Are diesel or petrol cars better for the environment?

By Henry Le Fleming

Using natural capital accounting to understand the trade-off between greenhouse gas emissions and local air pollution.

The US investigation into emissions from diesel cars has drawn attention to difference between emissions performance during tests and real world driving. Some commentary confuses the issue of discovery of actions to undermine the tests, and the well-known issue of the difference between test and on road emissions. Car makers and governments were aware of the latter and have published research on this since at least 2011.

The attention has opened up an old question – which is better for the environment, diesel or petrol? And if diesel is not better, why have lower taxation for diesel vehicles? In this blog I show how to use natural capital accounting to understand the problem and create better balanced incentives.

The trade-off between greenhouse gases and local air pollution

Here in the UK, incentives never explicitly favoured diesel.  Tax policy was simply based on greenhouse gas performance rather than other local air pollution such as nitrogen oxides (NOx) or particulates. New engine standards, mainly Euro 6, would reduce emissions of NOx from 180 mg /km to 80 mg/km. Also NOx emissions in total in the UK were falling from nearly 3 million tonnes a year in 1992 to under 1 million tonnes in 2015.

The outcome was lower vehicle excise duties for owners of diesel cars, as they produced fewer greenhouse gas emissions (fig.1). The tax for the diesel powered vehicle from April 1 this year would be £140 and the tax for the petrol powered vehicle would be £160.

But the graph also shows the trade-off between the impacts: while diesels might perform better on greenhouse gas emissions, their NOx and particulates levels appear significantly higher than petrol.

Divergence in test versus on road emissions

Unfortunately this second part of the policy mix has not worked. For most tailpipe pollutants, the results produced in test conditions have been similar to those on road - but this hasn’t been the case with NOx.

Whilst the UK air pollution monitoring network shows falls across many sites for NOx emissions, there has been no reduction in the levels of emissions in NOx for roadside sites. Figure 2 indicates there is little or no variance in roadside concentrations of NOx across three locations included in a long running UK monitoring programme – a wider selection of sites is shown in the Defra 2015 air pollution report.

The investigations into difference between test and real world emissions are the cause of the problem. The Dutch transport laboratory, TNO, found that real world NOx emissions for Euro 6 engines were 8 times greater than the standard. UK testing of vehicles found them to be 6 times greater than the Euro 6 test standard.

Using the estimates from UK testing we can assess the impact on society from the impacts of the same car with either diesel or petrol engines (fig 3). They show that for rural areas with lower populations, there is not much difference between petrol and diesel. For outer conurbation and inner urban areas, the overall environmental impact is much higher for diesel.

What is the solution?

Vehicle excise rates in the UK continue use greenhouse gas emissions to determine the excise duty. But this data shows that a combined approach would provide a better basis for changes to vehicle excise duty. Alternatively policy makers might leave the current approach in place but target diesel cars with high levels of pollution through a congestion charging scheme. There are already changes in place to the London congestion charge to address this issue

Some see electric cars as the solution, and they certainly are better. For the same distance, the environmental impacts for driving an electric vehicle are around £86 per 10,000 km. This impact arises from the electricity production used, rather than from the vehicle itself, they do not reduce overall greenhouse gas emissions unless you remove fossil fuel electricity generation from the grid. Also electric vehicles have a higher impact in manufacturing (although this is not something we have included in this analysis). Despite these qualifications, as the electricity grid gets cleaner, electric cars will get even better for the environment.

Using natural capital accounting to investigate environmental trade offs

Natural capital accounting is a way of examining different types of impact. Here it is useful in examining different fuel types that have different environmental impacts. The approaches developed at PwC can be useful in other industries too. They can be used to examine the trade-offs between water use, water pollution, waste and land use in addition to those impacts discussed above.

You can find out more on how we do this here. If you want to see how we could apply these techniques to your business problem please get in touch.