Autogas - Incentive - Policies Country by Country

AUTOGAS INCENTIVE POLICIES
A Country-by-Country Analysis of Why & How

Governments Promote Autogas & What Works
menecon
CONSULTING
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© 2005 World LP Gas Association and Menecon Limited.
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Contacts for Information

Inquiries about the study should be addressed to:
Trevor Morgan Ben Muirheid

Managing Director Director, Market Development
Menecon (Consulting) Ltd WLPGA
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75018 Paris 75017 Paris
France France
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Web site : www.menecon.com Web site: www.worldlpgas.com
2 AUTOGAS INCENTIVE POLICIES

WORLD LP GAS ASSOCIATION / MENECON CONSULTING
CONTENTS
Executive Summary 6
Introduction 9
Objectives of the Study 9
Approach and Scope of Work 9
Structure of this Report 10
Acknowledgements 10
PART A: MAIN FINDINGS 11
1. The Global Autogas Market 12

1.1 Market Trends 12
1.2 Drivers of Autogas Use 14
1.2.1 Alternative Automotive Fuel Policies 14
1.2.2 Practical Considerations 16
1.2.3 Cost Factors 17
2. Comparative Environmental Performance 18
2.1 Environmental Benefits of Autogas 18
2.2 Light Duty Vehicle Emissions 18
2.2.1 Regulated Pollutant Emissions 18
2.2.2 Non-regulated Pollutant Emissions 22
2.2.3 Greenhouse Gas Emissions 22
2.3 Heavy Duty Vehicles 24
3. Government Policies to Promote Alternative Fuels 25
3.1 Principles of Automotive Fuel Policy 25
3.2 Typology of Policies to Promote Alternative Fuels 26
3.2.1 Financial Incentives 26
3.2.2 Regulatory Policies and Measures 28
3.2.3 Other Measures 28
4. International Comparison of Autogas Incentive Policies 29
4.1 Fuel Taxation and Pricing 29
4.1.1 Comparative Taxation of Autogas 29
4.1.2 Comparative Pricing of Autogas 31
4.2 Autogas Vehicle Subsidies 35
4.3 Other Incentives 35
5. Effectiveness of Autogas Incentive Policies 38
5.1 Autogas Share of the Automotive Fuel Market 38
5.2 Comparative Competitiveness of Autogas 39
5.3 Impact of Autogas Competitiveness on Fuel-Market Penetration 42
5.4 Impact of Non-Financial Incentives 43
6. Lessons for Policymakers 45
6.1 The Rationale for Promoting Autogas 45
6.2 Critical Success Factors for Autogas Market Development 45
6.3 Formulating an Effective Autogas Strategy 47
AUTOGAS INCENTIVE POLICIES · CONTENTS 3

PART B: COUNTRY SURVEYS 49
1. Algeria 50
1.1 Autogas Market Trends 50
1.2 Government Autogas Incentive Policies 50
1.3 Competitiveness of Autogas Against Other Fuels 51
2. Australia 53
3. Belgium 57
4. Bulgaria 60
5. Canada 62
6. China 66
7. Czech Republic 69
8. France 72
9. Italy 75
10. Japan 78
11. Korea 81
11.1 Market Trends 81
4 AUTOGAS INCENTIVE POLICIES · CONTENTS

12. Lithuania 86
13. Mexico 89
14. Netherlands 92
15. Poland 95
16. Russia 98
17. Thailand 101
18. Turkey 104
19. United Kingdom 107
20. United States 110
20.2.1 Fuel-Tax Differentials 111
20.2.2 Federal Clean-Fuel Vehicle Incentives and Mandates 111
20.2.3 State Programmes 112
Annex 1: Global Autogas Market Data 114

Annex 2: References 116
Annex 3: Note on Data Sources 118
AUTOGAS INCENTIVE POLICIES · CONTENTS 5

Executive Summary
Autogas – LP Gas used as a transport fuel – is by far the most widely
used and accepted alternative automotive fuel in use in the world today.
Global consumption of autogas reached an estimated 17.1 million tonnes in
2004, and is increasing rapidly. Today, there are close to 10 million autogas
vehicles in use around the world. Yet autogas use is still concentrated in a
small number of countries: five countries – Korea, Japan, Poland, Turkey
and Australia – together account for more than half of global autogas
consumption. The twenty countries surveyed in this report account for
94%. The share of autogas in total automotive-fuel consumption also
varies widely among those countries, ranging from a mere 0.1% in the
United States to 16% in Poland. The only countries other than Poland
where autogas accounts for more than 10% of the automotive-fuel market
are Korea, Bulgaria, Turkey and Lithuania. The enormous disparity in the
success of autogas in competing against the conventional automotive
fuels, gasoline and diesel, is largely because of differences in government
incentive policies.
In most countries, the government encourages the use of autogas and

other alternative fuels for environmental reasons. But the strength of
actual policies and measures deployed does not always fully reflect the
true environmental benefits of switching to autogas from conventional
automotive fuels. Autogas outperforms gasoline and diesel as well as
most alternative fuels in the majority of studies comparing environmental
performance that have been conducted around the world. Autogas
emissions are especially low with respect to noxious pollutants. With respect
to greenhouse-gas emissions, autogas performs better than gasoline
and, according to some studies, outperforms diesel, when emissions are
measured on a full fuel-cycle basis and when the LP Gas is sourced mainly
from natural gas processing plants. Some countries promote autogas for
economic reasons too, notably to provide an outlet for surplus indigenous
production of LP Gas.
The most effective autogas incentive policies are those that help to make
the fuel more competitive against gasoline and diesel and give a strong
financial incentive for an end user to switch to autogas. In practice, the
financial attractiveness of autogas over other fuels depends on the net cost
of converting an existing gasoline vehicle (or the cost of a factory-built
autogas vehicle compared with an equivalent gasoline or diesel vehicle) and
the pump price of autogas relative to diesel and gasoline. Since converting
a vehicle to run on autogas involves upfront capital expenditure and some
minor inconvenience, the owner needs to be compensated through lower
running costs, of which fuel is the most important. The time it takes for
the savings in running costs to offset the capital cost – the payback period
– depends on the usage of the vehicle, i.e. the average distance travelled
monthly or annually. The payback period usually has to be less than two
to three years to encourage commercial vehicle owners to switch; private
individuals often demand a quicker return on their investment.
6 AUTOGAS INCENTIVE POLICIES · EXECUTIVE SUMMARY

The payback period is very sensitive to the extent to which government
incentives lower fuel costs relative to the other fuels and lower the upfront
expenditure on the vehicle. Taxes on autogas must be low enough relative
to those on gasoline and diesel to compensate for the lower mileage of
autogas per litre (due its lower energy-content-to-volume ratio). In some
cases, lower taxes also have to offset the higher pre-tax price of autogas
at the pump. The wide variation in actual autogas pump prices among the
countries surveyed, both in absolute terms and relative to the prices of other
fuels, mainly reflects differences in the way automotive fuels are taxed. In
five countries, there are no excise taxes on autogas at all. In all countries
except the United States, excise taxes are less than half of those on gasoline
on a volume basis. Financial incentives aimed at the vehicle, in the form of
grants or tax credits, can also be effective in offsetting part or all of the
cost of conversion or the incremental cost of buying an autogas vehicle.
Six countries currently make available such subsidies for either gasoline or
diesel conversions. Vehicle incentives are particularly important where fuel
taxes generally are low, limiting the scope for savings on running costs.
The market penetration of autogas is strongly correlated with the

competitiveness of autogas vis-à-vis gasoline and diesel. We have
estimated, for each country, the distance at which an autogas light-duty
vehicle becomes competitive against gasoline and diesel in each country,
based on the latest available data on pump prices and vehicle costs. The
results show that autogas use and rates of market growth are generally
highest in countries where the break-even distance is lowest, especially
against gasoline. For example, Bulgaria, Korea, Lithuania, Turkey and
Poland have the highest rates of autogas penetration and among the lowest
break-even distances. At the other extreme, autogas is least competitive in
Canada and the United States, where autogas accounts for a very small
share of total automotive-fuel consumption.
But the competitiveness of autogas is not the only factor driving autogas
demand. For example, Belgium’s break-even distance for autogas against
gasoline is slightly lower than that of Korea, yet the penetration of autogas
in Belgium is much lower – even though autogas is always competitive
against diesel in Belgium, regardless of distance. And the penetration
of autogas is exceptionally low in France, where autogas is extremely
competitive. Several factors explain these divergences:
> Government policy commitment: The autogas market has tended to

develop more quickly where the government has shown a strong,
long-term policy commitment in favour of autogas. For example, a
proposal to impose an excise duty on autogas in Australia in 2003
quickly led to a sharp drop in conversions and fuel sales.
> Non-financial policies and measures: In some cases, the use of non-
financial incentives or other measures have either helped to boost or
to hinder autogas use. Public awareness and education campaigns
to promote autogas have certainly made a significant contribution to
market growth in several countries, including the United Kingdom.
Mandates and public transport fleet conversion programmes have
AUTOGAS INCENTIVE POLICIES · EXECUTIVE SUMMARY 7

also been very successful in several countries, including China and
the United States.
> Restrictions on diesel vehicles: Local and central government

environmental restrictions on the use of diesel vehicles have been an
important factor behind the success of autogas in Korea and Japan.
> Availability of vehicles and fuel: Autogas has struggled to penetrate

the fuel market in some countries, where car makers have been
reluctant to market OEM models or where there is a limited number
of refuelling sites selling autogas.
> Public attitudes to autogas safety: Worries about the safety and
reliability of autogas have clearly affected demand in several
countries.
In countries where autogas remains small, the role of the government

in giving an initial strong impetus to kick-start the simultaneous
development of demand and supply infrastructure is vital. Even where
strong financial incentives exist, autogas use will not necessarily take off
until critical market mass is achieved. The market needs to be large enough
to demonstrate to potential autogas users and fuel providers that the fuel is
a safe, reliable and cost-effective alternative to conventional fuels. Autogas
must be widely available. And the market must be big enough to support
a viable network or properly-trained mechanics to convert and maintain
autogas vehicles and ensure the availability of spare parts and equipment.
In practice, achieving critical mass requires a concerted effort on the part of
all stakeholders, vehicle manufacturers and converters, autogas suppliers
and the government to promote the development of the market.
The most effective approach to designing and implementing autogas

incentive policies depends on national circumstances. These include
budgetary considerations, which might limit available funds for subsidies,
the seriousness of local pollution problems, fuel-supply and cost issues,
the stage of development of the autogas market and the prevailing barriers
to fuel switching, including restrictive regulations and the local cost of
vehicle conversions. Whatever the circumstances, however, experience in
the countries surveyed in this study has clearly shown that the single most
important measure – and a necessary condition – for making autogas an
attractive fuel to vehicle owners is favourable fuel-tax treatment vis-à-vis
conventional fuels.
Policy stability and a strong, long-term commitment by the government

to achieving environmental-policy objectives are vital to the success
of policies to promote the development of alternative-fuel markets.
Stakeholders need to be given clear advance warning of any major shift
in policy. Without policy stability, coherence and consistency, neither fuel
suppliers, nor equipment manufacturers, nor consumers can be confident
that they will be able to make a reasonable return on the investments
required to switch fuels.
8 AUTOGAS INCENTIVE POLICIES · EXECUTIVE SUMMARY

Introduction
Objectives of the Study

Autogas – LP Gas used as a transport fuel – is the most widely used and
accepted alternative to the conventional oil-based fuels, gasoline and diesel,
in the world today. Sales of autogas are growing quickly in many countries,
thanks to its inherent environmental, practical and cost advantages over
other alternative fuels and effective government policies to encourage its
availability and use. Today, there are close to 10 million vehicles running on
autogas around the world. Total autogas consumption reached 17.1 million
tonnes in 2004, according to preliminary data. But in some countries,
autogas-market development is being held back by ineffective or poorly-
designed policies, such as unfavourable tax rates and regulations, that fail
to account fully for the social benefits of switching to autogas.
This study, published jointly by the World LP Gas Association and Menecon
Consulting, seeks to explain why governments encourage switching to
autogas and how they go about doing so based on a in-depth survey of
the world’s largest autogas markets. It assesses what types of policies are
most effective and why.
Approach and Scope

The study involved a detailed survey of autogas taxation and other incentive
programmes covering twenty of the world’s largest autogas markets:
Algeria, Australia, Belgium, Bulgaria, Canada, China, Czech Republic,
Lithuania, France, Italy, Japan, Korea, Mexico, the Netherlands, Poland,
Russia, Thailand, Turkey, the United Kingdom and the United States. Almost
all of these have annual sales of more than 100 000 tonnes. Historical data
was compiled on pump prices, excise duties and sales taxes for autogas and
the conventional fuels, gasoline (95 RON unleaded) and diesel. In addition,
we collated data on road-fuel consumption, vehicles fleets and current tax
and non-tax policies with regard to conventional and alternative fuels. In
most cases, these data cover the period 2000 to 2004.
The information on autogas prices and taxes was used to analyse

quantitatively the competitiveness of autogas vis-à-vis gasoline and diesel
in all twenty national autogas markets. This analysis takes account of fuel
prices at the pump, differences in mileage per litre (due to differences in
energy content per litre and vehicle-engine technology among the three
fuels) and the relative costs of acquiring each type of vehicle and converting
conventionally-fuelled vehicles to autogas. It also takes into account local
market conditions and regulations. The results were then compared to the
current penetration of autogas in the overall automotive fuel market and
recent rates of autogas-market growth.
The study also reviewed recent studies of the comparative environmental

performance of autogas in order to examine the rationale for promoting
use of the fuel.
AUTOGAS INCENTIVE POLICIES · INTRODUCTION 9

Structure of this Report
Part A of this report presents the main findings of the study:
> Section 1 provides an overview of current global autogas market

trends and the main drivers of autogas demand.
> Section 2 assesses the environmental performance of autogas

compared with conventional fuels and other alternative fuels.
> Section 3 sets out the principles of government policies and the
different approaches available to policy-makers to promote alternative
fuels generally.
> Section 4 summarises and compares current autogas incentive

policies across the countries surveyed in the study, focusing on
differences in taxes and subsidies.
> Section 5 analyses the impact of differences in policies on the

competitiveness of autogas vis-à-vis conventional fuels and autogas’
penetration of the overall market for automotive fuels.
> Section 6 assesses the implications of this analysis and the lessons
that can be drawn for policymaking.
Part B presents the detailed results of the survey and analysis of autogas
competitiveness by country. Summary tables, references and a note on
data sources are included in the annexes.
Acknowledgements
The principal author of this report is Trevor Morgan, President of Mene-
con Consulting. Ben Muirheid, Director of Market Development, at the
World LP Gas Association, co-managed the project. Helpful comments and
suggestions were provided by James Rockall, WLPGA Managing Direc-
tor, and Bruno de Calan, WLPGA Technical Director. Johanna Wickstrom,
WLPGA Project Manager, assisted with the preparation of the final report.
Franck Seiller was responsible for layout and design.
10 AUTOGAS INCENTIVE POLICIES · INTRODUCTION

PART A:
MAIN FINDINGS
1. The Global Autogas Market
1.2 Market Trends

Autogas is the most widely used and accepted alternative to the conventional
oil-based transport fuels, gasoline and diesel. A number of countries today
have well-developed autogas markets. Global consumption of autogas
reached 17.1 million tonnes in 2004, according to preliminary data (Table
A1.1), and is increasing rapidly. Demand jumped by more than 5.6 million
tonnes, or almost half, in the five years to 2004, mainly due to rapid growth
in emerging markets and despite a levelling-off since 2000 in the two largest
markets – Korea and Japan (Figure A1.1). The twenty countries surveyed in
this report account for 94% of all the autogas consumed worldwide. Today,
there are just under 10 million autogas vehicles in use around the world and
almost 40 000 refuelling sites. Their numbers are growing rapidly, especially
in the developing world. A detailed breakdown of the global market and
recent trends in consumption, numbers of vehicles and refuelling sites can
be found in Annex 1.
Box A1.1: Autogas Characteristics
Autogas is the abridged name for automotive liquefied petroleum gas (LP Gas, or
LPG) – that is, LP Gas used as an automotive transport fuel. LP Gas is the generic
name for mixtures of hydrocarbons that change from a gaseous to liquid state
when compressed at moderate pressure or chilled. The chemical composition of
LP Gas can vary, but is usually made up of predominantly propane and butane
(normal butane and iso-butane). Autogas generally ranges from a 30% to 99%
propane mix. In some countries, the propane content varies according to the
season as the physical characteristics of the two gases differ slightly according
to ambient temperatures.
LP Gas is derived either as a product from crude-oil refining or from natural-gas

or oil production. At present, more than 60% of global LP Gas supply comes from
natural gas processing plants, but the share varies markedly among regions and
countries. With both processes, LP Gas must be separated out from the oil-
product or natural-gas streams. LP Gas is generally refrigerated for large-scale
bulk storage and seaborne transportation as a liquid, but it is transported and
stored locally in pressurised tanks or bottles.
LP Gas has high energy content per tonne compared to most other oil products
and burns readily in the presence of air. These characteristics have made LP
Gas a popular fuel for domestic heating and cooking, for industrial processes,
including as a feedstock in the petrochemical industry, and increasingly as an
alternative automotive fuel.
12 AUTOGAS INCENTIVE POLICIES · THE GLOBAL AUTOGAS MARKET

Table A1.1: Largest Autogas Markets, 2003
Consumption
Vehicles
Country (thousand Refuelling sites
(thousands)
tonnes)
Korea 3 740 1 723 1 242
Japan 1 528 290 1 900
Turkey 1 260 1 000 4 000
Australia 1 213 492 3 240
Italy 1 202 1 220 2 150
Mexico 1 200 450 1 400
Poland 1 070 1 100 4 500
Russia 780 550 470
United States 730 190 4 300
China 500 115 285
Rest of the World 3 722 2 401 16 439
World 16 445 9 416 39 641
Source WLPGA (2004).
Figure A1.1: Global Autogas Consumption, 1999-2004
18000
16000
14000
12000
thousand tonnes
10000
8000
6000
4000
2000
0
1999 2000 2001 2002 2003 2004*
Other Turkey Japan Australia Poland Korea
* Preliminary data.
Source: WLPGA (2004).
AUTOGAS INCENTIVE POLICIES · THE GLOBAL AUTOGAS MARKET 13

Autogas accounts for less than 8% of global consumption of LP Gas, but this
share varies considerably across countries. Among the countries surveyed,
the share is highest in Bulgaria, where it is 86%, and is lowest in the United
States at 1%. Consumption of autogas worldwide grew at an average rate
of about 5% in the ten years to 2004, about twice the rate of growth in
total LP Gas use. The highest rates of growth – and the largest increases in
absolute terms – were recorded in Turkey, Poland and Korea.
The make-up of the autogas vehicle fleet by vehicle type differs by country,
reflecting mainly differences in government policies. In the two largest
markets – Korea and Japan – taxis and other light-duty fleet vehicles
account for a large share of autogas consumption. In both countries, the
overwhelming majority of taxis run on autogas as a result of a combination
of incentives and government mandates requiring the use of alternative
fuels. In Europe, private cars comprise the main market. In most countries,
vehicles that run on autogas are gasoline-powered vehicles that have been
converted to use either autogas or gasoline. Most gasoline vehicles can
be converted at moderate cost (see section 1.2.2). Korea, where most
vehicles are Original Equipment Manufactured (OEM) vehicles, is the main
exception.
At present, there are relatively few heavy-duty vehicles that run on autogas,
since costly alterations to the diesel engine are needed. Most heavy-
duty autogas vehicles in operation today are dedicated OEM buses. The
municipal bus company in Vienna, which has 550 autogas buses, has the
longest and most extensive experience of operating heavy-duty autogas
vehicles. The largest autogas-bus fleets today are to be found in China.
Some delivery trucks fuelled by autogas are operating in some major cities
in Australia. Conversion technology is less advanced for diesel vehicles
than for gasoline vehicles and diesel conversions are rarely competitive.
1.2 Drivers of Autogas Use

The emergence of autogas as an alternative to gasoline and diesel is the
direct result of government policies to address energy-security and/or
environmental concerns. Autogas has been far more successful than
any other alternative automotive fuel because of its practical and cost
advantages over other fuels.
1.2.1 Alternative Automotive Fuel Policies

The oil-price shocks of the 1970s provided the initial impetus for the
development of alternative automotive fuels, as countries sought to
reduce their dependence on imports of crude oil and refined products.
Environmental concerns have since overtaken energy security as the
principal driver of government policies to promote such fuels, as they are
generally less polluting.
The initial focus of policy action was air pollution in major cities, which is
caused mainly by automotive fuels. Since the 1990s, attention has shifted
to the threat of global climate change due to rising concentrations of
greenhouse gases in the atmosphere resulting primarily from the burning
of fossil fuels. As a result, governments are looking to fuels that emit less

carbon dioxide (CO2), methane (CH4 ) and NO2 – the main energy-related
greenhouse gases.
Research and development of alternative automotive-fuel technology in

recent years has focused on oil- and natural gas-based fuels, bio-fuels
derived from vegetable matter such as ethanol or bio-diesel, electric-
powered vehicles and hydrogen-based fuel cells. The development of
electric batteries and fuel cells is advancing, but both technologies are still
some way from widespread commercialisation due to their high cost and
technical constraints. The production of ethanol and bio-diesel has risen
sharply in recent years, but both fuels are usually blended with conventional
gasoline and diesel for sale to end users.
The main non-blended alternative fuels in use in the world today are
autogas (LP Gas), compressed natural gas (CNG) and methanol. Autogas
has established itself in many countries as by far the most important of
these fuels, because of its favourable mix of inherent practical and cost
advantages and environmental benefits compared to gasoline, diesel and
other alternative automotive fuels. Air-borne emissions of regulated and
unregulated toxic gases from autogas use are among the lowest of all the
automotive fuels commercially available today. In addition, greenhouse-
gas emissions from autogas are lower than those from gasoline, diesel
and some alternative fuels according to some studies. The comparative
environmental performance of autogas is discussed in more detail in the
next section.
From an energy-security perspective, autogas has advantages over

conventional fuels. There is an abundant supply of LP Gas from many
sources around the world. In addition to proven reserves in oil and gas fields,
the flexibility of modern refining processes offers considerable potential for
expanding supply to meet demand from the transport sector. LP Gas supply
is expected to rise briskly in the next few years with growing natural-gas
production and associated liquids extraction – already the primary source
of LP Gas worldwide. And field and refinery supplies will also increase as
wasteful flaring and venting practices, which are still common in many parts
of the world, are eradicated. In addition, there is considerable scope for
diverting supplies from relatively low-value petrochemical uses, where LP
Gas can easily be replaced by other feedstocks such as naphtha, ethane and
distillate. The use of gaseous automotive fuels may also enhance energy
security in the long term, by paving the way for a hydrogen economy, where
lessons learned in the handling and use of gas, storage, transportation and
safety will be critically important.
Autogas use has generally responded much better to government policies

to promote alternative fuels than CNG, methanol or electric vehicles for
practical and cost reasons. Despite some environmental advantages over
conventional fuels, the development of CNG has been slow because of cost
and practical considerations associated with the fuelling infrastructure.
Methanol also has appealing environmental attributes, especially if
produced from renewable biomass, but is no longer widely used as a
motor fuel, largely because of technical problems associated with its
corrosiveness. In contrast, the technology for installing autogas systems
in vehicles or converting existing conventional-fuel vehicles is proven,

greatly reducing the financial risks to investors. The costs of establishing
the distribution infrastructure and converting vehicles to run on autogas
are generally much less than for other alternative fuels.
1.2.2 Practical Considerations

In most cases, an existing conventional-fuel vehicle is converted to run
on autogas by installing a separate fuel system that allows the vehicle
to switch between both fuels. For mainly technical reasons, most light-
duty vehicle conversions involve gasoline-powered engines, which are
particularly well-suited to run on autogas. Specialist companies, using
standardised kits involving a parallel fuel system and tank, typically carry
out conversions. The tank is usually installed in the boot/trunk. Some large,
multinational OEM vehicle manufacturers have become involved in the
development, design and manufacture of autogas systems. Several OEMs
are now producing and marketing dedicated autogas vehicles with under-
floor fuel tanks. For example, Volvo markets fully factory-assembled bi-fuel
cars in Europe. All four carmakers in Australia – Ford, Holden, Mitsubishi
and Toyota – offer bi-fuelled autogas/gasoline models. In the United States,
Ford markets a bi-fuelled pickup truck. Mitsubishi offers autogas cars in
Japan, where they are primarily used as taxis.
The performance and operational characteristics of autogas vehicles

compare favourably with other fuels. Autogas has a higher octane rating
than gasoline, so converted gasoline-powered spark-ignition engines
tend to run more smoothly. This reduces engine wear and maintenance
requirements, including less frequent spark plug and oil changes. Autogas
exhibits less soot formation than both gasoline and diesel, reducing
abrasion and chemical degradation of the engine oil. In addition, autogas
does not dilute the lubricating film on the cylinder wall, which is a particular
problem with gasoline engines in cold starts. The higher octane of autogas
also allows higher compression ratios, which can deliver increased engine-
power output and better thermal efficiency, reducing fuel consumption
and emissions. Acceleration and top speed using the latest generation of
autogas-fuel systems are comparable to gasoline or diesel. Autogas has a
lower energy density than gasoline and diesel. Although this has no effect
on engine performance, it does mean that a larger volume of fuel and a
bigger tank are required to achieve the same overall driving range.
In practice, however, converting a vehicle to be able to run on autogas

involves some operational inconveniences. The most important of these are
the loss of boot/trunk space to accommodate the fuel tank and, in some cases
(depending on the equipment installed), the marginal loss in acceleration
and speed mainly due to the extra weight of the tank. This is also a problem
for CNG vehicles. The development of new technologies, including ring-
tanks and lightweight composite tanks, has helped to alleviate these
problems. This inconvenience is offset to some extent by the lower weight
of autogas fuel compared to gasoline and the increased flexibility provided
by the dual-fuel capability of converted vehicles. Practical experience has
shown that vehicle owners are often willing to convert their vehicles to
autogas if the savings in running costs are sufficiently attractive.
Safety concerns with regard to the handling and on-board storage of

autogas are a barrier to conversion in some cases. Yet many years of

operation worldwide have amply demonstrated the integrity and safety of
bulk LP Gas/autogas transportation and storage containment systems, as
well as on-board vehicle tanks. In fact, the safety record of autogas use in
practice is at least as good as, if not better than, gasoline or diesel. Autogas
is fully contained under pressure in solid tanks, which limits the danger of
leakage. Being stored in liquid form, gasoline is prone to leaks or vapour
escapes. A risk assessment study carried out by TNO, a Dutch research
Institute, in 1998 concluded that the safety of modern autogas vehicles was
actually better than for gasoline vehicles. Nonetheless, widely-publicised
accidents, often resulting from poor installation, the absence of a safety
valve on the fuel-tank or the illegal use or cylinder gas, have undermined
the safety image of autogas in some countries.
1.2.3 Cost Factors

The cost of autogas supply and infrastructure is generally lower than for
other alternative fuels. On an energy-content basis, the cost of bulk LP Gas
delivered to service stations is roughly comparable to gasoline (Section
4.1.2). Rising demand for autogas is not expected to raise significantly the
cost of LP Gas on the international spot market relative to gasoline given
abundant supplies.
The costs incurred in establishing or expanding an autogas distribution

network essentially relate to investments in service-station storage
and dispensing facilities. The plants and equipment that already exist to
handle the importation, production, storage and bulk distribution of LP Gas
for traditional uses are exactly the same as for autogas, although some
additional investment may be needed to cope with higher throughput. Since
autogas generally makes use of the existing service-station infrastructure for
distribution of conventional fuels, additional costs for autogas dispensing
are low relative to some other alternative fuels. For example, the cost of
installing a standard tank, pump and metering equipment for autogas
alongside existing gasoline and diesel facilities is typically around a third
that of installing dispensing facilities for CNG with the same capacity. This
is because of the added cost of dedicated supply pipelines, high-pressure
compression, storage cylinders and special dispensers for CNG. In addition,
the fuelling rate for CNG is much lower than for autogas.
Vehicle-conversion costs vary considerably from one country to another,

depending on the sophistication and quality of the equipment installed and
local labour costs. Conversion costs for older cars with less sophisticated
engines tend to be much lower. Worldwide, costs vary from about $500 in
developing countries to $3 000 in the United States. The premium for an
OEM vehicle is typically at least $1 000 for a light-duty vehicle.
Despite the favourable environmental attributes of autogas compared

to other alternative fuels, the rate of switching to autogas and overall
consumption is highly dependent on the financial benefits to end users. A
publicly-owned bus company may take account of the local environmental
benefits as well as relative costs of different fuel options in deciding
whether to switch to autogas. But for most private fleet operators, truckers
and individual motorists, the sole factor is cost. As a result, private
vehicle owners must be given an adequate financial incentive to switch to
autogas.

2. Comparative Environmental
Performance
2.1 Environmental Benefits of Autogas
Road-transport vehicles are an important source of both air pollutants
and climate-destabilising greenhouse gases. There is clear evidence of
the harmful impact on human health of exposure to vehicle pollutants.
As a result, local air quality has become a major policy issue in almost all
countries. Most industrialised countries have made substantial progress in
reducing pollution caused by cars and trucks through improvements in fuel
economy, fuel quality and the installation of emission-control equipment in
vehicles. However, rising road traffic has offset in many cases at least part
of the improvements in vehicle-emissions performance. Less progress has
been made in developing countries, where local pollution in many major
cities and towns has reached catastrophic proportions.
Governments are also looking increasingly at ways of encouraging a shift

in fuel use to alternative fuels that can yield a reduction in emissions of
greenhouse gases at least cost. Globally, road transport has become the
main source of emissions of carbon dioxide – the leading greenhouse gas.
Autogas outperforms gasoline and diesel and most alternative fuels in

the majority of studies comparing the environmental performance of
conventional and alternative fuels that have been conducted around the
world in recent years. Autogas emissions are especially low with respect
to noxious pollutants. With regard to greenhouse-gas emissions, autogas
performs better than gasoline and, according to some studies, outperforms
diesel, when emissions are measured on a full fuel-cycle basis and when the
LP Gas is sourced mainly from natural gas processing plants (see below).
The results of these studies vary to some degree, according to the

types of vehicles selected, the quality of the fuel, the types of emissions
measured and the conditions under which they were carried out vary:
actual vehicle emissions are highly dependent on vehicle technology and
driving behaviour. The rest of this section summarises the results of the
main studies, according to the main categories of emissions for light-
duty vehicles (essentially passenger cars and vans, in most cases with a
maximum gross weight of less than 3.5 tonnes) and heavy-duty vehicles
(trucks and buses).
2.2 Light Duty Vehicle Emissions
2.2.1 Regulated Pollutant Emissions

Most industrialised countries and a growing number of developing
countries with serious urban pollution problems now regulate noxious
emissions from vehicles through mandatory emission standards, as well
as through fuel-quality standards and traffic controls. The most commonly
regulated emissions are the following:
18 AUTOGAS INCENTIVE POLICIES · COMPARATIVE ENVIRONMENTAL PERFORMANCE

> Nitrogen oxides (NO and NO2, or NOx).
> Particulate matter (PM).
> Hydrocarbons (HC), measured as total hydrocarbons (THC) or non-

methane hydrocarbons (NMHC).
> Carbon monoxide (CO).
CO, NOx and HC emissions contribute to the creation of ground-level ozone

and photochemical smog, while PM is a known carcinogen and contributor
to respiratory problems. NOx also impairs the lung function in humans,
increasing the incidence of asthma attacks. Because these emissions are
detrimental to local or regional air quality, most studies of this type of
vehicle emissions have focused on tail-pipe emissions.
Autogas performs well in comparison with gasoline and diesel with respect
to regulated emissions because propane and butane are chemically
simpler and purer forms of hydrocarbons that mix easily with air, allowing
almost complete combustion. NOx emissions from light-duty vehicles
(LDVs) are much lower for autogas vehicles, particularly when compared
with diesel. Autogas emissions are comparatively even lower for cold
starts, since gasoline needs to be enriched when the engine is cold due
to its poor vaporisation characteristics at low temperatures. PM emissions
are negligible for both autogas and gasoline vehicles, but remain a major
problem for diesel vehicles – despite recent advances in filter technology.
In the European Emissions Test Programme (EETP), the most recent major
comparative study of LDV emissions (Box A2.1), emissions of NOx – the
most important of the regulated toxic gases – from autogas were found to
be many orders of magnitude lower than diesel and less than half the level
of gasoline (Figure A2.1). Although autogas performs less well than diesel
and gasoline with respect to CO and HC emissions, the levels of these
emissions for all three fuels were found to be much lower than from older
vehicles and the differences (on a full fuel-cycle, or well-to-wheel basis)
do not influence significantly the overall comparison of the environmental
impact of the different fuels.
The Dutch testing centre, TNO, has published the results of its part of the
EETP, which also tested emissions from compressed natural gas (CNG).
Contrary to assertions that the latest gasoline and diesel vehicles, which
incorporate advanced emission-control technology, are cleaner than auto-
gas models, the results demonstrate that autogas continues to outperform
gasoline and diesel and compares favourably with CNG across a range
of regulated and non-regulated emissions. In particular, autogas PM and
NOx emissions are much lower than for diesel, while regulated emissions
are comparable to or better than for gasoline (Table A2.1). The report con-
cludes that autogas and CNG show the best overall results (TNO, 2003).
AUTOGAS INCENTIVE POLICIES · COMPARATIVE ENVIRONMENTAL PERFORMANCE 19

Box A2.1: The European Emissions Test Programme (EETP)
In 2003, several major oil companies in Europe commissioned an exhaustive

test programme to compare the emissions from currently available new vehicles
operating on gasoline, diesel and autogas. The tests were carried out at four
leading independent emission-testing laboratories: Millbrook (United Kingdom),
TNO (Netherlands), the Institut de Petrole (France) and TUV (Germany).
The test programme covered 26 vehicles – 20 cars and 6 vans. The vehicles were
selected on the basis of the most up-to-date emissions-control technology as
of early 2003 (meeting at a minimum Euro-3 emission standards). Comparable
diesel vehicles were selected according to the nearest equivalent power to the
autogas version. Where more than one option was available, the lowest power
vehicle diesel vehicle was chosen. On average, the power of the diesel vehicles
was lower than for the autogas equivalent vehicles. As a result, the results tend
to understate diesel emissions for a given power of vehicle. All vehicles were
tested according to the standard European Driving Cycle (EDC) and the so-called
Artemis Cycle (CADC), which is intended to simulate actual driving conditions.
Euro-3 regulated emissions (PM, NOx, HC and CO) were tested, in addition to
carbon dioxide (CO2) and a number of unregulated air toxics. Tailpipe emissions
were adjusted to yield full fuel-cycle results.
The final report of the full programme has not been published. However, a
summary of partial results covering regulated and CO2 emissions was released
by the UK LPG association. TNO also published a report on the results of its
segment of the programme in December 2003.
Figure A2.1: NOx Tailpipe Emissions by Fuel – EETP Results

grammes / km
Source: www.lpga.co.uk.

Table A2.1: Potential for Reducing Regulated Emissions by Fuel – TNO Results
Relevance Gasoline Diesel Autogas CNG
NO2 High ++ -- -- ++ ++
Overall PM High + -- -- + +
Smog potential (photochem. ozone) High -- -- ++ - +
Smog potential (tropospheric ozone) High - -- -- - o
Acidification potential Medium + -- -- + +
Euthropification High + -- -- + +
Symbols:
-- Very high impact (highest impact potential of all cases for the effect
under consideration; a case means a combination of fuel and driver profile).
- High impact potential (relative to case with highest impact potential).
o Average impact potential.
+ Low impact potential.
++ Very low impact potential.
Results are for an average driver (business and local).
Source:TNO (2003).
These results are broadly in line with those of earlier studies of regulated
emissions from pre-Euro-3 models, which still make up the majority of
vehicles in use in Europe and the rest of the world today. A number of
studies cited in WLPGA (2002) and ALPGA (2003a) demonstrate that
autogas generally yields lower CO, HC and NOx emissions compared with
gasoline and, in some cases, diesel, and much lower emissions of PM. Table
A2.2 summarises the results of two studies of the emissions performance
of a range of conventional and alternative fuels from Euro-2 standard light-
duty vehicles based on the EDC test cycle.
Table A2.2: Regulated Emissions by Fuel (g/km)
THC NMHC CO NOx PM
Gasoline 0.08 0.07 0.60 0.03-0.08 0.001
Diesel 0.06 0.06 0.50 0.30-0.50 0.040
Diesel with PM filter 0.01 0.01 0.01 0.30-0.50 0.002
CNG 0.15 0.30 0.30 0.03-0.06 <0.001
Methanol (M85) 0.05 n.a. 0.60 0.03-0.08 <0.001
Autogas 0.05 n.a. 0.30 0.05-0.08 <0.001
VOC = volatile organic compounds, including THC, aldehydes, methane and ethane. CURE is the Cancer Units
Risk Estimate, relative to benzene (CARB method).
Source: Argonne (2000a).

2.2.2 Non-Regulated Pollutant Emissions
The environmental advantages of autogas over conventional and other
alternative fuels are even greater with respect to non-regulated emissions.
These include air toxics such as benzene, acetaldehyde, formaldehyde
and 1,3 butadiene. As the hazards at different concentrations of these
pollutants in the air are not yet fully understood, their emissions are not yet
regulated.
Table A2.3 summarises the results of a major study of non-regulated toxic

emissions carried out by the US Argonne National Laboratory (Argonne,
2000a). Tailpipe emissions for diesel, autogas and other alternative fuels
covered by the study are expressed as a percentage of those for conventional
gasoline. Autogas emissions are lower than for all of the conventional and
alternative fuels, with the exception of CNG which yields lower benzene
and butadiene emissions but higher emissions of acetaldehyde and much
higher emissions of formaldehyde and methanol. Autogas emissions of
benzene, linked with various cancers, and butadiene are particularly low
compared with gasoline and diesel.
Evaporative and fugitive emissions of hydrocarbons from motor vehicles

and refuelling facilities are known to make a substantial contribution to
total HC emissions. This is a particular problem with gasoline, due to its
volatility. Because they have completely sealed fuel systems, autogas
vehicles and pumps have virtually zero evaporative emissions and fugitive
emissions are normally limited to the small release of gas when the fuelling
coupling is attached and removed.
Table A2.3: Non-Regulated Tailpipe Emissions – Argonne Results

(% of conventional gasoline)
VOC Formaldehyde Acetaldehyde 1,3 Butadiene Benzene CURE
Diesel 125 103 108 110 68 98
CNG 40 200 37 2 1 15
Methanol (M85) 84 613 37 13 13 52
Ethanol (E85) 84 355 2 237 19 13 50
Autogas 80 76 58 10 4 13
VOC = volatile organic compounds, including THC, aldehydes, methane and ethane. CURE is
the Cancer Units Risk Estimate, relative to benzene (CARB method).
Source: Argonne (2000a).
2.2.3 Greenhouse Gas Emissions

Greenhouse-gas emissions for any given fuel are almost directly proportional
to the amount of fuel consumed. Thus the main factors affecting emissions
are the energy and carbon content of the fuel. Autogas has an intrinsic

advantage over gasoline and diesel with respect to CO2 emissions – the
main greenhouse gas – because of its lower carbon content, although this
is largely offset by the higher fuel consumption of autogas vehicles.
Several studies compare emissions of CO2 and other greenhouse gases

from different fuels and vehicles over the full life cycle, including emissions
incurred during the production and supply of the fuel. In general, these
studies show that autogas yields lower emissions compared with gasoline
and similar emissions to diesel. Results vary somewhat among the
various studies that have been conducted, partly because of differences
in assumptions about the source of LP Gas: emissions from LP Gas
production from natural gas processing plants are considerably lower than
from refineries. Results for CO2 emissions from the 2003 EETP study are
shown in Figure A2.. Autogas emissions are lower than diesel and gasoline
in the EDC cycle, but are marginally higher than diesel in the EDC cycle.
Figure A2.2: CO2 Fuel-Cycle Emissions by Fuel – EETP Results
250 EDC
CADC
200
Grammes / km
150
100
50
0
Diesel Gasoline Autogas
Source: UK LPG Association.
Earlier studies point to slightly higher greenhouse-gas emissions compared

with diesel, although autogas emissions are always lower than those for
gasoline. For example, a major study by the Argonne National Laboratory
carried out in 2000 using the Greenhouse Gas and Regulated Emissions from
Transportation (GREET) model, shows 13-14% lower autogas emissions
compared to gasoline; CNG emissions are 11% lower and diesel emissions
26% lower than for gasoline (Argonne, 200b). CNG emissions are lower than
autogas emissions in some other studies (for example, Institut de Petrole,
2001), mainly because they do not take account of leaks of methane, which
has a very high global-warming potential, in the production and distribution
of the fuel.

2.3 Heavy Duty Vehicles
Almost all heavy-duty vehicles (HDVs) in use today around the world are
diesel-fuelled. The main environmental advantage of autogas over diesel
for HDVs relates to emissions of PM, which are several orders of magnitude
lower for autogas, and NOx. Various studies have shown that autogas can
also offer lower CO and HC emissions compared to diesel and CNG. Tests
on London buses carried out at Millbrook in the United Kingdom under
typical real-life driving conditions show that autogas yields 90% lower
emissions of NOx, PM and CO, and 20% lower emissions of HC compared
with low-sulphur diesel (WLPGA, 2002).
A study carried out in 2003 by CSIRO on behalf of the Australian Greenhouse

Office provides further evidence of the emissions gains from dedicated
autogas HDVs compared with conventional and ultra-low sulphur diesel
and bio-diesel (Table A2.4). CNG also yielded favourable results.
Table A2.4: Life-Cycle Emissions from Heavy-Duty Vehicles
Greenhouse
PM NOx THC
gases
Ultra-low sulphur diesel o ++ ++ ++
Bio-diesel (canola, soybean and rape) +++ + - o
CNG +++ +++ +++ +++
Autogas ++ +++ +++ +++
Symbols:
+++ Significantly better (lower)

++ Better
+ Slightly better
o Much the same
- Worse
Source: CSIRO (2003).

3. Government Policies to
Promote Alternative Fuels
3.1 Principles of Alternative Fuel Policies

Environmental improvement is the main justification for governments
to promote the use of autogas and other alternative fuels. Pollution and
global warming caused by rising concentrations of greenhouse gases in
the atmosphere are prime examples of market failure, since the market fails
to put a financial value or penalty on the cost of emissions generated by
individuals or organisations. Air quality and the climate are, in economists’
parlance, public goods, from which everyone benefits. Damage done to the
environment is known as an external cost or externality. Governments have
a responsibility to correct these failures, to discourage activities that emit
noxious or greenhouse gases and to make sure that each polluter pays for
the harm he causes to public goods.
Levying charges on polluting activities is effectively a way of internalising

these environmental externalities, although placing an exact financial value
on them is extremely difficult and inevitably involves a large degree of
judgment. A large number of studies have attempted to assess the health
and economic costs of different types of emissions, including greenhouse
gases. Estimates vary widely according to the assumptions made and
methodological approaches used (ALPGA, 2003b). A study carried out by
the Allen Consulting Group in 2002 on behalf of the Australian Environment
Ministry cites a value of A$40 (US$30) per tonne of carbon dioxide emitted,
and A$29 000 (US$22 000) per tonne for PM emissions.
In principle, the most economically efficient approach to internalising

external costs is one that relies mainly on financial incentives, i.e. a market-
based approach. In other words, the effective market price of the activity
that gives rise to an environmental externality should be adjusted through
the application of a tax and/or subsidy large enough to reflect the value or
cost of that externality. Once an appropriate fiscal framework is in place,
consumers and producers should be free to make informed economic
choices according to their own preferences. In the case of road transport,
that involves taxing or subsidising transportation in such a way that the
financial costs to end users of the different fuel and vehicle options reflect
their associated environmental costs.
In practice, however, developing effective transport and energy policies

that take account of environmental externalities is extremely complex
– even if reliable quantitative estimates of external costs can be obtained.
It is impractical to apply taxes and subsidies exactly according to actual
vehicle usage and the actual emissions produced during use. Financial
AUTOGAS INCENTIVE POLICIES · GOVERNMENT AFV POLICIES 25

incentives have, thus, generally focused on fuel-based taxes, as they are
simpler and politically less sensitive than measures that impact vehicle use
directly, such as road pricing – even though evidence suggests that pricing
1 The UK government vehicle use can be very effective.1 The earliest wide-spread experience of
is considering
differential taxation to support environmental goals was the introduction of
introducing a national
road-pricing scheme unleaded gasoline, where lower taxes relative to leaded fuel were extremely
based on satellite effective in accelerating its uptake. More recently, similar incentives have
technology to reduce
the country’s chronic
been focused on encouraging the use of low-sulphur diesel and alternative
congestion problems. fuels. A recent report (ECMT, 2001) concludes that the case for lower fuel
Singapore and
taxes for to achieve environmental objectives is well established, though
Stockholm already
operate similar road- they may have to be significantly lower and their introduction needs to be
pricing schemes. well-timed to be effective. In principle, economic efficiency demands that the
excise taxes levied on any given fuel should be applied at the same rate to all
users, commercial and non-commercial.
Most governments deploy other complementary approaches that target

vehicle use and modal choices rather than just the prices of transport
fuels, as such broader approaches tend to be more effective in practice in
reducing emissions – especially of greenhouse gases – from road vehicles
(OECD, 2003). Such approaches seek to internalise implicitly the external
environmental costs of road transportation. They may be aimed specifically
at encouraging the use of clean fuels, including autogas and other alternative
fuels, or discouraging the use of more polluting fuels.
3.2 Typology of Policies to Promote Alternative Fuels
In practice, there is wide range of options at the disposal of policymakers

within the normal policy-toolbox to promote the supply and use of alternative
fuels, including autogas. The main approaches that governments could
or do deploy are financial incentives and regulatory measures. Other
measures include support for technology development and public awareness
programmes. These are summarised in Table A3.1 and are discussed below.
3.2.1 Financial Incentives

Financial incentives can be directed at the fuels themselves or vehicles that
are able to use them. Fuel incentives – the main measure that the countries
surveyed in this report use to promote autogas – can take the form of a
lower rate of excise duty (and/or sales tax) or its complete exemption. In
some cases, commercial vehicles may enjoy a rebate on fuel taxes. These
measures directly reduce the cost of running an alternative fuel vehicle
(AFV) vis-à-vis gasoline and diesel vehicles and shorten the payback period
on converting or acquiring the AFV. Since differences in excise duty show
up in prices at the pump, the measure is also highly visible, raising public
awareness of the potential cost savings from using alternative fuels. The
lower the rates of duties and taxes relative to other fuels, the bigger the
financial incentive to switch.
26 AUTOGAS INCENTIVE POLICIES · GOVERNMENT AFV POLICIES

Table A3.1: Typology of Government Policies and
Measures to Promote Alternative Fuels
Fiscal/financial Regulatory Other
Excise-duty exemption or rebate Mandatory sales/purchase

requirements for public and/or Government own-use of AFVs
Road/registration-tax exemption or private fleets (with enforcement)
rebate
Standards to harmonise refuelling Information dissemination and
Vehicle sales-tax exemption facilities public awareness campaigns
or income/profit tax credit
(purchasers and OEMs) Vehicle conversion standards Voluntary agreements with OEMs
Tax credits for investment Coherent and appropriate health to develop and market AFV
in distribution infrastructure and safety regulations technologies
and R&D
Exemptions from city-driving
Grants/tax credits for AFV restrictions Direct funding for research,
conversion/acquisition. development, demonstration
and deployment of AFVs
Rapid depreciation for commercial
purchasers of autogas vehicles
and owners of distribution
infrastructure
Exemption from
parking/road-use charges
Source: Based on WLPGA (2001).
The main way of providing incentives for AFV themselves is to subsidise

the higher cost of buying an OEM vehicle or the cost of converting an
existing conventional fuel vehicle. Subsidies are most easily provided
through grants or tax credits. Eligibility can be made dependent on the
emission performance of the vehicle being converted. Governments can
also encourage AFV purchases or conversions directly through partial
or complete sales or consumption-tax exemptions. Favourable rates or
exemptions from vehicle registration and/or annual road taxes are another
approach. Such incentives may be restricted to a pre-determined number
of years to limit the loss of tax revenue and the free-rider problem (where
the financial benefit to some end users from the tax incentive is greater
than is necessary for them to switch to using an alternative fuel).
The measures cited above are demand-side fiscal incentive measures

aimed directly at reducing the cost to the end user of switching to an
alternative fuel. Supply-side fiscal measures that reduce the tax liability
of fuel providers and/or AFV manufacturers can also help to lower these
costs in an indirect way. For example, profit-tax credits can be used to
encourage OEMs to develop and market dedicated AFVs, or to encourage
fuel providers to invest in distribution infrastructure.
AUTOGAS INCENTIVE POLICIES · GOVERNMENT AFV POLICIES 27

3.2.2 Regulatory Policies and Measures
Governments can strongly influence how quickly alternative fuels and
technologies are adopted through the design of the regulatory framework.
There is a wide range of policies and measures that governments currently
employ to promote the use of alternative fuels.
The most direct form of regulatory measure involves the use of legal
mandates on public or private organisations to sell or purchase a fixed
number of AFVs. Traffic-control regulations can be also be used to favour
such vehicles. For example, AFVs may be granted exemptions from city or
highway-driving restrictions, such as those imposed on peak-pollution days.
They may also be exempt from on-street parking charges and road-pricing
schemes. Government can also facilitate the development of coherent
standards, in partnership with industry, covering vehicle conversions,
refuelling facilities and health and safety aspects of alternative fuel supply
and use.
3.2.3 Other Measures

Governments can support the research, development, demonstration
and deployment of alternative-fuel technology either through voluntary
agreements with OEMs and fuel providers or through direct funding of such
activities. Voluntary agreements or collaborative partnerships with industry
are usually seen as an alternative to stringent, mandatory regulations and
punitive fiscal measures.
Other measures include the use of voluntary agreements and programmes

between government and fuel providers and fleet operators. The aim is to
advance public understanding and awareness of the benefits of switching
away from conventional fuels and of the various incentives available to
them. The deployment of AFVs by the government itself can also expand
the market for alternative fuels and set an example to other end users.
Information dissemination and education can also form a key element of

government-incentive programmes for alternative fuels. They may take the
form of regular communications, such as websites or newsletters, to inform
the public of market and technology developments and to indicate how to
apply for subsidies if available.
28 AUTOGAS INCENTIVE POLICIES · GOVERNMENT AFV POLICIES

4. International Comparison
of Autogas Incentive Policies
4.1 Fuel Taxation and Pricing
4.1.1 Comparative Taxation of Autogas

Rates of excise taxes and duties on road-transport fuels vary markedly
across countries, both in nominal terms and relative to each other. In no
country among those surveyed in this report is the same rate of excise duty
applied uniformly across all fuels either on a mass or volume basis. Rates of
value-added tax (VAT) or sales taxes also vary substantially, ranging from
5% in Japan and some US states to 22% in the Czech Republic and Poland.
And the rules governing the recovery of VAT, consumption and sales tax by
commercial users also vary. In practice, the absolute level of tax on autogas
matters less than how high it is relative to conventional fuels.
Figure A4.1: Autogas Excise Taxes as % of Taxes

on Gasoline per Litre, 2004
On a per-litre basis, autogas taxes are usually lower than for both diesel and
gasoline, but the extent of the tax advantage varies significantly. Autogas
is totally exempt from excise taxes in Australia, Belgium, China, Mexico
and Russia (Figure A4.1). The ratio of autogas taxes to gasoline taxes is
highest in the United States and Turkey. In all the countries surveyed except
the United States, excise taxes on autogas are less than 50% of those on
gasoline. The arithmetic average ratio across all the countries surveyed is
21%.
AUTOGAS INCENTIVE POLICIES · INTERNATIONAL COMPARISON OF AUTOGAS POLICIES 29

Excise taxes on diesel are lower than on gasoline in all countries except the
United Kingdom, where they are the same. As a result, autogas enjoys a
much smaller tax advantage over diesel than gasoline. The ratio of excise-
tax rates on autogas to diesel is highest in Algeria at 160%. In fact, Algeria
is the only country where autogas is taxed more than diesel (Figure A4.2).
Autogas taxes as a proportion of diesel taxes average 34% for all twenty
countries.
Figure A4.2: Autogas Excise Taxes as % of Taxes

on Diesel per Litre, 2004
Because the calorific value of each fuel varies, the tax advantage of autogas
is in reality smaller – especially over diesel, which has the highest calorific
value per litre. If all three fuels were taxed equally on an energy-content
basis, taxes per litre would on average be 28% higher for gasoline and 40%
higher for diesel compared to autogas.
There is no environmental justification for taxing diesel less than gasoline

– even less autogas – either on a volume or energy-content basis (see
Section A3). The favourable treatment given to diesel vis-à-vis gasoline
reflects lobbying by road hauliers and industry generally to minimise
commercial fuel costs, especially in countries where trucks can easily refuel
in a neighbouring country where duties and therefore pump prices are
lower. Many European countries come into this category. It is impractical as
well as economically inefficient to levy different rates of duty on different
categories of end users: of the countries surveyed here, only Mexico
differentiates excise duties between consumer categories. No country
currently reimburses excise duties on diesel to commercial users.
30 AUTOGAS INCENTIVE POLICIES · INTERNATIONAL COMPARISON OF AUTOGAS POLICIES

Most governments have traditionally used fuel taxes to raise money for the
exchequer. Nonetheless, there are limits to how much governments can tax
conventional fuels. In 2000 and 2001, several European governments were
forced to lower duties on gasoline in the face of strong public protests at
higher gasoline prices, caused by a surge in international market prices.
4.1.2 Comparative Pricing of Autogas

Retail or pump prices of autogas also vary considerably across the countries
surveyed both in absolute terms and relative to the prices of other fuels.
This is largely because of differences in the way automotive fuels are taxed.
But differences in the bulk price (import, ex-refinery or ex-processing plant)
of LP Gas and the distribution and retail mark-up (including costs and
profit margins) also contribute to price differences at the pump. Margins
differ among countries and regions according to the degree of competition
between distributors and, in some cases, government margin or price
controls. Autogas prices are controlled in Algeria, China, Mexico and
Thailand. In all the other countries surveyed, the government is no longer
directly involved in setting wholesale or retail prices.
In 2004, pre-tax pump prices converted to US dollars were on average

lowest in Algeria and highest in the United Kingdom (Figure A4.3). In part,
these differences reflect recent movements in exchange rates. Autogas
prices were lower than both diesel and gasoline in all countries except
France, Japan, Mexico and the United Kingdom. In those countries, the
reverse is true. In the United States, the pre-tax price of autogas is higher
than that of diesel but lower than that of gasoline. Pre-tax prices change
over time in line with fluctuations in international prices (Box 4.1).
Figure A4.3: Pre-Tax Pump Price of Autogas, 2004 (US$/litre)
Netherlands
Czech Rep.
Note: Prices are converted to US dollars at average 2004 exchange rates.

Box A4.1: International LP Gas Pricing
Propane and butane are traded internationally and within the large North
American market on a spot basis (cargo by cargo) and under term contracts that
cover a specified number of cargoes over a specified period. Contract prices
are typically indexed to published spot-price quotations for LP Gas and other
oil products. Spot prices and the base prices in term contracts are determined
by market conditions at the time the deal is struck. The primary determinants
of propane and butane prices are crude oil, natural gas and naphtha prices, the
local supply and demand balance, the proximity of the market to supply sources
and the types of uses to which LP Gas are put.
Because of the large share of petrochemical demand in total world LP Gas

demand and because of the volatility of demand from this sector, LP Gas prices
tend to fluctuate more sharply in the short term than those of oil or natural
gas. In particular, LP Gas prices tend to increase in the summer in the northern
hemisphere, when petrochemical and refinery demand is highest because
of increased demand for gasoline. Propane and butane replace naphtha as
feedstock in ethylene plants, as larger volumes of naphtha are diverted to
gasoline production in refineries. However, over the longer term, the bulk prices
of LP Gas, crude oil and naphtha tend to move closely in line with each other.
Propane and butane prices are usually very close and also move very closely in
parallel.
The per-litre pump price of autogas for non-commercial users (including all
taxes) is lower than that of both conventional fuels in all countries except
the United States, where autogas costs slightly more than diesel. In more
than half the countries surveyed, autogas pump prices per litre in 2004
were less than half those of gasoline. The price of autogas as a proportion
of that of gasoline ranged from 31% in Belgium to 93% in the United States,
averaging 52% across all countries (Figure A4.4).
Because diesel is taxed less than gasoline everywhere except the United
Kingdom, the pump-price differential between autogas and diesel is
significantly lower than that between autogas and gasoline. The price of
autogas was on average 63% that of diesel in 2004. The ratio was highest
in the United States and Mexico, and lowest in Belgium (Figure A4.5). The
share of total taxes in the per-litre pump price of each fuel and the ratio of
autogas pump prices including all taxes to those of diesel and gasoline are
detailed in Table A4.1.

Figure A4.4: Autogas Pump Price including all Taxes as % of Gasoline
Price per Litre, 2004
Czech Rep.
Figure A4.5: Autogas Pump Price including all Taxes as % of Diesel

Price per Litre, 2004

Table A4.1: Automotive-Fuel Taxes and Prices, 2004
Autogas pump price as %

Share of total taxes in price prices of other fuels
(including all taxes)
Autogas Diesel Gasoline Diesel Gasoline
Algeria 48.9% 20.1% 52.8% 61.3% 32.4%
Australia 9.1% 47.2% 47.8% 42.0% 40.2%
Belgium 18.8% 54.8% 66.0% 40.5% 31.3%
Bulgaria 41.1% 50.1% 53.1% 65.3% 56.6%
Canada 18.6% 30.0% 37.5% 74.5% 69.2%
China 11.5% 17.6% 20.2% 66.8% 59.9%
Czech Republic 32.3% 56.5% 60.8% 54.7% 51.0%
France 27.0% 63.5% 71.9% 63.8% 53.2%
Italy 45.7% 59.6% 66.3% 57.5% 47.9%
Japan 19.4% 39.5% 52.7% 73.8% 57.8%
Korea 46.1% 49.4% 63.6% 74.2% 49.3%
Lithuania 33.1% 50.3% 53.5% 52.9% 49.2%
Mexico 15.0% 40.1% 55.2% 85.9% 64.8%
Netherlands 27.7% 57.3% 69.2% 52.4% 37.2%
Poland 40.2% 52.8% 59.9% 54.3% 46.0%
Russia 16.6% 28.4% 42.0% 67.8% 54.8%
Thailand 21.5% 24.9% 28.2% 63.2% 47.4%
Turkey 50.8% 62.3% 68.4% 66.1% 51.9%
United Kingdom 27.2% 72.4% 73.6% 47.0% 48.0%
United States 19.7% 25.1% 18.9% 105.8% 92.9%
Note: Percentages are calculated on a volume basis.
Effective pump prices can also differ between commercial and non-
commercial. In most countries, commercial (business) users are able to
recover VAT but usually not excise duties. Consequently, the prices for
commercial users shown in the country sections in Part B exclude VAT for
all fuels in most cases. The exceptions are Canada, Korea, Thailand and
the United States, where all commercial prices include sales taxes. In most
cases, the rules governing VAT refunds are the same for all fuels and all
types of vehicles. Where this is the case, the relative competitiveness of
the different fuels is not affected, although the absolute savings on running
costs from switching to cheaper fuel/vehicle options differ between
commercial and non-commercial users. In two countries, the rules on
VAT refunds differ according the fuel. In France, VAT can be recovered on

commercial purchases of diesel and, solely in the case of taxis, on autogas
too (up to a ceiling), but never for gasoline. Taxis can also recover the excise
duty on autogas. In Japan, VAT can be recovered for diesel and gasoline,
but not for autogas.
4.2 Autogas Vehicle Subsidies

The most effective measure other than favourable fuel taxation in
encouraging switching to autogas is subsidies to the vehicle itself. They
take the form of grants or tax credits for converting gasoline vehicles to run
on autogas or for purchasing OEM autogas vehicles. Among the countries
surveyed, the central government and/or local authorities subsidised
gasoline-vehicle conversions or OEM purchases in Australia, France, Italy,
the United Kingdom and the United States in 2004. Subsidies effectively
cover the entire cost of conversion in France and part of the cost in the
other countries. In early 2005, the UK government withdrew funding for
its grant scheme. The Japanese government makes available diesel-engine
conversion grants, but there has been little interest in taking up these grants
because of the high cost of diesel conversions. The Korean government
also makes available grants to convert public diesel trucks and buses in
Seoul, Incheon and Gyeonggi-do.
Discounts on annual road taxes and initial vehicle registration taxes

compared to those levied on gasoline or diesel vehicles are less common.
Australia, the Netherlands and the United Kingdom currently use this
approach. The incentive is largest in the Netherlands, where both the special
car sales tax and the annual road tax is much higher for diesel vehicles than
for autogas or gasoline vehicles.
4.3 Other Incentives

Supply-side fiscal or subsidy measures that reduce the tax liability,
investment cost or running costs of fuel providers and/or vehicle converters
or OEMs are used in only two countries. Some US states have introduced
profit-tax credits, including Connecticut where such a credit is available
for 50% of the construction cost of refuelling stations or improvements
to existing stations so they can provide autogas or other alternative fuels.
The Japanese government has also established a programme to promote
autogas distribution, through grants covering 50% of both the cost of
building and the cost of running autogas refuelling stations up to a fixed
ceiling.
Fleet-vehicle purchase mandates or autogas-fuelled public transport

programmes are used in five countries: Australia, China, France, Italy,
Mexico and the United States. In addition, federal legislation in Canada
provides for mandatory purchases of alternative fuel vehicles, including
autogas, for public fleets. Guangzhou in China currently has one of the
biggest programes, where 700 buses will be converted to autogas by the
end of 2005. In addition, 17 000 taxis will be converted by the end of 2006.
A large proportion of buses in Beijing and some other big cities already run
on autogas.

Mandates for AFVs, including those using autogas, have been most widely
used in the United States. The Clean Fuels programme, set up under the
1990 Clean Air Act Amendments, mandates clean-vehicle purchases
for fleet operators in the 22 most polluted US cities. The 1992 Federal
Energy Policy Act also laid down mandatory purchases of AFVs (which
can include autogas vehicles) in specific incremental percentages for
federal and state LDV fleets as well as those operated by fuel providers.
Under these mandates, alternative fuels must power 75% of new vehicle
acquisitions by federal bodies from 1999. The same requirement has been
in place for state organisations since 2000. These mandates are intended
to demonstrate the viability of alternative fuel technologies and, along with
various fiscal incentives, catalyse OEMs and fuel providers into making
vehicles and refuelling facilities more widely available. In California, there
is a requirement on car manufacturers to sell a minimum number of low or
zero-emission vehicles as a percentage of their total sales.
Autogas vehicles – along with other with other clean AFVs – enjoy
exemptions from city or highway-driving restrictions imposed on peak-
pollution days in several European cities, including Rome, Athens and Paris.
In some US cities, autogas vehicles are given access to dedicated lanes.
In the United Kingdom, autogas vehicles are exempt from the London
congestion charge.
Most industrialised countries directly fund and manage transportation

and automotive fuel R&D programmes. In most cases, however,
autogas technology has not been considered a priority, despite autogas’
environmental and economic advantages over other alternative fuels. There
is a particular need at present to improve the performance of dedicated
autogas-powered HDV engines, given the potential for reducing noxious
emissions – especially particulates – by replacing diesel with autogas. A
positive step was taken by the US Congress in 1996, with the creation of the
national Propane Education Research Council (PERC) to conduct technical
R&D, demonstration, training and educational programmes. PERC is funded
by a small levy on all LP Gas sales. The LPG Center of Japan performs a
similar role.
Other measures that have been or are being used by governments to

promote autogas use include the use of voluntary agreements and
programmes between governments and fuel providers and fleet operators.
For example, the US Clean Cities Program, run by the Federal Department
of Energy, is aimed at helping city authorities seek voluntary commitments
from fuel providers to expand the distribution network and fleet operators
to increase their purchases of alternative fuel vehicles. This involves
advancing public understanding and awareness of the benefits of switching
away from conventional fuels and of the various federal and state incentives
available to them. The deployment of autogas vehicles by the government
itself is also used to expand the market for autogas and set an example to
other end users.
Information dissemination and education programmes for autogas and

other alternative fuels are used in several other countries. In the United

Kingdom, for example, TransportEnergy, a non-profit company established
by the government, produces regular publications to inform the public of
autogas market and technology developments and the benefits of switching
to autogas and other alternative fuels. In addition, the Department of Trade
and Industry Automotive Unit has set up a campaign, called BoostLPG, to
improve the availability of information and to promote the benefits and
opportunities associated with using LPG-fuelled vehicles. The campaign is
run by the LP Gas Association.
Table A4.2 provides a summary of the principal measures deployed in the

countries surveyed in this report. The most commonly used measure to
support autogas is a tax exemption or large rebate relative to conventional
fuels.
Table A4.2: Summary of Autogas Incentive Policies

in Countries Surveyed, 2004
Fuel tax Vehicle tax Grants/tax credits Autogas fleet

exemption or exemption or for conversions or vehicle purchase
large rebate1 rebate2 OEM purchases3 mandates3
Algeria ¸4
Australia ¸ ¸ ¸ ¸
Belgium ¸
Bulgaria ¸
Canada ¸ ¸5
China ¸ ¸
Czech Republic ¸
France ¸ ¸ ¸
Italy ¸ ¸ ¸
Japan ¸ ¸6
Korea ¸6
Lithuania ¸
Mexico ¸ ¸
Netherlands ¸ ¸
Poland ¸
Russia ¸
Thailand
Turkey ¸
United Kingdom ¸ ¸ ¸
United States ¸ ¸
1
Excise duty less than half that levied on diesel and gasoline, calculated on a per litre
equivalent basis. 2 Compared to gasoline. Includes taxes on vehicle conversion/acqusition and
annual road/registration charges. 3 Central and state governments. Includes public transport. 4
Implicit tax advantage through a low regulated wholesale price. 5 Programme covers all AFVs.
6
Diesel-vehicle conversions only. 7 Ended in 2005.

5. Effectiveness of Autogas
Incentive Policies
5.1 Autogas Share of the Automotive Fuel Market
The effectiveness of autogas incentive policies varies considerably
among the countries surveyed in this report. The share of autogas in total
automotive-fuel consumption ranges from a mere 0.1% in the United States
to 16% in Poland (Figure A5.1). The only countries other than Poland where
autogas accounts for more than 10% of the fuel market are Korea, Bulgaria,
Turkey and Lithuania. The share is only slightly higher in the United
Kingdom than in the United States, but it has been rising quickly, reaching
almost 0.5% in 2004 according to preliminary data – up from 0.3% in 2003.
Figure A5.1: Share of Autogas in Total Automotive-Fuel Consumption

and LDV Fleet, 2003 (%)
35% 40% 45%
Note: The timeliness of data on road-fuel consumption and vehicles differs among countries.
Shares were calculated using the most up-to-date number for both variables (2003 for autogas
use and vehicles; and 2002 or 2003 for total fuels consumption and vehicle numbers).
The share of autogas vehicles in the total number of passenger vehicles

is, unsurprisingly, closely correlated with the share of autogas in total
automotive-fuel consumption (Figure A5.2). In Turkey and Lithuania, the
share of autogas vehicles is disproportionately high. This probably reflects
the recent rapid growth in the number of autogas vehicles in 2003 (the
data is for end-year) and the fact that a significant proportion of autogas
vehicles regularly switch back to using gasoline – possibly due to a lack of
availability of autogas in certain parts of the country.
38 AUTOGAS INCENTIVE POLICIES · EFFECTIVENESS OF AUTOGAS POLICIES

Figure A5.2: Share of Autogas in Total Automotive-Fuel Consumption
versus LDV Fleet, 2003
0%
Note: Log scale.
5.2 Comparative Competitiveness of Autogas

The market penetration of autogas depends largely on how competitive
the fuel is against gasoline and diesel – in other words, how financially
attractive it is for an end user to switch to autogas. This largely depends on
the cost of converting the vehicle (or the cost of a dedicated OEM vehicle
compared to a gasoline or diesel vehicle) and the pump price of autogas
relative to diesel and gasoline. Since converting a vehicle to run on autogas
involves upfront capital expenditure and some minor inconvenience, the
owner needs to be compensated through lower running costs, of which
fuel is the most important. The time it takes for the savings in running costs
to offset the capital cost – the payback period – depends on the usage of
the vehicle, i.e. the average distance travelled monthly or annually.
The extent to which government incentives lower the initial expenditure and
fuel costs are critical to the payback period. In practice, the payback period
generally has to be less than two to three years to encourage commercial
vehicle owners to switch; private individuals often demand a quicker return
on their investment.
We have estimated, for all the countries surveyed, the distances over which
a typical LDV of recent vintage would need to travel before it becomes
competitive with similar gasoline and diesel vehicles. The methodology
and assumptions used for this analysis are described in Box 5.1. The results
are shown in Table A5.1.
AUTOGAS INCENTIVE POLICIES · EFFECTIVENESS OF AUTOGAS POLICIES 39

Box A5.1: Methodology for Calculating the Comparative
Competitiveness of Autogas
In order to analyse the role inter-fuel competition plays in autogas demand, we

have calculated indicative break-even distances for autogas vehicles compared
with both gasoline and diesel vehicles for all 20 countries surveyed. This involved
compiling information on current pump prices and effective differences in
actual vehicle conversion and acquisition costs for autogas and diesel relative to
gasoline vehicles, taking account of any grants or tax rebates currently available.
To allow cross-country comparisons, uniform assumptions about fuel and vehicle

types were adopted. For all countries, a typical passenger car of recent vintage
was assumed (a five-door salon or hatchback) with the same power rating
for each fuel. Mileage differences due to the lower per litre energy content of
autogas and engine performance were also taken into account. The diesel vehicle
was assumed to consume 22% less fuel per kilometre on a volume basis than the
gasoline vehicle, while the autogas vehicle was assumed to consume 25% more
per kilometre than the gasoline vehicle. No differences in fuel specifications and
operating characteristics between countries were taken into account, because
of the difficulty in obtaining reliable information for each country (notably the
propane-butane mix of autogas, which varies in practice across seasons and
countries).
Break-even distances were calculated for both commercial and non-commercial

users. As the results were very similar, only those for non-commercial users have
been used to measure the overall competitiveness of autogas relative to gasoline
and diesel.
There is considerable variation in the competitiveness of autogas against

each of the other fuels among the countries surveyed. Converted vehicles
eventually break even with gasoline vehicles in all countries, except the
United States. The break-even distance is nonetheless above 100 000 km
in Canada, Japan and Mexico. Autogas is most competitive in France,
where a converted autogas vehicles is always the lowest cost fuel/vehicle
option, regardless of distance travelled. This is because government grants
currently cover the entire conversion cost and because per kilometre fuel
costs are lower than those of gasoline (and diesel), even allowing for its
lower mileage. In nine countries, the break-even distance against gasoline
is under 50 000 km – or about three years of driving for an average private
car owner. The equivalent break-even distance for OEM autogas cars is
always higher than for converted vehicles, because the extra cost of buying
and OEM is always more than the cost of converting a gasoline car.
The picture is less straightforward when autogas is compared with diesel.

Converted autogas vehicles are always competitive against diesel in seven
countries, where both per-kilometre fuel costs and autogas-conversion
costs net of grants compared to the higher cost of a diesel vehicle are
lower. But in several countries, the running costs of diesel are lower than

for autogas, so diesel eventually breaks even against autogas. This is the
case in Canada, Mexico, Turkey and the United States. In Turkey, however,
diesel only becomes competitive against autogas at 120 000 km. In the
United States, the equivalent distance is only 20 000 km. Japan is the only
country where autogas is never competitive against diesel.
Table A5.1: Break-Even Distance for a Non-Commercial Autogas LDV,

2004 (thousand km)
Autogas conversion against Autogas OEM against
diesel gasoline diesel gasoline
Algeria 0 41 n.a. n.a.
Australia 13 35 21 40
Belgium 29 28 57 38
Bulgaria 0-131 31 n.a. n.a.
Canada 0-83 124 NC >200
China 0-92 51 n.a. n.a.
Czech Republic 62 57 124 78
France 0 0 NC 17
Italy 0 33 151 55
Japan NC 117 NC 161
Korea n.a. n.a. 0-28 29
Lithuania 0 20 n.a. n.a.
Mexico 0-112 103 NC >200
Netherlands 0 35 0 47
Poland 0 16 n.a. n.a.
Russia 0-104 49 n.a. n.a.
Thailand 0 42 n.a. n.a.
Turkey 0-120 14 n.a. n.a.
UK 36 41 60 53
US 0-20 NC NC NC
Note: Zero indicates that autogas is always competitive up to at least 100 000 km. A range
indicates the distances over which autogas is competitve before the competing fuel becomes
more economic. NC indicates that autogas is never competitive up to 100 000 km. n.a. is not
applicable.

5.3 Impact of Autogas Competitiveness on Automotive-Fuel
Market Penetration
There is a very clear correlation between how competitive autogas is
against other fuels and how successful autogas has been in penetrating the
automotive-fuel market. Figure A5.4 plots the market penetration of autogas
against the competitiveness of autogas (based on a converted gasoline
car) vis-à-vis gasoline and diesel for all countries. Autogas use is generally
higher in countries where the break-even distance is low, especially against
gasoline. For example, Bulgaria, Korea, Lithuania, Turkey and Poland have
the highest rates of autogas penetration and among the lowest break-even
distances. At the other extreme, autogas is least competitive in Canada
and the United States, where autogas accounts for a small share of total
automotive-fuel consumption. The correlation for diesel is weaker, largely
because autogas is always competitive against that fuel in a third of the
countries.
Figure A5.3: Autogas Break-Even Distance against Gasoline

(thousand km)
Lithuania
Czech Rep.
Note: The break-even distance is for a converted non-commercial autogas LDV based on
2004 fuel and vehicle costs (OEM vehicle for Korea). United States is not shown, as autogas
is never competitive against gasoline.
Focusing solely on market penetration fails to capture market dynamics and

policy changes. Some countries have recently changed their policies either
to support autogas use or, as in Poland and Turkey, to curb demand growth.

In the United Kingdom, for example, the adoption of a policy to promote
autogas use in 1999 led to rapid rates of growth in demand, but autogas
as yet still accounts for only a small share of total road-fuel consumption.
The removal of conversion grants in 2005 has pushed up the break-even
distance for autogas vehicles and threatens to rein back market growth.
Strong autogas-tax incentives and restrictions on diesel vehicles resulted in
the rapid growth in autogas use in Korea through to the start of the current
decade, but those incentives have since been drastically reduced resulting
in an increase in the break-even distance of autogas against gasoline.
Figure A5.4: Autogas Share of Automotive-Fuel Consumption versus

Break-Even Distance Against Gasoline
Canada
120 Japan
Gasoline
Break- even distance (thousand km)
Mexico
100
Diesel
80 Gasoline trend
Diesel trend
60 Czech Rep.
China
Russia
40 UK Thailand Algeria
Netherlands
Australia
Italy Bulgaria
Belgium Korea
20 Lithuania
Turkey Poland
0 France
0% 2% 4% 6% 8% 10% 12% 14% 16%
Share of autogas in total road-fuel consumption
Note: Break-even distance is for a converted non-commercial autogas LDV(OEM in Korea)

based on 2004 fuel and vehicle costs. The share of autogas in total automotive-fuel
consumption is based data for the latest year available, usually 2003. Country names refer to
gasoline only.
5.4 Impact of Non-Financial Incentives

The competitiveness of autogas is the most important factor, though not
the only factor, in explaining the actual market penetration of autogas and
recent rates of market growth. For example, Belgium’s break-even distance
for autogas against gasoline is slightly lower than that of Korea, yet the
penetration of autogas in Belgium is much lower – even though autogas
is always competitive against diesel. And the penetration of autogas is
exceptionally low in France, where autogas is extremely competitive.
Several factors explain these divergences:

> Government policy commitment: The autogas market has tended to
develop more quickly where the government has shown a strong,
long-term policy commitment in favour autogas. Frequent changes
of policy, including shifts in taxation, deter end users, equipment
manufacturers and fuel providers from investing in autogas. For
example, a proposal to impose an excise duty on autogas in Australia
in 2003 quickly led to a sharp drop in conversions and fuel sales.
> Non-financial policies and measures: In some cases, the use of non-
financial incentives or other measures have either helped to boost or
to hinder autogas use. Public awareness and education campaigns
to promote autogas have certainly made a significant contribution
to market growth in several countries, including the United Kingdom
and the United States. Mandates and public transport fleet conversion
programmes have also helped to sustain autogas use in several
countries, including China and the United States. In other cases,
regulations restricting autogas use, including bans on underground
parking (a problem in several European countries), have been a
barrier to market development.
> Restrictions on diesel vehicles: Local and central government

environmental restrictions on the use of diesel vehicles have been an
important factor behind the success of autogas in Korea and Japan.
> Availability of equipment and fuel: Autogas has struggled to penetrate

the fuel market in some countries, where car makers have been
reluctant to market OEM models or where there is a limited number
of refuelling sites selling autogas. A lack of OEM vehicle availability
has been a major barrier to market development in the United States,
where only one such vehicle is currently marketed. Limited availability
of fuel at service stations has deterred end users from switching to
autogas in several countries, notably China, where there are only 285
sites outside of Hong Kong.
> Public attitudes to autogas safety: Worries about the safety and
reliability of autogas have clearly affected demand in several countries.
In France, some widely publicised incidents involving autogas vehicles,
including an explosion caused by arson in an underground car park
in 1999, has severely dampened consumer interest in autogas. The
introduction of legislation making compulsory the installation of a
safety valve on all autogas tanks has so far had little impact.

6. Lessons for Policymakers
6.1 The Rationale for Promoting Autogas

For environmental and economic reasons, autogas remains the most
attractive alternative automotive fuel for countries looking to tackle
urban air pollution and to curb rising emissions of greenhouse gases. In
most parts of the world, these problems are getting worse as demand for
mobility – whether for transporting people or goods – grows inexorably
with increasing economic activity and prosperity. Urgent action is needed
in many places, especially in Asia. Draconian measures to curb mobility are
politically and socially unacceptable. Breakthrough fuel technologies under
development today, such as hydrogen-powered fuel cells, hold out the
prospect of much lower or even zero emissions, but their commercialisation
is still many years away. As a result, the most practical approach in the
short-term to reducing emissions is by encouraging people and businesses
to switch to cleaner-burning fuels that are already commercially available.
Autogas outperforms conventional fuels and most other alternative

automotive fuels for local and regional environmental benefits. It can also
play an important role in mitigating climate-destabilising greenhouse gas
emissions until such time as ultra-low or zero-emission vehicle technologies
are commercialised on a large scale. The development of autogas-
distribution infrastructure could also later provide the basis for on-board
hydrogen production for fuel cells using autogas as the primary input.
Autogas makes economic as well as environmental sense because its raw

material costs are competitive and installing the distribution infrastructure
costs less than for other alternative fuels. Most gasoline-powered LDVs,
including commercial vans and taxis, are highly amenable to conversion
to autogas. OEM autogas buses have operated for many years in a number
of cities around the world. Yet there are obstacles to market take-off
and development. In practice, autogas can only be successful if there is
a concerted effort on the part of all stakeholders � vehicle manufacturers
and converters, autogas suppliers and governments � to make switching
attractive to end users.
The loss of revenue from lower taxation of autogas fuels or vehicle sales may
be used by the government as an excuse for not providing fiscal incentives
– especially in countries where fuel-tax revenues make up a large share of
the overall government budget. In practice, however, any reduction in taxes
from automotive-fuel sales can be easily offset by marginal increases in
taxes on gasoline and diesel.
6.2 Critical Success Factors for Autogas Market Development

In designing autogas incentives, policymakers need to take account of the
critical success factors behind the development of a sustainable autogas
AUTOGAS INCENTIVE POLICIES · LESSONS FOR POLICYMAKERS 45

market. The analysis of the preceding two chapters demonstrates clearly
that the most important factors are the financial attraction of switching to
potential autogas-vehicle owners, i.e. the speed of payback on the initial
investment, and the achievement of critical market mass.
Fuel taxes and vehicle grants are the primary determinants of the financial
benefit to vehicle owners of switching to autogas. In practice, the crucial
variable to vehicle owners and operators in their choice of fuel is the speed
of payback on the initial additional cost of converting a gasoline vehicle to
run on autogas or the higher price of an OEM vehicle relative that of a new
gasoline or diesel vehicle. The payback period has to be sufficiently short
to justify the investment and to compensate for the inconvenience associ-
ated with autogas, notably the loss of space in the boot/trunk and the more
limited availability of refuelling stations in some countries and regions.
Even where reasonably strong financial incentives exist, autogas use will
not necessarily take off until critical market mass is achieved:
> The market needs to be large enough to demonstrate to potential

autogas users and fuel providers that the fuel is safe, reliable and cost-
effective alternative to conventional fuels. The more autogas vehicles
there are on the road, the more confidence other vehicle owners will
have to switch fuels.
> Autogas must be widely available. Lack of refuelling stations is a

major impediment to persuading vehicle owners to switch to autogas,
even where there is a strong financial incentive.
> The autogas market must be big enough to support a viable network
or properly-trained mechanics to convert and maintain autogas
vehicles and ensure the availability of spare parts and equipment.
The role of the government in giving an initial strong impetus to the

simultaneous development of demand and supply infrastructure in
collaboration with all stakeholders is vital. Favourable taxation of autogas
vis-à-vis gasoline and diesel is a necessary but not always a sufficient
condition for establishing and sustaining an autogas market. Other
government incentives may be necessary where the market has not yet
reached critical mass. Government grants for vehicle conversions for
private individuals and fleets have been particularly successful in kick-
starting autogas markets in some instances. Road and vehicle registration
and purchases taxes that favour autogas vehicles can also be an effective
policy, with relatively low implementation costs and few negative side-
effects. Conversion of public vehicle fleets to autogas is also an effective
way of demonstrating the benefits of autogas and driving the development
of distribution infrastructure.
Technical and safety standards are another important area of responsibility

for governments in partnership with LP Gas suppliers, vehicle converters
and OEMs. It is essential for the authorities to lay down and enforce
harmonised operating standards for aspects of both autogas distribution
46 AUTOGAS INCENTIVE POLICIES · LESSONS FOR POLICYMAKERS

and vehicle equipment, including installation. Poor-quality conversions can
undermine engine and emission performance and jeopardise sustainable
development of the market. The European Union has addressed this
concern with the adoption of ECE Regulation 67.01. Another issue concerns
refuelling nozzles at service stations, which must be compatible with the
vehicle connector. Differences between and even within countries were
initially a significant barrier to the development of the European autogas
market. The development of a new standardised filling system designed by
autogas providers and the major OEMs is helping to resolve this problem
and support the development of the market.
Safety should be an overriding concern for policymakers everywhere.

Fuel providers and end users need to be reassured that the transportation,
handling and storage of autogas pose no safety risks. But the drafting
and implementation of safety regulations specific to autogas need to be
based on an objective assessment of risk. In many countries, regulations
still limit unnecessarily access and parking of autogas vehicles, the siting
of refuelling stations and the on-site location of dispensers. Studies have
shown that many of these restrictions are unjustified. For example, some
countries do not allow the positioning of autogas dispensers next to
gasoline and diesel pumps. This raises the station’s capital and operating
costs and undermines the customers’ confidence in the safety of autogas
refuelling. Experience in countries where this is permitted, such as France,
the Netherlands and the United Kingdom, shows that there is little risk if
good equipment and appropriate procedures are in place.
In most cases, there is no need for policymakers to draw up technical and

safety standards and regulations from scratch, since several countries have
developed effective frameworks based on many years of experience of
autogas use. For example, the European Standards Organisation, CEN, has
drawn up detailed minimum safety requirements for autogas vehicles, fuel
and storage systems and installation procedures as well as fuel distribution.
The European autogas industry is working to harmonise technical and
safety standards through EU regulations.
6.3 Formulating an Effective Autogas Strategy

There is no single model or approach to formulating and implementing
a government programme of incentives to promote the development of
a sustainable autogas market. The appropriate strategy for each country
depends on specific national circumstances. These include budgetary
considerations, which might limit available funds for subsidies, the
seriousness of local pollution problems, fuel-supply and cost issues, the
stage of development of the autogas market and the prevailing barriers to
fuel switching, including restrictive regulations and the local cost of vehicle
conversions.
Whatever the circumstances, however, experience in the countries surveyed

in this study has clearly shown that the single most important measure to
making autogas an attractive fuel to vehicle owners is favourable fuel-tax
treatment vis-à-vis conventional fuels. At a minimum, taxes should be set
AUTOGAS INCENTIVE POLICIES · LESSONS FOR POLICYMAKERS 47

on an energy-content basis and should take account of the environmental
benefits of encouraging switching to autogas. But this is not always
sufficient. Complementary policy initiatives, including grants and tax credits
to lower the cost of vehicle conversions, and regulatory measures may also
be needed – especially during the early stages of market development.
Vehicle incentives are particularly important where fuel taxes generally are
low, limiting the scope for savings on running costs.
Policy stability and a strong, long-term commitment by the government to

achieving environmental-policy objectives are vital to the success of policies
to promote the development of alternative-fuel markets. Stakeholders need
to be given clear advance warning of any major shift in policy. Without
policy stability, coherence and consistency, neither fuel suppliers, nor OEMs
nor consumers will be confident that they will be able to make a reasonable
return on the investments required to switch fuels.
48 AUTOGAS INCENTIVE POLICIES · LESSONS FOR POLICYMAKERS

PART B:
COUNTRY
SURVEYS
1. Algeria
1.1 Autogas Market Trends

The Algerian government has pursued a policy of promoting autogas
since the 1980s, to take advantage of its large production of LP Gas from
refining and natural-gas processing and to tackle urban pollution. Autogas
consumption has grown rapidly in recent years, reaching 271 000 tonnes
in 2003 – an increase of half since 1999 (Figure B1.1). Autogas currently
accounts for 15% of total national consumption of LP Gas and just over
6% of total automotive-fuel use. At end-2003, there were 120 000 autogas
vehicles and almost 300 refuelling stations in Algeria, accounting for 14%
of the national fuel-retailing network. More than 80% of the country’s LP
Gas production of 9.6 million tonnes in 2003 was exported.
Figure B1.1: Autogas Consumption and Vehicle Fleet – Algeria
300 140
Consumption
Vehicles 120
250
100
Thousand vehicles
200
Thousand tonnes
80
150
60
100
40
50
20
0 0
1999 2000 2001 2002 2003
1.2 Government Autogas Incentive Policies

The Algerian government promotes the use of autogas through a substantial
tax and price differential to gasoline and diesel, and price and distribution-
margin controls. The government fixes both the wholesale and retail prices
of all automotive fuels. Pump prices and excise taxes on autogas and diesel
have not altered for several years, with the autogas price (including 17%
VAT) set at only 61% of that of diesel. A higher excise duty on autogas
than on diesel is more than outweighed by a much lower ex-refinery price.
Gasoline taxes and retail prices were increased in 2002, leaving the price
of autogas at only 32% of that of super gasoline – the lowest ratio of any
country in the world (Table B1.1). The government plans to liberalise the
downstream oil market, but has signalled its intention to maintain a strong
price incentive for consumers to use autogas through favourable taxation.
50 AUTOGAS INCENTIVE POLICIES · ALGERIA

Table B1.1: Automotive-Fuel Prices and Taxes – Algeria
(centime Algerian dinar/litre)
2000 2001 2002 2003 2004
Pump prices
Autogas – commercial 628.5 628.5 628.5 628.5 628.5
Autogas - non-commercial 720.0 720.0 720.0 720.0 720.0
Diesel – commercial 1 102.4 1 102.4 1 102.4 1 102.4 1 102.4
Diesel - non-commercial 1 175.0 1 175.0 1 175.0 1 175.0 1 175.0
Gasoline - commercial 1 827.2 1 827.2 1 927.2 1 927.2 1 927.2
Gasoline - non-commercial 2 125.0 2 125.0 2 225.0 2 225.0 2 225.0
Total taxes
Autogas - commercial 260.8 260.8 260.8 260.8 260.8
Diesel - commercial 163.8 163.8 163.8 163.8 163.8
Diesel - non-commercial 236.4 236.4 236.4 236.4 236.4
Gasoline - commercial 777.5 777.5 877.5 877.5 877.5
Excise duty
Autogas 260.8 260.8 260.8 260.8 260.8
Diesel 163.8 163.8 163.8 163.8 163.8
Gasoline 777.5 777.5 877.5 877.5 877.5
Pre-tax price
Autogas 367.7 367.7 367.7 367.7 367.7
Diesel 938.6 938.6 938.6 938.6 938.6
Gasoline 1 049.6 1 049.6 1 049.6 1 049.6 1 049.6
The government does not subsidise conversions of gasoline vehicles to run

on autogas. However, conversion costs are relatively low due to low labour
costs and the type of cars that are converted, averaging about 4 500 dinars
(US$600). There are no vehicle manufacturers in Algeria, and OEM autogas
vehicles are not actively marketed in the country. Most imported cars are
second-hand.
1.3 Competitiveness of Autogas Against Other Fuels

For a private LDV, autogas breaks even with gasoline at just over 40 000 km
– equivalent to a little over two years of driving for a typical user (Figure
B1.2). Diesel breaks even with gasoline at a higher distance of 66 000 km,
assuming that a diesel car costs 8,500 dinars more than a gasoline car. As
running costs are slightly higher than for autogas, diesel is never competi-
tive with autogas.
AUTOGAS INCENTIVE POLICIES · ALGERIA 51

Figure B1.2: Running Costs of a Non-Commercial LDV, 2004 – Algeria
20000000
18000000 Autogas - conversion
Cost (centimes algerian dinar)

Diesel
16000000
Gasoline
14000000
Diesel breaks even
against gasoline
12000000
10000000
8000000
Autogas conversion
6000000
breaks even against
gasoline
4000000
2000000
0
0 10 20 30 40 50 60 70 80 90 100
Distance travelled (thousand km)
52 AUTOGAS INCENTIVE POLICIES · ALGERIA

2. Australia

Australia has a long history of autogas use. It has the fifth largest autogas
market in the world and the most extensive retail distribution networks,
with around 3 500 refuelling sites throughout the country serving around
half a million cars at end-2004. Around half of all service stations in
Australia sell autogas. Autogas accounts for about 60% of the country’s LP
Gas consumption.
The Commonwealth government has encouraged autogas use since

1981 for reasons of energy security – the country is a large producer and
exporter of LP Gas – and air quality. Industry and consumers have invested
more than A$3.2 billion in distribution infrastructure, fuel production,
vehicles and related services (ALPGA, 2003c). Nonetheless, the market
contracted between 2000 and 2003, due mainly to the introduction of
a goods and services tax (GST) that raised the cost of conversions and,
more recently, to the uncertainty generated by a government proposal in
2003 to introduce an excise tax on autogas. Sales dropped from a peak of
just under 1.5 million tonnes in 2000 to 1.2 million tonnes in 2003 (Figure
B2.1) – equal to 5.5% of total road-fuel consumption. Victoria accounts for
an estimated 44% of national autogas use. The autogas-vehicle fleet also
shrank in 2002, but levelled out at about 500 000 vehicles in 2003. After
intensive lobbying by the autogas industry, the government agreed in 2004
to delay the introduction of an excise tax until 2011 and to phase in the full
tax over five years.
Figure B2.1: Autogas Consumption and Vehicle Fleet – Australia
1600
Consumption
600
Vehicles
1400
500
1200
Thousand vehicles
Thousand tonnes
1000 400
800
300
600
200
400
100
200
0 0
1999 2000 2001 2002 2003
AUTOGAS INCENTIVE POLICIES · AUSTRALIA 53

Autogas and other alternative fuels (including ethanol and CNG) currently
benefit from a complete exemption from excise duties. Duties amount
to 38.1 Australian cents/litre on diesel and 40.5 cents/litre on premium
gasoline. Non-commercial users of all types of transport fuels are obliged
to pay a 10% Goods and Services Tax (GST) that was introduced in 2000; the
tax is refunded for commercial users. The pump price of autogas including
GST is currently around 40% that of gasoline and 42% that of diesel (Table
B2.1). The price differentials in absolute terms increased in 2004 because of
large increases in pre-tax gasoline and diesel prices.
Table B2.1: Automotive-Fuel Prices and Taxes – Australia (A$/litre)
2000 2001 2002 2003 2004
Pump prices
Diesel – commercial 0.851 0.822 0.784 0.828 0.909
Gasoline - non-commercial 0.914 0.901 0.887 0.927 1.045
Total taxes
Excise duty
Autogas 0.000 0.000 0.000 0.000 0.000
Diesel 0.411 0.381 0.381 0.381 0.381
Gasoline 0.434 0.405 0.405 0.405 0.405
Pre-tax price
Autogas 0.424 0.423 0.387 0.386 0.382
Diesel 0.440 0.441 0.403 0.446 0.528
Gasoline 0.436 0.414 0.402 0.438 0.545
54 AUTOGAS INCENTIVE POLICIES · AUSTRALIA

The Commonwealth government offers rebates for the costs of diesel,
autogas and other alternative fuels for some categories of commercial
users under the Energy Grants Credit Scheme. The current rebate is 18.5
cents/litre for diesel and 11.9 cents for autogas.
In addition, the Commonwealth government offers grants covering up to

50% of the cost of conversion or the additional purchase cost of buses and
other heavy-duty commercial vehicles (weighing more than 3.5 tonnes)
to run on autogas or CNG. In all cases, a minimum reduction of 5% in
greenhouse gas emissions must be demonstrated and the vehicle must
continue to meet current emission limits for noxious gases. These grants
are available until end-June 2008.
Several states have also adopted policies to promote autogas. These

include the following:
> Western Australia offers grants of A$500 for private autogas

conversions or OEM vehicle purchases. Demand for grants in 2004
was the highest since the scheme was introduced in 2000. The state-
owned utility, Western Power, also plans to replace up to 200 of its
commercial diesel LDVs with autogas vehicles if an on-going pilot
programme is successful.
> The government of Victoria mandates that a proportion of new high-

usage government-fleet passenger six-cylinder vehicles must be able
to run on autogas.
> The New South Wales government has also recently adopted a policy
of increasing the share of autogas vehicles in its public fleet, based
on CO2-emission performance. In February 2004, the NSW police
force began a programme to replace up to half of its 1 600 passenger
vehicles with OEM autogas vehicles.
> The ACT government provides a rebate of 20% on the annual vehicle-
registration fee for private autogas vehicles.
The future of the Australian autogas industry was thrown into doubt in May
2003 when the government announced that it was planning to end the fuel’s
exemption from excise duties from 2008. The initial proposal was to apply a
duty of 29 Australian cents/litre, which would have wiped out almost all the
effective price advantage over gasoline and all the advantage over diesel
taking differences in kilometres per litre into account. But in December
2003, the government finally announced that the initial duty would amount
to only 2.5 cents in 2008, rising in incremental annual steps of 2.5 cents/
year to a ceiling of 12.5 cents. The government subsequently decided to
postpone the introduction of the duty until 1 July 2011, so that the ceiling
will not be reached until 1 July 2015. The government also announced that
it will make available grants of A$1 000 for each autogas conversion or
OEM purchase from 1 July 2011 through to 30 June 2014 to compensate for
the reduction in the fuel-tax incentive.
AUTOGAS INCENTIVE POLICIES · AUSTRALIA 55

On 1 March 2004, the Commonwealth government implemented national
fuel-quality standards for autogas under the Fuel Quality Standards Act
2000.

Thanks to the excise-duty exemption and state subsidies, autogas breaks
even with gasoline at about 35 000 km for converted gasoline vehicles
(Figure B2.2) – equal to about half a year for taxis and around two years for
typical private owners. OEM vehicles break even with gasoline at around
40 000 km. The average cost of converting a gasoline-fuelled LDV to run on
autogas is currently around A$1 980 (including GST) and the incremental
cost of dual-fuelled OEM dual-fuelled vehicle about A$2 200. For the
purposes of this analysis, these costs are assumed to be partially offset
by an average subsidy from state programmes of 25%. This reduces the
break-even distance by around 10 000 km. The break-even distance should
fall significantly with the introduction in 2011 of an additional A$1 000
grant for conversions and OEM purchases. Diesel currently breaks even
with gasoline at less than 60 000 km, but is competitive with a converted
autogas LDV only up to 13 000 km and OEM autogas LDV up to 21 000 km.
Break-even distances are even lower for dedicated OEM autogas vehicles,
which typically retail for only A$1 400 more than an equivalent gasoline
model.
Figure B2.2: Running Costs of a Non-Commercial LDV, 2004 – Australia

Autogas - OEM
8000
Diesel
Gasoline
7000
Cost (Australian dollars)
6000
5000
Autogas conversion
4000 breaks even against
diesel
3000 Autogas OEM
breaks even against
2000 gasoline
Autogas conversion
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
56 AUTOGAS INCENTIVE POLICIES · AUSTRALIA

3. Belgium

Autogas has held a fairly constant share of the overall automotive-fuel
market in Belgium in recent years, averaging a little over 1% of total fuel
use. Autogas consumption has fluctuated between 90 000 and 100 000
tonnes per year since 1999 (Figure B3.1). The market continues to enjoy
support from a relatively large tax differential relative to gasoline and
diesel, although grants for new autogas conversions were stopped in 2003.
At end-2003, there were an estimated 93 000 autogas vehicles and 600
refuelling stations in Belgium. Autogas accounts for just under a quarter of
all the LP Gas consumed in the country. Belgium is a small net exporter of
LP Gas.
Figure B3.1: Autogas Consumption and Vehicle Fleet – Belgium*
120 Consumption 120

Vehicles
100 100
80 80
Thousand vehicles
Thousand tonnes
60 60
40 40
20 20
0 0
1999 2000 2001 2002 2003
* Including Luxembourg.

Autogas has been completely exempt from excise duties since 1982. Diesel
sales currently carry a duty of 33 euro cents/litre and gasoline 55.7 cents/
litre. As a result, autogas prices at the pump are now less than a third those
of gasoline and half those of diesel (Table B3.1). The price difference has
widened in recent years as gasoline and diesel duties have been raised.
The government recently made a commitment not to apply any excise duty
on autogas at least until end-2006.
AUTOGAS INCENTIVE POLICIES · BELGIUM 57

Table B3.1: Automotive-Fuel Prices and Taxes – Belgium (euros/litre)
2000 2001 2002 2003 2004
Pump prices
Total taxes
Excise duty
Autogas 0.000 0.000 0.000 0.000 0.000
Diesel 0.290 0.290 0.305 0.294 0.330
Gasoline 0.507 0.507 0.507 0.507 0.555
Pre-tax price
Autogas 0.325 0.297 0.288 0.292 0.318
Diesel 0.380 0.355 0.295 0.331 0.398
Gasoline 0.357 0.326 0.302 0.334 0.388
In 2001, the Belgian federal government introduced grants for autogas

conversions of 508 euros – equal to around a third of the total cost of
conversion. These grants were stopped in 2003. Autogas vehicles are
subject to an additional annual road tax over and above that paid by all
vehicles, amounting to 89 euros.

Thanks to the excise-duty exemption, which more than offsets the higher
road tax on autogas vehicles, autogas breaks even with gasoline at around
28 000 km – equivalent to less than two years of driving for a typical private
user. Diesel breaks even with gasoline at almost the same distance, but
running costs are higher than for autogas at higher distances (Figure B3.2).
OEM autogas vehicles break even with diesel at around 57 000 km.
58 AUTOGAS INCENTIVE POLICIES · BELGIUM

Figure B3.2: Running Costs of a Non-Commercial LDV, 2004 – Belgium
10000
Autogas - conversion
9000 Autogas - OEM
Diesel
8000
Gasoline
7000
6000
Cost (euros)
5000
4000
Autogas OEM
breaks even against
3000
diesel
2000
Autogas conversion
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
AUTOGAS INCENTIVE POLICIES · BELGIUM 59

4. Bulgaria

The Bulgarian autogas market has grown strongly in recent years, although
the pace of expansion has slowed since 2002 due to the introduction of an
excise duty and road tax. Autogas consumption reached almost 260 000
tonnes in 2003, equal to 14% of the total automotive-fuel market. Autogas
use has tripled since 1999, thanks largely to a strong fuel-price incentive
and relatively low vehicle-conversion costs (Figure B3.1). At end-2003, there
were an estimated 195 000 autogas vehicles and 1 500 refuelling stations
in Bulgaria. An estimated 90% of all taxis and mini-buses and about half
of all private cars (most of which are imported second-hand models) are
able to run on autogas. Virtually all autogas vehicles are converted, as
OEM vehicles are not actively marketed in the country. Autogas accounts
for 86% of all the LP Gas consumed in the country, almost two-thirds, or
190 000 tonnes, of which is imported.
Figure B4.1: Autogas Consumption and Vehicle Fleet – Bulgaria
300 250
Consumption
Vehicles
250
200
Thousand vehicles
Thousand tonnes
200
150
150
100
100
50
50
0 0
1999 2000 2001 2002 2003

An excise duty on autogas was introduced in 2003, despite public protests.
The current duty, at 0.19 leva/litre, is nonetheless well below that on diesel
(0.395 leva) and gasoline (0.495 leva). As a result, autogas has retained
a strong price advantage at the pump (Table B4.1). The pump price of
autogas in 2004 was only 57% of that of gasoline and 65% of that of diesel.
Oil prices were liberalised in the 1990s and competition in the retail and
60 AUTOGAS INCENTIVE POLICIES · BULGARIA

wholesale markets is reported to be strong. The government introduced
a 140 leva road toll on autogas at the beginning of this year. There are no
grants available to cover part of the cost of vehicle conversions.
Table B4.1: Automotive-Fuel Prices and Taxes, 2004 – Bulgaria (leva/litre)
Gasoline Diesel Autogas
Pre-tax price 0.64 0.59 0.45
Excise duty (consumption tax) 0.49 0.39 0.19
VAT (at 20%)* 0.23 0.20 0.13
Total taxes 0.72 0.59 0.32
Pump price 1.36 3.18 0.77
* Refundable for commercial users.

The large fuel-tax advantage, low pre-tax price and low conversions
cost results in a break-even distance for autogas against gasoline of only
31 000 km – equivalent to less than two years of driving for a typical
private user (Figure B4.2). This assumes a conversion cost of just under
1 000 levas (500 euros). Diesel vehicle running costs are marginally lower
than for autogas, but diesel only breaks even against autogas at well over
100 000 km.
Figure B4.2: Running Costs of a Non-Commercial LDV, 2004 – Bulgaria
12000
Diesel
10000 Gasoline
8000
Cost (levas)
6000
Diesel breaks against

4000
gasoline
Autogas conversion
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
AUTOGAS INCENTIVE POLICIES · BULGARIA 61

5. Canada

Until recently, autogas was a Canadian LP Gas industry success story.
From virtually nothing in 1980, autogas sales soared to over 700 000 tonnes
in 1992, becoming Canada’s leading alternative fuel by a wide margin.
Market expansion was helped by the introduction in the early 1980s by
the federal government of a grant programme for conversions of gasoline
vehicles to run on alternative fuels in response to national energy-security
concerns. The industry subsequently developed a network of refuelling
stations, reaching over 5 000 sites across Canada to fuel the growing
autogas-vehicle fleet. Energy-security concerns were supplemented by
environmental concerns and the federal government, and to a lesser extent
the provincial governments, continued to provide a favourable fuel tax
status for alternative fuels, including autogas.
Figure B5.1: Autogas Consumption and Vehicle Fleet – Canada
500 120
Consumption
450 Vehicles
100
400
350
80
Thousand vehicles
Thousand tonnes
300
250 60
200
40
150
100
20
50
0 0
1999 2000 2001 2002 2003
The autogas market went into decline in the early 1990s. In total, autogas
use has fallen by more than a half since it peaked in 1992, to 310 000 tonnes
in 2003 (Figure B5.1) – equal to 0.8% of total automotive-fuel use. The
slump in autogas use is a direct result of the declining number of autogas
conversions in fleets, primarily due to increased conversion equipment
costs and the removal of federal conversion grants. This has led many
fleet users to switch from autogas to diesel fuel or CNG to realise fuel-cost
savings. Additionally, autogas conversion equipment technology lagged
the improvements in gasoline-engine technology. Another problem has
been the limited availability of factory-produced autogas vehicles.
62 AUTOGAS INCENTIVE POLICIES · CANADA

The majority of the estimated 92 000 autogas vehicles in use in Canada
today are commercial high-mileage vehicles. Roughly two-thirds of autogas
vehicles are commercial and the rest private. Converted vans dominate the
commercial fleet (77%), followed by taxis (12%) and school buses (9%).
Alberta, Ontario and British Columbia have the largest autogas markets
with a 31%, 27% and 25% share, respectively, of the total autogas market.
By end-2003, there were still about 3 000 autogas filling stations across
Canada.
Canada is a large producer and exporter of LP Gas. Most of the 5.4 million
tonnes of LP Gas exported in 2003 went to the United States. Only half of
the country’s 10 million tonnes of production was consumed in the domestic
market.

Autogas enjoys a significant per-litre tax advantage over gasoline and
diesel. However, because fuel taxes across the board are relatively low in
Canada, differences in prices at the pump are not very large. The autogas
tax differential (including sales taxes) is currently 12 Canadian cents/litre
compared to diesel and 20 cents/litre compared to gasoline (Table B5.1).
Taxes have not changed since 1997. The average pump price of autogas in
2004 was about 26% lower than that of diesel and 31% lower than that of
gasoline.
The Alternative Fuels Act 1995 requires that a proportion of vehicles

purchased by the federal government be capable of operating on one of
a range of alternative fuels, including autogas, where it is cost-effective
and operationally feasible. The Act requires a gradual adoption of new
AFVs using the following schedule: 50% of new vehicles in 1997-98; 60%
in 1998-99; and 75% from 1999. The Canadian government also makes
available, through Natural Resources Canada, incentives for natural gas
OEM vehicles and conversions, but not for autogas vehicles. The federal
government increasingly favours ethanol through government grants for
building refuelling stations.
In Ontario, the provincial sales tax is refundable up to a limit of CA$750

on autogas vehicles, and up to a limit of CA$1 000 on vehicles powered by
alternative fuels other than propane. In addition, the fuel-conservation tax
paid on new passenger cars or sport utility vehicles (bought or leased) may
be refunded if the vehicles operate, or are converted to operate, exclusively
on an alternative fuel. A refund of this tax is not available if a vehicle can
operate as a dual-powered vehicle.
AUTOGAS INCENTIVE POLICIES · CANADA 63

Table B5.1: Automotive-Fuel Prices and Taxes – Canada (CA$/litre)
2000 2001 2002 2003 2004
Pump prices
Autogas – commercial n.a. n.a. n.a. 0.565 0.563
Autogas - non-commercial n.a. n.a. n.a. 0.565 0.563
Total taxes
Autogas - commercial n.a. n.a. n.a. 0.105 0.105
Excise duty*
Autogas 0.068 0.068 0.068 0.068 0.068
Diesel 0.178 0.178 0.178 0.178 0.178
Gasoline 0.252 0.252 0.252 0.252 0.252
Pre-tax price
Autogas n.a. n.a. n.a. 0.460 0.458
Diesel 0.458 0.466 0.417 0.467 0.529
Gasoline 0.428 0.406 0.405 0.437 0.509
* Includes provincial taxes.

Note: Commercial and non-commercial prices are the same, as federal and pronvincial goods
and services taxes are generally not refundable.

Current tax differentials and conversion subsidies are insufficient to make
autogas a financially-attractive alternative to either diesel or gasoline,
which explains the recent stagnation in autogas use in Canada. Converted
autogas vehicles in Ontario are only competitive with diesel up to a distance
of 83 000 km, after which diesel becomes more competitive. Autogas is
competitive with gasoline only after 124 000 km for a converted vehicle
(Figure B5.2). This analysis takes account of the tax rebates available in
Ontario. In other provinces, where such tax incentives are not available, the
break-even distances are even higher.
64 AUTOGAS INCENTIVE POLICIES · CANADA

Figure B5.2: Running Costs of a Non-Commercial LDV, 2004 – Canada
(Ontario)
9000
8000 Autogas - OEM

Diesel
7000 Gasoline
Cost (Canadian dollars)
6000
5000
4000
3000
2000
Diesel breaks even
1000 against autogas conversion
0
0 10 20 30 40 50 60 70 80 90 100
Note: assumes an average conversion tax credit of CA$750.
AUTOGAS INCENTIVE POLICIES ·CANADA 65

6. China

In keeping with the overall LP Gas market in China, autogas sales in the
country grew strongly until early in the current decade, but there are
signs that demand may be levelling off. According to preliminary data,
autogas consumption in the country (including Hong Kong) reached about
700 000 tonnes in 2004 – more than three times the level of 1999 but
unchanged from 2003 (Figure B6.1). Hong Kong alone accounts for more
than a quarter of total autogas use. Despite the expansion in sales in recent
years, autogas accounts for little more than 1% of total automotive-fuel use
in China. At end-2003, there were an estimated 134 000 autogas vehicles
– mostly taxis and buses – and close to 300 refuelling sites. Autogas
accounted for less than 3% of total Chinese LP Gas consumption in 2003, a
third of which is imported.
Figure B6.1: Autogas Consumption and Vehicle Fleet – China
800 160
Consumption
700 Vehicles 140
600 120
Thousand vehicles
Thousand tonnes
500 100
400 80
300 60
200 40
100 20
0 0
1999 2000 2001 2002 2003 2004*
* Preliminary data.

The Chinese government promotes the use of autogas through a fuel-tax
incentive and public-transport conversion programmes. There is no excise
(consumption) tax on autogas, while a tax of 0.21 yuan/litre is levied on
gasoline and 0.10 yuan on diesel. In addition, VAT is levied at a rate of 17%
on gasoline and diesel, but only 13% on autogas. The government also
controls wholesale and retail prices, though there is some flexibility for
retailers to adjust prices. As a result, the pump price of autogas was only
66 AUTOGAS INCENTIVE POLICIES · CHINA

60% of that of gasoline and 67% of that of diesel in 2004 (Table B6.1). The
central government does not provide any grants or tax credits for autogas
vehicle purchases or conversions.
Table B6.1: Automotive Fuel Prices and Taxes – China, 2004 (yuan/litre)
Gasoline Diesel Autogas
Pre-tax price 2.89 2.70 1.92
Excise duty (consumption tax) 0.21 0.10 0.00
VAT* 0.53 0.47 0.25
Total taxes 0.73 0.57 0.25
Pump price 3.62 3.25 2.17
* 13% for autogas and 17% for diesel and gasoline.

Note: Diesel and gasoline prices are national averages; autogas prices are for Shanghai.
The government launched a clean-air scheme in 1998 to deal with

worsening urban-pollution problems. As part of this scheme, a programme
to promote alternative fuels – including autogas – in 14 major cities was
adopted. Guangzhou, the capital of the Guandong province, currently has
one of the biggest programmes, where almost half of the city’s 6 800 buses
will be converted to autogas by the end of 2005. Almost 2 400 buses were
already equipped to use autogas by end-2004. In addition, 17 000 taxis will
be converted by the end of 2006. Harbin, the capital of the Heilongjiang
province in northeast China, has already converted around 5 000 taxis and
buses to autogas. A large proportion of buses in Beijing and some other
big cities also run on autogas. More buses are being converted in Beijing,
as part of a programme of improving air quality in the run up to the 2008
Olympic Games. Of the estimated 19 000 buses already using autogas in
China (excluding Hong Kong), half are in Beijing and Shanghai.
Several cities have also mandated the conversion of public taxis to

alternative fuels. Almost of the taxis in Shanghai, for example, have been
converted to autogas. In Hong Kong, all the city’s 20 000 taxis now run on
autogas, as a result of a conversion programme launched in 1997. Diesel
taxis are now banned. That programme involved a subsidy of HK40 000
per vehicle. More than 30% of public buses also use autogas. Recently,
the Hong Kong Government announced an incentive scheme for minibus
operators to switch to autogas.
Many of the 20 million vehicles on the road in China are reportedly still
at Euro-1 emission standards, producing as much as three times as much
carbon monoxide and four times as much hydrocarbon and nitrogen oxides
as Euro-4 standard cars that are becoming available in Europe. Converting
gasoline vehicles to autogas, therefore, brings disproportionately large
emission benefits in China.
AUTOGAS INCENTIVE POLICIES · CHINA 67

In Shanghai, a converted non-commercial autogas LDV vehicles breaks
even with gasoline at just over 50 000 km, based on an autogas conversion
cost of 3 700 yuan (350 euros). However, diesel breaks even with autogas
at a distance of 92 000 km (Figure B6.2). For this reason, autogas is only
competitive for high-mileage vehicles, such as taxis, where the use of diesel
is banned or where there is a subsidy for autogas conversions.
Figure B6.2: Running Costs of a Non-Commercial LDV, 2004 – China

(Shanghai)
35000
Diesel
30000 Gasoline
25000
Cost (yuan)
20000
15000
Diesel breaks even
against autogas conversion
10000
Autogas conversion
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
68 AUTOGAS INCENTIVE POLICIES · CHINA

7. Czech Republic

Autogas sales in the Czech Republic have been edging higher in recent
years, as a result of rising demand for automotive fuels generally and
substantial fuel-tax incentives vis-à-vis gasoline and diesel. Autogas
consumption peaked at 70 000 tonnes in 2001, dropping back slightly in
2002 and 2003 (Figure B7.1). Autogas currently accounts for 1.3% of total
automotive fuel use by mass. At end-2003, there were an estimated
145 000 autogas vehicles and 350 refuelling stations in the Czech Republic.
Autogas accounted for 28% of total Czech consumption of LP Gas in 2003.
Net imports accounted for a similar share of national consumption.
Figure B7.1: Autogas Consumption and Vehicle Fleet – Czech Republic
Consumption
80 160
Vehicles
70 140
60 120
50 100 Thousand vehicles

Thousand tonnes
40 80
30 60
20 40
10 20
0 0
1999 2000 2001 2002 2003

The Czech government encourages autogas use through a much lower
excise duty compared with conventional fuels. (Table B7.1). The differential
in 2004 was 7.8 crowns/litre against diesel and 9.7 crowns/litre against
gasoline. The price of autogas at the pump (including VAT) is currently
just over half that of gasoline and less than 55% those of diesel. There
are no grants or tax credits available for autogas vehicle purchases or
conversions.
AUTOGAS INCENTIVE POLICIES · CZECH REPUBLIC 69

Table B7.1: Automotive-Fuel Prices and Taxes – Czech Republic
(crowns/litre)
2000 2001 2002 2003 2004
Pump prices
Autogas – commercial n.a. 10.43 9.09 9.63 11.37
Autogas - non-commercial n.a. 12.72 11.08 11.75 13.61
Total taxes
Autogas - commercial n.a. 1.57 1.57 1.57 2.16
Excise duty
Autogas n.a. 1.57 1.57 1.57 2.16
Diesel 8.15 8.15 8.15 8.15 9.95
Gasoline 10.84 10.84 10.84 10.84 11.84
Pre-tax price
Autogas n.a. 8.85 7.52 8.06 9.21
Diesel 12.10 11.61 9.66 9.80 10.83
Gasoline 12.69 11.56 9.32 9.49 10.45

A converted private autogas LDV breaks even against gasoline at about
57 000 km and diesel at 62 000 km, based on an autogas conversion cost
of 45 000 crowns (Figure B7.2). OEM autogas vehicles are only competitive
with gasoline at 78 000 km and break even with diesel only at a distance of
well over 100 000 km.
70 AUTOGAS INCENTIVE POLICIES · CZECH REPUBLIC

Figure B7.2: Running Costs of a Non-Commercial LDV, 2004
Czech Republic
250000
Autogas - OEM
Diesel
200000
Gasoline
Cost (crowns)
150000
100000 Autogas conversion

breaks even against
diesel
50000
Autogas conversion
breaks even against
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
AUTOGAS INCENTIVE POLICIES · CZECH REPUBLIC 71

8. France

Until the beginning of the current decade, France had one of the fastest
growing autogas markets in Europe, thanks to strong policy incentives.
Consumption climbed steadily from only 45 000 tonnes in 1996 to almost
220 000 tonnes in 2001, but then fell back sharply to an estimated 151 000
tonnes in 2004 (Figure B8.1). Autogas currently accounts for around 0.4%
of total automotive-fuel use by mass. At end-2003, there were an estimated
190 000 autogas vehicles in use and almost 1 900 refuelling stations.
Autogas accounts for less than 5% of total LP Gas use in France, which is a
small net importer.
Figure B8.1: Autogas Consumption and Vehicle Fleet – France
250 Consumption 220
Vehicles
210
200
200
Thousand vehicles
Thousand tonnes
190
150
180
100
170
160
50
150
0 140
1999 2000 2001 2002 2003 2004*
* Preliminary data.

The French government has had a policy of strongly encouraging autogas
(and compressed natural gas) use since 1996, when it reduced sharply the
excise duty on autogas and introduced a range of other fiscal and regulatory
measures. The duty has been constant since 1999 at 6 euro cents/litre,
while duties on gasoline and diesel have gradually increased (Table B8.1).
The differential currently stands at 36 cents/litre for diesel and 53 cents/litre
for gasoline. In addition, taxis and buses are able to reclaim all the excise
duty on autogas purchases up to a ceiling of 9 000 litres per year. The price
of autogas at the pump is currently just under two-thirds that of diesel and
53% of that of gasoline.
72 AUTOGAS INCENTIVE POLICIES · FRANCE

Table B8.1: Automotive-Fuel Prices and Taxes – France (euros/litre)
2000 2001 2002 2003 2004
Pump prices
Total taxes*
Excise duty
Autogas 0.060 0.060 0.060 0.060 0.060
Diesel 0.384 0.375 0.383 0.392 0.417
Gasoline 0.581 0.572 0.581 0.589 0.589
Pre-tax price
Autogas 0.376 0.365 0.355 0.390 0.412
Diesel 0.321 0.293 0.262 0.271 0.323
Gasoline 0.329 0.294 0.267 0.261 0.298
* Certain categories of commercial users can recover VAT on diesel.

VAT on autogas is only recoverable for tourist vehicles. VAT on gasoline is never recoverable.
At the beginning of 2001, the government introduced a tax credit of

1 525 euros for the purchase of OEM autogas vehicles or the conversion
of gasoline-fuelled vehicles of less than three years old that meet Euro-
3 emission standards. The credit is increased to 2 300 euros where the
purchase or conversion is accompanied by the scrapping of an old vehicle
(registered before 1992). This programme is due to terminate at the end of
2005. Conversion grants for taxis were phased out at the end of 2003.
Other tax measures include a rebate of between 50% and 100% on the
annual road tax on commercial vehicles and the initial vehicle-registration
tax for autogas vehicles in a number of departments. Autogas vehicles are
also exempt from the national annual tax on tourist vehicles. Tourist-related
businesses can also recover the VAT on autogas purchases. In addition,
investments in new autogas or converted vehicles and refuelling facilities
can be fully depreciated in the first year.
AUTOGAS INCENTIVE POLICIES · FRANCE 73

Autogas is also promoted through regulatory measures. Public fleets,
including municipal bus operators, have been obliged since 1999 to replace
at least 20% of retired vehicles of more than 3.5 tonnes with autogas or CNG
vehicles. Autogas vehicles are exempt from driving restrictions imposed in
major cities during periods of high pollution.

The large tax credit on autogas conversions for private individuals, which
typically cover the entire cost, means that autogas always has the lowest
running costs regardless of the distance travelled (Figure B8.2). France,
together with Italy from 2005, is the only country in the world where this
is the case. The total saving in fuel costs for a non-commercial converted
autogas vehicle compared to a gasoline vehicle for 100 000 km driven is
2 840 euros based on average 2004 pump prices. OEM autogas vehicles
break even with gasoline at only about 17 000 km – equivalent to around
one year for a typical private owner. Diesel breaks even with gasoline at a
significantly higher distance.
Figure B8.2: Running Costs of a Non-Commercial LDV, 2004 – France
9000
8000 Autogas - OEM
Diesel
7000 Gasoline
6000
Cost (euros)
5000
4000
3000
Diesel breaks even
against gasoline
2000
Autogas OEM
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
The stagnation of autogas demand in recent years is surprising, in view of

the extraordinarily large competitive advantage of autogas over both diesel
and gasoline, and appears to have resulted from four main factors: a poor
public perception of autogas following a some widely publicised incidents
involving autogas vehicles, including an explosion caused by arson in an
underground car park in 1999; the relatively small gap in competitiveness
between autogas and diesel; difficulties in establishing a network of relia-
ble autogas-vehicle converters; and the limited availability of OEM vehicles
due to a lack of support from the dealer network. Only 6 700 OEM autogas
cars were sold in France in 2004, though this was a quarter higher than in
2003.
74 AUTOGAS INCENTIVE POLICIES · FRANCE

9. Italy

Italy has the second-largest autogas market in the European Union after
Poland. It was one of the first countries to introduce the fuel, in the 1950s.
Annual consumption fluctuated around 1.3 million tonnes at the turn of the
century, but dipped sharply in 2003 and 2004 to around 1.1 Mt (Figure B9.1).
Autogas accounts for a third of total LP Gas consumption in Italy and 3.3%
of total automotive-fuel demand. The number of autogas vehicles in use
has risen gradually, reaching 1.35 million at end-2002, but fell back slightly
in 2003. Most autogas vehicles are converted old gasoline-fuelled vehicles.
The number of refuelling sites has grown to 2 150 – about 10% of all service
stations in Italy. In the past, the Italian government promoted the use of
autogas through fiscal incentives to provide an outlet for surplus volumes
of LP Gas from the large domestic refining industry. Italy has since become
an importer of LP Gas: net imports met 26% of demand in 2003. In recent
years, environmental concerns have been the main driving force behind
autogas policies.
Figure B9.1: Autogas Consumption and Vehicle Fleet – Italy
1600 1400
Consumption
Vehicles
1400 1350
1200 1300
Thousand vehicles
Thousand tonnes
1000 1250
800 1200
600 1150
400 1100
200 1050
0 1000
1999 2000 2001 2002 2003 2004*
* Preliminary estimates.

The Italian government and local authorities encourage autogas use
through a mixture of policies, including favourable fuel-taxes, subsidies
for conversions of old gasoline vehicles and traffic regulations. Autogas
AUTOGAS INCENTIVE POLICIES · ITALY 75

currently enjoys a substantial excise-tax advantage of 40 euro cents/litre
over gasoline and 25 cents/litre over diesel. This results in a pump price
for autogas of less than 48% that of gasoline and 57% that of diesel (Table
B5.1).
Table B9.1: Automotive-Fuel Prices and Taxes – Italy (euros/litre)
2000 2001 2002 2003 2004
Pump prices
Total taxes
Excise duty
Autogas 0.146 0.147 0.157 0.157 0.157
Diesel 0.383 0.385 0.403 0.403 0.403
Gasoline 0.521 0.524 0.542 0.542 0.559
Pre-tax price
Autogas 0.306 0.353 0.277 0.292 0.293
Diesel 0.360 0.339 0.310 0.328 0.379
Gasoline 0.380 0.354 0.331 0.341 0.379
Under a 2000 law, grants of 310 euros were made available for the
conversion to autogas or compressed natural gas of taxis and private
gasoline-fuelled cars brought into use before 1992, or for vehicles less than
one year old. Larger subsidies were available for bus conversions. Funding
for the three years to 2004 was set at 4.5 million euros. At the end of
2004, the government announced that a further 4.5 million euros per year
would be set aside to finance a new grant scheme for autogas and CNG
vehicles. There are doubts, however, about whether funding will, in fact, be
forthcoming. Under the new scheme, subsidies will now be made available
for private vehicles up to three years old. Businesses and public transport
76 AUTOGAS INCENTIVE POLICIES · ITALY

operators are not eligible for now, but the government is considering making
them so. The size of the subsidy has been increased to up to 1 500 euros for
converting a brand-new vehicles. Older vehicles qualify for a subsidy of up
to 650 euros to cover the cost of conversion. The subsidies are given to the
companies that install conversion kits, by allowing them to recover the full
cost of installation through a tax credit.
The government also abolished road tax on gas-fuelled vehicles in 2001. In

addition, a number of cities have mandated the conversion of bus fleets for
environmental reasons and have adopted traffic regulations that exempt
autogas vehicles from driving restrictions imposed on gasoline and diesel
vehicles during periods of acute pollution. In several Italian cities, autogas
vehicles are also exempt from car tax.

The large fuel-tax advantage over gasoline resulted in a break-even
distance for old vehicles converted to autogas (with the conversion grant
of 310 euros) of around 33 000 km in 2004. The break-even distance for
diesel against gasoline was around 40 000 km (Figure B9.2). OEM autogas
cars were competitive with gasoline at a distance of over 50 000 km, but
were only competitive with diesel at over 150 000 km. With the increase in
the conversion subsidy in 2005, converted autogas vehicles will always be
competitive with gasoline and diesel, regardless of distance (assuming no
change in pump-price differentials).
Figure B9.2: Running Costs of a Non-Commercial LDV, 2004 – Italy
10000
9000 Autogas - OEM
Diesel
8000 Gasoline
7000
6000
Cost (euros)
5000
4000
Diesel breaks even
3000 against gasoline
2000
Autogas conversion
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
AUTOGAS INCENTIVE POLICIES · ITALY 77

10. Japan

Japan has the second largest autogas market in the world after Korea.
Consumption amounted to just over 1.6 million tonnes in 2004, equal to
2.2% of total road-transport fuel consumption. The market contracted for
several years through to the start of the current decade, but has stabilised
in the last three years (Figure B10.1). Preliminary data point to a rebound
in demand in 2004. Autogas accounts for about 8% of total Japanese LP
Gas consumption. The country imports about 78% of its LP Gas needs.
The Ministry of Economy, Trade and Industry projects autogas demand to
contract by 2% between 2004 and 2009, due to improved fuel-efficiency.
Figure B10.1: Autogas Consumption and Vehicle Fleet – Japan
1750 300
Consumption
Vehicles 298
1700
296
Thousand vehicles
1650 294
Thousand tonnes
292
1600
290
1550
288
1500 286
284
1450
282
1400 280
1999 2000 2001 2002 2003 2004*
Taxis account for most autogas use, and commercial fleet LDVs for almost
all the rest. The number of autogas vehicles in use has been broadly flat
in recent years, at 290 000, but increased to almost 300 000 in 2004 – the
second highest in the world after Korea. The two largest OEMs, Nissan and
Toyota, produce dedicated mono-fuel taxis for the national market. Sales
have been running at around 45 000 vehicles per year. There are 1 900
refuelling sites, equal to just under 4% of service stations.

The Japanese government has maintained low excise duties on autogas
relative to diesel and gasoline for many years. The duty on autogas is
less than a third the level of that on diesel and less than a fifth of that on
78 AUTOGAS INCENTIVE POLICIES · JAPAN

gasoline. Duties on automotive fuels have not changed since the late 1990s.
However, lower autogas taxes are partially offset by the higher pre-tax
retail price of autogas relative to diesel and gasoline, despite the fact that
no import duties are levied on LP Gas for social reasons (it is widely used
for household cooking and heating). The pump price of autogas is currently
74% of that of diesel and 58% of that of gasoline.
Table B10.1: Transport Fuel Prices and Taxes – Japan (yen/litre)

2000 2001 2002 2003 2004
Pump prices
Gasoline - commercial n.a. n.a. n.a. n.a. n.a.
Total taxes
Gasoline - commercial n.a. n.a. n.a. n.a. n.a.
Excise duty
Autogas 9.80 9.80 9.80 9.80 9.80
Diesel 32.10 32.10 32.10 32.10 32.10
Gasoline 53.80 53.80 53.80 58.86 59.15
Pre-tax price
Autogas 51.30 51.34 50.81 52.20 52.05
Diesel 28.75 30.58 29.40 31.55 36.23
Gasoline 47.70 48.70 45.40 47.45 53.17
The Japanese government, under a programme managed by the Japan

LP Gas Association, provides grants covering either the cost of the
difference in purchase price between a diesel car and an autogas OEM
car, or the cost of converting a diesel car to run on autogas. Since April
2003, the grant is set at 50% of the incremental cost. The grant is capped at
200 000 yen (US$1 900) for a light-duty van, small truck or station wagon
and 250 000 yen (US$2 350) for a normal truck or bus. This programme has
attracted limited interest as the cost of converting diesel vehicles is very
high. A lower rate of local sales tax (1.1% compared to the usual rate of 3%)
AUTOGAS INCENTIVE POLICIES · JAPAN 79

is also applied to OEM autogas vehicle purchases when accompanied by
the scrapping of a diesel vehicle.
The government has also established a programme to promote autogas

distribution, which is also managed by the Japan LP Gas Association,
through grants covering 50% of both the cost of building and the cost of
running autogas refuelling stations. The construction subsidy is capped
at 30 000 000 yen per station (US$280 000) and 1 986 000 yen per station
per year (US$18 700). In December 2004, the government approved a 125
million yen (US$1.2 million) research and development study of autogas
fuel quality and a 250 million yen (US$2.4 million) project to develop non-
sulphur autogas odorant.
Stringent regulations governing noxious emissions in designated urban

areas restrict the use of diesel vehicles, thereby favouring autogas. In
addition to the lower fuel cost (see below), this is why most operators of
high-mileage commercial LDVs generally opt for autogas over diesel.

Autogas breaks even against gasoline only at distances in excess of 100 000
km for both converted and OEM vehicles (Figure B10.2). This is because
of the high cost of conversion (just under ¥300 000) and OEM vehicle
purchases (around ¥500 000 more than an equivalent gasoline car). Diesel
is always competitive against autogas and is competitive against gasoline
at distances of more than 57 000 km. This analysis demonstrates why
autogas is largely confined to taxis and public fleets.
Figure B10.2: Running Costs of a Non-Commercial LDV, 2004 – Japan
1200000
Autogas - OEM
1000000 Diesel
Gasoline
800000
Cost (yen)
600000
400000 Diesel breaks even

against gasoline
200000
0
0 10 20 30 40 50 60 70 80 90 100
80 AUTOGAS INCENTIVE POLICIES · JAPAN

11. Korea
11.1 Market Trends
The Republic of Korea was one of the first countries to promote the
widespread use of autogas and now has the largest autogas market in
the world. Demand surged in the 1990s in response to strong government
support for the fuel’s use in taxis and public buses, including a large fuel-tax
advantage. Environmental restrictions on diesel vehicles helped encourage
autogas use by high-mileage vehicles. The relaxation of a restriction on
autogas use in private vehicles in 2000, allowing vans and minibuses and
any type of vehicle owned by handicapped people to use the fuel, gave a
further boost to demand.
The phenomenal growth in autogas demand began to slow at the beginning

of the current decade, due to saturation of demand and, more importantly,
to a sudden change in government policy towards autogas use. This was
motivated by the perceived improvement in emissions performance of new
diesel and gasoline vehicles relative to autogas vehicles, and the objective
of boosting revenues from automotive-fuel taxes. Excise duties on autogas
were raised in step-wise fashion with the aim of realigning the pump prices
of autogas with those of diesel and gasoline (see below). As a result, the
growth in autogas use has slowed to a halt. Consumption reached a peak
of 3.7 Mt in 2003 and then dipped to 3.6 Mt in 2004, equal to just over half
of total Korean LP Gas use (Figure B11.1) and about 15% of total road-trans-
port fuel consumption. Korea imports 56% of its LP Gas needs.
Figure B11.1: Autogas Consumption and Vehicle Fleet – Korea

4000 2000
Consumption
Vehicles 1800
3500
1600
3000
1400
Thousand vehicles
Thousand tonnes
2500
1200
2000 1000
800
1500
600
1000
400
500
200
0 0
1999 2000 2001 2002 2003 2004*
AUTOGAS INCENTIVE POLICIES ·KOREA 81

The growth in the number of autogas vehicles has also slowed. There were
around 1.76 million registered autogas vehicles at the end of 2004, of which
about half were private passenger cars and a quarter private minibuses.
That represents an increase of 135 000 vehicles compared to end-2002, but
monthly registrations slowed from 10 000 to 15 000 a month in early 2003 to
only 5 000 in 2004. Diesel-vehicle registrations, in contrast, have remained
strong, with the total fleet reaching more than 5 million at end-2003 – an
increase of around 350 000 compared with end-2002. The autogas fleet is
equal to about 12% of the country’s total vehicle fleet. Two thirds of the
country’s fleet are passenger vehicles. Most autogas vehicles are OEMs
manufactured locally.
Table B11.1: Automotive-Fuel Prices and Taxes in Korea (won/litre)
2000 2001 2002 2003 2004
Pump prices
Gasoline - commercial 1 248.4 1 280.0 1 269.1 1 294.7 1 365.1
Total taxes
Excise duty
Autogas 23.4 55.5 119.6 184.1 249.3
Diesel 179.7 208.6 268.2 316.9 365.5
Gasoline 738.8 744.2 744.1 743.8 743.7
Pre-tax price
Autogas 295.3 344.5 296.5 331.7 363.0
Diesel 377.4 377.4 347.9 389.9 459.5
Gasoline 396.1 419.4 409.6 433.2 497.3
82 AUTOGAS INCENTIVE POLICIES · KOREA

Autogas is taxed less than the conventional fuels, but tax differentials have
narrowed significantly since 2000 (Table B11.1). Since July 2004, autogas has
been subject to a total excise duty of 282 won/litre, compared to 392 won
for diesel and 744 won for gasoline. Both commercial and non-commercial
users also pay value-add tax (VAT) of 10% – the same rate as for the other
fuels. In 2004, the average price of autogas at the pump was only 49% that
of gasoline and about 74% that of diesel. Pre-tax prices include a 5% import
duty on LP Gas and a 8% duty on gasoline and diesel. An additional import
surcharge of 40 won/litre is currently applied to gasoline and diesel but not
LP Gas.
The government adopted a plan in 2000 to progressively adjust the excise

duties on transport fuels to make autogas relatively more expensive over
the period 2001-2006 (Table B11.2). Diesel taxes are also being raised, but
less than autogas taxes. By 2006, autogas was targeted to cost 40% less
than gasoline on a volume basis and 20% less than diesel. However, on a
calorific-value basis, autogas would cost only 28% less than gasoline and
24% more than diesel. The implementation of the plan has already resulted
in a significant narrowing of the per litre retail-price differential between
gasoline and autogas, from an average of 910 won/litre in 1999 to 692 won
in 2004 (Figure B11.2).
Table B11.2: Korean Transport Fuel Ewxcise Duty Plan, 2001-2006

Target price ratios
Autogas excise duty
(gasoline: diesel: autogas)
Effective date
Won/kg Won/litre Per litre basis Calorific value basis
July 2001 150 88 100 : 52 : 32 100 : 40 : 39
July 2002 260 152 100 : 56 : 38 100 : 43 : 46
July 2003 371 217 100 : 61 : 43 100 : 47 : 52
July 2004 483 282 100 : 66 : 49 100 : 51 : 59
July 2005 592 346 100 : 70 : 54 100 : 54 : 65
July 2006 704 411 100 : 75 : 60 100 : 58 : 72
Source: Korean LPG Association.
In addition to reforming road-fuel taxes, the government also decided to lift

environmental restrictions on diesel under pressure from the automakers,
Hyundai and Kia. These restrictions, effectively limiting diesel passenger
car sales to four-wheel drive recreational (sports utility) vehicles, had
originally been introduced on environmental grounds. Sales of ordinary
diesel passenger vehicles were to have been permitted since January 2005,
as a result of a relaxation of emission standards. Sales of diesel cars are
now expected to be authorised later in 2005. Diesel vehicles will initially
only need to comply with Euro-3 emission standards, but the tougher
Euro-4 standards will apply from the start of 2006.
AUTOGAS INCENTIVE POLICIES · KOREA 83

Figure B11.2: Autogas Pump-Price Differentials against Gasoline
and Diesel in Korea
1000
900
Gasoline - autogas
800 Diesel - autogas
700
600
won / litre
500
400
300
200
100
0
1999 2000 2001 2002 2003 2004
In response to intensive lobbying by the autogas industry and environmen-

tal groups, the government announced its intention in late 2004 to revise
the tax-reform plan, with a view to giving autogas more favourable treat-
1
A 2004 report by ment.1 The proposal, which has yet to be passed into law, would establish
Menecon Consulting
to the World LP
target price ratios of 100 (gasoline) to 85 (diesel) and 50 (autogas) from
Gas Association 2007. Thus, the price of autogas will increase slightly relative to gasoline
and the Korean LP but will fall significantly relative to diesel, from an average of 73% in 2004
Gas association
concluded that the to 59% in 2007.
full implementation
of the 2000 tax plan The Korean government does not make available any grants or tax credits
threatened to sharply
reverse the expansion for conversions of light-duty gasoline vehicles to run on autogas or for
of the Korean autogas OEM purchases. However, the Environment Ministry announced in 2003 a
market, entailing
significant economic
programme to convert about 2 000 public diesel vehicles in Seoul, Incheon
and environmental and Gyeonggi-do to run on autogas. Grants of 3 million won for vehicles
costs. over 1 tonne and of 4.5 million won for trucks and buses over 2.5 tonnes
are offered. Funding for 2004 was 4.4 billion won.
Compressed natural gas (CNG) is given favourable tax treatment over

autogas. At present, CNG is taxed at only 40 won/kg, while grants are
offered for purchases of dedicated CNG buses, which are exempt from
VAT and registration (road) tax. The Ministry of Environment has targeted
20 000 CNG buses by 2007, but this is unlikely to met on current trends
– mainly because CNG buses are more expensive to operate than autogas
buses.
84 AUTOGAS INCENTIVE POLICIES · KOREA

At present, autogas remains competitive with gasoline, despite a narrowing
of fuel prices since 1999. OEM autogas vehicles were estimated to break
even with gasoline passenger vehicles at around 28 000 km in 2004,
assuming a higher autogas vehicle acquisition cost of 1.2 million won
(Figure B11.3). But diesel also breaks even with gasoline – and also becomes
more competitive than autogas – at about the same distance, assuming a
diesel car costs 1.5 million won more to buy than a gasoline car.
Figure B11.3: Running Costs of Light Duty Non-commercial Vehicles,

2004 – Korea
12000000
Autogas - OEM
Diesel
10000000 Gasoline
8000000
Cost (won)
6000000
4000000
OEM autogas and diesel
both break even against
gasoline, while diesel breaks
2000000 even against autogas
0
0 10 20 30 40 50 60 70 80 90 100
This analysis demonstrates that, at the existing price ratios, consumers

would no longer have a financial incentive to opt for autogas vehicles, once
it is possible for them to buy diesel vehicles. The government’s proposed
change in fuel taxes will, however, restore the competitiveness of autogas
against diesel and should ensure the continued development of the autogas
market in Korea.
AUTOGAS INCENTIVE POLICIES · KOREA 85

12. Lithuania

Lithuania has a large autogas market relative to the size of the country.
Sales reached an estimated 137 000 tonnes in 2003 – almost double the
level of 1999 – before falling back to 120 000 tonnes in 2003. That figure
was equal to almost 12% of total automotive-fuel consumption, and 40% of
total LP Gas consumption. Demand is thought to have increased sharply in
2004. The number of autogas vehicles has continued to increased, reaching
almost 125 000 at the end of 2003 (Figure B12.1). There are an estimated
400 refuelling sites throughout the country.
Figure B12.1: Autogas Consumption and Vehicle Fleet – Lithuania
160 140
Consumption
140 Vehicles
120
120
100
Thousand vehicles
Thousand tonnes
100
80
80
60
60
40
40
20 20
0 0
1999 2000 2001 2002 2003

Autogas use is encouraged solely through a strong fuel-tax incentive. The
excise duty on autogas, at 0.23 litas/litre, is less than a quarter of that on
gasoline and just over a quarter of that on diesel. The tax-differential has
increased slightly in absolute terms against gasoline since the start of the
current decade, but has risen much more against diesel. As a result,the
pump price of autogas has fallen relative to both conventional fuel,
strengthening the incentive for high-mileage vehicle owners to switch to
autogas. In 2004, autogas cost only 49% as much as gaoisline and 53% as
much as diesel. (Table B12.1).
86 AUTOGAS INCENTIVE POLICIES · LITHUANIA

Table B12.1: Automotive-Fuel Prices and Taxes – Lithuania (lita/litre)
2000 2001 2002 2003 2004
Pump prices
Autogas – commercial n.a. 1.068 0.975 1.068 1.085
Total taxes
Excise duty
Autogas 0.000 0.170 0.200 0.200 0.229
Diesel 0.470 0.470 0.600 0.720 0.849
Gasoline 0.910 0.910 0.930 0.940 0.995
Pre-tax price
Autogas n.a. 0.898 0.775 0.868 0.856
Diesel 1.250 1.149 1.069 1.111 1.202
Gasoline 1.243 1.115 1.062 1.085 1.208

The break-even distance for autogas against gasoline is estimated at
around 20 000 km for converted vehicles (Figure B13.2). This assumes an
average conversion cost of about 1 600 litas (US$600) and average 2004
prices. Autogas is always competitive against diesel, both because running
costs are lower and because the autogas conversion cost is less than he
higher vehicle-acquisition of diesel. The net financial savings to the owner
of a converted autogas vehicle for a distance of 100 000 km are well over
6 000 litas ($2 000).
AUTOGAS INCENTIVE POLICIES · LITHUANIA 87

Figure B12.2: Running Costs of a Non-Commercial LDV, 2004 – Lithuania
25000
Diesel
20000 Gasoline
Cost (lita)
15000
10000
5000
Autogas conversion
breaks even against
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
88 AUTOGAS INCENTIVE POLICIES · LITHUANIA

13. Mexico
Mexico has one of the largest autogas markets in the world, thanks to fuel-
tax incentives and the relatively low cost of vehicle conversions. Sales
reached an estimated 1.26 million tonnes in 2002, almost double the level
of five years before. Sales dropped slightly to 1.20 million tonnes in 2003,
equal to 3.3% of total automotive-fuel consumption. Yet autogas accounts
for less than 12% of total Mexican consumption of LP Gas, roughly a quarter
of which is imported. The number of autogas vehicles has continued to rise
steadily, to around 450 000 at the end of 2003 (Figure B13.1). Most vehicles
are converted gasoline cars, using conventional IMPCO fuel systems.
Conversions reached 110 000 in 1999, but have slowed since due to higher
costs. General Motors and Ford, which has an assembly-plant near Mexico
City, both sell OEM autogas pick-up trucks, though sales have weakened
in recently. Refuelling infrastructure is extensive, with almost 1 900 sites
around the country.
Figure B13.1: Autogas Consumption and Vehicle Fleet – Mexico
1400 500
Consumption
Vehicles 450
1200
400
1000
Thousand vehicles
350
Thousand tonnes
300
800
250
600
200
400 150
100
200
50
0 0
1999 2000 2001 2002 2003

There are no excise duties on autogas, while duties on diesel amounted to
1.4 pesos/litre for private users and 3.6 pesos for commercial users in 2004.
Duties on gasoline are estimated to have amounted to 2.8 pesos. The higher
rate of excise duty levied on commercial diesel users – the exception for
OECD countries – makes diesel more expensive for them than gasoline at
AUTOGAS INCENTIVE POLICIES · MEXICO 89

the pump. Pump autogas prices for non-commercial users are 86% of those
of diesel and 65% those of gasoline (Table B13.1). The government has so far
resisted pressure from Pemex to introduce an excise tax on autogas. Pemex
want to discourage switching away from gasoline on which it makes a bigger
margin. However, the government has raised autogas prices through direct
price controls. The pre-tax price of autogas is significantly higher than that
of gasoline or diesel. In most countries, autogas is cheaper.
Table B13.1: Transport Fuel Prices and Taxes – Mexico (pesos/litre)
2000 2001 2002 2003 2004*
Pump prices
Total taxes
Excise duty
Autogas n.a. n.a. 0.000 0.000 0.000
Diesel** 1.285 1.750 2.074 1.545 1.379
Gasoline 2.535 3.141 3.529 3.062 2.849
Pre-tax price
Autogas 2.669 2.312 2.958 3.154 3.723
Diesel 2.344 2.182 2.080 2.750 3.032
Gasoline 2.344 2.182 2.080 2.750 3.032
* Average of first three quarters.

** For non-commercial users. A higher rate of excise duty is levied on commercial users.
There are no subsidies for vehicle owners to convert to autogas or purchase

OEM vehicles. However, some autogas vehicles are exempted from driving
restrictions in Mexico City for anti-pollution reasons.
90 AUTOGAS INCENTIVE POLICIES · MEXICO

Autogas becomes competitive with gasoline at just over 100 000 km for
converted vehicles (Figure B13.2), assuming an average conversion cost for
a relatively old vehicle of about 11 000 pesos (US$1 000) and average 2004
prices. The conversion cost for newer vehicles using more sophisticated
fuel systems is estimated at over 20 000 pesos and as much as 30 000
pesos for some vehicles. The higher vehicle-acquisition and running costs
of diesel mean that autogas is more competitive than diesel up to about 110
000 km. The break-even distance of autogas has increased substantially in
the last two years: in 2003, it was an estimated 70 000 km. This explains the
recent fall in autogas conversions and fuel sales.
Figure B13.2: Running Costs of a Non-Commercial LDV, 2004 – Mexico

Autogas - OEM
70000 Diesel
Gasoline
60000
50000
Cost (pesos)
40000
30000
20000
Gasoline is the cheapest fuel option
10000 up to just over 100 000 km
0
0 10 20 30 40 50 60 70 80 90 100
AUTOGAS INCENTIVE POLICIES · MEXICO 91

14. Netherlands

The Netherlands has the third largest autogas market in the European
Union after Italy and Poland, with consumption in 2004 running at an
estimated 378 000 tonnes – equal to 3.6% of total road fuel use (Figure
B14.1). At end-2002, there were about 300 000 autogas vehicles in use
and 2 140 refuelling stations. Autogas consumption has declined in recent
years, despite some strengthening of fiscal incentives at the beginning
of this decade (see below). Preliminary data point to a drop of 13% in
2004. The Dutch government has encouraged the use of autogas and LP
Gas generally for many years because the country, with a large refining
industry, used to be a major producer and exporter of the fuel. The country
is now a net importer of LP Gas, to the tune of 27% of total consumption in
2004. Autogas accounts for 23% of total LP Gas use in the Netherlands. The
rationale for encouraging autogas now is purely environmental.
Figure B14.1: Autogas Consumption and Vehicle Fleet – Netherlands
700 400
Consumption
Vehicles
350
600
300
500
250
400 Thousand vehicles
Thousand tonnes
200
300
150
200
100
100 50
0 0
1999 2000 2001 2002 2003 2004*
* Preliminary data.

The Dutch government has maintained a policy of strongly encouraging
autogas through fuel and vehicle tax incentives for many years. The excise
duty on autogas was reduced in 2002 and 2003, and currently stands at
92 AUTOGAS INCENTIVE POLICIES · NETHERLANDS

only 5.5 euro cents/litre, while duties on gasoline and diesel have gradually
increased (Table B14.1). The differential currently stands at 31 cents/litre
for diesel and 61 cents/litre for gasoline. Autogas prices at the pump are
currently a little over half those of diesel and only 37% those of gasoline.
Table B14.1: Automotive-Fuel Prices and Taxes – Netherlands (euros/litre)
2000 2001 2002 2003 2004
Pump prices
Total taxes
Excise duty
Autogas 0.064 0.067 0.065 0.055 0.055
Diesel 0.352 0.342 0.344 0.344 0.367
Gasoline 0.599 0.611 0.628 0.638 0.667
Pre-tax price
Autogas 0.321 0.295 0.297 0.309 0.337
Diesel 0.368 0.346 0.320 0.324 0.380
Gasoline 0.390 0.358 0.333 0.336 0.385
Although there are no grants or tax credits available for autogas conversions
or OEM purchases, vehicle-purchase taxes are significantly lower than for
diesel cars (and the same as for gasoline cars). At present, the full retail
price of a standard diesel car is more than 3 000 euros more than for
a gasoline model, and more than 500 euros more than an OEM autogas
model. In addition, annual vehicle (road) tax, known as the holdership tax, is
significantly higher for diesel. For autogas cars that meet euro-3 emissions
standards, the holdership tax is the same as for gasoline vehicles.
AUTOGAS INCENTIVE POLICIES · NETHERLANDS 93

The large excise tax differential with gasoline results in a relatively low
break-even distance for autogas against gasoline, of around 35 000 km for
converted vehicles and 47 000 km for OEM vehicles (Figure B14.2). The
higher vehicle-acquisition and running costs of diesel mean that autogas is
always more competitive than diesel, regardless of the distance travelled.
Figure B14.2: Running Costs of a Non-Commercial LDV, 2004

Netherlands
12000
Autogas - OEM
10000 Diesel
Gasoline
Cost (euros)
8000
6000
4000 Autogas OEM

breaks even against
gasoline
2000 Autogas conversion

breaks even against
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
Note: the diesel cost does not take into account higher annual vehicle (holdership) and
provincial taxes.
94 AUTOGAS INCENTIVE POLICIES · NETHERLANDS

15. Poland

Poland has a large and rapidly growing autogas market, mainly due to a
substantial fiscal advantage over conventional fuels. Consumption more
than tripled between 1999 and 2004, reaching 1.44 million tonnes – the
second largest in the European Union after Italy. Autogas use is equal to
15.4% of total road-fuel use (Figure B15.1). Part of these sales is thought to
be accounted for by illegal filling of car tanks with gas from cylinders, on
which there is no excise duty. Autogas now accounts for around two-thirds
of total LP Gas consumption in Poland.
Figure B15.1: Autogas Consumption and Vehicle Fleet – Poland
1600 1600
Consumption
Vehicles
1400 1400
1200 1200
Thousand vehicles
Thousand tonnes
1000 1000
800 800
600 600
400 400
200 200
0 0
1999 2000 2001 2002 2003 2004*
* Preliminary estimates
At end-2004, there were an estimated 1.45 million autogas vehicles in use,

or 13% of the total vehicle fleet. Most vehicles are LDVs for private and
commercial use, but 85 autogas-fuelled buses have also been brought into
service. About 80% of the country’s taxis have been converted to autogas.
The number of conversions to autogas was boosted in 2004 by a surge
in imported second-hand gasoline cars following Poland’s entry into the
European Union. Around half of the 820 000 cars, mostly imported from
Germany, are thought to have been converted to autogas. Conversion costs
are very low compared to Western European countries.
AUTOGAS INCENTIVE POLICIES · POLAND 95

Some 1 600 new retail outlets were established in 2002 and 2003. Another
1 500 outlets are thought to have been added in 2004, bringing the total
number by the end of the year to 4 500. Most are small, family-run stations,
although more large service stations are installing autogas pumps. The
consumption of autogas is expected to slow in the coming years as most
old cars, which are cheap to convert, already run on autogas. The cost of
new-car conversions is much higher.

Booming autogas sales have resulted from a large tax differential between
autogas on the one hand and gasoline and diesel on the other. The excise
duty on autogas has more than trebled since 2000, including a jump from
0.31 to 0.41zlotys/litre in May 2004, but is still well below those levied on
the other fuels. Autogas enjoys an excise-duty advantage of 1.18 zlotys over
gasoline and 0.72 zlotys over diesel (Table B15.1). As a result, the pump
price of autogas is 46% that of gasoline and 54% that of diesel.
Table B15.1: Automotive-Fuel Prices and Taxes – Poland (zlotys/litre)

2000 2001 2002 2003 2004
Pump prices
Autogas - non-commercial 1.200 n.a. n.a. 1.441 1.719
Total taxes
Excise duty
Autogas 0.120 n.a. n.a. 0.253 0.381
Diesel 0.893 0.933 0.980 1.003 1.103
Gasoline 1.224 1.393 1.464 1.498 1.562
Pre-tax price
Autogas n.a. n.a. n.a. 0.928 1.029
Diesel 1.202 1.159 1.135 1.321 1.494
Gasoline 1.347 1.191 1.152 1.250 1.500
96 AUTOGAS INCENTIVE POLICIES · POLAND

The Polish government is expected to narrow tax differentials further in the
next few years to curb the growth in autogas sales and bolster tax revenues.
There are no grants or other kinds of subsidy for vehicle conversions.

The break-even distance for autogas against gasoline vehicles is extremely
low in Poland, both because of the big tax advantage on the fuel itself and
the relatively low costs of vehicle conversions. The latter factor is partly
due to the poor quality of conversions, which has raised concerns about
safety. Labour costs are also significantly lower than in Western Europe.
The cost of converting an old-model gasoline car is around 1 500 zlotys
(400 euros), compared to up to 4 000 zlotys (nearly 1 000 euros) for a new
Euro-3 standard vehicle. Assuming an average cost of 2 000 zlotys yields
a break-even distance of about 16 000 km – about one year of driving for a
private car owner (Figure B15.2). Even at a conversion cost of 4 000 zlotys,
the break-even distance is little more than 30 000 km. The higher vehicle-
acquisition and running costs of diesel mean that autogas is always more
competitive with diesel, regardless of the distance travelled.
Figure B15.2: Running Costs of a Non-Commercial LDV, 2004 – Poland
35000
Autogas - conversion (old model)
Autogas - conversion (new model)
30000 Diesel
Gasoline
25000
Cost (zlotys)
20000
15000
10000 Autogas conversion (new model)

breaks even against
gasoline
5000 Autogas conversion (old model)
breaks even against
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
AUTOGAS INCENTIVE POLICIES · POLAND 97

16. Russia
Russia has the world’s eighth-largest autogas market. Demand reached

almost 800 000 tonnes in 2003, 180 000 tonnes higher than in 2000 (Figure
B16.1). Autogas currently accounts for 2.2% of road-fuel consumption and
13% of total LP Gas consumption. At end-2003, there were an estimated
550 000 autogas vehicles and 470 refuelling stations in Russia. Of production
of 7.2 million tonnes in 2003, Russia exported 1.2 Mt.
Figure B16.1: Autogas Consumption and Vehicle Fleet – Russia
900 600
Consumption
800 Vehicles
500
700
Thousand vehicles
Thousand tonnes
600 400
500
300
400
300 200
200
100
100
0 0
2000 2001 2002 2003

The main government incentive for autogas in Russia is the exemption from
excise duty, which – together with a relatively low pre-tax price – results in
a large pump-price differential vis-à-vis gasoline and, to a lesser extent,
diesel (Table B16.1). The prices of LPG sold as autogas, as well as the
prices of gasoline and diesel are deregulated in Russia, but the wholesale
and retail prices of LPG sold in cylinders to households are still controlled.
Regulated wholesale prices are roughly half the true market level, which
tends to depress deregulated wholesale prices. The government plans to
98 AUTOGAS INCENTIVE POLICIES · RUSSIA

lift these remaining price controls by 2008. In 2004, the average pump price
of autogas in Russia was 55% of the price of gasoline and 68% of that of
diesel. There are no other fiscal or regulatory incentives.
Table B16.1: Automotive-Fuel Prices and Taxes – Russia (rubles/litre)
2000 2001 2002 2003 2004
Pump prices
Diesel – commercial n.a. 4.89 4.50 5.91 9.66
Diesel - non-commercial n.a. 5.88 5.40 7.09 11.60
Gasoline - commercial n.a. 5.21 5.84 7.31 11.97
Gasoline - non-commercial n.a. 6.25 7.01 8.77 14.37
Total taxes
Diesel - commercial n.a. 0.46 0.52 0.75 1.36
Diesel - non-commercial n.a. 1.44 1.42 1.93 3.30
Gasoline - commercial n.a. 1.37 1.54 2.23 3.64
Gasoline - non-commercial n.a. 2.42 2.71 3.69 6.04
Excise duty
Autogas n.a. n.a. n.a. 0.00 0.00
Diesel n.a. 0.46 0.52 0.75 1.36
Gasoline n.a. 1.37 1.54 2.23 3.64
Pre-tax price
Autogas n.a. n.a. n.a. 4.00 6.56
Diesel 3.59 4.43 3.98 5.16 8.30
Gasoline n.a. 3.84 4.30 5.08 8.33

Autogas in a converted LDV is competitive with gasoline at a distance of
around 50 000 km, based on a conversion cost of about 18 000 rubles (500
euros). Autogas is competitive against a new diesel LDV, but only up to
a distance of just over 100 000 km as running costs for diesel are slightly
lower than for autogas (Figure B16.2).
AUTOGAS INCENTIVE POLICIES ·RUSSIA 99

Figure B16.2: Running Costs of a Non-Commercial LDV, 2004 – Russia
140000
Diesel
120000
Gasoline
100000
80000
Cost (rubles)
60000
40000
Autogas conversion
breaks even against
20000
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
100 AUTOGAS INCENTIVE POLICIES · RUSSIA

17. Thailand

The fortunes of Thailand’s autogas market have fluctuated in recent years,
as a spell of rapid growth in the early part of the current decade was
followed by a downturn since 2002. Autogas sales were boosted initially by
favourable taxation, a measure aimed at encouraging a switch away from
more polluting diesel and gasoline in major urban centres. But government
policy has recently shifted towards support for compressed natural gas,
although the fiscal incentive to use autogas remains strong. Autogas
demand peaked at almost 250 000 tonnes in 2002, falling to 210 000 tonnes
in 2003 (Figure B17.1). That level represented a little over 1% of total road-
transport fuel sales and about 8% of total LP Gas use in Thailand. The
number of vehicles has also begun to decline. At end-2003, there were an
estimated 46 000 autogas vehicles – almost exclusively taxis and motorised
rickshaws – and 56 refuelling stations. Almost half of Thailand’s LP Gas
needs are imported.
Figure B17.1: Autogas Consumption and Vehicle Fleet – Thailand
300 60
Consumption
Vehicles
250 50
200 40
Thousand vehicles
Thousand tonnes
150 30
100 20
50 10
0 0
1999 2000 2001 2002 2003

Autogas carries a duty of 1.3 baht per litre – roughly half that on diesel
and a third that on gasoline. Duties have not changed since the 1990s. The
government controls the pump price of autogas through a fixed distribution
AUTOGAS INCENTIVE POLICIES · THAILAND 101

margin. As a result, the pre-tax price is significantly lower than that of the
other fuels. In 2004, the average pump price of autogas including VAT was
47% of that of gasoline and 61% of that of diesel (Table B3.1). The price
difference in absolute terms has widened in recent years as gasoline and
diesel prices have increased more rapidly than autogas prices. Pump prices
are the same for commercial and private consumers, as commercial users
cannot recover sales taxes.
Table B17.1: Automotive-Fuel Prices and Taxes – Thailand (bhat/litre)*
2000 2001 2002 2003 2004
Pump prices
Total taxes
Excise duty
* In Bangkok.
Autogas 1.326 1.326 1.326 1.326 1.326
Diesel 2.536 2.536 2.536 2.536 2.536
Gasoline 4.054 4.054 4.054 4.054 4.054
Pre-tax price
Autogas 4.010 4.711 5.730 6.197 6.964
Diesel 5.999 9.554 10.036 9.749 10.589
Gasoline 9.545 10.506 10.251 11.476 13.441
* In Bangkok.
There are no subsidies for the conversion of gasoline vehicles to autogas.

Moreover, the government has adopted a policy of favouring compressed
natural gas over autogas, in order to make use of the country’s indigenous
gas resources.
102 AUTOGAS INCENTIVE POLICIES · THAILAND

The relatively low level of prices results in a break-even distance for a
typical passenger car converted to run on autogas against gasoline of just
over 40 000 km (Figure B17.2). This analysis assumes a conversion cost of
25 000 baht (US$600) and a premium of 60 000 (US$1 200) for a diesel car
over a gasoline car. Diesel breaks even with gasoline at a distance of more
than 80 000 km. As marginal running costs for diesel cars are similar to
those of autogas cars, autogas is always more competitive.
Figure B17.2: Running Costs of a Non-Commercial LDV, 2004 – Thailand
160000
140000 Diesel
Gasoline
120000
Cost (bhat)
100000
80000
60000
Autogas conversion
gasoline
20000
0
0 10 20 30 40 50 60 70 80 90 100
AUTOGAS INCENTIVE POLICIES · THAILAND 103

18. Turkey

The Turkish autogas market boomed at the end of the 1990s, as consumers
took advantage of the much lower rate of duty on autogas compared with
gasoline to convert their cars following the lifting of a ban on autogas
vehicles. Consumption almost doubled in 2000, reaching almost 1.3 million
tonnes. It fell back in 2001 and 2002, as the government hiked the duty
on autogas to rein back demand and discourage illegal conversions that
failed to meet safety standards (Figure B18.1). It rebounded again in 2003 to
almost 1.3 million tonnes and to an estimated 1.39 million tonnes in 2004,
with a widening of the autogas price differential with gasoline helped by a
cut in the excise duty on autogas at the end of 2003. Autogas accounted for
13.6% of total automotive-fuel consumption in Turkey by mass in 2004 – the
highest share of any country in the world after Korea and Poland. Autogas
accounts for 36% of Turkey’s total LP Gas consumption, more than three-
quarters of which is met by imports.
Figure B18.1: Autogas Consumption and Vehicle Fleet – Turkey

1600 1400
Consumption
Vehicles
1400
1200
1200
1000
Thousand vehicles
Thousand tonnes
1000
800
800
600
600
400
400
200 200
0 0
1999 2000 2001 2002 2003 2004*
The number of vehicles able to run on autogas has continued to rise,

reaching 1.2 million at end-2004, or more than one-quarter of the country’s
total vehicle fleet. Most vehicles that use autogas are converted old
gasoline cars. An estimated 200 000 gasoline cars were converted in 2004.
Conversion costs are low in Turkey, in part due to poor quality. Almost all
taxis operate on autogas. There are an estimated 4 000 refuelling sites –
equal to a third of all service stations. The safety of refuelling operations
has become a major issue, following a series of accidents.
104 AUTOGAS INCENTIVE POLICIES · TURKEY

The boom in autogas use in Turkey came about more as a result of a social
policy of low taxation of LP Gas as a household fuel than a deliberate policy
of promoting alternative fuels. In the 1990s, the government levied an excise
duty on autogas only slightly higher than that on cylinder gas. The surge in
autogas use eventually persuaded the government to raise the excise duty
and apply the special 40% rate of VAT on autogas sales at the start of 2000,
as well as increasing the annual inspection charge for converted autogas
vehicles.
Table B18.1: Transport Fuel Prices and Taxes – (liras/litre)
2000 2001 2002 2003 2004
Pump prices
Autogas – commercial n.a. n.a. 0.636 0.837 0.863
Autogas - non-commercial n.a. n.a. 0.816 0.988 1.018
Total taxes
Autogas - commercial n.a. n.a. 0.267 0.411 0.362
Excise duty
Autogas n.a. n.a. 0.267 0.411 0.362
Diesel 0.192 0.285 0.425 0.700 0.730
Gasoline 0.277 0.474 0.810 1.010 1.040
Pre-tax price
Autogas n.a. n.a. 0.370 0.426 0.501
Diesel 0.180 0.338 0.520 0.480 0.580
Gasoline 0.223 0.369 0.441 0.520 0.620
The standard VAT rate of 18% was restored in the second half of 2002,
following a ruling by the Supreme court, but excise duties were raised
further to compensate. But duties were lowered again in the second half
of 2003 and at the beginning of 2004 to reduce the differential with LP Gas
AUTOGAS INCENTIVE POLICIES · TURKEY 105

sold in cylinders, which had encouraged many independent retailers to
illegally sell the fuel for autogas use (Table B18.1). The tax reform involved
an increase in the excise tax on cylinder LP Gas and a cut in the tax on
autogas. The excise duty was cut further to 0.28 lira/litre in late 2004. The
Turkish LP Gas market was deregulated at the beginning of 2005, allowing
retailers to set prices freely. But the government continues to exert influence
over pricing through control of the ex-refinery price. Including VAT, taxes in
2004 accounted for just over half the pump price of autogas on average.
Autogas prices were 52% those of gasoline and 66% those of diesel.
The government is seeking to improve the enforcement of safety regulations,

following a series of accidents involving poorly converted vehicles and
illegal filling of autogas tanks at service stations with fuel destined for sale
in cylinders. There is already a legal requirement for converted vehicles to
undergo compulsory bi-annual inspections. The European Autogas Quality
Standard EN 589 became mandatory at the start of 2004, which has helped
to reduce problems caused by poor fuel quality.

The low cost of conversions in Turkey, due to low labour costs and relatively
unsophisticated technology, results in relatively low break-even distances
for autogas. For a typical conversion, the distance is only 14 000 km against
gasoline (Figure B18.2). Diesel breaks even against gasoline only at 25 000
km, and is only competitive against autogas at distances of more than
120 000 km. This analysis does not take account of mandatory inspection
charges for autogas vehicles, which are thought to amount to over 200 liras
(US$150). However, diesel servicing costs are marginally higher than for
autogas. Annual fuel costs are marginally lower for diesel than autogas.
Figure B18.2: Running Costs of a Non-Commercial LDV, 2004 – Turkey
18000
16000 Diesel
Gasoline
14000
12000
Cost (lira)
10000
8000
6000
4000
Autogas conversion
2000
breaks even against
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
106 AUTOGAS INCENTIVE POLICIES · TURKEY

19. United Kingdom

The UK autogas market has seen spectacular growth in the last five years.
Until the end of the 1990s, autogas use was minimal. Consumption started
to pick up in 1999, and increased rapidly to just under 100 000 tonnes in
2004, thanks to strong tax incentives and vehicle subsidies (Figure B19.1).
Yet autogas still accounts for only 0.3% of total transport fuels use by mass.
By end-2003, there were 105 000 autogas vehicles in use and 1 272 refuelling
stations. The number of vehicles is thought to have increased to around
130 000 by early 2005.
Figure B19.1: Autogas Consumption and Vehicle Fleet – United Kingdom
120 140
Consumption
Vehicles
120
100
100
80 Thousand vehicles
Thousand tonnes
80
60
60
40
40
20
20
0 0
1999 2000 2001 2002 2003 2004*

The recent emergence of an autogas market in the United Kingdom resulted
from strong fiscal incentives, including the establishment of a large excise-
duty differential between autogas and gasoline and diesel, which the
government introduced in 1999. In that year’s March budget, the government
cut the rate of duty on autogas by 29%, while raising duties on the other
fuels by 8%. The autogas duty was further reduced in 2000 and 2001, and
AUTOGAS INCENTIVE POLICIES · UNITED KINGDOM 107

has remained constant since then at under 5 pence/litre, equivalent to 10%
of the current duty on both gasoline and diesel (Table B19.1). As a result,
autogas prices at the pump are currently just under half those of gasoline
and diesel.
Table B19.1: Automotive-Fuel Prices and Taxes – United Kingdom

(pounds/litre)
2000 2001 2002 2003 2004
Pump prices
Autogas – commercial n.a n.a 0.317 0.330 0.328
Total taxes
Autogas - commercial n.a n.a 0.047 0.047 0.047
Excise duty
Autogas 0.055 0.047 0.047 0.047 0.047
Diesel 0.484 0.463 0.458 0.461 0.471
Gasoline 0.484 0.464 0.458 0.461 0.471
Pre-tax price
Autogas n.a n.a 0.270 0.283 0.281
Diesel 0.208 0.200 0.184 0.202 0.226
Gasoline 0.196 0.181 0.165 0.186 0.212
The government announced in March 2005 that it would reduce the excise-
tax differential between autogas on the one hand and diesel and gasoline
by 1p/litre each year to 2008. The duty on autogas was duly raised by 2p/li-
tre to 6.7 p/litre from May 2005, while gasoline and diesel duties were raised
by 1p/litre. But the government also announced that autogas vehicles will
benefit from an increase to 2% in the discount on the annual company-car
tax from April 2006, while the 3% discount currently applied to Euro-4 die-
sel vehicles will be removed in January 2006.
108 AUTOGAS INCENTIVE POLICIES · UNITED KINGDOM

Up to March 2005, the government made available grants through the
PowerShift programme to cover a large part of the cost of converting
gasoline vehicles to autogas and some other alternative fuels, as well as
the difference in price between a bi-fuelled autogas vehicle and that of its
gasoline or diesel equivalent. PowerShift, which is run by the independent
Energy Savings Trust, was set up to promote the use of cleaner fuels and
kick-start the market. Grants amounted to £700 for passenger cars and £800
for vans and minibuses. These grants are no longer available, following a
removal of funding for the scheme.
Autogas vehicles are exempt from the London congestion charge, which
was introduced in 2003. Autogas vehicles also benefit from a £10 discount
on the annual road (vehicle registration) tax over gasoline vehicles and a
£20 discount over diesel vehicles.
In addition, the Department of Trade and Industry Automotive Unit has set
up a campaign, called BoostLPG, to improve the availability of information
and to promote the benefits and opportunities associated with using LPG-
fuelled vehicles. The campaign is run by the LP Gas Association.

The large tax differential and government grants for autogas LDVs
resulted in a breakeven distance of around 41 000 km against gasoline and
36 000 km against diesel for non-commercial users in 2004 (Figure B11.2).
The break-even distance for diesel against gasoline was slightly higher,
because higher fuel costs than autogas offset the low purchase-price
Figure B19.2: Running Costs of a Non-Commercial LDV, 2004 – United

Kingdom

Autogas - OEM
6000 Diesel
Gasoline
5000
Cost (pounds)
4000
3000
Autogas conversion
diesel
Autogas conversion
1000
breaks even against
gasoline
0
0 10 20 30 40 50 60 70 80 90 100
AUTOGAS INCENTIVE POLICIES · UNITED KINGDOM 109

20. United States

Despite federal and state efforts to encourage vehicle conversions and ad-
ditions to refuelling stations, the US autogas (propane) market has been
flat in recent years at around 750 000 tonnes, although there has been a
modest increase in the total autogas-vehicle fleet (Figure B20.1). Autogas
accounts for only 13% of total US LP Gas consumption. High pump prices
of autogas relative to conventional fuels is the main reason for the low pen-
etration of autogas in the US road-transport fuel market. The main sup-
port for autogas sales now comes from federal AFV mandates. There are
currently an estimated 190 000 vehicles, mostly fleet vehicles and fork-lift
trucks, operating on autogas. There are 4 300 refuelling stations across the
country.
Figure B20.1: Autogas Consumption and Vehicle Fleet – United States
800 Consumption 200
Vehicles
190
750
180
Thousand vehicles
Thousand tonnes
170
700
160
650 150
140
600
130
120
550
110
500 100
1999 2000 2001 2002 2003
Fuel suppliers have become less and less interested in the potential of
increasing autogas sales in traditional transportation markets, and are
increasingly concentrating on off-road markets such as forklift trucks and
tractors. Several vehicle manufacturers have also abandoned the autogas
market and only one OEM vehicle, a Ford pickup truck, is currently available
in the United States. The planned phase-out of federal subsidies is a major
contributory factor in the dwindling interest in OEM sales (see below).
The Department of Energy projects sales of light-duty autogas vehicle to
decline during over the next decade from 46 300 in 2001 to 35 900 in 2010
(DOE/EIA, 2004).
110 AUTOGAS INCENTIVE POLICIES · UNITED STATES

20.2.1 Fuel-Tax Differentials

Federal fuel taxes give no incentive for gasoline vehicle users to switch to
autogas. At present, the excise duty on autogas, at 3.6 US cents/litre, is
lower than that on gasoline (4.9 cents/litre) and on diesel (6.4 cents/litre).
But pre-tax autogas prices are higher than those of conventional fuels. As a
result, the average price of autogas at the pump is only 4 cents/litre lower
than that of gasoline and 3 cents/litre higher than that of diesel, including
state taxes (Table B20.1). On a calorific-value basis, autogas prices are
higher than those of both fuels. Autogas prices to public fleets are thought
to be lower, as they are exempted from some state duties and sales taxes.
The United States is the only country in this survey where autogas for non-
commercial users is more expensive on a per litre basis than gasoline.
20.2.2 Federal Clean-Fuel Vehicle Incentives and Mandates

The 1992 Energy Policy Act (EPAct) has been the main thrust of federal
efforts to promote alternative fuels in recent years. EPAct established a goal
of replacing 10% of oil-based motor fuels in the United States by the year
2000 and 30% by the year 2010. EPAct provides two principal instruments
to promote the use of autogas vehicles:
> Tax credits and deductions for the purchase of AFVs or conversion of
existing conventional vehicles to run on alternative fuels and for the
development of supply infrastructure.
> Mandates on federal, state, and private “alternative fuel provider”

fleets to purchase AFVs.
The owner of a dedicated or converted autogas car is entitled to a one-

off federal income-tax deduction of up to $2 000 per vehicle, to cover the
incremental cost of converting a vehicle to run on autogas or purchasing
an OEWM vehicle. The incentive will be reduced to a maximum of $500 in
2006 and will be phased out at the end of that year. A larger incentive for
buses and trucks of up to $50 000 is currently available. A tax deduction
of up to $100 000 is also available for certain assets used for refuelling
autogas vehicles.
EPAct requires all federal fleets consisting of at least 20 or more LDVs

operating in a “metropolitan statistical area” to purchase a specific
minimum percentage of AFVs. In addition, the State and Alternative Fuel
Provider Fleets Program requires all state and alternative fuel provider fleets
to purchase a minimum number of such vehicles as a proportion of their
annual LDV acquisitions. Fleets earn credits for each vehicle purchased and
those credits earned in excess of their requirements can be banked or traded
with other fleets. This gives fleets flexibility in meeting their requirements.
However, the Department of Energy issued a final rule in 2004 rejecting the
imposition of AFV mandates on private and local fleets – as required by
EPAct – on the grounds that the move would have little impact on fuel use.
AUTOGAS INCENTIVE POLICIES · UNITED STATES 111

Table B20.1: Automotive-Fuel Prices and Taxes – United States ($/litre)
2000 2001 2002 2003 2004
Pump prices
Total taxes*
Excise duty**
Autogas 0.036 0.036 0.036 0.036 0.036
Diesel 0.064 0.064 0.064 0.064 0.064
Gasoline 0.049 0.049 0.049 0.049 0.049
Pre-tax price
Autogas n.a. n.a. n.a. 0.320 0.407
Diesel 0.277 0.253 0.230 0.279 0.359
Gasoline 0.347 0.337 0.312 0.367 0.443
* Average across states. ** Federal excise duties only.
20.2.3 State Programmes

Most US states make available additional fiscal incentives to support the
autogas market. Current programmes include the following:
> The Colorado Department of Revenue offers a tax credit for the
purchase of new AFVs and for the conversion of vehicles to alternative
fuels.
> In Connecticut, the incremental cost of purchasing a new vehicle

exclusively fuelled by CNG, LNG, autogas or electricity is eligible for a
10% corporate-tax credit.
> Georgia offers a tax credit towards the purchase, lease, or conversion
of a vehicle that operates solely on an alternative fuel and is certified
as a low emissions vehicle.
112 AUTOGAS INCENTIVE POLICIES · UNITED STATES

> The Louisiana Department of Natural Resources offers a state income-
tax credit worth 20% of the cost of converting a vehicle to operate on
an alternative fuel, 20% of the incremental cost of purchasing an OEM
AFV and 20% of the cost of constructing an alternative fuel refuelling
station.
> The Utah Clean Fuels Grant and Loan Program provides grants worth
up to 50% of the cost of converting a vehicle to run on a clean fuel ($2
500 maximum) and/or up to 50% of the incremental cost of purchasing
an OEM vehicle ($3 000 maximum).

The higher federal excise duty on autogas means that autogas is never
competitive with gasoline, regardless of distance travelled, and is only
competitive with diesel up to a distance of about 20 000 km. Figure B13.2
compares the running costs of autogas vehicles against gasoline and diesel
vehicles, taking into account an assumed average tax deduction on the
vehicle purchase or conversion cost of $1 000.
Figure B20.2: Running Costs of a Non-Commercial LDV, 2004 – United

States
14000
Autogas - OEM
12000 Diesel
Gasoline
10000
Cost (US dollars)
8000
6000 Diesel breaks even with

autogas conversion
4000
2000
0
0 10 20 30 40 50 60 70 80 90 100
These incentives are not enough to offset the relative high cost of
converting gasoline cars to autogas, due to stringent safety standards and
high labour charges. Our analysis assumes a conversion cost of $3 000,
but actual costs can be considerably higher for some types of vehicle. The
per-km running cost of autogas is much higher than that of both diesel and
gasoline because of the lower number of kilometres per litre. Mandates for
public fleet vehicle purchases are the main reason why autogas continues
to be used in the United States.
AUTOGAS INCENTIVE POLICIES · UNITED STATES 113

Annex 1: Global Autogas Market Data
Autogas Consumption, 2000-2003 (thousand tonnes)
Average
2000 2001 2002 2003 annual
growth (%)
Algeria 182 217 254 271 14.3%
Australia 1 484 1 370 1 232 1 213 -6.4%
Azerbaijan 31 36 50 52 19.7%
Belgium 89 100 93 94 2.1%
Bulgaria 120 215 250 258 32.9%
Canada 380 350 320 310 -6.5%
China 341 501 638 694 27.7%
Czech Republic 65 70 68 68 1.6%
Dominican Republic 62 84 120 125 27.5%
France 217 210 188 166 -8.5%
Germany 10 14 15 19 24.6%
Hungary 22 39 41 40 26.7%
Iran 211 300 318 320 16.3%
Italy 1 141 1 394 1 326 1 202 2.6%
Japan 1 603 1 538 1 543 1 528 -1.6%
Korea 3 025 3 326 3 360 3 740 7.4%
Lithuania 108 114 137 120 4.4%
Mexico 860 1 042 1 260 1 200 12.4%
Netherlands 570 521 494 435 -8.6%
New Zealand 22 25 25 25 4.5%
Pakistan 17 30 44 40 38.0%
Poland 605 800 960 1 070 21.2%
Portugal 21 20 18 20 -1.2%
Russia 600 700 750 780 9.3%
Spain 32 28 24 18 -17.3%
Sri Lanka 9 14 16 21 33.7%
Thailand 162 248 229 210 12.4%
Tunisia 23 24 15 20 0.1%
Turkey 1 282 1 230 1 176 1 260 -0.4%
Ukraine 40 44 45 50 7.8%
United Kingdom 19 50 73 93 78.9%
United States 720 750 740 730 0.5%
World 14 363 15 415 15 978 16 445 4.6%
Source: WLPGA (2004); IEA (2005); Menecon Consulting estimates.
114 AUTOGAS INCENTIVE POLICIES · GLOBAL AUTOGAS MARKET DATA

Autogas Vehicles in Use, 2000-2003 (thousands)
Average
2000 2001 2002 2003 annual
growth (%)
Algeria 70 78 85 120 20.5%
Australia 590 600 508 492 -5.6%
Azerbaijan 30 40 50 50 19.4%
Belgium 85 90 100 93 3.3%
Bulgaria 120 165 185 195 18.3%
Canada 95 93 92 92 -1.1%
China 65 99 127 134 28.7%
Czech Republic 150 150 145 145 -1.1%
Dominican Republic 12 15 21 22 23.3%
France 200 210 190 180 -3.3%
Germany 8 10 12 15 23.3%
Hungary 60 90 100 75 12.0%
Iran 75 75 75 75 0.0%
Italy 1 234 1 250 1 350 1 220 -0.1%
Japan 290 288 289 290 0.0%
Korea 1 214 1 428 1 625 1 723 12.5%
Lithuania 100 110 120 125 7.8%
Mexico 350 400 430 450 8.8%
Netherlands 323 360 330 290 -3.0%
New Zealand 10 10 10 10 0.0%
Pakistan 25 65 77 75 58.6%
Poland 470 700 900 1 100 33.2%
Portugal 37 37 33 35 -1.6%
Russia 400 500 530 550 11.6%
Spain 8 7 5 4 -20.4%
Sri Lanka 15 18 19 20 10.3%
Thailand 40 50 50 46 5.7%
Tunisia 6 6 6 7 5.6%
Turkey 950 975 1 000 1 000 1.7%
Ukraine 22 25 26 28 8.4%
United Kingdom 39 65 89 120 46.1%
United States 180 185 188 190 1.8%
World 7 505 8 429 9 009 9 416 7.9%
Source: WLPGA (2004); IEA (2005); Menecon Consulting estimates.
AUTOGAS INCENTIVE POLICIES · GLOBAL AUTOGAS MARKET DATA 115

Annex 2: References
Allen Consulting Group (2002), Fuel Quality Standards LPG: Cost-Benefit

Analysis of Options for Standard and Implementation.
Australian Liquefied Petroleum Gas Association (ALPGA) (2003a), LPG – The

Clean Transport Alternative.
Australian Liquefied Petroleum Gas Association (ALPGA) (2003b), The

Indirect Taxation of LPG in Australia: Quantifying the Costs and Benefits of the
Current Differentiated Treatment .
Australian Liquefied Petroleum Gas Association (ALPGA) (2003c), The

Autogas Dimension: Strategy and Policy.
Argonne National Laboratory Center for Transportation Research, United

States (2000a), Fuel-Cycle Emissions for Conventional and Alternative Fuel
Vehicles: An Assessment of Air Toxics.
Argonne National Laboratory Center for Transportation Research, United

States (2000b), Greenhouse Gases and Regulated Emissions from
Transportation (GREET) 1.5a – Transportation Fuel-Cycle Model.
CSIRO Atmospheric Research Report to Australian Greenhouse Office

(2003), Life-Cycle Emissions Analysis of Alternative Fuels for Heavy Vehicles
(Stage 2 Study).
Department of Energy/Energy Information Administration (DOE/EIA)

(2004), Annual Energy Outlook .
Energy Futures, Inc., The Clean Fuels and Electric Vehicles Report (monthly
newsletter, various issues).
European Council of Ministers of Transport (ECMT) (2001), Vehicle Emissions

Reduction.
International Energy Agency (IEA) (2005), Energy Prices and Taxes, 2nd
quarter 2005 .
Kfrafthardt-Bundesamt (2001), Fuel Composition and Emissions, Type

Approval Data of MY 2001 Light Duty Vehicles , Publication 11.
116 AUTOGAS INCENTIVE POLICIES · REFERENCES

OECD (2003), Can Cars Come Clean? Strategies for Low-emission Vehicles.
Petroleum Argus, LPG World (twice-monthly newsletter, various issues).
Ricardo Consulting Engineers (2001), Particulate Research Programme 1998-2001: Summary
Report.
TNO (2003), Evaluation of the Environmental Impact of Modern Passenger Cars on Petrol,
Diesel, Automotive LP and CNG.
TNO (1998), The Alternative Fuels Directory.
World LP Gas Association (2001), Developing a Sustainable Autogas Market: Guidelines for
Policymakers .
World LP Gas Association (2002), Clearing the Air: A Technical Guide on Autogas.
World LP Gas Association (2004), Statistical Review of Global LP Gas 2004.
AUTOGAS INCENTIVE POLICIES · REFERENCES 117

Annex 3: Note on Data Sources
Data on automotive-fuel prices and taxes were compiled from a range of

sources. For most countries, Energy Prices and Taxes, a quarterly report
published by the International Energy Agency (IEA), was the source for
historical price and tax data for diesel and gasoline (unleaded 95 RON).
The EU Oil Bulletin, published weekly and monthly by the European

Commission, was the primary source of historical data for autogas for most
European countries. The IEA made available unpublished autogas price and
tax data for several countries from its in-house databases compiled from
national submissions. For other countries, autogas prices were obtained
from national sources, including national LP Gas associations, government
agencies and fuel providers.
Estimates of autogas vehicle conversion costs and the incremental cost of

OEM vehicles and diesel vehicles were compiled from industry sources,
including car and equipment manufacturers. Where country-specific
information was not available, generic cost estimates were used.
Most data on autogas consumption, vehicles and refuelling sites are from
the WLPGA’s annual publication, Statistical Review of Global LP Gas. For
several countries, data for 2004 was obtained from the European LPG
Association and from national sources. Data on total road-vehicle fleets
are from International Road Statistics 2004, published by the International
Roads Federation.
118 AUTOGAS INCENTIVE POLICIES · NOTE ON DATA SOURCES


Autogas - Incentive - Policies Country by Country

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AUTOGAS INCENTIVE POLICIES

A Country-by-Country Analysis of Why & How

World LP Gas Association SARL

Tel: +331 5805 2800

Contacts for Information

Trevor Morgan Ben Muirheid

Tel: +331 4263 8824 Tel: +331 5805 2803

2 AUTOGAS INCENTIVE POLICIES

PART A: MAIN FINDINGS 11

1. The Global Autogas Market 12

AUTOGAS INCENTIVE POLICIES · CONTENTS 3

4 AUTOGAS INCENTIVE POLICIES · CONTENTS

Annex 1: Global Autogas Market Data 114

AUTOGAS INCENTIVE POLICIES · CONTENTS 5

In most countries, the government encourages the use of autogas and

6 AUTOGAS INCENTIVE POLICIES · EXECUTIVE SUMMARY

The market penetration of autogas is strongly correlated with the

> Government policy commitment: The autogas market has tended to

AUTOGAS INCENTIVE POLICIES · EXECUTIVE SUMMARY 7

> Restrictions on diesel vehicles: Local and central government

> Availability of vehicles and fuel: Autogas has struggled to penetrate

In countries where autogas remains small, the role of the government

The most effective approach to designing and implementing autogas

Policy stability and a strong, long-term commitment by the government

8 AUTOGAS INCENTIVE POLICIES · EXECUTIVE SUMMARY

Objectives of the Study

Approach and Scope

The information on autogas prices and taxes was used to analyse

The study also reviewed recent studies of the comparative environmental

AUTOGAS INCENTIVE POLICIES · INTRODUCTION 9

> Section 1 provides an overview of current global autogas market

> Section 2 assesses the environmental performance of autogas

> Section 4 summarises and compares current autogas incentive

> Section 5 analyses the impact of differences in policies on the

10 AUTOGAS INCENTIVE POLICIES · INTRODUCTION

1.2 Market Trends

Box A1.1: Autogas Characteristics

LP Gas is derived either as a product from crude-oil reﬁning or from natural-gas

12 AUTOGAS INCENTIVE POLICIES · THE GLOBAL AUTOGAS MARKET

Korea 3 740 1 723 1 242

Japan 1 528 290 1 900

Turkey 1 260 1 000 4 000

Australia 1 213 492 3 240

Italy 1 202 1 220 2 150

Mexico 1 200 450 1 400

Poland 1 070 1 100 4 500

Russia 780 550 470

United States 730 190 4 300

China 500 115 285

Rest of the World 3 722 2 401 16 439

World 16 445 9 416 39 641

Source WLPGA (2004).

Figure A1.1: Global Autogas Consumption, 1999-2004

Other Turkey Japan Australia Poland Korea

AUTOGAS INCENTIVE POLICIES · THE GLOBAL AUTOGAS MARKET 13

1.2 Drivers of Autogas Use

1.2.1 Alternative Automotive Fuel Policies

14 AUTOGAS INCENTIVE POLICIES · THE GLOBAL AUTOGAS MARKET

Research and development of alternative automotive-fuel technology in

From an energy-security perspective, autogas has advantages over

Autogas use has generally responded much better to government policies

AUTOGAS INCENTIVE POLICIES · THE GLOBAL AUTOGAS MARKET 15