LPG vs. Petrol pollution and effect of taxes

LPG vs. Petrol pollution and effect of taxes

There are many reasons for the intensified focus on energy taxes. Some are purely political. To many policy makers, certain types of energy taxes seem more acceptable to the voting public than typical tax increases, such as increments to personal or corporate income tax rates.

Environmental considerations also are relevant. Many have argued that the use of energy contributes disproportionately (in comparison with other activities) to major forms of pollution, and that taxing energy

is a sensible way to discourage environmentally damaging activities.

This year the Albanian government proposed the new LPG excise tax for cars as a key component of security in the market of gas for population use, because of the increased price for LPG fuel for cars. Since the actually sale of LPG is a problem of security for citizens, the new excise tax on LPG is not about the need of government for more tax revenues, but to discipline a very chaotic process of filling gas cylinders, to discipline liquefied gas market, which has caused numerous accidents in population.

In the case of the proposal to put an excise for LPG vehicle, which was made during the presentation of the fiscal package 2017 in the Parliament, he was opposed by some members of the left wing, saying that the new tax will promote pollution and discourage the use of LPG. The argument that accompany this contradiction shows that cars that use LPG make less pollution, rather than pollution from the use of petrol and diesel cars.

But, based in the latest studies, the situation in this regard is different, from the situation advocated by the environment officials.

When LPG was introduced to the market it was considered as a “clean-burning” fuel.

Is it still clean today, many years down the road?

LPG definitely had the potential to become a clean fuel. The reasons for the superior emissions performance were the following:

  • Reduced emissions of carbon monoxide compared to gasoline engines (but not as low as in diesel engines).
  • No heavy hydrocarbon emissions. HC which are emitted, are of short carbon chain and low ozone-forming reactivity.
  • Low emission of toxic air contaminants such as benzene and 1,3-butadiene.
  • Low cold-start emissions.
  • Zero evaporative and running losses due to the sealed fuel system.

For a variety of reasons LPG is not considered the alternative fuel of the future any more. Its place has been taken by natural gas competing with diesel and biodiesel. Consequently, there has been little development in dedicated LPG engine technology. On the other hand, gasoline engines and their emissions improved tremendously over the last decade. As a result of that development, some of the used-to-be advantages of LPG fuel, especially the low CO² emissions, are now less pronounced.

Essentially all LPG engines are gasoline engine conversions. As such, they are not engineered to take advantage of the low emission potential of LPG. Their engine/fuel control system is not optimally calibrated for the new fuel, often sacrificing performance, fuel economy, and emissions. The performance and emissions vary between different engines and conversion kits.

Electronic LPG conversion kits are available now which should provide the lowest emissions and best fuel economy, but little data exists so far to verify that statement. Many of the mechanical conversions produce engines not even remotely resembling the ideal, low-emission LPG picture.

Unfortunately, brand new LPG conversions emitting CO levels of 2 to 4% are not uncommon. An acceptable LPG engine should have exhaust CO concentration of less than 1% under any steady-state condition.

Emissions from LPG engines depend very much on the maintenance that should be done to vehicles after the necessary distance that they have performed until to the next technical control, which has already is very strict in the check of low emissions of CO.

Despite the extensive debate on the attractions and drawbacks of energy taxes, there has been relatively little quantitative analysis of the gross efficiency costs (the efficiency costs before netting out environmental benefits) and the environmental effects of these taxes in comparison with plausible alternatives such as increases in income taxes.

A well-known principle of public finance is that the economic distortion or cost of a new tax depends fundamentally on what taxes already exist in the system, because taxes interact. It is simply impossible to calculate the effects of new tax initiatives without accounting for preexisting taxes.

Another distinguishing feature of the new tax is its consideration of environmental impacts.

Governments tax energy, particularly fossil fuels, for a variety of reasons. Taxes on fuel are a powerful tool for internalizing in prices the cost of environmental damage caused by emissions of CO² and local air pollutants from burning fossil fuels.

In the case of motor vehicle fuels, the new excise tax proposed does not distort this equilibrium between the two types of fuels: petrol-diesel and LPG, because the use of the LPG fuel for cars is not depended only by the price, but from the security and future maintenance cost.

On traditional efficiency grounds, each of the energy taxes emerges as costlier to the economy than equal-revenue increases in personal or corporate income taxes: the time profiles of GDP and consumption are significantly lower under the energy taxes than under the alternatives. Likewise, the welfare costs of the energy taxes are more than twice as large as the costs of equal-revenue increments to personal or corporate income taxes.

An important structural difference between the excise tax on LPG and the consumer-base gasoline tax is that the former applies to a not more than 3-4% of total car users in Albania. This difference underlies the contrasting and consumption profiles of the two energy tax products.

On the environmental side, we find that for each of the eight major air pollutants considered, the energy taxes induce emissions reductions that are at least nine times larger than the reductions under the income tax alternatives. The differences in emissions impacts reflect the close connections between energy use and pollution generation.

It remains an open question whether the environmental attractions of these taxes are large enough to offset their relatively high nonenvironmental costs. To settle this issue, analysts need to be able to quantify more accurately the links from emission reductions to environment-related improvements in human welfare

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