So no, there is nothing in it when driving in Europe other than spending a WHOLE lot less money on fuel.

      The reason I have been priviledged to drive these cars is that one of my best friends from College is a guy from Hungary, and I have spent extensive time visiting and traveling with him. He could provide you the fuel reciepts that will prove my statement of 1/2 the fuel consumption in the real world. And for making time on public highways this guy in Jack Baruth’s league.

      As to the why? Diesels are inherently more efficient (higher compression ratio, no pumping losses due to no throttle, leaner mixture), and as has been pointed out, diesel has more energy per unit. And all that torque allows taller gearing, which means more distance traveled per engine revolution. Simple.

      And always realize, horsepower is an artificial measure. It is essentially torque x rpm. if a 335D could rev to 7K like a 335i does, it would have a much higher peak horsepower rating than the 335i.

  • avatar
    jkross22

    Thankfully, the governments making these decisions are full of scientists with first hand knowledge of the benefits and drawbacks of this type of change.  I’m sure that consumer advocates also work for the government, so they can speak up during these discussions to help point out why Diesels have won acceptance over gasoline counterparts.

    My guess is that this has nothing to do with energy density and fairness, and everything to do with economic realities of liabilities increasing and fewer people to pay for them.

  • avatar
    grzydj

    Europe. Tax everything.

  • avatar
    Lorenzo

    The German example gives a clue to what’s going on.  The EU minimum tax is 330 Euros while The German minimum tax is 470 Euros. The 170 Euro difference goes to the German treasury.
     
    If the EU minimum goes up, and the German public doesn’t want a price increase, the German revenue goes down. Brussels is daring the Germans to raise fuel taxes, or lose some revenue to Brussels. No wonder the Germans are opposed.

    • 0 avatar
      Fusion

      Thats actually not true. The minimum tax doesn’t go to brussel, it just says what the minimum for the german tax would be, it would still all go to germany. At this moment, I don’t believe there is even one “direct EU” tax. EU income comes from membership “fees” (which of course then come from taxation, but in the countries, and import duties.

  • avatar
    Robbie

    This has nothing to do with reason or science: the low price for diesel in Europe is because of the historically strong trucking lobby. They argued that taxation levels similar to those on gas in Europe would bring transportation in Europe to a standstill. Apparently, that lobby is getting less strong.

    • 0 avatar

      The high gasoline tax was the coal industry’s doing in the early days of the car. they didn’t want to lose their hegemony. I don’t know about the trucking industry keeping the price of diesel low–I am inclined to doubt it because at the time the high gas tax was instituted (the 20s maybe, I can’t remember exactly) there wouldn’t have been much of a trucking industry, if any. Unfortunately, my expert on this issue, Greg Nowell of SUNY Albany (who did his thesis on major energy transitions) is not answering his phone.

      • 0 avatar
        dastanley

        And don’t forget that diesel fuel/engines didn’t really take hold in the US until the 30s and later.  Up until WWII and beyond, many rigs (and construction equipment) still used gasoline.

  • avatar
    GS650G

    And lost in the quest for cash disguised as concern for polar bears is the fact that higher energy prices inflates the price of everything everywhere. All these increased costs, from trucking to personal use, end up driving prices higher with resultant lower standards of living. Even if a German businessman pays more to fill his Mercedes you can be he will look for a way to recover that hole in his wallet by some means. His secretary might not get that raise after all.
    But at least we feel good about helping polar bears.
     

    • 0 avatar
      Ubermensch

      It’s not about helping polar bears, although that does make for a cuddly reminder of climate change.  It’s about survival of the human species and the devastating effect climate change will have on human life and yes, everyone’s wallet.

      • 0 avatar
        GS650G

        So whacking people with higher fuel taxes will save humanity?
        Sorry,  not buying all that. And I don’t think a lot of people do at this point. But your free to do your part and ride a bike, turn off the lights, and invest in companies that promise results.
         

  • avatar
    Steve65

    So after using taxaton to artificially inflate the demand for diesel in Europe, they now propose to use taxation to punish those who made the fiscally rational choice of comitting to it. Sounds like par for the course for those who view taxes as a tool to manipulate the populaton rather than as a tool to fund necessary services.

    • 0 avatar
      Michal

      Here in Australia LPG gets heavy promotion by the federal government as it lacks a fuel tax.  Every litre of petrol or diesel is taxed at 38c/L, but not LPG.  Why?  It was the Australian government’s answer to the oil shocks of the 1970s.  Taxation is often used to effect the purchasing decisions of the population.  In LPG’s case, it was to promote the use of a fuel not tied directly to the world oil price.
       
      Now that many people (including me) enjoy cheap LPG fuel, the federal government is starting to add a fuel excise.  The subsidy for converting to LPG has been progressively cut too.  One could be a cynic and say the government promoted cheap LPG and is now going to punish those people who spent a couple thousand dollars converting to it.

  • avatar
    Garak

    I’m pretty sure that the EU will collapse instead of Germany, France and the UK bowing to a “a single, fair energy standard.” The energy bill will most likely just stall and get stuck in an endless cycle of revisions. And many member states largely ignore the EU directives anyway.

  • avatar
    Maxb49

    When are Europeans going to get a handle on their out of control leaders? Higher fuel taxes will not have the effect of minimizing fuel consumption. Instead, it will have the affect of driving up the cost of consumer goods.

    • 0 avatar
      GS650G

      Not according to some. The idea is put the problem on individuals and have them figure out what to do. It’s a different form of tyranny that could care less about ordinary folks  and it flies under the banner of saving planet earth.
       
      Too bad climate change is being exposed as a hoax of biblical proportions. They almost had a way to govern all of us right down to our exhaled breath.
      I think Diesel is a great idea and technology has taken it really far. With ideas like this we will eventually see the end of passenger car diesel engines and exorbitant prices for goods and staples Humanity needs to live.
      How about saving that Humanity instead? We are already seeing the unrest in overseas countries caused by high fuel and food prices. Too bad most of the world can’t eat polar bears, they sure look tasty.

  • avatar

    Power to tax is power to destroy.


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